Lululemon made a really stupid decision this year that explains why its stock is getting crushed

On April 22, Lululemon (LULU) appointed a new CEO, Heidi O'Neill, with an effective start date of September 8. However, this long delay in her official commencement has further delayed the company's progress. Currently, Lululemon is operating under interim leadership by co-CEOs Meghan Frank and André Maestrini, who are essentially placeholders until O'Neill arrives to make significant changes.

These interim leaders' main objective is to keep the company afloat, manage inventory, and ensure employees continue performing their duties. Unfortunately, this decision to appoint a new CEO has backfired, leading to the company's disastrous earnings report and guidance cut on Friday, causing its stock to plummet by 20% (adding to the 42% drop this year).

O'Neill, a former top Nike executive, is highly experienced, but her delayed arrival has undoubtedly hampered the company's performance. The brand's market share in sportswear continues to dwindle due to product missteps from the team led by former CEO Calvin McDonald, which still persist in the stores. Lululemon's second-quarter results were abysmal, with total comparable sales crashing by 10%, North America comparable store sales dropping by 12%, and the women's category sales falling by 4%. The iconic leggings, which once defined the brand, have also seen a 20% decline in sales.

Furthermore, the company's third-quarter revenue guidance suggests a 10% to 11% year-over-year decline, with North America down by a mid-teens percentage. Consequently, earnings are now expected to be in the range of $9.48 to $9.73 for the year, down from the previously anticipated $10.95 to $11.15. Analysts are expressing their disappointment with the company, stating that this move is yet another in a series of successive missteps.