TLDR
- Lululemon stock plummeted 17% pre-market after slashing Q3 revenue growth guidance to 5-6%
- Trump tariffs and policy changes will cost the company $240 million in 2025
- US store traffic declining, forcing company to rely on price promotions
- CEO admits product cycles have become “too predictable” and missed trends
- Stock down nearly 50% year-to-date as premium pricing model faces pressure
Lululemon Athletica shares crashed over 17% in pre-market trading Friday following disappointing Q3 guidance and mounting tariff pressures. The athleisure retailer now sits nearly 50% below 2025 highs after multiple setbacks.
The company cut Q3 revenue growth expectations to just 5-6%, missing analyst projections. This latest guidance reduction continues a troubling pattern for the once high-flying retailer.
Trump administration trade policies are creating major headwinds. Lululemon expects tariffs and the elimination of the de minimis exemption to cost $240 million this year. The de minimis rule previously allowed online orders under $800 to enter the US without import duties.
CFO Meghan Frank warned these policy changes will severely impact earnings by disrupting US e-commerce operations. Most Lululemon products are manufactured in China and Vietnam, making the company particularly vulnerable to trade tensions.
Domestic Headwinds Intensify
Beyond tariff concerns, Lululemon faces growing challenges in its core US market. Store traffic has slowed, especially in women’s apparel, forcing the premium brand to offer promotions.
This promotional shift threatens Lululemon’s fundamental value proposition. The brand built its success on customers paying full price for premium athletic wear.
CEO Calvin McDonald acknowledged the company’s product cycles had “run too long” and become “too predictable.” This admission suggests Lululemon has fallen behind emerging trends that competitors have captured.
Lower-priced rivals like Vuori and Alo Yoga continue gaining market share with similar styles at more accessible prices. This competition pressure compounds Lululemon’s domestic struggles.
International Markets Provide Hope
McDonald highlighted “positive momentum” in overseas markets during Thursday’s earnings call. International expansion remains a key growth driver as the company diversifies beyond North America.
China represents a major opportunity despite trade tensions. The men’s apparel category also shows continued promise as Lululemon expands its customer base.
However, these positive developments couldn’t offset investor concerns about near-term challenges. The stock’s sharp decline reflects growing skepticism about Lululemon’s premium positioning strategy.
Market Outlook
Lululemon guided for Q3 sales between $2.47-$2.5 billion, below analyst expectations. The company previously announced “modest” price increases to offset rising costs, which may accelerate under tariff pressure.
Other sportswear companies face similar challenges. Adidas warned tariffs will cost €200 million and has already raised US prices for products made in Asia.
Trading around $170 in pre-market action, Lululemon stock faces key support levels at $165 and $152. The sharp selloff suggests investors are losing confidence in the company’s ability to maintain premium pricing power.
The latest earnings call revealed deeper issues beyond temporary headwinds, with management admitting to predictable product cycles and increased promotional activity.
