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Morris Starts Lululemon Athletica (LULU) at MARKET PERFORM

February 8, 2010

John D. Morris, senior analyst covering the Apparel Retail sector, has today launched coverage of Lululemon Athletica (LULU) with a MARKET PERFORM rating.

From Morris' note: "In our view, lululemon is a company with a strong brand and solid growth story addressing an underserved market. Management is making inroads for expansion via strategic investments in supply chain systems, additional store personnel, and a growing e-commerce platform. Additionally, our proprietary focus group research indicates that LULU is a rising brand that dominates its niche. However, while we think LULU should be a solid performer over the long term, we believe the stock's current valuation adequately reflects its positive near-term attributes. Given the valuation, our MARKET PERFORM rating takes into account our view that incremental SG&A spend on store labor, while necessary, likely limits the potential for cost leverage upside in FY2010, and out-of-stocks on core categories suggest some replenishment kinks, based on our checks. Accordingly, we view the stock as fairly valued at current levels."

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