Lululemon warns $240 million hit from US tariffs, trims sales outlook as shares tumble

Lululemon Athletica said Thursday that changes to U.S. trade policy and weaker domestic demand will reduce gross profit by about $240 million this year and prompted the company to lower its near-term sales outlook, sending its shares sharply lower.

The Vancouver-based maker of athletic apparel forecast sales for the next three months between $2.47 billion and $2.50 billion, below Street estimates, and said the removal of the so-called de minimis exemption — which had allowed low-value online imports into the United States to clear without duties — will significantly disrupt its U.S. e-commerce shipments.

Meghan Frank, Lululemon's chief financial officer, told analysts on an earnings call that U.S. tariffs and the end of the de minimis rule would shave roughly $240 million from gross profit in 2025. She said the changes will "have a significant impact" on the company's earnings and that the firm is evaluating supply-chain adjustments and cost savings measures to mitigate the effect, but those changes will take time.

Chief executive Calvin McDonald said the business has seen "positive momentum" overseas but that the company is "disappointed" by its performance in the United States. The company also cut its longer-term revenue and profit expectations in a profit warning issued alongside its quarterly report, citing both trade costs and softer consumer spending as the holiday season approaches.

Lululemon's stock fell about 14% after the market close on the news. The company framed the hit as a combination of an external trade-policy shock and an internal challenge to rekindle demand amid increased competition in the athleisure market.

Analysts and industry observers said the retailer is facing pressure from lower-priced private-label competitors and newer premium brands. Suzy Davidkhanian, an analyst at eMarketer, said Lululemon "once the trailblazer in athleisure, has lost its innovation edge, now squeezed by luxury newcomers like Alo Yoga and private-label dupes with comparable fabric tech at lower prices." Her comments reflect broader concerns that competitors and copycats have eroded Lululemon's pricing power.

Company executives said they are examining changes to sourcing and distribution to blunt tariff costs, including shifting inventory strategies for U.S. shipments and seeking cost efficiencies across operations. The firm did not provide a specific timetable for when such adjustments would meaningfully restore margin pressure.

The policy change follows a decision by the U.S. administration to close a duty-free loophole that had allowed many online shipments valued at $800 or less to enter without import duties. Retailers and trade groups warned that revoking the exemption would raise costs for e-commerce and cross-border sellers that had used the threshold to avoid tariffs on smaller parcels.

The warning comes as consumer spending shows signs of cooling. A recent PwC survey cited by market observers predicted the U.S. holiday season could see its steepest drop in spending since the pandemic, a trend that would compound pressure on discretionary-focused retailers such as Lululemon.

Lululemon executives said international sales momentum is a bright spot but not enough to offset the expected U.S. shortfall in the near term. The company reiterated that it remains focused on long-term strategic priorities, including product innovation, store productivity and expanding its membership initiatives, while also pursuing near-term cost and supply-chain actions to protect margins.

Investors will be watching the retailer's next quarterly update for signs that the strategic adjustments and any shifts in consumer behavior are taking hold. For now, Lululemon faces the combined challenge of an abrupt policy change that raises import costs and a competitive market that has eroded some of the pricing advantages that helped the company grow into a major athleisure brand.