Lululemon shares plunged more than 12% in extended trading Thursday after the company provided a much worse-than-expected full-year outlook.
Why it matters: The impact of tariffs and the removal of the de minimis exception are cited as major factors affecting Lululemon’s sales, as the company faces increasing competition from lower-priced rivals and changing consumer preferences.
The details:
- Lululemon expects full fiscal-year earnings of $12.77 to $12.97 per share, well below Wall Street estimates of $14.45 per share.
- The company anticipates full-year revenue of $10.85 billion to $11 billion, compared with Wall Street expectations of $11.18 billion.
- Same-store sales in the Americas were down 4%, and overall comparable sales increased just 1% compared to Wall Street estimates of 2.2%.
- The removal of the de minimis exemption, which excluded some smaller shipments from tariffs, will significantly affect the company, representing roughly 1.7 percentage points of the 2.2 percentage-point tariff-related decline in profit expected for the year.
CEO Calvin McDonald acknowledged that the company has let its product lifecycles “run too long,” particularly in its lounge and social categories, and has become too predictable within its casual offerings, missing opportunities to create new trends.
What they’re saying:
- “We are facing yet another shift within the industry related to tariffs and the cost of doing business,” CEO Calvin McDonald said during a call with analysts.
- “My view is that it’s now time to reset many of our practices related to how we develop and create the range of products that will fuel the next phase of our growth,” McDonald said.
- “We are not satisfied with the results for the quarter, and we know our brand can and will perform better than these results,” McDonald concluded.
What’s next: To regain its U.S. momentum, Lululemon plans to increase its new styles from 23% of its overall assortment to 35% next spring and enhance its fast-track design capabilities while avoiding short-term decisions that could damage the brand in the long term.
