Michael Burry
· Cassandra Unchained
· June 05, 2026 at 19:56
· ⏱ 1 min read
| Read on Substack ↗
Summary
Despite uninspiring earnings and a 330bps gross margin decline driven by tariffs, Lululemon (LULU) has $1.5B cash, minimal debt, improving free cash flow, and a healthy cash conversion cycle — yet only 2 of 32 analysts rate it a buy. The author suggests the consensus is overly pessimistic given the company's financial strength, implying the tariff drag may be temporary and the stock's risk/reward is asymmetric to the upside.
•Gross margins fell 330bps, with tariffs accounting for -380bps partially offset by +100bps cost cutting and -40bps markdowns.
•LULU holds ~$1.5B cash with insignificant financial debt.
•Q1 free cash flow turned positive this year versus a 'nightmare' last year.
•Only 2 of 32 Wall Street analysts have buy ratings, described as the 'least cheery consensus' the author has seen for a company in this financial condition without legal/regulatory liabilities.