Is lululemon's (LULU) Bark Getting Bigger Than Its Bite? (NKE) (GPS) (UA)
lululemon athletica (Nasdaq: LULU) shares are slumping today, possibly related to analyst speculation that the one-time niche player will have trouble "stretching" into other markets, segments.
Bloomberg noted late Wednesday that the search for a new CEO isn't lululemon's only issue: the company is grappling with growing pains as it primary North American market is largely saturated and competition from the likes of Nike (NYSE: NKE), Under Armour (NYSE: UA), and Gap (NYSE: GPS) is growing.
One Kantar Retail analyst agreed, saying that double-digit growth isn't likely to continue and goals the company has are very, very big for what could possibly happen within the next three years.
About 35 percent of lululemon analysts now hold a Buy rating on the stock, versus 50 percent in the same period last year. The company is also trading with a P/E that is 42 percent above the S&P Retailing Index.
Overseas, Nike has demonstrated how much pricing can come into play for most consumers. The company recently announced price cuts in order to clear inventory in China and Europe is still largely on the mend.
Both Gap and Under Armour are looking to expand offerings in womens active wear. Gap acquired Petaluma last year for $150 million and, with just 35 North American locations at the end of January, plans call for that number to nearly double to 30 by the end of 2013.
lululemon hasn't been blind to the shift; the company has been adding gold and tennis items to locations nationwide with plans to open its first stand-alone mens boutique by 2016. Given the close association with yoga and running, it might be challenging for the company to garner the attention of different demographics.
With comps slowing to 7 percent (albeit, amid a massive black luon pants recall) and sales per square foot largely unchanged in the most recent quarter, investors to keep the "downward-facing dog" share price in the studio...and out of the stock!
Shares are down 2.4 percent on the session.
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