Tuesday, June 11, 2013

Investopedia: As One Problem Fades At lululemon athletica, Another One Emerges

Even the most patient investor in lululemon athletica (Nasdaq:LULU) has to be dreading earnings release dates from this fast-growing athletic apparel company. Not only does this stock experience the normal volatility that goes with high-growth/high-expectation names (“You missed comps by a half-point? Off with your head!”), but the announcement of a major product defect (see-through pants) and now the CEO resignation have added even more turmoil.

Through all of this, lululemon has remained an impressive growth story, but maybe the cracks are starting to appear and competitors are starting to up their games as well. While I'm solidly on board with the idea of picking up growth stocks on pullbacks that don't seem related to material events, the loss of a quality CEO seems pretty material to me. Consequently, I'd be careful about piling into lululemon with the idea that a quick rebound is guaranteed.

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