Lululemon The company plans to close its distribution center in Washington and lay off 128 employees after opening a massive new warehouse outside Los Angeles, the company confirmed on Friday.
The athletic apparel retailer filed a warning notice with the state Employment Security Department on Thursday, informing it of its plans to close its distribution center in Sumner, located about 35 miles south of Seattle, and eliminate 128 jobs. The layoffs will begin 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 implement 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,” the spokesperson said. To support our growth, we have made the decision to close one of our smaller distribution centers – located in Sumner, Washington.”
“Although some employees will be retained and transferred to other facilities, including the recently opened distribution center in the greater Los Angeles area, the improvement will result in a reduction of just over 100 jobs 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 the company's securities filings.
Lululemon first began operating a warehouse in Sumner in 2010, and it appears to be the first major distribution center the company opened in the United States after going public in 2007, according to securities filings.
The closure comes after Lululemon more than tripled the size of its warehouses in the past few years to accommodate its rapid growth.
As of January 31, 2021, Lululemon leased and owned 1.12 million square feet of distribution centers across Canada and the United States, the filings show. By the end of January, this space had increased to nearly 4 million square feet.
The bulk of the growth is coming from two new facilities leased by Lululemon outside Los Angeles and Toronto.
In 2021, the company entered into a new lease for a 1.26 million square foot facility outside Los Angeles in Ontario, California, filings show. In 2022, it leased a 980,000-square-foot warehouse outside Toronto in Brampton, Ontario.
The California facility recently opened, a Lululemon spokesperson said. The new Canadian facility is expected to be operational in fiscal 2026, the filings say. The retailer previously expected the facility to be operational in fiscal 2024, the filings say.
Lululemon has spent the last decade dominating the activewear space and becoming one of the most popular brands among teens. Its annual sales have increased from $1.6 billion in fiscal year 2013 to $9.6 billion in fiscal year 2023.
But recently, its growth in North America — its largest region by sales — has begun to stagnate.
In March, it reported holiday earnings that beat Wall Street expectations, but issued disappointing guidance after seeing sales slow in the United States.
In the three months that ended Jan. 28, sales rose 9% in the Americas, compared with 29% growth in the same period last year.
—Additional reporting by CNBC's Annie Palmer.
