J@joe @joe8 cases · 0% hit · -5.1% avgConviction 4/5 Into Q3 FY2026 earnings (December 2026), with a 6-12 month view on Spring 2027 p
Thesis
The shares trade near 9x trailing EPS after a roughly 18-20% post-Q2 reset, and the market is pricing the current product weakness as permanent. A product-led reset under a new CEO and a new chief product officer, plus a low Q3 bar, gives the recovery from the October low room to continue.
Lululemon Athletica Inc., alongside its subsidiaries, specializes in the design, global distribution, and retail of athletic apparel and accessories for both women and men. Its business operations are structured into two main divisions: company-owned retail establishments and direct-to-consumer sales. The firm's offerings encompass a range of clothing…
Entry 107.00 is the approximate Nov 3 close (106.95 per Google Finance). The stock traded higher on Nov 4 (about 108 to 110 per Robinhood and StockAnalysis), so please refresh it.
Price target 120.00 is about 13.7x ex-tariff FY26 EPS of roughly 8.75. That is the guided midpoint of 9.48-9.73 less the $0.86 tariff benefit. It also matches the roughly $120 average price management paid in Q2 buybacks. The multiple is my scenario assumption, not a sourced estimate.
Stop 89.50 sits just below the 52-week low of 90.38, so a break would invalidate the recovery.
Support 90.38 is the 52-week low (early October). Interim supports are the broken prior low of 95.35 and the Oct 15 close of 99.09.
Resistance 114.73 is the Nov 4 intraday high per StockAnalysis. The next reference is about 115, the Baird and Freedom Broker targets, then about 120.
Catalysts
1Q3 FY2026 earnings, expected early to mid December 2026 (TipRanks estimates Dec 3, Public.com lists Dec 10
2not confirmed by the company). Guide is revenue of $2.29-2.32B and EPS of $0.93-0.98.
3First Spring 2027 product under chief product officer Maggie Gauger, and any signs of newness and reorder traction on the Q3 call.
4Americas comps: Q3 guided to a mid-teens decline in North America, so any result better than that would support the recovery case.
5Further IEEPA tariff refunds: the $134.5M received in Q2 is in guidance, but refunds from later periods are not.
Key Risks
1Leggings fell about 20% in Q2 and newness underperformed at the start of Q3, per management. October data from Baird showed newness growth slowing to 34% fro…
2Q3 guidance implies operating margin of about 6.5% and a gross margin decline of about 250 bps, per the Q2 call. Q2 EPS of $2.92 included $0.86 of tariff ref…
3Sentiment is bearish and the analyst consensus target is about 103.66 (Hold), below the current price. Wolfe initiated at Underperform with a $75 target, and…
4A new CEO may reset the plan and guidance again (BofA flagged this), and UBS sees no meaningful fundamental improvement before 2H 2027. Inventory of $1.7 bil…
Read the Full Thesis
What is priced in: the stock fell about 18% after the Q2 print on Sep 3, per Investing.com, and made a 52-week low of 90.38 in early October, against a 52-week high of 225.98. The last close I could verify was 106.95 on Nov 3. Trailing P/E is about 8 to 9x per Google Finance and Robinhood, and Yahoo Finance data put the forward multiple near 10x (per the Motley Fool, Oct 19). The market is treating a weak product cycle as structural.
Product and revenue: Q2 revenue fell 4% to $2.4 billion with comps down 9%, per the company release. Under that, men's revenue was down only about 1%, women's down 4%, and international revenue up 4%, per the Q2 call. The damage is concentrated in women's leggings (down about 20%) and accessories (down 13%, with bags the weak spot). Management said it is chasing into winning styles, with about 20% more reorder volume than last year (per the Yahoo Finance call summary). A problem concentrated in one category, with other categories near flat, is more fixable than a broad brand failure.
Turnaround: Heidi O'Neill (ex-Nike) took over as CEO in September and hired Athleta CEO Maggie Gauger as a new chief product officer (per TipRanks, Oct 8). O'Neill said the reset starts with product. Elliott has reportedly built a stake above $1 billion (per Investopedia).
Bar and balance sheet: Q3 guidance is revenue of $2.29 to $2.32 billion (down 10% to 11%) and EPS of $0.93 to $0.98, per the Q2 call. Baird called its October checks a low bar into the December print. The company has $1.4 billion of cash, and it repurchased $330 million of stock in Q2 at an average of about $120 (per the Q2 release and the Yahoo Finance buyback piece).
What has to be true: Q3 prints at or above guidance, newness and reorders stabilise full-price selling, and Spring 2027 product lifts the Americas trend. Recovery is already visible in the shares, which were up about 18% from the Oct 7 low as of Nov 3 (per Baird via Investing.com).
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Investment case published by @joe. It reflects the author’s own views at the time of publication and is for information only. It is not investment advice or a recommendation to buy or sell any security. Prices and company data are delayed and may be inaccurate. User content is not verified. · How we measure performance
Long $LULU | Investment Case. The shares trade near 9x trailing EPS after a roughly 18-20% post-Q2 reset, and the market is pricing the current product weakness as permanent. A product-led reset under a new…