Prediction: Lululemon Will Be Worth More Than Adidas by 2030

Lululemon Athletica, after a two-year stock decline and 53% year-to-date slump, is implementing a turnaround strategy focused on accelerating new product development to increase assortment to 35% new styles by next spring, aiming to reignite U.S. sales while leveraging strong international growth, including 25% year-over-year in China. Analysts project significant revenue growth from $10.98 billion in fiscal 2025 to $15.62 billion in 2030, with EPS rising from $12.99 to $25.65 over the same period. This outlook, combined with current valuation multiples (forward P/E of 14) well below historical averages, suggests potential for multiple expansion as the company seeks to reclaim its market cap lead over Adidas.

Analysis

Lululemon Athletica (LULU) has experienced a significant two-year sell-off, culminating in a 53% year-to-date decline and a five-year low in mid-September, placing it at the bottom of the Consumer Discretionary Select Sector SPDR Fund. Despite a recent 13% bounce, its market value of $21 billion as of Oct. 28 lags Adidas' $38 billion, a reversal from early 2024 when LULU was twice its size. Management is initiating a turnaround focused on accelerating new product design, development, and production to boost assortment, aiming to increase new styles from 23% to approximately 35% of the overall offering by next spring.

The company's strategy targets reigniting demand in its underperforming U.S. business, while leveraging strong international growth, notably a 25% year-over-year revenue increase in China and 19% in other international markets during Q2. Analysts project substantial future growth, with full-year revenue estimated to rise from $10.98 billion in fiscal 2025 to $15.62 billion in 2030, and adjusted EPS from $12.99 to $25.65 over the same period. This indicates a robust long-term outlook despite recent struggles.

Lululemon currently trades at a forward P/E ratio of 14 and a price-to-sales ratio of 2, both significantly below their five-year averages. The projected EPS growth further reduces its P/E to just 7 times fiscal 2030 estimates. This depressed valuation, combined with anticipated growth and renewed brand enthusiasm, suggests potential for multiple expansion, which could enable LULU to reclaim its market leadership over Adidas.

Key Decisions for Investors

• Monitor Lululemon's Q3 earnings report and management's detailed update on the product acceleration strategy in early December for tangible signs of turnaround execution.
• Assess the impact of the increased new product assortment on U.S. sales performance and the sustainability of strong international growth, particularly in China.
• Evaluate the current depressed valuation multiples (forward P/E of 14) against long-term analyst growth projections, considering potential for multiple expansion if the turnaround gains traction.