Lululemon founder Chip Wilson is not following up with the brand after announcing that he would nominate three people to its board and advocate for annual board elections, the brand said last week.
A week ago, Wilson said he would nominate Marc Maurer, former co-CEO of Swiss sneaker company On Holding; Laura Gentile, former chief marketing officer of ESPN; and Eric Hirshberg, former Activision CEO. But Wilson has been silent since notifying the brand of his intentions, Lululemon said in a statement on the same day.
“In the interest of avoiding a costly and distracting proxy fight, the Board requested from Mr. Wilson the names of his director nominees to evaluate their qualifications and backgrounds, but Mr. Wilson declined to engage further,” the brand said in a Dec. 29 press release. “Now that the names have been submitted, the Board will evaluate Mr. Wilson’s director nominees in due course in accordance with the Board’s governance process.”
In his release, Wilson said his nominees represent “the change that is needed to redefine lululemon and begin this company's next chapter of success.”
“As I have stated for years, lululemon needs visionary creative leadership to thrive,” he said, adding, “The simple truth is that the current Board lacks these skills and, as a result, lululemon is unable to win back the confidence of its critical stakeholders and regain commercial momentum.”
But Lululemon defended its board as “highly engaged and experienced” and “well-equipped to provide effective guidance on the company’s direction and the execution of our growth strategy.” More than a third of the directors joined within the last four years, per the release.
Moreover, the board has overseen a decade of nearly $9 billion in revenue growth and operating income that grew nearly sixfold. Today, the board is looking to find a new chief executive, as Calvin McDonald prepares to step down at the end of this month.
It's feeling pressure from another activist investor on that front. Elliott Investment Management, which has a $1 billion-plus stake, reportedly wants former Ralph Lauren executive Jane Nielsen to take McDonald’s place.
Last week, Wilson slammed McDonald’s departure’s as “the third total failure of Board oversight with no clear succession plan in place” and said “shareholders have no faith” in the board’s ability to find the next chief executive. Wilson is one of the brand’s largest shareholders.
Lululemon has fallen from its perch, with declining sales in North America, its biggest market. In its most recent quarter, overall revenue grew 7% to $2.6 billion, but sales in the Americas declined 2%. Similarly, comps rose 1% overall but fell 5% in the Americas.
Notably, Wilson — who has a history of battling Lululemon’s board — didn’t nominate himself. “My passion for the lululemon athletica muse has never changed, but I know this campaign for change cannot be about me,” he said.
In its statement last week, Lululemon said its leadership has “engaged extensively and in good faith for many years with Mr. Wilson to understand his perspectives and communicate our strategy.” But installing hand-picked directors would give Wilson more control, according to Michael Appel, founder of turnaround and strategic advisory firm Appel Associates. This is especially likely if, as Wilson also proposed on Dec. 29, Lululemon were to switch to electing all directors annually. This — known as declassifying — would also give Wilson more leverage, Appel said by phone.
“The big problem is that it's not the same company that he left,” Appel said. “Calvin McDonald tripled the size of the company. The playing field has changed and they’re facing more competition. And when you're the 10,000-pound gorilla of yoga, it's harder to continue to be as innovative.”
