UBS analyst sees Lululemon stock stagnating

UBS analyst sees Lululemon stock stagnating, worries about delayed shipments in 2nd half

Associated Press

NEW YORK (AP) -- Lululemon Athletica Inc.'s stock will stagnate over the next 12 months, an analyst said, noting concerns about delayed shipments and hurt sales. The analyst, Roxanne Meyer of UBS, trimmed her earnings expectations for Lululemon for next year.

Meyer cut her price target on the Canadian yoga wear maker's stock to $69 from $72.

Still, the shares rose $2.83, or 2.7 percent, to $70.20 Monday afternoon. They had dropped about 10 percent this year.

Lululemon had to recall its Luon line of yoga pants in March over complaints that they were too sheer, which led to lost sales. The company is also in transition, searching for a new leader. CEO Christine Day plans to leave when the company finds a replacement.

Meyer said in her client note Monday that the retailer has tightened control over its products' fabric quality, fit and sewing. But those efforts are leading to shipment delays, which Meyer believes will hurt Lululemon's sales until January.

Lululemon does not comment on analyst reports. But Day said during a conference call on Thursday that the product shipment delays led to the company not having as much new product in its stores at the end of the second quarter as it would have liked. CFO John Currie said that there were delays in fall product reaching stores, so Lululemon left a lot of its summer products on floors through August and ended up selling more of it than it would have otherwise.

The company on Thursday shaved its profit prediction for the year. Meyer's estimate for this year, which ends in January, is unchanged and in line with the company's guidance.

But she now expects Lululemon to earn $2.45 per share in the year ending in January 2015, down from her previous estimate of $2.52 per share. Analysts polled by FactSet forecast profit of $2.51 per share for that fiscal year.

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