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The athleisure brand colloquially known as ‘Lulu’ has been handed some lemons the past few years, but investors are hopeful that a change in leadership will result in some freshly squeezed lemonade.
Driving the news: Shares of Lululemon were up ~10% yesterday following the announcement that CEO Calvin McDonald will leave his post on January 31. Prior to Friday’s surge, shares of the Canadian apparel giant were down ~50% on the year.
Why it’s happening: Even though Lulu essentially created the athleisure market, sales in North America have ground to a halt as it struggles to keep up with competitors — losing on the price front against brands like Nike, and on the trendiness front against rising hotshots like Alo Yoga and Vuori.
The company admitted as much earlier this year, saying its products had grown “predictable,” and launching a plan to revamp designs and get items to market faster.
Meanwhile: Chip Wilson — Lulu’s founder, its largest independent shareholder, and a noted Red Hot Chili Peppers fan — launched a campaign against Lulu’s leadership. He even went so far as to take a full-page ad in the Wall Street Journal titled “Lululemon: in a Nosedive.”
Wilson is now taking credit for McDonald’s departure and calling for a clean sweep of Lulu’s board of directors to lead the new CEO search.
Why it matters: Investors are optimistic a new leader with expertise in product development can turn the ship around. If whoever takes the helm fails to do that though, Lulu and its leggings could go the way of skinny jeans and become just another Millennial cultural relic.—QH