Investor confidence in Lululemon (LULU) has declined as the company faces slower growth and tightening margins, with shares down 50% over the past year, currently trading near a 52-week low of $156. The athletic apparel leader will report its Q4 results after the market close on Tuesday, March 17, with projected sales of $3.6 billion, reflecting virtually flat growth from the previous year, and Q4 EPS expected at $4.77, a 22% decrease from $6.14 per share in the prior quarter.
The resignation of former CEO Calvin McDonald at the end of January, amid weaker U.S. sales, adds to the uncertainty. Lululemon’s full-year EPS for fiscal 2026 is projected to fall 11% to $13.04, despite annual sales expected to rise over 4% to $11.08 billion. Going forward, Wall Street anticipates Q1 sales to increase 5% year-over-year, with FY27 sales also up by 5% to $11.62 billion.
Trading at a P/E valuation of 12X forward earnings, Lululemon is below the industry average of 18X, indicating potential for a rebound. However, the company’s free cash flow (FCF) conversion rate has turned negative at -3.8%, raising concerns about its efficiency in generating cash amidst rising import tariffs and increased capital expenditures.
