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MIAMI BEACH, FLORIDA - APRIL 03: People walk past a Lululemon store on April 03, 2025 in Miami ... More Beach, Florida. (Photo by Joe Raedle/Getty Images)
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What would your reaction be if Lululemon stock plummeted by 90% or more in the coming months? While that might sound extreme, history shows it's not out of the question. So far this year, the stock has already shed over 30% of its value — including a sharp single-day drop of more than 14% after the company reported its fiscal 2024 results, followed by a 10% dip after Trump's tariff news. Given how the stock has responded to previous economic slowdowns, a drop from its current level near $260 to below $100 isn’t entirely implausible.
What’s striking is that the recent downturn comes despite strong financial results. LULU posted fourth-quarter earnings per share of $6.14 and revenue of $3.61 billion, both beating expectations of $5.85 and $3.57 billion, respectively. Yet, fears around slowing consumer spending, global tensions, and cautious forward guidance have rattled investors.
Key insight: In times of economic decline, LULU stock has shown a tendency for steep drops. It lost 36% during the inflation-driven selloff, nearly 47% during the Covid crisis, and over 90% during the 2009 financial meltdown. That last one isn’t a typo — market reactions to economic fears can be extreme. So, is Lululemon’s current situation comparable to its state during the Great Recession?
In March 2009, LULU reported $45 million in operating cash flows and traded at about 12 times that number — an 8% yield. For comparison, over the past year, the company generated $2.27 billion in operating cash flow, translating to a 7% yield on a $31 billion market cap. So what does this mean? While another crash of the same scale seems unlikely given the company’s maturity and investor confidence, concerns remain valid. Individual stocks can be much more volatile than broad portfolios. If you're after growth with less risk, the High-Quality portfolio may be a better fit, having outperformed the S&P 500 with over 91% returns since inception.
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