It's something that every corporation faces sooner or later.
What do you do when one of your top people walks out the door?
Last month, Tesla (TSLA) lost several executives as the electric vehicle maker contends with layoffs, a sinking stock price, and slumping sales.
Related: Single Best Trade: Wall Street veteran picks Palantir stock
April also saw the departure of longtime ESPN executive Norby Williamson.
It seems that many C-suite types are hitting the bricks, according to the executive outplacement firm Challenger, Gray & Christmas. The firm said 622 CEOs announced their departures in the first quarter of the year, the highest quarterly total on record.
"C-Level leaders have had an incredibly challenging few years and are transitioning out of their roles, whether for new opportunities or to get fresh starts elsewhere,” Andrew Challenger, the firm's senior vice president, said in a statement.
A 2022 survey by Deloitte found that the majority of C-suite executives said they weren’t able to take time off and disconnect, citing too much work, a desire to show that they were dedicated to their jobs, and concerns that no one would be able to cover for them while they’re away.
One out of four executives said they don’t disconnect because their workload would be unmanageable when they return, and they were afraid they would miss out on important messages or emails.
Lululemon exec pursing 'another opportunity'
Lululemon Athletica (LULU) is now contending with the loss of a top executive.
On May 21, the athletic apparel maker announced that Chief Product Officer Sun Choe will leave the Vancouver, Canada-based company later this month "to pursue another opportunity."
Related: Analysts reset Lowe's stock price targets ahead of earnings
She will not be replaced, and her responsibilities for product design will be moved over to Jonathan Cheung, the company’s global creative director, the company said.
Choe joined Lululemon in 2016 and was reportedly instrumental in the company’s expansion into footwear.
Investors reacted badly to the announcement, and shares were down nearly 6% at the last check.
Lululemon is scheduled to report first-quarter earnings on June 5.
In March, the company beat Wall Street's fourth-quarter expectations but offered disappointing guidance, which caused its shares to tumble.
"As you've heard from others in our industry, there has been a shift in the US consumer behavior of late, and we're navigating what has been a slower start to the year in this market," CEO Calvin McDonald told analysts during the company's earnings call.
While business outside the U.S. has remained strong, McDonald said, "Consistent with what we've seen from others in the market, the consumer environment in the United States has been somewhat challenging."
"We have robust plans in place to further strengthen our position," he said.
Several financial investors issued reports on news of Choe's upcoming departure.
Wedbush analyst Tom Nikic said that Lululemon has been a notable laggard in his coverage this year due largely to concerns that upstart competitors such as Alo and Vuori are slowing U.S. growth.
Analyst: 'Company narrative has worsened'
The analyst, who has an outperform rating on the company, cut his price target to $397 per share from $492
Nikic said he understands why the company's stock fell, "given how well-liked and well-respected Ms. Choe was by the Street."
More Retail Stocks:
- Walmart sales news reveals growing problem for McDonald's
- Costco has a new online store for members only
- Analysts revise Walmart stock price targets after earnings
He said that Lululemon's revenue grew by about 20% compounded annually during her tenure.
"While this can't be attributed entirely to Ms. Choe, we do believe that she played an instrumental part in LULU's success over the past 7+ years," Nikic said. "Clearly, the narrative around the company has worsened, and as a result, we no longer think LULU will command the valuation multiples it has achieved in recent years."
Still, the analyst said that "the selloff in shares is overdone, as hyper-growth internationally can mitigate slower growth at home, while reduced discounting online could be a sign that U.S. trends are starting to stabilize."
After Lululemon announced multiple adjustments to its product team and Choe's departure, Jefferies analyst Randal Konik said he believes this release could signal future top-line growth issues, although the announcement didn't include a revision to guidance.
The firm's recent store visits have highlighted several issues with the company's assortment and it continues to expect shares to underperform as the firm believes "business performance has peaked and competition is rising."
"It's clear that the company is running into product problems and it's clear that the company is running into competition issues," Konik, who maintained an underperform rating and a $240 price target, told CNBC.
UBS analyst Jay Sole slashed the firm's price target on Lululemon to $385 from $475, keeping a neutral rating on the shares.
Sole said that he thinks risk to Wall Street's earnings per share estimates and sentiment is slightly to the downside.
He added that questions about whether the slowdown in North American sales growth is temporary or signals that the business is maturing with the slow growth likely to continue for the foreseeable future.
The firm's channel checks suggest that U.S. sales trends have been lackluster from the second quarter to date.
Related: Veteran fund manager picks favorite stocks for 2024
