Lululemon CEO Departs After Slowdown; Shares Gain on Outlook
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A Lululemon store in New York. Photo by Yuki Iwamura /BloombergArticle content(Bloomberg) — Lululemon Athletica Inc. said Chief Executive Officer Calvin McDonald is stepping down as the pricey yoga-wear brand looks to reignite growth amid pressure from upstart competition and its founder. Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentMcDonald will depart the company at the end of January, and the company is searching for a replacement. The chair of the board, Marti Morfitt, will take on an expanded role as executive chair. While Lululemon searches for a new top executive, Chief Financial Officer Meghan Frank and Chief Commercial Officer André Maestrini will serve as interim co-CEOs. Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle contentSeparately, the company raised its full-year outlook. Lululemon now sees net revenue in a range of nearly $11 billion to almost $11.05 billion, higher than the previous guidance.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentThe shares jumped 10% at 5:50 p.m. in postmarket trading in New York. So far this year through Thursday’s close, the stock has declined more than 50%. Lululemon shares rose 37% during McDonald’s tenure, starting in 2018, compared with a gain of 142% in the S&P 500 Index over the same period. Article contentLululemon’s growth has slowed in recent quarters and that trend is expected to continue, according to analyst estimates, underscoring mounting challenges for the company. Sales growth is near the lowest level since the company went public in 2007 as Lululemon, which largely created the athleisure category and is known for its pricey leggings, faces fierce competition from lower-priced upstarts including Alo Yoga and Vuori.Article contentMcDonald’s departure follows pressure from billionaire founder and shareholder Chip Wilson, who has called for changes at the board level and a renewed focus on the products.Article contentArticle contentNeil Saunders, managing director of GlobalData, said that Lululemon’s disappointing performances are the result of a softer market for athleisure products, growing competition and a failure to set its merchandise apart from rival brands. Article content“Lululemon is now a brand without a captain at the very time when it needs a strong sense of direction,” Saunders said in e-mailed comments. “While the market and investors may welcome a change, this shift seems very sudden and hasty. It will be critical for Lululemon to quickly put in place a new CEO or have a very clear interim strategy for getting back on track.” Article contentUnder McDonald, Lululemon entered new categories like sneakers — a bid to take on the likes of Nike Inc. and Adidas AG. It also expanded its size ranges and entered an agreement with Fanatics Inc. and the National Hockey League to create merchandise.Article contentThe company is pushing to improve the allure of its products and accelerate development times. During the company’s call with analysts, executives said they’ve seen a good response to special-edition training gear. They added that the company has let some product life cycles run too long.Article contentLululemon has been particularly impacted by President Donald Trump’s levies, and raised some prices to counteract changes such as the end of the de minimis exemption, which had helped Lululemon ship e-commerce orders under $800 duty free from Canada. Article contentFrank said the company expects gross margin in the fourth quarter to decrease, mostly because of the tariffs and the loss of the de minimis exemption. It’s looking to trim costs and improve efficiency to help compensate. Article content(Updates share trading, adds analyst voice.)Article contentTrending CRA penalized taxpayer for repeated failure to report income Personal Finance Who is Mark Wiseman? 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The career of the man expected to be Canada’s new U.S. ambassador Finance Lululemon CEO to leave after slowdown as shares gain on outlook Retail & Marketing U.S. trade deficit unexpectedly shrinks to smallest since 2020 Economy Canadian households boost their wealth to another record high of $18.4 trillion with ‘supercharged' financial asset growth Wealth