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Michael Burry Sees Value in Troubled Lululemon
25 Jun
Summary
- Burry framed a Lululemon bag with 'Who is John Galt?'
- Lululemon stock fell from over $400 to under $120.
- Burry predicts an 18% CAGR for Lululemon over 15 years.
Investor Michael Burry, known for his contrarian bets, has identified potential in Lululemon, a company he personally holds. Burry previously drew attention by framing a Lululemon bag bearing the Ayn Rand quote 'Who is John Galt?', an unusual pairing with the brand's core demographic.
This move by Lululemon founder Chip Wilson in 2011 is cited by Burry as an 'own goal' contributing to customer alienation. The brand's stock has experienced a sharp decline, falling from over $400 to below $120 within the last 18 months.
Burry attributes Lululemon's struggles to various factors including new taxes, product missteps, and leadership gaps, suggesting the brand is out of sync with the current AI era. He draws a parallel to Ross Stores' resurgence after the dot-com bubble.
Currently trading around $105, Lululemon's stock represents a 2.5 times tangible book value, the lowest multiple since early 2009. Burry views the company as a "spring-loaded franchise" weighed down by temporary issues. He forecasts an approximate 18% compound annual growth rate over a 15-year investment horizon, contingent on his assumptions.
