A month into her tenure as CEO, Heidi O’Neill has made her first steps toward revitalizing the athleisure brand. The executive announced a slate of changes to Lululemon’s senior leadership team Wednesday, including a new chief operating officer and chief product officer.
The latter position, to be filled by Athleta CEO Maggie Gauger, is particularly important for Lululemon as it oversees design, merchandising and product innovation.
Analyst reactions to the news were mixed, with William Blair analysts Sharon Zackfia and Dylan Carden noting that Gauger has had “little tangible success” at Athleta over the past year. Her prior two decades were spent at Nike, where she overlapped with O’Neill.
“Having executives from Nike and Athleta at the top makes sense on paper as these people are experienced — but the performance of both of these brands has been far from stunning,” GlobalData Managing Director Neil Saunders told Retail Dive. “There is a great deal to prove in terms of how the new team will deliver.”
While change on the product front is welcome and necessary, it’s also not a complete refresh. William Blair analysts noted that Lululemon has not replaced the brand’s global creative director, for example. Jonathan Cheung was named to that role in 2024.
“While refreshing to see a shake-up occur given deteriorating trends (constant-dollar comps down a worse-ever 10% in the July quarter), we are surprised to see no change in the global creative director position as trends have worsened since his full assortment arrived this spring,” those analysts said.
What is encouraging to analysts is O’Neill’s emphasis on putting design at the center of the organization. In the past year, Lululemon has regularly missed the mark with shoppers and CFO Meghan Frank said last month that customer response to new products continues to be “inconsistent.”
The leadership restructure — which introduces both the chief product role and the chief operating role to the company — is aimed at “putting product, design, and innovation at the center of how we operate, with the focus and accountability to create a stronger pipeline of differentiated product to raise the bar for our guests across every touchpoint, in stores and online,” O’Neill said in a statement.
That is a step in the right direction, according to Jefferies analysts. They noted, however, that Lululemon has not yet hired a chief brand officer and that it will take several seasons for new product leadership to have an impact on the assortment. The retailer is also still hiring for a communications chief and a technology chief, who will join the senior leadership team, and a chief strategy officer, who will report to Frank.
“We think this goes after the right problem. One product leader at the president level brings the clear accountability needed to build a stronger pipeline of differentiated product, and a new COO should add operating discipline,” Jefferies analysts, led by Randal Konik, said in emailed comments Wednesday. “O'Neill herself said LULU has work to do to become a stronger, more competitive company, and we agree. Still, the path is long.”
Indeed, there is limited visibility into when Lululemon’s revenue in the Americas will return to growth, William Blair said. In the brand’s most recent quarter, revenues in that segment fell 8%, while comps were down 12%. China is also “beginning to fracture” and Lululemon is up against increasingly tough competition.
Even so, Lululemon has to start somewhere.
It’s “always good to have a fresh set of eyes in a turnaround,” Matt Powell, senior adviser with BCE Consulting, said.
Now, analysts need to hear what O’Neill’s strategy is.
“A reshuffle at the top is sensible as Lululemon needs fresh thinking and a new sense of direction,” Saunders said. “It also makes it clear that for Heidi O’Neill it will not be a case of business as usual at Lululemon. All that said, alongside the appointments we need to hear more about the strategy — it’s fine if that comes over time, but the new sense of direction needs to be communicated.”
