Shares of athletic apparel maker Lululemon (LULU) plunged last week after the company downgraded its profit outlook due to declining consumer sentiment, raising concerns that the Trump-led trade war is weighing on U.S. consumer spending.
LULU stock dropped as much as 20.1% on Friday, extending earlier pre-market losses. Financial platform Barchart described the sharp decline as a “death candle,” foretelling of further losses in the near term.
LULU stock is now down more than 30% year-to-date and 17% over the past 12 months.
Ironically, Lululemon’s first-quarter earnings and revenue exceeded Wall Street expectations. The company reported earnings of $2.60 per share on revenue of $2.371 billion, just above analysts’ forecasts of $2.58 per share on $2.36 billion in revenue.
The downturn began after Lululemon CEO Calvin McDonald addressed shareholders.
“We continue to see a more cautious, discerning consumer,” McDonald said during the company’s earnings call. “We’re definitely not happy where the growth is in the U.S.”
Lululemon also cut its full-year earnings outlook, citing a “dynamic macroenvironment” — a veiled reference to the ongoing trade tensions.
The company now expects earnings per share between $14.58 and $14.78, down from its previous estimate of $14.95 to $15.15.
“Strategic price increases”
Lululemon has become an unfortunate casualty of President Trump’s trade war as the administration pushes to bring more manufacturing back to the U.S.
For Lululemon, the thought of moving production facilities to the United States is daunting. As of 2024, 85% of Lululemon’s products were manufactured in Asia, including 40% in Vietnam and 17% in Cambodia.
Other key manufacturing hubs include Sri Lanka, Indonesia, and Bangladesh.
Many of these countries appeared on President Trump’s “Liberation Day” tariff list, with Cambodia, Vietnam, and Bangladesh facing some of the highest proposed tariffs.
In response to the tariff threat, Lululemon is planning “strategic price increases, looking item by item across our assortment,” according to the company’s chief financial officer, Meghan Frank.
These price hikes are expected to roll out in the second half of the current quarter and continue into the third quarter, Frank added.
Lululemon isn’t the only apparel maker cutting its profit forecasts in response to tariffs. PVH, the parent company of Calvin Klein and Tommy Hilfiger, has warned that tariffs will impact its profitability in 2025.
American Eagle Outfitters, Abercrombie & Fitch, and Macy’s have also lowered their profit outlooks or scrapped their 2025 forecasts altogether.
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