Lulu’s Style Lounge Holdings downgraded at Cowen on margin issues (NASDAQ:LVLU)

Lulu’s Style Lounge Holdings (NASDAQ:LVLU) slid in premarket buying and selling on Wednesday as Cowen analyst Oliver Chen voiced issues on margin tendencies and markdowns in coming quarters.

“LVLU has alternatives to drive larger recurring purchases by increasing its product assortment exterior of occasion dressing (greater than ~50% presently),” Chen acknowledged. “Within the close to time period, nevertheless, we see a scarcity of catalysts as sometimes 4Q and 1Q will not be significant quarters for LVLU, and the extremely promotional atmosphere pressures LVLU’s margins.”

He added that the corporate will lap powerful yr over yr comparisons in early 2023, some extent the place customers are rising more and more prone to pull again on purchases. Buyer acquisition price is predicted to extend into the yr as nicely.

“We predict customers are prone to pull again on discretionary spending within the close to

time period, and retailers might have to advertise to drive foot site visitors,” Chen advised shoppers. “Additional, we spotlight that LVLU skilled excessive full-price sell-throughs in 4Q21 and 1Q22, which makes the impression of upper promotions extra pronounced.”

He downgraded the inventory from “Outperform” to “Market Carry out” and decreased his worth 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 worth of $21.29.

Learn extra on the corporate’s lately reported Q3 earnings outcome.