Lululemon Athletica (LULU – Research Report), the Consumer Cyclical sector company, was revisited by a Wall Street analyst today. Analyst Adrienne Yih from Barclays downgraded the rating on the stock to a Hold and gave it a $395.00 price target.
Adrienne Yih’s rating is based on a cautious outlook for Lululemon Athletica, due to several market dynamics and company-specific factors. Yih recognizes that Lululemon’s performance in the Americas is positive yet showing signs of deceleration, which may not be fully offset by growth in the Chinese market. Additionally, there is an expectation of a shift in consumer spending away from athleisure towards other apparel categories, as well as an increasingly competitive landscape with numerous emerging brands that could, collectively, erode Lululemon’s market share at the margins. Finally, there are concerns about the potential for fixed-cost deleverage if sales growth continues to slow down, coupled with limited potential for earnings per share (EPS) and margin upside based on the company’s initial fiscal year 2024 guidance.
The decision to issue a Hold rating instead of a more optimistic view stems not from a lack of confidence in Lululemon’s long-term business model, which Yih regards as solid due to the company’s innovation, technical solutions, and quality products, but rather from the relative potential for stock appreciation in 2024. The report indicates that amidst a broader sector strategy favoring companies with accelerating sales growth, those with decelerating sales might struggle to deliver sustained EPS upside. The report also notes the possibility of a shifting trend in fashion preferences among teens and young adult women, which could redirect spending away from athleisure—a category where Lululemon has been a dominant force. This anticipated shift in consumer behavior could lead to a deceleration in sales growth for the second half of 2024, prompting the Hold recommendation.
According to TipRanks, Yih is a 4-star analyst with an average return of 6.4% and a 49.32% success rate. Yih covers the Consumer Cyclical sector, focusing on stocks such as Nike, TJX Companies, and Lululemon Athletica.
In another report released on April 26, Bernstein also maintained a Hold rating on the stock with a $384.00 price target.
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Lululemon Athletica (LULU) Company Description:
Founded in 1998 and headquartered in Vancouver, Canada, Lululemon Athletica, Inc. is an athletic apparel retailer. The company designs, distributes, and retails athletic apparel and accessories for women, men, and female youth. The company operates through two business segments: Company-Operated Stores, which comprises of lululemon and ivivva brands; and Direct to Consumer, which is its e-commerce business.
