Lululemon Stock Plummets on Weak Guidance and Tariff Warnings

Lululemon Athletica Inc. (LULU) shares plunged nearly 20% after the company issued a weak forecast for the upcoming quarter and the full year, citing significant financial pressure from higher U.S. tariffs. The athletic apparel giant warned investors of a due to increased tariffs and the elimination of the de minimis import exemption, leading to a significant pre-market sell-off.

For its second quarter of fiscal 2025, Lululemon reported a 7% increase in net revenue to $2.5 billion. However, this top-line growth was overshadowed by a slight decrease in diluted earnings per share to $3.10, down from $3.15 in the same period last year. The company's performance in the Americas was particularly concerning, with a 4% decrease in comparable sales. In contrast, international sales remained a bright spot, surging 22%.

The company's revised outlook triggered the sharp decline in its stock price. Lululemon now expects full-year revenue growth of just 2-4%, a significant reduction from previous estimates. The was also below analyst expectations, with projected EPS between $2.18 and $2.23.

In the wake of the announcement, Wall Street analysts rushed to adjust their models. Several firms, including BofA Securities and JPMorgan, cut their price targets on the stock, although they maintained "Neutral" ratings. The for Lululemon has now dropped significantly, reflecting the increased uncertainty surrounding the company's profitability.

CEO Calvin McDonald acknowledged the challenges, stating, "While we continued to see positive momentum overall in our international regions in the second quarter, we are disappointed with our U.S. business results and aspects of our product execution." The company plans to take action to strengthen its merchandise mix and accelerate growth, but the immediate future appears challenging as it navigates both internal execution issues and external macroeconomic pressures.