Lululemon Athletica (LULU) Fell on the De Minimis Application of Tariffs

Middle Coast Investing, an investment advisor firm, released its third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The third quarter was favorable for Middle Coast Investing. Its collective portfolio outperformed the S&P 500 and is ahead of benchmarks year to date. In Q3 2025, the US Portfolios returned 9.6% compared to 7.8% for the S&P 500. It’s Core U.S. portfolios returned 10% while the Russell 2000 returned 12%, the S&P 600 returned 8.7% and the Nasdaq generated 11.2% for the same period. Also, its European Portfolios appreciated by 5.5%. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its third-quarter 2025 investor letter, Middle Coast Investing highlighted stocks such as Lululemon Athletica Inc. (NASDAQ:LULU). Lululemon Athletica Inc. (NASDAQ:LULU) designs, distributes, and retails athletic apparel, footwear, and accessories. The one-month return of Lululemon Athletica Inc. (NASDAQ:LULU) was 4.69%, and its shares lost 35.42% of their value over the last 52 weeks. On October 3, 2025, Lululemon Athletica Inc. (NASDAQ:LULU) stock closed at $175.59 per share, with a market capitalization of $20.888 billion.

Middle Coast Investing stated the following regarding Lululemon Athletica Inc. (NASDAQ:LULU) in its third quarter 2025 investor letter:

"Lululemon Athletica Inc. (NASDAQ:LULU) is on the loser list for the 3rd quarter in a row. It’s fair to say I got the analysis wrong, even as things I couldn’t quite predict fouled up the picture. The company suffers from tariffs and especially the de minimis application of tariffs on smaller shipments. It is fending off competition from Alo and Vuori and other big clothing retailers trying to muscle in on athleisure. And the part I think I got most wrong is that international growth is not strong enough to pick up the slack.

The shares are now quite cheap. If/when the company gets back to growing earnings, it could be a very attractive proposition. It doesn’t seem like that turning point is imminent, however. I’ve reduced our stake, both for tax loss purposes and given the bleak near-term outlook.  We’ll see if it flips, and also see how contagious this is for Deckers Outdoor (DECK), another of our holdings.

Lululemon athletica inc. (NASDAQ:LULU) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 55 hedge fund portfolios held Lululemon athletica inc. (NASDAQ:LULU) at the end of the second quarter, up from 48 in the previous quarter.  While we acknowledge the potential of Lululemon athletica inc. (NASDAQ:LULU) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Lululemon athletica inc. (NASDAQ:LULU) and shared the list of most undervalued retail stocks to invest in. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.