Lululemon shares took a beating today after a Sterne analyst said the company didn't provide an effective plan for growth. The company's share price was down 2.64 points before trading ended today, but the price has risen 0.06 points in after hours trading. While a falling share price is certainly trouble, this isn't the first time that the athletic wear company has been in hot water this year.
Back in March, Lululemon announced that it was recalling a number of its popular black Luon yoga pants. The company said that the affected pants were affected by a lack of coverage that left the sheerness at a level the company said fell short of its "very high standards." After the recall began, some customers reported that they were asked to wear their yoga pants in front of employees to prove that they were of inferior quality and shareholders even sued the company claiming that it should have properly tested the yoga pants before shipping them to stores. The lawsuit was dismissed earlier this month.
So, why did Lululemon's share price take a hit? It would appear that the company finally has all its ducks in a row after all. As it turns out, the company isn't impressing shareholders and analysts anymore now than it was earlier this month. Sam Poser, an analyst with Sterne Agee & Leach, Inc., says the company "did not provide any updates on its long-short-term financial objectives." He also added that the company "did not address in specific terms plans to reengage with the customer at the store level and reignite new customer acquisition." In the end, Sterne rated the company "underperform."
Other players on Wall Street have been skeptical of the company as well. The Street rated Lululemon's shares as a Hold and said that it could neither justify a positive or negative rating relative to other stocks. It says that the company has shown solid revenue growth, but warns that its stock performance over the last year has been "generally disappointing."
So, what does Poser say the company needs to do to turn things around? It's really quite simple:
“A detailed constructive strategy, beyond the improved product, not just words, is needed to rebuild the aspirational quality of the Lululemon brand,” Poser wrote. “Most of those who do not see the brand as damaged are loyal Lululemon customers, but new customers are needed for the long-term success of both the company and the stock.”
Maybe the company should heed the advice it gave to its fans on Friday:
[h/t: Bloomberg] Image via lululemon/YouTube
Do more with less.
— lululemon athletica (@lululemon) April 18, 2014