Lululemon Athletica Inc. (LULU) suffered its worst stock drop in over five years Friday, plummeting 17% after slashing its full-year profit forecast amid rising tariffs, declining U.S. store traffic, and intensifying competition.
The Vancouver-based retailer now expects annual earnings of $14.58 to $14.78 per share, down from its earlier projection of $14.95 to $15.15. CEO Calvin McDonald cited a “dynamic macroenvironment” — including at least 30% tariffs on Chinese imports and 10% duties on goods from other countries — as key pressures.
Tariffs, Consumer Caution Weigh on Growth
“Today’s tariff paradigm has created uncertainty across retail,” McDonald told analysts Thursday, acknowledging Lululemon is “not happy” with U.S. growth trends. The company joins Nike and On Running in implementing selective price hikes, though CFO Meghan Frank emphasized increases will be “modest” and limited to premium items like yoga pants and shoes.
Cash Reserves Offer Cushion
Despite the downturn, McDonald stressed Lululemon’s $1.3 billion cash position and zero debt provide “significant financial flexibility” to weather challenges. The reassurance failed to stem investor concerns, with shares marking their fourth-worst daily decline ever.
Competition Heats Up
Rivals like Vuori, Alo Yoga, and Gap’s new budget-friendly Old Navy activewear line are squeezing Lululemon’s market share. Gap recently warned tariffs could cost it up to $150 million this year, signaling broader industry strain.
Year-to-date, Lululemon stock is down 11%, underperforming the S&P 500’s 4% gain. Analysts expect further volatility as tariff policies and consumer spending trends evolve.
For real-time updates on retail sector impacts, follow @FinancialNews on X or visit financialnews.com/tariffs.
Relation topics：
