Following a 17% pullback over the past three months, lululemon’s shares now trade at roughly 20 times next-year’s consensus earnings estimate, near the lowest multiple in over two years. This discount reflects growing investor concern over a 3.5% decline in U.S. comparable-store sales during the holiday quarter and guidance that gross margins will compress by 150 basis points in fiscal 2026 due to higher freight and promotional costs. However, analysts note that the company’s free cash flow conversion remains robust—projected to exceed $1.6 billion this year—and that a return to positive like-for-like growth in China and its recently expanded men’s line could provide the upside needed to justify the current valuation.

Just days after launching the new “Get Low” high-stretch leggings, lululemon briefly paused online sales following over 250 customer complaints on social media channels about fabric transparency under stress. The company resumed e-commerce distribution within 48 hours, adding size-up recommendations and suggestions to pair with skin-tone undergarments. While this marks the first major quality-control interruption in two years, management has allocated an additional $10 million this fiscal year to strengthen textile testing and quality assurance. Investors will watch whether quick remedial action protects the premium pricing power that supports lululemon’s 55% gross margin on technical apparel.