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A month ago, Michael Berry told all his followers that any price below $100 was a bargain, and that he planned to buy more. Well, you know what happened yesterday, guys? Stocks are now falling to historic lows . You haven't seen these levels for Lululemon since around 2018. P/E ratio is seven, guys.
Market capitalization is 10.5 billion. Anyway, Michael Berry sold the stock, but he's doing it to capture tax losses, and he bought Deckers. Decker shares. This is the manufacturer of Hoka Guys and Ugg boots, and he said he buys them as replacements. Once he covers his losses from Lululemon, he will buy them back.
That's the trick. If you sell shares at a loss and buy the same shares back within 30 days , the IRS will offset the loss. This is the " wash sale" rule. So, Deckers is keeping him in a similar thread for a month, but after that, he plans to return to Lululemon. He says he's not going to give up the shares yet, guys .
I mean, he definitely sold at a loss. He was optimistic about $200. I was optimistic about $100, and honestly , he's right. This company is underrated. I think he just bought the stock a little too early, and the market is of course super irrational, but he's a typical value investor, and he's right.
This company is underrated. He just bought the stock a little too early , which probably makes him wrong, right? So, according to his Substack, the purchase price of Lululemon was around $238, and he added more shares at around $10. Uh, now he's selling at a loss of $94. He said he would buy more shares up to $100.
We don't know if he did this before the sale. Right now the earliest he could clearly return to the stock is November 5th, but that says a lot about tax season behavior and very little about whether business is coming back. But let's take a look at Lululemon today. Uh, let's quickly check Finviz. 13% short position, 100 million shares outstanding, 8% insider holdings .
Um, sales haven't changed. The number of shares outstanding is actually falling year after year, as are earnings per share. A bunch of discounts, guys. A bunch of discounts. Wall Street doesn't like these stocks, but we have a little insider buying . It seems like it's still June. Insider purchase for half a million, half a million, a million dollars from one of the directors for $164.
Um, so at these levels you buy them cheaper than when Michael bought them. You buy them cheaper than insiders buy them. I think this is a good deal. The P/E ratio is seven. Let's take a quick look at the numbers. They posted $2.4 billion in revenue last quarter. This is 4% less than last year. This is the first quarter they have fallen.
And earnings per share were $2.92. This is 5% less. Earnings per share have now been declining for five consecutive quarters. But here's what we need to pay attention to. In fact, the situation is much worse, as Lululemon received a $134 million duty refund. So this return of funds provided them with an increase in earnings per share of 86 cents.
This will bring the figure down to around $2.06. Now the situation is even worse, 33% less than last year. Profitability 60%. In fact, it has grown. Again, this was helped by the return of customs duties. Very similar to what is happening with Nike. Their numbers looked good last quarter, but that's only thanks to a giant customs refund.
Again, if you factor in the profitability, it's probably going to be somewhere in the 54-55% range, which is actually lower than last year. They peaked at 60% profitability. Since then, it has been steadily decreasing. Let's take a look at the comparative sales, guys. In America, the drop is 12%. Every region, mainland China, the rest of the world–everything is falling year after year.
But will the company survive? Let's move on to the balance sheet. So, finances, balance. We are quick to follow the annual report. Well, they still have $1.3 billion in cash, compared to an all-time high of $2.2 billion in 2024. And absolutely zero debt. No long-term debts. So, just talking about cash, guys, if we go back to my report, I have what's called a cash position.
So, I take the cash, subtract the debt, which is zero debt, and divide by the total number of shares outstanding. This gives us $12, which Lululemon has as a cash-only position. So that's about $12 of net cash per share for Lululemon alone. Now, where they went wrong, since they had a lot more cash, was with the stock buybacks they were doing.
They didn't do very well . So, I mean , look at this. This is from, I mean, since 2024, they've spent $591 million, $1.6 billion on buybacks in 2025, $1.2 billion on buybacks for 2026 so far. And look at these prices . In 2025, they probably bought when the stock had tripled, quadrupled in price. And they are still buying the 2026 stock , which is still twice as high.
The shares are currently worth $94. So, the stocks they were buying fell by about a third if they bought here. Uh, buybacks certainly reduced the number of shares outstanding, as you can see here, but they also used cash at prices that now look too high. And the company said in its latest report that the forecast does not include further buybacks.
Uh , they're trying to reserve their cash now. So, they spent about $2 billion buying back shares at prices that were too high. What else? On the other hand, guys, Lululemon is still making a ton of money. Cash flow from operating activities increased by 374 million, up 14% year-over- year. The free cash flow margin is still 9%.
They still bring in a lot of money. And if you scroll down, the net profit is negative, 329 million. This is 11% less than last year. No news yet on Heidi O'Neill, the Nike veteran. Remember, she took office in September, but there has been no news, public information, or any strategy from Lululemon yet.
Its first earnings report will be in December, when its latest earnings are released. Now that's a falling knife, guys. I wonder where the bottom will be. There's still a lot of negative news coming from Lululemon, competition from Alo and Vuori. Tariff pressure is still ongoing. Yes, the balance sheet gives us protection against declines, but all comparable sales are falling year over year.
So once they get back to growth we might see a turnaround, but they have no debt, which means you can't really lose. It depends on how irrational the market becomes. However, at $94, it trades at a P/E ratio of 7. Total annual sales for 2026 are currently $ 11.1 billion. By the way, this is a historical maximum.
Sales at price multiplied by revenue. Income is higher than market capitalization. So it looks cheap. This looks cheap. But when earnings estimates continue to fall, especially from banks and analysts, then it could continue to get cheaper. For analysts to revise their earnings, we will have to wait to see what her plan is, there will also be a turnaround in the markets.
But now, guys, Burry has sold. I can't believe Burry sold to take a tax loss. He says he plans to return after the 30- day window. Lululemon, the stock is a falling knife right now. Real profits are actually worse if you remove the tariff refunds for the last quarter. Hmm, North America is shrinking, China is shrinking.
The company has cash and they have no debt. In my opinion, I still think it's extremely underrated and they will eventually come back. I forgot to check some technical indicators. Look at this, guys. Selling well below the 200- day moving average. On a weekly basis, guys, it's almost in oversold territory.
$94 seems like a good entry point, but Michael Berry sold. He could be the new Jim Cramer. Share your thoughts in the comments below. Everything in this video is for educational purposes only. Anyone optimistic about Lulu? See you next time.
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