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Concerns about the US economy and the effects of tariffs have hit Lululemon hard, with shares falling by more than 20% after the company revised its annual profit projections downward. The athleisure brand's warning echoes those of other major companies grappling with current US trade policies.
"We experienced lower store traffic in the Americas, partially reflective of economic uncertainty, inflationary pressures, lower consumer confidence, and changes in discretionary spending," Lululemon said in a statement.
The Trump administration's approach to tariffs has triggered concerns over rising prices and a weakening economy.
"We are planning to take strategic price increases... on a small portion of our assortment, and they will be modest in nature," Lululemon's finance chief Meghan Frank said.
The company also said it will cut costs and negotiate with its vendors. Last year, 40% of its products were made in Vietnam, and 28% of its fabrics came from mainland China.
Clothing and footwear brands are among the businesses hit hardest by tariffs as they make goods in Asian countries, which have faced steep levies from the US.
In April, sportswear giant Adidas warned that import taxes imposed by Trump will lead to higher prices in the US for popular trainers including the Gazelle and Samba.
"Since we currently cannot produce almost any of our products in the US, these higher tariffs will eventually cause higher costs for all our products for the US market," chief executive Bjorn Gulden said.
Lulu cut its full-year guidance citing a “dynamic macroenvironment” that includes a decline in visits to its US stores, the impact of tariffs and rising competition from other brands, such as Vuori and Alo.
The uncertainty around tariffs and consumer spending in the US forced Lululemon to cut its full-year earnings to between $14.58 to $14.78 per share – a decrease from its previously forecasted $14.95 to $15.15.
Despite that, Meghan said Lululemon is “better positioned than most” to endure and navigate the financial environment because it has $1.3 billion in cash and no debt, “which provides us significant financial flexibility,” he said.
