Lululemon Lowers Projections Amid Falling Demand
On Thursday, Lululemon Athletica announced a significant downward revision to its annual revenue and profit projections, reflecting a slump in consumer demand as the holiday season approaches. This comes at a time when many shoppers are tightening their budgets, partly due to increased tariffs.
The company’s stock took a hit, dropping around 14% after the market closed.
It’s been tough for sportswear brands lately. They’ve struggled to spark renewed interest among consumers, who are dealing with inflation and the unpredictable trade policies from the previous administration.
“Athlete pioneers have lost their innovative edge,” noted an industry observer. Today, they seem to be competing mainly against new luxury brands such as Arroyoga and Private Label Dupet, which offer comparable fabric technology at lower prices
—it’s really interesting how the landscape has shifted, isn’t it?
Analysts expect Lululemon’s outlook, particularly for the Canadian company based in Vancouver, to fall sharply, reflecting anticipated declines in U.S. holiday spending, as reported by a PWC study.
For 2025, forecasts predict gross profits nearing $240 million, with an estimated impact of around $320 million on operating margins for 2026. This restructuring is partly due to the elimination of minimum exemptions under the new regulations.
Speaking of regulations, the De Minimis exemption allows for tax-free and minimal documentation for international shipments valued under $800 and has been in effect since late August.
Lululemon continues to roll out product variations weekly and plans to raise prices strategically and modestly, a move aimed at offsetting the effects of tariffs. They’re also looking for ways to cut costs and negotiate better terms with suppliers—a necessity in challenging times.
The company’s latest forecast indicates that about 40% of its products come from Vietnam, while 28% of its fabrics are sourced from China. Both countries are subject to rigorous obligations, impacting overall costs.
Projected annual revenues now sit between $10.85 billion and $11 billion, a shift from previous forecasts of between $11.5 billion and $11.3 billion. The earnings per share expectation has also dropped to a range of $12.77 to $12.97, down from earlier predictions of $14.58 to $14.78.
“We anticipate that cuts to guidance will persist and could become even more drastic as we head towards the fiscal year-end,” stated analysts from Jeffries in a memo.
In terms of sales, the second quarter, which concluded on August 3rd, showed a 7% revenue increase, totaling $2.53 billion, which aligned with analyst expectations based on data from LSEG.
