Pulse Check on $LULU
Up $35/share since publication, CEO stepping down—what now?
Good morning.
As many of you will have seen, Lululemon jumped on heavy volume following its Q3 earnings release Thursday afternoon—extending a rally that’s now put the stock roughly $35/share higher since I published my deep dive. (For those new here, Lulu is Aquitaine’s largest holding, at roughly 40%.)
A brief recap of the quarter:
Financials: Revenue and operating income (OI) exceeded consensus estimates by 3.5% and 18%, respectively.
Americas: Same-store sales (SSS) in the Americas declined 5% y/y—largely in line with expectations.
International: Results were a meaningful upside surprise, driven by 25% comps growth in China (FX-neutral), accelerating from 16% in Q2.
The most consequential surprise, however, came on the management front. CEO Calvin McDonald announced he will step down after seven years in the role, effective January 31, 2026. While revenue tripled under his tenure, the stock’s immediate reaction suggests the market views his departure as a positive. But is that read correct?
In my deep dive, I argued that many of the criticisms directed at McDonald were—when properly contextualized—broadly unfair, and that I remained confident in his leadership. I did, however, flag an important caveat: if the Spring 2026 assortment failed to reignite growth, all else equal on the macro front, a leadership change would likely follow.
Against that backdrop—and with the stock now up roughly 20% since publication—this feels like an appropriate moment to take a temperature check and reassess the portfolio implications. Specifically: do the facts argue for adding, trimming, or staying put?