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Analysis: Comp sales a concern at Lululemon

  • Credit Suisse reduces it price target on Lululemon (LULU) to $46 from $53.
  • The investment firm thinks comparable-store sales growth could be more challenging for the retailer due to the recent hits to the brand.
  • Shares are rated Neutral.
Comments (24)
  • DRB1234
    , contributor
    Comments (14) | Send Message
     
    Looks like pure stock manipulation. All good news recently then out of the blue this "investment firm" makes these comments...no facts or research to support the accusation. Makes one wonder about their motivation. Could it be they have shorted the stock and want to cover at a lower price or want to get in before the train leaves the station...time will tell.
    28 Feb, 10:46 AM Reply Like
  • PackerFan77
    , contributor
    Comments (90) | Send Message
     
    DRB1234,

     

    Credit Suisse published a detailed 17 page report today substantiating why they lowered their price target on LULU. You should read it and understand it before you say they do not have any facts or research upon which to base their conclusion and accuse them of stock manipulation.
    28 Feb, 11:59 AM Reply Like
  • Stan Ackman
    , contributor
    Comments (790) | Send Message
     
    Hey DRB, what are the recent good news for LULU? A few investment firms upgrade or stock price rebound? All these are not the sort of good news that really supports a company's real value.
    28 Feb, 12:23 PM Reply Like
  • bronchiti
    , contributor
    Comments (50) | Send Message
     
    Any link to that 17 page report?
    28 Feb, 06:13 PM Reply Like
  • PackerFan77
    , contributor
    Comments (90) | Send Message
     
    "Any link to that 17 page report? "

     

    I am a professional and subscribe to a service that provides access to broker dealer research reports in .PDF format, but perhaps if you did some searching on the internet you may be able to locate the report.

     

    Otherwise, you could always ask your broker or contact Credit Suisse for a copy of their report.

     

    Hope that helps.
    28 Feb, 07:49 PM Reply Like
  • Master of Disaster
    , contributor
    Comments (7) | Send Message
     
    Believe your eyes. If you frequent any gym, you'll see the women wearing Lululemon clothes despite the debacles of the past year. $LULU enjoys the kind of product reputation that $KO does. Sales will rebound and put all this negative investment buzz to rest.
    28 Feb, 11:57 AM Reply Like
  • Stan Ackman
    , contributor
    Comments (790) | Send Message
     
    Master of Disaster, what you said about women in any gym with Lulu is true, but you read the fact in the wrong angle. Here is my read: Many women already bought many LULU clothes, so the LULU is pretty close to market saturation in North America.

     

    Like many others, you invest in good companies. However, investing often is about if good companies will become even better.
    28 Feb, 12:21 PM Reply Like
  • Master of Disaster
    , contributor
    Comments (7) | Send Message
     
    Stan: Thank you for your reply. I concur that the market saturation for women in North America is close to 100%. However, I've recently read of their aim to expand into Asia as well as starting a men's clothing line as well. I also agree with your final assertion and look at the future of $LULU as bright.
    28 Feb, 12:36 PM Reply Like
  • flux8
    , contributor
    Comments (582) | Send Message
     
    Saturation is a concern when it comes to products that people typically only buy one or two of, or infrequently. Things like cars, and PC's. There is nothing limiting a person who buys one piece of Lululemon clothing from buying another. If they have enough money that they consider one piece worth it, they will be unlikely to hesitate to get another. Considering the rapid turnover of Lululemon's styles, saturation is not a very large concern.
    28 Feb, 01:01 PM Reply Like
  • Savajo15
    , contributor
    Comments (29) | Send Message
     
    100% saturation. Not hardly. These are priced to luxury level shoppers. You may see it at the gym, but I would be surprised if they had 30%. They have a lot of competition now too...under armor, atheleta, etc.

     

    They have a kid brand coming and a men brand on the way.
    28 Feb, 12:45 PM Reply Like
  • jeepnsam
    , contributor
    Comments (49) | Send Message
     
    "women already bought many LULU clothes, so the LULU is pretty close to market saturation in North America."

     

    My wife has over 20 Coach purses, 6 Michael Kors purses, gazillion pairs of shoes, dresses and she continues to purchase the latest designs. LULU is a high end gym fashion, sports, casual day out play and women will continue to purchase.

     

    Long $KORS $LULU
    28 Feb, 01:01 PM Reply Like
  • Master of Disaster
    , contributor
    Comments (7) | Send Message
     
    Buy on the dip?
    28 Feb, 01:06 PM Reply Like
  • sdnewstreet
    , contributor
    Comments (4) | Send Message
     
    I own LULU, having re-purchased at what, so far has been a recent bottom. It was my intention to sell on January 10th, simply as a matter of buying for the top of 2014. As I went to sell, there was a sudden upsurge in the price. I second guessed that move only to find the stock had traded down even prior to pre-market. I licked my wounds and later went long the stock for several reasons, however, yesterday, the bit of a bounce was notable prior to today's "analyst report/remarks". Today is options expiration for this 2/28/14.

     

    Beyond the concerns on the above "conspiracy thread", I have spent the past 15 years living in "Tech" clothing markets. What that means is, I have lived where to activities of folks and their clothing are related to weather patterns for daily comfort needs and recreation. So, a pair of pants, jacket and other support garments have properties that allow for snow, water and dry land recreation. I can cross country ski, do yoga, run and paddle board in a LULU pair of pants and jacket. Their reps are active and savvy.

     

    In an area where mom's live as if they are about to go to yoga and especially in chronic weather patterns, I can GTD, that when you know your fit, you change it out to "feel new" and not look redundant to the neighbor.

     

    From current location, LULU continues to have a reputation that makes it the top choice for women who want fit, comfort, style and the "smart look" in tech wear that does out wear several competing brands.

     

    This is simply based on the Southern California, Portland-and-Bend Oregon Markets. I will also remark, no matter what the weather, as long as the mail gets to my home, so does Lululemon.
    28 Feb, 04:04 PM Reply Like
  • flux8
    , contributor
    Comments (582) | Send Message
     
    Yup, I live in the Portland/Columbia Gorge area. I just went snowboarding this last weekend at Mt. Bachelor wearing just an R1 Patagonia hoodie and my Lululemon "rain" jacket. The conditions started out sunny and mild so I felt it would be sufficient. Got caught in a surprise heavy snowstorm and strong winds in the last half of Sunday. Surprisingly, my 2 layer outfit held up quite well and I was very happy with how my Lululemon jacket held up in comparison to my 3x more expensive Arc'teryx shell.
    28 Feb, 04:38 PM Reply Like
  • nick1200
    , contributor
    Comments (25) | Send Message
     
    Didn't RBC just upgrade Lulu last week? What about the fact that by the end of this year Lululemon is forecast to be sitting on over $1B of cash? Lulu has no debt and a gross profit margin of 57.26%. That's pretty high. I think the market has unfairly punished Lulu, the store here in Santa Monica is still consistently crowded, I think Lulu still has a competitive advantage although the growth is going to be slow. I think Laurent Potdevin can turn it around.
    28 Feb, 04:42 PM Reply Like
  • PackerFan77
    , contributor
    Comments (90) | Send Message
     
    Nick1200,

     

    We are probably in agreement about Laurent Potdevin. He has two proven sets of skills that LULU is most lacking and those are manufacturing and public/customer relations. Like you said, he could be the individual to turn the ship around.

     

    But thus far he has not been able to lay out a vision or even a strategy for solving the significant issues within LULU. His reduced guidance was not exactly something that would spark enthusiasm or investor confidence either.

     

    I am keeping an open mind regarding LULU. Unless they construct a solid plan for recovery and have at least demonstrated some ability to execute that plan; my money is going to be invested elsewhere in companies that are executing a solid business plan.
    28 Feb, 08:09 PM Reply Like
  • bronchiti
    , contributor
    Comments (50) | Send Message
     
    At my mall in Vancouver there is a cheap imitation Lulu store called J76 and every time i pass by its empty. Whereas the Lulu store upstairs has good traffic even though its FREEZING OUTSIDE TO GO RUN AND WORKOUT. P.S I can't wait till this winter weather is over
    28 Feb, 06:18 PM Reply Like
  • DRB1234
    , contributor
    Comments (14) | Send Message
     
    Reply to Packer Fan and Stan Ackman

     

    I've tried to find the report but haven't had much luck (could you post the link please?)

     

    I did however find these comments from Sept 13, 2013 SA site. I realize this is before the comments by Chip Wilson which I think have been overstated as far as the affect it has on this company. He said something politically incorrect (probably true) but offensive nonetheless, and the financial media which for the most part is as liberal as all other media just constantly and continually resurrects it in order to pound this company...enough already. They have addressed all of these issues but it never seems to satisfy all the talking heads in the financial press. New management has not been given a chance, just keep pounding away.

     

    Lululemon climbs on Credit Suisse upgrade, while Stifel lowers PT

     

    Sep 13 2013, 14:40 ET

     

    Shares of Lululemon (LULU +3.8%) climb after Credit Suisse upgraded the athletic apparel maker to Outperform from Neutral while maintaining a PT of $78.
    Analysts Christian Buss and James Berkley believe demand will bring about strong Q2 results while inventory flow issues will "moderate over the balance of the year and reverse in 2014." Lululemon is "compelling given rich valuation and signs of decelerating sales trends for the group as a whole."

     

    Stifel Nicolaus analyst Jim Duffy took the opposite stance, lowering his PT to $80 from $85 while maintaining a Buy rating. He is less optimistic on inventory problems and expects delays to continue into FQ4. "While our checks have shown frequent incidence of stock-outs on core pant styles suggesting supply remains too tight for demand, comp deceleration coincidental with deceleration noted across the retail landscape suggests Lululemon is no longer transcending the environment."

     

    I think what is fair to say is that Credit Suisse comments can move the stock price.

     

    And then there is this from a Dec 10, 2013 Vancouver Sun article note the quote from the same CS analyst and this is just a couple of months ago.

     

    "Hiring Mr. Potdevin to helm Lululemon “puts the business under the control of an executive who has demonstrated the ability to successfully manage two cult brands,” said retail analyst Christian Buss of Credit Suisse, lauding the announcement as a positive move."You can read the entire article here:

     

    http://bit.ly/OLrkBd

     

    Credit Suisse is all over the place on this company and their opinions change almost monthly it seems.

     

    As stated by many others, from the stores they visit (I've done the same where I live and have spoke to several employees) they seem to be very busy and most of the customers I saw in the store I visited were buying. I don't know, but it seems with the financial strength that this company has, the new management and the quality issues they've addressed they have a very bright future. They are funding all of this growth with no debt and they still have more than quarter of billion more cash than UA! And remember there is no national advertising (maybe that's the reason for the cash disparity) This will be a very compelling story in my opinion as it continues to unfold. Only time will tell but my bet is with this brand.
    28 Feb, 07:58 PM Reply Like
  • Lord Baltimore
    , contributor
    Comments (85) | Send Message
     
    A big part of the CSFB report focuses on website traffic from comScore.com. CSFB reports that comScore's measurement of traffic to lululemon.com was down 17% in 4Q and they contrast that with Athleta.com being up 7% in the same period. What is strange is that compete.com (which offers a similar web traffic measurement service to comScore) shows U.S. traffic to shop.lululemon.com up +61% y/y in the 4Q and traffic to lululemon.com up +72% y/y. I don't subscribe to comScore so I cant verify that CSFB's data is correct, but it would not be the first time that there was a disparity between these two web traffic measurement companies and so only the company's actual web logs know the truth. However I have not seen a disparity quite this wide (+72% vs -17%) before so it is a head scratcher. Consistent with the CSFB report compete.com shows Athleta's traffic has been higher than LULU's every month in the past year (interestingly except for two of the past three months). That said, I would expect a cataloger such as Athleta (they have been primarily selling via catalog and online before opening physical stores) to drive traffic to its website when a new catalog comes out. LULU doesn't mail catalogs and relies mostly on the stores to sell so I don't think it shows anything conclusive regarding share gains by Athleta based on the web traffic comparisons. Just food for thought before putting much weight on this negative CSFB report. As DRB1234 points out the CSFB analyst has flip-flopped on LULU several times in the past six months. This note seemed to be an attempt to reiterate their newly established negative view. Interesting that the analyst chose the end of the month to put this out. As a former sell-side analyst I can say it used to be considered poor form to trash a stock at months end. Oh well.
    3 Mar, 12:17 AM Reply Like
  • DRB1234
    , contributor
    Comments (14) | Send Message
     
    Poor form indeed and the stock has yet to recover because of this CS report. Thank you for your comments I don't think the CS view should be accepted at face value; too many contradictions. I would think they would review their conclusions more carefully...it's as if the previous statements never took place.
    4 Mar, 02:11 PM Reply Like
  • PackerFan77
    , contributor
    Comments (90) | Send Message
     
    More bad news for LULU. Down 3.18% so far today. This is an excerpt from the negative Zacks report on 03/11/2014.

     

    "Taking a cue from the company’s warning of weakened results in the upcoming fourth quarter, the Zacks Consensus Estimate for Lululemon has been witnessing a downtrend, as over the last 90 days estimates have declined 3.6% to $1.89 for fiscal 2014 and 11.6% to $2.20 for fiscal 2015."

     

    Maybe Credit Suisse and the other firms that have downgraded and/or reduced estimates and price targets for LULU are on to something.
    12 Mar, 02:20 PM Reply Like
  • DRB1234
    , contributor
    Comments (14) | Send Message
     
    As stated previously, time will tell but I'm going to patiently (maybe stubbornly) stick with this one. I'm placing a pretty big bet, so keeping my fingers crossed.

     

    I like the brand and the new management. The one time charge from the pants fiasco last year was in excess of $65M; all things being equal, they should therefore be $65M ahead of last year's number's right out of the chute. If you've been to their web site and stores, you'll find that they sell more than women's yoga pants; quite a bit more actually and the web site is first rate. Their men's line is nice too. IMO they've taken steps to address all of the issues that have caused the stocks poor performance. The numbers they report on 3/27 will be important and finally put this year behind them. More importantly, their guidance will be my focus. I have never seen a more pristine balance sheet. Buy at these prices. Best of luck to all LULU holders.
    13 Mar, 11:53 PM Reply Like
  • meta9999
    , contributor
    Comments (157) | Send Message
     
    I've heard all these bullish comments about LULU for the past 6 months. I have patiently tried to warn the bulls about this stock from 80 all the way down to where it is presently. It's not about how many people wear LULU now, it's about how many will wear LULU down the road. You really can't compare this to purses or shoes because this is strictly a niche product.... and right now the "yogawear" fad has peaked in both the number of active yoga participants and in the slowing store comps, The signs are all around you; the increased number of competitors, the "gotta have it" mentality, and CEO's own statement regarding slowing comp sales, not to mention the alienation of some of their customers all of which will lead to shrinking margins and a lower P/E. Seriously, how many affluent people are there that will continue to buy this stuff, because most can't or won't plunk down $100 a pop for this kind of gear over and over again. I stick by my original call. This is a $25 stock, and you'll probably see it by the end of the year.
    18 Mar, 02:26 AM Reply Like
  • DRB1234
    , contributor
    Comments (14) | Send Message
     
    That's what makes a market buyers and sellers with differing views on a company's future prospects. I think it was the CFO that commented on slowing comp sales some of which had to be attributable to weather. Based on average earnings estimates and current share price LULU 2015 PE is approx. 23; UA on the other hand is 53! Somebody better buy it before it takes off...or maybe LULU will be the buyer. We'll know by 3/27.
    19 Mar, 10:21 AM Reply Like
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