Lululemon Athletica Inc. has a patent drawback.
The yogawear maker lacks the mental property wanted to mount a protection towards Amazon.com Inc. encroaching on its market, in response to Canaccord Genuity Corp. analyst Camilo Lyon.
That’s of specific concern since Amazon started utilizing a prime Lululemon provider, Eclat Textile Co., to make a brand new line of private-label athletic put on. The Taiwanese vendor helped Lululemon develop its signature Luon material, in addition to newer supplies, Lyon stated. Though Lululemon holds dozens of patents, they’re principally targeted on design features — quite than making materials.
“Sharing manufacturers is not ideal, particularly with no patent protection,” he stated in a report on Monday.
Amazon has already pushed into different style classes with its private-label manufacturers, and now it’s making a foray into sportswear — a transfer reported by Bloomberg News final week. That’s raised concern that Lululemon will see its market share and revenue margins get squeezed by the e-commerce behemoth.
Shares of Lululemon fell virtually four % within the two days after the information was reported on Friday.
Lyon recommends promoting Lululemon shares, which he expects to drop to $43. They closed on Tuesday at $58.93.
“We believe Amazon will use its ever-potent price weapon to create awareness for its emerging athletic brand, as it is wont to do when entering a new category,” Lyon stated. “Assuming comparable quality of product and attractive pricing, we believe Lululemon’s fashion-driven customer is likely to be the first to explore a lower-cost alternative from Amazon.”