Why Lululemon (LULU) Received a Price Cut From Credit Suisse

NEW YORK (TheStreet) -- Lululemon received a target price cut on Friday as it battles its public image woes. Credit Suisse lowered its target price on signs of eroding customer loyalty. The investment firm downwardly revised its price to $46 from $53 and reiterated it as "neutral."

By early afternoon, Lululemon shares had tumbled 5.4% to $50.06.

In a note on Friday, analyst Christian Buss said, "Communication missteps continue to drive core customers to disassociate with the brand. As a result, we believe that erosion of productivity at mature stores (49% of total) will delay a comp rebound, margins may suffer as the new management team seeks to reengage customers, and earnings power falls short of consensus expectations."

Buss noted increasingly negative public commentary on Lululemon across the internet and social media as indicative of the shift. Research shows 34% of internet comments posted are negative from 22% a year earlier.

"Given our concerns regarding longer-term brand momentum, we are increasingly convinced that a comp rebound will likely be delayed, eCommerce growth will likely slow, and margins will likely take a hit as the company has to reinvest to regain the trust of its customers," said Buss.

Over fiscal 2014 ending January, Buss anticipates comparable-store sales growth of 3%, revenue of $1.813 billion and 6% earnings growth to $2.01 a share.

Analysts surveyed by Thomson Reuters anticipate Lululemon's per-share earnings of $2.20 and revenue of $1.84 billion.

Also See: 3 Stocks Dragging the Consumer Goods Sector Downward

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