Cramer: Sell a Bounce in ‘This’ Stock

(Click for video linked to a searchable transcript of this Mad Money segment)

Cramer has been a fan of Lululemon for quite some time. However, he's just become less of a fan.

Largely the Mad Money host changed his outlook after CEO Christine Day stunned the Street by resigning from her post.

As far as Cramer is concerned, "The chief reason for owning the stock was Day's amazing leadership."

The Mad Money host always believes that management is a key criteria for any investor to consider when owning a stock, and he thinks Day's resignation is a game changer.

Not only does Cramer believe that Day's vision drove the success at LuLulemon, he thinks she's so good at her job, she was able to turn a potential catastrophe into a huge opportunity.

Guido Mieth | Flickr | Getty Images

Specifically, a few months ago, Lululemon came under the microscope after a type of workout pants it sells were found to be defective. Day took aggressive action and recalled the pants. As a result, the company stood to lose as much as $40 million in profit. Although the Street questioned whether a recall was necessary, customers met the decision with enthusiasm.

"What she said with her recall is that neither she nor Lululemon would put short-term earnings above quality," Cramer said. It demonstrates just how well Day understood her customer.

Cramer believes that was a key reason to hold Lululemon stock; an expensive stock with a 40 multiple.

"Without her stewardship, all that's left is a very expensive stock of a very niche apparel purveyor," Cramer said. That's not a bullish combination.

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Now that's not to say Cramer doesn't understand how popular Lulumemon's fashionable yoga-wear is, he does. And he still sees great growth potential.

Cramer is simply saying he believes management is an important component to consider when owning a stock and in the case of Lululemon, that component has now changed so significantly, that stock doesn't warrant its current price level.

"I am sure the stock can bounce after the current sell-off. But, frankly, I think it's a bounce to sell, In these kinds of situations leadership is everything and this company just lost a truly outstanding leader," said Cramer.

Call Cramer: 1-800-743-CNBC

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