Lululemon to Close Washington Distribution Site, Lay Off 128 Employees Amid Expansion Challenges

Canadian multinational athletic apparel retailer Lululemon is making changes to its distribution centres, and closing one in Washington. They're saying goodbye to their distribution centre in Sumner, near Seattle, and sadly, that means laying off 128 employees. The layoffs are set to start from June 21, and the centre will shut down completely by the end of this year.

Changes in Distribution Centers

According to a Lululemon representative, they're constantly trying to adjust to serve their clients better. After reevaluating their distribution system and investing heavily in expansion, they have decided to shut down the smaller Sumner Center. Over a hundred jobs will be lost in Sumner, while some workers will be offered positions at other places, such as the new warehouse in Los Angeles. Lululemon wants to ensure that its workers get support throughout this difficult period, the rep added.

The Sumner building is approximately 150,000 square feet in size, and the lease was originally set to expire in July 2025.

When Lululemon opened its first significant distribution centre in Sumner in 2010, the company began its journey in the warehouse business. Considering this as the company’s US launch, the first major distribution centre since it went public in 2007, the move was significant for the business .

Lululemon grew rapidly over the years, and they needed the extra space to keep up. They have more than tripled the size of their warehouse to keep up with their explosive growth. By January 2021, Lululemon will have approximately 1.2 million square feet of distribution space located in Canada and the US. However, that number had increased to nearly 4 million square feet this January!

Growth in Distribution over the years

The two new locations close to Los Angeles and Toronto are the for the majority of this expansion. In 2021, they leased a large 1.26 million square foot property in California, and in 2022, they also acquired a 980,000 square foot warehouse located in Toronto.

The Canadian centre is still under construction, but the California centre is finally operational. It was originally anticipated to be completed by 2024, however, it seems that it will be fully operational only in 2026. Over the past 10 years, Lululemon has dominated athletic wear market sales and become an adolescent favourite. Sales have increased dramatically from $1.6 billion in 2013 to an astounding $9.6 billion in 2023!

Expansion and Recent Challenges

But recently, they've hit a roadblock in their expansion in North America, where they generate the most revenue. Though they exceeded holiday sales projections, slowing U.S. sales meant their future prospects were less promising. Although exceeding forecasts for holiday earnings, Lululemon's stock value saw a dramatic decline following the company's release of poor guidance and weak U.S. sales figures. While revenue and earnings per share showed a remarkable increase in the fourth fiscal quarter, especially in overseas countries like China, investors were concerned about the downturn in the company's main market, North America. CEO Calvin McDonald highlighted the significance of addressing popular product sizes and colours to suit consumer demand, attributing the US sales fall to reasons including lower traffic and conversions.

This statement caused the company's price to plunge by roughly 16%, and shares have fallen almost 21% year-to-date. This is in stark contrast to the S&P 500's rising trend. For the upcoming quarter, Lululemon predicts modest revenue growth and lower-than-expected earnings per share, indicating continued difficulties in a cutthroat industry. Despite these obstacles, Lululemon is still committed to innovation and growth, especially in the men's and footwear markets, to maintain its current growth trajectory in the face of shifting consumer tastes and market conditions.