Canaccord Genuity Cuts Price Target on lululemon athletica (LULU) to $54 Following 2Q15
Canaccord Genuity maintained a Hold rating on Lululemon Athletica Inc. (NASDAQ: LULU), and cut the price target to $54.00 (from $60.00), following the company's 2Q15 earnings report and conference call. Analyst Camilo Lyon said that LULU's Q2 report and conference call raised more questions than it answered.
Lyon commented, "LULU's Q2 report and conference call raised more questions than it answered. A lack of clarity around Q2 gross margin pressure coupled with further margin pressure on 2H is calling into question the company's ability to recapture the 300bps of lost product margin in 2016. Furthermore, we are less confident in LULU's ability to clear out of its excess inventory position at full margin as it states it will. Our concerns are exacerbated by the addition of two more warehouse sales (one in Q3 and one in Q4) to presumably clear out excess inventory. To our knowledge, LULU has never had 3 consecutive warehouse sales. Despite solid Q2 comps and an increased comp outlook (HSD from MSD) we believe the company will have to show gross margin stability/expansion before the stock can regain a premium multiple - something that is not likely to happen for a couple of quarters."
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Shares of Lululemon Athletica Inc. closed at $53.54 yesterday.