Lululemon shares hit 5-1/2 year low after company slashes annual forecasts; last down 16.4%

Lululemon shares hit 5-1/2 year low after company slashes annual forecasts; last down 16.4%

Lululemon Athletica's stock price plummeted to a 5-1/2-year low on Friday, following the company's announcement of significantly revised annual forecasts. The yogawear maker reported earnings per share of $3.10, beating analysts' expectations of $2.88, but the news was overshadowed by a full-year outlook that fell short of market expectations.

The company reduced its full-year earnings guidance to $12.77 to $12.97 per share, down from a previous forecast of $14.58 to $14.78. Revenue expectations were also cut to $10.85 billion to $11 billion, compared to the previous outlook of $11.15 billion to $11.30 billion. The stock price subsequently dropped by more than 17% in premarket trading [2].

Lululemon cited weak U.S. business performance and product issues as the primary reasons for the downgrade. The company's CEO, Calvin McDonald, attributed the underperformance to a focus on lounge and social wear, which has not resonated with American shoppers, and a failure to effectively tap into seasonal trends. McDonald also noted that the company has been "too predictable" in its product offerings, leading to a loss of innovation edge [3].

The company's struggles are compounded by the removal of the de minimis exemption, a U.S. customs rule that allowed duty-free entry for shipments under $800. Lululemon expects this change to have a significant impact on its 2025 gross profit, with an estimated $240 million hit [1]. Additionally, the company's reliance on Vietnam and mainland China for manufacturing, which accounts for 40% of its production and 28% of its fabrics, has been affected by tariffs [3].

Despite the challenges, Lululemon remains optimistic about its international business, which continues to show strong growth. The company expects international sales to rise by 15% in the second quarter, driven by robust demand in regions outside the U.S. [1].

Looking ahead, Lululemon plans to address its product challenges by increasing new styles from 23% of its overall assortment to 35% next spring. The company aims to improve its fast-track design capabilities and avoid short-term decisions that could harm the brand in the long run [3].

References:
[1] https://finance.yahoo.com/news/lululemon-slashes-annual-sales-profit-201546942.html
[2] https://investorshub.advfn.com/market-news/article/15799/lululemon-shares-plunge-as-weak-u-s-performance-prompts-full-year-guidance-cut
[3] https://www.cnbc.com/2025/09/04/lululemon-lulu-q2-2025-earnings.html