Welcome to The Week Ahead, your guide to the coming week’s most important and interesting events. Last week was a busy one, particularly for luxury fashion, between Chanel’s Métiers d’Art show and Prada’s acquisition of Versace, followed quickly by the departure of designer Dario Vitale from the latter. Read all about it in Robert Williams’ High Margin newsletter.
At first glance, this week is shaping up to be a quieter one. The industry is starting to wind down for the holidays, but it’s too early for a pre-Christmas news dump. Though as any superstitious journalist will tell you, the previous two sentences just guaranteed a steady flow of major breaking news.
In this week’s edition:
- The US Supreme Court is expected to rule on the legality of the Trump administration’s tariffs sometime in December. I look at the repercussions for fashion, whether it happens this week or next.
- Investors have rock-bottom expectations for Lululemon’s earnings on Thursday, as the athleisure giant is beset by nimble competition and tariffs. But there are bright spots (and polka dots).
Just Another Athleisure Brand
A bad year: Lululemon won’t be sad to put 2025 in the rearview mirror. The activewear giant, which reports third-quarter results on Thursday, is besieged by competitors, which promise a younger, cooler approach to athleisure. It hasn’t helped that founder Chip Wilson – no longer with the company but still its largest shareholder – has been lobbing bombs from the sidelines, even taking out full page ads denouncing the brand’s current leadership. Or that head of Americas Celeste Burgoyne, a 20-year company veteran, left in November for a senior role at Vail Resorts.
What’s expected this week: Third-quarter sales are expected to rise by between 3 and 4 percent, while earnings are seen declining by more than 20 percent.
This week, investors will want to hear more about how the company will win back customers without leaning too much on discounts, and how the company is adjusting to the new tariff landscape. Lululemon has extra work to do on this front compared with its peers. In September, it disclosed that it had benefitted from the “de minimis” loophole to a far greater degree than was widely known, shipping some two-thirds of its US e-commerce sales — $2.8 billion annually — without paying taxes at the border, according to Cowan.
This caught markets by surprise, and seven analysts immediately downgraded their outlook for Lululemon’s stock. Shares now trade roughly where they did before the pandemic, perhaps the most definitive sign yet that the Covid-induced athleisure boom is truly over.
It’s not all bad news though: The Supreme Court might unwind Trump’s trade policy any day now (more on that below). And while opening warehouses in the US may be expensive, it can be done; if Shein can survive the end of de minimis, Lululemon certainly can.
On the fashion front, Lululemon’s new NFL partnership shows the brand knows how to leverage its scale. And it can still produce viral hits as well as any buzzy startup. In her “After School” newsletter, Casey Lewis flagged a polka dot workout set as “by far the most coveted find of Black Friday” for Gen Z. Executives in Vancouver can reread Lewis’ report that “girls ‘literally ran’ to malls after spotting the pieces on TikTok” next time Wilson publicly blames them for the brand’s “loss of cool.”
Now About Those Tariffs
In early November, a majority of Supreme Court justices appeared to be highly sceptical of the Trump administration’s argument that it could impose sweeping tariffs without Congressional approval. A ruling is expected any day. Kalshi, a predictions market, puts the chances of a favourable decision for Trump at just 22 percent.
The fashion industry is crossing its fingers; large brands have collectively said tariffs will hit their profits to the tune of billions of dollars. The Supreme Court won’t have the final word, as Trump may eventually try to impose costs on imports by other means. But there would likely be immediate and in many cases permanent relief across the board. Depending on how far the Supreme Court’s ruling goes, importers may even be owed refunds on tariffs already paid.
Some retailers aren’t waiting for the justices. Last week, Costco and other businesses sued the US government to secure refunds. Whether they succeed depends on the Supreme Court, but it can’t hurt to get to the front of the line if things go importers’ way.
The cloudy tariff picture further complicates the Federal Reserve’s next interest rate decision, which is due on Wednesday. A quarter percentage point cut is expected, which will lower borrowing costs at a time when fashion companies are looking behind the couch cushions for spare change.