Here's Why Lululemon Athletica (LULU) Fell in Q3

Diamond Hill Capital, an investment management company, released its “Large Cap Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. Markets continued their YTD rally in the third quarter of 2025, with the Russell 3000 Index gaining 8%, bringing the calendar-year returns to over 14%. The portfolio declined and underperformed the Russell 1000 Value Index in the quarter.  In addition, you can check the top 5 holdings of the fund to know its best picks in 2025.

In its third-quarter 2025 investor letter, Diamond Hill Large Cap Fund highlighted stocks such as Lululemon Athletica Inc. (NASDAQ:LULU). Lululemon Athletica Inc. (NASDAQ:LULU) designs, distributes, and retails athletic apparel, footwear, and accessories. The one-month return of Lululemon Athletica Inc. (NASDAQ:LULU) was -3.40%, and its shares lost 46.85% of their value over the last 52 weeks. On November 5, 2025, Lululemon Athletica Inc. (NASDAQ:LULU) stock closed at $167.59 per share, with a market capitalization of $19.874 billion.

Diamond Hill Large Cap Fund stated the following regarding Lululemon Athletica Inc. (NASDAQ:LULU) in its third quarter 2025 investor letter:

"Among our bottom Q3 individual contributors were CarMax and Lululemon Athletica Inc. (NASDAQ:LULU). Athletic apparel manufacturer lululemon’s efforts to improve merchandise this year have seemingly fallen flat with customers — requiring the company to reset its strategic plan and setting back the timeline for its expected reacceleration. Increased competition and evolving fashion trends are also weighing on sales, and tariffs and the removal of the de minimis exemption (which exempted imports worth $800 or less from taxes) are expected to disproportionately affect lululemon — and will take time to mitigate. We exited our position during the quarter in favor of more attractive investment opportunities elsewhere."

Lululemon athletica inc. (NASDAQ:LULU) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 55 hedge fund portfolios held Lululemon athletica inc. (NASDAQ:LULU) at the end of the second quarter, up from 48 in the previous quarter.   While we acknowledge the potential of Lululemon athletica inc. (NASDAQ:LULU) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Lululemon athletica inc. (NASDAQ:LULU) and shared stocks to buy from Michael Burry stock portfolio. JB Global Fund  opened a position in Lululemon Athletica Inc. (NASDAQ:LULU) during Q3 2025. In addition, please check out our hedge fund investor letters Q3 2025 page for more investor letters from hedge funds and other leading investors.

READ NEXT: The Best and Worst Dow Stocks for the Next 12 Months and 10 Unstoppable Stocks That Could Double Your Money.

Disclosure: None. This article is originally published at Insider Monkey.