Jim Cramer On Lululemon: Good Business But 'Toxic' Stock

Lululemon Athletica inc. LULU's stock tumbled in late March after the company's fourth-quarter earnings report was overshadowed by a worrisome first-quarter guidance.

CNBC's Jim Cramer said at the time that there are two main issues plaguing Lululemon's business: 1) the core women customer is happy buying cheaper alternatives and 2) retailers have been able to "figure out" how to beat Lululemon at its own game.

Nevertheless, the "Mad Money" host added that Lululemon can be a long-term comeback story but with short term pain.

Partial Credit Deserved

Give Cramer partial credit for calling for a rebound in Lululemon's business as evident in the stock's surge last Friday following an encouraging earnings report.

"The darned thing is so darned volatile that it's very hard to game even when you get the darned story right," Cramer said during last Friday's "Mad Money" segment. "When you nail it, you make big money."

Cramer reaffirmed his bullish stance on Lululemon, but if anything, the volatility in Lululemon's stock is reason enough to avoid the issue. There are few investors that are able to sustain the level of pain Lululemon offers in the near-term for long-term gains, he added.

In fact, Lululemon's stock is so "toxic" the fourth-quarter earnings report hinted that the company's woes aren't company specific, but one of a larger issue plaguing the entire apparel retail space. Fast forward just three months later to Thursday's report, which paints a completely different picture for the stock.

Cramer highlighted several notable aspects of the earnings report, including the introduction of new styles and colors, improvements in prior supply chain problems and the continued global expansion.

Yet despite an encouraging earnings report on Thursday, Lululemon's stock hasn't recovered from its March declines and is still notably short of its 52-week high of $81.81.

"I ain't playing," Cramer added. "Why? Because the risk from being wrong turned out to be much bigger than the reward from being right."

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