How Tariff Headwinds and Lower Guidance at lululemon (LULU) Have Changed Its Investment Story

• Earlier this month, lululemon athletica inc. reported its second quarter 2025 results, announcing higher sales of US$2.53 billion but a year-on-year decline in net income to US$370.91 million, alongside reduced full-year guidance due to increased tariff-related costs and weaker U.S. trends.
• A key development is management’s expectation that new tariff costs and the end of the de minimis import exemption will reduce gross profit by approximately US$240 million this year, prompting operational resets and accelerated product innovation efforts.
• We’ll examine how these additional tariff headwinds and guidance cuts may impact lululemon's narrative of innovation-led growth and global expansion.

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lululemon athletica Investment Narrative Recap

To own shares in lululemon athletica, investors must believe the brand can reinvigorate U.S. sales through accelerated product innovation and global expansion, even amid profit pressures from tariffs and weakening domestic demand. The recent guidance cut directly highlights the near-term risk: higher tariff costs and a softer U.S. market threaten margin recovery, putting greater urgency on the success of product resets as the primary catalyst for a turnaround.

Among recent company announcements, the downward revision of full-year 2025 revenue and earnings guidance is especially relevant. It reflects the tangible impact of tariff costs and slower U.S. trends, emphasizing just how much delivering on innovation and international growth must compensate as management works to mitigate margin pressures. Despite this, investors should also be aware that...

Read the full narrative on lululemon athletica (it's free!)

lululemon athletica's narrative projects $12.8 billion revenue and $1.9 billion earnings by 2028. This requires 5.4% yearly revenue growth and a $0.1 billion earnings increase from $1.8 billion today.

Uncover how lululemon athletica's forecasts yield a $202.60 fair value, a 27% upside to its current price.

Exploring Other Perspectives

Fifty separate fair value estimates from the Simply Wall St Community range from US$117 to US$410 per share, highlighting wide differences in outlook. While perspectives vary, consensus analyst concerns about U.S. category fatigue and promotional pressures underscore the importance of staying informed on emerging risks.

Explore 50 other fair value estimates on lululemon athletica - why the stock might be worth over 2x more than the current price!

Build Your Own lululemon athletica Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your lululemon athletica research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.
• Our free lululemon athletica research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate lululemon athletica's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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