CEO "Resignation" Hardly Helps Lululemon Athletica Trouble: Founder to Blame

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Lululemon Athletica (NASDAQ: LULU) will replace its CEO Christine Day as soon as possible, probably because of a debacle that involved the shipping of pants which were too "see-through" to sell, at least to real ladies. One odd point about the transition is that the Lululemon Athletica board did not bother to find a replacement before the announcement. Day will be a lame duck, which hardly serves shareholders well. The blame for much of the trouble belongs Dennis Wilson, who owns 29.2% of the company's shares.

The other odd aspect of Day's demise is that Lululemon Athletica posted a relatively strong quarter. The stock price fell after the report was issued, but the drop was because of Day's departure. That leaves a second concern about why the change is necessary at all, and again, why Wilson would be so fickle when the company is doing relatively well.

The numbers from the most recent period:

For the first quarter ended May 5, 2013:

And its forecast:

For the second quarter of fiscal 2013, we expect net revenue to be in the range of $340 million to $345 million based on a comparable-store sales percentage increase of 5% to 7% on a constant-dollar basis. Diluted earnings per share are expected to be in the range of $0.33 to $0.35 for the quarter. This assumes 146.0 million diluted weighted-average shares outstanding and a 30.0% tax rate.

For the full fiscal 2013, we now expect net revenue to be in the range of $1,645 million to $1,665 million and diluted earnings per share are expected to be in the range of $1.96 to $2.01 for the full year. This assumes 146.2 million diluted weighted-average shares outstanding and a tax rate of 30.0%.

Most retailers would be thrilled with those same-store sales figures, so why aren't they good enough for Day to keep her job? The Lululemon Athletica board would rather have investors sweat out a transition. Or, better to say, Wilson, who virtually controls the board, is the problem.


Filed under: 24/7 Wall St. Wire, Earnings, Management Change Tagged: featured, LULU