Lululemon, the beloved athleisure brand with a huge fanbase among millennials and Gen Z fitness lovers, recently saw its stock drop sharply — tumbling 20% on Friday.
Despite beating Wall Street’s earnings expectations for the first quarter, the company is feeling the pressure from tariffs imposed under former President Trump’s trade policies, forcing it to rethink its pricing strategy.
Earnings Beat but Growth Slows
While Lululemon’s first-quarter results showed a slight sales increase of 1% compared to the same period last year, this was well below the 3% growth analysts had predicted.
The company also lowered its revenue forecast for the rest of the year, signaling a more cautious outlook.
Chief Financial Officer Meghan Frank attributed this slowdown to a “dynamic macroenvironment” dominated by tariffs and concerns over a potential economic downturn.
To cope with these challenges, Lululemon plans to introduce “strategic price increases” on a small selection of products.
Price Hikes on the Horizon
Frank reassured investors that the upcoming price hikes would be “modest” and affect only a limited portion of their product line.
However, considering the brand’s reputation for premium pricing — like their $128 yoga pants — these changes might still sting for some customers.
The company expects to roll out these price increases in the coming weeks.
CEO Calvin McDonald admitted he was “not happy” with the slower growth in the U.S. market and recognized that consumers are becoming more cautious with their spending.
The Tariff Impact Runs Deep
Lululemon’s manufacturing is spread across several countries — with 40% of products made in Vietnam, 17% in Cambodia, and 11% each in Sri Lanka and Indonesia.
However, its significant sourcing from China has been hit hardest by a 30% tariff, with other countries facing 10% tariffs.
The brand is far from alone in facing these challenges.
Many retailers have had to revise or withdraw their full-year earnings forecasts due to the disruptions caused by the tariffs.
Big names like Macy’s and Abercrombie & Fitch have cut profit projections, while American Eagle Outfitters has paused its full-year guidance altogether.
Widespread Price Increases Across Retail
Lululemon’s rival Gap recently warned that tariffs could cost it between $100 million and $150 million annually.
Nike also announced plans to raise prices on many products to offset the added costs.
This wave of price hikes isn’t limited to apparel.
Walmart, which imports about 60% of its goods from China, has confirmed it will pass some tariff-related costs on to customers — and warns that more price increases are coming.
Cars and Consumer Goods Feeling the Squeeze
The automotive industry is also feeling the heat.
Car makers like Subaru and Toyota have announced that Americans will soon face higher prices on vehicles.
Toyota’s North American COO, Mark Templin, recently said, “Business is not sustainable longer term without significant price increases,” highlighting the growing affordability crisis.
Toyota expects to pay $1.3 billion in tariff-related costs in just April and May and is forecasting a 20% profit decline in the upcoming year.
What’s Next for Consumers and Businesses?
With tariffs continuing to disrupt supply chains and increase costs, many companies are caught between maintaining profitability and keeping prices competitive.
Consumers can likely expect to see more price hikes across a wide range of goods, from workout clothes to groceries and even cars.
The big question remains: How long will this challenging environment last, and what will it mean for both businesses and shoppers going forward?