Lululemon shares dive on risks of prolonged overhaul under new CEO

At least 12 brokerages lowered their price targets on Lululemon LULU.O on Friday, with analysts arguing the company still operates a cost structure built for growth despite declining sales, with store square footage up 11% in the second quarter.

Revenue in the Americas, Lululemon's largest market, fell 8% in the quarter compared with a 1% rise a year earlier, while China revenue fell 2% after growing 24% the previous year.

"I think the store expansion will slow down," Morningstar analyst David Swartz said, adding that cost cuts, management changes and a possible operational "realignment" can be expected.

Lululemon needs to win back customers from rivals such as Skims and Alo Yoga with relevant merchandise, Swartz said. O'Neill must also decide the future of categories such as footwear, which have potential but have seemingly failed to catch on, he added.