By Michael Elkins
{{0|Piper Sandler} } reiterated an Overweight rating and $385.00 price target on Lululemon Athletica (NASDAQ:LULU), following a promotional tracker update. Although promotions will weigh on 4Q margins, Piper Sandler analysts believe that the company is clearing through promotional product as Piper Sandler's promotional tracker points to sale SKUs declining sequentially from a peak in mid-January.
Total online sale SKUs peaked in mid-January and have since declined ~17% through the end of the month. Notably, women's size availability for sale SKUs has declined significantly, which the analysts think points to sell through of promotional product.
{{0|Piper Sandler} } has also begun to see the advertising messaging shift from promoting 'We Made Too Much' to 'What's New'. Our checks point to strong traffic in LULU stores, and it seems that the sale racks in-store have begun to dwindle post the Christmas return period.
The analysts wrote in a note, "We continue to see strong brand affinity for LULU including strong y/y Google Trends and store checks. Despite clear tailwinds during COVID for athleisure, we think consumers continue to demand technical performance and comfort in their day to day apparel, so while mix may shift, we think LULU will continue to capitalize on these secular trends. We also believe LULU has been strategic at responding to changing trends (i.e. the return of flared yoga pants) and a reopening in China should support near-term growth. We will continue to monitor the behavioral trends of new customers and the competitive environment."
They also noted that while investor sentiment has been mixed, they remain confident in mid-teens EPS growth in 2023.
Shares of LULU are down 0.14% in mid-day trading on Wednesday.