Lululemon cut its profit forecast for the year, hurt by higher costs to mitigate U.S. tariffs and as tepid demand for its latest products failed to draw away buyers from upstart athleisure rivals such as Vuori.

Lululemon Athletica’s (LULU.O), shares slumped 22% in trading after the bell on Thursday.

“We experienced lower store traffic in the Americas, partially reflective of economic uncertainty, inflationary pressures, lower consumer confidence, and changes in discretionary spending,” Lululemon said in a statement.

U.S. President Donald Trump’s chaotic global tariffs have fanned fears that the economy is headed for stagflation, pushing even wealthier shoppers to prioritize essential purchases.

Companies are diversifying sourcing and increasing prices to mitigate any hit from tariffs, which are expected to shrink margins.

“We are planning to take strategic price increases … on a small portion of our assortment, and they will be modest in nature,” Lululemon’s finance chief Meghan Frank said.

The company will also negotiate with vendors and cut costs, Lululemon said in a filing.
In 2024, 40% of Lululemon’s products were manufactured in Vietnam, and 28% of its fabrics were sourced from mainland China.

The company now expects annual profit between $14.58 and $14.78 per share, compared with previous expectations of $14.95 to $15.15 each.

Lululemon also forecast second-quarter profit below an average estimate from LSEG. Its revenue forecast of between $2.54 billion and $2.56 billion was largely in line.

“Lululemon also hasn’t had a lot of huge hit products recently that are having some effect,” said Morningstar analyst David Swartz.

It introduced new apparel franchises for men and women — including the Glow Up activewear collection and its new lifestyle trousers Daydrift — but those have done little to boost sales.

“Lululemon has a history of beating numbers, so even when Lululemon doesn’t raise estimates, that’s considered to be kind of a disappointment,” Swartz added.

Author Credits- Ananya Mariam Rajesh
Reuters