Lululemon Shares Plunge After U.S. Tariff Shift and End of De Minimis Rule

Lululemon Athletica warned on Friday that new U.S. trade policies will hit its business, sending the Canadian sportswear company's shares tumbling 18% on the Nasdaq and cutting market value after investors priced in higher import costs.

The company said the elimination of the U.S. de minimis rule — which had allowed shipments valued at $800 or less to enter the United States without import duties — alongside tariffs announced by President Donald Trump, will cost Lululemon about £178.4 million this year. Most of the company's merchandise is manufactured in Asian countries subject to the higher levies, the firm said.

Chief Executive Calvin McDonald said he was "disappointed" with the company's performance in the U.S., where sales rose just 1% in the three months ended in June. Lululemon reported total sales increased 7% to £1.85 billion for the period. The warning and weak U.S. sales prompted steep selling: the 18% drop reported Friday took the stock's decline to more than one-third over the past year.

Analysts said the combination of higher import costs and softer demand in Lululemon's biggest market raised questions about the brand's near-term profitability and appeal. The company, known for premium athletic wear and endorsed by celebrities and athletes, has faced increasing competition in recent quarters, and the tariff-related costs will further pressure margins.

The de minimis rule had been a longtime feature of U.S. customs practice, allowing low-value online purchases to bypass duties and smoothing logistics for retailers that source goods overseas. Its removal means smaller shipments that previously entered duty-free will now be subject to tariffs and the administrative costs of customs processing, affecting companies with significant cross-border product flows.

Investors and market watchers said the impact will vary by retailer depending on product sourcing, pricing power and the ability to absorb or pass on costs to consumers. Lululemon's reliance on Asian manufacturing made it particularly vulnerable to the levy changes announced by the administration.

The company did not provide a detailed breakdown of how the £178.4 million estimate was calculated, but said it reflected expected tariff expenses and the closure of previously relied-upon tax and duty gaps. Management reiterated its focus on product innovation and direct-to-consumer channels as it navigates the changing trade environment.

Lululemon's results and outlook will be watched closely by investors and policymakers as other apparel and consumer-goods firms assess the implications of tariff policy and the end of the de minimis exemption. The company faces the immediate task of managing cost pressures while trying to restore momentum in its U.S. business, where a large share of growth and profits have historically been generated.