Shares of Lululemon Athletica Inc. were heavily traded on Tuesday — surpassing its three-month average volume — on speculation that it could become a takeover target for VF Corp.

This story first appeared in the May 14, 2014 issue of WWD. Subscribe Today.

A report from International Strategy & Investment analyst Omar Saad, who upgraded VF Corp. to a “buy” from “neutral” and raised the target price of its shares to $75 from $65, suggested that Lululemon could be a potential takeover target for VF. Saad also cited Puma — currently owned by luxury group Kering — and Lands’ End, which was recently spun off from Sears Holdings, as potential candidates as well.

It was shares of Lululemon that saw heavy trading volume as 3.4 million shares changed hands, compared with the average trading volume of nearly 3.3 million shares. Lululemon’s stock closed at $45.38 in over-the-counter trading, but at one point in midmorning trading they were up by as much as 4.5 percent to $46.77. Although shares of Lululemon so far this year have reached a high of $59.60 on Jan. 10, that’s still below their 52-week high of $82.50 on June 10 in intraday trading. The company for most of 2013 was plagued by issues in connection with its black Luon pants, which had to be recalled because they were deemed too sheer.

Last year also saw the resignation of chief executive officer Christine Day, the departure of chief product officer Sheree Waterson in April as part of a reorganization, and the arrival of Michael Casey as the new non-executive chairman. Casey took over the chairmanship from founder Chip Wilson, whose comments about the Luon pant issue, among other statements, were a public relations problem for the company.

In a conference call to Wall Street analysts in March in which the company posted fourth-quarter earnings that beat the consensus earnings per share estimate by 3 cents, new ceo Laurent Potdevin, who began in January, said 2014 is an “investment year,” and noted that the company’s international expansion includes new stores in Asia and in Europe.

VF Corp. chairman Eric Wiseman said to WWD in February when the company posted fourth-quarter results that the group is interested in expanding its outdoor and active sportswear business to the midtier market and that it could turn to an acquisition to make that happen.

“We ask ourselves if there are other product categories we could take to the midtier,” he said. “There’s nothing to announce at this point, but we would absolutely acquire a brand that could fill in a white space. A great brand to acquire that could take outdoor into a channel we’re not in? That’s something that would interest us.”

A spokeswoman for VF did not return a call for comment Tuesday.

While VF has a small presence in women’s athletic performance through its 2007 acquisition of Lucy Activewear Inc. for $110 million, which also includes yoga apparel, the business is not exceptionally huge, with just 62 stores across 17 states.

Activewear is a category that is seeing more activity on the fashion front, with yoga apparel still a fast-growing market. On April 29, Columbia Sportswear said it will acquire Prana Living for $190 million.

Citigroup recently held a call with Shaz Kahng, who previously led Lucy while at VF. In the call, she said while Lululemon remains differentiated, the category is getting crowded from increased competition from brands such as Gap’s Athleta concept, as well as Target’s Mossimo brand, Macy’s Ideology and J.C. Penney’s Xersion line.

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