Lululemon is experiencing growing pains, said John Morris at BMO Capital Markets. Morris said the athletic apparel company has been expanding at a rate of 20-percent footage annually. And even though it’s a hot retailer in active apparel and has great management, a company that expands beyond 100 stores often gets more difficult to manage.
As of February, LULU opened or acquired 210 stores in North America and Australia. It launched 37 stores in 2012. And during the next few years, it plans to expand its global presence. Morris said it’s difficult to maintain a loyal customer base with 250 and 400 stores because it means moving to secondary markets. This expansion can begin to squeeze customer margins and the quality of growth may not be as good, the analyst said.
How long can Lululemon sustain its loyal customers? So far they’ve stood by the company, overlooked a recall of see-through pants in March and a dye problem involving bleeding bright colors. (On a related note, according to Yahoo searches, 75 percent of searches for these infamous yoga pants are coming from men.) But Morris said the worst is behind LULU. Lululemon reports first quarter earnings after the bell Monday.