Key Takeaways
- Shares of LULU plummeted 18% in after-hours trading following a disappointing fiscal Q2 earnings report
- Second-quarter revenue declined 4% year-over-year to $2.42 billion, while comparable store sales tumbled 9%
- The athletic apparel company revised its full-year sales forecast downward, now projecting a 5%-7% decrease for 2026
- Investor Michael Burry, who maintains LULU as his top position representing 17.4% of his holdings, described the stock as a “trickster” while pledging to acquire additional shares below $100
- Management attributed the weak performance to declining demand across North America and persistent challenges in the Chinese market
Shares of Lululemon (LULU) experienced an 18% decline in after-hours trading following the release of disappointing fiscal second-quarter results and a reduced full-year revenue forecast. The athletic apparel retailer’s shares had gained 1.4% during regular market hours before the dramatic post-market 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 fell 9%, surpassing analyst expectations for weakness.
Management also revised its annual guidance downward. The company now anticipates 2026 sales will decline between 5% and 7%, attributing the forecast to sluggish North American consumer demand and ongoing struggles in the Chinese market.
Meghan Frank, serving as Interim Co-CEO and Chief Financial Officer, explained that the company is adopting a “prudent approach” with its updated projections. She emphasized that internal teams are concentrating on enhancing merchandise assortments, expanding marketing initiatives, and optimizing cost structures.
“As we transition into Q3, while we are observing positive customer engagement with our activations and certain newer designs, the broader market reception to our product introductions continues to be uneven,” Frank stated during the quarterly earnings conference call.
Notable investor Michael Burry, famous for profiting from the 2008 financial crisis, entered the earnings announcement with LULU representing his largest equity holding at approximately 17.4% of his investment portfolio.
Burry Labels LULU a “Trickster”
Notwithstanding the sharp decline, Burry openly acknowledged his disappointment while maintaining his conviction. He characterized Lululemon as a “trickster” and noted the position has continuously challenged his resolve.
“Today, lululemon is the trickster in my portfolio. It does seem determined to take me where mermaids fear to tread,” he posted on his Substack publication.
Burry indicated he had anticipated a challenging quarter beforehand and reiterated his disciplined approach: either accumulate additional shares or exit the position. He chose accumulation.
“I will buy more of it if it trades under $100 tomorrow morning,” he declared. The stock was hovering near that threshold during extended trading hours.
Burry referenced historical investments to justify his continued patience. He mentioned Avanti, which he purchased at $12 in 2001, endured watching it decline to the $2 range, and continued accumulating before its eventual acquisition at $22 per share. He also highlighted Adobe (ADBE), Molina Healthcare (MOH), and Veeva Systems (VEEV) as examples of positions that experienced significant declines before ultimately rebounding.
LULU Has Declined More Than 40% in 2026
Burry mentioned that trading volume patterns and shareholder turnover metrics gave him greater confidence in maintaining his position. He suggested that more recent shareholders at current price levels would demonstrate lower selling pressure.
LULU stock had already lost over 40% of its value in 2026 prior to Thursday’s after-hours decline, though Burry has consistently characterized it as “very cheap.”
Frank acknowledged that both North America and China, representing the company’s two most significant markets, are expected to face continued brand headwinds as the third quarter progresses.
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