Lululemon Stock Is a Buy After CEO Exit

• Lululemon has been struggling successful the Americas nether its existent CEO, Calvin McDonald.

• New initiatives were rolled retired successful October, but the problems had persisted since aboriginal 2024.

• McDonald is stepping down, paving the mode for a caller CEO and a caller communicative for the stock.

• 10 stocks we similar amended than Lululemon Athletica Inc. ›

Apparel retailer Lululemon (NASDAQ: LULU) has been struggling, and the communicative remained unchanged successful the 3rd quarter. While full gross roseate by 7% year-over-year and comparable income accrued by 1%, the planetary conception did astir of the dense lifting. In the Americas, comparable income plunged 5%, starring to a 2% gross decline. Earnings per stock dropped by 10% arsenic costs roseate faster than revenue.

Along with the quarterly report, Lululemon announced that CEO Calvin McDonald planned to measurement down connected Jan. 31. McDonald has been starring the institution since 2018, and gross has much than tripled during his tenure. But McDonald was dilatory to admit that Lululemon's merchandise assortment had go stale, and corrective steps announced earlier this twelvemonth apt weren't assertive enough.

A caller CEO consenting to truly shingle things up and refresh the company's merchandise improvement strategy is conscionable what Lululemon needs.

Lululemon has been suffering anemic income maturation successful the Americas since aboriginal 2024. In the archetypal 4th of that year, comparable income successful the Americas were flat. Since then, results person been inconsistent and mostly negative. For each of 2024, comparable income dipped 1% successful the Americas.

This has been a known occupation for astir 2 years, but it took until October of this twelvemonth for McDonald to displacement gears. The program is to bring caller benignant penetration up to 35% adjacent outpouring by ramping up the instauration of caller products. Lululemon is besides moving to trim the clip it takes to bring a caller mainline merchandise to market. Currently, it takes 18 to 24 months, an eternity successful an manufacture wherever user preferences tin displacement rapidly. The institution is targeting a 12- to 14-month improvement cycle.

These are invited developments, but they came astir a twelvemonth excessively late. Had the institution recognized the occupation early, it could person perchance saved investors from an abysmal stretch. Since the opening of 2024, Lululemon banal has shed astir 60% of its value.

McDonald volition enactment connected arsenic a elder advisor done March of adjacent year, and the institution has already started a hunt process for the adjacent CEO. Between Jan. 31 and the assignment of a caller imperishable CEO, CFO Meghan Frank and CCO André Maestrini volition service arsenic interim co-CEOs.