Burry is ready to buy more Lululemon shares after an 18% plunge. Why isn't he closing out his position?

Investor Michael Burry, the real-life inspiration for the protagonist in the movie *The Big Short*, said he was prepared to buy more shares of athletic apparel maker Lululemon—even though the company’s quarterly report had raised his concerns. Wall Street was also unimpressed with the company’s results: during trading on September 4, the stock plummeted nearly 18%—to around $100.

Burry calls Lululemon the “trickster” of his portfolio—one that breaks the rules, throws a wrench in the works, and wreaks havoc. In his Substack blog, he writes that the stock—which is the largest holding in his portfolio—is behaving contrary to expectations and dragging him deeper into a drawdown with each passing day— “to a place even mermaids are afraid to venture.”

Even before the earnings report was released, Burry had anticipated a weak quarter for Lululemon and had mentioned this several times on his blog: In July, he wrote that investors were misjudging the company and predicted “explosive growth” for Lululemon in the long term.

The investor was right about the quarter. On September 3, the company reported weak quarterly results and once again lowered its full-year revenue and earnings forecasts. After reviewing the results and management’s comments, Burry acknowledged that the company’s situation was worse than he had expected. Sales declined in both China and the U.S., and in the U.S. market, they fell even despite the expansion of the store network. Global comparable sales fell by 9%, leggings sales dropped by 20%, and the company lowered its operating margin forecast to approximately 5%.

Technically, Burry writes, Lululemon exceeded its earnings forecast; however, the investor considers this result misleading: it was significantly bolstered by a one-time refund of previously paid import duties.

According to the investor, when a position experiences a drawdown like Lululemon did during Friday's trading session, he either buys more shares or sells them. In Lululemon's case, he continues to hold the company's shares—and plans to buy more.

In the investor’s view, the brand has the potential for stronger results going forward. The company has already incurred a significant portion of its marketing expenses early in the year, and its forecast does not take into account repeat orders for products that are selling better than expected. However, the mention of a postponement in the timing of expense recognition raised concerns: such changes can affect which reporting period the profit is recognized in.

In addition, Burry still considers the current stock price attractive. The company recently repurchased and retired 7% of its own shares at $142 per share. Even that price was significantly below his intrinsic value estimate: according to Burry’s calculations, the business’s true value is much higher, and at a price below $100 per share, the stock offers a tremendous margin of safety.

Burry’s bet is based on the assumption that Lululemon simply needs to return to growth for the current stock price to be justified. If that happens, according to Burry’s calculations, buying shares at around $99.50 could yield an annual return of 15–20% over a 15–20-year horizon. In his view, this is a very low bar, leaving little room for error. Therefore, he plans to increase his position when the stock trades below $100.

“In my view, betting against Lululemon right now is like betting back then that Abercrombie & Fitch would never return to growth, that Ralph Lauren would never return to growth, or that Lululemon itself would never return to growth (as in 2017),” Burry concludes.

Wall Street is generally cautious about Lululemon stock: According to MarketWatch, 27 analysts covering the stock recommend holding it (Hold rating), while four advise buying (Buy and Overweight) and four advise selling (Sell and Underweight).

Given the sharp decline on September 4, the company's stock is now trading at about 50% less than it was at the beginning of 2026. The average target price of $107.97 is 8% higher than the current price.

This article was AI-translated and verified by a human editor