US: Beleaguered Lululemon rolls out '&Go' line
Lululemon quietly rolled out its '&Go' line earlier this week
Beleaguered Canadian yoga wear brand Lululemon Athletica may be hoping the roll-out of its latest apparel line will work to turn its fortunes around and provide a meaningful change of heart for investors.
Lululemon quietly rolled out '&Go', a collection of fast fashion branded clothing, earlier this week. The line includes items such as sundresses, trousers, and tank tops. While no official announcement has been made by the company on the launch, the line will be available in Lululemon's 250-plus stores and is featuring online.
In a tweet on Monday (17 March), the brand stated: "You're busy living. We get it. Introducing &Go. Dropping tomorrow."
Research analyst Chris Katje believes the launch has the potential to set Lululemon apart and get people back in stores shopping again. But, he adds: "The real risk and downside here is the price, with dresses costing around US$198 and shirts ranging around $58. However, the current customers at Lululemon seem okay with shelling out up to $100 for a pair of yoga pants, so I don't see price being a huge issue. The new brand could provide a meaningful change of heart for investors."
Shares of Lululemon were down 20% in 2013 and sit off another 16% in 2014, Katje noted. Shares are now trading at around $49, which is near the bottom of the company's 52 week range ($44.32 to $82.50). "It's hard to believe that shares now trade for almost half of what they traded for in the last year," he added.
The launch of the &Go line comes as Lululemon continues to feel pressure from other companies launching yoga apparel.
A report by the Cowen Group this morning showed that when asked what their first choice preference in activewear was, only 14 women and three men chose Lululemon out of a survey of 2,500 people. The brand is facing increasing competition from brands such as Gap's Athleta, which has lower price points.
In January, Lululemon lowered its fourth-quarter earnings and sales guidance on the back of declining traffic and revenue trends. Months earlier, the company had faced fresh complaints about the quality of its products, eight months after the brand was forced to pull a line of black Luon trousers from its stores after the fabric was found to be see-through.
Nonetheless, Katje said of this week's launch: "I see shares of Lululemon being one of the turnarounds for 2014. I think shares will regain some momentum as the launch of &Go is picked up by news outlets. A positive launch and positive same stores sales growth in the first quarter could send shares to the $60 level. I am bullish on shares of Lululemon going forward."
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