FY2025 10-K: Americas revenue flat (-1.0%), China +28.9%. CEO transition (interim co-CEOs) creates execution risk. Valuation fair (11x P/E) but growth inflection uncertain. Downgrading from 7 pending new CEO strategy.
Lululemon: DCF FV=$276 vs $165 (P(above)=99.7%). PE=11.5 is historically cheap for this brand — used to trade 30-40x. Below 200dma is the key concern (momentum headwind, China slowdown fears, post-founder execution risk). But the DCF screams undervaluation. Thesis: premium athletic brand at value prices. Missing element: below 200dma and no clear catalyst to reverse sentiment. Upgrading 5→7.
Weekly reeval Mar 15 — REDUCING conviction. LULU at .78, well below MA50 () and MA200 () — technically broken. Analyst target (31% upside) but missing estimates and losing mindshare to Alo Yoga, Vuori. fPE 12.6x = not cheap for a retailer losing momentum. Americas growth slowing, China expansion uncertain. Reducing conviction 7→5. Would revisit at -135 if Americas SSS show signs of recovery. Not actionable today.
Fair Value Distribution — percentile bands
99.8% of simulations place fair value above current price
WHAT IS PRICED IN
Revenue-Based Reverse DCF
-1.4%/yr
±4.5% · revenue growth to justify current price
FCF-Based Reverse DCF
-4.8%/yr
±2.4% · FCF growth to justify current price
THE GAP
Market pricing margin expansion or capex normalization
KEY VALUE DRIVERS
Spearman correlation — what moves this valuation most
New CEO could reinvigorate Americas; valuation 11x PE cheap historically; China expansion intact.
No permanent CEO = no strategy; Americas flatline worsens in macro downturn; tariff risk on apparel.
Interim CEO installs replacement doubling down on Americas discounting.
Updated Mar 30
LULU FY2025 10-K reveals Americas growth inflection negative (-1% vs +3.9%), offset by strong China (+28.9%). CEO transition creates near-term execution risk. Valuation fair but not compelling given u...
Americas collapsing (-5% comps), tariffs will reduce FY2025 OI ~M, CEO transition underway. China growing strong (+24% comps) but can't fully offset. Margin compression real. Downside risk elevated.