Shares of premium leggings giant Lululemon plunged to their lowest level in eight years after its earnings announcement. Burry also continued to increase his stake through buying the dip.
Lululemon reported a year-on-year decline in revenue in its quarterly results announced on the 3rd, with revenue for the May–July period down 4%, net income down 11%, and full-year guidance revised downward. As a result, the share price closed at $100.61 in New York trading on the 4th, down 17.38% from the previous day and sharply lower year to date.
Second-quarter net revenue was $2.42 billion, adjusted EPS was $2.06, GAAP diluted EPS was $2.92, and comparable-store sales were down 9%. By region, the Americas were affected most severely, while mainland China reported lower revenue on a constant-currency basis and other regions remained solid. Full-year revenue and EPS guidance was lowered for the third time.
Analysts have pointed to the brand's fading appeal among Generation Z and cited an analysis indicating that customers are shifting to rival brand Alo Yoga. Burry is said to view Lululemon as a long-term holding and to be continuing to buy the dip. Although the share price fell immediately after the earnings announcement, his stake had reached 17% of his portfolio.
Wall Street's view remains measured, with many analysts maintaining neutral ratings and price targets not far from the current share price. The impact has also reached partner manufacturers in Japan and Taiwan, while plans to expand the store footprint in Japan remain in place. At the same time, the possibility of further downside cannot be completely ruled out.