About 60 per cent of Lululemon stores around the world are now open, in a June 11, 2020 story. (Photo by THE CANADIAN PRESS)

Lululemon Q1 profit falls with many stores closed amid COVID-19 pandemic

60 per cent of Lululemon stores around the world are now open

VANCOUVER — Lululemon Athletica Inc. missed analyst expectations in its most recent quarter as it saw profit and revenue slip, but the athleisure retailer’s e-commerce business soared with many of its stores closed for a significant portion of the period due to the COVID-19 pandemic.

Lululemon closed all its stores in mainland China in February, as well as all stores in North America, Europe and some Asia Pacific countries in March to help curb the spread of the coronavirus. That meant many of its stores in the latter three areas were closed for much of its first quarter, which ends May 3.

The company, which keeps its books in U.S. dollars, reported net income for the first quarter totalled $28.6 million or 22 cents per diluted share — down from $96.6 million or 74 cents per share for the same quarter in 2019.

It reported net revenue of $652 million for the quarter ended May 3, down from $782 million in the first quarter last year.

Analysts had expected net income to come in at $31.32 million or 23 cents per share with $688.40 million in revenue, according to financial markets data firm Refinitiv.

About 60 per cent of Lululemon stores around the world are now open.

“We will open the remainder of our stores when it is safe to do so in each community,” said CEO Calvin McDonald, during a conference call with analysts Thursday after markets closed.

The company expects nearly all locations to reopen by the end of June, said Meghan Frank, senior vice-president, financial planning and analysis.

Lululemon is pleased with customer response where it has opened stores so far, she said, noting the early response in North America is exceeding the company’s expectations.

Still, it expects total revenue for the second quarter could decline in the high, single digits, she said, and improve to a high, single-digit increase in the fourth quarter.

Lululemon noted some positives for the quarter, including triple-digit e-commerce growth.

For the first quarter, e-commerce sales grew 70 per cent, said McDonald, calling it “a meaningful acceleration.”

In April, it saw e-commerce sales grow by 125 per cent, he said, with the momentum continuing into the second quarter.

For the second quarter, the company expects e-commerce sales “to be relatively consistent” with the trend set in April, said Frank.

“We expect revenue in our digital channel to remain strong in Q2, but moderate in the second half as the store business continues to recover.”

McDonald also noted the company saw one of its largest quarterly gains in market share in recent years in the athletic apparel space, citing data from a market-research firm.

That shows a consumer shift toward the category, as they seek more comfort at home, and toward the Lululemon brand, he said, adding the company is well-positioned for what it believes will and won’t change as the world emerges from the pandemic.

Consumers will continue to want to lead healthy, active lives, he said, but they may be working from home increasingly and wanting more comfort from their clothing.

“So the shift is, in my opinion, very positive for our brand.”

This report by The Canadian Press was first published June 11, 2020.

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