Lululemon Shares Plunge as Tariffs and Sluggish U.S. Sales Hit Outlook
Shares of Lululemon tumbled more than 15% in extended trading on Thursday after the Canadian athletic apparel brand slashed its sales forecast, citing the heavy financial toll of U.S. tariffs and a crackdown on duty-free imports under President Donald Trump’s trade policies.
The company said it expects the new tariffs, coupled with the elimination of the “de minimis” exemption, to cost roughly $240 million (£178.4 million) this year. The exemption had previously allowed retailers to ship online orders worth $800 or less to U.S. customers without paying import duties – a key driver of Lululemon’s e-commerce operations.
“The removal of the de minimis rule will have a significant impact on our earnings as it disrupts U.S. e-commerce shipments,” said Chief Financial Officer Meghan Frank during an earnings call.
For the next quarter, Lululemon projected revenue between $2.47 billion and $2.5 billion, falling short of Wall Street expectations.
U.S. Sales Disappoint Despite Overseas Growth
While international sales have shown “positive momentum,” CEO Calvin McDonald admitted that performance in the U.S. market has been underwhelming.
“We are disappointed by our results in the U.S.,” McDonald said, adding that the company plans to explore changes to its supply chain and cost structure to offset the rising expenses from tariffs. However, he cautioned that these adjustments would take time to deliver results.
McDonald also acknowledged that the brand’s product cycles had become too long and predictable, causing it to miss out on emerging fashion trends and opening the door for rivals like Vuori and Alo Yoga, which offer similar products at lower prices.
Earlier this year, Lululemon raised prices slightly to help manage rising costs, a strategy now complicated by the latest wave of U.S. import duties. Most of the company’s products are manufactured in Asia, particularly China and Vietnam – regions that have been hit hardest by the steep tariffs imposed on apparel.
Tariffs Shake Up Sportswear Industry
The impact of Trump’s trade policies is being felt across the global sportswear industry.
German sportswear giant Adidas recently warned that U.S. tariffs would cost it €200 million ($233 million; £173 million) this year, prompting the company to raise prices for American customers. Nearly half of Adidas’ products are manufactured in Asia.
Similarly, Nike increased prices on select trainers and apparel in June to counter higher import costs.
As tariffs ripple through supply chains, Lululemon faces mounting pressure to maintain its premium pricing strategy while defending market share against more affordable competitors. Investors, spooked by Thursday’s warning, wiped billions off the company’s market value as its stock fell sharply after hours.
