Lululemon Athletica Inc.’s CEO says he is not happy with the clothing retailer's latest results, as it faces softer consumer demand and tariff headwinds, coupled with the removal of the de minimis exemption for small U.S.-bound shipments.
"We are not satisfied with the results for the quarter, and we know our brand can and will perform better than these results," Calvin McDonald told an earnings call Thursday.
The company reported net income of US$370.9 million during its second quarter, down from US$392.9 million a year earlier. The profit amounted to earnings per diluted share of US$3.10 compared with US$3.15 during the same period last year.
In its updated guidance for 2025, the company noted an estimated reduction in gross profit, reflecting the impact of tariffs and the removal of the de minimis exemption last month, which had allowed packages worth US$800 or less to ship south of the border without duties.
"We now expect a 220-basis-point, or approximately US$240-million, mitigated impact on gross margin for the year," Meghan Frank, Lululemon's chief financial officer, told the call.
She added that the company had been "well-positioned" to ship some e-commerce orders to U.S. customers from Canada. Most of the shipments were under US$800, so they would qualify for the de minimis exemption.
"This removal will have a significant impact on our gross margin," Frank said.
The company now expects net revenue for 2025 to come in between US$10.85 billion and US$11 billion. In its first-quarter results release in June, the retailer had expected net revenue of between US$11.15 billion and US$11.3 billion.
"We are facing yet another shift today within the industry related to tariffs and the cost of doing business. The increased rates and removal of the de minimis provision have played a large part in our guidance reduction for the year," McDonald said.
He added that the company also faces a softer consumer demand in the U.S.
"The overall market for premium athletic wear in the U.S. remains challenging, with declines continuing in Quarter 2. Consumers are spending less on apparel overall, spending less in performance active wear, and are being more selective in their purchases, picking out truly new styles," McDonald said.
Net revenue for the quarter reached US$2.53 billion, rising roughly seven per cent year-over-year from US$2.37 billion.
Lululemon says its comparable sales rose one per cent during the quarter.
The Vancouver-based clothing retailer also says it repurchased 1.1 million of its shares at a cost of US$278.5 million.
This report by The Canadian Press was first published Sept. 4, 2025.
Daniel Johnson, The Canadian Press
