Lululemon to shutter Washington distribution center, lay off 128 employees after tripling warehouse footprint

Lululemon is planning to shut down its Washington distribution center and lay off 128 employees after opening a massive new warehouse outside of Los Angeles, the company confirmed Friday.

The athletic apparel retailer filed a WARN notice with the state’s Employment Security Department on Thursday, notifying it of its plans to close its distribution center in Sumner, located about 35 miles south of Seattle, and cut 128 jobs. Layoffs will begin on June 21, the WARN notice said. The facility is expected to close by the end of the year, according to a Lululemon spokesperson.

“As we continue to deliver on our growth strategy to meet the needs of our guests, we regularly evaluate our distribution network to help shape and support the future vision of our business. Following a review of our current infrastructure and the evolution of our fulfillment strategy, which includes a multi-year investment to increase overall capacity and support our growth, we have made the decision to close one of our smaller distribution centers — located in Sumner, WA,” the spokesperson said. 

“While some employees will be retained and will relocate to other facilities, including our recently opened distribution center in the greater Los Angeles area, the optimization will result in the reduction of just over 100 positions within the existing Sumner distribution center,” the person added. “We are committed to supporting our impacted employees through this transition.”

The 150,000 square foot facility has a lease that expires in July 2025, according to company securities filings. 

Lululemon first started operating a warehouse in Sumner in 2010, and it appears to be the first major distribution center the company opened in the U.S. after going public in 2007, according to securities filings. 

The closure comes after Lululemon more than tripled its warehouse footprint in the past few years to accommodate its rapid growth. 

As of Jan. 31, 2021, Lululemon leased and owned 1.12 million square feet of distribution centers across Canada and the U.S., filings show. By the end of this January, that footprint grew to nearly 4 million square feet.

The bulk of the growth comes from two new facilities Lululemon leased outside of Los Angeles and Toronto.

In 2021, it entered into a new lease for a 1.26 million square-foot facility outside of Los Angeles in Ontario, California, filings show. In 2022, it leased a 980,000 square foot warehouse outside of Toronto in Brampton, Ontario.

The Lululemon spokesperson said the California facility recently opened. The new Canadian facility is expected to be up and running in fiscal 2026, company filings show. The retailer previously expected the facility to be operational in fiscal 2024, the filings say.

Lululemon has spent the past decade dominating the athletic apparel space and becoming one of the most popular brands among teens. It has grown annual sales from $1.6 billion in fiscal 2013 to $9.6 billion in fiscal 2023.

But recently, its growth in North America — its largest region by sales — has started to stagnate. 

In March, it reported holiday earnings that beat Wall Street’s expectations, but it issued disappointing guidance after seeing slow sales in the U.S.

In the three months that ended Jan. 28, sales grew 9% in the Americas, compared to 29% growth in the year-ago period.

— Additional reporting by CNBC’s Annie Palmer.

Source: https://www.cnbc.com/2024/04/19/lululemon-to-shutter-washington-warehouse-lay-off-128-employees.html

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