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Down >20% on weak guidance in the face of tariff uncertainties. TACO trade?

I'm curious how vulnerable they are to a recession involving their core customer base. Their stuff is quite expensive and if they customers are feeling pinched, they may forgo some expensive ath-leisure clothing for a while. Plus, I have read that quality has declined since they first got to be trendy.

In my circle (wife, kids, etc...) their brand is very strong - no mention of quality issues. Yes their products are expensive :)

tecmo
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LULU has reached a level around 246 that looks good to me. CFRA has it rated 5* since the price drop, and M* currently pegs fair value conservatively at 305. Balance sheet is rock solid. I've opened a modest position.

I want a lower entry price, below 15 * 2025 EPS. So I sold March 2026 $240 puts for $28. Should give me an entry price of $212 if put or an yield of almost 18% on the cash backing the puts. Will be satisfied with either outcome.

I am on the fence after looking at this a bit.

The EPS trend has been very good the past 5 years

           Sales       EPS (TTM)   Stock Price*    PE
2021 :     $ 4.40B      $ 4.70     $322            68
2022 :     $ 6.26B      $ 7.79     $297            38
2023 :     $ 8.11B      $10.07     $330            32
2024 :     $ 9.62B      $12.77     $311            24
2025 :     $10.59B      $14.64     $315            21

2026?:     $11.25B?     $14.80?    $225?           15?

* Jun 1st each year    

Yes during this time the stock has been generally flat - showing how much growth was priced into the stock back in 2021. My general hesitation in investing in retailers is also a bias I have.

Forecasts are for $14.80 per share in EPS this year, but that is based on a fairly pessimistic view on tariff policy (TACO opportunity?). On the negative side, have they tapped out their growth potential on the top line? Their products are for a very specific market - that customer base is loyal but can they grow it?

I would suggest an entry point below $225 is probably on the safer side for a trade - with the expectations that the tariff policy challenges are over stated and the stock would probably pop back over $350 - but that is a speculative position; so it would be risky.

tecmo
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<<On the negative side, have they tapped out their growth potential on the top line? Their products are for a very specific market - that customer base is loyal but can they grow it?>>

China is the second largest market in the world for athleisure wear, and LULU has only begun to penetrate there, with much success to date. The company keeps innovating with new materials and products. They're also planning on entering the athletic shoe market. And they have plenty of room to grow in clothing for men.

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