Retailers are struggling, but don’t tell Lululemon. The retailer is one of the few in its industry to currently pay all of its workers and make monthly rental fulfillments. This is incredibly impressive since they shut down all stores across North America and have made no announcement as to when they’ll reopen.
Lululemon is able to focus away from the short term worries even though they have halted buybacks, made agreements for senior leadership to take pay cuts and stopped cash retainers for the board of directors. They are able to do this as a result of their incredibly healthy balance sheet. Lululemon made almost $4 billion in revenue this past year, a 21% boost from the previous year. In addition to this, their gross profits went up 22%, net income up 33% and have nearly a 3:1 current assets to current liabilities ratio. Lululemon is well-suited for this work stoppage, but what does this mean moving forward?
Now is the time to use their resources to their advantage. They can demonstrate great PR by making advertising campaigns surrounding their incredible treatment of workers and take the extra money they have to add extra layers to their business. As the economy weakens, the desire for luxury fitness and wellness clothing items decreases as well. By working on ways to create lower priced items and developing products that are seen as a need compared to a luxury, they can take on the apparel giants of the world for decades to come.
Lululemon has a chance to compete with the Nikes and Adidas of the world. One can argue they’re defeating them already when it comes to their financial success, but those brands have the legacies that Lululemon can’t compete with yet. Look at products like Jordan Brand for Nike and Boosts for Adidas. They are luxury items that are seen as a need for so many consumers based on the longstanding trust they have with so many people. Lululemon can use this time do this because just being a luxurious athleisure brand can only get them so far.