Lululemon Athletica Is 'Over-Investing In Innovation,' Analyst Cuts Price Target
Lululemon Athletica faces risks due to product execution issues and growth in sale sections, according to Piper Sandler analyst Anna Andreeva. She maintained a Neutral rating and cut the price target from $270 to $200. The company has significantly increased its innovation efforts, but this has led to more products ending up on clearance, resulting in higher discounting. Lululemon's shares rose by 0.64% to $217.97 at the time of publication.
There could be further risk to Lululemon Athletica Inc's LULU estimates, given its continued product execution issues and sale section growth, according to Piper Sandler.
The Lululemon Athletica Analyst: Analyst Anna Andreeva maintained a Neutral rating, while reducing the price target from $270 to $200.
The Lululemon Athletica Thesis: The company has 57 instances of innovation and newness in color year to date, which is almost three times the levels last year, Andreeva said in the note.
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The number of SKU’s on sale from the We Made Too Much tab started to pick up mid-June, the analyst wrote. The last three weeks of July ran in the 1,000+ SKU range, levels now slightly above last Holiday and vs.~600 SKU’s on average last July.
Lululemon offered a 25% discount on as many as 15 full-priced items in June, she added.
This over-investment is evident from new products moving quickly to the clearance racks, which helps explain the higher discounting being offered, Andreeva further stated.
Price Action: Shares of Lululemon Athleticahadrisen by 0.64% to $217.97 at the time of publication on Tuesday.
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