Beneath Lululemon’s Stock Slump Lies a Broader Spending Squeeze

Lululemon Athletica (NASDAQ:LULU) has been trading in the double-digit range this month for the first time in this decade. The popular apparel stock has halved in 2026, down more than 53% year to date. With falling revenues and same-store sales, surface-level pessimism is obvious, but the result may signal a broader sector pullback rather than an isolated brand issue. Follow the Leggins The Q2 earnings results failed to reverse the yearly trend. Revenue decreased 4% year over year to $2.4 billion, missing the $2.46 billion analysts expected, while comparable sales dropped 10% on a constant-dollar basis. Management cut full-year EPS guidance to $9.48–$9.73 from $10.95–$11.15, implying a 26%–28% decline from fiscal 2025’s $13.26. The third-quarter outlook of $0.93–$0.98 sits roughly 60% below prior consensus, JPMorgan‘s Matthew Boss noted. With North American revenues sliding 8% and China contracting 2%, new CEO Heidi O’Neill has to choose where to focus first. O’Neill spent 27 years at Nike (NYSE:NKE), a brand facing an existential crisis of its own, where she specialized in brand management. Thus, her first mission might be restoring the reputation after the firm arguably went after too many categories and diluted itself. "You have these brands that stretch; they lose that brand equity. They’re able to sell a lot, but not mean a lot. And so, what that means is you watch the profits go down," Guggenheim Securities analyst Simeon Siegel said according to Fortune. The Valuation Trap vs. the Contrarian Bet At these prices, the shares trade at about 8x the forward earnings, but Wall Street has issued a mass retreat. Morgan Stanley cut its price to $83, BMO to $70 with an Underperform initiation, and JPMorgan to $95 from $154. Still, Michael Burry sees it differently. Lululemon is roughly 17% of his portfolio, and he has dubbed it the “trickster.” In February, he called $150 his “load up the truck price,” noting the stock traded at less than three times tangible book and under ten times earnings. Yet, the stock has lost more than a third since then, forcing the contrarian investor to rethink his IV15 metric – the price where he believes the stock could deliver a 15% annualized return over 15 years. However, Burry sees a possible path to the upside through a buyout – signaling that the business is a candidate for being taken private at a decent premium. The Sector Signal Cap-weighted consumer discretionary benchmarks like Fidelity MSCI Consumer Discretionary Index ETF (NYSE:FDIS) mask systemic weakness across apparel and specialty retail. FDIS, which lost only about 4% year-to-date, is heavily weighted toward megacaps like Amazon and Tesla. Meanwhile, numerous discretionary stocks from the index are trading at or near their 52-week lows, including Nike, Home Depot (NYSE:HD), Lowe’s (NYSE:LOW), Whirlpool (NYSE:WHR), and RH (NYSE:RH). The squeeze is hitting the pantry too. Campbell’s cut its quarterly dividend to $0.25 from $0.39 and guided fiscal 2027 sales down 2%–4%, citing private-label trade-down and an 8% drop in U.S. soup sales. This breadth suggests spending may have moved past discretionary belt-tightening and into structural exhaustion. Image: Shutterstock