Things are looking up at Lululemon after a tough year.
Last spring, the athletic-attire retailer recalled 17% of its pants for being too sheer. Longtime CEO Christine Day left, and founder Chip Wilson stepped down as chairman after making controversial comments about customers.
Analysts at RBC Capital Markets believe that Lululemon is moving past quality control issues and bad press. The company reports earnings on Thursday.
Here are a few reasons to be optimistic about Lululemon, according to analysts Howard Tubin and Courtney Wilson.
1. The brand is strong. The bank’s survey suggests that shoppers are still willing to pay a premium for Lululemon products. Shoppers also indicated that they planned to purchase lots of Lululemon in the future. This indicates that despite growing competition from brands like Under Armour and Athleta, Lululemon’s brand is still dominant.
2. Room for growth. Lululemon only has 170 stores, and most are in North America. “We believe the runway for growth remains long and the brand remains under-penetrated,” the analysts write. “Given the relatively small store footprint both in the U.S. and outside of North America, we believe store openings will likely continue.”
3. Managers in place. Last year, Lululemon’s CEO and chief product officer both left. But new CEO Laurent Potdevin has been on the job for several months, and the brand has also hired a new chief product officer. Hiring these important managers will undoubtedly have a positive impact on Lululemon, RBC writes.
4. New assortments. Lululemon has exciting new product offerings that will lure customers to stores. The brand has a new “& Go” line of athletic-inspired casual-wear. This line has been well-received because it is both fashionable and practical.
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