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lululemon Extends Store Closure on Rising Coronavirus Impact

Zacks Equity Research

Given the growing cases of COVID-19 and the unprecedented impacts of it, lululemon athletica inc. LULU, has announced certain control measures to safeguard customers and employees. To this end, the company has decided to extend store closures in North America, Europe, Malaysia, Australia and New Zealand until the situation stabilizes. It will continue to pay its employees till Jun 1, irrespective of whether stores remain closed or reopen. However, the company informed that shoppers can continue purchasing via website and mobile app. 

Notably, other major retailers such as Nike NKE, Kohl’s KSS and Gap GPS have taken similar steps and closed stores for an indefinite period. Nike extended store closures in North America, Western Europe, Australia and New Zealand until further notice, as per sources. Further, Gap stores will remain closed in North America and Europe till the virus subsides. Also, Kohl’s stores across the United States will remain closed until further notice according to sources.

Coming back to the news, lululemon’s senior leadership will take a salary cut by 20% while the board members will forgo their cash retainers. The proceeds from these will then be utilized to fund its new initiative — We Stand Together Fund — in a bid to support employees affected by the pandemic. 

Moreover, management has undertaken some bold steps, which involves managing expense structure, capital investment, and store opening and remodel projects. The company has also suspended its share repurchase program for the time being.

Shares of this Zacks Rank #3 (Hold) company have lost 20.2% in the past three months compared with the industry’s decline of 46.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

 

Wrapping Up

COVID-19 has derailed economic activities worldwide. The outbreak has wreaked havoc denting demand, hurting supply chain, slowing down production activities and temporarily closing brick-and-mortar locations. Certainly, the retail sector remains under pressure. Incidentally, several retailers have chosen to withdraw their guidance, unable to ascertain the possible impact of the deadly virus on their performance.

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