I can't tell if Lulu was being an idiot or a genius by retreating after that. If he were to play by his own principals, he'd take the game. The ends justify the means. He got the empress, so who cares what anyone else thinks of him. But instead he lets him go, as if to say he wanted to win properly, which is the exact opposite of how he usually operates, though he's begun to show more and more of that side.
I really think he just had no idea what to do and moved on a whim.