Why Lululemon Shares Turned Sour

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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 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.

The article Why Lululemon Shares Turned Sour originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends lululemon athletica. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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