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Jun 11, 2020

Lululemon sinks after sales lose steam during COVID-19 pandemic

Lululemon is capitalizing on an evolving casualisation in what we wear: Analyst

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Lululemon Athletica Inc. fell after the company reported revenue that fell short of expectations, with a doubling of online e-commerce not enough to compensate for shuttered stores.

The Vancouver-based retailer said online sales, when excluding currency impact, climbed 70 per cent in the quarter that ended May 3. Including brick-and-mortar stores, revenue was US$652 million, compared to the US$691 million forecast by analysts.

Key Insights

• The results show Lululemon, a preeminent purveyor of yoga pants with a loyal following, hasn’t fully capitalized on the trend toward comfy clothes. As pandemic-related office closures keep many people working from home, loungewear stands to benefit while formal wear falls out of favour.

• E-commerce was already underpinning growth before the pandemic. Lululemon has recently strengthened its service, with “digital educators” making recommendations to shoppers over video chat.

• Of Lululemon’s 489 total stores, 295 were open as of June 10, including all of its mainland China locations. The retailer, like most others, is not giving guidance.

Market Reaction

• Shares fell as much as 7.2 per cent in after-market trading as of 4:09 p.m. The stock, which has 23 buy recommendations from analysts, 12 holds and one sell, advanced 33 per cent this year through Thursday’s close.