A leadership overhaul at Lululemon Athletica pushed its stock higher in late trading on Thursday, after the company confirmed that CEO Calvin McDonald will leave in January with no successor yet named. Investors reacted positively to the update, even as the athletic apparel maker continues to navigate a tougher competitive landscape in the United States.
McDonald’s departure comes after nearly seven years in charge, a period marked by both sustained international expansion and a sharp decline in domestic sales. The company’s stock has fallen 61 percent over two years as rivals such as Alo Yoga and lower priced private label alternatives gained traction. Executives acknowledged ongoing disappointment in recent product execution, which has weighed on its performance.
The Wall Street Journal reported that founder Chip Wilson had grown frustrated with the company’s marketing strategy and had been considering a proxy fight, citing people familiar with the matter. Lululemon appointed finance chief Meghan Frank and chief commercial officer André Maestrini as co interim CEOs while it searches for a long term leader. The transition adds to a wave of C suite changes across the retail sector, as brands attempt to capture a younger and more cautious consumer while coping with supply chain pressure.
Alongside the management shakeup, Lululemon increased its stock buyback program by one billion dollars. “With the stock down so much, I think investors are satisfied that Lululemon’s board is taking aggressive action,” said David Swartz of Morningstar Research, who also noted that McDonald has been a highly effective CEO.
The company’s holiday season began well during the Thanksgiving period, but McDonald said momentum softened as shoppers traded down in apparel. Higher discounting is expected as Lululemon clears older products, and inventory planning for 2026 will focus on keeping unit levels below anticipated sales. Interim co CEO Frank added that the business will step up marketing in the fourth quarter to drive traffic and strengthen brand visibility.
Lululemon raised its full year profit forecast and now expects earnings between $12.92 and $13.02 per share. It also lifted its annual sales target. However, it projects a 210 million dollar impact to 2025 operating income from tariffs and reiterated that operating margin will fall by about 390 basis points.
Analysts warn that leadership will need to address deeper structural challenges. Matt Jacob of M Science said that the company “lost share in a increasingly competitive athleisure market” and has struggled to reverse declines in its core women’s pants segment despite repeated efforts. This, he said, will remain a major test for the next permanent CEO.
Lululemon faced earlier controversy when Dennis “Chip” Wilson said in 2013 that some women’s body shapes “just actually don’t work” with its products, remarks made shortly before he stepped down as board chairman following the recall of see through yoga pants. The company did not immediately respond to a request from Reuters regarding the report of a potential proxy fight.
For the quarter ending November 2, Lululemon posted revenue of 2.57 billion dollars, outperforming estimates of 2.48 billion from LSEG data.
Related Readings:
