This year, with a stock price drop of over 40%, Lululemon is the worst "S&P constituent stock"

Canadian sports brand Lululemon had a dim start this year, and the departure of a key executive this week has exacerbated Wall Street's concerns about the company's upcoming financial prospects.

On May 21st local time, Lululemon announced in a statement that its product director Sun Choe has resigned. The company stated that it will create a new team composed of leaders from the sales and brand functions. As a result, Lululemon's stock price fell by 9.34% this week. Since the beginning of the year, the company's stock price has dropped by over 40%, making it the worst-performing stock among the S&P 500 index components.

This change marks a significant reversal for Lululemon, which has been performing strongly in the U.S. stock market in recent years. Previously, there was strong demand from consumers for Lululemon's yoga pants and other sportswear. However, the lackluster annual performance outlook released by the company earlier this year, signs of softening sales trends in the first quarter, and intensified market competition have put pressure on its stock price this year.

"Clearly, the narrative around the company has deteriorated, so we no longer believe Lululemon can command such a high valuation as it has in recent years," wrote Wedbush Securities analyst Tom Nikic in a report following the company's organizational changes. He maintained an "outperform" rating on the stock but lowered the 12-month target price from $492 to $397.

It is worth noting that Lululemon will announce its first-quarter financial performance for the fiscal year after the market closes on June 5th. Evercore ISI analyst Michael Binetti stated that investors are expecting the company to make updates in product development and sales strategies.

Binetti mentioned that Choe's departure led him to remove Lululemon from his top picks list. While he maintains an "outperform" rating on Lululemon and is optimistic about the company's international market development, his confidence in its recent business performance has weakened.

For investors, it is crucial to pay attention to Lululemon's outlook for the current quarter, as the company has shown weak sales trends in the U.S. in the first quarter so far. Binetti noted that the data for May has been mixed.

"This is an inconsistent signal," he said, "which is why the upcoming financial report update in a few weeks is so important."

It is important to note that as consumers reduce discretionary spending, especially on categories that involve significant spending during the pandemic, Lululemon is not the only sportswear company facing challenges. For example, Nike's stock price has dropped by 15% this year, and Under Armour's stock price has fallen by 24%