Lululemon increasing air freight ahead of expected port congestion in Asia
CANADIAN clothing retailer Lululemon will increase its international air freight shipments before the fall to get ahead of expected tariff-fueled port congestion, reports New York's Air Cargo World
02 July 2019 - 19:00
Vancouver-based Lululemon chief financial officer PJ Guido mentioned this by way of explaining the 'modest impact from potential new tariffs' and 'additional costs to air freight' as the company moved to dodge tariffs.
'We are committing to higher air freight usage as a hedge against disruption in ocean shipping lanes as we approach the key dates related to tariff increases,' he said. 'This will ensure delivery of new product on time.'
Outside of the anticipated impact from tariffs, however, Lululemon is doing well in Asia - especially China. Their market in the country grew nearly 70 per cent this past quarter, and had strong store openings in three new cities.
Mr Guido pointed out that the company's 'direct exposure to China is relatively small', with six per cent of its finished goods exported from China to the US.
Only one per cent of its finished goods exported from China are subject to current tariffs; after the new rates are implemented, however, the remaining five per cent would also be subject to tariffs.
'So that's the direct impact,' he said. 'The better part of the expense is really coming from this indirect exposure we have.'
Lululemon expects port congestion from mid to late July, and thinks it's prudent to deliver new products and protect the sales through air freight.
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