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12/14/2020

Digital Momentum Helps Lululemon Beat Expectations

Jamie Grill-Goodman
Editor in Chief
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On the heels of lululemon athletica’s ongoing digital investments, e-commerce contributed 43% of total revenue in its third quarter of 2020.

As digital momentum climbed, the athleisure retailer reported sales of $1.1 billion, up 22% from a year ago, beating analysts’ estimates and its own expectations for a mid-to-high single-digit increase. In the digital channel, lululemon posted a 93% comp increase on top of a 30% increase last year, driven by a healthy mix of new and existing shoppers.

Even with stores being open for a majority of the quarter, we continued to see historically retail-only guests now shopping with us online,” Celeste Burgoyne, president, Americas and global guest innovation, said in the earnings call.

“In this spring, as we recognize the dramatic behavior shift towards e-commerce, we layered on additional investments in IT infrastructure, fulfillment capabilities and our guest education center, all to ensure we are ready for a spike in traffic over the holiday season, and I'm thrilled that we are seeing these investments paying off.”

Capital expenditures were $66 million for the quarter compared to $78 million in the third quarter last year, primarily on the digital channel and analytics capabilities, supply chain investment, technology spend to support business growth and store capital for new locations, relocations and renovations.

“We have been investing in our digital capabilities and enhancing the experience of our e-commerce sites for several years, which enabled us to quickly respond to the accelerated shift to omni this year,” CEO Calvin McDonald noted.

The retailer has responded to the health crisis with several digital transformations over the last year. While 97% of lululemon’s stores were open in its third quarter, it has seen a tightening of capacity constraints in several markets due to spikes in COVID-19.

“While these constraints can lead to lines outside stores during peak shopping times, I'm proud of how we have successfully implemented several strategies to improve the guest experience and reduce wait time,” Burgoyne said.

These include:

  • The virtual waitlist. Shoppers no longer need to physically wait in line and can be notified by text when it's their turn to enter the store.
  • Mobile POS. Certain transactions such as returns, exchanges and purchasing gift cards can all occur just outside of the store.
  • Buy-online-pickup-in-store, at door or at curbside. The options offer flexibility and choice for shoppers.
  • Appointment shopping. Appointments can be scheduled before, during and after a store's normal operating hours.
  • The digital education program. The program is designed to assist shoppers who would rather engage online. Shoppers can have a quick online chat or schedule an appointment for a personal or a group shopping experience.

Burgoyne noted lululemon also continues to successfully execute ship-from-store capabilities to leverage inventory across channels.

“In fact, we achieved our highest volume ever with ship-from-store orders over the Thanksgiving and Black Friday holiday week,” Burgoyne noted.

Additionally, since lululemon’s MIRROR acquisition five months ago, the retailer has launched a dedicated MIRROR tab in its U.S. website, including a hyperlink for customers to complete a purchase transaction, and lululemon has included MIRROR in its e-mail marketing campaigns.

In November, the retailer created shop-in-shops in 18 U.S. locations to test and learn how to refine the in-store selling experience. McDonaldsaid the company plans to expand this to several hundred stores next year and still expects MIRROR to generate in excess of $150 million in revenue in 2020.

“One of our store managers in Santa Monica described it best,” he noted. “Our guests are blown away by the sleek design and functionality of MIRROR that is as innovative and unique as our own products. We are just at the beginning of our journey with MIRROR and we are thrilled with the current momentum and excited with what this can mean for next year and beyond.”

Looking ahead, Burgoyne noted lululemon will share more in the future about how it plans to leverage its membership program and MIRROR members together to bring new experiences.