Business

Lululemon stock falls 4.4% after the yoga equipment maker announced the departure of its chief product officer.

By Ciara Linnane

Wedbush believes the move is overblown and points to slowing U.S. sales, but international demand remains strong.

Lululemon Athletica Inc.'s stock was down 4.4% premarket Wednesday, after the company announced the departure of its chief product officer and said it would reorganize its product and brand teams.

Sun Choe, who had held the position for seven years, resigned to pursue another opportunity, the yoga equipment maker said in a statement on Tuesday.

The company (LULU) will now have Jonathan Cheung, Global Creative Director, who will report directly to Managing Director Calvin McDonald and oversee product design and innovation. Cheung has over 30 years of experience in leadership positions within global brands.

Lululemon will also create a new team of leaders from merchandising and brand functions to manage global and regional go-to-market strategies, the company said in a statement.

Nikki Neuburger will become Chief Brand and Product Activation Manager to oversee merchandising, footwear and product operations in addition to her current responsibilities.

Elizabeth Binder, director of merchandising, will report to Neuburger.

Wedbush analyst Tom Nikic said the selloff appears exaggerated and is likely due to Choe's appreciation and respect on Wall Street.

Lululemon has been “noticeably lagging” in Wedbush's coverage this year with the stock down 37%, while the S&P 500 SPX has gained 12%, according to Nikic.

This is due to concerns about competition from new entrants such as Alo and Vuori leading to a slowdown in U.S. growth, the analyst wrote in a note to clients.

Under Choe's reign, Lululemon's revenue grew about 4%.

“While this cannot be entirely attributed to Ms. Choe, we believe she has been instrumental in LULU’s success over the past seven years,” Nikic said. “Clearly, the narrative around the company has deteriorated and, as a result, we no longer believe LULU will achieve the valuation multiples it has achieved in recent years.”

Wedbush lowered its stock price target from $492 to $397, but said the company's strong international sales growth in the fourth quarter should provide protection against slowing U.S. sales, and that reduced Online discounts could indicate that US trends are starting to stabilize.

The international business grew sales 56% in the fourth quarter at constant exchange rates, he wrote, thanks to low-80s growth in mainland China and mid-80s growth elsewhere. of the world.

See: Lululemon stock falls on weak revenue forecast

“We also note that management believes the first quarter slowdown is more due to internal execution (size and color issues), and if that is truly the case, LULU has historically bounced back very quickly from these missteps” , he wrote.

Lululemon is expected to report its first quarter results on June 5 after the market close. The company is expected to report earnings per share of $2.41 on revenue of $2.202 billion, up from $2.28 on revenue of $2.001 billion a year earlier.

Read now: The battle between athleisure and baggier pants is here. That means even more problems for Lululemon, the analyst says.

-Ciara Linnane

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently of Dow Jones Newswires and the Wall Street Journal.

(END) Dow Jones Newswires

05/22/24 0711ET

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