Lulu’s Trend Lounge Holdings (NASDAQ:LVLU) slid in premarket buying and selling on Wednesday as Cowen analyst Oliver Chen voiced issues on margin traits and markdowns in coming quarters.
“LVLU has alternatives to drive increased recurring purchases by increasing its product assortment exterior of occasion dressing (greater than ~50% at present),” Chen acknowledged. “Within the close to time period, nonetheless, we see an absence of catalysts as usually 4Q and 1Q should not significant quarters for LVLU, and the extremely promotional setting pressures LVLU’s margins.”
He added that the corporate will lap powerful 12 months over 12 months comparisons in early 2023, some extent the place customers are rising more and more more likely to pull again on purchases. Buyer acquisition value is predicted to extend into the 12 months as nicely.
“We expect customers are more likely to pull again on discretionary spending within the close to
time period, and retailers may have to advertise to drive foot visitors,” Chen advised purchasers. “Additional, we spotlight that LVLU skilled excessive full-price sell-throughs in 4Q21 and 1Q22, which makes the influence of upper promotions extra pronounced.”
He downgraded the inventory from “Outperform” to “Market Carry out” and lowered his value goal to $5.50 from a previous $8. Shares of the California-based retailer fell 1.61% on very mild quantity. The inventory has declined about 80% from its mid-June peak value of $21.29.
Learn extra on the corporate’s just lately reported Q3 earnings end result.