Lululemon shares fall as sales weaken

The numbers explain the caution. Lululemon reported second-quarter net revenue of $2.4 billion, down 4% from a year earlier, while comparable sales fell 9%. Management then guided third-quarter revenue to $2.29 billion-$2.32 billion, implying another 10% to 11% decline. Shares are down about 20% since that earnings update, underscoring how little patience investors have left for a company once treated as a structural growth story.

What makes the selloff economically important is that Lululemon is not just dealing with a cyclical dip. Foord’s concern is that the business is showing signs of product fatigue in the very categories that built the brand, especially leggings, which he says fell nearly 20% in the quarter. That matters because premium apparel companies rely on brand heat and pricing power to keep margins intact; when that weakens, revenue pressure tends to flow quickly into earnings estimates and valuation multiples.

China is another reason the story matters beyond one stock. Foord points out that the region had been the only part of the business still growing, but is now becoming a headwind. For investors, that changes the entire geographic mix of the bull case: a once-promising international offset is no longer enough to neutralize sluggish demand elsewhere. In a market increasingly sensitive to consumer weakness, that kind of reversal can reshape sector sentiment fast.

The valuation argument is more nuanced than it first appears. Lululemon’s multiple has come down sharply with the stock, but Foord says the company’s PEG has actually risen, a sign that the market may be discounting earnings erosion faster than the price decline can compensate. That is the classic setup for a value trap — cheap on headline multiples, but still expensive relative to the earnings trajectory. Investors who buy purely on the drawdown risk catching a falling knife if margins and growth keep deteriorating.

Still, this is not a story of collapse without response. Lululemon is trimming its pop-up store count to around 40 from 65 and slowing net new store growth, moves that suggest management is trying to protect returns rather than chase growth for growth’s sake. The company also has a new CEO, Heidi O’Neill, giving the market at least one credible catalyst for a reset in execution. For long-term investors, that matters because premium brands often recover only after management accepts that distribution discipline and product relevance matter more than expansion.

Wall Street, for now, is in wait-and-see mode, with 21 Holds, four Sells and just one Buy. The consensus target of $101.05 barely implies upside from here, which tells you the market is not pricing in a quick rebound. That may be exactly why contrarian investors are watching closely: when expectations are this depressed, even a modest stabilization in traffic, product mix or China sales could drive a sharp re-rating.

For investors, the key takeaway is that Lululemon is no longer being valued as a growth compounder — it is being treated as a turnaround. That changes the playbook. The stock is not yet a clear buy, but if the market has already priced in a prolonged slump, the next major move could come from any evidence that core demand is stabilizing. In a sector where brand recovery can be sudden and violent, patience may be the most valuable position now.