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Lululemon Cuts Spending but Says It Is Well Positioned to Navigate the COVID-19 Disruption

By Demitri Kalogeropoulos - Mar 27, 2020 at 11:21AM

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The retailer heads into the pandemic with over $1 billion of cash on the books.

lululemon athletica (LULU 2.46%) is making changes to its short-term spending plan in response to sharp demand declines in recent weeks. Yet the management team says they have what they need to navigate through the disruption to its retailing operations caused by the COVID-19 pandemic.

In a conference call with Wall Street analysts on Thursday evening, CEO Calvin McDonald described a "dramatic" shift in sales volumes as the company closed stores in China, Europe, and the U.S. Most of its Chinese shops are back online now, but other geographies remain closed for business.

A woman holds a yoga pose.

Image source: Getty Images.

In response, Lululemon has curtailed its inventory purchases and reduced capital spending. Management is also reviewing its plans for store openings and remodels.

The company believes it has plenty of financial firepower available to weather the coronavirus disruption. It counted $1.1 billion of cash on the books, no long-term debt, and access to a $400 million credit line as major resources. Lululemon noted strength in its digital shopping business, which is still operating and accounted for 29% of all sales in the latest fiscal year.

Looking further out, the chain believes its industry will remain a growth niche even after coronavirus fears fade. "We do not believe the current situation will change the trend toward people wanting to live an active and healthy lifestyle," McDonald said.

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