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Lululemon CEO to step down; shares sink

Lululemon Athletica Inc. shares dropped nearly 14 percent

Lululemon Athletica Inc. shares dropped nearly 14 percent in after-hours trading after the news June 10, 2013, of the company's CEO stepping down. Credit: MCT

When Lululemon Athletica announced this week that chief executive Christine Day was leaving, investors bolted.

Day, 51, had been a Wall Street darling: Sales tripled in the past three years, and shares had climbed more than fivefold since June 27, 2008, the day before she became chief executive of the Canadian yogawear giant.

And while her reputation took a hit this year when the Vancouver-based company was forced to recall pants that became transparent when wearers bent over, her announced departure caught analysts by surprise.

"It's perception that's going to drive the stock, and the perception is going to be that there's really no one that's driving the strategic vision on a day-to-day basis," said Camilo Lyon, an analyst in New York for Canaccord Genuity.

Day, who will stay on until a replacement is found, is leaving at a time of challenges for Lululemon. Nike, Gap and Under Armour, attracted by the premium prices women will pay for quality activewear, all are piling in. To keep growing, Day was moving the brand into running and golf apparel and adding stores in Europe and Asia.

"This was a personal decision of mine," Day said on a conference call after the company reported earnings Monday.

With a blend of fashion and lifestyle marketing -- along with offering free yoga classes, it spotlights "ambassadors" who "embody the Lululemon lifestyle" -- the retailer built a cultlike following since moving into the U.S. market in 2003.

When Day took charge, Lululemon had 87 stores worldwide. Today it has 218. In 2009 the brand started an online store. In the first quarter Lululemon generated 15.6 percent of sales on the Web, up 40 percent from a year earlier.

But trouble hit in March, when the see-through pants debacle prompted Lululemon to recall shipments of black Luon pants, which accounted for about 17 percent of all women's pants sold, and cut its sales forecast for its fiscal first quarter.

The company's shares closed sharply lower Tuesday at $67.85, down $14.43.

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