Lululemon Sinks 20% After Second Guidance Cut: Michael Burry Calls It a Fat Pitch Below $100

Shares of Lululemon Athletica (NASDAQ:LULU | LULU Price Prediction) are down 20% to $97.85 in Friday morning trading after the athletic-apparel retailer released Q2 FY2026 results and slashed its full-year outlook for the second time this year. The selloff caps a brutal stretch for a name that was down 41% year to date (YTD) through Thursday’s close at $121.77, after rising 1% Thursday ahead of the release.

Retail is broadly holding up while athletic apparel takes the brunt of the selling. Lululemon’s guidance cut describes weaker demand for its own brand, and that distinction matters for how other names in the group trade Friday.

Sitting under the day’s action is a live debate: the same guidance cut that broke Lululemon stock also pushed it into the range Michael Burry publicly named as his buy level. That tension frames the tape.

Second Guidance Cut Breaks the Stock

Lululemon reported Q2 comparable sales down 10%, with North America comps falling 12% and leggings sales down 20%, a drop in what remains the company’s signature category. Lululemon slashed full-year EPS guidance to $9.48 to $9.73, from a prior $10.95 to $11.15, and Lululemon’s Q3 revenue guidance implies a 10% to 11% year-over-year decline. Interim co-CEO Meghan Frank framed the update as a prudent recalibration given softer traffic and inconsistent new-product response entering the second half.

Management stated Q3 “has gotten off to a slow start” and pointed to negative brand commentary in North America and China as added pressures. Jefferies analyst Randy Konik was less generous, stating, “There are plenty more lemons to squeeze before this one turns.” His view captures what a cut of that size implies: the reset isn’t finished, and the second half likely gets worse before it gets better.

Beneath the top line, Lululemon’s Q2 revenue came in at $2.42 billion, missing estimates. Gross margin looked healthier at 60.5%, but the reported result included a one-time International Emergency Economic Powers Act (IEEPA) tariff refund that added 86 cents to EPS. Strip that benefit out and the underlying quarter looks materially softer than the reported figures suggest.

Burry’s Fat Pitch Below $100

Michael Burry took the other side in a Substack post Friday morning. Burry called Lululemon stock a “fat pitch” below $100 and said he plans to buy more shares. He pointed to $1.3 billion in cash and no financial debt as downside protection while the brand works through its issues, according to Substack.

Burry estimated 15% to 20% annual returns over 15 to 20 years if Lululemon returns to growth, a long-dated bet resting entirely on the turnaround. Lululemon named Heidi O’Neill as incoming CEO on April 22, with a start date of September 8. Interim co-CEOs Frank and André Maestrini have run the company across that gap, and the business deteriorated meaningfully during that stretch, which is the structural fact sitting underneath both the bull and bear reads.

The catch is the timing. Buying below $100 gives investors optionality on a turnaround, but the balance sheet doesn’t fix the traffic problem management flagged in North America, according to Substack. Burry is essentially paying today for a brand recovery that hasn’t started, betting the incoming leader can execute a reset with the cash cushion Lululemon still has intact.

Peers and the Retail Tape

Nike (NYSE:NKE) was down 38% YTD through Thursday’s close, weighed by weak Nike Sportswear demand and a Greater China reset that CEO Elliott Hill has described as multi-quarter. Meanwhile, Dick’s Sporting Goods (NYSE:DKS) was down 29% after CEO Lauren Hobart flagged “growing pressure across portions of the athletic footwear and apparel marketplace” at the company’s August update.

The sector picture tells the same story at the tape level. The SPDR S&P Retail ETF (NYSEARCA:XRT) was up 2% over the same period, a spread that isolates the pain in athletic apparel. Reddit sentiment on Lululemon flipped from bullish earlier in the week to bearish by Thursday afternoon, with a thread titled “phone Burry” dominating discussion into Friday.

What to Watch Next

Heidi O’Neill takes the helm September 8, and her early strategic signals set the tone for how the turnaround gets framed. The bull case rests on execution under a leader who hasn’t yet arrived, and the bear case rests on the guidance Lululemon just cut, which flags a demand problem.

Investors sizing new positions in Lululemon shares can watch for whether O’Neill offers a clear reset framework before the Q3 report. Given the range of outcomes and the CEO gap, keeping their exposure modest until the trajectory clarifies is a reasonable approach.

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