lululemon critics need to chill out

by:INGOR SPORTSWEAR     2019-10-25
Athletica Inc. of lulululemon.
Investors need to take a deep breath.
Shares in yoga
Gear maker shares fell more than 20% on Thursday after the company warned investors
Quarterly sales in established stores will be lower than in the previous year.
If so, it would be the first decline in comparable sales since 2009 (
In fixed dollars).
These signs are worrying.
But the panic in the market seems a bit overkill.
First of all, lulullemon said comparable sales are expected to increase throughout the year and reiterated that by 2020 it is expected to achieve its goal of doubling revenue to $4 billion.
If you are skeptical, look at the fourth-quarter data released later on Wednesday.
When other retailers struggled to attract customers during the brutal holiday season, lululullemon grew by 8% on comparable sales.
From a stable profit point of view
Profit growth, it also managed to create these sales without the crazy discounts used by many peers.
For the first time in three years, lulululemon has announced revenue growth.
Its inventory levels remain low, meaning it is able to sell most of the stuff it makes.
This is important because Lululemon already expects customers to buy a pair of elastic leggings for $100.
While other retailers are desperately selling discounts to get customers shopping with them, lulululemon has been trying to raise prices.
This pricing capability itself illustrates the brand\'s loyal devotees, who are willing to spend at lulullemon even if they cut spending at other retailers.
Because it\'s more like a professional retailer that swings in the face of fashion shocks and misses, lululullemon\'s stock tends to be very volatile.
Volatility intensified after earnings were released: stocks have doubled
In the past eight quarters, seven quarterly earnings have fluctuated.
This time, analysts on Wall Street were frightened by this pessimism.
Quarterly forecasts have their own kneesjerk reactions.
After the release, more than two analysts followed Bloomberg to lower their price target, with some cutting the stock rating from \"buy\" to the equivalent of \"hold \".
\"It\'s easy for lulululemon CEO Laurent Porter Devon to blame the weak first --
Quarterly Outlook for sports and outdoor retailers for a recent string of bankruptcies.
Or overall retail environment. Orthe election. Or the weather.
In the past quarter, many other retail management teams have backed down under such excuses.
But Potdevin has ownership of Lululemon\'s turnovers, using revenue phones to explain how the company plans to respond by rolling out more colorful leggings, tops and sports bras.
Executives have also developed measures to increase online sales by making the company\'s mobile and website more exciting and easy to use.
They highlighted a range of new products for bras, jackets, coats and accessories to be launched later this year.
Of course, there are also some big challenges for Lululemon, including restoring online sales growth (
12% growth in the fourth quarter lags behind the overall market).
New stores also need to be careful--
It is expected to increase 12% square feet this year and add 50 new stores-
Properly carry out international expansion and reverse the trend of insufficient customer traffic.
But any suggestion that lumlumon will suffer the same fate as Sports Authority or other bankrupt countries --
With recent stock sales, the gear store
Not recommended, a bit far-fetched.
Contact the author of this story: Shelly Banjo, sbanjo @ bloomberg, New York.
NetTo contacted the editor in charge of the story: Mark Gongloff from mgongloff1 @ bloomberg.
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