Squeezing Value Out Of Brand Lululemon After A Few Sour Years

Lululemon — with its reputation worn down by quality-control problems, some questionable decisions and the propensity of its co-founder to strike the foot-in-mouth posture — appears to be in recovery mode.

In advance of its quarterly earnings report before the market opens this Thursday, Wedbush analysts Morry Brown and Taryn Kuida “see multiple paths to higher share price,” reportsBarron’s Ben Levisohn, even against the risk of increased competition from the likes of Nike, Under Armour, Gap’s Athleta brand and others.

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The athletic category — helped by “long-term shifts in consumer lifestyles” — is in healthy shape, the analysts maintain, and they “like Lululemon’s positioning” even if the fitness trend should peak. “We believe Lululemon’s customer engagement is a competitive advantage and difficult to replicate, particularly for brands that are not vertically integrated,” they write.

In reporting that Lululemon’s shares have risen 19% since it issued an optimistic report in September — if still down 34% since the recall of some pants for being too sheer in March 2013 — the Wall Street Journal’s Chelsey Dulaney writes that the company’s “best shot at regaining its spot atop the fitness retailing world could be a $102 pair of tights in a gold-sequins print, or maybe a black-and-white jacket in a dizzying floral print.”

Continues Dulaney: “Adding more fashion and designs to the mix has been an important strategy for Tara Poseley, who took over as Lululemon’s chief product officer a little more than a year ago. The company also has freed up more time for its designers to work on creating new looks."

Meanwhile, former CEO Christine Day “talked openly for the first time about why she left the apparel retailer” at the Fortune Most Powerful Women Next Gen conference last Wednesday, Beth Kowitt reports on the magazine’s website. “She said at the end of her time at the company, her vision didn’t match founder Chip Wilson’s,” Kowitt writes.

“You have to take control of your own life and say, ‘This isn’t working for me,’” Day said. “She added that Wilson loved disruption and clash: ‘That wasn’t who I was and that wasn’t going to work for me.’”

As for the firestorm over the see-though yoga pants, she said that it “never felt like the big failure of her career, noting that you have to be willing to ‘manage through bad times as well as good times,’” Kowitt reports.

TheStreet’s Jim Cramer, who is not letting a little personal negativity on the part of one of his investors distract him, sees an opportunity for investors even if he’s not entirely enamored of the current leadership.

“He says he thinks this quarter will be ‘better’ but still ‘horrible’ because he does not think the company is executing well,” reports TheStreet’s Andrew Meola, adding it is “a great brand that is under-managed.”

Cramer believes that it is prime candidate for a takeover, according to Bezinga’s Craig Jones, telling his “Mad Money” viewers that “he would buy half of a position before the earnings, and the other half after the earnings.’

Meanwhile, Lululemon hopes to do for men what it did for women by not only bringing them “more stylish” gym wear than the “distressed t-shirt and faded gym shorts” they are wont to don for a workout but also by “designing leisure wear that is sweat pants comfortable, happy-hour ready,” G. Clay Whittaker reports in Men’s Journal.

It has created “a three-phase collection with categories called Sweat, Post-Sweat, and No Sweat,” Whittaker continues. “‘Sweat’ focuses on mobility and function for active men, with fitted hoodies, half-zips, henleys, and technical shorts, ‘Post Sweat’ sticks to cotton shirts, pullovers, sweatpants that can be thrown on after a workout and worn right up until your evening out, and ‘No Sweat’ includes blazers, button-downs, polos, and chinos that actually comply with company dress code.”

And in Time last month, Denver Nicks offered a “sneak preview” of a new 1,600-square-foot Lululemon store in Manhattan’s SoHo neighborhood that is “geared exclusively to men” that was to open Black Friday.

Its ideal guest is “in his 30s, confident, accomplished, goal-oriented, self-assured (your proverbial ‘husband material,’ basically),” writes Nicks.

“We call him the ‘athletic opportunist’,” Lululemon  Men’s SVP Felix del Toro tells Nicks. “He’s a guy who does a variety of things, whether he’s on vacation and he’s going to pick up surfing or in the mountains going skiing for the weekend. He could be a team sport player, he could be a triathlete, he could be a marathon runner.”

Or, getting back to reality, a husband.

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