Lululemon slides after Credit Suisse downgrade

Fri Jan 4, 2013 11:09am EST
 
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* Downgrade to "neutral" from "outperform"

* Target price cut to $80, from $86

* Note highlights risks of competition

Jan 4 (Reuters) - Rising competition and heavy discounting at Lululemon Athletica Inc prompted an influential analyst to cut his rating on the yoga wear retailer's stock on Friday, sending its shares down more than 5 percent.

Credit Suisse analyst Christian Buss downgraded Lululemon to "neutral" from "outperform," also citing slowing sales growth at established stores in Canada, the company's home market.

"We see long-term risks to its competitive positioning and pricing power as active wear gains shelf space across retail channels," he wrote, singling out premium department stores as a particular threat.

Buss cut his target price to $80 from $86.

Lululemon, closely watched by investors because of its meteoric rise, now faces a growing number of competitors offering similar products, often at lower prices.

In Canada, Lululemon's home market, the retailer is facing the challenge of generating more sales in older stores that are already very productive, Buss wrote.   Continued...