Ahead of the Bell: KeyBanc downgrades Lululemon

KeyBanc downgrades yoga seller Lululemon, says wealthy may be reining in their spending

Associated Press

NEW YORK (AP) -- An analyst downgraded Lululemon Athletica Inc., the seller of pricey yoga pants, saying that he's concerned about a slowdown in shopping by wealthy U.S. consumers.

Edward Yruma of KeyBanc Capital Markets cited Tiffany & Co. in his research note on Lululemon, which he cut to "Hold" from "Buy." The luxury jewelry seller on Thursday said that its sales growth has slowed and cut its forecast for the year. Yruma said that Tiffany had noted a pullback by wealthy U.S. shoppers.

The affluent had been spending more since the Great Recession ended in mid-2009, recovering faster than other people. But late last year, many started cutting back as worries about the European economy roiled markets.

Lululemon's popular yoga pants cost $70 or more. The Canadian company also sells clothes for running and other athletic gear in stores throughout the U.S. and Canada. Lower spending by wealthier consumers would hurt the retailer's business.

The popularity of Lululemon's clothing and its growing store count have propelled its stock price. Shares are up 56 percent in 2012. Yruma said shares are pricey compared with some other fast-growing companies

Lululemon's stock closed at $72.67 on Thursday.

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