Its adjusted profit and revenue beat Wall Street's expectations for the quarter, but the Canadian yoga clothing company lowered its full-year earnings forecast Thursday and said that Chief Financial Officer John Currie plans to retire by fiscal year's end.
The company is also starting up a $450 million share repurchase program.
Lululemon (LULU) shares skidded 15 percent lower in afternoon trading.
Lululemon has been working on improving its business since last spring when it pulled one of its popular yoga pants from stores because they were too sheer, which it blamed on a style change and production issues. Fixing the problem cost the company millions and made investors question quality control.
The earnings report came a day after Lululemon founder Chip Wilson said that he voted against the re-election of outside directors Michael Casey and RoAnn Costin. Wilson, who has a 27 percent stake in the Canadian company, said that he believes board changes are needed to help increase shareholder value.
For the period ended May 4, Lululemon earned $19 million, or 13 cents a share. A year earlier it earned $47.3 million, or 32 cents a share.
The company said that the current quarter had a tax expense of $52.5 million, which included a non-recurring adjustment of $30.9 million for the planned repatriation of foreign earnings that will be used to fund a buyback program.
The tax rate for the quarter, including the one-time adjustment, was 73.4 percent. The normalized rate before the adjustment would have been 30.1 percent.
Stripping out the one-time adjustment, earnings were 34 cents a share. Analysts surveyed by FactSet predicted earnings of 32 cents a share.
Revenue rose 11 percent to $384.6 million from $345.8 million, beating Wall Street's estimate of $381.7 million.
Sales at stores open at least a year edged up 1 percent. This figure is a key indicator of a retailer's health because it excludes results from stores recently opened or closed.
The retailer also revised its revenue forecast to a range of $1.77 billion to $1.8 billion. Previously it anticipated $1.77 billion to $1.82 billion in revenue.
Analysts expect full-year earnings of $1.89 a share on revenue of $1.8 billion.
Shares of Lululemon declined $6.67, or 15.1 percent, to $37.61 in afternoon trading. Its shares have fallen almost 25 percent so far this year through Wednesday's close.
For the second quarter, the chain foresees earnings of 28 cents to 30 cents a share on revenue of $375 million to $380 million. Wall Street is calling for earnings of 36 cents a share on revenue of $387.1 million.
Jim Duffy of Stifel Nicolaus cut Lululemon to "Hold" from "Buy." The analyst said in a client note that the full-year and second-quarter outlooks suggest traffic at the retailer's stores is "on a slippery slope." Duffy said this makes it hard to plan the business and may lead to inventory exceeding demand.
Long term, the analyst said that he still believes in the franchise's value.
Lululemon said Thursday that it will work with an executive search firm to find a replacement for Currie, who had worked at the company since 2007. Currie will assist with the transition process.
The retailer also announced that its board has approved the repurchase of up to $450 million of its common stock to help boost shareholder value. The buyback program is expected to be completed in two years.