While many retailers are cutting back or even going out of business in the pandemic’s economic downturn, Lululemon Athletica is the rare exception with plans to open 30 to 35 new stores by the end of 2020.
The continuing work-at-home environment has accelerated the demand for its casual wear and athleisure clothes, and Lululemon seems confident that its physical stores can help generate even more online sales. Lululemon’s stores work as a pick-up place for online shoppers, and some customers prefer to use ship-from-store service.
“We continue to believe physical stores are and always will be an extremely important part of our ecosystem,” said Calvin McDonald, CEO of Lululemon in the second-quarter earnings conference call on September 8. “Our stores are our local hub and communities across the globe, gathering spots for our ambassadors and our connection to local studios.”
He added that they “facilitate e-commerce transactions via our ship-from-store and buy online, pick-up-in-store capabilities and are a portal to bring new quests into our brand, particularly men.”
Despite Covid-19-related challenges, McDonald reiterated the company’s plans to expand stores. By that point, Lululemon had opened 17 new stores, including 8 in North America, 7 in Asia, and 2 in Europe, since the beginning of the year.
McDonald also said the company would open 50 to 70 stores, including pop-ups, for holiday shopping, and add omnichannel and other non-face-to-face options to its stores to meet g social distancing requirements.
The Covid-19 crisis hit clothing and accessories retailers hard, but it also drove the momentum of Lululemon’s growth. Now people are spending more time at home, and many tend to buy casual clothes rather than business wear.
“I cannot dress up to stay in my room, but also I cannot wear my pajamas for Zoom meetings,” said Shaikhah Alhomaizi, a Lululemon customer in Hoboken, N.J. “Lululemon is super comfy, and they are actually pretty cute. I don’t wear it for working out. It is just the best choice for my work-from-home environment.”
Paul Hao, an equity research associate at Wedbush Securities, wrote in a note, “Lululemon is coming out of the coronavirus environment positioned better than most owing to strong demand trends.”
Lululemon has strong digital platforms like the home fitness brand Mirror. Amber Ryu of New York, N.Y, who spent over $1,000 on Lululemon products last month for the fitness class she takes online, said she welcomed the company’s new stores and was willing to use omnichannel or other virtual communication options to buy more for the holidays.
Ryu has to take at least two subway lines to go to the nearest store. “And the store is not that big,” she said. “But if I can talk to someone in the store without visiting, it can’t be better.”
David Swartz, an equity analyst at Morningstar Research Service LLC, said that Lululemon remains strong thanks to its customer loyalty and that the company did not need to pull back its plans to expand.
“Even with the stores reopened after the virus restrictions were lifted, compared to other companies like Nike, the number of their stores is relatively low,” said Swartz. “They also have to restrict the number of people in a store. Lululemon stores are very small. They are only about 3,000 square feet. They are usually very crowded, but they cannot be crowded right now because of the virus.”