Lululemon Athletica (LULU) Stock Dives, Analysts Bearish on Supply Chain Issues
NEW YORK (TheStreet) -- Shares of Lululemon Athletica (LULU) - Get Report are taking a hit, down 4.57% to $50.10 in pre-market trading on Monday, after FBR Capital downgraded the yoga apparel maker to "underperform" from "market perform" earlier this morning.
The firm also slashed its price target to $42 from $55.
"While we believe that LULU has a strong women's customer base, that it has gained traction in men's, and that kid's has potential, the elevated inventories, supply chain issues, mix shift, and fixed-cost de-leverage will likely weigh more on GM than expected," analysts said.
Overall, the firm sees robust sales at the expense of margins.
Based in Canada, Lululemon Athletica designs, manufactures, and distributes athletic apparel and accessories for women, men, and female youth.
Separately, 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 notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- LULU's revenue growth has slightly outpaced the industry average of 15.3%. Since the same quarter one year prior, revenues rose by 15.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the 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 3.74, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for LULULEMON ATHLETICA INC is rather high; currently it is at 50.49%. Regardless of LULU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 10.52% trails the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Textiles, Apparel & Luxury Goods industry average, but is greater than that of the S&P 500. The net income has decreased by 2.2% when compared to the same quarter one year ago, dropping from $48.75 million to $47.67 million.
- Net operating cash flow has significantly decreased to $11.22 million or 78.83% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: LULU