Lululemon warns about ‘cautious shopper’ as inflation, tariff issues take a toll

Lululemon inventory (LULU) fell 15% in afternoon buying and selling after CEO Calvin McDonald mentioned shoppers are starting to spend much less in response to elevated fears in regards to the US financial system.

“The dynamic macro atmosphere has contributed to a extra cautious shopper,” McDonald instructed buyers on a name Thursday night. “Shoppers are spending much less on account of elevated issues about inflation and the financial system,” which led to slower visitors on the athleisure firm and throughout the retail business, he mentioned.

The most recent studying on shopper sentiment launched Friday appeared to again up the CEO’s feedback. The College of Michigan’s shopper sentiment index fell to its lowest stage since November 2022, echoing an analogous decline in one other measure of shopper confidence earlier this week.

A rising variety of retailers have additionally signaled shoppers could also be pulling again as they assess how shifting financial insurance policies and tariffs may influence their wallets.

Learn extra: What Trump’s tariffs imply for the financial system and your pockets

“We have seen plenty of struggles throughout the sector, [companies’ outlooks] coming in conservative,” Bernstein senior analyst Aneesha Sherman instructed Yahoo Finance. “Declining shopper sentiment and plenty of uncertainty round macro … all of that’s taking a toll on steering.”

For fiscal 12 months 2025, Lululemon expects internet income to be between $11.1 billion and $11.3 billion. Adjusted earnings per share are anticipated to be between $14.95 and $15.15.

“The patron clearly noticed a giant slowdown in February and … it is continued by means of early March,” added John Kernan, TD Cowen managing director of retail and shopper manufacturers. “I believe if you have a look at [it], we got here out of a really robust vacation, and I believe everyone felt good in regards to the shopper. However the headlines have modified, [and] shopper confidence has radically modified. And proper now, the patron is in a interval of hesitation in terms of discretionary spend.”

Regardless of shopper worries, Lululemon could also be “properly positioned” to climate greater tariffs because it has restricted its publicity to China, William Blair analyst Sharon Zackfia instructed Yahoo Finance earlier this 12 months. Earlier this month, President Trump imposed an further 20% tariff on items imported to the US from China.

In line with Lululemon’s 2023 annual report, 42% of its merchandise have been manufactured in Vietnam, 16% have been made in Cambodia, 11% in Sri Lanka, 10% in Indonesia, and eight% in Bangladesh, amongst different international locations. It additionally sourced 40% of its materials from Taiwan, 26% from China, and 12% from Sri Lanka.