By Jordan Valinsky, CNN
New York (CNN) — Lululemon’s stock is on pace for one of its biggest routs in history after the athleisure maker warned that tariffs will dent its profit.
The company cut its full-year guidance citing a “dynamic macroenvironment” that includes a decline in visits to its US stores, the impact of tariffs and and rising competition from other brands, such as Vuori and Alo.
Lululemon (LULU) shares plunged more than 20% in premarket trading, on pace for the stock’s worst day in more than five years and its fourth-worst day ever.
“The current tariff paradigm has brought uncertainty into the retail environment,” said CEO Calvin McDonald on a call with analysts Thursday, adding that Lululemon is “definitely not happy where the growth is in the US.”
Following the likes of Nike, Roger Federer-backed On and other similiar brands, Lululemon will also implement “strategic price increases” on a “small portion” of its lineup that includes pricey yoga pants, shoes and shorts, Chief Financial Officer Meghan Frank revealed on the call, but said the price hikes “will be modest in nature.”
The uncertainty around tariffs and consumer spending in the US forced Lululemon to cut its full-year earnings to be between $14.58 to $14.78 per share – a decrease from its previously forecasted $14.95 to $15.15.
Despite that, McDonald said Lululemon is “better positioned than most” to endure and navigate the financial environment because it has $1.3 billion in cash and no debt, “which provides us significant financial flexibility,” he said.
Lululemon is the latest company to reduce its guidance because of the at-least 30% tariffs on imports from China and 10% tariffs from other countries implemented by President Donald Trump.
Gap recently said it would could cost the company $100 million to $150 million this year. Sister brand Old Navy also recently launched a new, budget-friendly activewear line this month, that could further pressure Lululemon and attract budget-conscious customers.
Lululemon stock is down about 11% for the year.
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