Lululemon stock price: LULU shares crash over tariff impact fears

Fast Company

15 hours ago

Popular athletic apparel brand Lululemon Athletica is seeing its share price crash today. As of this writing, the stock (Nasdaq: LULU) is down nearly 20% in early-morning trading. The company's dramatic share price fall comes a day after it announced its first-quarter results for fiscal 2025, and issued a tariff-related warning about its profit forecasts. Here's what you need to know.
Lululemon reports Q1 2025 results
Despite today's stock price fall, Lululemon actually reported fairly positive results for its first quarter of fiscal 2025, which ended on May 4.
Announcing its results yesterday after the closing bell, Lululemon reported $2.37 billion in net revenue, an increase of 7% compared to the same quarter a year earlier. The company also announced a comparable sales increase of 1%.
However, diving into that comparable sales increase of 1% reveals some potentially downbeat foreshadowing. That comparable sales increase of 1% is taking Lululemon's full global sales into account. Internationally, Lululemon's comparable sales increased 6%. But when you look at the comparable sales only in America, they actually decreased by 2%.
That American slice of the comparable sales pie suggests that the company is facing greater struggles in the U.S. than the rest of the world.
Lululemon also announced a gross profit for the quarter of $1.4 billion, up 8% from the same quarter a year earlier. The company's diluted earnings per share (EPS) were $2.60, versus $2.54 for the same quarter a year earlier.
The good news for Lululemon is that its revenue of $2.37 billion and EPS of $2.60 beat Wall Street expectations. According to a consensus estimate cited by CNBC, analysts were expecting revenue of $2.36 billion and an EPS of $2.58.
Yet despite these beats, Lululemon also reported something that sent shivers down the spines of investors: a Q2 forecast that did not meet expectations.
Lululemon issues disappointing guidance forecast
Lululemon said it expects its current Q2 net revenue to be in the range of $2.54 billion to $2.56 billion. That forecast was below what analysts were expecting. As Yahoo Finance notes, analysts had expected a Q2 net revenue forecast of $2.57 billion.
But worryingly, the company said its guidance does 'not incorporate future unknown impacts, including tariffs and macroeconomic trends.'
It's that unknowable impact of tariffs on Lululemon's sales that likely worries investors the most. Its Q1 results already showed that the company's sales in America are not as strong as in other markets, which is likely driven by in part weakening consumer confidence and fears of further tariff-fueled price increases ahead.
If consumer confidence weakens further, Lululemon, like other retailers, could be hit harder as Americans cut back on nondiscretionary spending to mitigate the impact on their wallets.
However, Lululemon faces bigger challenges than just weakening consumer confidence in the United States. The Canadian company manufactures the majority of its goods in Asia.
As Yahoo Finance notes, as of 2023, 42% of Lululemon's products were made in Vietnam, 16% in Cambodia, 11% in Sri Lanka, 10% in Indonesia, and 8% in Bangladesh. Additionally, it sourced 40% of its components for those products from Taiwan, 26% from China, and 12% from Sri Lanka.
Many of those countries have had huge tariffs placed upon goods from them by President Trump. If all those tariffs go into effect, it could necessitate price hikes for many of Lululemon's products in America—something not all its U.S. customers may be willing to absorb. That could ultimately lead to a decline in sales.
In fact, Lululemon has already said that it will raise prices on some of its goods.
'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,' Lululemon CFO Meghan Frank said on the company's financial call.
One positive forward-looking sign, however, was that Lululemon reiterated its previously forecasted outlook for all of 2025. The company said it still expects net revenue of between $11.15 billion and $11.30 billion.
LULU shares tank
Still, Lululemon's disappointing Q2 forecast and its manufacturing vulnerability to Trump's tariffs have sent the company's shares plunging this morning. As of the time of this writing, LULU shares are down almost 20% to just above $265.