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Lululemon Turns to E-Commerce to Offset First-Quarter Store Closures

By Rich Duprey – Jun 12, 2020 at 12:07PM

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But the athleisure leader still couldn't overcome the weight of stay-at-home orders.

Customers working from home during the COVID-19 pandemic didn't give lululemon athletica (LULU -4.28%) the lift many had expected.

While the athleisure leader was forecast to see gains as businesses implemented work-from-home policies and workers traded suits for sweats, it wasn't enough to offset the forced closure of its retail stores, leading revenue for the first quarter to tumble 16% to $652 million on a currency-adjusted basis. Operating profits plunged 75% to $32.8 million.

The results missed Wall Street forecasts, the first time in three years Lululemon underperformed expectations, and shares are trading 4% lower in morning trading.

Woman and dog stretching on yoga mat

Image source: Getty Images.

Improving its position through adversity

The earnings report could have been a lot worse, though the damage to comparable store sales was unknown as Lululemon chose not to reveal the metric. The company said the numbers weren't meaningful to understanding its performance, as comps "are not currently representative of the underlying trends of its business."

Among those trends were soaring direct-to-consumer sales through its website and app, which jumped 70% overall, but rose as much as 150% in Australia and 170% in Europe. The gains accelerated the results seen in the fourth quarter when e-commerce comps jumped 41%.

Where direct-to-consumer sales represented 28% of total revenue in 2019, they accounted for 54% of sales in the first quarter.

CEO Calvin McDonald said that although Lululemon suffered some operational challenges during the period due to the pandemic, "demand for the brand and the demand for the category I feel has only strengthened through this."

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Lululemon Athletica. The Motley Fool has a disclosure policy.

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