Lululemon (LULU) Plunges 3.55% to April 2025 Low on Earnings, Options Activity

Lululemon Athletica (LULU) shares plummeted 3.55% intraday, marking the seventh consecutive day of decline and reaching its lowest level since April 2025, with a total drop of 28.66% over the past week.

The strategy of buying LULU shares after they reached a recent low and holding for 1 week resulted in poor performance over the past five years. The strategy yielded an excess return of -79.42% and a CAGR of -10.15%, significantly underperforming the benchmark return of 56.54%. Additionally, the strategy had a high maximum drawdown of -55.53% and a Sharpe ratio of -0.25, indicating significant risk and negative returns.

Lululemon Athletica's recent stock volatility can be attributed to several factors. The company's earnings report, released on June 5, 2025, was met with mixed reactions from investors. While the report showed some positive aspects, concerns about U.S. market weakness and the overall economic outlook weighed heavily on the stock. This led to a significant selloff, with the stock price dropping by approximately 20% following the earnings release.

Adding to the market's unease was unusual options trading activity. Traders were observed purchasing a large number of put options, indicating a bearish sentiment towards the stock. This activity further exacerbated the downward pressure on Lululemon's share price, contributing to the overall decline.

Despite the recent challenges, some analysts believe that the 18% selloff may have been overdone. They point to the company's strong brand and successful earnings reports in the past as reasons for optimism. However, the market's current sentiment remains cautious, and it will take time to see if the stock can regain its footing.