Lululemon: changes in tariff landscape, including de minimis removal expected to have significant adverse effect on business & results of operation

Lululemon: changes in tariff landscape, including de minimis removal expected to have significant adverse effect on business & results of operation

The end of the de minimis exemption, which allowed shipments valued under $800 to enter the U.S. duty-free, has significant implications for Lululemon and the broader retail industry. The de minimis exemption, originally scheduled to end in July 2027, was eliminated by an executive order from President Trump in 2025, giving businesses and customs officials less time to prepare.

Lululemon, a Canadian retailer known for its athletic wear, has been using the de minimis exemption to reduce costs and support its strong online business. The removal of this exemption means that shipments valued under $800 will now be subject to tariffs, potentially leading to higher costs and reduced profitability. According to Wells Fargo, the company's stock price target was recently cut from $225 to $205 due to the expected impact of the de minimis elimination [1].

The change in tariff landscape is expected to have a significant adverse effect on Lululemon's business and results of operation. The company has been utilizing the de minimis exemption to support its supply chain and reduce operational costs. With the exemption removed, Lululemon will need to rethink its supply chain strategies and potentially incur higher costs, which could impact its profitability.

The end of the de minimis exemption is not the only challenge facing Lululemon. In a recent federal appeals court ruling, most of Trump's steep tariffs, including his so-called "reciprocal tariffs," were deemed illegal, further adding uncertainty to the toll on companies [2]. This ruling could exacerbate the financial impact on Lululemon, which has been using the exemption to support its online sales.

To mitigate the adverse effects of the de minimis removal, Lululemon is exploring ways to reduce costs and is leveraging its manufacturing footprint across different countries. However, the overall impact on the company's financial performance remains uncertain, and investors should closely monitor the situation as it unfolds.

References:
[1] https://www.cnbc.com/2025/08/29/retail-impact-de-minimis-exemption-ends-globally.html
[2] https://www.cnbc.com/2025/08/29/retail-impact-de-minimis-exemption-ends-globally.html