$LULU: Burry Calls It a Fat Pitch Below $100. A $134 Million Tariff Refund Says Check the Math First.
Lululemon fell 17% to a 52-week low after its second guidance cut in three months, and Michael Burry called sub-$100 shares a fat pitch. Strip out a $134 million one-time tariff refund and the real math gets interesting on both sides.
Lululemon shareholders had a bad Friday. The stock fell 17.4% to close at $100.61, touching $97.99 intraday, a fresh 52-week low, on 37 million shares of volume, roughly nine times a normal session. From its 52-week high of $225.98, the stock has now lost more than half its value.
The trigger was Thursday night's second-quarter report and, more importantly, the second full-year guidance cut in three months. And then Michael Burry, the investor who made his name shorting the housing bubble, threw gasoline on the cashtag by publicly naming Lululemon below $100 a "fat pitch," alongside JD.com and Alibaba. That is why $LULU is all over the stream this weekend.
Before anyone swings at the pitch, it is worth reading the quarter closely, because the headline numbers are flattered by a large one-time item that has nothing to do with selling leggings.
The quarter: a miss against its own guide
Revenue for the second quarter of fiscal 2026, which ended August 2, came in at $2.416 billion, down 4% from a year ago. Back in June, management guided this quarter to $2.450 to $2.475 billion. They missed their own three-month-old forecast.
The regional split shows where the problem lives:
- Americas revenue fell 8%, and Americas comparable sales fell 12%
- United States revenue fell 8%, Canada fell 11%
- International revenue rose 4% reported, but only 2% in constant currency
- China Mainland, the growth engine of the last three years, grew 4% reported but shrank 2% in constant dollars
Total comparable sales fell 9%, or 10% in constant currency. This is not a macro story. A brand losing 12% comps in its home market while premium athleisure competitors keep opening stores is a share and product story.
The $134 million check that dressed up the print
Headline diluted EPS was $2.92 against $3.10 a year ago. A modest 6% decline, at first glance almost resilient.
Except $0.86 of that $2.92 came from a one-time item: $134.5 million in IEEPA tariff refunds plus $4.1 million of associated interest, recognized in the quarter. Strip it out and underlying EPS was roughly $2.06, down about a third year over year.
The same item dressed up the margin line. Reported gross margin was 60.5%, up 200 basis points. The refund contributed 560 basis points, which means underlying gross margin was roughly 54.9%, down about 360 basis points, with tariffs and markdowns doing the damage. Meanwhile SG&A rose to 41.7% of revenue from 37.7% a year ago, the ugly arithmetic of deleveraging fixed costs against a shrinking top line.
Operating income fell 13% to $453.7 million even with the refund inside it.
Two cuts in three months, and a new captain arriving
In June, management guided fiscal 2026 to $11.00 to $11.15 billion in revenue and $10.95 to $11.15 in EPS. On Thursday they cut that to $10.35 to $10.50 billion and $9.48 to $9.73, and that new EPS range still includes the $0.86 refund. That is roughly $650 million of revenue guidance gone in one quarter, on top of the cut that produced the June numbers in the first place.
The company is also mid-handover. Two interim co-CEOs have run the business since the summer, founder Chip Wilson extracted board seats through a May cooperation agreement, and incoming CEO Heidi O'Neill, a longtime senior Nike executive, starts this week.
So here is the actual question the stream is arguing about: Burry's case rests on the multiple, and the multiple depends entirely on which earnings number you believe is real, the $9.48 to $9.73 with the refund in it, or the cleaner number underneath, and on whether the second guidance cut was the last one. That is a math problem, and the math is checkable.
The rest of this briefing is for paid members: the clean ex-refund earnings math and what multiple you are actually paying at $100.61, the holiday-quarter assumption buried inside the new guide, the buyback and net-cash arithmetic on a debt-free balance sheet, and scenario-by-scenario price zones into the early-December Q3 report.
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