Lululemon (LULU) does not have Good Jeans

Client Question: Is LULU Overdone on the Downside?

We got this question from a LikeFolio member this week:

Ask and ye shall receive.

When we pulled the consumer data, we expected to see a potential rebound signal. Instead, we found a mix of macro and cultural headwinds that suggest LULU isn’t at its consumer bottom yet.

Why the data surprised us

On the surface, LULU has the makings of a contrarian buy: a historically high-quality brand, a stock that’s off 50% YTD and trading near 5-year lows, and a premium price point that’s weathered plenty of cycles before.

But the consumer side tells a different story:

• Category shift: Rising consumer interest in denim and a move away from athleisure.

• Cultural headwinds: The most viral apparel campaign right now isn’t leggings — it’s Sydney Sweeney’s Good Jeans for AEO.

• Brand perception: Consumers are flagging LULU for lower-than-expected quality, lack of innovation, and in some cases, store-related negatives like thefts or bizarre incidents (like twerking parties in stores).

• Competitive heat: Premium customers are leaning into more fashion-forward activewear brands like Outdoor Voices, Alo Yoga, Beyond Yoga, and Rhone — all viewed as “cooler” than LULU in current influencer/fashion circles.

Even ChatGPT, when prompted on trendiness, echoed the shift:

Our LikeFolio data confirms this perception shift.

Web visit trends have been moving almost in lockstep with the stock’s fall… no divergence yet to suggest a consumer-led rebound.

Bottom line on LULU

While the stock looks cheap on valuation and history, consumer momentum hasn’t turned. Buying here would be a bet on a reversal that we simply don’t see in the data yet.

So instead of trying to catch this falling knife, we’re focusing on three brands in the same general space that do have consumer momentum right now, and in some cases, the cultural spotlight.

Three Hotter Stocks to Watch Right Now

1. Levi Strauss & Co. (LEVI)

Levi’s is taking advantage of shifting apparel demand tailwinds…and quietly capitalizing on LULU’s demise.

• Beyond Yoga is booming: Did you realize this was owned by LEVI? Brand visits are up nearly +52 YoY. Levi’s acquisition of Beyond Yoga is paying off as the premium activewear brand gains market share, especially with women, and opens more high-performing DTC doors.

• Core denim is resurging: Levi’s classic denim segment is up +17% YoY in visits, riding the consumer pivot toward denim styles. Management sees double-digit growth in women’s denim and the loose/baggy trend driving both men’s and women’s segments.

• Lifestyle expansion is working: Tops grew 16% last quarter, and management has reset the category with shorter go-to-market cycles and more fashion-forward assortments, helping Levi’s evolve into a full head-to-toe brand.

2. American Eagle Outfitters (AEO)

AEO has been in turnaround mode, and early signs show their aggressive marketing and product reset could be hitting the mark, especially in denim.

• Sydney Sweeney’s “Good Jeans” campaign is significantly driving traffic: Digital visits have spiked sharply this month, approaching holiday shopping levels. The campaign tapped into a core denim niche that’s giving the brand a much-needed turnaround catalyst…despite headline drama.

• OFFLINE is a growth engine: The activewear sub-brand is gaining market share and awareness, with a cohesive product mix balancing basics and fashion. Management is leaning heavily into OFFLINE’s momentum.

• Product cleanup ahead of back-to-school: After a tough Q1 with product misses and an inventory write-down, the team has reset buys, tightened assortments, and is prioritizing clean inventories for the “Super Bowl” back-to-school season.

3. On Holding AG (ONON)

ONON has been one of our highest-conviction calls this season, and it’s already delivered for members.

A LikeFolio member wrote us after closing a bullish earnings trade for a 100% gain in under two days:

The reason for our conviction is simple: the data and fundamentals are both surging.

• Q2 beat with raised guidance: Net sales up 38% constant currency, gross margin to 61.5%, and adjusted EBITDA margin to 18.2%. ONON raised its full-year outlook across sales and margins despite higher tariffs.

• DTC strength + apparel growth = margin expansion: DTC sales grew 54% cc, lifting mix to 41% of revenue. Apparel sales rose 75% cc, proving ONON is successfully expanding from footwear to a toe-to-head sportswear brand.

• Brand heat across performance and lifestyle: Nine footwear franchises each contribute 5%+ of revenue, with standout launches like the Cloudsurfer 2 and Cloud 6. Collaborations with LOEWE, Zendaya, and FKA twigs are widening appeal and reinforcing premium positioning.

Final Takeaway

LULU is tempting on price, but consumer momentum hasn’t turned — and in this market, that’s a dangerous setup.

Meanwhile, LEVI, AEO, and ONON are showing the kind of positive consumer and cultural trends that can fuel both near-term stock moves and longer-term growth stories.

• LEVI is capitalizing on the denim revival and monetizing Beyond Yoga’s growth.

• AEO is leveraging a viral campaign and category winners like OFFLINE to rebuild momentum.

• ONON is executing a premium, multi-category expansion with accelerating brand heat.

That’s where we’re putting our attention — and our bullish bets — right now.