Cramer: Lululemon's CEO Should Not Resign, Sell the Stock

The announcement that Lululemon's CEO, Christine Day, will step down was a bad decision, CNBC's Jim Cramer said, and investors should sell the stock, even after a drop in share price following the news.

"I thought this was staggering," Cramer said. "The timing could not have been worse to bring in a new person to lead … She's gone and I don't know who is going to run Lululemon"

(See where Lululemon shares are trading now)

Lululemon said Day, who has been at the helm for more than five years, will stay on as CEO until a successor is named. The news came a few months after the company had to recall one of its yoga pants for being too sheer.

The board has already formed a search committee, the company said in a statement.

"This was a shocker, I can't find out what's happening," Cramer said on "Squawk on the Street" Tuesday.

(Read More: Lululemon CEO Christine Day to Step Down; Earnings Beat)

He also pointed out that with a lack of other earnings to concentrate on, and investors will focus on the company, overexposing the situation. It was "the wrong day" to make this announcement, he said.

His opinion is in direct contrast with the company's official statement, which said "now is the right time to bring in a CEO who will drive the next phase of Lululemon's development and growth."

Cramer has been supportive of Day, calling her a "great CEO" and "is really considered to be one of the great executives of the era."

(Related: Lululemon Drops on CEO Resignation)

"I don't know what to say when someone really fabulous exits the building," he said of Day. "I was shattered by this one."

When asked whether he would sell the stock at this level, Cramer said yes. "This is not a cheap stock ... I'd rather be in Nike than Lulu, how about that? This was a shocker and the call was a bad call."

— By CNBC's Paul Toscano. Follow him on Twitter and get the latest stories from "Squawk on the Street" @ToscanoPaul