Lululemon's stock (LULU) experienced a 15% drop in midday trading following remarks by CEO Calvin McDonald about consumers beginning to reduce spending due to growing concerns about the US economy. McDonald stated during an investor call that the uncertain economic environment was leading to more cautious consumer behavior, with people scaling back expenditures due to worries about inflation and the overall state of the economy. This resulted in decreased foot traffic at Lululemon and throughout the retail sector.

The most recent consumer sentiment data from the University of Michigan, released on Friday, supported the CEO's observations, showing a decrease to the lowest level since November 2022, mirroring a similar trend in consumer confidence indicators earlier in the week. Several retailers have also indicated that consumers might be holding back spending as they evaluate the potential impacts of evolving economic policies and tariffs on their finances.

Despite the challenging consumer sentiment, Lululemon is projecting net revenue of $11.1 billion to $11.3 billion and adjusted earnings per share between $14.95 and $15.15 for fiscal year 2025. The company appears to be in a favorable position to cope with higher tariffs since it has limited exposure to China, as pointed out by William Blair analyst Sharon Zackfia. The annual report for 2023 revealed that a significant portion of Lululemon's products and fabrics are sourced from Vietnam, Cambodia, Sri Lanka, Indonesia, and other countries, with only a minor percentage coming from China.