LULU

Executive Summary

Cheap for a reason — the reset hasn't found its floor yet

lululemon (LULU) trades at $94.66, −58.1% from its 52-week high and 4.7% above its low, after Q2 FY26 revenue fell to $2.416B (≈−4.3% y/y) on comps of −9% and Americas comps of −12%. Management cut FY26 guidance a second time, to revenue of $10.35–10.50B and EPS of $9.48–9.73. The Q2 EPS of $2.92 includes a one-time $0.86/share tariff refund, so the underlying figure was about $2.06. The Q3 EPS guide is $0.93–0.98 against roughly $2.41 consensus before the print. China, which had been offsetting the Americas, flipped to −8% comps. The case for patience rests on new CEO Heidi O'Neill (ex-Nike, since Sep 8) and her Oct 7 product and operations hires, on Elliott's >$1B stake, and on a net-cash balance sheet ($1.4B cash, no funded debt) at ≈10× FY26 guidance. But FY27 consensus ($8.68) is still lower than FY26, so the multiple is less cheap than it looks. HOLD, $97 target — accumulate only near the $90 low or after evidence that Americas comps have bottomed.

FUNDAMENTALS

Premium margins on a value multiple — with an asterisk — Q2 FY26 (quarter ended Aug 2, 2026) from SEC EDGAR and the company release; multiples at $94.66 (Oct 12, 2026 close)

Q2 FY26 Revenue

$2.416B

≈−4.3% y/y vs $2.525B (EDGAR); comps −9%

Q2 Gross Margin

60.5%

~54.9% excluding the ~560 bps tariff-refund benefit

Q2 Operating Margin

18.8%

−190 bps y/y

Q2 Diluted EPS

$2.92

≈$2.06 excluding the $0.86/sh refund (EDGAR $2.92)

FY26 Revenue Guide

$10.35–10.50B

−5% to −7% y/y; cut twice this year

P/E on FY26 Guide

≈9.9×

$94.66 ÷ $9.605 midpoint; ≈7.8× trailing-4Q EDGAR EPS of $12.17

Market Cap · P/S (TTM)

$10.0B · ≈0.9×

TTM revenue ≈$11.10B (EDGAR, last 4Q)

Cash · Q2 Buyback

$1.4B · $330M

2.7M shares repurchased in Q2; inventory $1.7B (−1%)

Quarterly Revenue — Trailing 4 Quarters (SEC EDGAR)

$2.57B

Q3 FY25

$3.64B

Q4 FY25

$2.47B

Q1 FY26

$2.42B

Q2 FY26

GROWTH STORY

International still growing — but no longer enough to offset the Americas

+4%

International revenue, Q2 FY26

China Mainland +4% reported (−2% cc); Rest of World +5% (Q2 release, Sep 3, 2026)

−12%

Americas comparable sales, Q2 FY26

Americas revenue −8%; leggings −20% as shoppers moved to looser fits

40–45

New stores planned for FY26

25–30 international, mostly China (early-2026 plan)

SEP 3, 2026

Q2 FY26 results and second guidance cut

Revenue $2.416B, EPS $2.92 including a $134.5M tariff refund. FY26 guided to −5% to −7% revenue and EPS of $9.48–9.73. Shares fell ~15–17% to an 8-year low.

SEP 8, 2026

Heidi O'Neill becomes CEO

The former Nike president of consumer, product and brand replaces the interim co-CEOs.

OCT 7, 2026

Leadership overhaul

Maggie Gauger named President & Chief Product Officer and Joseph Godsey named COO. The Chief Brand and Supply Chain officers are leaving, and three C-suite seats remain open.

DEC 9, 2026 (EST.)

Q3 FY26 earnings

Guide: revenue $2.29–2.32B (−10% to −11%), EPS $0.93–0.98. First full quarter under O'Neill, where a 'kitchen-sink' reset is possible.

FY26–27

Tariffs, de minimis and activists

Further IEEPA refunds are excluded from guidance (upside). Elliott (>$1B) and Chip Wilson (~8.6%) keep pressure on the board.

Earnings & Signals

Forward Estimates, Surprises & Insider Activity

Forward Earnings Estimates

FY+1 EPS Consensus$9.44 (FY26 consensus; company guide $9.48–9.73, including ~$0.86 one-time refund)

FY+2 EPS Consensus$8.68 (FY27 consensus, year ending Jan 2028, a further decline)

PEG Ration/m (EPS expected to fall in FY26 and FY27)

Forward P/E≈10.0× FY26 / ≈10.9× FY27 (calculated at $94.66)

EPS Revisions (90d)↑n/a ↓n/a (FY26 consensus fell from ~$10.9–11.5 to ~$9.4) (Sharply down)

Guidance AccuracyWeak. FY26 EPS guide cut twice ($12.10–12.30 → $10.95–11.15 → $9.48–9.73). The Q3 guide of $0.93–0.98 compares with ~$2.41 consensus before the print.

Earnings Surprise Track Record

Q3 FY25 Est: $2.29 Act: $2.59 +12.6%

Q4 FY25 Est: $4.78 Act: $5.01 (release; EDGAR-derived $4.97) +4.8%

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

Q2 FY26 Est: $1.83 Act: $2.06 ex-refund ($2.92 reported) +12.5%

Beat Rate4/4 last four quarters, but beats have not prevented two guidance cuts

Insider Activity (90 Days)

Net Buying/Sellingn/a (no Form 4 open-market trades found Jul–Oct 2026)

Sell/Buy Ration/a

Neutral to mildly positive. The only recent open-market trade was a director purchase at ~$117, about 24% above the current price. Insider ownership outside Wilson is thin.

Director Chip Bergh (ex-Levi's CEO) bought 4,275 sh at $117.05 (~$500K) on Jun 15, 2026. Director Nicole Neuburger sold 622 sh (~$100K) on Apr 8, 2026.

Peer Comparison

Relative Valuation vs. Competitors

Company	P/E (fwd)	EV/Rev	Rev Growth	Gross Margin
lululemon	≈10.0×	≈0.8×	−4.3% (Q2 y/y)	60.5% (Q2; ~54.9% ex-refund)
Nike	17.9× (Aug '26)	n/a	−4% (FQ1'27)	42.8%
Deckers	≈11.0× (Aug '26)	n/a	n/a	n/a
On Holding	n/a	n/a	+21.6% cc (Q2'26)	65.4%
Amer Sports	≈14.5×	n/a	n/a	57.6%

LULU trades at a discount to Nike and roughly in line with Deckers on forward earnings, with revenue shrinking like Nike's. Its gross margin is still premium, but only On is pairing growth with margin. The multiple prices in continued U.S. share loss. Peer figures are from mixed dates.

Valuation

Price Targets & Scenarios

Scenario	Price Target	Assumptions	Probability
O'Neill Reset Lands	$136	Q3 marks the trough. Americas comps improve toward −3% by 1H FY27 as compressed product cycles and the new product team land, and China recovers. FY27 EPS ≈$9.75 (above the $8.68 consensus) re-rates to 14×, closer to Deckers and Amer.	20%
Slow Grind, Stabilizing	$100	FY27 EPS in line with the $8.68 consensus. Americas declines narrow but don't turn positive, and international grows mid-single digits. The multiple holds near 11.5× with net cash (~$13/sh) as support.	45%
Kitchen-Sink & Share Loss	$68	The new CEO resets with a third guidance cut and inventory or store charges. Alo and Vuori keep taking U.S. share and China stays negative. FY27 EPS ≈$7.50 at 9×, close to Morgan Stanley's $83 bear target and below it.	35%

Probability-Weighted Target: $97 (≈+2.5% vs $94.66 — no margin of safety above $90)

$97

Weighted

Bull $13620%

Base $10045%

Bear $6835%

Analyst Consensus

Stifel

$100

Hold, reiterated (Oct 8, 2026); cut from $134 after Q2

Morgan Stanley

$83

Underweight, maintained (Oct 8, 2026)

Goldman Sachs

$95

Neutral, PT cut $111 → $95 (Sep 14, 2026)

JPMorgan

$95

Neutral, PT cut $154 → $95 (Sep 7, 2026)

1 Buy · 29 Hold · 5 Sell — Consensus is a hard Hold: 1 Buy · 29 Hold · 5 Sell across 35 analysts (S&P Global via StockAnalysis, Oct 8, 2026). The average target is $104.91 and the median is $100, both only slightly above spot after the post-Q2 wave of cuts.

Technical

Key Levels & Options Intelligence

S/RSupport & Resistance

52-Week High

$225.98

200-Day MA

$141.44

Pre-Q2 gap (Aug 31 close)

$121.74

50-Day MA

$108.95

Post-Q2 close / round-number resistance

$101

Current Price

$94.66

52-Week Low (support)

$90.38

OptOptions & Sentiment

IV30 (Jul 2, 2026): 46.9% (IV rank 68)
Skew: Put skew steepened after HSBC downgrade to Hold
Short interest (Mar 13, 2026): 4.71M sh · ~4.3% of shares · 1.84 days to cover
Post-Q2 move: −15% to −17% on Sep 4, 2026 (8-year low)
Trend: Below 50- and 200-DMA; 50-DMA < 200-DMA
RSI(14): 38.5 (weak, not oversold)
Analyst avg PT: $104.91 (35 analysts, Oct 8)

Conviction Analysis

Systematic Conviction Score: 47/100 (Low)

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 is 47, which is Low (down from Medium at 54 in August). The valuation is depressed (≈10× guide, net cash), but FCF visibility has worsened after a second guide cut and a Q3 guide ~60% below consensus. FY27 consensus still points down, the new CEO's reset could go either way, and Street alignment is a hard Hold with Sell-side targets at $83.

Risk & Ownership

Risk Assessment & Insider Signals

OOwnership & Insider Signals

Institutional ~85%: Institutions and hedge funds own ~85.2% of LULU (MarketBeat, Aug 2026). Insiders excluding the founder own ~0.54%.
Chip Wilson (founder) ~8.6%: Largest individual holder. His proxy fight was settled on May 27, 2026: Laura Gentile and Marc Maurer joined the board, with a third apparel/brand director to follow.
Elliott Investment Management: Activist stake of more than $1B built in 2025. It pushed Jane Nielsen for CEO and has stayed publicly quiet since the O'Neill appointment.
Notable funds: Viking Global (~$150M, Q1 2026 13F), Giverny Capital, Scion Asset Management (Burry) and Fairfax Financial hold disclosed positions.
Institutional rotation: Mixed 13F flows. First Trust cut its stake 81% and Assenagon sold 263K shares (Jun 2026), while OMERS added (Jul 2026).
Short interest modest: 4.71M shares short (~4.3% of shares), 1.84 days to cover as of Mar 13, 2026, down from ~8.0M in Oct 2025. No post-Q2 figure was found.

Risk Heatmap

Quantified Risk Assessment

Severity Risk Factor Prob. PT Impact

High North America demand erosion

Q2 FY26 Americas comps fell 12% and leggings sales fell 20% as shoppers moved to looser 'away-from-body' fits. The U.S. is still the largest market, and management cited negative brand commentary and weaker traffic.

60% -20%

High Further guidance cuts

The FY26 guide was cut twice this year, to revenue of $10.35–10.50B (−5% to −7%) and EPS of $9.48–9.73. The Q3 EPS guide of $0.93–0.98 compares with ~$2.41 prior consensus, and management flagged a slow start to Q3.

40% -15%

High Earnings quality / margin compression

Q2 EPS of $2.92 included a $134.5M tariff refund ($0.86/sh). Excluding it, EPS was ~$2.06. Tariff costs, markdowns and earlier inventory build weigh on gross margin, which runs in the mid-50s % excluding the refund.

50% -12%

Medium China growth stall

China comps fell 8% in Q2 after social-media backlash over a marketing event and a soft Tmall 618. China had been the main growth offset; it was +30% comps in Q4 FY25.

40% -10%

Medium New-CEO 'kitchen-sink' reset

Heidi O'Neill (ex-Nike) became CEO on Sep 8, 2026 and reshaped the C-suite on Oct 7. A reset on the Q3 call could bring further guidance cuts, charges, or reinvestment that dilutes margins.

45% -10%

Low Governance / capital-allocation friction

The Wilson proxy fight was settled May 27, 2026 with 2 nominees added and a third director due. Elliott holds a stake of over $1B. TTM buybacks (~$1.12B) absorbed most of TTM FCF (~$1.28B) while sales declined.

25% -5%

Recommendation

Summary

Rating

HOLD

Conviction

Low

Price Target

$97

Timeframe

12 mo

Upside

+2%

Position Size

1%-2%

Entry Strategy

Tranche 1 — 25%

~$90

Starter only on a retest of the $90.38 52-week low ahead of the Dec 9 print. Keep it small; the Q3 guide already implies EPS down ~60%.

Tranche 2 — 35%

~$82

Add if a kitchen-sink Q3 pushes shares to Morgan Stanley's $83 bear target, about 9.5× FY27 consensus, with net cash at ~$13/sh.

Tranche 3 — 40%

Reclaim of $109 (50-DMA)

Complete only on evidence that Americas comps have bottomed and price reclaims the 50-DMA. Paying up for confirmation beats catching the knife.

1-Year Price & Key Levels