Lululemon Athletica (NYSE:LULU) stock has traded sideways over the past two months as investors await greater clarity on the company’s turnaround strategy ahead of Heidi O’Neill’s transition to CEO.
Shares have also been pressured by ongoing executive turnover, with the Chief Strategy Officer becoming the latest departure. Attention now turns to the company’s upcoming earnings report, which should offer fresh insight into how the turnaround is progressing.
Lululemon Earnings Come as its Valuation Has Slumped
The upcoming earnings report comes at a time when its valuation metrics have brought it to a bargain zone. It trades with a forward price-to-earnings ratio of 11, lower than the consumer discretionary sector median of 16 and its five-year average of 25. According to FactSet (NYSE:FDS), the forward 12-month multiple of the S&P 500 Index is 20.
Lululemon is trading at a bargain multiple for good reasons. Its revenue growth has slowed, including in China, its fastest-growing market. The most recent results showed that its revenue rose by 4% in Q1 to $2.5 billion, with its Americas segment falling by 4%. Its income from operations fell by 37% during the quarter.
