This Growth Stock Is Down 45%. Should You Buy It Like There's No Tomorrow?

It's surely encouraging to spot a concern transcend Wall Street estimates. This is precisely what Lululemon Athletica (NASDAQ: LULU) did successful its fiscal 2024 4th fourth (ended Feb. 2). Revenue jumped 13% twelvemonth implicit twelvemonth to $3.6 billion, portion diluted net per stock (EPS) roseate 16% to $6.14. That's wherever the affirmative presumption ends, arsenic shares tanked treble digits pursuing the fiscal update.

It's worthy mentioning that Lululemon's maturation has slowed. Fiscal 2024 showed the lowest gross summation successful astatine slightest the past decade. What's more, investors were apt not pleased with management's guidance. Forecasts for some gross and diluted EPS for fiscal 2025 came successful beneath Wall Street estimates.

There are surely concerns astir the authorities of the U.S. economy. Ongoing changes to commercialized policies adhd tons of uncertainty, with enforcement teams successful a scope of industries adopting a wait-and-see approach.

"The outer situation remains dynamic, and determination continues to beryllium sizeable uncertainty driven by macro and geopolitical circumstances," CEO Calvin McDonald said connected the Q4 2024 net call.

Consumers besides aren't successful the champion shape. Credit paper indebtedness successful the U.S. is astatine a grounds $1.2 trillion and user assurance is astatine its lowest level successful astir 3 years. This could pb to a self-fulfilling prophecy that results successful curtailed spending, tipping the system into a recession.

The macro backdrop tin person a much pronounced interaction connected Lululemon's business. That's due to the fact that it deliberately positions its apparel and footwear products astatine the premium extremity of the market. This is evidenced by its mean gross margin of 57% implicit the past 5 years, good up of manufacture heavyweight Nike.

Consequently, it makes consciousness that consumers would hold these purchases erstwhile they foresee economical occupation ahead. Why bargain costly covering that you mightiness not request erstwhile you deliberation you mightiness look fiscal difficulties?

Another ongoing hazard origin is the competitory quality of the industry. Lululemon faces truthful overmuch competition, some from the high-end and the low-end areas of the market. Fashion tastes are perpetually changing. And consumers person nary restrictions connected wherever they take to walk their money.