Analyst: Lululemon sales to rise once issues fixed

Analyst expects Lululemon sales to pick up once supply chain issues are resolved

Associated Press

NEW YORK (AP) -- An analyst anticipates that once Lululemon Athletica Inc. works through its supply chain issues its sales will likely start to pick up again.

Camilo Lyon of Canaccord Genuity said in a client note that the Canadian yoga wear maker is in a spot similar to Under Armour Inc. a year ago, with a great brand, strong demand and disruptive supply chain issues while dealing with increased competition and management turnover.

But similar to Under Armour, once these issues are resolved, Lyon foresees Lululemon's sales and stock rising.

Lululemon had to recall its Luon line of yoga pants in March over complaints that they were too sheer, which led to lost sales.

Earlier this month, Lululemon reported a drop in second-quarter net income, issued a weak outlook for the current quarter and cut its predictions for the full year.

The company is also in transition, searching for a new leader. CEO Christine Day plans to leave when the company finds a replacement.

Lyon believes that Lululemon will likely name a new CEO by year's end, which would remove an overhang from the stock.

The analyst kept a "Buy" rating and $85 price target.

The company's stock gained $2.22, or 3.2 percent, to $72.44 in morning trading on Monday. Over the past year, shares have traded between $59.60 and $82.50.

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