Updated Aug 7 at 11:20am ET.
Follow Lululemon to never miss an important update.
The US economy unexpectedly lost 23,000 jobs in July, falling far short of the 80,000 gains analysts had expected. Hiring for the previous two months was also revised lower, suggesting the labor market is cooling faster than many thought.
For a premium retailer like Lululemon, this is a signal to watch closely. The company sells high-end apparel that depends on people having plenty of extra cash to spend. If fewer people are working or if job security feels shaky, shoppers often pull back on luxury-lifestyle purchases first. Since the company is already dealing with slower growth in North America, a weaker job market could make that recovery more difficult.
Source: Bloomberg Markets and Finance
Lululemon recently entered a new agreement to take on debt or financial obligations, according to a recent regulatory filing. These types of agreements are common for large retailers to ensure they have enough cash on hand to fund day-to-day operations or invest in new projects.
While taking on debt adds a new obligation to the balance sheet, it is a routine part of managing a global business. For a company like Lululemon, which generates significant cash from its high-end apparel sales, this move likely provides extra flexibility as it continues to expand into international markets like China.
Source: 8-K filing
Truist Securities downgraded the stock to a sell rating, signaling they expect it to perform worse than the broader market. Along with the downgrade, the firm set a price target of 94 dollars, which is about 24 percent below where the stock currently sits.
This move suggests growing concern about the company's ability to maintain its high growth rates as the North American market matures. While international sales are still rising, analysts are increasingly worried that domestic cooling will weigh on the stock price in the near term.
The company joined a 30 million dollar funding round for Syntetica, a French startup working on new ways to recycle nylon. Nylon is a core material for high-end athletic gear because it is durable and stretchy, but it is notoriously difficult to process for reuse once a garment is finished. This is a small financial move, but it matters for the brand's long-term goals. Finding a way to recycle its primary material could eventually help lower waste and protect its premium image as shoppers care more about how their clothes are made.
Morgan Stanley set a price target of 93 dollars for the stock. This is a cautious call, placing the expected value significantly lower than the current price of roughly 124 dollars.
Analysts are likely looking at the combination of a leadership transition and a slowdown in the core yoga wear business in the U.S. and Canada. For the stock to prove this target wrong, the company will need to show that its expansion into China and the men's category can pick up the slack.
Source: Morgan Stanley
Analysts recently issued a wave of cautious updates and price target cuts throughout June. Most experts are split, with 29 of 71 rating the stock a buy, while the average target price is roughly equal to today's share price.
Management has a perfect record of clearing its own hurdles, beating expectations for eight straight quarters. This suggests they set conservative targets that they are very confident they can hit.
| Expectation | |
|---|---|
| EPS | $1.83 |
| Revenue | $2.46B |
