After a relatively quiet period, analysts have begun to ramp up their research on Lululemon Athletica (LULU) ahead of its earnings report scheduled for June 12.
Today was no exception when Sam Poser of Sterne, Agee & Leach upgraded Lululemon to Neutral from Underperform after it dipped below the $43 price target.
In his note, Poser looked at the past, present and future, noting that the company had great success until last spring when things began to unravel. Still, Poser chooses to hang out in the negative space with his report, noting that Lululemon didn't take much risk with its latest releases. He explains:
The women’s product was, in our view, too focused on the core Lululemon customer. In order to revive the same-store sales, updated basics with broad appeal must be offered, and we did not see such product.
Customer service, once considered top notch, could also use a facelift, Poser says:
Fitting room service has gone down a notch, and the engagement is just not what it once was. The modest deterioration of the service, in conjunction with the problems of 2013, has led a number of customers and potential customers to try other brands where a better value proposition may have been found. The wandering customer is often hard to bring back.
With all that less-than-stellar commentary, we began to wonder why Poser upgraded Lululemon (albeit to Neutral) until we came across this explanation:
We see significant challenges ahead facing the Lululemon brand and modest downside to the stock price. At the same time, the brand is scarred but not ruined, and the store expansion plans remain intact.
And there we have it! Shares of Lululemon have dipped 0.2% as of $42.90 at 3:52 p.m. today.
No comments:
Post a Comment