Lululemon’s Booming Digital Business Not Enough to Offset Store Closures
Lululemon Athletica posted solid digital sales, but the boost in online activity wasn’t enough to save it from a sharp sales dip, as temporary store closures due to the COVID-10 pandemic took place.
In the Athletic Apparel space, a category that is performing better than other apparel categories, lululemon saw one of its largest quarterly gains and market share in recent years according to NPD data, CEO Calvin McDonald said during the retailer’s recent earnings call.
However, due to the pandemic, all of lululemon’s stores in North America, Europe, and certain countries in Asia Pacific were closed for a significant portion of its first quarter 2020, which ended May 3.
In February 2020, the company temporarily closed all of it retail locations in Mainland China. All of these locations have since reopened.
In March 2020, it temporarily closed all of its retail locations in North America, Europe, and certain countries in Asia Pacific. As of June 10, 2020, 295 of its company-operated stores were open.
With stores shut, Luluemon’s e-commerce comps increased 70% in the quarter and 125% in April. This was on top of a 35% increase last year and a 41% increase in Q4 2019.
Direct to consumer net revenue increased 68% in luluemon’s Q1, but sales still declined 17%, compared Q1 2019. E-commerce contributed approximately 54% of total revenue.
“As our e-commerce business spike throughout the quarter, we were able to harness the power of our agile distribution network to ensure guests continue to receive a high level of service,” said McDonald. “We recently implemented intelligent sourcing capabilities that use machine learning and artificial intelligence to route e-commerce orders through our distribution network in the most efficient way. The benefits include increased delivery speed to guests, minimizing costs and efficiently utilizing inventory pools to help reduce markdowns.”
Lululemon moved quickly to bring customer engagement online. The retailer launched its Community Carries On portal on its e-commerce sites globally, providing a hub for customers to “live the Sweatlife” through virtual channels. It recently launched a digital educator service, to enable shoppers to chat with educators via video to help them discover new products, answer their questions on fit, or help them find a gift.
“This program speaks to the power of our omni-educators and the engagement they can have with our guests whether in-store or online,” said McDonald. “We've clearly seen our guests interact with us in new ways via our digital offerings. We expect these behaviors and routines will continue as we move forward. “
The athleisure market is poised to grow by $80.74 billion during 2020-2024, progressing at a CAGR of over 4% during the forecast period, according to Technavio. Factors such as the growing prominence of online shopping, increasing adoption of fitness initiatives by corporate, and rise and evolution of the athleisure movement are expected offer immense growth opportunities.
“Heading into this,” McDonald noted, “there is guest behavior and wants, and certain things won't change as a result of COVID-19, and definitely some things will change. I think the things that won't change play to our strengths, and that's living an active, healthy lifestyle. And the things that will change, equally play to our strengths, and that is more work from home, looking for comfort, the role that digital and omni play in that behavior, and wants that the guest has. So the shift is, in my opinion, very positive for our brand and the role that we play in it.”