Lulu’s Fashion Outlet Holdings (NASDAQ:LVLU) was between the steepest decliners in the market on Friday soon after a downgrade from Piper Sandler.
Shares of the Chico, California-dependent on the web retailer fell over 30% at the intraday low, adding to major declines because June. In fact, shares peaked at $21.29 in early June, only about a month and a half prior to touching Friday’s lower of $6.78.
The outsized go in shares follows a downgrade posted by former bull Piper Sandler in advance of the day’s market open up. When the agency remained largely optimistic on the company, citing positives this kind of as consumer loyalty and a powerful management team, the problem of a consumer shelling out slowdown determined a shift in sentiment on the title.
“The shopper is currently being squeezed by improved gas and meals costs, which is resulting in pullback in expending on other types,” the research stated. “Although we consider LVLU is positioned very well inside our WOT framework, we think growth deceleration could take place specified the unfavorable shopper backdrop.”
The notice went on to clarify that a fall in demand from customers could make an inventory difficulty that would then cycle as a result of to margin pressures and make an unhappy cycle for the retailer. Outside of these manner and execution issues, opposition was cited as a critical problem.
“Digitally native peers together with Shein, Princess Polly, Revolve (RVLV), and PrettyLittleThing outperform Lulus on Google Trends and Acquired Media Value regardless of Lulus having a greater customer rely than both equally Revolve and Princess Polly,” the investigate pointed out. “Shein and Princess Polly also considerably outperformed Lulus in our Spring 2022 Having Inventory with Teens Survey. If these retailers continue on to obtain share, we believe it could limit Lulus’ progress as the on the web female Gen Z/Millennial retail space results in being far more aggressive.”
Taken altogether, the group of analysts suggested shifting to the sidelines. The team assigned a $14 price target to the stock alongside the downgrade to “Neutral”. Browse extra of the team’s over-all outlook on retail.