What Happened?
Shares of athletic apparel retailer Lululemon (NASDAQ: LULU) fell 15% in the pre-market session after President Trump announced "reciprocal tariffs" on all US imports, set at a minimum rate of 10%.
From clothing brands and electronics makers to the e-commerce sites that move their goods, companies built on global supply chains took the biggest hit. Stocks with heavy exposure to Asia were especially hard-hit, as the new tariffs threatened the growth and profits of firms with factories in the region. Vietnam, central to many companies' production plans, faced a 46% tariff. Cambodia and Indonesia were also in the crosshairs, with tariff rates of 49% and 32%. These measures could significantly erode the competitiveness of goods produced in those regions. For example, reduced production volumes would negatively affect the sales growth of all companies benefiting from these manufacturing hubs.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Lululemon? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Lululemon’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. Moves this big are rare for Lululemon and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 6 days ago when the stock dropped 15% on the news that the company reported underwhelming fourth quarter 2024 results and provided full-year revenue and EPS guidance below analysts' estimates. The Americas region showed flat comparable sales during the quarter, while international markets posted a 20% increase.
Following the underwhelming performance, Raymond James analysts downgraded the stock's rating from Buy to Hold, adding "We lower LULU to Market Perform from Outperform after F4Q24 expectations but F1Q25 and FY25 guidance were set below expectations."
Lululemon is down 31.7% since the beginning of the year, and at $254.46 per share, it is trading 39.6% below its 52-week high of $421.16 from January 2025. Investors who bought $1,000 worth of Lululemon’s shares 5 years ago would now be looking at an investment worth $1,404.
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