Lululemon Athletica inc. (NASDAQ:LULU) has managed to increase its share of the women’s athletic apparel market, but will the trend continue? Sterne Agee analysts aren’t so sure, and they say the departure of the company’s chief financial officer just makes their uncertainty about the company’s future even worse than it already was. As a result, they have reduced their estimates for the company.

Lululemon Athletica

Lululemon Athletica’s estimates reduced

In a report dated June 12, 2014, analysts Sam Poser and Ben Shamsian say they’ve reduced their fiscal 2014 year earnings per share estimate from $1.75 to $1.72 per share. They also cut their 2015 fiscal year estimate from $1.97 to $1.92 per share.

In the most recently completed quarter, which was reported on June 12, Lululemon Athletica inc. (NASDAQ:LULU) posted a modest first quarter beat. Earnings were 34 cents per share, compared to expectations of 32 cents and guidance of between 31 cents and 33 cents per share. The company’s total same store sales rose 1%, including a 4% decline in brick and mortar locations and a 25% increase in ecommerce.

Lululemon Athletica inc. (NASDAQ:LULU) guided for between $1.71 and $1.76 per share for the full fiscal year. The company also cut its second quarter earnings guidance to between 28 cents and 30 cents per share and revenue to between $375 million and $380 million. However, the Sterne Agee team sees these numbers as being “optimistic” because they say it doesn’t take into account gross margin headwinds because of higher inventory levels.

Lululemon Athletica’s position improving?

Poser and Shamsian say while Lululemon Athletica inc. (NASDAQ:LULU) has managed to increase its share of the women’s athletic clothing market, the field keeps getting more and more crowded. They also say competitors are “stepping up their game as they smell weakness.”

They say although Lululemon Athletica inc. (NASDAQ:LULU) announced a $450 share buyback plan without any timing framework, it won’t distract investors from the turmoil that’s been going on within the company. The company will fund its share buyback plan from cash it is repatriating from Canada. This means the program is extremely inefficient, as the repatriation creates about a $45 million tax charge.

Turmoil at Lululemon Athletica

They note that Lululemon Athletica inc. (NASDAQ:LULU) Chief Financial Officer John Currie had been with the company since 2007, but he’s leaving by the end of this year. As a result, the apparel company is looking for a replacement. Another key executive who’s leaving is Corporate Communication Vice President Therese Hayes. The Sterne Agee team sees both departures as “a significant blow to a company with a troubled investor and consumer message, complicated by Chip Wilson’s (founder) loud voice.”

No solutions presented

The analysts also say Lululemon Athletica inc. (NASDAQ:LULU) has been talking extensively about transition and ways to fix problems but doesn’t have a “concrete plan” in place. They note that management has been saying that this year is a transition year, although they haven’t said what they are transitioning to. They believe the second quarter of 2015 will be the earliest point at which any meaningful changes can be seen.

They also note that management hasn’t provided any substance to initiatives to drive more traffic, in spite of the estimated $10 million those initiatives will cost. The analysts worry about consumer engagement and competition problems and say management has not provided adequate solutions for either problem.