TD Cowen Flags 250 Basis Point Margin Risk for Lululemon Athletica (LULU) Following Discovery of Unsustainable Annual Benefit to Gross Margin

Lululemon Athletica Inc. (NASDAQ:LULU) saw a 250 basis point margin risk after TD Cowen reduced its price target to $220 from $298. The firm attributed the change to 66% of Lululemon's US e-commerce orders being completed via Canada, exploiting the de minimis loophole closed by the Trump administration. The firm believes this unsustainable annual benefit to gross margin is far higher than expected.

Lululemon Athletica Inc. (NASDAQ:LULU) has been grappling with significant challenges as it navigates the shifting landscape of international trade policies. The company recently saw its outlook revised downward, with TD Cowen reducing its price target from $298 to $220, citing concerns over the impact of the de minimis loophole closure by the Trump administration.

The de minimis exemption had allowed Lululemon to ship a substantial portion of its US e-commerce orders under the $800 duty-free threshold, which is now no longer available. This policy change is expected to have a material impact on the company's gross margin, with TD Cowen estimating that 66% of Lululemon's US e-commerce orders were completed via Canada, exploiting the loophole Lululemon Falls on Slashed Outlook as Sales Growth Slows^[1].

The retailer's shares have been volatile, with a 20% decline on September 5, 2025, further deepening the year's market value erosion of $22 billion. Lululemon warned that the removal of the de minimis exemption would result in a $240 million hit to its gross margin, a figure higher than initially anticipated Lululemon’s woes mount on weak demand, Trump trade policies^[3].

In response to these challenges, Lululemon has been exploring strategic measures to mitigate the impact. The company is focusing on diversifying its supply chain and enhancing its marketing efforts, including partnerships with high-profile athletes such as tennis star Frances Tiafoe and Formula 1 champion Lewis Hamilton Lululemon Falls on Slashed Outlook as Sales Growth Slows^[1].

However, the overall market sentiment towards Lululemon remains cautious. Several investment analysts have downgraded their price targets and ratings for the company, with Jefferies Financial Group reducing its target to $150, indicating a potential downside of 24.71% from the current stock price Jefferies Financial Group Has Lowered Expectations for lululemon athletica (NASDAQ:LULU) Stock Price^[2].

Despite these challenges, Lululemon continues to focus on its core strengths, including its strong brand and loyal customer base. The company is also working to streamline its organizational structure, with recent layoffs aimed at trimming costs and improving efficiency Lululemon Falls on Slashed Outlook as Sales Growth Slows^[1].

References:
Lululemon Falls on Slashed Outlook as Sales Growth Slows^[1] https://financialpost.com/pmn/business-pmn/lululemon-falls-on-slashed-outlook-as-sales-growth-slows
Jefferies Financial Group Has Lowered Expectations for lululemon athletica (NASDAQ:LULU) Stock Price^[2] https://www.marketbeat.com/instant-alerts/lululemon-athletica-nasdaqlulu-given-new-15000-price-target-at-jefferies-financial-group-2025-09-02/
Lululemon’s woes mount on weak demand, Trump trade policies^[3] https://www.businesstimes.com.sg/companies-markets/lululemons-woes-mount-weak-demand-trump-trade-policies