TORONTO – Lululemon Athletica Inc. (TSX:LLL) stock has dropped sharply from the recent highs that they’d reached before the trendy clothing company announced that its high-profile chief executive has decided to leave.
Lululemon shares plunged about 16 per cent to $70.99 on the Toronto Stock Exchange shortly after the open and to US$68.68 on Nasdaq, which handles most of the stock’s trading volume.
They closed at US$82.28 on the U.S. market Monday and at C$84.03 in Toronto on Monday before the announcement.
The Vancouver-based fashion company shocked the investment community after markets closed on Monday by announcing CEO Christine Day has decided to leave the company.
Day, who will remain as CEO while the board searches for a replacement, provided little explanation for her departure.
“The plans have been laid for the next five years and a vision for the next 10,” Day said in a conference call with analysts.
“I feel that the timing is now right to bring in the next CEO candidate who will drive that 10-year vision. The board has formed a search committee and is executing its CEO succession plan.”
Day said she notified the Lululemon board of her leaving on Friday and a search committee was put in place over the weekend.
The transition comes as the retailer, which reports in U.S. dollars, posted a first-quarter profit of $47.3 million or 32 cents per share.
The results came in above analyst expectations of 29 cents per share, according to a poll of analysts by Thomson Reuters, but marked only a slight increase in profits from a year ago when it earned $47 million, also 32 cents per share.
Revenue strengthened 21 per cent to US$345.8 million from US$285.7 million.
The company also boosted its full-year outlook, with expectations of earnings per share of $1.96 to $2.01, an increase from $1.95 to $1.99. Revenue is targeted to be in the range of $1.645 billion to $1.665 billion, an increase from $1.615 billion to $1.640 billion.
Despite the improved results, Lululemon is still struggling to overcome the recall earlier this year that saw the company pull about 17 per cent of its black Luon yoga pants from store shelves for being too sheer.
Lululemon blamed the problem on a style change and production problems and hired a new team to oversee the making of the pants. Around the same time, chief product officer Sheree Waterson departed the company though specific reasons for Waterson’s departure were not disclosed.
Lululemon will delist from the Toronto Stock Exchange on June 24 due to “minimal trading volume of its shares.” Lululemon is also listed on the Nasdaq market.