On Friday, Citi reaffirmed its Buy rating and $500.00 price target for NASDAQ:LULU, the stock of Lululemon Athletica (NASDAQ:LULU) Inc. The endorsement follows a series of investor meetings with Lululemon's top management in New York City, where discussions revealed both external and internal factors affecting the company's recent performance.
Management, including CEO Calvin McDonald and CFO Meghan Frank, acknowledged that macroeconomic uncertainty has contributed to a slowdown in U.S. store traffic. However, they also identified specific execution missteps within the company, such as a lack of color variety in women's leggings and insufficient inventory in popular sizes. These issues, they believe, have led to missed opportunities in meeting customer demand.
The company's leadership pointed to the second quarter as a time for potential improvement in the U.S. market. They expect a shift in the product assortment from leggings to more seasonally appropriate items like shorts and skirts, which they feel more confident about in terms of sizing and color options.
A fully updated and appropriate legging color and size assortment is anticipated to be available in the second half of the year, considering the lead times involved.
Despite the presence of competitors like Alo and Vuori, Lululemon's management does not perceive a significant impact on store performance when new stores from these brands open in proximity to Lululemon locations. They noted that 22% of Lululemon stores have an Alo or Vuori store nearby, and while there is some competition in the men's and lounge categories, Lululemon continues to experience strong trends in these areas.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.