Why Lululemon Shares Turned Sour

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of lululemon athletica (NASDAQ: LULU  ) plummeted 17% today, after the yoga-gear retailer announced that CEO Christine Day is stepping down.

So what: Lululemon posted first-quarter results that managed to top Wall Street, but Day's surprise move raises another cloud of uncertainty over the company's future. While Day called it a "personal decision," the recent costly recall of super-sheer pants, coupled with other management departures of late, suggests that the announcement might be a tipping point for the company.

Now what: Lululemon has formed a search committee and enacted its CEO succession plan. "Now is the right time to bring in a CEO who will drive the next phase of lululemon's development and growth," Day said in a statement. "I will continue to actively lead the organization while the board searches for a new CEO, and will work to ensure a smooth transition."

When you couple all the uncertainty surrounding the stock with its still-lofty 35-plus P/E, however, I'd wait for an even bigger pullback before buying into that optimism.  

Interested in more info on Lululemon? Add it to your watchlist.


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