Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Is This the End of Lululemon Athletica inc. (LULU) as We Know It?

Page 1 of 2

Occasionally, The Economist will post high-level positions in the back of its pages for CEOs, finance ministers, or the like — anyone interested in running a massive yogawear company might consider picking up the next issue. Yesterday, after the markets closed, Lululemon Athletica inc. (NASDAQ:LULU) announced that Christine Day would be stepping down from the CEO role after a five-and-a-half-year run. Today, the stock dropped 16% in midday trading.

Lululemon Athletica inc. (NASDAQ:LULU)

The journey, according to Day
The stock’s fall trimmed back a huge amount of the gain that Lululemon Athletica inc. (NASDAQ:LULU) has seen over the last 12 months, and the news puts up a huge warning sign for the future of the company. Day spent the first part of her career at Starbucks Corporation (NASDAQ:SBUX), moving to Lululemon in 2008. Since then, the company has grown from a $275 million in annual revenue  minnow into a $1.4 billion leviathan.

Along with Day’s resignation, Lululemon Athletica inc. (NASDAQ:LULU) also announced analyst-beating estimates yesterday, in a scene that’s become familiar to anyone watching the company’s growth. The fact that the stock still fell highlights the value that Day was seen as adding to the company. In her statement, Day said that the company was ready for new leadership as “[plans] have been laid for the next five years and a vision set for the next 10.” That confidence in the ability of the Lululemon machine to continue beyond her reign may be misplaced.

The cost of leadership
While Day may have the hearts of investors, she has recently been a lightning rod for complaints from Lululemon Athletica inc. (NASDAQ:LULU) fans. Since the sheer-pants scandal earlier in the year, customers have called on Day to resign, citing her failure to live up to the brand ideals of Lululemon while expanding the company at all costs.

That allegation certainly has some backing. The product issues of earlier in the year did have a meaningful impact on sales. The company had originally forecast a comparable-sales increase of 11%  but only managed an increase of 7% . The product issues may well have stemmed from the company’s — and Day’s — single-minded focus on expansion. When Day joined the company, Lululemon Athletica inc. (NASDAQ:LULU) operated 81 stores — today it runs 218.

What comes next
With Day’s resignation, Lululemon is in an interesting position. The company could probably find an internal candidate fairly easily, but since Day’s appointment in 2008, the competitive landscape has changed dramatically. Now, Lululemon Athletica inc. (NASDAQ:LULU) is facing competition from The Gap Inc. (NYSE:GPS)‘s Athleta brand, as well as from Under Armour Inc (NYSE:UA) and other traditional sporting goods companies.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!