Lululemon stock plunges 20% as company's second quarter outlook misses Wall Street estimates
Lululemon stock (LULU) fell as much as 20% in after hours trade on Thursday after the company warned profits would take a hit amid what it called a “dynamic macro-environment.”
It now expects second quarter adjusted earnings per share to fall in a range of $2.85-$2.90, far lower than Wall Street’s estimates for EPS of $3.31. Lululemon also cut its full-year EPS outlook to a range of $14.58-$14.78 from $14.95-$15.15.
“As we navigate the dynamic macro-environment, we intend to leverage our strong financial position and competitive advantages to play offense, while we continue to invest in the growth opportunities in front of us,” CEO Calvin McDonald said in the release.
Revenue for the second quarter is expected to grow 7%- 8% to a range of $2.535 billion-$2.560 billion. That’s below with the Street’s expectations of $2.568 billion, according to Bloomberg data.
The company reiterated its revenue outlook for 2025 in a range of $11.15 billion-$11.30 billion.
For the first quarter, Lululemon posted mixed results as revenue came in at $2.37 billion, slightly higher than the $2.36 billion Wall Street anticipated. Adjusted earnings per share came in line with expectations at $2.60. Same-store sales, however, increased by 1%, less than the 2.4% growth the street hoped for.
These results come as consumer confidence has waned in recent months and more consumers turn to discount retailers as they seek out value with inflation and labor market uncertainty weighing on purchase decisions.
“My sense is that in the US, consumers remain cautious right now, and they are being very intentional about their buying decisions,” McDonald said on the company’s earnings call.
Lululemon also joins a growing list of retailers, like Macy’s (M), to lower its earnings outlook as President Trump’s tariffs take effect.
According to Lululemon’s 2023 annual report, 42% of its products were manufactured in Vietnam, 16% were made in Cambodia, 11% in Sri Lanka, 10% in Indonesia, and 8% in Bangladesh, among other countries. It also sourced 40% of its fabrics from Taiwan, 26% from China, and 12% from Sri Lanka.
“The current tariff paradigm has brought uncertainty into the retail environment as consumers try to assess the impact they will have on daily life,” McDonald added.
Morningstar analyst David Swartz told Yahoo Finance on Thursday he still believes, “Lululemon does have pricing power.”
“Its products are generally more expensive than others…I think it can actually raise prices to offset higher tariffs better than most of their competitors,” Swartz said.
Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.