The Motley Foolยท2025-04-11 11:15Core Viewpoint - The stock market is experiencing volatility due to the recent tariffs imposed by the U.S. government, significantly impacting apparel companies like Nike and Lululemon, with contrasting implications for their future performance [1][2]. Nike - Nike has faced a global slowdown, with a 9% year-over-year revenue decline last quarter and a drop in operating margin from 15% to 10.3% over the past few years [3][4]. - The company is heavily reliant on Asian manufacturing, particularly from China and Vietnam, which are now subject to high tariffs, potentially leading to a significant decrease in profit margins and revenue in the U.S. market [4][6]. - Nike's North American division, which generated $1.4 billion in operating income last quarter, is its most profitable segment, and any tariff-related losses could severely impact overall earnings [5]. - Revenue from China has also declined by 17% year-over-year, indicating challenges in replacing lost revenue from other markets [6]. Lululemon - Lululemon has shown stronger performance compared to Nike, with a 13% year-over-year revenue growth to $3.6 billion last quarter and a remarkable 46% increase in China revenue [7]. - The company has maintained a high operating margin of 24%, although tariffs may threaten this in the future [8]. - Lululemon's pricing power allows it to potentially increase prices without losing core customers, which may help mitigate the impact of tariffs [9]. - The brand is currently performing well and is positioned to succeed in various markets, particularly in China, despite the overall consumer slump [10]. Investment Outlook - Both Nike and Lululemon have similar trailing price-to-earnings (P/E) ratios, with Nike at 18 and Lululemon at 16.7, but Lululemon is experiencing faster growth [12]. - Lululemon is viewed as a more attractive investment opportunity due to its business momentum and potential for long-term gains, while Nike's declining revenue and profit margins suggest caution [13].