Lululemon is facing challenges due to rising costs and has adjusted its annual profit forecasts downward. Additionally, weak demand for its latest offerings has made it difficult for the brand to stand out against competitors like Vuori.
Shares of Lululemon dropped 22% in after-hours trading on Thursday.
The company noted, “We experienced a decline in traffic at our stores in the Americas, reflecting part of the economic uncertainty, inflationary pressures, lower consumer confidence, and shifts in discretionary spending.”
President Trump’s unpredictable global tariffs have raised concerns about a potential economic downturn, which may have led affluent consumers to focus more on essential items.
To address the impact of tariffs, companies are diversifying sourcing strategies and implementing price hikes to protect profit margins.
“We’re planning on a strategic price increase… with just a small portion of our assortment, they’ll be inherently modest,” said Meghan Frank, finance director at Lululemon.
The brand is also aiming to negotiate with suppliers and cut costs, according to company statements.
In 2024, around 40% of Lululemon’s products were manufactured in Vietnam, while 28% of its fabrics came from mainland China.
Earlier this year, Lululemon adjusted its annual forecast, anticipating a negative impact from tariffs.
Morningstar analyst David Swartz remarked, “Lululemon also doesn’t have many big hit products that have some effect these days.”
The company’s projected annual profits now range between $14.58 and $14.78 per share, down from earlier predictions of $14.95 to $15.15.
Moreover, Lululemon anticipates second-quarter profits will fall short of average estimates, with revenue projections between $2.54 billion and $2.56 billion closely aligned.
Despite launching new collections for both men and women, such as the Glow Up Active Wear Collection and the Daydrift lifestyle line, promotions have been limited.
“Lululemon has a history of meeting expectations, so if they don’t raise estimates, it feels like a disappointment,” Swartz added.
