BNP Paribas Exane on Lululemon Athletica Inc. (LULU): 'we think management needs to acknowledge the innovation and newness is not working'

BNP Paribas Exane analyst Laurent Vasilescu reiterated an Underperform rating and $194.00 price target on Lululemon Athletica Inc. (NASDAQ: LULU).

The analyst comments "Our key Underperform view on the name is on North America not inflecting due to 1) product missteps (selfcare in 2019, Mirror in 2020, Like New in 2021, Footwear in 2022, Wundermost in 2023 and Breezethrough in 2024), 2) competition from the likes of alo, Vuori, FP movement, Aritzia and others and 3) fashion rotation out of compression to looser fits. We think the next leg(ging) down is on margins detailed in our recent deep dive Downward Facing Dog on Margins. Last March, we heard lulu blaming North America’s lackluster results on colors and sizes and suggesting the region should reaccelerate. Then we heard the inflection should come in 2H24. But the Breezethrough launch was pulled after we observed it was removed from the website (see link). Then the narrative turned to spring with innovation and newness. When Glow Up was launched in February we were skeptical on its ability to scale detailed in Is Glow Up the Next Blow Up?. We now observe that Glow Up is marked down in plenty of colors shown below from $118 to now $79 (33% off). The same applies to the Glow Up tank top and the Onesie yet markdowns always remain equal to last year per guidance. We think the same can be said with Align No Line and that it will be discounted soon enough. After pushing out the inflection multiple times, there is a line in the sand where we think management needs to acknowledge the innovation and newness is not working."

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 $304.20 yesterday.

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