LULU Stock: Lululemon Athletica (NASDAQ: LULU) shares plummeted by as much as 20% Friday morning after the athletic apparel giant slashed its second-quarter and full-year profit forecasts, blaming a “dynamic macro-environment” marked by new tariffs, softening consumer confidence, and rising promotional activity in the U.S.
The Vancouver-based brand now expects second-quarter earnings per share (EPS) to land between $2.85 and $2.90, well below Wall Street’s forecast of $3.28. Revenue is projected between $2.535 billion and $2.560 billion, missing consensus estimates of $2.57 billion. For the full year, the company cut its EPS guidance to $14.58–$14.78, down from a prior range of $14.95–$15.15.
“This is a wake-up call for investors. The consumer is cautious, tariffs are adding cost pressure, and promotions are on the rise,” said JPMorgan analysts, who lowered their price target for LULU stock from $389 to $303.
Lululemon CEO Calvin McDonald acknowledged the shift in consumer behavior. “In the U.S., shoppers are being more intentional about their spending decisions,” McDonald said on the earnings call. “While we’ve seen strong engagement with our product innovations, macroeconomic concerns and increased price sensitivity are clearly influencing purchasing patterns.”
Lululemon joins a growing list of retailers adjusting forecasts as tariffs introduced by the Trump administration take effect. According to the company’s 2023 annual report, a significant portion of its manufacturing base is located in Southeast Asia, with 40% of its fabric coming from Taiwan and 26% from China.
To combat the rising costs, CFO Meghan Frank announced plans for strategic, modest price increases on a selective portion of its products. “We’re using pricing and sourcing levers to manage margin pressure,” she said, noting the company is assuming a 30% tariff on goods from China and 10% on other countries. She added that Lululemon is pursuing cost-saving supply chain shifts that may take effect in the second half of 2025 and into 2026.
Despite the gloomy forecast, Lululemon reaffirmed its full-year revenue guidance of $11.15 billion to $11.30 billion, signaling continued demand, particularly outside the U.S.
Q1 results showed a mixed picture: total revenue slightly beat expectations at $2.37 billion, and adjusted EPS matched at $2.60. However, same-store sales rose just 1%, far short of analysts’ 4.5% expectations — a key sign of weakened domestic momentum.
Frank also highlighted an increase in inventory, up 23% year-over-year to $1.7 billion, which may force additional markdowns in the coming quarters.
As of Friday, LULU stock is now down over 30% year-to-date, underscoring investor anxiety about the apparel sector’s vulnerability to shifting trade policies and tightening consumer wallets.
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