Lululemon and Aritzia: Vancouver’s Apparel Exporters Face the US Tariff Wall

The same tariff wall that Lululemon and Aritzia hit in 2025 produced a crisis at one company and a record year at the other, which says more about brand momentum than about trade policy. Both companies are headquartered in Vancouver, both earn most of their revenue in the United States, both source largely from Asia, and both lost the duty-free de minimis channel for cross-border e-commerce in 2025. Lululemon’s problem was that its US customers were already leaving for Alo Yoga and Vuori when the tariffs arrived; Aritzia’s advantage was that American shoppers were still discovering it. This article compares the two, examines founder Chip Wilson’s campaign against Lululemon’s board, quantifies the tariff cost, and uses Canada Goose to show what domestic manufacturing buys in a trade war. It is part of the Canada Company Stories hub.

How did Vancouver become an apparel export hub?

Vancouver produced two global apparel brands in a generation because of a founder culture that treated clothing as a technical product and the US market as home turf from the first store. Chip Wilson founded Lululemon in 1998 after two decades in surf and snowboard apparel, opening a design studio and yoga space in Kitsilano and building the brand around technical fabrics, community ambassadors and full-price selling. The company listed on Nasdaq in 2007, surpassed US$1 billion of revenue in 2011 and reached about US$10.6 billion by fiscal 2024 with more than 700 company-operated stores.

Aritzia is older and grew more slowly. Brian Hill opened the first boutique inside his family’s Hill’s of Kerrisdale department store in 1984, built a Canadian chain of “everyday luxury” boutiques over the next three decades, took private-equity investment from Berkshire Partners in 2005 and listed on the Toronto Stock Exchange in 2016. Jennifer Wong, who joined as a store associate in 1987, became chief executive in 2022, and Hill remains executive chair and a major shareholder. The US expansion that now defines the company began in earnest after 2017 and accelerated when American demand for its Babaton, Wilfred and TNA labels surged on social media during the pandemic.

What the two share is a model: design in Vancouver, manufacture through contract suppliers in Vietnam, Cambodia, China, Sri Lanka and elsewhere, sell through owned stores and e-commerce rather than wholesale, and treat the United States as the primary growth market. That model delivered gross margins near 60% at Lululemon and in the high 40s at Aritzia. It also meant that when the United States imposed tariffs on Asian apparel and closed the de minimis loophole in 2025, both were exposed at the same time. Canada’s wider export vulnerability is covered in the Canada–US trade war story.

Why did Lululemon’s US business stall?

Lululemon’s US business stalled because its core customer found newer brands more exciting, its product cycle produced too few hits and its stores and marketing had been optimised for a growth that was no longer there. Americas comparable sales turned negative in 2024, and by the second quarter of fiscal 2026 (ended 2 August 2026) they were down 12%, with Americas revenue down 8% to US$1.62 billion. Chief financial officer Meghan Frank told analysts that negative commentary in media and social channels had hurt traffic and that response to some new launches was weaker than planned.

The competitive explanation is straightforward. Alo Yoga and Vuori, both private and both heavily funded, took the fashion-forward end of the premium activewear market that Lululemon had created, while Nike and Athleta recovered from their own slumps. Lululemon’s attempt to expand into menswear, footwear and lifestyle categories diluted its focus; a 2024 leggings launch, Breezethrough, was pulled after customer complaints. By 2025 the brand that had defined “athleisure” was being described in the same analyst notes as Under Armour had been a decade earlier.

Management’s response in 2026 under interim co-chief executives Frank and André Maestrini, and now under Heidi O’Neill, is a product reset: fewer, stronger launches, more marketing spend, disciplined expenses and continued buybacks (US$695 million in the first half of fiscal 2026). The second-quarter gross margin of 60.5% was flattered by 560 basis points of tariff refunds; operating margin fell to 18.8% from 20.7%. Third-quarter guidance calls for revenue of US$2.29–2.32 billion, down 10–11%.

What did Chip Wilson’s proxy fight achieve?

Chip Wilson’s campaign forced Lululemon’s board to accept two of his preferred directors, a declassified board and a change of chief executive, without a shareholder vote ever being held. Wilson, who left the board in 2015 but remained the second-largest shareholder with a stake of around 8%, gave notice on 29 December 2025 that he would nominate three directors and propose declassifying the board. His argument, set out in letters and a dedicated website, was that the company had lost its “cool” because the board, led by chair Marti Morfitt and lead independent director David Mussafer of Advent International, the private-equity firm that invested in 2014, prioritised Wall Street expectations over product innovation and had installed a “private equity mindset”. He cited both directors’ roles at underperforming brands such as Olaplex.

Events moved quickly. Calvin McDonald, chief executive since 2018, stepped down and left the board on 31 January 2026, days after reports that Elliott Management had built a stake of more than US$1 billion and was pressing for a disciplined CEO search. Wilson filed his definitive proxy on 10 April 2026 and the company filed its own on 18 May, nominating Chip Bergh (formerly of Levi Strauss), Esi Eggleston Bracey and Teri List. On 26 May the two sides signed a cooperation agreement: Wilson withdrew his nominees and ended his solicitation, the company appointed Laura Gentile and former On Running co-chief executive Marc Maurer to the board, and Lululemon agreed to pay US$4 million toward improvements to Kitsilano Beach, the Vancouver neighbourhood where the company began. All five proposals carried at the annual meeting on 25 June 2026. The contest cost Lululemon US$24.8 million in the first half.

Heidi O’Neill’s appointment, announced on 22 April 2026 and effective 8 September, was the board’s answer to both Wilson and Elliott. O’Neill had been president of consumer, product and brand at Nike and a candidate for its top job; Elliott had reportedly preferred Jane Nielsen, the former Ralph Lauren executive. The shares fell as much as 7% after hours on the announcement and were down more than 21% for the year at that point. Her first results, due in December 2026, will be the earliest test of whether a Nike-trained operator can restore Lululemon’s product edge.

How is Aritzia winning in the United States?

Aritzia is winning in the United States by doing what Lululemon did fifteen years ago: opening a small number of large, carefully located boutiques in affluent districts, letting social media do the marketing, and selling at full price. US net revenue in the quarter ended 30 August 2026 rose 60.3% to C$779.4 million, two-thirds of the company total, while Canada grew 19.8% to C$390.4 million. Comparable sales rose 34.5%. E-commerce, which had lagged, grew 67.7% to C$402.9 million, or 34% of revenue, helped by a new US distribution centre and faster delivery.

Profitability expanded even faster. Adjusted EBITDA nearly doubled to C$246.2 million, a 21.0% margin, up 590 basis points; net income tripled to C$201.7 million; adjusted diluted EPS was C$1.31 against C$0.59 a year earlier. Reported gross margin of 57.1% included tariff refunds; excluding them, adjusted gross margin was 48.7%, still up 490 basis points on scale, lower markdowns and sourcing changes. The boutique count reached 146, with 14 openings in the preceding twelve months, and the fiscal 2027 plan calls for 12–13 new boutiques, eleven or twelve of them in the United States.

The guidance tells the story. In October 2025 Aritzia cut its fiscal 2027 adjusted EBITDA margin outlook from about 19% to the high teens because of US reciprocal tariffs and the end of de minimis. A year later it raised fiscal 2027 revenue guidance to C$4.78–4.88 billion, 29–32% growth, and chief executive Jennifer Wong said momentum had continued into the third quarter on Fall product and brand affinity. An investor day on 27 October 2026 is expected to set out the next phase, including international markets beyond North America.

What did the US tariffs and the end of de minimis actually cost?

For Lululemon the direct cost was about US$275 million of gross profit in fiscal 2025 before mitigation, according to its own disclosure, a figure that rose twice from a September 2025 estimate of US$240 million; the company remitted US$216 million of tariffs imposed under the International Emergency Economic Powers Act in fiscal 2025 and US$230 million cumulatively. The de minimis change hit Lululemon’s e-commerce business, which had shipped Canadian-warehoused orders into the United States duty-free below the US$800 threshold until that channel closed for all countries in August 2025.

The 2026 twist was the refund. After US courts ruled that the IEEPA tariffs exceeded presidential authority, importers began recovering duties paid; Lululemon received US$134.5 million plus US$4.1 million of interest in the second quarter, worth US$0.86 of earnings per share, and said it had not recognised any asset for further claims. Aritzia booked a similar benefit, which is why its reported gross margin jumped 1,330 basis points while the adjusted figure rose 490. Both companies treat the refunds as one-off and continue to pay the replacement tariffs imposed under other authorities.

Mitigation has followed the usual playbook: shifting production out of China toward Vietnam and other lower-tariff countries, negotiating cost-sharing with suppliers, selective price increases, and moving US-bound inventory into US distribution centres rather than Canadian ones. Aritzia opened a US distribution centre and is building a new one in British Columbia; Lululemon has relied on its scale with suppliers. For both, the larger cost of the trade war has been indirect: a weaker Canadian dollar inflates US-dollar sourcing costs, and US consumer confidence has been volatile. The policy context, including the CUSMA review due in 2026, is examined in the CUSMA review story.

How does Canada Goose compare?

Canada Goose shows the other way through a tariff wall: make the product at home. About 75% of the Toronto company’s parkas are manufactured in its own Canadian facilities, which means they qualify as originating goods under CUSMA and enter the United States duty-free, a protection neither Lululemon nor Aritzia enjoys. Even so, the company withheld its fiscal 2026 guidance in May 2025 because of tariff uncertainty and reported a larger-than-expected quarterly loss in July 2025 as retail expansion and promotional costs rose.

Ownership is the second difference. Bain Capital bought a majority of Canada Goose in 2013 and took it public in 2017; by 2025 it had hired Goldman Sachs to explore an exit, and in late 2025 the company received take-private approaches valuing it at about US$1.4 billion, roughly 20% above its market value at the time, from Advent International (also Lululemon’s long-standing investor) and Boyu Capital, with Bosideng and an Anta Sports–FountainVest consortium also reported as interested. Founder-chairman Dani Reiss retains a significant stake and voting control through multiple-voting shares, which gives him a say in any transaction. Whatever the outcome, Canada Goose is likely to end 2026 as a smaller, privately held luxury brand rather than the global growth story its 2017 IPO promised.

The comparison with Vancouver’s two exporters is instructive. Domestic manufacturing protected Canada Goose from tariffs but not from a weak luxury cycle, Chinese demand swings or its own cost base; Asian sourcing exposed Lululemon and Aritzia to tariffs but gave them the margins to absorb them. In apparel, where the product is made matters less than whether customers want it.

Where does China fit in Lululemon’s future?

China Mainland is the only major region where Lululemon is still growing, at 4% in the second quarter of fiscal 2026 to US$407 million, and it is the pillar of the company’s international plan. The brand entered China in 2013, had around 150 stores by 2025 and has targeted several hundred, with a premium positioning that appeals to urban consumers and a product cycle that is less saturated than in North America. Rest-of-world revenue, including Europe, Australia and Japan, grew 5% to US$392 million. International now accounts for about a third of revenue and management wants it to reach half.

The risk is that China has become a crowded premium activewear market with strong local players and a volatile consumer, and that comparable sales there were already down 2% in the second quarter even as new stores lifted the total. Geopolitics add a layer: a Canadian brand expanding in China while depending on the US market and sourcing from Southeast Asia sits in the middle of every trade dispute of the decade. Canada’s own diversification push toward Asia is discussed in the export diversification story.

For Aritzia, international expansion is still ahead. The company has hinted at markets beyond North America for its October 2026 investor day, and its product, more fashion than performance, travels well. It has the advantage of watching Lululemon’s path and the handicap of a much smaller balance sheet.

What can founders and investors learn from Lululemon and Aritzia?

First, momentum is the best tariff hedge. Aritzia absorbed the same duties as Lululemon and expanded margins because its customers were still arriving; a brand in demand can raise prices, open stores and negotiate with suppliers from strength. Founders should spend the good years building the pricing power that pays for the bad ones.

Second, founders retain power long after they leave. Chip Wilson had no board seat and about 8% of the stock, yet he reshaped Lululemon’s board and contributed to a chief executive change through a public campaign that cost the company US$24.8 million. Boards of founder-created companies should maintain a working relationship with the founder, and investors should price the possibility of a revolt.

Third, owned channels compound. Both companies sell almost exclusively through their own stores and websites, which is why their gross margins are so far above wholesale-dependent peers and why the loss of a department-store channel such as Hudson’s Bay, described in the Hudson’s Bay collapse story, barely registered.

Fourth, diversify the customer before the crisis, not during it. Lululemon’s international build-out, begun when the US business was booming, is now the only growth it has. Aritzia’s US expansion did the same for a company that was once entirely Canadian. The Canadian retailers that stayed domestic, as the Canadian Tire and Dollarama story shows, chose a different trade-off: lower growth, lower tariff exposure and a home market they understand.

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