What Has The Market Missed In Lululemon Stock’s Drop?
Lululemon Athletica (LULU) continues to quietly absorb its own shares, a trend the current stock price appears to ignore. Investors generally view the athletic apparel maker as a leggings brand dealing with stalled sales. The stock lost 41.4% over the past twelve months, while the S&P 500 returned 17.9%. Yet the company steadily reduced its share count alongside that falling valuation, setting up a sharp contradiction. So how much of its own stock is Lululemon buying back?
Lululemon Spent A Tenth Of Its Value On Buybacks
Over the twelve months ended August 2, 2026, Lululemon deployed the equivalent of 10.3% of its current market value to buy back its own stock. That spending roughly matched the company’s free cash flow, which came to 12.1% of market value over the same twelve months.
These repurchases also easily outpaced the equity Lululemon issued for stock-based pay. The diluted share count fell from 120 million to 113 million in the year to August 2, 2026. The share count has dropped 11.3% over three years, leaving each remaining share to represent a larger portion of the underlying business.
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Why Do Buybacks Matter While Lululemon’s Sales Shrink?
The primary concern for the market is that Lululemon’s sales have started to shrink. Management now expects revenue for fiscal 2026 to fall 5% to 7% from fiscal 2025. Sales of leggings, one of its core categories, fell about 20% in the quarter ended August 2, 2026.
A lower share count cannot fix a contracting top line. Even so, Lululemon is currently purchasing equity at a low multiple. The stock trades at 7.9 times its earnings over the past twelve months, compared to 22.7 for the S&P 500. Those earnings incorporate the tariff refunds discussed below, and management’s guidance assumes no further impact from them.
During its September 3, 2026 call, management reported repurchasing shares at an average price of $120. The stock later closed at $99.09 on October 15, sitting about 17% below that average price. At this lower valuation, the same level of spending naturally retires a larger block of shares.
Can Lululemon Keep Buying Back Stock At This Pace?
Management expects to maintain this cadence, projecting repurchases in fiscal 2026 to be in line with fiscal 2025. The more difficult hurdle is profit. For the third quarter of fiscal 2026, management guided earnings per share of $0.93 to $0.98, well below the $2.59 reported a year earlier.
Additionally, profit in the quarter ended August 2, 2026 received a lift from refunds of tariffs. Those refunds and related interest, net of tax, added $0.86 to earnings per share of $2.92.
Lululemon can cover its buybacks for now. Over the past twelve months, the company spent less on repurchases than it generated in free cash flow. Falling profit, however, will test that financial buffer. The company is slated to release its next report on or around December 9, 2026. If repurchase spending slows or the diluted share count stops falling at that time, the broader case for the stock weakens.
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