Lululemon Athletica Inc. LULU plunged 20.79% during the pre-market trading session on Friday, as it cut its full-year earnings forecast amid an unpredictable macroeconomic environment.
What Happened: The athletic apparel company’s Q1 earnings, released on Thursday, exceeded analysts’ expectations. However, the company has adjusted its full-year earnings forecast due to a “dynamic macroenvironment.” The company is dealing with tariffs and a potential deceleration in the U.S. economy.
CEO Calvin McDonald acknowledged the challenges posed by tariffs and concerns about a potential slowdown in the U.S. economy. Despite these challenges, McDonald expressed the company’s intention to capitalize on its strong financial position and competitive advantages.
McDonald also noted that U.S. consumer behavior is cautious and deliberate, expressing his dissatisfaction with the U.S. growth. The company’s CFO, Meghan Frank, disclosed plans to introduce “strategic price increases, examining each item across our range,” to counterbalance the effects of tariffs. She emphasized that these hikes would be applicable to a minor fraction of their products and would be “modest in nature.”
The company’s shares fell by 5% in after-hours trading following the announcement.
Why It Matters: Lululemon's report follows a wave of retailers cutting or withdrawing their guidance amid uncertainty over President Donald Trump's tariff policies. Companies like Abercrombie & Fitch ANF and Macy's M lowered their profit forecasts, while others, such as American Eagle Outfitters AEO, scrapped their full-year outlook entirely.
On the earnings call, Frank said Lululemon's outlook factors in a 30% tariff on Chinese imports and a 10% tariff on goods from other sourcing countries. In 2024, the company sourced most of its products from Vietnam (40%), followed by Cambodia, Sri Lanka, Indonesia, and Bangladesh. Lululemon outsources all manufacturing and fabric supply to external vendors.
Investors will be closely monitoring Lululemon’s strategies to navigate these challenges and sustain its growth momentum in the face of economic uncertainties.
Image via Shutterstock
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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