Lululemon Shares Slide as Forecasts Cut Amid Demand Slowdown
Lululemon has been hit with some tough news, and investors are reacting quickly. Shares of the popular athleisure brand dropped sharply, losing about 14 percent in after-hours trading, after the company announced it was lowering its full-year sales and profit outlook. The move has sparked concerns that consumer demand is weakening at a time when the holiday season—typically the most important stretch for retailers—is just around the corner.
The revised forecast paints a less optimistic picture than the company had previously shared. Lululemon now expects revenue for the year to fall between $10.85 billion and $11 billion, down from its earlier projection of $11.15 billion to $11.30 billion. Earnings per share are also being pulled back, with the company forecasting $12.77 to $12.97, compared with its earlier outlook of $14.58 to $14.78.
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This downgrade is coming as U.S. holiday spending is expected to see its steepest decline since the height of the COVID-19 pandemic. A survey by PwC suggests that younger shoppers, particularly those in Gen Z, are cutting back as inflation and tighter budgets weigh on discretionary purchases. For a company like Lululemon—whose products are often considered premium-priced—that kind of pullback can be felt more acutely.
Tariffs are adding another layer of pressure. The company estimates that it will face a $240 million hit to gross margins this year due to higher U.S. import duties. That number factors in mitigation strategies, like modest price increases and efforts to negotiate with suppliers, but the financial drag remains significant. The recent removal of the “de minimis” exemption, which previously allowed small international shipments under $800 to enter the U.S. duty-free, is also contributing to higher costs. Since Lululemon relies heavily on overseas manufacturing—40 percent of products from Vietnam and nearly 30 percent of fabrics from China—the impact of these trade shifts is being felt directly in its bottom line.
Still, it’s not all negative in the latest report. For the second quarter, which ended August 3, revenue rose 7 percent to $2.53 billion, a figure that was largely in line with Wall Street’s expectations. Earnings per share came in at $3.10, which was better than the $2.88 analysts had predicted. Comparable sales inched up 1 percent, and the company also continued its share buyback program, repurchasing 1.1 million shares for $278.5 million.
Even with those positives, CEO Calvin McDonald admitted the company was disappointed with its U.S. business performance. The reality is that, while Lululemon continues to be a recognizable brand worldwide, the pressures of inflation, shifting consumer habits, and global trade dynamics are starting to show.
For investors, the big question now is whether Lululemon can navigate these headwinds and regain momentum. The holiday season will be an important test, and how consumers respond to the brand’s pricing and new products could determine if this is just a temporary stumble—or the start of a longer slowdown.
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