Credit Suisse Downgrades Lululemon Athletica Inc. (LULU) to Neutral; Markdown Intensity Up
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Credit Suisse downgraded Lululemon Athletica Inc. (NASDAQ: LULU) from Outperform to Neutral with a price target of $53.00 (from $76.00), noting markdown intensity is up year-over-year.
Analyst Christian Buss commented, "Our proprietary pricing and inventory analysis suggests markdown intensity has increased for lululemon this quarter – the 2.7% rate is higher both Y/Y (2.5%) and sequentially (2.0%). With an increase in discounting in Women's Tops particularly, we have less conviction in the company being able to sustain recent topline momentum, which we view as crucial in supporting earnings recapture. As a result, we lower our FY16 comp assumption to 5.1% from 6.2% and reduce our forward multiple to 25x from 30x as the benefits from restructuring and margin recapture moderate. We downgrade shares to Neutral, adjust estimates, and lower our Target Price to $53 from $76."
Shares of Lululemon Athletica Inc. closed at $56.81 yesterday.
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