lululemon athletica inc. (LULU): A Bull Case Theory

We came across a bullish thesis on lululemon athletica inc. on Louis’s Substack by On the Street With Louis. In this article, we will summarize the bulls’ thesis on LULU. lululemon athletica inc.’s share was trading at $200.21 as of September 2^nd. LULU’s trailing and forward P/E were 13.62 and 13.57 respectively according to Yahoo Finance.

Lululemon, a leading athleisure brand founded in 1998, has seen its stock decline from over $500 in 2023 to around $200 today, trading at a historically low 13.7x earnings and 15.5x free cash flow compared with peers such as Nike, Adidas, and Under Armour. The recent weakness reflects a plateau in growth, with Q1 2025 revenue up 7% to $2.4 billion, driven primarily by international markets, while the Americas segment showed modest 3–4% growth.

Gross profit increased 8%, but operating margins fell slightly, signaling minor pressures on profitability. Lululemon’s business model integrates retail, digital, and warehouse operations into a seamless omni-channel experience, supported by proprietary fabrics and innovative product design, which continues to provide a durable economic moat.

The company’s historical “Power of Three” growth strategy has delivered strongly, doubling men’s revenue, tripling digital sales, and expanding international revenue ahead of schedule, demonstrating management’s execution capability. Over the past decade, revenue has grown 423% and net income nearly 600%, with ROIC rising from 24% to over 30%, well above competitors. Despite these fundamentals, free cash flow per share has recently softened due to temporary operational factors, including inventory and capex increases, rather than structural decline.

Lululemon remains debt-free, highly profitable, and differentiated in the market. While competition from brands like Alo has intensified, the company retains significant room for growth outside North America. Conservative cash flow modeling suggests a base-case valuation of $243 per share, with upside to $285 under moderate growth assumptions, implying 23–41% potential upside. With a strong balance sheet, proven management, and resilient margins, Lululemon represents a high-quality, attractively priced opportunity for investors seeking long-term growth.

Previously we covered a bullish thesis on Lululemon Athletica Inc. (LULU) by FeedbackAlarmed5045 in May 2025, which highlighted its strong moat, premium pricing, and expanding men’s and international segments. The stock has depreciated about 28% since coverage due to growth plateauing. On the Street With Louis shares a similar bullish view but emphasizes recent Q1 2025 results, a lower valuation, and continued upside potential.

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Disclosure: None.