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Lululemon defies physical store woes and plans to add more outlets

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Lululemon's store in Hong Kong. While most of its new locations are opening overseas, especially in China, Lululemon has not stopped expanding in the US.

Vancouver

THE Covid-19 pandemic may have wiped out demand for sports apparel and driven many customers online, but that is not stopping Lululemon from eyeing new brick-and-mortar stores across the United States.

Unlike some overstretched competitors, the upscale purveyor of yoga pants is still at an early stage of growth, according to chief executive officer Calvin McDonald.

In a recent video interview, he laid out the company's case for expansion amid the tumult, saying that Lululemon's stores are small and profitable, while serving as an anchor for the brand's loyal customers.

"We may adjust slightly, but there's still enough room for growth," said Mr McDonald, who took over the Vancouver-based company two years ago.

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Lululemon, known for its US$98 yoga pants and US$58 tank tops, has benefited from enduring demand for comfortable clothes during the Covid-19 crisis, even as most apparel categories have struggled.

The company's online sales have soared, buoying the chain while it was forced to close stores for several weeks.

While productivity has not fully recovered in reopened stores, sending shares down recently, the company is taking a long-term view with landlords.

Lululemon has paid full rent throughout the crisis - a contrast to brands such as Gap that suspended some payments. Mr McDonald said that he hopes the move pays off as some retailers are forced out of prime spots.

"We are a growth retailer that works well for landlords," he said. "When opportunity in great locations come up, I think that goodwill will pay dividends for us."

The company has about 500 stores worldwide, with 370 in North America. While most new locations are opening overseas, especially in China, Lululemon has not stopped expanding in the US.

Lululemon has tried to build a community of followers and repeat customers with free classes, sports events and support for local "ambassadors" - athletes and yoga practitioners known as yogis.

That aspect is essential to the store-expansion strategy, Mr McDonald said: "If our physical existed only to transact, I would think differently."

Recent experiments also justify more space, he said. They include experiential stores, which debuted in Chicago last year, with gym and cafe features. There is a paid membership programme that comes with exclusive classes.

The company also plans to start selling Mirror, an exercise device streaming on-demand workouts that Lululemon recently acquired, at some US locations this year.

There are new apparel products coming as well. Lululemon has devoted more square footage to men's outfits as part of a goal to double revenue in that category by 2023.

Within 12 to 18 months, the brand will unveil its own footwear line, according to Mr McDonald.

The foray into the highly competitive space is not accounted for in the company's five-year financial targets.

"We are going to take a test-and-learn approach," said Mr McDonald, who was a top executive at LVMH's beauty chain Sephora before joining Lululemon. BLOOMBERG

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