Lululemon Athletica Inc. (LULU) reported its second-quarter earnings on Thursday, revealing a less optimistic outlook for the remainder of the year. The company’s shares experienced a 13% drop in after-hours trading.
The downward revision stems primarily from increased US import tariffs. Lululemon now projects annual sales between $10.85 billion and $11 billion, significantly lower than the previously anticipated $11.15 billion to $11.3 billion. Similarly, earnings per share are expected to range from $12.77 to $12.97, a substantial decrease from the earlier forecast of $14.58 to $14.78.
This revised forecast incorporates an estimated $240 million reduction in gross profit, directly attributable to the higher tariff rates and the elimination of the de minimis exemption, which previously allowed for tariff-free entry of smaller shipments into the United States.
While second-quarter revenue increased by 7% to $2.5 billion, and earnings per share exceeded expectations at $3.10, same-store sales growth lagged behind market projections at only 1%. Meghan Frank, Lululemon‘s Chief Financial Officer, attributed the revenue shortfall to underperformance in the US market and broader industry headwinds related to tariffs.
Analysts had previously expressed concerns regarding Lululemon‘s performance, noting inconsistencies in fashion offerings across its various stores. These concerns, coupled with the impact of tariffs, contributed to the negative market reaction to the company’s updated financial projections. The company’s revised guidance reflects its current assessment of the impact of these external factors on its business. The situation highlights the significant challenges facing businesses operating in a global market subject to fluctuating tariff policies. The company’s future performance will depend on its ability to mitigate the effects of these tariffs and address other market challenges.
Related
