Lulu stock took a sharp hit this week after Lululemon Athletica slashed its near-term outlook, citing weaker demand in its core US market and higher costs from new trade tariffs. The athleisure giant’s shares dropped more than 15% in extended trading on Thursday, sparking concern among investors about the retailer’s ability to sustain its growth momentum.
Lululemon Faces New Trade Challenges
According to the company’s latest update, US President Donald Trump’s decision to end the “de minimis exemption” — which had previously allowed duty-free imports of online orders under $800 — will cost the brand roughly $240 million in 2025. Most Lululemon stock products are manufactured in Asia, particularly China and Vietnam, making them highly vulnerable to Washington’s tariff policy.
The company warned that the new duties will directly disrupt its e-commerce business, a key driver of sales in recent years. Meghan Frank, Lululemon’s chief financial officer, noted during the Lulu earnings call that the removal of this exemption will have a “significant impact” on profitability in the US.
Forecast Misses Analyst Expectations
Lululemon now expects sales between $2.47 billion and $2.5 billion for the upcoming quarter, falling short of Wall Street’s estimates. CEO Calvin McDonald admitted that while international markets continue to show “positive momentum,” performance in the US has been disappointing.
The weaker outlook immediately weighed on lululemon stock, with analysts voicing concerns that the brand’s growth strategy may be losing its edge. Shares of Lulu have been among the strongest performers in the retail sector over the past five years, but the latest earnings revision suggests that challenges are mounting.
Product Strategy Under Scrutiny
Beyond tariffs, McDonald acknowledged that the company’s product cycles had become “too predictable,” limiting its ability to capitalize on fast-moving fashion trends. While Lululemon has been a pioneer in the premium athleisure space, rivals such as Vuori and Alo Yoga have been gaining ground with lower-priced alternatives.
Earlier this year, the brand also announced modest price increases to offset rising manufacturing and logistics costs. With tariffs further raising expenses, analysts worry that higher price tags may push consumers toward competitors, particularly in the US market where demand has softened.
Lululemon Earnings Pressure in Competitive Market
The latest lululemon earnings report underlines the pressure facing athletic wear companies as tariffs ripple through global supply chains. Industry peers such as Adidas and Nike have also raised prices in recent months to manage higher costs, underscoring how trade policy continues to shape consumer pricing in the sector.
For Lulu stock, however, the problem is compounded by declining US sales and questions about whether the brand can keep its premium positioning. International demand remains robust, but domestic headwinds have left investors questioning the sustainability of future growth.
Investor Outlook
With Lulu stock sliding more than 15% after the announcement, market sentiment has turned cautious. Analysts suggest that while the company’s strong brand equity and loyal customer base remain key advantages, its reliance on Asian supply chains leaves it exposed to geopolitical risks.
To regain momentum, Lululemon is exploring supply chain adjustments and cost-cutting measures. However, these changes will take time to materialize, leaving the brand vulnerable in the short term.
Investors will be closely watching how the company adapts its product strategy, especially as consumer preferences shift quickly in the athleisure space. For now, the latest Lululemon earnings update has cast a shadow over one of retail’s biggest success stories of the past decade.
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