Athleisure is the word on everyone’s tongues—and the look on most of our hips. So it’s natural that Lululemon, the mother of the sporty-turned-chic craze, is seen as a bellwether for the category’s overall performance. But should the retailer, which has made some positive strides in the last year, shoulder the responsibility for the entire market?
Fair or not, analysts on both sides are looking to the brand to determine how far the athleisure trend can stretch.
It’s no wonder they’re anxious though. Skinny jeans aside, no trend lasts forever. And with so many brands proffering leggings these days (Groupon leggings, anyone?), a shake out of some sort is probably inevitable. The question is when and who goes first.
Though Lululemon Athletica (LULU) stock is up 14 percent year over year, ahead of Lululemon’s third quarter results two analysts indicated they’re losing confidence in the retailer—and the category—by reducing expectations. Despite the positive overhaul of its pants program, they cite the slew of competitors duking it out at lower price points as one reason.
As reported in Reuters, Mizuho Securities analyst Betty Chen cut her price target for the brand to $60 from $68 because she sees denim making a move. Chen sees ripped and distressed jeans and old-school styles from true athletic brands emerging as winners.
On the other hand, Dan Moskowitz of Investopedia has a different take. He says the eyes don’t lie. Though he acknowledges there’s lots of talk about denim these days, there’s still “a lot of athleisure” when he looks around in public. For him, it’s too soon to count athleisure, or Lululemon out.
For its part, the company reported that in the three months ended Oct. 31, comp store sales and direct to consumer increased 7 percent compared to 9 percent during the same period last year. Net revenue increased by 13 percent to $544.4 million from $479.7 million at the same time in 2015. Posted profits of $68.3 million compared to last year’s $53.2 million. The company expects net revenue to be in the range of $765 million to $785 million in the fourth quarter.