MW Here's why apparel stocks like Deckers, Lululemon and Nike are sprinting lower

By Steve Gelsi

As tariffs jack up costs for business with close ties to Asia, stocks are selling off

Shares of Lululemon Athletica Inc., Deckers Outdoor Corp. and Nike Inc. were among the steepest decliners among S&P 500 companies caught up in Thursday's steep premarket selloff, as Wall Street grappled with the impact of President Donald Trump's tariffs.

Deckers Outdoor $(DECK)$, which makes Ugg boots and Hoka running shoes, and yoga-apparel brand Lululemon $(LULU)$ each dropped 13%.

'We view the entire complex as highly exposed.'Jefferies

Nike $(NKE)$ fell about 10%, and Crocs Inc. $(CROX)$ was down 12%.

"The recent tariffs could affect many of the top producing apparel countries including Vietnam, Cambodia, India, and Indonesia," Jefferies analysts said in a Thursday note. "We view the entire complex as highly exposed."

Trump imposed tariffs of 34% on China and 46% on Vietnam, where much of the footwear production for Deckers and others takes place.

Deckers does business with Yue Yuen Industrial Holdings and Huali Industrial Group, both based in China, according to FactSet data.

Lululemon gets its yoga-pants spandex from Huafon Chemical Co., which is based in China.

Deckers, headquartered in Cailfornia, derives 66.8% of its annual revenue in the U.S., which is by far its biggest market, according to FactSet. Mainland China is in second place, accounting for 8.1% of total revenue.

For Lululemon, which is based in Vancouver, B.C., the U.S. accounts for 61.2% of overall annual sales, followed by Canada at 18%, according to FactSet.

Also read: How much Nike, Adidas and Puma source from Asian countries including Vietnam

Only about 1% of U.S. footwear and 2.5% of clothing is made domestically, Jefferies said.

Raymond James analysts said every company in its coverage space is likely to be negatively impacted by higher costs, but the footwear category will "face the most scrutiny" given the new Vietnam and China tariffs.

"While China risk was well known, new Vietnam tariffs are a significant negative as most footwear brands source 40%-90% from the country," Raymond James analysts said.

They cited retailers Abercrombie & Fitch $(ANF)$ and America Eagle Outfitters $(AEO)$ as vulnerable, along with Deckers and Lululemon. Abercrombie's stock is down 9% in premarket trading, while American Eagle is off by about 9.5%.

Off-price retail may fare better, as it is better positioned to take advantage of dislocation in the market place, given the business model, Jefferies analysts wrote.

However, even the discounters may come under pressure from higher prices.

"On its latest earnings call, TJX $(TJX)$ specifically called out its sourcing efforts from Europe as a key differentiator, but now the EU will be subjected to 20% tariffs," Jefferies analysts wrote, referencing the operator of the T.J. Maxx and Marshalls chains. "We expect [off-price retailers'] value proposition could resonate well with customers ahead, given the uncertainty."

Even before Thursday's selloff, Decker's stock had fallen 21% in the last 12 months, while the S&P 500 SPX had gained 9%. Lululemon has been down 26% so far this year.

-Steve Gelsi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 03, 2025 08:44 ET (12:44 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.