Key Takeaways
- Shares of LULU plummeted 18% in after-hours trading following a disappointing fiscal Q2 earnings release
- Second quarter revenue declined 4% year-over-year to $2.42 billion, while comparable store sales tumbled 9%
- The athleisure giant slashed its full-year revenue forecast, now projecting a 5%-7% decline for fiscal 2026
- Big Short investor Michael Burry, who holds LULU as his top position representing 17.4% of his fund, labeled it a “trickster” but plans to increase his stake if shares fall below $100
- Management attributed the weakness to sluggish North American consumer demand and persistent challenges in the Chinese market
Shares of Lululemon (LULU) tumbled 18% in extended trading Thursday following a disappointing fiscal second quarter earnings report and reduced annual sales projections. The athletic apparel maker had gained 1.4% during regular market hours before the sharp after-hours reversal.
Lululemon Athletica Inc., LULU
The company reported second quarter revenue of $2.42 billion, representing a 4% decrease from the prior-year period. Comparable sales metrics showed an even steeper 9% contraction, surpassing analyst expectations for weakness.
Adding to investor concerns, Lululemon significantly reduced its full-year revenue outlook. The company now anticipates fiscal 2026 sales will contract between 5% and 7%, attributing the downgrade to softening consumer spending in North America alongside persistent headwinds in the Chinese marketplace.
Interim Co-CEO and Chief Financial Officer Meghan Frank characterized the company’s updated guidance as a “prudent approach” to current market realities. She emphasized that internal teams are concentrating efforts on enhancing merchandise assortments, amplifying marketing initiatives, and implementing disciplined expense management.
“As we transition into Q3, while we are observing positive guest feedback to our activations and select new designs, the broader customer response to our product introductions continues to be uneven,” Frank stated during the quarterly earnings conference call.
Renowned investor Michael Burry, celebrated for his prescient subprime mortgage bet chronicled in The Big Short, entered the earnings announcement with LULU representing his most substantial investment, comprising approximately 17.4% of his total portfolio holdings.
Burry Labels LULU a “Trickster” But Stands Firm
Notwithstanding the significant price decline, Burry candidly acknowledged his exasperation while maintaining his investment conviction. He characterized the athletic apparel company as a “trickster” and acknowledged the position has repeatedly challenged his resolve.
“Today, lululemon is the trickster in my portfolio. It does seem determined to take me where mermaids fear to tread,” he published on his Substack platform.
Burry disclosed that he had anticipated a disappointing quarterly report and reiterated his fundamental investment philosophy: either accumulate additional shares or exit the position entirely. His decision landed firmly on accumulation.
“I will buy more of it if it trades under $100 tomorrow morning,” he declared. Shares were hovering near that threshold in after-hours trading.
To justify his continued patience, Burry referenced historical investments that tested his conviction. He highlighted Avanti, which he initially purchased at $12 in 2001, endured watching collapse into the $2 range while continuing to accumulate shares, before ultimately realizing gains when it was acquired at $22 per share. He additionally cited Adobe (ADBE), Molina Healthcare (MOH), and Veeva Systems (VEEV) as holdings that experienced substantial drawdowns before ultimately recovering.
LULU Shares Down Over 40% Year-to-Date in 2026
Burry observed that trading volume patterns and shareholder composition turnover provided him increased confidence in maintaining the position. He reasoned that more recent investors who established positions at current price levels would demonstrate greater reluctance to liquidate.
Prior to Thursday’s after-hours decline, LULU stock had already surrendered over 40% of its value in 2026, yet Burry has persistently characterized the valuation as “very cheap.”
Frank acknowledged that both North America and China, representing the company’s two most significant geographic markets, continue experiencing brand-related pressures as the company enters its fiscal third quarter.
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