Lululemon: The Market Just Priced America at Zero

Michael Burry, a man who shorts bubbles was buying this on the way down

Lululemon’s American business earned about 1.8 billion dollars after tax last year.

The market is paying roughly nothing for it.

That is not a figure of speech. Run the arithmetic. The whole company is worth about 13.3 billion dollars today. Lululemon’s China business alone earned 701 million of operating income last year, growing 28%, at a 40% margin. Put a sober price on that, thirteen times, and China is worth nine billion on its own. The Rest of World business adds three billion more. The balance sheet holds another billion and a half in cash and zero debt.

China plus international plus the cash come to about 13.7 billion dollars. The entire company costs 13.3.

So the math hands you the American business, the single largest premium athletic brand in the United States, the one still throwing off 2.5 billion in operating profit, for less than nothing. The market has not just discounted America. It has assigned it a negative price.

That is the anomaly.

Everyone can see Lululemon fell 78%. Almost no one has done this subtraction, because the segment reporting that makes it visible only started in January 2024. The crowd is still looking at one wounded brand. The numbers say it is three separate businesses moving at three different speeds, and the market is pricing all three as if they were the worst one.

Let me earn that, then tell you why I still might not touch it.