VANCOUVER, Canada —  Lululemon Athletica Inc. dropped after the company reported revenue that fell short of expectations, with a doubling of online e-commerce not enough to compensate for shuttered stores.

The Vancouver-based retailer said online sales climbed 70 percent in the quarter that ended May 3 after excluding currency impacts. Including brick-and-mortar stores, revenue was $652 million, which was short of analysts’ estimate for the first time in almost four years.

Key Insights

• Like most retailers, Lululemon withdrew its outlook due to the impact of the Covid-19 pandemic. Company executives said on a call with analysts that improvement will be gradual, with revenue seen declining by high-single digits this quarter. Earnings per share, meanwhile, won't grow until the fourth quarter.
• The results show Lululemon, a preeminent purveyor of yoga pants with a loyal following, hasn't fully capitalised on the trend toward comfy clothes during the work-from-home era. Loungewear stands to benefit while formal wear falls out of favour, although apparel has broadly suffered as consumers shift toward staples like groceries.
• E-commerce, which was already underpinning growth before the pandemic, expanded rapidly. Lululemon is now offering "digital educators" who make recommendations to shoppers over video chat. Online sales were up 125 percent in April and the momentum has continued, Chief Executive Officer Calvin McDonald told analysts.
• Of Lululemon's 489 total stores, 295 were open as of June 10, including all of its mainland China locations. It expects to be almost back to normal by the end of June.
• Inventories jumped 41 percent during the quarter, which McDonald attributed in part to resisting discounts. About 40 percent of its stock consists of core items that sell year-long and are in high demand, as opposed to seasonal merchandise, he said.

Market Reaction

Shares fell as much as 8.4 percent in after-market trading. The stock, which has 23 buy recommendations from analysts, 12 holds and one sell, advanced 33 percent this year through Thursday’s close.

By Sandrine Rastello