Lululemon's Chart Is Trying to Bottom While Sales Keep Falling

Lululemon's stock has finally produced a recognizable bullish setup after losing about 82% from its 2023 peak to its October 2026 low. That does not mean the business or the share price has completed a durable turn.

Technical analyst Frank Cappelleri identified a potential inverse head-and-shoulders pattern after the stock's September gap lower. His measured-move target was $119, with a $99 stop to define the trading risk. If the shares could sustain that breakout and later move toward $130, he argued, roughly six months of trading might form a larger base. These are chart-based scenarios, not company guidance or a valuation estimate.

The recent record argues for caution. CNBC's analysis counted five bullish breakout patterns during the past year, and only one produced even a modest advance before sellers returned. The stock also entered bear-market territory in early 2024 and became technically oversold that April, yet neither signal stopped the decline. A low relative-strength reading and a large loss from the peak are therefore not evidence by themselves that the bottom is in.

Fundamentals explain why buyers have been reluctant. Lululemon's fiscal second-quarter revenue fell 4% to $2.4 billion, while comparable sales declined 9%. Americas revenue decreased 8%, and Americas comparable sales fell 12%. International revenue increased 4% as reported, but its comparable sales still decreased 3%.

The margin headline also needs care. Gross margin rose 200 basis points to 60.5%, but the quarter included $134.5 million of tariff refunds that added 560 basis points to gross margin. Operating margin fell 190 basis points to 18.8%. Diluted earnings were $2.92 per share, including $0.86 from tariff refunds and related interest after tax. The one-time benefit therefore masked part of the underlying pressure.

Management expects fiscal 2026 revenue to decline 5% to 7% and diluted earnings of $9.48 to $9.73 per share. Third-quarter guidance called for a 10% to 11% revenue decline. Those forecasts create a clear fundamental test for any chart breakout: slowing declines, better Americas demand and margin support that does not depend on refunds.

The setup may be useful to traders because it defines invalidation near $99 and a potential objective near $119. Long-term investors need more. A sustainable base would be more credible if improving price action arrives with better comparable sales and cleaner profitability rather than another short-lived technical bounce.