Lululemon Drops Second Bombshell Of Year With CEO’s Plan To Step Down

Christine Day plans to leave the expensive yoga-wear maker after more than 5 years as its chief executive officer. The move follows a major recall of yoga pants for being too sheer. posted on

$LULU CEO Christine Day presided over +400% gain in stock during tenure. Investors voting with the stock...down as much as 8%

Shares of high-end yoga-wear brand Lululemon went into a downward spiral Monday after CEO Christine Day announced that she planned to step down once a replacement is found.

The news marks the second unexpected earnings report bombshell in a row for Lululemon, following fiscal fourth quarter results announced in March that centered around the major recall of its black Luon pants for being too transparent.

Day, an ex-Starbucks executive, is leaving after more than 5 years with the company, during which she helped grow its sales to more than $1 billion annually. She is credited with pioneering the retailer’s strategy of limiting the amount of hot items stocked in stores so demand exceeds supply, minimizing discounts and avoiding use of software to track customer purchases.

“This was a personal decision of mine,” Day said on a conference call with analysts today. “It’s never a perfect time to leave a company that you love. I’ve had a great run at Lululemon over the past 5 1/2 years, and I’m really proud of what the team and I have accomplished.”

Now is the right time for a new CEO to carry out plans for the next five and 10 years, she said. Day said she will lead the company during the search for her replacement and will work to ensure a smooth transition. She said she informed Lululemon’s board of her decision to step down on Friday and a search committee was formed over the weekend.

In March, Lululemon said it had to recall 17 percent of its pants for being too sheer, and Day made headlines after saying in an earnings call that the pants slipped through quality inspections because “the only way you can actually test for the issue is to put the pants on and bend over.”

The issue was viewed as a threat to Lululemon, which is able to sell $98 yoga pants and $64 tank tops — and even enforce a two-week return policy — because of its carefully developed reputation for exclusive, high-quality products.

But despite the recall, and calls for Day’s ouster from some Lululemon shoppers, first quarter sales rose 21 percent to $345.8 million, according to Monday’s report. Prior to this, Luluemon’s sales increased by about 30 percent or more for 14 straight quarters.

$LULU #4: I think this like a college basketball coach who gets to Final 4 with 5 senior starters & knows the next few years much tougher.

While investors and analysts were dismayed, brand enthusiasts on the Lululemon Addict blog, some of whom blame Day for quality missteps in the past year such as color bleeding, expressed excitement. One fan of the retailer also took to Lululemon’s Facebook page to bid Day “an early adieu.”

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