‘Orderly transition’ expected at Lululemon

Share

Viewed by analysts as something of a "loose cannon," Chip Wilson never had an easy time letting go of Lululemon Athletica Inc., the fast-growing yoga wear purveyor he founded in 1998.

But with the Vancouver-based company embroiled in controversy, partly of his making, and the announcement of a new CEO, now is the right time for Mr. Wilson, who holds more than 20 per cent of the company's shares, to relinquish the chairman's role.

On Tuesday, Lululemon confirmed that he will step aside by June, and that Laurent Potdevin, an executive with experience in managing global upscale fashion and athletics goods brands, will replace Christine Day as chief executive officer next month.

"We believe the timing of this shift allows ample room for an orderly transition," Michael Casey, the lead director who will become chairman of the company's board, said Tuesday.

Mr. Wilson built the company into a $1.4-billion (U.S.) athletics clothier with a loyal clientele that doesn't mind paying top dollar for premium-priced yoga wear, despite the fact that supply is often scarce – a deliberate tactic to keep customers coming back.

But he became something of a liability with his controversial views, including his recent suggestion that only svelte women could wear Lululemon apparel, prompting angry responses and threatening to disenfranchise long-time customers – and hurt profits. This came after the company was forced to pull its signature yoga pants from shelves last spring when it said they were too sheer, which resulted in it having to take a $17.5-million (U.S.) writedown.

And Mr. Wilson had a habit of getting involved in day-to-day decision making, occasionally getting in Ms. Day's way, although she suggested in an interview earlier this year that any tension had been resolved.

"Chip is an idea-a-minute guy and he'd pursue all of them tomorrow and that would set the organization off on so many different things," Ms. Day said in February. "And so I'd have to say, 'Okay Chip, here's the deal: I can carry 20 balls and you can say, I love the shiny one, and I'll figure out how to put it in. But something's got to come off. You can't run around the other side of me and say, You dropped this ball. You've to got to trust that I'm always going to make the right decision about what's needed now.'"

Ms. Day wasn't available to comment on the matter on Tuesday.

Analysts generally view Mr. Wilson's resignation as chairman as an appropriate step. "This will allow the new CEO to operate free from the founder's micro-management style," said Camilio Lyon, an analyst at Canaccord Genuity in New York.

Added Faye Landes, an analyst at Cowen and Co.: "He is obviously considered something of a loose cannon who may have been alienating consumers and certainly seems to have had that effect on some investors and perhaps potential CEOs as well."

The choice of Mr. Potdevin as the next CEO came as a surprise to many industry watchers. He was previously president of Toms Shoes and, before that, spent 15 years at Burton Snowboards. He started his career at LVMH, whose luxury brands include Louis Vuitton.

"Very early on I learned about the importance of quality and craftsmanship," Mr. Potdevin said in an interview. "Product and quality are very key to the premium positioning of the Lululemon brand. This will be an area of focus." He said his initiatives to expand globally at each of the companies he led in the past give him a leg up in now moving to do the same at Lululemon.

The announcement removes a big element of uncertainty at Lululemon, analysts said. His experience with premium and innovative athletic brands "checks the cultural-fit box," said Roxanne Meyer, analyst at UBS Investment Research.

But Ms. Landes noted that Toms' founder and "chief shoe giver" – Blake Mycoskie – was the high-profile leader and "we are not sure how big" Mr. Potdevin's role was. And his role at Burton "does not seem like a natural segue" to Lululemon, she added.