Lululemon’s stock takes a tumble

THE#BCBIZDAILY
Plus, a controversial coal export terminal gets the green light and how British Columbians plan to spend over the holidays

Troubles on the mat
“Lululemon’s Black Monday,” a headline in the Wall Street Journal, caught the mood among investors and stakeholders. As markets opened this week, the company’s shares tumbled seven per cent, as a note from FBR & Co. analyst Susan Anderson—citing pileup in inventory and heavy discounting—scuttled investors who have concerns as the retailer enters the crucial holiday season.

“We do not expect significant gross-margin recovery in 2016,” writes Anderson:

“While we believe that Lululemon (ticker: LULU ) has a strong women’s customer base, that it has gained traction in men’s, and that kid’s has potential, the elevated inventories, supply-chain issues, mix shift and fixed-cost de-leverage will likely weigh more on gross margins than expected. Our checks have shown significantly higher clearance levels in-store and online over the past few weeks.”

And:

“Recent in-store checks show significantly higher clearance levels year-over-year (almost double the number of clearance racks) and deeper clearance markdowns (43% this year, versus 30% last year).”
 

Over in Quartz, a writer makes the argument that the same trend that made Lululemon is now bringing it down. Lululemon, he argues, rode the crest of athleisure trend, and now that it has blown up, the space is becoming a lot more competitive.

“Nike Inc. and Under Armour Inc. are targeting the women who were Lululemon’s loyal customers, new activewear labels are always popping up, and apparel companies from Gap to H&M have launched their own workout lines, often at lower prices.”

 

Stoking controversey
On Monday, Port Metro Vancouver green-lit a proposal for a new $15-million coal export terminal in Surrey, a contentious project that faces opposition in the community and basement coal prices abroad. Construction is set to start in the winter, and the terminal will be up and running by January 2017, according to its proponent, Fraser Surrey Docks.

The expanded terminal, which will increase exports of coal used for both heating and metal-making coal, has turned into a lightning rod for climate change activists and more local opponents concerned about air quality. Those concerns about air quality led the dock owner to rejig the proposal so that the current means of exporting coal—by barge to a separate terminal on Texada Island—will be replaced by ships with covered storage areas, reducing the impact of coal dust.

‘Tis the season
British Columbians plan to spend less than their Canadian counterparts this holiday season according to a poll commissioned by CIBC. We on the coast plan to spend $557 over the holiday season—budget-conscious Albertans plan to spend $649, Ontarians $759, and Atlantic Canadians $867. In fact, we’re the thriftiest after Quebeckers, who plan to spend $450. The Canadian average was $652, up 26 per cent over a similar poll conducted last year.

Besides the dollars thrown down on gifts, poll respondents plan to spend half of their holiday budget on entertaining family and friends, 32 per cent on dining out, 15 per cent on decorations, 14 per cent on travel and 10 per cent on “the perfect outfits for the holiday season.”