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Lululemon’s chief executive plans to step down at the end of January, as the activewear manufacturer seeks to revive its fortunes after a disappointing stretch of operational and share price performance.
The Canadian company announced on Thursday afternoon it had kicked off a search for a new CEO to take over from Calvin McDonald, who will continue as a senior adviser until the end of March.
Shares in Lululemon, which had more than halved this year amid Donald Trump’s tariffs, intensifying competition and a tough consumer environment, leapt more than 10 per cent in after-hours trading following the announcement. The company also reported better than forecast third-quarter results and boosted its stock buyback programme by $1bn.
Lululemon said that chief financial officer Meghan Frank and chief commercial officer André Maestrini will serve as interim chief executives during McDonald’s transition period. Company chair Marti Morfitt will take on an “expanded role” of executive chair.
McDonald became Lululemon’s CEO in August 2018 after five years leading the Americas division of Sephora, the LVMH-owned make-up retailer.
Annual sales more than tripled during his tenure to $10.6bn in its fiscal year that ended in January, but the group has in recent months failed to maintain the double-digit growth it enjoyed for a decade, particularly in the US.
Chip Wilson, Lululemon’s founder, said two months ago that the company has suffered a “loss of cool”, which he blamed on leadership that could “speak Wall Street” but was not “product-driven” or able to attract or motivate creative talent.
Lululemon has been facing intensifying competition at both ends of its business.
While price-conscious consumers can trade down to cheaper offerings, upstart and niche brands such as Alo, Fabletics, Vuori and Kim Kardashian’s Skims have been picking up share in the high-end segment that the Canadian company once dominated and arguably pioneered.
The more casual approach to clothing brought about by the pandemic pushed Lululemon to a peak valuation of more than $64bn in 2023. At Thursday’s closing bell, the group was valued at about $22bn.
Wilson, writing in an ad that ran in the Wall Street Journal in October, said Lululemon should have been a $100bn company by its 25th anniversary.
“Like a plane crash, decline rarely happens because of a single failure, it’s a series of mistakes,” he said.
Lululemon on Thursday reported a 7 per cent year-on-year increase in revenue to $2.6bn in the three months ended November 2. Sales in its international business jumped by a third, but those for the US declined 2 per cent.
That marked the fifth time in six quarters that group revenue growth has been in the single digits. Before last year, there had been only four quarters in the past decade where sales growth came in below 10 per cent.
Third quarter net income dropped about 13 per cent to $307mn. The group’s revenue and earnings topped Wall Street estimates.
Lululemon issued guidance for the full year, setting midpoints for revenue and earnings per share that exceeded Wall Street’s forecast.
Wilson, who founded Lululemon in 1998 and ended his involvement with the company in 2015, said the group’s directors had “systematically dismantled” its business model and failed to retain talented employees.
