Lululemon Stock (LULU) Sinks on News of Texas Investigation

Shares of Canadian retailer Lululemon Athletica (LULU) are sliding lower on news that the State of Texas has opened an investigation into whether the company has misled consumers about product safety and health impacts.

Texas Attorney General Ken Paxton announced the civil investigation, saying that it will examine potential misrepresentation regarding the safety, quality, and health effects of Lululemon’s products. The Vancouver, Canada-based company makes active wear and running shoes for consumers, including its popular yoga pants.

The Texas investigation will focus on whether Lululemon’s athletic apparel contains so called “forever chemicals” that health-conscious customers would not expect based on the brand’s marketing, according to the Attorney General’s statement. Forever chemicals have been associated with infertility, cancer, and other health issues.

One More Problem for Lululemon

The Texas Attorney General’s office said it will review Lululemon’s Restricted Substances List, testing protocols, and supply chain practices to determine whether the company’s clothing and footwear comply with its stated safety standards.

“Americans should not have to worry if they are being deceived when trying to make healthy choices for themselves and their families,” said Paxton in the news release. The Texas investigation is the latest in a series of problems for Lululemon Athletica.

The company is grappling with declining sales, a slumping stock price, CEO transition, an activist investor, and a public feud with company founder Chip Wilson, who is demanding changes be made to the board of directors.

Is LULU Stock a Buy?

Lululemon Athletica’s stock has a consensus Hold rating among 20 Wall Street analysts. That rating is based on one Buy and 19 Hold recommendations issued in the last three months. The average LULU price target of $179.53 implies 11.47% upside from current levels.