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Amid Buyout Whispers, Should Lululemon (LULU) Finally Sell?

Benjamin Rains

Shares of Lululemon Athletica Inc. LULU have plummeted since the beginning of the year as the once-powerful "athleisure wear" maker faces continued uncertainty. Is it finally time for the company to strongly consider a sale?

Today’s Movement

Lululemon’s stock was up 0.81% to $52.11 per share in afternoon trading on Tuesday, and there is one reason the struggling yoga wear company might be up today: another buyout rumor.

But even if this chatter is nothing more than that, should the Canadian athletic wear giant with a market cap of $7.13 billion think about finally diving headfirst into a sale after years of buyout speculation?

Potential Buyout

While shoppers have expressed concern about Lululemon’s product quality and pricing, the biggest reason why Lulu’s stock price has been so volatile since 2013 is that the sector the company operates in has gone through a massive change over this same period.

As retail becomes much harder to survive in, Lululemon has been in buyout talks dating back to 2014 when the company was trading at $38.47 per share.

Lululemon went on a massive run from early 2009 until May 2013. Over that period, the Canadian company saw its stock price rise from $2.86 per share to an all-time high of $77.81 per share. Since then, its stock has gone through ebbs and flows like much of the rest of the retail sector.

The Vancouver-based company, which sells luxury athletic wear items like yoga pants and running shorts for both men and women, cornered a niche market of upscale athletic clothing. Lululemon’s success spawned competitors in the athleisure market, such as The Gap Inc.’s THE Athleta and celebrity-based brands by Kate Hudson and Carrie Underwood.

Lululemon’s fourth quarter earnings report fell short of analyst estimates, and although the company posted some impressive growth metrics, its stock price still plummeted.

And the latest round of acquisition speculation comes after luxury retailer Coach Inc. COH officially announced its $2.4 billion buyout of rival Kate Spade KATE yesterday. Coach, the larger and older brand, bought a rival that it will likely allow to operate on its own. The move is set to help both survive in today’s retail climate.

Could the same be done with Lululemon?

While athletic apparel giants Nike NKE, Adidas AG ADS stock, and Under Armour UAA, all look to grow, buying Lululemon and letting it stand alone as its own brand might be what both parties need.

However, the latest rumors seem to imply that Lululemon is in talks with a private equity firm, so perhaps the company moving back into the private sphere would ease pressure as well.

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