Lululemon, the athletic apparel company based in Canada, has decided to close its distribution center in Sumner, Washington, which will lead to the loss of over 100 jobs. This decision, announced in April, is part of the company’s plan to reevaluate its distribution network to accommodate future expansion. The 150,000-square-foot facility in Sumner is scheduled to shut down by the end of 2024.

Although some employees have been moved to other locations, like the warehouse in Ontario, California, more than 100 positions were terminated. Lululemon has stated it will support the employees impacted by this change.

Key Takeaways

• Closure and Job Losses: Lululemon will close its Sumner, Washington distribution center by the end of 2024, resulting in 128 layoffs. The Lululemon layoffs process in June​.
• Strategic Shift in Distribution: Lululemon is closing the facility as part of a broader strategy to optimize its retail logistics network, shifting focus toward larger centers to enhance growth and efficiency.
• Impact of Market Changes: The decision comes amid slowing demand for high-end athleisure in North America and excess inventory in sports retail, which has contributed to the company’s strategic reevaluation​.
• Support for Affected Employees: Some Sumner employees will be transferred to other locations, including a new distribution center in the Los Angeles area, although details on specific support measures remain limited​.

Lululemon to Close Washington Distribution Center Amid Shifts in Business Strategy

Lululemon Athletica announced its decision to close its distribution center in Sumner, Washington, by the end of April of this year. The company issued a WARN notice to the Washington State Employment Security Department in April, outlining its plan to close the facility, situated about 35 miles south of Seattle, and eliminate 128 jobs. The Lululemon layoffs commenced on June 21. A company spokesperson indicated that the closure is set to occur by year’s end.

The athletic apparel company stated its commitment to assisting employees impacted by the closure, though it did not specify the support methods.

The spokesperson explained that the company regularly assesses its distribution network as part of Lululemon’s ongoing efforts to support its growth strategy and meet customer needs. This evaluation is aimed at aligning with the future direction of the business. After reviewing their infrastructure and updating their fulfillment strategy, which involves a multi-year investment to enhance capacity and bolster growth, they decided to close the smaller Sumner facility.

This decision occurred because Lululemon experienced a decrease in demand for its high-end athleisure wear in North America, a region where an excess of inventory at sports retailers has led to reduced orders for sportswear companies. According to a regulatory document, the lease for Lululemon’s 150,000-square-foot distribution center in Sumner is set to expire in July 2025.

A company spokesperson stated that some employees from the Sumner center will be retained and transferred to other locations, including a new distribution center in the greater Los Angeles area.

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Lululemon began operating the Sumner warehouse in 2010, marking what seems to be its first significant distribution center in the U.S. since its 2007 public offering, according to securities filings. The company’s decision to close the facility follows a period of extensive expansion, having more than tripled its warehouse space in recent years to support its swift growth.

As of January 31, 2021, Lululemon managed 1.12 million square feet of distribution space in Canada and the U.S., according to filings. By the end of this past January, that area had expanded to nearly 4 million square feet. This expansion primarily involves two new leases for facilities outside Los Angeles and Toronto.

In 2021, Lululemon signed a lease for approximately 1.26 million square feet at a new facility in Ontario, California, which, as indicated in its annual report, runs until 2039.

Lululemon, whose stock has fallen over 42% year to date at the time of writing, also operates a distribution center in Groveport, Ohio, and leases the majority of its other properties throughout the United States, Canada, and Australia.

Over the last ten years, Lululemon has become a leading force in the athletic apparel industry and a top choice among teenagers. The company’s annual sales have increased from $1.6 billion in fiscal 2013 to $9.6 billion in fiscal 2023. However, Lululemon’s growth in North America, its biggest market in terms of sales, has begun to plateau recently.

In March, while the company reported holiday earnings that exceeded Wall Street predictions, it also provided less optimistic future earnings projections following sluggish U.S. sales. For the quarter ending January 28, sales in the Americas rose by 9%, a decrease from the 29% growth experienced in the same period the previous year.

During the earnings call, Lululemon’s CEO, Calvin McDonald, informed investors that consumer interest in the U.S. is somewhat subdued and the company is adjusting to a fluctuating retail landscape.

About Lululemon

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Lululemon Athletica Inc. and its subsidiaries design, distribute, and sell athletic apparel, footwear, and accessories under the Lululemon brand for both women and men. Their product range includes shorts, pants, jackets, and tops tailored for activities like running, yoga, and training, along with fitness-related accessories.

The company markets its products through its retail stores, outlet locations, interactive workout platforms, and partnerships with yoga studios, university campuses, and other retailers. Lululemon also sells products through its mobile apps and e-commerce site, lululemon.com. Lululemon operates in various regions, including the United States, Canada, Mainland China, South Korea, Australia, Japan, and several countries in Europe, the Middle East, and Africa. Founded in 1998, the company is headquartered in Vancouver, Canada.

Conclusion

Lululemon’s decision to close its Sumner distribution center highlights the company’s strategic shift in retail logistics, as it aims to streamline operations and meet future growth goals. While the closure will result in significant job losses, Lululemon aims to align its operations with long-term growth goals by consolidating its distribution network.

The closure also comes when the company faces slower growth in North America due to reduced demand and an excess of inventory in the athleisure market. As Lululemon continues to expand its warehouse capacity in larger facilities, such as in Los Angeles and Toronto, the company remains committed to adapting its operations to meet future business needs, even as it navigates current challenges in its core markets.