Lululemon stock (LULU) fell 15% in afternoon trading after CEO Calvin McDonald said consumers are beginning to spend less in response to increased fears about the US economy.
“The dynamic macro environment has contributed to a more cautious consumer,” McDonald told investors on a call Thursday evening. “Consumers are spending less due to increased concerns about inflation and the economy,” which led to slower traffic at the athleisure company and across the retail industry, he said.
The latest reading on consumer sentiment released Friday appeared to back up the CEO’s comments. The University of Michigan’s consumer sentiment index fell to its lowest level since November 2022, echoing a similar decline in another measure of consumer confidence earlier this week.
A growing number of retailers have also signaled consumers may be pulling back as they assess how shifting economic policies and tariffs could impact their wallets.
Read more: What Trump’s tariffs mean for the economy and your wallet
“We’ve seen a lot of struggles across the sector, [companies’ outlooks] coming in conservative,” Bernstein senior analyst Aneesha Sherman told Yahoo Finance. “Declining consumer sentiment and a lot of uncertainty around macro … all of that is taking a toll on guidance.”
For fiscal year 2025, Lululemon expects net revenue to be between $11.1 billion and $11.3 billion. Adjusted earnings per share are expected to be between $14.95 and $15.15.
“The consumer clearly saw a big slowdown in February and … it’s continued through early March,” added John Kernan, TD Cowen managing director of retail and consumer brands. “I think when you look at [it], we came out of a very strong holiday, and I think everybody felt good about the consumer. But the headlines have changed, [and] consumer confidence has radically changed. And right now, the consumer is in a period of hesitation when it comes to discretionary spend.”
Despite consumer worries, Lululemon may be “well positioned” to weather higher tariffs as it has limited its exposure to China, William Blair analyst Sharon Zackfia told Yahoo Finance earlier this year. Earlier this month, President Trump imposed an additional 20% tariff on goods imported to the US from China.
According to Lululemon’s 2023 annual report, 42% of its products were manufactured in Vietnam, 16% were made in Cambodia, 11% in Sri Lanka, 10% in Indonesia, and 8% in Bangladesh, among other countries. It also sourced 40% of its fabrics from Taiwan, 26% from China, and 12% from Sri Lanka.
