Lululemon will start the year focused on a turnaround strategy and finding its next leader while its newest major investor is poised to have a significant say in the direction of the brand.
Activist investor Elliott Management has taken a reported $1 billion stake in the brand, according to a source familiar with the matter who spoke with Reuters in a report on Wednesday. The infusion in Lululemon comes at a time when the brand is trying to rebound amidst a period where its shares have fallen nearly 50 percent in the past year.
Last week, CEO Calvin McDonald announced during the company’s third quarter earnings call that he would step down by January 31. Lululemon has struggled to find its footing against younger rivals like Vuori and Alo in the competitive athleisure weatr segment that it helped define in the mid-2010s.
“The timing is right for a change,” McDonald said in the call. “I’ve described being CEO of Lululemon as my dream job. It truly has lived up to every expectation and given me the opportunity of a lifetime.”
McDonald took the helm at Lululemon in 2018 but has been under pressure to revive new life into the brand as consumers have strayed. In June the company announced it would shuffle its organizational structure and cut 150 corporate jobs.
He will remain on board as a senior advisor until March 31 as the company launches a search for its next CEO.
But McDonald’s exit also means Elliott is position to directly impact who will be his successor. The fund is now one of Lululemon’s major shareholders and will be locked in a deep process to fill the position. Founder Chip Wilson has the largest stake in the brand at over 8 percent and has lobbied for change at Lululemon and openly criticized of the direction of the company in recent years — and McDonald.
Wilson retired as Lululemon’s chief innovation and branding officer in 2013. He remained as a board member but later stepped down after making comments about how women’s bodies look in yoga pants.
Meanwhile, Elliot’s influence could tip the CEO search in favor of Jane Nielsen, an industry veteran who recently served as chief financial officer and then chief executive at Ralph Lauren before stepping down in April. Nielsen has been linked to Elliot in recent months, according to the source and is seen as a viable choice for the role.
Before her stint at Ralph Lauren, Nielsen was chief financial officer at Coach and was instrumental in successful reboot at the brand. And while the challenges the new CEO of Lululemon will face differ from those Nielsen faced at Ralph Lauren and Coach, she is seen as a preferred choice of Elliott’s leadership.
The first step once McDonald exits in January is a detailed assessment of the major competitors in the crowded athleisure space along with giving a serious look at upstarts that have swayed the attention — and buying power — of consumers. Lululemon, valued at $25 billion, faces a reset that will likely mean a focus on core products after forays into footwear, its Studio Mirror fitness platform and Selfcare beauty products were met with lukewarm reception and have either been scaled back or canceled.
