Lululemon Athletica’s stock saw a significant rise on Friday following CEO Calvin McDonald’s announcement of his resignation, attributed to declining sales in the U.S. and a potential proxy fight indicated by the company’s founder.
McDonald, who has been with the company for seven years, will leave his position on January 31 but will continue as an advisor until March. This decision comes in light of two consecutive quarters showing drops in North American sales, which he mentioned during an earnings call.
In discussions with the board, which is now looking for his replacement, he stated, “We agreed that the timing is appropriate for change.”
Following the leadership news, shares of the Vancouver-based company experienced a boost in after-hours trading, climbing about 10 percent to $208 by Friday afternoon.
Meanwhile, Chip Wilson, the founder and former CEO, is pushing for new board members, expressing frustration with the current board’s management. “The board has failed to hold management accountable for delivering product innovation,” he remarked.
Lululemon, widely recognized for its $100 yoga leggings, has begun to see a downturn this year, particularly after launching styles that quickly sold out—an unexpected turn for a brand that was traditionally seen as pricey rather than discount-driven.
In the most recent quarter ending November 2, the company’s total sales grew 7% to $2.6 billion, supported by increases in markets like China, although North American sales decreased by 2%.
“We realize our current product mix, especially in North America, doesn’t align with our long-term vision,” McDonald noted during a conference call.
Megan Frank, the interim co-CEO, acknowledged that some major product lines have overstayed their welcome, failing to engage high-value customers as effectively as before.
Some analysts have pointed fingers at McDonald. Jefferies analyst Randall Connick commented that under his leadership, Lululemon has seemingly lost direction and is now viewed as “clearly a declining business” due to inconsistent design choices that stray from core categories.
The circumstances surrounding McDonald’s departure coincide with Wilson’s preparations for a proxy fight and investor meetings. Reports suggest that Wilson, who has a contentious history with the company, views the current situation as a significant failure of the board to adequately plan for succession and management.
Wilson, having previously made controversial remarks about issues surrounding the brand, believes the lack of effective oversight has hurt both the brand and shareholder value. He insisted on the necessity of appointing an independent director to spearhead the search for McDonald’s successor.
The Post has reached out to Lululemon for a response.
