Lululemon Pivots to Focus on Digital, Faced With Store Closures due to Coronavirus
Lululemon Store Closures
- North America and Europe: stores have been closed since March 16.
- New Zealand: stores are closed at this time
- Australia: operating on reduced hours
- China: all stores except a location in Wuhan are open with most operating on regular schedules
- Additional Asian markets: stores remain open except in Malaysia where its two locations are currently closed
Lululemon is focusing on digital efforts as its stores in North America and Europe remain closed due to the coronavirus since mid-March.
With a balance sheet in good shape (the retailer currently holds over $1 billion of cash and has no long-term debt) lululemon said it will use its closed stores as ship-from-store locations to fulfill online orders.
Thanks to lululemon’s investments in RFID technology, the athletic apparel retailer can access product at any point. CEO Calvin McDonald said the retailer plans to “turn on” ship-from-store capabilities in the next week.
“Although [stores] will not be open to the public we will be opening up some locations from a ship-from-store perspective and have a small number of staff operating that is going to allow us to continue to manage that inventory, that’s already in the network very effectively,” he said. “And so those I think combined with the relationships we have with our vendors and the fact that we own the end-to-end are a number of very unique levers that put us in a much better position to manage our inventory levels.”
Since closing stores, lululemon’s digital business has picked up, but it’s not recovering all the volume loss from stores being closed. While lululemon declined to provide financial guidance, it did report comparable sales increased 20% in its fourth quarter of 2019; including a bump in comparable store sales of 9%, while direct to consumer net revenue spiked 41%. Capital expenditures were approximately $69 million for the quarter, which went to store capital for new locations, relocations and renovations, and IT and supply chain investments.
“We had an incredible fourth quarter total comps of 20%, which was the strongest in all of 2019, which was a very strong year for us. So it’s great to end with that type of momentum,” McDonald noted. “We saw that momentum continue into the start of this year across both physical stores and digital.”
Amid the spread of COVID-19, luluemon has been offering online yoga, meditation, pilates, dance and train classes to its customers to increase engagement.
“Our teams in North America and Europe have followed the lead of our people in China where we have gained thousands of new followers on WeChat,” McDonald said, noting that on Instagram, during lululemon’s first week of store closures and thanks to the increased content offerings, the retailer saw nearly 170,000 people join for live classes.
“It’s inspiring to see the strength of our guests come together this way and will continue to stay closely connected as we navigate what’s ahead,” he continued.
While he said the retailer is planning for “multiple scenarios,” he also noted lululemon has the balance sheet, connection to community, category strength and the right growth initiatives to sustain it.
“The underlying health of our business is strong which provides us with many levers to successfully manage through this period,” McDonald said.