This story has been updated from 7:56 a.m. EST to include additional information, stock price update.
NEW YORK (TheStreet) -- Shares of Lululemon Athletica (LULU - Get Report) were tumbling 15% to $37.61 on Thursday, a level not seen since March 2011, as the yoga and athletic apparel retailer struggles to regain the luster it once had prior to its Luon pant recall last March.
Investors were fleeing from the stock after the Vancouver-based company lowered its outlook for the second quarter and fiscal year on Thursday. Lululemon reported first-quarter net income of $18.98 million, or earnings of 13 cents a share. Earnings included a non-recurring adjustment of $30.9 million, or 21 cents a share, from the repatriation of foreign earnings the company is planning as a way to fund a share repurchase program of $450 million that it also announced on Thursday. Excluding the adjustment, earnings were 34 cents a share compared to $47.3 million, or 32 cents a share in the year-earlier quarter.
Lululemon's net revenue rose 11% to $384.6 million compared to a year earlier, surpassing estimates of $381 million. Comparable sales rose 1% in the quarter, fueled by a 25% increase in direct-to-consumer sales. Comparable store sales actually declined 4% in the quarter. Separately, Lululemon's executive management continues to be in transition. CFO John Currie said in a separate announcement that he would retire from the company at the end of its fiscal year.
Lululemon is still suffering from the after-effects of last year's Luon pant recall, its most popular item, over customer complaints the merchandise was too sheer. The issue was blamed on problems within the growing retailer's supply chain. As well, a lack of both new product mix and having enough of its core product in stores following the recall was hurting sales.
Lululemon said that second-quarter revenue is expected to be in the range of $375 million to $380 million, below the average analysts' expectation of $387 million, and based on comps that "decrease in the low- to mid-single-digits." The company said earnings per share will range between 28 cents and 30 cents a share compared to consensus estimates of 36 cents a share.
Lululemon's new CEO Laurent Potdevin came on board in January to replace Christine Day, who resigned last year following the recall. Potdevin reiterated in his earnings statement that 2014 is "very much a transitional year for lululemon, and we are on track with the improvements we have set out to achieve. We are focused on building a scalable foundation to further elevate our North American business and pursue the brand's incredible international potential." "We're in this game to win it and maintain our premium positioning in the market," Potdevin said on the call.
Still analysts are concerned that the re-invigoration of Lululemon may take longer than a year.
"While FQ1 came in slightly better than expectations, management is looking for a weak FQ2. And despite the good news that the company authorized its first share repo, this is outweighed by the announcement that the CFO is retiring, which adds to the significant management turnover the company has experienced. The company continues to term 2014 an 'investment year' and we believe the period of investment may last longer than a year," Wells Fargo Securities analyst Paul Lejuez writes in a research note prior to the call.
"The retirement of CFO John Currie and the reduction of both 2Q and 2H guidance, including lower than expected sales and margins (particularly vs. easier 2H compares) lowers visibility of medium-term recovery further and raises more questions about product direction/mix and organizational structure to support growth," UBS analyst Roxanne Meyer writes in a research note. -- Written by Laurie Kulikowski in New York. Follow @LKulikowski >>Read More: Why Uber Users with American Express Cards Will Be Getting Rides Will Consumers Buy Apple's iWatch? Binge Watching This Weekend? Netflix Debuts 'Orange Is The New Black' Season 2
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