Lululemon Athletica Inc, the renowned brand known for its trendy yogawear, is cautiously hopeful about the upcoming holiday season. However, the company has anticipated a potential decrease in adjusted profit for the current quarter due to higher marketing expenses. Consequently, Lululemon’s shares experienced a decline of approximately 5% during extended trading.

To capitalize on the surging demand for home workout classes brought on by the coronavirus pandemic, Lululemon plans to allocate more funds towards marketing Mirror, an at-home fitness company it acquired earlier this year for $500 million. This strategic move aligns with the company’s objective to drive business during the holiday season. It is projected that Mirror will generate $150 million in revenue for Lululemon in 2020.

The decision to invest in Mirror arose as Lululemon had to suspend its in-store yoga and fitness classes, which had previously served as an effective marketing tool to attract more customers. Consequently, the company expedited its investments in the digital channel and prepared for various scenarios in response to the ongoing uncertainties caused by the COVID-19 environment.

Lululemon anticipates that the limited capacity of its relatively small stores, coupled with reduced operating hours, will impact foot traffic in the latter half of 2020. To counterbalance this effect, the company intends to open 70 seasonal stores in key areas, aiming to attract more customers to its physical retail locations during the crucial holiday season.

On a positive note, Lululemon’s direct-to-consumer business, comprising online sales, witnessed an impressive growth of 155% in the second quarter that concluded on August 2nd. Additionally, the company reported a 2.1% increase in net revenue, reaching a total of $902.9 million, surpassing the estimated figure of $842.5 million.

While Lululemon maintains a cautious optimism regarding the holiday season, it recognizes the continuing uncertainty created by the COVID-19 pandemic. As the year progresses and the holiday season draws nearer, Lululemon remains committed to closely monitoring the situation and adapting its strategies accordingly.

Useful links:
1. Lululemon Gets Serious About Mirror Acquisition
2. Lululemon Beats Expectations Amid Pandemic Boost