Canaccord Keeps lululemon (LULU) at Buy Following Analyst Day; Int'l & Men's Both Strong Expansion Areas

Canaccord Genuity affirms its Buy rating and $69 price target on lululemon athletica (Nasdaq: LULU) following the company's recent analyst day.

Analyst Camilo Lyon noted that following takeaways from the event:

• International is a multi-billion dollar opportunity and one that could outpace North America in time. Early indications from the recent London opening are very positive (sales are 60% over target thus far) while Hong Kong showrooms are also performing well. With a vast opportunity, LULU will speed up its international growth plans by opening stores in parallel vs. sequentially. We expect to see the store ramp commence in 2016 once the infrastructure is set.

• Men's is a $1B opportunity that, together with international expansion, should help attract new customers to the brand.

• Significant margin opportunities from a more efficient supply chain: After dramatic levels of underinvestment in all aspects of supply chain including systems and people, LULU is finally playing catch up. The problems of last year brought to light how inadequate LULU's infrastructure has been relative to its level of sales growth. That said, we believe these problems are well on the way to being solved and should result in structural margin improvements.

• LULU is coming back to its designed heritage by focusing on improving the product life cycle of both its core and seasonal merchandise. The current misconception is that seasonal product is selling well while core product is not. In fact, many core items continue to be strong sellers, however some have started to downturn, as would naturally be expected. The challenge is to catch that deceleration before it becomes a drag. As such, Tara Poseley is instituting more defined parameters around a product’s life cycle and the refreshes it might need so as to limit markdowns and keep the stores stocked with high demand goods. We believe stricter guidelines on all aspects of planning, production, and commercialization will benefit LULU’s sales and margins as the appropriate balance is struck between core and seasonal product.

For an analyst ratings summary and ratings history on Lululemon Athletica Inc. click here. For more ratings news on Lululemon Athletica Inc. click here.

Shares of Lululemon Athletica Inc. closed at $51.71 yesterday.

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