Investors in athletic apparel maker Lululemon Athletica are seeing red this morning after the company reported its second-quarter fiscal 2025 results.
While the athleisure brand surpassed Wall Street earnings estimates for the quarter, it provided guidance that alarmed its investors. Here’s what you need to know about that guidance and why Lululemon’s stock (Nasdaq: LULU) is crashing.
Lululemon Q2 results by the numbers
After the closing bell yesterday, Lululemon reported its Q2 results for fiscal 2025, which ended on August 3, 2025.
On the surface, the company had some modest wins for the quarter. The highlight was the company’s international net revenue, which increased 22%. International comparable sales increased 15%, and gross profit increased 5% to $1.5 billion.
The company also posted diluted earnings per share (EPS) of $3.10. As noted by CNBC, these results handily beat LSEG analyst expectations of an EPS of $2.88.
Yet it’s the company’s Americas numbers, which include the United States, where cracks have begun to show. Despite strong international net revenue and comparable sales increases, net revenue in the Americas increased by just 1%. And Americas comparable sales decreased 4%.
These Americas results offset a substantial number of the significant gains that Lululemon saw internationally for the quarter, and reduced its global net revenue increase to just 7% (to $2.5 billion). Global comparable sales increased just 1%.
In total, Lululemon posted revenue for the quarter of $2.53 billion, slightly behind the $2.54 billion analysts expected.
But those results aren’t primarily what have investors spooked. Rather, Lululemon’s guidance for its 2025 full fiscal-year earnings and revenue appears to have shaken investor confidence.
Impact of de minimis exemption expiration and Trump’s tariffs
Along with its Q2 earnings, Lululemon updated its full-year earnings and revenue guidance for fiscal 2025.
In terms of 2025 revenue, Lululemon said it expects to take in between $10.85 billion and $11 billion for its fiscal year.
That range is below the $11.18 billion that Wall Street analysts were expecting. However, the revenue shortfall doesn’t seem to be the main thing driving LULU shares lower this morning. That would be the company’s revised full-year earnings outlook for 2025.
Now Lululemon says it expects diluted earnings per share to be between $12.77 and $12.97. That is well below what Wall Street analysts were expecting, which CNBC says was an EPS of $14.45 per share.
Why did Lululemon’s guidance fall so sharply?
Blame two Trump-fueled policy shifts: tariffs and the end of the de minimis exemption.
As Lululemon noted in its earnings release, “The guidance for 2025 includes an estimated reduction in gross profit of approximately $240 million, net of currently anticipated mitigation efforts, including vendor savings, and pricing actions, reflecting our current assumptions about higher levels of tariffs on imports into the United States and the removal of the de minimis exemption.”
American businesses have relied on the de minimis exemption for years. It previously allowed goods valued at less than $800 to enter the country tariff-free. This means a U.S. customer could order up to $800 worth of product and a company like Lululemon could ship it to them directly without paying any import duty, thus keeping down costs.
As of last month, this de minimis exemption is now a thing of the past, meaning companies will now pay more to get their goods to U.S. customers. And if companies pass those costs onto customers, customers could cut back on spending. That’s a big factor why Lululemon’s is forecasting a full fiscal year gross profit reduction of $240 million.
LULU stock has had a bad 2025
As of the time of this writing, LULU shares are currently plummeting in premarket trading. The stock price is currently down 19% to $166.94 per share. It hasn’t been that low for over five years.
But even before today’s premarket crash, LULU shares have had a rough time as of late. Largely thanks to fears over how Trump’s tariffs will impact the company—which relies on significant imports from Southeast Asian nations—LULU stock has dropped sharply in 2025.
As of yesterday’s closing price of $206.09, LULU shares have lost more than 46% of their value since the year began.
