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Lululemon Trims Earnings Outlook Amid Tariff Impact and U.S. Sales Slump

Tariffs and U.S. sales slump hit Lululemon. But with a strong presence in China and a history of innovation, the athleisure giant is well-positioned to bounce back.

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1 min read
In this image we can see a woman wearing yellow T-shirt, cap and red color boots is hanged to the...
In this image we can see a woman wearing yellow T-shirt, cap and red color boots is hanged to the rope. Here we can see the stores, books kept on the shelf, board, banner, a few people standing here, glass doors and the ceiling lights in the background.

Lululemon Trims Earnings Outlook Amid Tariff Impact and U.S. Sales Slump

Lululemon Athletica, the pioneering athleisure brand, has trimmed its earnings outlook due to the expiration of the de minimis exemption, which previously allowed it to bypass tariffs on small shipments. Meanwhile, the company grapples with declining comparable sales in the U.S. and a sell-out of popular styles in other categories. Despite these challenges, Lululemon maintains its pricing power and luxury branding, even in the face of growing competition.

Lululemon's current struggles appear temporary, with macroeconomic issues and the one-time impact of the de minimis exemption removal contributing to its woes. The brand's success in China, driven by strong localized branding, superior technology, and community-building, offers a silver lining. In the U.S., however, Lululemon is contending with weak consumer spending, evolving workout trends, and management missteps. To address inventory issues, the company is introducing new styles and expediting its go-to-market process.

Historically, Lululemon has been a stock market success story. However, its shares have taken a significant tumble this year, dropping 53% year to date and 65% from their peak in late 2023. This decline makes Lululemon one of the worst-performing stocks on the S&P 500.

Despite its recent setbacks, Lululemon's long-term prospects remain promising. The brand's strong Chinese market performance and its ability to innovate and adapt suggest that it is well-positioned to weather current challenges. As Lululemon works to address its inventory issues and U.S. market struggles, investors and consumers alike will be watching to see how the athleisure pioneer responds to these temporary headwinds.

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