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Key Takeaways
- Lululemon announced CEO Calvin McDonald is departing at the same time as its search for his replacement.
- The process irked Lululemon’s founder Chip Wilson—who, along with analysts, expressed optimism about bringing on fresh leadership.
Lululemon’s once high-flying stock has plummeted this year. Now a new CEO will be brought in to help coach the athleisure brand through its recovery.
Lululemon Athletica (LULU) said Thursday that Calvin McDonald’s roughly eight-year tenure will conclude at the end of January. The transition process is unfolding in a somewhat dramatic manner, with the company announcing a search rather than immediately naming a permanent replacement, and founder Dennis “Chip” Wilson publicly grousing about what he sees as insufficient planning.
“As one of the largest active shareholders of Lululemon, I am deeply concerned about what appears to be a tremendous failure by the Board to competently plan for the future and manage an effective succession process,” Wilson said in a Friday statement.
Wilson, who was listed as owning more than 8% of the company’s stock in an August regulatory filing, said the company’s “premium brand value” has eroded and the board “does not understand its target customers anymore or what will drive shareholder value.” Lululemon didn’t respond to Investopedia’s questions in time for publication.
Why This News Matters
A number of retailers, from Walmart to Target to Nike, were ready to name a successor when their CEO announced a retirement date. The lack of a successor may make some investors think Lululemon’s path forward is less certain.
Wilson has been a critic of the company before, in early 2024 telling Forbes that the company was “trying to become like the Gap, everything to everybody,” and suggesting that “You’ve got to be clear that you don’t want certain customers coming in.” A new CEO could end Wilson’s vocal complaints about the company’s direction, which were “becoming a growing distraction,” William Blair said.
“Management has indicated it is looking for someone with growth and restructuring experience, who likely benefits in taking over following some initial improvement,” the analysts said in a research note Friday.
Lululemon hopes to improve its U.S. performance, where revenue fell 3% year-over-year last quarter, by ramping up new merchandise. The company wants fresh styles to account for 35% of merchandise in spring, and a quicker design process to fuel innovation, CFO Meghan Frank said on a conference call Thursday.
“We’ve let product life cycles run too long within some of our key franchises,” Frank said, according to a transcript made available by AlphaSense, recalling comments the company made earlier this year about a need for “newness” on its shelves.
Frank and Chief Commercial Officer André Maestrini will serve as interim co-CEOs throughout the search process, and Wilson will advise the company through the end of March, Lululemon said.
Lululemon’s stock began climbing after the company announced McDonald’s departure and released better-than-expected results Thursday evening. Shares were recently up 10%, but remain nearly 50% below where they were a year ago.
