Still, the news spooked investors. The retailer's shares fell 17.5% on Tuesday to $67.85. Sam Poser, equity analyst at Sterne Agee, downgraded lululemon to 'neutral' from 'buy' and cut his 12-month price target to $75 from $90.
The stock fell an additional 6% on Wednesday to $63.78.
While it would behoove lululemon to consider internal and external candidates, observers say lululemon's new chief executive is likely to come from left field. Day herself was a 20-year veteran at Starbucks (SBUX) before joining the company in January 2008.
"You could compare this a little bit to what [Estee Lauder (EL)] did," says retail consultant Michael Appel, referring to 2008, when the cosmetics company hired Procter & Gamble (PG) veteran Fabrizio Freda to succeed William Lauder, then CEO and grandson to the company's founder.Estee Lauder hired "somebody that had consumer packaging experience as well as strong international experience because they were looking ahead to where they wanted to move the company," Appel says. "He's done a fantastic job there." Freda was hired as President and COO of Estee Lauder, with the intention of becoming CEO within 24 months. On July 1, 2009, the day that Freda assumed the CEO position, Estee Lauder's stock closed at $16.15. On Wednesday it closed at $67.75. Betty Chen, retail analyst at Wedbush Securities, expects the process to take somewhere between six and nine months to find a successor. But, she adds, it will be "critical to maintain the culture of the company," which is more entrepreneurial and collaborative and reflective of the yoga and fitness mindset of the product's consumers. Chen has a neutral rating on the stock. While the exact reasons behind Day's departure are unknown - one theory is that the extensive travel needed to build lululemon's international presence did not appeal to her -- Chen said it would be disappointing if Day left as a result of the Luon debacle. "It's important to keep in mind during her five to six years that she's been able to lead [lululemon] through tremendous growth, expand their product offerings and set the foundation to seed those international businesses," Chen said.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV