Lululemon disappoints with sales declines despite digital uptick

By

Robin Driver

Published
Jun 11, 2020

A spike in Canadian athleticwear company Lululemon’s online sales proved insufficient to make up for the negative impact of coronavirus-related brick-and-mortar store closures, leading to lower-than-expected quarterly revenues.

 
For the first quarter ended May 3, 2020, the company reported total net revenue of $652.0 million, a 17% decrease compared to $782.3 million in the prior-year period. In constant dollars, the decline was 16%.
 
Wall Street analysts polled by FactSet and cited by MarketWatch had expected the company to report sales of $692 million.

Lululemon’s digital direct-to-consumer segment was a bright spot in the quarter, posting a 68% sales increase (70% in constant dollars) and representing 54.0% of total net revenue, compared to only 26.8% in the same period in the previous year.
 
However, this growth could not compensate for sales lost due to widespread store closures. In response to the Covid-19 pandemic, Lululemon temporarily closed all of its stores in mainland China in February, followed by all of its locations in North America, Europe and certain countries in Asia Pacific in March.
 
All of the company’s stores in China have now reopened, as well as 295 of its locations in other regions where closures were implemented.
 
Lululemon did not report comparable store sales or total comparable sales for the quarter, as it believes that they “are not currently representative of the underlying trends of its business” due to the extended store closures.
 
The company’s quarterly net income totaled $28.6 million, or $0.22 per diluted share, decreasing from $96.6 million, or $0.74 per diluted share, in the first quarter of fiscal 2019, but just beating analysts’ estimates of earnings per share of $0.20.
 
“I'm proud of how Lululemon has navigated these unexpected and unprecedented times. We are learning more every day about our guests – how they enjoy interacting with us online and what makes them comfortable as stores reopen,” said McDonald in a release. “Our strong digital business demonstrates the strength of our guest connection and the long-term opportunity to create further omni experiences going forward.”
 
Due to uncertainty regarding the development of the Covid-19 pandemic, Lululemon has not provided financial guidance for either the first quarter or the full fiscal year 2020.