QS Research · Michael Burry's Scion Capital analyst template · 2006
lululemon athletica inc. (LULU)
As of 2026-11-08 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case +0% · downside -26% · upside +112%
At $110.79, today's 4.1x EV/EBITDA on $2.52B TTM EBITDA gives $10.33B EV plus $1.39B net cash = $11.72B equity / 105.59M shares = about $111/share, so the base case is roughly today's price. The downside at 2.9x is $82 (-26%) and the upside at 9.3x is $235 (+112%); even the large upside does not make this a long because the base case is flat and the downside is just worse than -25%. The market is treating the comp decline and margin pressure as permanent, while the company still has net cash, an 11.6% FCF yield and buybacks, but Q2 2026 comps fell 9%, FY2026 guidance was cut to -5% to -7% revenue and $9.48-$9.73 EPS, and the CEO transition leaves the operating inflection unproven. I use a rerated scenario range only because the 2026-09-03 guidance cut, the 2026-09-08 CEO start and the 2026-09-18 product reset are dated operating catalysts [S5, S36, S92]; the verdict is watch, not long.
Key numbers
- Share price: $110.79
- Market cap: $11.70B
- Latest financial period: TTM to Aug 2, 2026
- Revenue (TTM): $11.09B
- EV / EBITDA (TTM): 4.1x
- P/E (TTM): 8.3x
- Price / book: 2.44x
The 15 boxes
- ✓ 1. Long-form business notes
LULU makes money by designing and selling technical athletic apparel, footwear and accessories through an omni-channel model of company-operated stores, e-commerce and other channels, organized into Americas, China Mainland and Rest of World. Between the oldest and latest 10-K, scale rose from 521 stores in 17 countries and $4.40B revenue in the fiscal year ended Jan. 31, 2021 to 811 stores in 30 countries and $11.10B revenue in the fiscal year ended Feb. 1, 2026, while the mix shifted toward China/Asia and men's. The latest fiscal year shows revenue growth but lower operating income, net income and operating cash flow than the prior year.
- ✓ 2. Competitive advantage
The advantage is a brand-and-experience advantage, not a legally protected one: management says it competes on premium brand image, technical innovation, vertical retail and community marketing, while its own risk factors concede it holds limited patents and that imitation products can copy the performance characteristics. The history shows real pricing power — gross profit went from $2.46B on $4.40B revenue (FY ended 2021-01-31) to $6.28B on $11.10B (FY ended 2026-02-01) — but the latest year stalls: gross profit flat at $6.28B from $6.27B, operating income down to $2.21B from $2.51B, sales per square foot down to $1,426 from $1,574, and Americas revenue down 1.0%. Growth now comes from China Mainland (+28.9% in 2025 to $1,754,799K) and Rest of World (+15.6% to $1,500,757K), with tariffs adding a cost headwind. Durable-ish brand, structurally thin moat, currently eroding at the margin in its core market.
- ✓ 3. 10-Q takeaways
Q2 fiscal 2026 (quarter ended 2026-08-02, reported 2026-09-03) was a shrinking quarter: net revenue fell 4% to $2.416 billion, comparable sales fell 9% (10% in constant dollars) with Americas comps down 12%. The reported gross-margin gain and EPS both lean on a one-off: $134.5 million of IEEPA tariff refunds plus $4.1 million of interest added 560 basis points to gross and operating margin and $0.86 to diluted EPS of $2.92, so operating income of $453.7 million (-13%) is not like-for-like against $523.8 million a year earlier; SG&A rose 5.7% to 41.7% of revenue, including $13.4 million of proxy-contest costs. Cash was $1.4 billion with $593.7 million of revolver capacity, inventories $1.7 billion (-1% by value, -7% by unit), and 2.7 million shares were repurchased for $330.0 million. Guidance was cut: Q3 revenue $2.290-$2.320 billion (-10% to -11%) and EPS $0.93-$0.98; FY2026 revenue $10.350-$10.500 billion (-5% to -7%) and EPS $9.48-$9.73.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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