Lululemon’s Stock Plunge: Can International Growth Offset Domestic Weakness?

The athletic apparel retailer Lululemon, once a celebrated growth stock, is confronting a significant challenge. Its core North American business is faltering, dragging share prices downward, even as its international operations show robust expansion. The critical question for investors is whether the company can orchestrate a recovery or if the decline will persist.

Analyst Sentiment: A Cautious Stance

Market experts are largely maintaining a “hold” rating on Lululemon’s shares, reflecting a market caught between doubt and optimism. While clear buy or sell signals are absent, price targets have been adjusted downwards. These revised forecasts, now ranging from $195 to $230, still sit notably above the current trading level, highlighting a conflicted outlook.

The company’s present valuation is a key point of discussion. Shares are currently trading at approximately 12 to 13 times expected earnings, a multiple that appears historically attractive. Some observers consider the stock undervalued, pointing to Lululemon’s powerful brand identity and a balance sheet free of debt. However, the central uncertainty remains: are these strengths sufficient to counterbalance the severe downturn in its home market?

North American Core Business Faces Headwinds

The company’s most pressing issue became clear in its second-quarter 2025 report. Although Lululemon posted overall revenue growth of 7%, reaching $2.5 billion, its performance in the United States and Canada was dismal. Comparable sales in this crucial region dropped by 4%, an alarming indicator of trouble at home. This weakness is attributed to subdued consumer spending and a product lineup that has lost its innovative edge.

Should investors sell immediately? Or is it worth buying Lululemon?

In response to these challenges, management was forced to issue a starkly reduced annual forecast. Instead of previously anticipated strong gains, the company now projects revenue growth of just 2-4% for the full year 2025. The profit outlook is even more concerning, with expected earnings per share forecast to plummet by roughly 12%. This guidance triggered a sharp negative reaction from investors, leading to a substantial sell-off.

International Expansion Provides a Glimmer of Hope

Contrasting the domestic slump, Lululemon’s international segment continues to be a powerhouse. In the second quarter, revenue outside its home markets surged by 22%. The Chinese market was a particular standout, boasting impressive growth of 25% and establishing itself as a primary engine for new growth.

This international strength may serve as the company’s crucial lifeline. While the American market shows signs of saturation, emerging economies and Europe present substantial untapped potential. Currently, the successful expansion beyond North America seems to be the primary reason investors are retaining any confidence in the company’s long-term strategy.

All eyes are now on the upcoming quarterly report in December. This release is expected to reveal whether Lululemon’s leadership has a viable plan to revitalize its American business, or if the impressive international performance will be inadequate to halt the overall downward trend.