Dive Brief:
- Just days after Lululemon announced CEO Calvin McDonald would step down, Elliott Investment Management has acquired a more than $1 billion stake in the company and is pushing for former Ralph Lauren executive Jane Nielsen to become CEO of the activewear brand, according to a person familiar with the matter.
- Nielsen served as Ralph Lauren’s chief operating officer and chief financial officer for several years, along with a short stint as interim CEO, and also has experience as the chief financial officer of Coach. She is currently a board member at Mondelēz International, according to her LinkedIn.
- Lululemon did not immediately respond to a request for comment. CFO Meghan Frank, who will co-lead the retailer in the interim when McDonald exits, said last week the retailer was looking for experience in growth and transformation for its next CEO.
Dive Insight:
Lululemon’s CEO succession plans have caught the interest of multiple observers.
Founder Chip Wilson last week noted there were “several qualified CEO candidates” that he thought could build on the brand’s legacy, though he did not name them. Wilson also urged the retailer to consult with those with deep knowledge of the brand as the CEO search commences.
Now, investment firm Elliott wants a say as well. The firm believes Nielsen’s experience as a strong strategist will help her in revitalizing the Lululemon brand, according to a person familiar, who also noted significant gains in share price, gross margin expansion and earnings-per-share growth at Ralph Lauren under Nielsen.
Analysts tend to agree. Needham analysts led by Tom Nikic said in emailed comments Thursday that Nielsen would be “an extremely strong candidate for the role,” calling her “one of the most well-respected and capable executives in the industry.” The analysts noted her “immense success” in driving turnarounds at both Ralph Lauren and Coach, though they pointed out that Lululemon is facing different problems than either of those brands.
“Coach and RL were both suffering because of aggressive pushes into downstream distribution (outlets, flash sale sites, off-price, etc.), which stifled margins and diluted the brands' images,” Nikic said, adding that Lululemon’s problems stem from product missteps and increased competition. “Her turnaround experience isn't perfectly aligned with LULU's current ills, but on the bright side, we believe that Coach and RL had much deeper-rooted issues than what LULU is currently facing.”
Jefferies analysts on Wednesday responded to Elliott’s efforts, saying a “refreshed board, a thoughtful CEO with real leadership, and a return to LULU’s roots are critical.” The analysts, led by Randal Konik, outlined their keys to a successful turnaround at Lululemon, including reprioritizing the U.S. market, rationalizing the brand’s store footprint, cutting back on noncore categories like outerwear, rebuilding the innovation pipeline and restoring the brand’s yoga-based DNA.
“Reduce the newness for newness’ sake approach,” Jefferies wrote. “Stop flooding stores w/ disjointed colors, patterns, and logo-heavy designs that dilute brand equity.”
The analysts added that any turnaround will be “a multi-year lift (not easy) but we support the founder’s push and activism.”
