Shares in Lululemon Athletica Inc fell by more than 20% on Monday after the company cut its annual profit forecast, citing a slowdown in sales at stores across North America.
The Canadian athletic apparel maker now expects earnings per share of $10.45 to $10.65 for the year, down from a previous forecast of $11.35 to $11.55.
Reasons for Decline
Lululemon attributed the decline to several factors:
- Lower store traffic due to economic uncertainty
- Inflationary pressures
- Decreased consumer confidence
- Changes in discretionary spending
This decline is part of a broader trend affecting major retailers, including Nike and Adidas, which have also warned about the impact of U.S. trade policies on their businesses.
Impact of Trade Policies
Former President Donald Trump imposed tariffs on billions of dollars worth of Chinese imports as part of his "America First" agenda. This aimed to:
- Reduce U.S. trade deficits
- Protect domestic industries
Trump also targeted other countries with duties to change their trading practices or secure new deals with Washington.
U.S.-China Relations
U.S.-China relations have deteriorated sharply this year over various issues, including:
- Taiwan
- Hong Kong
- Human rights
- Technology policy disputes
High-level talks between the two sides are scheduled for next week, following failed negotiations last month. These discussions are crucial as both countries approach potentially contentious elections next year, which could complicate ties further.
Economic Outlook
The continuation of tariffs could weaken global economic growth, especially as many central banks may start raising interest rates again after cutting borrowing costs during the COVID-19 pandemic.
Market Reaction
- Lululemon shares fell 22% to C$236 ($180) before market opening.
- Nike shares were down 2% in pre-market trading.
- Adidas shares remained flat.
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