Lululemon Shares Dive As CEO Exits Over Pants Issue

Lululemon Shares Dive As CEO Exits Over Pants Issue
By WestportWiki (Own work) [CC BY-SA 3.0], via Wikimedia Commons

Shares of yoga-apparel retailer Lululemon Athletica inc. (NASDAQ:LULU) plunged after CEO Christine Day quit. Some of the biggest fans of Lululemon Athletica inc. (NASDAQ:LULU) have been demanding the CEO’s resignation since the yoga gear maker’s most popular pants styles tanked in the fashion market because they were too sheer.

Lululemon Shares Dive As CEO Exits Over Pants Issue

Lululemon Forms a Special Search Committee

Lululemon Athletica inc. (NASDAQ:LULU)’s board has formed a special search committee to find a replacement for Christine Day. Ms. Day has been the  company’s public face since she became CEO in June 2008. Day was the strength behind Lululemon’s rapid growth over the past five years. The company’s sales have more than quadrupled during her tenure. Day also forayed into golf and running apparel and expanded the business to Europe and Asia. But the biggest quality control problem in Lululemon Athletica Inc’s history also occurred under her management.

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Black Loun Pants Recall

In March, Lululemon announced a recall of its black Loun pants from the market. The company offered exchanges or full refunds to customers who purchased the garment after March 1. The pants had a production defect which made them too transparent whenever the wearer bent over. Chief product officer Sheree Waterson has already been hired over the same blunder. The black Loun pants accounted for about 17 percent of the company’s total pants sales. After the recall, Lululemon Athletica inc. (NASDAQ:LULU) lowered its first quarter revenue forecasts.

About a dozen analysts have lowered their price targets for the stock. RBC Capital Markets analyst Howard Tubin said in a research report that Day’s pending exit is related to the sheer pants fiasco. The departure of Ms. Day and chief product officer has created a new uncertainty around Lululemon Athletica inc. (NASDAQ:LULU).

Lululemon Athletica inc. (NASDAQ:LULU) also announced first quarter results yesterday. The company’s earnings rose 1.4 percent to $47.3 million or 32 cents on revenues of $345.8 million. Analysts were expecting 30 cents in earnings.

Lululemon Athletica inc. (NASDAQ:LULU) shares plunged 16.71 percent to $68.54 at 12:23 PM EDT.

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