Lululemon shares plunged in extended trading Thursday after the company gave a much worse than expected full-year outlook.

The company topped second-quarter earnings estimates but slightly missed revenue expectations. But it said it expected tariffs to hit its full-year profits by $240 million.

Lululemon said it expects full fiscal year earnings of $12.77 to $12.97 per share, well below Wall Street estimates of $14.45 per share. It also anticipates full-year revenue of $10.85 billion to $11 billion, compared with Wall Street expectations of $11.18 billion.

“We are facing yet another shift today within the industry related to tariffs and the cost of doing business,” CEO Calvin McDonald said on a call with analysts. “The increased rates and removal of the de minimis provisions have played a large part in our guidance reduction for the year.”

Here’s how the company did for its second quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

• Earnings per share: $3.10 vs. $2.88 expected
• Revenue: $2.53 billion vs. $2.54 billion expected

Shares of the company sank more than 12% after the bell Thursday. The stock is down more than 45% this year.

The company reported second-quarter net income of $370.9 million, or $3.10 per share, compared to $392.92 million, or $3.15 per share, in the year-ago period. Gross margin decreased 1.1 percentage points to 58.5%, and operating margin decreased 210 basis points to 20.7%.

CFO Meghan Frank said on the call that the removal of the de minimis exemption, which excluded some smaller shipments from tariffs, will significantly affect the company, representing roughly 1.7 percentage points of the 2.2 percentage point tariff-related decline in profit expected for the year.

Same-store sales in the Americas were down 4%. Overall comparable sales increased just 1% compared to Wall Street estimates of 2.2%. Lululemon said it added 14 net new stores during the second quarter, bringing its total to 784 stores.

“My view is that it’s now time to reset many of our practices related to how we develop and create the range of products that will fuel the next phase of our growth,” McDonald said on Thursday. “We have seen that when we get our product right, everything else can follow.”

Lululemon projects third-quarter revenues will be between $2.47 billion and $2.50 billion compared to Wall Street estimates of $2.57 billion. The company said it expects earnings per share in the next quarter to be between $2.18 and $2.23 per share, compared to an estimate of $2.93 per share.

McDonald said on the Thursday call that he believes the company has let its product lifecycles “run too long,” particularly in its lounge and social categories.

“We have become too predictable within our casual offerings and missed opportunities to create new trends,” he said, identifying those issues as the “root causes” of the company’s product challenges in the U.S.

“Our lounge and social product offerings have become stale and have not been resonating with guests,” McDonald added.

To regain its U.S. momentum, McDonald said the company plans to increase its new styles from 23% of its overall assortment to 35% next spring and improve its fast-track design capabilities. He said Lululemon will not make any short-term decisions that “could hurt or damage” the brand in the long-term.

“We are not satisfied with the results for the quarter, and we know our brand can and will perform better than these results,” McDonald said.