Lululemon Athletica is a juggernaut athletic apparel company based in Vancouver, Canada.
The international company has recently made headlines for the massive distribution center in Washington state going out of business and laying off more than 100 people.
Sumner Distribution Center Closing in Washington
The company will close their large distribution center based in Sumner, Washington.
As a part of their business optimization efforts, the company will cut 128 jobs on June 1st according to a WARN notice filed with the state’s Employment Security Department.
Support for the Future of the Business
A spokesperson for the company stated that the business regularly evaluates the distribution network to help support the future of the business.
The center in Sumner, Washington, was not living up to its potential to support the global goals of the company.
Smaller Centers Aren’t Holding Up Value
Although the Sumner location employed more than 100 people and sent out millions of dollars of products in a year, the space was too small to keep the overall success of the company functioning.
The fulfillment strategy has a bigger opportunity for growth when kept in fewer but larger locations.
Some Employees Moving to the Los Angeles Location
Not all of the employees at the large distribution center will be laid off, some will be moving over to the Los Angeles location.
A newly opened location in Los Angeles will be the hub for shipping out online purchases on the West Coast.
Massive Earnings for the Company
The Q1 revenue on Lululemon’s last earnings report showed that the company made an estimated $2.18B to $2.20B.
The entire year of earnings are estimated to top out at the $10 billion mark.
Share Price Falling Consistently
According to The Globe and Mail, the company’s shares have fallen 18.9 percent since the beginning of 2024 despite massive revenue.
Reports show that the company is trading well below 20% of its 52-week high of $511.29 per share. The shares currently stand at $405.96.
Sales Increasing Through In-Store Purchases
The company’s growth over the last quarter was fueled by the 12% increase in same-store sales.
As well, American stores grew by 7% last year and international locations grew by an impressive 44%.
A Weak Quarter Despite Growth
Although the store still seems to be growing and increasing sales, the company is not matching its projections.
Part of a company’s value is based on its ability to continue growing year over year. For now, the growth seems to have slowed down.
Layoff Often Lift a Company’s Stock Price
The calculated move to close the Sumner location and send 128 employees packing might be a part of a larger scheme.
Companies have often used the tactic of reducing their paid employee pool to retain more revenue and thus boost their stock prices.
Following in Tech Lay off Footprints
During the massive tech stock slump in 2022, companies began laying off tens of thousands of employees en masse.
The move to lay off employees when the business starts to suffer boosts internal revenue and can start to save the company from sliding even further with their stock prices.
Layoffs Are Always About Cutting Costs
Although the distribution center in Sumner was turning a profit and making the company money, the choice to close the location harkens back to a bigger trend of cutting overhead costs.
The choice by Lululemon to focus all of their West Coast distribution to one facility means that they can squeeze out a similar amount of production with minimal disruption.
