Lululemon shares fell sharply on Thursday after the company warned over the impact on its business of US President Donald Trump’s tariffs and his decision to close a duty-free loophole.
The Canadian company says the US levies and the ending of the so-called de minimis exemption will cost it about $240m (£178.4m) this year.
The policy had allowed companies to ship online orders worth $800 or less into the US without having to pay import duties.
The retailer slashed its outlook, forecasting sales for the next three months of between $2.47bn to $2.5bn, which was lower than analysts had expected.
The removal of the de minimis rule will have a “significant impact” on Lululemon’s earnings as it will disrupt its US e-commerce shipments, the firm’s chief financial officer Meghan Frank said in an earnings call.
In terms of sales, the company has seen “positive momentum” overseas but is “disappointed” by its US performance, said Lululemon boss Calvin McDonald in a statement.
The firm is considering ways to soften the impact of tariffs by adjusting its supply chain and cutting costs, though changes will take time, he told analysts.
Lululemon’s product cycles had “run too long” and had become “too predictable”, missing out on new trends, he said.
The company said earlier this year that it would make “modest” price increases due to the rising costs.
The majority of Lululemon’s products are made in Asian countries like China and Vietnam.
Clothing brands are among the businesses hit hardest by tariffs as they make goods in Asian countries, which have faced some of the steepest US levies.
Lululemon faces increasing competition from lower-priced rivals like Vuori and Alo Yoga.
Its shares were more than 15% lower in extended trading in New York on Thursday.
Trump’s tariffs have pushed other sportswear brands to raise prices in recent months.
Adidas warned that the tariffs will cost it €200m (£173m; $233m) and raised prices for American customers. Nearly half of the company’s products are made in Asia.
In June, Nike raised prices on some of its trainers and clothing in the US.
Credit: Source link
