Lululemon plans to shutter its Washington State distribution center and axe more than 100 employees, the athleisure purveyor confirmed Monday.
The Vancouver-based firm filed a Worker Adjustment and Retraining Notification with the state’s employment security department on Thursday, informing officials of the closure of its Sumner warehouse, 35 miles south of Seattle. Layoffs will begin on June 21, the WARN notice said, though the center itself will remain open until the end of the year.
“As we continue to deliver on our growth strategy to meet the needs of our guests, we regularly evaluate our distribution network to help shape and support the future vision of our business,” a spokesperson for the Team Canada outfitter said. “Following a review of our current infrastructure and the evolution of our fulfillment strategy, which includes a multi-year investment to increase overall capacity and support our growth, we have made the decision to close one of our smaller distribution centers—located in Sumner, WA—at the end of 2024.”
The lease for the 150,000-square-foot Sumner location will end in July 2025, according to a regulatory filing.
Lululemon said that it will retain and relocate some of Sumner’s 128 employees to other facilities, including the 1.26 million-square-foot warehouse that it opened in Ontario, Calif., 40 miles east of Los Angeles, in 2021. This will result in the loss of “just over” 100 positions, the spokesperson said, adding that the company is “committed to supporting our impacted employees through this transition.
Including both the closing Sumner warehouse and California facility, Lululemon currently has eight distribution centers in operation. Three of them are in the U.S., including another in Groveport, Ohio, while another four are stationed in Canada. Lululemon also has a distribution center in Australia.
Additionally, in 2022, the yogawear retailer entered into a lease for a 980,000-square-foot warehouse in Brampton, Ontario, which was expected to be up and running this year but will now be operational only in 2026, per a corporate filing.
Lululemon’s industrial real estate has seen significant expansion during the Covid-19 pandemic, with the brand more than tripling its distribution space between 2021 and 2024. By January, the company leased and owned nearly 4 million square feet of distribution centers across Canada and the U.S., a substantial increase from just 1.12 million square feet in early 2021.
Calvin McDonald, Lululemon’s CEO, highlighted what he called a “multi-year distribution center project” in a March earnings call, noting that capital expenditures in the quarter were $207 million. For all of 2024, Lululemon expects capital expenditures to be approximately $670 million to $690 million, with the spend relating the distribution centers, technology investments and capital for new stores, as well as relocations and renovations.
As of Jan. 28, 2024, Lululemon’s lease commitments for distribution center operating leases which have been committed to, but not yet commenced, was $299.6 million.
And moving goods out of its DCs is an expensive endeavor for the company as well. The brand incurred costs of $374.2 million in 2023 to transport its products from its distribution facilities to its retail locations and e-commerce consumers.
Lululemon has admitted to struggling with a slowdown in demand that has stagnated North American growth. During the fourth quarter, sales in the Americas rose 9 percent, versus 29 percent a year ago and 54 percent worldwide.
“There has been a shift in the U.S. consumer behavior of late, and we’re navigating what has been a slower start to the year,” McDonald said on a call with analysts last month. “We view this as an opportunity to keep playing offense as we lean into investments that will continue our growth trajectory. Outside the U.S., our business remains strong, and all our international markets in Canada.”
The decelerating growth appears to be in line with consumer discretionary spending habits. Additionally, the company has had to fend off the growing popularity of other competitors in its space, including Alo Yoga and Vuori.
The company still plans to open five to 10 stores in the Americas, and its innovation and product pipeline “remains very strong for this year,” he said.
“Despite the market dynamics, we remain optimistic about our opportunities to grow our business in the U.S. in 2024 and to continue to gain market share,” McDonald added. “Our stores facilitate a direct connection with our guests, help us attract new guests into the brand and act as hubs in our local communities. We will continue to invest into the market to increase our brand awareness as we continue to activate both community-based events and larger brand campaigns.”
Lululemon’s soft quarter wasn’t the only one in the athletic apparel field that resulted in some cuts. While Nike too surpassed analyst projections for its quarterly sales and earnings report in March it will let go 740 employees at its Oregon headquarters by June 28.
