Shares of Lululemon Athletica Inc. tanked on Thursday after the athletic apparel company’s founder announced plans to bail on the firm during an extraordinary management upheaval. This decline followed the company’s announcement of how international trade policy—U.S. The company’s shares fell more than 15% in after-hours trading in New York. This steep drop underscores investor concerns over its financial future.
The activewear, yet highly casual, retailer revised its guidance for the full year, now forecasting losses of up to $240 million (£178.4 million). Counterintuitively, these responsibilities result from U.S. customs duties and the elimination of the de minimis exemption. This policy previously allowed Lululemon to ship online orders valued at $800 or less into the United States without incurring import duties. Closing this little loophole will only put further pressure on the company’s profits. First, it needs to get on top of a growing difficult market landscape.
Lululemon updated its sales outlook for the next three months, ahead of when its fiscal year ends. It now anticipates revenues of $2.47 billion to $2.5 billion, well below analysts’ expectations. The company cited “disappointment” regarding its U.S. performance. We’re trying to build loyalty. CEO Calvin McDonald expressed this belief in a recent commentary on the company’s travails in the home market.
Although the U.S. market presents plenty of challenges for Lululemon, the company highlighted “positive momentum” internationally, where customers—and therefore demand—for its apparel continue to be robust. Almost 50% of Lululemon’s product is sourced in Asia. This heavy reliance puts the company especially at risk from any tariffs that the U.S. government might impose. The ongoing trade tensions have forced Lululemon, along with other clothing brands such as Nike, to implement price increases on various items sold within the U.S. market.
Earlier this year, Lululemon indicated it would introduce “modest” price hikes in response to rising costs brought on by tariffs, which have impacted many businesses reliant on Asian production for their goods. This story illustrates the broader consequences of U.S. trade policies on the retail sector. Sportswear brands in particular have had to weather some of the strongest storms.