UPDATE: ISI Group Reiterates Lululemon at Strong Buy, $100 PT on Improved Comps

In a report published by ISI Group, analyst Omar Saad reiterated his Strong Buy rating and $100 price target on Lululemon

. ISI Group reported that, “Last night Lululemon announced that it had pulled ~17% of its core black women's pants off the shelves due to a quality issue (not enough ‘coverage' resulting in pants being too sheer) and pre-announced 1Q revenue and comp guidance below current consensus estimates as a result (and the shares traded down 9% in the after market). While we are disappointed by the emergence of yet another quality issue (recall the color bleed problems last summer), it should be temporary in nature. And we were also happy to hear that comps improved to +11% 1Q-to-date before the product pull, an acceleration from the high-single digit 4Q comp preannounced in mid-January. While we would really like to see the company more aggressively invest in and exercise greater control over its supply chain given the importance of quality and consistent fit to the Lulu brand promise, it is still one of the best long-term growth stories in all of consumer discretionary, and we would be buying on the pullback. To reflect the financial impact of these latest quality issues, we are lowering our 1Q EPS estimate to $0.37 from $0.41, our 2013 estimate to $2.05 from $2.20, and our 2014 estimate to $2.60 from $2.70.” Shares of Lululemon closed at $66 on Monday.