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Shares of Lululemon Athletica (LULU) have lost 42.5% over the past twelve months, while the S&P 500 returned 15.3%. On October 26, the stock closed 52.3% below its highest close of the past year, set in January. A drop of that size can look like a buying opportunity, yet management lowered its revenue outlook for the year in September, and buying now could still be early. So has the price fallen further than Lululemon’s profits, or only as far?
Lululemon Stock Has Fallen Further Than Its Profits
At the end of June 2026, the shares traded at 9.1 times the past four quarters’ earnings, compared with 15.9 a year earlier. That marked the lowest multiple in the last 40 quarter ends. By the October 26 close, the multiple was 8.2 times, against 22.9 for the S&P 500.
This lower multiple accompanies a margin that has shrunk. Lululemon posted an operating margin of 17.8% over the four quarters ended August 2, 2026, down from 22.9% a year earlier. Only 4 of the last 40 quarter ends featured a lower figure. In the latest quarter, sales fell 4.3% from a year earlier, and expenses consumed a larger share of revenue. Management tied that shift to fixed costs spread over less revenue, increased store labor and marketing, and fees related to a proxy contest. Executives also said that a tariff refund added 560 basis points to the quarter’s 18.8% operating margin. The stock looks cheap relative to its own past, but its margin sits near the bottom of its historical range. The tariff refund also flatters both the four-quarter margin and the earnings behind the October multiple; without it, the margin is lower and the stock less cheap.
What Must Lululemon Deliver In Fiscal Q3 2026?
Lululemon would have to beat its own forecast for the fiscal third quarter of 2026 to match analyst expectations. In September, management guided for revenue of $2.29 billion to $2.32 billion for that quarter, reflecting a decline of 10% to 11%. Analysts expect revenue of about $2.36 billion for that quarter, clearing the top of the company’s own guide. Analysts are therefore counting on a better quarter than the one management laid out.
Management’s comments in September, made a week before Heidi O’Neill took over as CEO, provided less support for a beat. While customers reacted well to some newer styles, management said the overall response to Lululemon’s product launches remained inconsistent, and leggings sales fell about 20% in the second quarter. The company also reduced its full-year revenue guide to $10.4 billion at the midpoint, down from $11.1 billion in June. News reports say O’Neill has since begun overhauling the leadership team, naming a new chief product officer in October.
