This article first appeared on GuruFocus.
Lululemon Athletica (LULU) fell about 15% in early Friday after its fiscal second-quarter results missed expectations and the company reduced its full-year sales outlook.
The sharp decline also affected investor Michael Burry (Trades, Portfolio), whose position in the athleticwear retailer represents about 17.4% of his portfolio. Burry said he still owns the shares and could add to his position should the stock fall below $100.
Burry had anticipated a weak quarter and described Lululemon as a trickster, while noting that the company has faced periods of stress before. He said his approach is to either increase a position after a decline or exit it.
The earnings setback reflects weaker demand in China and increasing competition in the U.S. The company also posted a larger-than-expected sales decline, prompting another reduction to its annual outlook.
Interim co-CEO Meghan Frank said management is focusing on product development, higher marketing investment and expense control as it works to restore growth.
Burry’s willingness to buy below $100 may offer some support, but weaker sales and reduced guidance remain key risks.