Stock markets were buzzing with anticipation on Friday, September 5, 2025, as investors awaited the latest U.S. jobs report—a regular ritual that often sets the tone for trading sessions. Yet, while broader futures were mixed, one name dominated the headlines for all the wrong reasons: Lululemon Athletica. The athletic apparel giant saw its shares nosedive, plunging nearly 19% in pre-market trading after a string of disappointing news that left Wall Street analysts and retail investors alike scrambling for answers.
Lululemon’s troubles began with the release of its second-quarter results for fiscal 2025. On the surface, some numbers looked decent: the company posted earnings per share of $3.10, comfortably beating the $2.88 expected by analysts surveyed by LSEG (as reported by CNBC). But dig a little deeper, and the cracks began to show. Revenue for the quarter came in at $2.53 billion, just shy of the $2.54 billion that Wall Street had hoped for. That slight miss, combined with a gloomy outlook for the rest of the year, sent shockwaves through the market.
Perhaps the most jarring detail was Lululemon’s revised forecasts. The company now expects full-year earnings per share to land between $12.77 and $12.97—a significant drop from Wall Street’s consensus estimate of $14.45 per share. Full-year revenue projections were also slashed, now standing at $10.85 billion to $11 billion, well below the $11.18 billion analysts had penciled in. These downgrades were not just numbers on a page; they reflected deeper structural challenges facing the company.
One of the primary culprits? Tariffs. Lululemon said it expects a $240 million hit to profits in 2025, largely driven by the removal of the de minimis exemption, a policy that had previously shielded smaller shipments from tariffs. Chief Financial Officer Meghan Frank explained on the company’s earnings call that this policy change alone would account for roughly 1.7 percentage points of the 2.2 percentage-point tariff-related decline in profits expected for the year. "The increased rates and removal of the de minimis provisions have played a large part in our guidance reduction for the year," CEO Calvin McDonald told analysts, according to CNBC.
But tariffs weren’t the only headwind. Lululemon’s same-store sales in the Americas dropped 4%, and overall comparable sales grew just 1%—well below the 2.2% increase analysts had hoped for. The company’s gross margin slipped by 1.1 percentage points to 58.5%, and its operating margin shrank by 210 basis points, settling at 20.7%. Even as Lululemon added 14 net new stores during the quarter, bringing its global total to 784, the numbers couldn’t mask the underlying softness in its core U.S. market.
McDonald didn’t shy away from the company’s missteps, particularly in its merchandise strategy. "We have become too predictable within our casual offerings and missed opportunities to create new trends," he admitted during the September 4 call. He cited the company’s lounge and social categories as especially problematic, saying, "Our lounge and social product offerings have become stale and have not been resonating with guests." The CEO promised a reset, revealing plans to increase the proportion of new styles from 23% to 35% of Lululemon’s overall assortment by spring 2026, and to speed up the company’s fast-track design capabilities. "We are not satisfied with the results for the quarter, and we know our brand can and will perform better than these results," McDonald added, emphasizing that the company would not resort to short-term fixes that could harm its long-term brand value.
The market reaction was swift and severe. Lululemon shares plunged about 19% in pre-market trading on September 5, as reported by TipRanks, and extended losses to over 20% at one point in after-hours trading, according to CNBC. The stock’s year-to-date decline ballooned to more than 45% as of Thursday’s close, underscoring just how far the once high-flying brand had fallen.
Wall Street analysts wasted no time in revising their views. William Blair, Stifel, Evercore, Oppenheimer, and Telsey Advisory all downgraded Lululemon’s stock in the wake of the earnings report. William Blair’s Sharon Zackfia moved her rating to Hold from Buy, citing the uncertain timing of a U.S. sales turnaround and the outsized impact of tariffs. She now expects Lululemon to “lose a year of earnings,” with her 2026 EPS estimate of $14.18 falling below the incoming 2025 estimate of $14.41. Stifel’s Peter McGoldrick also downgraded the stock to Hold, slashing his price target to $205 from $324, and pointing to “dual pressure” from slower sales and trade policy shocks. Evercore’s Michael Binetti echoed those concerns, cutting his price target to $180 from $265 and highlighting the “far, far bigger issue” posed by tariffs and the removal of the de minimis exemption.
Binetti also noted a further deceleration in Lululemon’s U.S. business and a reduction in China’s FY25 sales growth outlook from 25-30% to 20-25%. He cited deteriorating innovation as another red flag, suggesting the company faces a “show-me story” until new products hit the shelves in spring 2026. As of early September, the Wall Street consensus was Moderate Buy, with an average price target of $267.76—implying about 30% upside from current levels—but those targets were expected to come under pressure as analysts digested the latest results.
For investors looking for silver linings, there were a few. Lululemon did beat second-quarter earnings estimates, and its global store network continues to expand. The company’s leadership is openly acknowledging its mistakes and pledging to make changes, rather than papering over the cracks. And while the removal of the de minimis exemption has hit profits hard, it’s a challenge faced by many apparel importers, not just Lululemon.
Meanwhile, other companies in the sector saw different fortunes. Braze, a software firm, surged 18% on the same day, standing in stark contrast to Lululemon’s struggles (as noted by Seeking Alpha). The divergence highlights just how much volatility and sector-specific risk remain in today’s market, especially as global trade policies and consumer trends continue to shift.
Looking ahead, Lululemon’s immediate future appears challenging. The company projects third-quarter revenue between $2.47 billion and $2.50 billion—below analyst expectations of $2.57 billion—and earnings per share between $2.18 and $2.23, compared to an estimate of $2.93. McDonald, for his part, remains optimistic that a renewed focus on product innovation and faster design cycles will help the brand regain its edge. But with tariffs biting, U.S. demand sagging, and Wall Street’s patience wearing thin, Lululemon has little room for error as it heads into the critical holiday season and beyond.
It’s a tough lesson for a brand that once seemed unstoppable. But as any seasoned investor will tell you, even market darlings aren’t immune to the realities of shifting consumer tastes, global trade tensions, and the ever-watchful eye of Wall Street. The next chapter for Lululemon will depend not just on new styles and supply chain tweaks, but on whether it can recapture the imagination of shoppers—and restore the confidence of investors who, for now, are keeping their distance.
