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Lululemon hires Kmart executive as product chief

Pedestrians walk past a Lululemon Athletica store in New York, March 19, 2013. REUTERS/Lucas Jackson

By Solarina Ho and Susan Taylor

TORONTO (Reuters) - Lululemon Athletica Inc (LULU), the fast-growing retailer of premium workout clothes, has hired an executive from U.S. discount chain Kmart to lead its global merchandising and design team, but offered no news on its hunt for a chief executive.

In the wake of a costly and embarrassing recall of overly sheer yoga pants this spring, Lululemon has hired a handful of new senior managers, but its CEO search, begun in June, continues.

The Vancouver-based company announced on Wednesday the appointment of Tara Poseley, a yoga fan and a 25-year industry veteran who was most recently president of Sears Holdings Corp's (SHLD) Kmart apparel division, as its new chief product officer (CPO). Poseley also spent 15 years at Gap Inc (GPS.N).

Lululemon's volatile stock dropped more than 3.5 percent after the news on concerns about the appointment and on investor disappointment that the company has not yet found a replacement for CEO Christine Day.

"I thought they were interviewing them both simultaneously and the new CEO would have to sign off on the new CPO. That didn't happen," said Sterne Agee analyst Sam Poser.

"Hopefully, the new CEO thinks as highly of her as the existing management. That would be the scary part."

The appointment of an executive from a discount chain does not suggest that Lululemon cannot attract top-tier talent, several analysts said.

While cultural fit is viewed as critical at Lululemon, Poser pointed out that Day's background, at coffee chain Starbucks Corp (SBUX), was also considered unconventional when she was hired.

Alex Arifuzzaman, a partner at Toronto retail consultancy InterStratics Consultants Inc, said Lululemon may need executives with mass merchandise experience as it seeks expansion in the United States and elsewhere.

"They're not going to convert into a Kmart, but some of the techniques used to appeal to a broader market may be relevant, may be skills that are brought to the table here," he said.

Lululemon carved out a niche for high-end yoga wear and built up a passionate clientele that helped the company regularly achieve quarterly sales growth of more than 20 percent.

It suffered its biggest stumble in March, when it was forced to pull overly sheer black yoga pants off store shelves, a recall that is likely to dent 2013 sales by $57 million to $67 million.

Cowen and Co analyst Faye Landes said in a client note that she views Poseley's appointment as positive after a "highly reliable industry source, who is a tough grader," said Poseley was "very good".

After Lululemon's former chief product officer left in April the company split the product officer position into two jobs. It recently hired industry veteran Jennifer Battersby as senior vice president of sourcing, the other half of the position.

Steve Berube was also brought on this summer, for the newly created position of senior vice president of global distribution and logistics.

Shares of Lululemon, which reports quarterly results on November 21, shed $2.58 to close at $70.67 on the Nasdaq on Wednesday.

(Reporting by Solarina Ho and Susan Taylor; Editing by Janet Guttsman, Leslie Adler and Peter Galloway)