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Lululemon shares slide on analyst downgrade; earnings on horizon

Yogawear seller's shares are up more than 40 per cent in 2023
Lululemon's flagship store in Vancouver is at the corner of Robson and Burrard streets | Glen Korstrom

Vancouver-based yogawear seller Lululemon Athletica Inc. (Nasdaq:LULU) saw its shares slide 1.25 per cent today (Dec. 4) following a downgrade by Wells Fargo analyst Ike Boruchow.

The move comes a few days before Dec. 7, when Lululemon is scheduled to release its quarterly earnings report.

Part of Boruchow's rationale for downgrading Lululemon, to equal weight from overweight, is that its shares have performed so strongly so far this year, particularly in relation to sportswear competitors such as Nike Inc. (NYSE:NKE), which he called a "more compellling" proposition.

Even after today's share-price decline, Lululemon's shares are up 42.48 per cent, bettering the Nasdaq's more than 36.57-per-cent advance since the start of the year. Nike's shares, in contrast, are down 3.03 per cent so far in 2023.

Stock markets were down today, with the Nasdaq index down 0.84. Nike's  shares were up 1.47 per cent.

Lululemon's earnings reports this year have been stellar. 

In March, the report impressed analysts, and the company's share price popped 10 per cent. Lululemon then beat analysts' expectations for revenue and profit in June, when it released its first quarter earnings report. 

When Lululemon in August released its second-quarter earnings report for the period ended July 30, it raised its full-year guidance in addition to beating analysts' expectations for revenue and profit.

CEO Calvin McDonald was ebullient.

"Our Q2 results highlight the ongoing strength of the business amid a dynamic operating environment," McDonald said at the time. 

Most analysts still rate Lululemon as Overweight, according to the data analytics firm FactSet.

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