Lululemon Athletica experienced a significant drop in its stock value on Thursday, following the company’s announcement of expected financial challenges due to tariffs imposed by the U.S. government and the termination of the de minimis exemption. This exemption previously allowed online purchases valued at $800 or less to enter the U.S. without incurring import duties. Lululemon estimates that these changes will result in approximately $240 million in additional costs for the fiscal year.
In light of this situation, Lululemon has revised its revenue forecast for the upcoming quarter, projecting sales between $2.47 billion and $2.5 billion, which is below analysts’ expectations. The company’s Chief Financial Officer, Meghan Frank, indicated that the removal of the de minimis rule would significantly affect the company’s earnings by disrupting U.S. e-commerce operations.
Despite showing “positive momentum” in international markets, Lululemon expressed disappointment regarding its performance within the U.S. The CEO, Calvin McDonald, stated that the company is exploring strategies to mitigate the financial impact of the tariffs, such as adjusting its supply chain and reducing costs. However, he acknowledged that implementing these changes will require time.
The company also recognized that its product cycles had become outdated and too predictable, missing opportunities to engage with emerging trends. Earlier this year, Lululemon indicated that it would introduce modest price increases in response to rising costs.
The majority of Lululemon’s products are manufactured in Asian countries, including China and Vietnam. This aligns with a broader trend among clothing brands facing difficulties from tariffs. Other sportswear companies, such as Adidas and Nike, have also reported significant costs attributed to these tariffs and have started raising prices for U.S. consumers. On Thursday, Lululemon’s shares fell more than 15% in after-hours trading.
Source: https://www.bbc.com/news/articles/cy9n4e1g1gyo?at_medium=RSS&at_campaign=rss