LULULEMON Athletica posted a second straight disappointing quarter, fueling concerns that rising competition and new tariffs are derailing the company’s ambitious growth plans.
The retailer is projecting sales in the range of US$2.54 billion to US$2.56 billion for its fiscal second quarter, below the average analyst estimate.
Lululemon’s expected profit for the quarter is also well below expectations, and it also trimmed its earnings-per-share outlook for the full year.
The shares fell as much as 23 per cent in extended trading in New York on Thursday. The stock had already declined nearly 14 per cent so far this year through Thursday’s close.
Lululemon’s move to further pare back its view for 2025 surprised investors who’ve become accustomed to breakneck growth rates from the upscale athletic-wear company.
Weaker-than-expected results in the first quarter ended May 4, including a decline in comparable-store sales in the Americas, added to the disappointment.
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The company and its retail peers are trying to manage supply chains that have been upended by US President Donald Trump’s trade wars. Apparel and footwear production hubs in Asia, including China and Vietnam, face elevated tariff rates as the White House pushes for new trade deals.
Lululemon’s guidance assumes 30 per cent tariffs on China and 10 per cent on other countries.
The tariffs further complicate chief executive officer Calvin McDonald’s target of doubling sales from 2021 to 2026. Rising competition and promotions in the apparel industry and years of higher inflation are also hindering the company. Sales growth is expected to slow for a fifth consecutive year in 2025.
In its quarterly filing, the company said that US tariffs imposed in April have raised the cost of doing business in the country and could cause “a significant reduction” in profitability. Lululemon, which usually charges around US$100 or more for its popular leggings, will raise some prices in response.
“We are planning to take strategic price increases looking item-by-item across our assortment as we typically do,” chief financial officer Meghan Frank said on the company’s earnings call on Thursday. She added that increases will be “on a small portion of our assortment and they will be modest in nature.”
Higher prices may further deter consumers who have started to pull back their discretionary spending.
“In the US, consumers remain cautious right now and they are being very intentional about their buying decisions,” McDonald told analysts on the conference call.
In its previous quarterly results released in March, Lululemon had warned investors that US shoppers were tightening their wallets. That, along with guidance that was disappointing, also sparked a sharp decline in the stock.
Management is looking to lift demand by entering new product categories and expanding its offerings to sports such as running, tennis and golf. Lululemon is also dealing with shifts in fashion trends, with more consumers opting for baggier styles instead of the form-fitting yoga pants for which the brand is best known.
Lululemon said it’s pleased with the early performance of new items including high-rise trousers and running shorts. But pressure from tariffs and weak store traffic is offsetting any positive feedback on new products, according to Bloomberg Intelligence analyst Poonam Goyal.
“The silver lining is that the newness is being well received,” said Goyal. “But tariff and consumer uncertainty is masking it.” BLOOMBERG
