Lululemon CEO: ‘We’re Building More Stores’

Don’t tell retail executive Calvin McDonald that construction of brick-and-mortar stores is a thing of the past.

The CEO of Lululemon Athletica Inc. told Bloomberg part of his growth strategy includes new stores.

McDonald said unlike some of its competitors, the upscale retailer is still in its infancy when it comes to growth.

“We may adjust slightly, but there’s still enough room for growth,” McDonald, who was named CEO in 2018, told the news outlet.

In the third quarter of 2019, the company had 460 stores. At the close of Q2 this year, it has 489 locations, a 6 percent increase, with most new stores overseas, especially in China, according to a regulatory filing.

McDonald said Lululemon has paid full rent throughout the pandemic, unlike brands like Gap Inc. that suspended some payments. He told Bloomberg that he hopes the move pays off as some retailers vacate prime spots.

“We are a growth retailer that works well for landlords,” he said. “When opportunity in great locations come up I think that goodwill will pay dividends for us.”

McDonald noted Lululemon has focused on growing its customer base by offering free classes, sporting events and support for local athletes and yoga practitioners. Those features are key to the company’s store expansion strategy.

“If our physical existed only to transact, I would think differently,” he said.

The CEO revealed Lululemon plans to launch a footwear line, a highly competitive space is not mentioned in the company’s financial targets.

“We’re going to take a test-and-learn approach,” he said.

This as the Canadian-based athletic apparel retailer reported direct-to-consumer net revenue was $554.3 million for the second quarter (Q2), marking a 155 percent rise from the same quarter last year. Lululemon concluded Q2 with cash and cash equivalents of $523 million, down from $623.7 million at the conclusion of Q2 2019. And Lululemon reported a 54.2 percent gross margin, marking a decrease of 80 basis points compared to the same quarter last year. It also reported an operating margin of 13.8 percent, marking a fall of 520 basis points from Q2 2019.

In July, Lululemon announced plans to buy home-exercise technology startup Mirror for $500 million.

The deal comes as the global pandemic has shut down gyms nationwide, leaving U.S. consumers finding ways to digitally transplant their gym workouts into their homes, a boon to home fitness providers.