After months of fielding criticism from founder Chip Wilson, Lululemon’s board is clapping back, calling Wilson’s campaign “the latest iteration of his long-standing personal grievances and desire to regain influence at Lululemon.”
The retailer issued a press release Monday urging shareholders to support its board nominees at the company’s annual meeting on June 25 — and not the three directors Wilson has suggested. Lululemon also defended its CEO pick, Nike veteran Heidi O’Neill, and the strategy it’s pursuing with interim co-CEOs Meghan Frank and André Maestrini until she starts in September.
“With an experienced and refreshed Board, an incoming CEO who brings a unique balance of creativity and operational discipline, and our strong company leadership team advancing a clear set of strategies with urgency and focus across the company, we are confident in our ability to accelerate growth and deliver enhanced shareholder value,” the company wrote.
Wilson did not immediately respond to a request for comment.
Wilson in December nominated former On co-CEO Marc Maurer, former ESPN marketing chief Laura Gentile and former Activision CEO Eric Hirshberg to the board. They are up against Lululemon’s board nominees, former Levi’s CEO Chip Bergh, former Unilever growth and marketing chief Esi Eggleston Bracey and current Lululemon board member Teri List.
Lululemon said in proxy materials filed Monday that it offered Wilson a settlement last week that would include the election of two of his board nominees after the annual meeting, a third new director by October and other concessions. Wilson replied with a counterproposal, which Lululemon did not accept, that called for more favorable terms and “full expense reimbursement” for his campaign against the company.
Lululemon noted it asked Wilson for any board nominees or potential CEO candidates starting last year, but that he “declined to provide names in both cases.”
Wilson then criticized the choice of O’Neill for Lululemon’s CEO spot, after also describing former chief Calvin McDonald’s tenure as one of “massive value destruction.”
The battle between the two parties has been escalating all year, with Lululemon accusing Wilson of not working constructively with the brand and Wilson in turn saying Lululemon refused to sufficiently engage with his criticisms.
He is not alone in his criticisms. Jefferies analysts on Monday said that regardless of the outcome of the proxy fight, Lululemon continues to struggle with product execution — "and it has only gotten worse." The analysts, led by Randal Konik, cited "deteriorating merchandising and incoherent designs, with assortments shifting week to week and lacking a clear point of view."
Wilson has likewise criticized Lululemon's product engine and demanded a return to a product-first organization.
In response to Wilson’s allegations around brand erosion at Lululemon, the company pointed to significant revenue growth since Wilson left the CEO role in 2005, as well as after he left the board in 2015. The retailer also spelled out a strategy it’s executing that focuses on accelerating innovation, driving product discovery and simplifying its operations.
In addition to concerns over Wilson’s board nominees — including Maurer’s sizable stake in competitor On — Lululemon also raised objections over Wilson’s involvement with Lululemon’s competitors. The founder said he had advised both Alo Yoga and Vuori, who had “adopted his playbook,” according to filings.
“No competent public company board would ever give a direct competitor as much influence or insight into strategy and future product plans as Mr. Wilson has demanded,” Lululemon wrote.
Among other things, Lululemon said Wilson asked for quarterly meetings from the brand’s new CEO and his board nominees, as well as the formation of an innovation and strategy committee chaired by one of his nominees that would oversee the CEO search, and other concessions.
“Mr. Wilson continues to recycle outdated views on the further trajectory of the company and remains adamant that the only acceptable solution is one that maximizes his personal influence,” Lululemon wrote, adding that electing his nominees would be an endorsement of Wilson’s views on the company.
The proxy fight comes at a crucial time for Lululemon, which is battling a slowdown in its key North America market and attempting to regain its cool after a period of product misses.
As a longtime Nike veteran who oversaw the women’s business and other product initiatives, O’Neill has the potential to be a great leader for Lululemon, according to analysts.
“There are many competent retail executives out there. Heidi is one of them,” Matt Powell, senior adviser with BCE Consulting, told Retail Dive recently. “And if there’s a prolonged fight with Wilson over this now … that’s going to be a very challenging position for any executive.”
