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TheStreet Open House

Lululemon Pant(ies) in a Bunch: Get Over It and Buy

This is not an operational issue, it is a personnel issue. She is willing to step away and know that the company will remain strong. Lululemon now needs a leader to step into Day's role and execute the plan in front of them.

The growth, international expansion and sales are all still intact. The company even raised its full year estimates, albeit slightly. I get that Day was important to shareholders and that this announcement had some form of shock factor to it but investors should ask themselves one important question: Is Christine Day worth 20% of the share price? If the answer is "no," they should be buying.

Day didn't even need to say what she did for us to know that the company is fine. The pants problem is in the past, the company beat earnings, raised estimates and this apparel giant is going to continue into its next phase of growth.

Although Lululemon's level of revenue growth is much closer -- and is actually higher -- than that of Under Armour (UA), its valuation isn't. At least, in the short-term that is. Lululemon now has a price-to-earnings ratio of 36, whereas Under Armour's is more than 50. This is a classic overreaction and soon investors will see that Lululemon is a steal, especially when compared to its rivals.

At least the Canadian-based company can have a laugh or two about it. This morning when I went to its Web site, a giant red banner on the homepage read, "CEO Wanted. Click Here To Apply."

Lululemon can joke because it knows they're going to be fine and investors should too. Just because Day is calling it a day, doesn't mean we have to. We'll thank her for the discount later.

-- Written by Bret Kenwell in Petoskey, Mich. .

At the time of publication the author is long LULU.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Bret Kenwell currently writes, blogs and also contributes to Rocco Pendola's Weekly Options Newsletter. Focuses on short- to intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.
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