Gary Black
Co-Founder & Portfolio Manager of The Future Fund
Lululemon remains one to avoid after another dismal quarter, with poor merchandising, product strategy and leadership. The shares fell 19% after hours on the results. The leadership handover was too slow: Heidi O'Neil, formerly Nike's President of Consumer and Product, was named CEO on April 22, 2026 but only takes over on September 8, a four-month gap a company should not allow. x.comÂ
Lululemon may still not be on the right path after a disastrous six months that included firing its CEO. Its new loose-fitting yoga and gym wear clashes with a brand built on tight-fitting wear. Management blamed weak Q1 sales on the boardroom fight with founder Chip Wilson, though a proxy fight should not hurt sales. New CEO Heidi O'Neill does not start until September, implying two more mediocre quarters as Vuori, Alo and others keep taking share. x.comÂ
Lululemon's new CEO is unlikely to turn it around. The pick comes from a company that has lost its way over the past few years, which gives shareholders little reason to believe in a turnaround and explains the stock's drop on the news. x.comÂ
Lululemon needs its founder Chip back as CEO, and he is getting board seats rather than the CEO job. New CEO Heidi starts September 8, while founder-CEO performance is what the company needs. Below $100 a share, its enterprise value is about $14B, less than the roughly $19B Nvidia has put into Poolside and Hugging Face. x.comÂ
Lululemon's 18% premarket drop looks like an overreaction given its improving margins. x.comÂ
Lululemon's CEO saying the company continues to navigate some challenging dynamics is corporate speak for serious trouble. The stock fell 18% after hours on the results. x.com x.comÂ
Lululemon's demand keeps deteriorating, and takeover hopes are a risky reason to hold it. It cut full-year guidance again, with Q2 revenue down 4%, Americas sales down 8% and comparable sales down 9%, sending shares below $100 for the first time since 2019. Michael Burry calls it his largest position and sees a possible private equity takeover, but a Stage 4 decline can last longer than expected, as PayPal holders learned when Stripe chose not to bid. x.com x.comÂ
Lululemon is an 800lb gorilla worth defending despite bad management and the politics around its skin-tight leggings. x.comÂ
Lululemon is probably going lower because sales and margins are imploding while inventory grows, and a new unproven CEO is coming in. Q3 guidance calls for revenue down 10-11%, North America down mid-teens and inventory up low single digits; full-year revenue should fall 5-7% with inventory up mid single digits. Even granting $6 of annualized EPS versus a ~$4 run rate, 12x for an off-trend retailer implies about $70, versus $100 after an 18% drop. x.com x.comÂ
Lululemon's guidance is the problem: the stock is dumping after mixed results that included a strong EPS beat. The chart had already signaled not to buy yet. x.com x.comÂ
Lululemon is cheap at around 11x earnings with gross margins above 50%, while many people, including the founder, are pushing for a turnaround. Sales growth is tiny, but the balance sheet is solid and the company makes an interesting acquisition target. The reported collapse of talks with founder Chip Wilson, per WSJ via @DeItaone, looks good for the stock: Wilson may try to take it private or bring in a strategic buyer. x.com x.comÂ
Lululemon is not worth bottom-fishing even though the bad news will eventually be priced in, because forward estimates keep falling and a bottom is hard to time before fundamentals bottom. The business is not a zero: its stores are still busy, if less than before. There are better places to look for a bargain. x.com x.com x.comÂ
