LULU

Executive Summary

Broken stock, not broken brand — but September decides which

lululemon (LULU) enters September as a broken stock, not a broken brand. Shares trade at ≈9.8× trailing earnings, −46.5% from the 52-week high, after five straight quarters of Americas comp declines and a June guidance cut to $11.0–$11.15B revenue (flat to −1%). Q1 FY26 gross margin fell 410 bps on tariffs and markdowns while Alo and Vuori chip at the core U.S. customer. Against that: international revenue grew 22% and China Mainland 30% in Q1, the balance sheet holds $1.5B cash with zero borrowings, buybacks continue ($358M in Q1), and management expects to offset nearly all tariff cost by year-end. The catalyst stack is dense — Q2 results September 3, ex-Nike executive Heidi O'Neill takes over as CEO September 8, a refreshed board seating On's former co-CEO, and a Spring 2027 assortment reset targeting 35% new styles. At ≈11× forward earnings, stabilization — not reacceleration — is the bar. We stay HOLD with a $125 probability-weighted target: the September events are two-sided (±8% implied move, 10.3% of the float short), consensus EPS is still being cut, and cheapness alone is not a catalyst.

FUNDAMENTALS

The P&L behind the de-rating — Q1 FY26 and FY25 figures from company releases and SEC filings; multiples at $120.81 (Aug 28, 2026 close)

Trailing P/E

≈9.8×

Trailing-4Q EPS ≈ $12.35 at $120.81 — the cheapest multiple in the peer set

Forward P/E

≈11.0×

On FY26 guidance of $10.95–$11.15 diluted EPS, cut in June from $12.10–$12.30

Q1 FY26 Gross Margin

54.2%

Down 410 bps YoY on tariffs and markdowns; FY25 full year was 56.6% (−260 bps)

Q1 FY26 Operating Margin

11.2%

Down 730 bps YoY as SG&A deleveraged; FY25 full year was 19.9%

Q1 FY26 Revenue

+4.3%

$2.472B, +2% constant dollar — Americas −3%, international +22%

FY26 Revenue Guide

$11.0–11.15B

−1% to 0% vs FY25's $11.1B; excludes potential IEEPA tariff refunds

China Mainland (Q1 FY26)

+30%

Net revenue growth (+23% cc), comps +20%; ~16% of FY25 sales, up from 13%

Cash & Buybacks

$1.5B

Cash with zero borrowings; $358.3M repurchased in Q1 after $1.2B in FY25 — TTM FCF ≈ $1.28B

Quarterly Revenue — Trailing 4 Quarters

$2.53B

Q2 FY25

$2.57B

Q3 FY25

$3.64B

Q4 FY25

$2.47B

Q1 FY26

GROWTH STORY

The growth engine moved offshore

+22%

International revenue, Q1 FY26

vs. Americas −3%; +16% constant dollar — international comps +13% (Q1 FY26 release, Jun 4, 2026)

+30%

China Mainland revenue, Q1 FY26

Comps +20%; China reached ~16% of sales in FY25 (from 13%), store base building toward ~220

35%

New-style penetration, Spring 2027

Assortment reset cuts product development cycles to 12–14 months from 18–24 (management plan)

SEP 3, 2026

Q2 FY26 earnings (after close)

Guide: revenue $2.450–2.475B (−3% to −2%), diluted EPS $1.76–$1.81; consensus $1.79 (−42% YoY). Watch Americas comps (−5% in Q1, a fifth straight decline), tariff-mitigation progress, and whether the FY26 guide survives a third pass.

SEP 8, 2026

Heidi O'Neill becomes CEO

Ex-Nike President of Consumer, Product & Brand replaces the interim arrangement; stated focus — accelerate product breakthroughs, deepen cultural relevance, unlock global growth. She inherits a C-suite emptied by three senior August departures.

OCT 1, 2026

Board refresh completes

Per the May 26 cooperation agreement with founder Chip Wilson: Marc Maurer (ex-On co-CEO) and Laura Gentile (ex-ESPN CMO) seated, plus one added apparel product/brand director due by this date.

H2 FY2026

India launch · China build-out

Franchise-partnership entry into India; the majority of FY26 international store openings are planned for China Mainland.

SPRING 2027

Assortment reset lands

~35% new-style penetration on compressed 12–14-month development cycles — the first full product test of the O'Neill era, after holiday Q4 tests full-price discipline and the pledge to offset nearly all FY26 tariff cost.

Earnings & Signals

Forward Estimates, Surprises & Insider Activity

Forward Earnings Estimates

FY+1 EPS Consensus$10.93 (consensus, 31 analysts — stockanalysis.com; range $10.00–$11.58; −17.6% YoY vs FY25's $13.26)

FY+2 EPS Consensus$11.54 (FY2027 consensus, year ending Jan 2028 — a +5.5% rebound)

PEG Ratio≈2.0 est. (11.05× forward P/E ÷ ~5.5% FY27 consensus growth); current-year EPS growth is −17.6%, so PEG is of limited use here

Forward P/E11.05× on FY26 consensus EPS of $10.93 at $120.81; Morgan Stanley (Aug 25, Underweight) calls ~9.5–11× historically cheap but warns cheapness isn't a bottom while estimates fall

EPS Revisions (90d)↑0 ↓25 (One-way traffic lower — most of ~31 covering analysts cut after the Jun 4 guidance reduction; FY26 consensus fell from ~$12.28 to $10.93 (−40% over the past year), though estimates have gone flat in the last 30 days into the print)

Guidance AccuracyPoor on the year, conservative on the quarter: FY25 guidance was slashed in Sep 2025 (tariff hit) yet FY25 finished above it at $13.26, and the initial FY26 guide of $12.10–$12.30 was cut to $10.95–$11.15 in June. UBS expects a further cut to ~$9.70–$9.90 on Sep 3 — management beats its own quarterly bars, but its year-ahead guides have not survived contact.

Earnings Surprise Track Record

Q1 FY26 Est: $1.67 Act: $1.69 +1.2%

Q4 FY25 Est: $4.78 Act: $5.01 +4.8%

Q3 FY25 Est: $2.21 Act: $2.59 +17.2%

Q2 FY25 Est: $2.88 Act: $3.10 +7.6%

Beat Rate4/4 beats — but three of the four prints were 'beat and lower,' each paired with a full-year guidance cut

Insider Activity (90 Days)

Net Buying/Selling~$40M net selling — Wilson's Low Tide Properties sold 328,292 sh to Citibank in July (two 164,146-sh tranches, Jul 17 & 31, pledge unwind) vs one ~$0.5M director buy

Sell/Buy Ratio~80:1 by value

Bearish tilt with a caveat — the big seller is the founder's pre-arranged pledge unwind ('financial flexibility,' per the 13D/A), not a C-suite exodus of stock, but there is no cluster buying at the lows either

Director Charles (Chip) Bergh bought 4,275 sh @ $117.05 (~$500K) on Jun 15, 2026 — the only open-market insider purchase near the lows (SEC Form 4)

Peer Comparison

Relative Valuation vs. Competitors

Company	P/E (fwd)	EV/Rev	Rev Growth	Gross Margin
lululemon	≈11.0×	1.3×	0% to −1% (FY26 guide)	55.7% (TTM)
Nike	23.1×	1.3×	flat (FY26 actual)	43.3% (TTM)
Deckers	11.5×	2.0×	+9.8% (FY26 actual)	57.8% (TTM)
On Holding	15.6×	2.2×	~+20% cc (FY26 guide)	64.8% (TTM)
Amer Sports	22.0×	2.5×	~+24% (FY26 guide)	59.8% (TTM)

LULU is now the cheapest name in the set on forward earnings (≈11.0×) and ties Nike for the lowest EV/revenue despite a gross margin ~12 points above Nike's — the market is pricing structural decline. Growth peers On and Amer command 2.2–2.5× revenue, so any Americas stabilization leaves meaningful room to re-rate.

Valuation

Price Targets & Scenarios

Scenario	Price Target	Assumptions	Probability
O'Neill Reset + Low-Bar Beat	$158	Q2 clears the guide with tariff mitigation on track, the FY26 outlook holds, O'Neill's first moves (compressed product cycles, brand-heat rebuild) land credibly, and China stays near +20%. With 10.3% of the float short, positioning fuels the move; multiple recovers to ~13.5–14× on FY27E EPS ~$11.5 — still half the historical 25–35× range.	25%
One More Trim, Then Stabilization	$128	Q2 beats the quarter but FY26 EPS is shaved toward $10.5–$10.9 — a third, smaller cut that the market has largely pre-priced (median PT $122 ≈ spot). Americas comps trough through H2, holiday is clean on full-price discipline, and the stock settles around ~11.5–12× FY27E ~$11 while the CEO transition plays out.	45%
Third Cut Breaks the Floor	$94	The UBS scenario lands hard: FY26 EPS reset to ~$9.70–$9.90 on weak US and China sales, markdowns spiral against +18% inventory, and China decelerates below 20%. The 'cheap on current numbers' case breaks; multiple compresses toward ~9.5× a falling base — Truist's $94 sell target zone.	30%

Probability-Weighted Target: $125 (≈+3.5% vs $120.81 — asymmetric only below $110)

$125

Weighted

Bull $15825%

Base $12845%

Bear $9430%

Analyst Consensus

UBS

$120

Cut PT $124 → $120, Neutral (Aug 25) — models a FY26 EPS guide cut to $9.70–$9.90 into the Sep 3 print

JPMorgan

$154

Raised PT $149 → $154, Neutral (Aug 4) — the Street's rare raise, now among its highest targets

Wells Fargo

$105

Cut PT $110 → $105, Equal Weight (Jul 21) — target now sits below the share price

Truist

$94

Downgraded Hold → Sell, PT $115 → $94 (Jul 16) — weakening card spend, fading brand heat vs Alo/Vuori

1 Buy · 29 Hold · 4 Sell — Consensus is a hard Hold — 1 Buy · 29 Hold · 4 Sell (34 analysts) with a $127.77 average and $122 median target vs $120.81 spot. Targets collapsed from ~$200 earlier in the year; Jefferies, Truist and Wells Fargo sit at $94–$115 and only JPMorgan ($154) has nudged higher.

Technical

Key Levels & Options Intelligence

S/RSupport & Resistance

52-Week High

$225.98

200-Day MA

$154.09

Range Resistance

$123.49

Current Price

$120.81

50-Day MA

$117.81

Swing Support

$110.69

52-Week Low

$104.44

OptOptions & Sentiment

Put/Call Ratio (OI): 0.72 — modestly call-tilted (Barchart)
30-Day Implied Volatility: 57.7% · IV Rank 58% (Barchart)
Implied Move — Sep 3 Print: ±8.1% (~±$10) per Bloomberg options data
Median Realized Post-Earnings Move: 11.9% over the last 8 quarters — realized has been running above implied
Short Interest: 10.33% of float · 10.8M shares (stockanalysis.com, late Aug) — up from ~7.7% in early 2025
Days to Cover: 4.38 — squeeze fuel if Q2 clears a low bar
Pre-Earnings Flow (June print): Options volume 1.8× normal, calls led puts 10:9 (The Fly)
Event Calendar: Q2 FY26 results Sep 3 AMC · new CEO O'Neill starts Sep 8 · board refresh completes Oct 1

Conviction Analysis

Systematic Conviction Score: 54/100 (Medium)

Analyst Alignment

30%

FCF Visibility

25%

Catalyst Clarity

20%

Valuation Safety

15%

Mgmt Quality

10%

Weighted 0.30/0.25/0.20/0.15/0.10, the score lands at 54 — Medium, up from July's Low. Catalyst clarity (70) is the big mover: three dated events inside five weeks replace an open-ended CEO vacuum, and cash generation stays elite (FCF 65: ~$1.28B TTM FCF, $1.5B cash, zero borrowings, ~3.9% buyback yield). But a hard-Hold consensus with a median target at spot (alignment 40), a decade-low multiple that is 'only cheap against earnings that hold' after two cuts (valuation 55), and an August C-suite exodus into the O'Neill handoff (management 38) keep this a wait-for-proof story, not a conviction buy.

Risk & Ownership

Risk Assessment & Insider Signals

OOwnership & Insider Signals

Institutions own ~75% of the float: Institutional ownership 75.3% across 1,027 filers (stockanalysis.com / Fintel); Vanguard (~11%), BlackRock (~8.4%) and FMR top the register — heavy passive/index anchoring.
Founder Chip Wilson — 8.4% and now settled: Wilson's group holds 9,576,564 shares (~8.4%, 13D/A Aug 2026), the largest individual stake; the May 27 settlement seated two of his nominees (Marc Maurer, Laura Gentile) with an ~18-month non-disparagement standstill.
Q2 13F rotation skewed to sellers: 403 institutions added vs 710 trimmed in Q2 2026 (HedgeFollow); FMR cut ~3.40M shares (−79%), Viking Global −980,568, and Soros Fund Management exited entirely — the Soros exit knocked shares −3.7% in August.
Contrarian adds exist: Fidelity International (FIL) added ~2.02M shares (~$230M), Curated Wealth +1.00M, Sixth Street +0.95M and JPMorgan +0.87M in Q2 2026 (13F data).
Buyback still working: Repurchased 2.2M shares for $358.3M in Q1 FY26 with $1.0B left on the authorization as of May 3, 2026 (~7.6% of the market cap); buyback yield ~3.9%, and management expects FY26 repurchases broadly in line with FY25.
Short interest elevated and rising: 10.8M shares short — 10.33% of float, 4.38 days to cover (late Aug 2026) — up from ~7.7% of float in early 2025. Heavy short positioning cuts both ways into a binary September.

Risk Heatmap

Quantified Risk Assessment

Severity Risk Factor Prob. PT Impact

High North America contraction & markdown spiral

Q2 guided with North America revenue down low-double-digits, gross margin −410bps YoY and 'additional seasonal clearance' flagged; inventory ran +18% earlier in the year, raising markdown risk into fall.

60% -15%

High Tariff cost escalation

Management pegs FY26 tariff drag at $380M gross, ~$220M net after mitigation — up from $213M net in FY25; pricing offsets risk further demand erosion in an already-soft U.S. market.

55% -10%

High Third guidance cut at the Sep 3 print

FY26 EPS guidance already fell from $12.10–$12.30 (March) to $10.95–$11.15 (June); Q2 consensus EPS $1.79 implies −42% YoY, and UBS models a reset to $9.70–$9.90. Another cut breaks the 'cheap on current numbers' case.

45% -12%

Medium Premium brand erosion — share loss to Alo & Vuori

Coverage of the 2026 sell-off consistently cites market-share losses to Alo Yoga and Vuori, and analysts flag mounting reliance on discounting that erodes the premium brand image in a contracting core U.S. market.

50% -10%

Medium China growth stall

Mainland China's ~20% growth guidance (maintained in June) is the last real growth engine offsetting U.S. declines; negative social-media commentary has surfaced and analysts flag weak sales trends in both the U.S. and China into the Q2 report.

40% -10%

Medium CEO transition stumble

Heidi O'Neill takes over Sep 8 after a ~9-month interim stretch — and the C-suite emptied ahead of her arrival: the Chief Strategy, AI & Technology, and Communications officers all departed within two August weeks (Bloomberg). Shares sold off on her April appointment; execution risk is real until her team is rebuilt.

35% -8%

Recommendation

Summary

Rating

HOLD

Conviction

Medium

Price Target

$125

Timeframe

12 mo

Upside

+3%

Position Size

2%-3%

Entry Strategy

Tranche 1 — 35%

~$112

Post-event entry near swing support ($110.69). Let the Sep 3 print and the CEO handoff clear first — with an ±8% implied move and realized moves running near 12%, patience is cheap.

Tranche 2 — 35%

~$104

Retest of the 52-week low ($104.44) — where June's washout found buyers and the remaining $1.0B buyback authorization is most accretive.

Tranche 3 — 30%

~$95

Capitulation into the bear zone (Truist's $94 sell target) — only on a third guidance cut, and only with evidence Americas comps are troughing rather than accelerating lower.

1-Year Price & Key Levels