Lululemon Athletica (LULU) shares tumbled nearly 18% Friday, marking their lowest levels since March 2020, after the company cut its full-year outlook for the second time in three months.
The stock has now lost more than half its value this year, sinking roughly 55% from January highs.
Second-quarter results were a mixed bag: revenue climbed 7% year-over-year to $2.53 billion, just shy of Wall Street forecasts, while earnings per share came in at $3.10, topping expectations. The real trouble came from U.S. demand, where same-store sales fell 4%, dragging overall comps to a muted 1% growth versus the nearly 3% analysts had projected.
CEO Calvin McDonald acknowledged missteps in product execution and weakness in the U.S., calling results “disappointing.” The company slashed its sales forecast to a midpoint of $10.93 billion from $11.23 billion previously and lowered its full-year earnings guidance to about $12.87 per share—down sharply from earlier expectations near $14.70.
Tariff Pressures Deepen the Hit
Beyond slowing demand, Lululemon faces an added $240 million profit hit tied to tariff changes, including the elimination of the de minimis exemption that had allowed packages under $800 to bypass U.S. import duties. Management expects this policy shift to cut gross margins by 2.2 percentage points this year, with tariffs alone responsible for nearly 1.7 points of the decline.
The tariff impact forced analysts to reset expectations. Evercore downgraded the stock, trimming its price target to $180 from $265, while Jefferies reiterated an “Underperform” rating with a $150 target. Both cited fading brand momentum, heightened competition from newer athleisure rivals, and limited near-term catalysts.
Beyond slowing demand, Lululemon faces an added $240 million profit hit tied to tariff changes, including the elimination of the de minimis exemption that had allowed packages under $800 to bypass U.S. import duties. Management expects this policy shift to cut gross margins by 2.2 percentage points this year, with tariffs alone responsible for nearly 1.7 points of the decline.
The tariff impact forced analysts to reset expectations. Evercore downgraded the stock, trimming its price target to $180 from $265, while Jefferies reiterated an “Underperform” rating with a $150 target. Both cited fading brand momentum, heightened competition from newer athleisure rivals, and limited near-term catalysts.
International Growth Isn’t Enough
Not all regions told the same story. International markets showed resilience, with same-store sales up 17% in China and 12% in other global markets. Still, that strength couldn’t offset the slowdown in North America, which remains Lululemon’s largest revenue base. Analysts warn that even with product refreshes planned for spring 2026, the near-term outlook remains weak.
Wall Street sentiment has cooled accordingly. FactSet data show that for the first time since 2011, Lululemon no longer carries an “Overweight” consensus rating. A majority of analysts now sit on the sidelines with “Hold” recommendations.
Conclusion
Lululemon’s second-quarter earnings beat wasn’t enough to reassure investors, as guidance cuts, tariff headwinds, and U.S. weakness drove shares down to five-year lows. With the brand banking on product innovation that won’t meaningfully arrive until 2026, and with consumer softness continuing in its home market, investors face a long stretch of uncertainty. International growth remains a bright spot, but it may not be enough to restore investor confidence in the near term.
Lululemon’s second-quarter earnings beat wasn’t enough to reassure investors, as guidance cuts, tariff headwinds, and U.S. weakness drove shares down to five-year lows. With the brand banking on product innovation that won’t meaningfully arrive until 2026, and with consumer softness continuing in its home market, investors face a long stretch of uncertainty. International growth remains a bright spot, but it may not be enough to restore investor confidence in the near term.
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