Lululemon ( LULU -0.48% ) has been a fantastic investment. In the past decade, shares have skyrocketed 599%.
This gain crushes the broader Nasdaq Composite Index . However, this apparel stock is trading 39% below its December 2023 peak. Investors appear to be worried about slowing growth in the current macro environment.
Lululemon stock now looks like a smart buy on the dip . Before adding the company to your portfolio, though, learn about this one warning. Competitive landscape Finding lasting success in the apparel industry is extremely difficult.
Companies must find ways to satisfy consumer preferences that are always changing. What's popular and fashionable one year might be completely forgotten the next year. Add in the fact that people have an unlimited number of clothing options to choose from, coupled with an industry that has almost no barriers to entry, and it's easy to have concerns.
As a result, the one warning investors can't ignore is the fact that Lululemon's brand might simply fall out of favor with consumers one day. Sales were up by 10% in the fiscal 2024 first quarter (ended April 28), compared to consistent high teens and greater than 20% growth in previous quarters. This might be a reason to worry that perhaps Lululemon's market position is weakening.
Lululemon also faces a ton of competition from both cheaper and more expensive alternatives. I don't think any industry observer would've accurately predicted that clothing brands like Vuori or Alo Yoga, for.
