Dive Brief:
- Luluemon is laying off about 150 corporate employees at its store support centers, a company spokesperson confirmed by email.
- The downsizing follows an operations review that led the athleisure brand “to evolve some aspects of our organizational structure to operate with more agility and further invest in our growth,” the spokesperson said.
- The specialty retailer has some 39,000 employees globally, according to its 2024 annual report, filed in March.
Dive Insight:
Lululemon is streamlining operations at an unsettled time.
The athleisure powerhouse’s business in the Americas is “sluggish” and “international comp growth slowed dramatically in Q1,” as Needham analyst Tom Nikic said earlier this month following the company’s quarterly report. The retailer is also among those whose inventories are up to an uncomfortable degree, according to a June 13 research note from Jefferies analysts led by Randal Konik.
Lululemon’s “USA sales keep slowing while inventories keep rising,” Konik said, adding that its inventory-to-sales spread is over 1,500 basis points, “its highest spread in a decade (ex-Covid) creating massive risk to margins which are near all-time highs.” Jefferies calculates that the Americas represents about 75% of the brand’s sales.
The company has talked up “newness” since at least March. This may be because it’s facing stiff competition these days, but merchandising meant to respond to that could be backfiring, according to Konik.
“[Management] continues to emphasize product newness, but our frequent channel checks suggest these efforts have not resonated broadly, with many new designs quickly hitting sales racks,” Konik said. “As [Lululemon’s] core customers shift their spending toward competitors like Alo and Vuori, the company has broadened its product assortment in an attempt to expand its base — potentially alienating its core audience further.”
Lululemon is raising prices to mitigate the impact of tariffs, but new levies earlier this month led executives to lower expectations for earnings and margins.
The evaluation that led to the layoffs was routine, the company’s spokesperson said Thursday.
“As we continue to deliver on our strategy, we regularly assess our business operations to ensure we are well-positioned for the future,” the spokesperson said. “Following a recent review, we have decided to evolve some aspects of our organizational structure to operate with more agility and further invest in our growth. … This is not a decision we made lightly, and we are committed to supporting our employees through this transition.”