Canadian activewear brand Lululemon Athletica has reported a 70% drop in first-quarter profit as sales slumped amid the temporary closures of stores worldwide following the outbreak of coronavirus.
For the three months ended 3 May, net income tumbled to CAD28.6m from CAD96.6m a year earlier. Gross margin was 51.3%, a drop of 260 basis points compared to the first quarter of 2019.
Net revenue was $652m, a decline of 17% on last year, while on a constant dollar basis, net revenue was down 16%. Direct to consumer net revenue surged 68%, or 70% on a constant dollar basis, and represented 54% of total net revenue compared to 26.8% last year.
Lululemon ended the first quarter with $823m in cash and cash equivalents and the capacity under its committed revolving credit facility was $398.2m. Inventories were up 41% to $625.8m, from $443m a year ago.
The company temporarily closed all of its retail locations in mainland China in February amid the coronavirus outbreak, before shuttering all of its stores in North America, Europe, and certain countries in Asia Pacific a month later. All of its stores in mainland China have since reopened, with those in other markets following from 3 May. As of 10 June, 295 of its company-operated stores were open.
CEO Calvin McDonald said: “We are learning more every day about our guests – how they enjoy interacting with us online and what makes them comfortable as stores reopen. Our strong digital business demonstrates the strength of our guest connection and the long-term opportunity to create further omni experiences going forward.”
B Riley analyst, Susan Anderson, notes: “Lululemon continues to outperform its peers and we believe they will continue to benefit as consumers focus on more comfortable/casual apparel and look to stay healthier and spend more time outdoors.”