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Lululemon Drops After FBR Lowers Rating, Citing Discounting

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Lululemon Athletica Inc. tumbled 8.9 percent after FBR & Co. downgraded the stock, saying the yogawear brand is facing a pileup in inventory and heavier discounting.

FBR analyst Susan Anderson lowered her recommendation to “underperform,” the equivalent of sell, from a market-perform rating. Elevated inventory is expected to put pressure on profit margins through 2016, she said in a report on Monday. Lululemon is relying more heavily on price cuts to get products out the door, said Anderson, who reduced her target on the stock to $42 from $55.