Lululemon confirmed its decision to close its distribution center in Washington and lay off 128 employees after opening a new warehouse outside Los Angeles.
Lululemon's WARN Notice Submission
Lululemon submitted a WARN notice to the state's Employment Security Department on Thursday, outlining its intention to close its Sumner distribution center and eliminate 128 jobs, scheduled on June 21.
In a statement, a spokesperson for Lululemon explained that they routinely assess their distribution network as part of their ongoing efforts to fulfill their growth strategy and cater to their customers' needs. After carefully evaluating their current infrastructure and the trajectory of their fulfillment strategy, involving a multi-year investment, they have chosen to shutter one of their smaller distribution centers situated in Sumner, WA, by the end of the year.
While some employees will have the opportunity to remain with the company and relocate to other facilities, such as the recently inaugurated distribution center in the greater Los Angeles area, the optimization process will lead to the elimination of just over 100 positions at the current Sumner distribution center, in which the spokesperson assured to be assisted throughout the transition period.
Sumner's Distribution Center Closure
Based on the company securities filings, the 150,000-square-foot facility has a lease set to expire in July 2025.
According to securities filings, Lululemon initiated operations at a warehouse in Sumner in 2010, marking the company's first major distribution center following its initial public offering in 2007 in the United States.
The decision to close the Sumner distribution center follows a period during which Lululemon significantly expanded its warehouse space, more than tripling its footprint to keep pace with its rapid growth.
Lululemon's Growth Trajectory
As of January 31, 2021, Lululemon leased and owned 1.12 million square feet of distribution centers across Canada and the U.S., which had expanded to nearly 4 million square feet by the end of this January, which according to filings, stems from two new lease agreements for a 1.26 million-square-foot facility outside of Los Angeles and Toronto. Subsequently, in 2022, the company leased a 980,000-square-foot warehouse outside of Toronto in Brampton, Ontario.
The California facility, initially expected to be operational in fiscal 2024, has recently opened and is projected to become operational in fiscal 2026, per company filings. Asserting its dominance in the athletic apparel market over the past decade, Lululemon emerged as a favored brand among teenagers, with a remarkable surge of annual sales from $1.6 billion in fiscal 2013 to $9.6 billion in fiscal 2023.
However, the company faces a new challenge as its growth in North America, its most significant sales region, has begun to slow down. Lululemon announced holiday earnings in March that surpassed Wall Street's expectations but provided disappointing guidance following sluggish sales, with 9% sales, compared to the 29% growth experienced in the same period the previous year for the three months ending on January 28.
