China poised to become Lululemon’s second largest market

Despite challenges brought about by the pandemic, Lululemon has proven to be especially profitable in the Chinese market. 

On September 1, the athleisure fashion brand announced its results for the second quarter of fiscal 2022 with a revenue of $1.868 billion, a year-on-year increase of 29%. Specifically, for its “market outside North America”, the brand accrued an impressive revenue of $321 million, a year-on-year increase of 35% more than the US and Canadian markets combined.

According to CEO Calvin Mcdonald, Lululemon has seen a rebound in the region. “Revenue grew over 30% versus last year, and we saw a nearly 70% increase on a three-year CAGR basis. We remain in the early innings of growth in China.”

Currently, China is poised to become Lululemon’s second largest market in the world after the United States. In fact, Lululemon predicts this to happen by 2026 or even earlier. Not only is store expansion in China accelerating, but the brand’s influence has also been amplified by the emerging urban movement. The surge in popularity is largely due to the pandemic which spurred a rise in outdoor niche sports, from ultimate frisbee to cycling and paddle boarding. 

As of July 2022, of the 600 Lululemon-owned stores, 331 were in the United States, 96 in China and 65 in Canada. Lululemon aims to have 220 stores in China by 2026.

Lululemon first entered the Chinese market less than 10 years ago. In 2015, it opened the official flagship store on Tmall. However, it was not until 2016 that it officially opened its first offline store in China. Although the number of stores is less than 100, they are highly sought after, predominantly by middle class Chinese women.

Meanwhile, Nike and Adidas once had 10,000 stores, but have been closing down locations ever since the outbreak of the pandemic. The two latest quarterly financial reports show that in Greater China, Adidas has had negative revenue growth for five consecutive quarters, while Nike’s revenue has fallen by 20%.

Although outperforming its athleisure peers, Lululemon certainly has challenges of its own when it comes to its online services. Lululemon pays more attention to offline stores in the global market, and the same is true in the Chinese market. Some yoga brand owners believe the problem lies in the fact that “low coverage of its stores in the Chinese market does not match the high growth of the market.”

Despite such challenges, Lululemon’s robust figures illustrate China’s ongoing shift towards a more healthy way of living and search for wellness and increase in demand for high-end activewear.

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