Lululemon shares in New York crashed on Friday after the upscale athletic apparel retailer slashed its full-year earnings guidance, citing the Trump administration's move to end the de minimis exemption loophole.
"This is a disappointing update from LULU, and we expect shares to underperform peers tomorrow as a result," Goldman analyst Brooke Roach wrote in a first take note to clients after the earnings release on Thursday.
Across the board, Lululemon cut its FY25 outlook, lowering revenue expectations in the US, Canada, and China as demand for its overpriced sports bras, workout tops, and leggings weakens.
Roach provided more color on the outlook downgrade:
The company lowered its FY25 outlook across all key line items. For FY25, LULU's lowered its revenue growth expectations for the US, Canada and China as consumer demand for the brand continues to soften, and margin pressures have increased as a result of (1) Incremental tariff rate increases (~50bps net headwind vs. 40bps prior); (2) Changes in the de minimis exemption (~170bps net headwind); (3) Elevated promotionality (~50bps headwind vs. 10-20bps prior); and (4) Incremental SG&A deleverage due to FX and ongoing investments in Power of 3x2 initiatives (~80-90bps deleverage vs. ~50bps prior). Management noted they expect a ~$320mn EBIT headwind from tariffs (incl. de minimis pressures) as they look out to FY26.
As a result, Lululemon shares plunged in New York, down about 16% by 10:00 a.m. EST. Year-to-date, the stock is off 55%, hitting lows not seen since early 2020.
Roach is "Neutral" on the stock. He explained (Pro Subs read here) that he lowered his 12-month price target to $200 from the previously stated $232.
Other Wall Street analysts noted weakness in its US business. Stifel downgraded the stock to "Hold" from "Buy."
According to Bloomberg data, 28.9% of Wall Street analysts rate the stock a "Buy," 57.9% a "Hold," and 13.2% a "Sell."
More commentary (courtesy of Bloomberg):
Stifel's Peter McGoldrick (cut to hold from buy, PT to $205 from $324)
The meaning FY25 guidance cut was due to challenges from domestic market pressures and removal of the de minimis exemption
While the acknowledgment of underperformance within the casual side of the business is a starting point, "reigniting brand momentum in the US is likely to take longer than we had previously anticipated"
Bloomberg Intelligence's Poonam Goyal
"Lululemon is facing increased pain from tariffs and slowing sales, notably in the Americas"
Along with guidance for a $240 million annual hit to gross profit from tariffs and the removal of the de minimis exemption, the company cut its earnings guide
JPMorgan's Matthew Boss (neutral, PT to $191 from $224)
The company's 2Q same-store-sales was weighed down by weak Americas comps, "which sequentially worsened over the course of the quarter despite taking higher than planned markdowns"
"Merchandise mix reset required into spring 2026"
Jefferies' Randal Konik (underperform; PT $150)
Says the US business is declining, adding that the third- quarter earnings appear to be a "little better," but the topline miss is the major issue due to competition and will continue to worsen given the below Street outlook
"We believe guidance cuts continue and will become more severe through the end of the fiscal year"
EMARKETER's Suzy Davidkhanian
Lululemon's second-quarter results were mixed as revenue grew 7% to $2.5 billion, but missed guidance, while adjusted EPS beat expectations
"Once the trailblazer in athleisure, Lululemon has lost its innovation edge, now squeezed by luxury newcomers like Alo Yoga and private-label dupes with comparable fabric tech at lower prices"
"Looking ahead, holiday gifting may provide a short-term lift, but sustainable growth hinges on whether Lululemon can move credibly into new sport verticals and find the right formula for its footwear"
Queue the Sweeney ad...
. . .