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Coronavirus to impact Lululemon's Q1'20 earnings, execs warn

Lululemon Athletica Inc. expects to see a negative impact on its first-quarter earnings after temporarily closing stores during the ongoing coronavirus pandemic, executives said March 26.

The company also expects lower-than-normal business once its stores reopen.

The head of the athletic-apparel retailer said the company is planning for multiple scenarios.

"We know that initially, the business will be lower than it was pre-COVID-19, but we believe that each day and each week, it will keep building," CEO Calvin McDonald said on Lululemon's fourth-quarter earnings call.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

The coronavirus outbreak has shuttered business operations and cities around the world as people stay home to prevent further spread of the virus.

Lululemon's sales trend "changed dramatically" in the second week of March as the impact of the outbreak accelerated and the company temporarily closed stores in various regions, according to CFO Patrick Guido.

"We did see a dramatic slowdown in our business in conjunction with our store closure," he said, adding that the company expects this to have a negative impact on first-quarter earnings.

Although Lululemon's digital business remained strong, online sales are not offsetting lost volume from retail stores, Guido said.

The company's liquidity is strong, he added, saying Lululemon holds more than $1 billion of cash with no long-term debt. There is also a $400 million revolving credit facility, which has three years left in maturity, according to Guido, with an option to upsize by $200 million.

Lululemon is managing expenses in several ways, including redeploying marketing funds toward digital strategies that drive online sales, Guido said.

The company did not provide fiscal 2020 guidance because of the uncertainty amid the pandemic.