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TheStreet Open House

Why Lululemon Athletica (LULU) Stock Is Falling Today

NEW YORK (TheStreet) -- Shares of Lululemon Athletica Inc. (LULU) are down -6.69% to $48.25 today after Sterne Agee rated the company "underperform." 

Lululemon, which makes work out apparel, is looking to regain lost customers after a yoga-pants recall.

Sterne Agee analyst Sam Poser believes the company didn't offer a clear strategy for how it will improve sales at its latest presentation: "The company did not provide any updates on its long-short-term financial objectives," he said. 

"Management did not address in specific terms plans to reengage with the customer at the store level and reignite new customer acquisition," he added. 

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TheStreet Ratings team rates LULULEMON ATHLETICA INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate LULULEMON ATHLETICA INC (LULU) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 15.4%. Since the same quarter one year prior, revenues slightly increased by 7.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • LULU has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 6.26, which clearly demonstrates the ability to cover short-term cash needs.
  • The net income growth from the same quarter one year ago has exceeded that of the Textiles, Apparel & Luxury Goods industry average, but is less than that of the S&P 500. The net income increased by 0.3% when compared to the same quarter one year prior, going from $109.38 million to $109.69 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, LULULEMON ATHLETICA INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • LULU has underperformed the S&P 500 Index, declining 24.74% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • You can view the full analysis from the report here: LULU Ratings Report

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