The challenge: Lululemon athetica warned the end of the de minimis exemption will be more damaging to its bottom line than tariffs alone.
- The removal of de minimis will account for nearly 80% of the retailer’s estimated $240 million tariff hit this year.
- Those higher costs led lululemon to project both Q3 and full-year earnings well short of analyst expectations. The company expects FY earnings per share (EPS) of between $12.77 and $12.75, significantly below the $14.45 consensus estimate. Q3 EPS is forecast to be between $2.18 and $2.23, while analysts expected $2.93.
A costly change: While most discussion about the end of de minimis has focused on effects to online marketplaces like Amazon and Temu, many retailers also relied on the exemption to reduce expenses—and are now paying the price.
- Lululemon used the duty-free policy on packages under $800 to ship ecommerce orders to US customers from its Canada distribution centers—a practice that applied to roughly two-thirds of its US online orders.
- Like lululemon, Coach parent Tapestry expects the end of de minimis to meaningfully increase its tariff bill, which it estimated would reach $160 million for the fiscal year ending June 2026.
Our take: De minimis’ abrupt end is pressuring retailers’ supply chains and their operating models. In addition to tariff-proofing their manufacturing strategies, companies that relied on duty-free shipments to the US must now also invest in local fulfillment and face the full weight of tariff costs.
While companies are looking to offset some of those expenses by reducing operating costs, most of the burden will ultimately be passed onto consumers—which could curb demand heading into the all-important holiday season.
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