Lululemon Athletica, the athleisure innovator, today reduced its full-year revenue and earnings projections, marking its second consecutive forecast cut in 2025. The company cited a confluence of challenges—from mounting tariff costs and removal of key customs exemptions to execution missteps in product strategy and continuing softness in its U.S. market. The news sent shares plunging approximately 15% in after-hours trading.
Despite Q2 results broadly meeting expectations, including $2.53 billion in revenue (up 7%) and earnings per share of $3.10 (surpassing estimates of $2.88), the company’s forward-looking outlook dimmed. While international sales surged 15%, comparable sales in the Americas slipped 1%, highlighting a growing divergence between regions.
CEO Calvin McDonald acknowledged significant shortcomings in merchandise strategy. The company has been slow to phase out underperforming categories like lounge and social wear, and misaligned with seasonal consumer trends. He added: “We have let our product life cycles run too long within many of our core categories.”
Tariff pressures and the end of the U.S. de minimis exemption—which used to allow for duty-free import of small shipments—will extract a heavy toll on profitability. Lululemon anticipates a $240 million drag on gross profit in 2025, with an even larger $320 million impact to its 2026 operating margin.
To counteract these headwinds, the company plans strategic U.S. price increases and augmented clearance efforts to manage its inventory and curb tariff-induced cost growth.
Revised guidelines now position 2025 revenue in the range of $10.85 billion to $11.0 billion, down from the previous forecast of $11.15 billion to $11.30 billion. Concurrently, adjusted earnings per share (EPS) have been lowered to $12.77–$12.97, a significant retreat from the earlier outlook of $14.58–$14.78.
Analysts have noted that Lululemon’s innovation edge has faded, particularly as brands like Alo Yoga and cost-effective private-label alternatives offer similar technical fabrics at lower prices. This intensifying competition is believed to be eroding the company’s once formidable brand moat.
