With Athleisure and E-Commerce Booming, Lululemon CEO Says 2020 Could Be a Turning Point for the Brand

The coronavirus pandemic has created a new retail environment centered on e-commerce and more leisurely wear — and that could significantly impact Lululemon Athletica Inc.’s business this year and beyond.

The athletic apparel chain today bested analysts’ second-quarter earnings and sales expectations: For the three months ended Aug. 2, it posted an income of $96.3 million, or adjusted earnings of 74 cents per share, while market watchers had forecasted earnings of 55 cents per share. Revenues improved 2% to $902.9 million, compared with consensus bets of $842.5 million.

In the first quarter, state and local government lockdown restrictions forced the widespread closures of all of Lululemon’s locations in North America, Europe and certain countries in the Asia-Pacific region. It began reopening its outposts during the second quarter and now has 492 of its 506 company-operated units back in business.

However, stay-at-home orders have already led swaths of consumers to not only shop online to prevent the spread of COVID-19, but also trade their heels and oxfords for slippers and sneakers as work-from-home culture continues to take hold — a shift that could ultimately prove advantageous for Lululemon.

“We’re pleased with our overall business results for the second quarter, as Lululemon increasingly lives into its omni-potential,” CEO Calvin McDonald said in a statement. “As trends around the world are shifting to working and sweating from home with an increased focus on health and wellness, we believe 2020 is likely an inflection point for retail and for Lululemon.”

According to the brand, direct-to-consumer sales — which represented more than three-fifths of the company’s revenues in the quarter — advanced 155% to $554.3 million. Despite the better-than-anticipated financial results, McDonald sounded caution for the remainder of 2020.

“We are cautiously optimistic with regard to the second half of the year as we continue to navigate the uncertain environment,” he said.

At the end of the second quarter, Lululemon had $523 million in cash and equivalents, as well as a $697.7 million capacity under its committed revolving credit facilities. Due to the impact of the ongoing health crisis, as well as its rapid developments, the brand opted against providing detailed financial guidance for the rest of the year.

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