It’s gonna take more than a new line of yoga pants to fix Lulu’s balance sheet.
Driving the news: Lululemon is warning that the closing of the U.S. de minimis exemption — which allowed shipments under US$800 to avoid tariffs — will shave hundreds of millions off its profits.
- Lulu says the addition of tariffs on those small packages will carve US$240 million from its profits this year and another US$320 million in 2026.
Catch-up: The Vancouver retailer leaned heavily on the loophole, which was officially axed on August 29. Two-thirds of its U.S. e-commerce orders were fulfilled through Canadian distribution centres, and most of those shipments slid in under that key $800 threshold.
- One analyst noted that the scope of Lulu’s reliance on de minimis was surprising, and had given the retailer’s profit margins an “unsustainable” boost.
Why it matters: Paying more to reach its most lucrative customers only adds insult to injury for Lulu. The retailer’s stock is down about 55% this year, fashion trends are shifting away from its core products, and upstarts like Vuori and Alo Yoga and cheaper private-label dupes are poaching customers quickly.
Big picture: Online retailers around the world are going to feel the pain of this loophole being closed. Don’t be surprised if those added costs translate to higher prices.—LA