Key Takeaways
- Lululemon shares plunged Friday after the company lowered its outlook, citing weak sales in the U.S. and the impact of higher tariffs.
- The athletic apparel retailer’s same-store sales missed estimates on a drop in U.S. demand.
- With Friday’s drop, Lululemon shares have lost more than half of their value this year.
Lululemon Athletica (LULU) shares plunged Friday, after the athletic apparel retailer lowered its outlook, pointing to sluggish demand and higher tariffs.
The stock was down nearly 18% in recent trading, bringing its year-to-date losses over 50%.
Lululemon cut its full-year sales forecast to $10.85 billion to $11 billion, down from $11.15 billion to $11.30 billion as sales slowed, in the second straight quarter the company has trimmed its guidance.
CEO Calvin McDonald said the company was “disappointed” with its U.S. business and “aspects of our product execution” in the second quarter. While Lululemon’s second-quarter revenue of $2.53 billion was roughly in line with analysts’ estimates, its same-store sales rose just 1% year-over-year, below the 2.76% analysts surveyed by Visible Alpha called for as U.S. demand dropped. Adjusted earnings per share of $3.10 exceeded forecasts.
CFO Meghan Frank said the company faces “industry-wide challenges, including higher tariff rates.” Lululemon also cited higher costs tied to the Trump administration’s removal of the de minimis exemption, which previously allowed packages valued at less than $800 to enter the U.S. without being subject to import duties and tariffs.
“It’s going to get worse… much worse through year-end,” Jefferies analysts told clients after the results, saying they believe the guidance “is not low enough,” given rising competition and some skepticism that the company’s pipeline of new styles will resonate.
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