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Lululemon Stock Pops as Founder Chip Wilson Stirs the Pot

Stocks in this article: LULU GS

NEW YORK (TheStreet) -- Lululemon's (LULU - Get Report) stock is popping on Monday morning after the Wall Street Journal reported founder Denis "Chip" Wilson was reaching out to Goldman Sachs (GS - Get Report) for help in regaining the company.

At midday the stock was up 3.7% at $41.71.

Wilson has a long relationship with Goldman from the days the banker took Lululemon public in 2007. For now, the Goldman rating is a neutral and the company has not issued any public statement.

Lululemon's stock that has lost over a third of its value in the past 12 months.

"It's been a horrific year for the company," said David Nelson, Chief Strategist at Belpointe Asset Management.  "Just about everything that could go wrong has. Sales are deteriorating and the company has suffered a blow regarding quality." Anecdotally, Nelson even observed that business at the Lululemon in his town used to be brisk on the weekends, but this past weekend it was empty.

Lululemon Rated a Hold.

Wilson hasn't endeared himself to his customer base. Women were offended by his comments that the quality issue was due to overweight women trying to wear the clothes. Equally offensive, Wilson said he named the company with "L's" because he was amused at hearing Asians trying to pronounce it. In an era of growing customer demand for social responsibility among clothing lines, he has advocated child labor and once said that smoking and birth control pills lead to high divorce rates. 

Nelson believes the stock is just too expensive saying, "It isn't cheap trading at 22x this year's consensus. " Nelson also noted that last week a number of analysts threw in the towel and downgraded the stock with estimates coming down as well. "One potential suitor could be VF Corp. (VFC) , because they already have a presence in athletic wear," said Nelson.


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