Is LULU Worth Chasing After a 14% Monthly Surge? What the Numbers Reveal

lululemon athletica inc. (LULU) has captured investor attention with a striking 14.5% rally over the past month, significantly outpacing broader market movements. While the Textile - Apparel sector added just 3.1% and the Consumer Discretionary segment managed 0.6%, lululemon’s ascent has left the S&P 500’s 1.7% gain in the dust. This outperformance wasn’t random—it was anchored by the company’s robust third-quarter fiscal 2025 results and an upwardly revised full-year outlook.

At $208.97 per share, the stock sits 31.2% above its 52-week floor of $159.25, though it remains 50.6% below its peak of $423.32. The price is trading above the 50-day moving average, a technical signal that reflects near-term buying pressure.

How LULU Stacks Up Against Rivals

The apparel landscape tells an interesting story when you examine peer performance. G-III Apparel (GIII) managed only a 3.1% monthly climb, matching the sector’s average, while Guess (GES) and Ralph Lauren (RL) actually declined by 1.8% and 2.1% respectively during the same window. lululemon’s separation from these competitors underscores either unique execution or market reassessment of the brand’s trajectory.

What’s Powering This Momentum?

Three major factors are driving investor confidence. First, lululemon demonstrated resilience in its third-quarter performance, delivering earnings and revenues that exceeded expectations despite headwinds from tariffs and macroeconomic caution. The standout element was international strength, particularly in Mainland China, where the company expanded market share across multiple city tiers and maintained robust revenue acceleration.

Second, management articulated a specific turnaround blueprint for the underperforming U.S. market, centered on three pillars: refreshed product creation, accelerated activation, and operational efficiency. The company aims to increase newness penetration to 35% by spring 2026 while sharpening inventory alignment with local preferences—a concrete plan that resonates with investors tired of vague turnaround rhetoric.

Third, the raised fiscal 2025 guidance matters. lululemon now projects net revenues between $10.96-$11.05 billion (up from the previous $10.85-$11 billion range) and expects EPS of $12.92-$13.02 (revised upward from $12.77-$12.97). Critically, management signaled that the most substantial benefits of its restructuring will materialize in fiscal 2026, providing a visible roadmap.

The company enters this transition from a position of financial strength: debt-free balance sheet, robust cash generation, and substantial share repurchase firepower. This flexibility allows lululemon to absorb near-term margin pressure and invest aggressively in turnaround initiatives without compromising long-term shareholder returns.

The Earnings Revision Story

Analyst sentiment has shifted modestly positive. Over the past 30 days, Zacks Consensus Estimate for fiscal 2025 EPS increased 1%, suggesting growing conviction in management’s near-term execution. However, fiscal 2026 EPS estimates slipped 0.5% in the past week, a reminder that not all uncertainty has evaporated.

For fiscal 2025, the consensus points to 4.5% revenue growth and an 11% EPS decline. For fiscal 2026, analysts project 4.4% revenue expansion paired with a 1.9% earnings contraction. These figures hint at the near-term margin compression lululemon will likely experience.

Valuation Context

Trading at a forward 12-month P/E of 16.31X, lululemon appears modestly valued relative to benchmarks. The industry average sits at 16.47X, and the broader S&P 500 trades at 23.44X. Ralph Lauren commands a premium at 21.81X, while some peers like G-III Apparel (9.94X) and Guess (9.65X) look substantially cheaper. This relatively compressed multiple for lululemon could suggest either opportunity or a market pricing in execution risk.

The Cautionary Elements

Not everything is tailwinds. North America remains troubled, with traffic pressured by consumers pulling back on discretionary purchases. Comparable sales are under pressure from elevated promotional activity industry-wide and slower-than-hoped recovery in core women’s categories. The company acknowledged these visibility challenges.

Additionally, gross margin headwinds are locked in for fiscal 2026. Tariff impacts, rising input costs, and reinvestments to spark U.S. revival will all compress profitability. While productivity initiatives are underway, management conceded that benefits will materialize gradually—creating an execution-sensitive period where the company must balance growth investment with profitability defense.

The Verdict: Hold or Chase Higher?

The case for lululemon is constructive but conditional. The company possesses genuine strategic assets—international growth momentum, a clearheaded turnaround plan, strong financial positioning, and demonstrated execution capability. The recent estimate upgrades and forward guidance revision suggest analysts increasingly believe in this story.

Yet the risks deserve respect. The relatively subdued valuation multiple may be pricing in legitimate concerns about U.S. business stabilization, margin sustainability, and the execution complexity of a multi-year turnaround. For investors already holding positions, maintaining exposure with a multi-year outlook seems prudent. For new buyers chasing the recent 14% rally, patience for a more obvious inflection point or better entry pricing might prove worthwhile. The company carries a Zacks Rank #3 (Hold) designation, reflecting this balanced risk-reward calculus.