Adds graphics, brokerage price cuts in paragraph 10
By Savyata Mishra
June 6 (Reuters) - Lululemon Athletica's LULU.O shares fell 20% in premarket trading on Friday, as the maker of high-end leggings warned that tariff-related costs and uneven demand in key markets of North America and China will dent its profits this year.
The Canadian firm, whose popular Align yoga pants sell for up to $128 apiece on its website, will take modest price hikes for a "small portion of the assortment" and ramp up discounts for the rest of the year, company executives said.
Lululemon has struggled to retain shoppers, despite its efforts to introduce fresh styles of sports bras and athletic jackets, as it faces intense competition from trendier and more affordable brands in North America and mainland China.
"Despite (Americas) decline, management continues to prioritize product newness and China expansion over addressing a pullback from core customers and evident traffic declines," Jefferies analyst Randal Konik said in a note.
"We believe this misalignment is concerning."
Lululemon joins sportswear rivals Nike NKE.N and On ONON.N in raising prices in the U.S. as erratic trade tactics under President Donald Trump rattle global markets and fuel fears of a recession.
Lululemon trimmed its 2025 earnings forecast and said it expects margins to come under pressure from the proposed tariffs, which will impact products from some of its largest sourcing hubs in Vietnam, Cambodia and Sri Lanka.
"My sense is that in the U.S., consumers remain cautious right now, and they are being very intentional about their buying decisions," CEO Calvin McDonald said on a post-earnings call.
The company's stock, which is down about 14% this year, was trading at $263.50 before the bell on Friday. The news dragged Nike's shares down 1.3%.
At least 12 brokerages cut their price targets on the stock, with J.P.Morgan slashing it the most, to $303 from $389.
Lululemon's forward price-to-earnings multiple, a common benchmark for valuing stocks, is 21.46, compared to that of 31.37 for Nike and 9.54 for Gap GAP.N.
Lululemon Americas sales tepid on choppy demand https://reut.rs/4dWwwOi
(Reporting by Savyata Mishra in Bengaluru; Editing by Shreya Biswas)
((Savyata.Mishra@thomsonreuters.com;))
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