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.

Lululemon Athletica inc. (LULU)’s Transparency Issues Just Got Worse

Lululemon Athletica inc. (NASDAQ:LULU) reported first-quarter earnings after the bell on Monday. However, the company’s impressive results were overshadowed by a surprising announcement from CEO Christine Day that she’s leaving. Shares plummeted on the news. So what’s next for the yoga apparel company?

Lululemon Athletica inc. (NASDAQ:LULU)

Things just got personal
The former Starbucks Corporation (NASDAQ:SBUX) executive said her decision to step down after more than five years at Lululemon Athletica inc. (NASDAQ:LULU) was a “personal” one. Unfortunately, investors took the news personally as well, sending the stock lower by nearly 15% ahead of the bell on Tuesday. Perhaps most frustrating is the fact that this news caught investors off guard during what was otherwise an upbeat earnings announcement.

Of course, this isn’t Lululemon Athletica inc. (NASDAQ:LULU)’s first transparency setback. Just three months ago, the retailer was forced to pull more than 17% of its signature luon pants from store shelves because the bottoms were sheer to the point of being see-through. The company also ran into quality-control issues a year earlier when colors on certain garments would bleed when washed.

I mention this because it would be easy to assume that Day’s exit was somehow related to the recent bout of recalls. However, Lululemon Athletica inc. (NASDAQ:LULU)’s chief product officer, Sheree Waterson, already fell on that sword.

Whatever the truth may be, the reality is that finding a replacement for Christine Day won’t be easy. At $1.37 billion, Lululemon Athletica inc. (NASDAQ:LULU)’s annual revenue is now five times what it was before she took the helm. Not to mention, during her tenure Lululemon Athletica inc. (NASDAQ:LULU) stock has grown in value from about $30 to where the stock trades today at around $82 a share.

Here to-Day, gone tomorrow
Lululemon’s board has enlisted an executive search committee to hunt for Day’s replacement. While Day said she would remain with the company until a successor is found, those are big shoes to fill and finding a new CEO isn’t something that happens overnight.

The sooner the board is able to name a new CEO, the better — particularly as the company prepares to expand into new markets overseas. In addition to new retail locations in London, Berlin, and Singapore, Lululemon plans to open at least three stores in China by the end of 2013. For now, Lululemon’s international growth plans are on track. However, new leadership at the company puts a lot of uncertainty going forward.

Lululemon has the potential to grow its sales by 10 times if it can penetrate its other markets like it has in Canada, but the competitive landscape is starting to increase.

The article Lululemon’s Transparency Issues Just Got Worse originally appeared on

Fool contributor Tamara Rutter owns shares of lululemon athletica. The Motley Fool recommends Lululemon.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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!