Lululemon Stock Surprises With Strong Earnings — Short-Interest and Steve Eisman’s Watchlist

Lululemon (NASDAQ:LULU): A Deep Dive into Earnings, Leadership, and Market Dynamics

Investors in the retail sector are keeping a close eye on Lululemon (NASDAQ:LULU), particularly as the stock has recently surged amid mixed earnings news and a key leadership shift. The company's third-quarter results beat expectations, yet its Q4 guidance fell short, raising questions about its trajectory. Meanwhile, short-interest in LULU has sparked renewed interest, with names like Steve Eisman reportedly watching the stock closely. For retail investors, the combination of strong international growth, domestic challenges, and an impending CEO transition makes Lululemon a compelling case study in retail resilience and stock market volatility.

Strong Earnings But Soft Outlook

Lululemon delivered a mixed bag of results in its Q3 fiscal 2025 report. The company notched $2.57 billion in revenue,

a 7.1% year-over-year increase and 3.7% above analyst estimates. GAAP earnings per share hit $2.59, surpassing the $2.21 estimate by 17.1%. These numbers reflect strong demand in international markets, where revenue grew by 33%, driven particularly by China. However, the U.S. and Canada, which together account for a significant portion of Lululemon's revenue, saw a 2% decline.

Despite the positive numbers, Lululemon issued Q4 revenue guidance of $3.54 billion, which is below analyst expectations. Management cited ongoing challenges, including soft U.S. consumer demand, tariff pressures, and a competitive athleisure market. The stock initially dipped after the earnings report but later rebounded, climbing roughly 10% following the announcement that CEO Calvin McDonald would step down.

CEO Transition and Short-Interest Dynamics

The news that Calvin McDonald will step down in January 2026 has added a layer of uncertainty for Lululemon investors. McDonald, who took the helm in 2022, is leaving after a year of underperformance and internal restructuring. While he will remain as a senior advisor until March, the board has begun searching for a new leader, raising questions about strategic continuity. Investors are now watching closely how the company will navigate this transition and whether the new leadership will be able to sustain Lululemon's growth momentum.

In parallel, LULU has seen a spike in short-interest, which measures the total number of shares sold short. Short sellers are typically betting that a stock will decline in value, and Lululemon's recent volatility has attracted attention from bears. The stock's sharp rise following McDonald's exit announcement caught many short sellers off guard, highlighting the unpredictable nature of retail stocks during leadership transitions. Names like Steve Eisman—known for his short bets on overvalued companies—have reportedly been watching LULU with interest, suggesting that the stock remains a point of debate in the investor community.

What This Means for Investors

For now, Lululemon's strong international growth and brand loyalty continue to offer a solid foundation for the company. Its 55.6% gross profit margin and $1.4 billion in gross profit for Q3 demonstrate healthy profitability. The company has also boosted its stock repurchase program by $1 billion, signaling confidence in its long-term value. Still, the Q4 guidance and domestic challenges point to a more complex picture. Retail investors should weigh how Lululemon plans to address U.S. performance while maintaining its international momentum.

The CEO transition adds an additional layer of uncertainty. While McDonald will remain as an advisor, the search for a new leader could influence strategic direction and investor sentiment. Investors looking to short LULU may be cautious about the stock's volatility, especially with Lululemon's track record of resilience and strong brand equity. Meanwhile, long-term investors may see this as an opportunity to assess whether the company can adapt and continue growing under new leadership.

Looking Ahead

The next few months will be crucial for Lululemon. As the board searches for a new CEO, the company will need to maintain its momentum while addressing domestic headwinds. The athleisure market remains competitive, and Lululemon will need to innovate and expand its product lines to stay ahead. Investors should watch closely how the new leadership team handles these challenges, as well as how Lululemon executes its Q4 strategy.

From a market perspective, LULU's short-interest activity shows that the stock remains a focal point for bears, but its recent performance has proven that it can rally sharply when sentiment shifts. For now, Lululemon's combination of brand strength, international growth, and stock repurchases provides a solid framework. Whether the stock can maintain its trajectory depends on how well the company navigates the transition and executes its strategy in the coming quarters.