LULU Stock Under Pressure As Company Warns Q2 Will Feel Tariff Heat, Plans 'Strategic Price Increases' — But Gary Black Blames EPS Revision On 'Competition,' Not 'Macro Challenges' - Invesco QQQ Trust, Series 1 (NASDAQ:QQQ), Lululemon Athletica (NASDAQ:LULU)

Despite better-than-expected first quarter results, Lululemon Athletica Inc. LULU’s management cautioned that the second quarter will bear the brunt of increased tariffs and lowered its full year earnings per share forecast.

What Happened: CFO Meghan Frank outlined the company’s financial outlook during its earnings call, highlighting that the gross margin in the second quarter is expected to decline by approximately 200 basis points relative to the same quarter of the previous fiscal year.

This notable dip is primarily attributed to higher tariff rates, alongside increased occupancy and depreciation costs, modestly higher markdowns and foreign exchange impacts.

“We are planning to take strategic price increases, looking item by item across our assortment as we typically do, and it will be price increases on a small portion of our assortment, and they will be modest in nature,” said CFO Frank.

These price increases are expected to begin rolling out toward the latter half of the second quarter and into the third quarter.

Furthermore, the company lowered its full-year earnings forecast to $14.58 to $14.78 per share, down from prior guidance of $14.95 to $15.15 per share.

Garly Black, the managing partner at Future Fund LLC, said that the EPS miss was a result of competition. “We see this as a result of intense competitive conditions rather than macro challenges,” he said.

Why It Matters: Lululemon’s tariff assumptions include a significant 30% incremental tariff on goods sourced from China and an additional 10% on products from other sourcing countries.

To counteract these rising costs, the company is implementing a multi-pronged mitigation strategy, with the most impactful results anticipated in the second half of 2025.

The company reported first-quarter revenue of $2.37 billion, beating the consensus estimate of $2.36 billion and earnings of $2.60 per share, in line with analyst estimates.

Apart from the EPS forecast, it expects full-year 2025 revenue to be in the range of $11.15 billion to $11.3 billion versus estimates of $11.24 billion.

LULU shares were down 20.04% in premarket on Friday; they have declined by 11.15% on a year-to-date basis, according to data from Benzinga Pro.

Benzinga Edge Stock Rankings show that LULU had a weaker price trend over the short, medium, and long term. Its momentum ranking was moderate, and its value ranking was also moderate at the 49.83th percentile. The details of other metrics are available here.

The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, rose in premarket on Friday. The SPY was up 0.40% at $595.44, while the QQQ advanced 0.44% to $527.08, according to Benzinga Pro data.