Lululemon CEO McDonald to step down, shares rise 10%

Lululemon Athletica stated that CEO Calvin McDonald was leaving the corporate and not using a substitute and raised its annual revenue forecast, sending shares up about 10% in prolonged commerce on Thursday.

McDonald will step down from Lululemon in January after about seven years on the helm.

However, gross sales within the U.S. have suffered in current occasions, with its inventory falling 61% over the past two years. Lululemon, identified for its expensive leggings and athleisure clothes, has misplaced floor to upstart manufacturers reminiscent of Alo Yoga in addition to private-label replicas, with executives noting that they had been dissatisfied with its product execution.

The Wall Street Journal reported, citing individuals conversant in the matter, that the corporate’s founder Chip Wilson was annoyed with advertising and had been contemplating a proxy struggle.

The firm named its finance chief Meghan Frank and chief business officer André Maestrini as co-interim CEOs whereas it searches for a brand new boss.

The shakeup on the high is also the newest in a string of huge modifications in C-suites for retailers as they appear to seize a youthful, extra cautious viewers and wade by way of provide chain and operational points. Lululemon additionally accepted a $1 billion improve to its inventory buyback program.

“With the stock down so much, I think investors are satisfied that Lululemon’s board is taking aggressive action,” stated Morningstar Research analyst David Swartz, who however stated McDonald has been a really efficient CEO.

While the vacation procuring season was off to a robust begin with the Thanksgiving interval, demand has slowed since, as customers continued to commerce down within the attire house, McDonald stated on a post-earnings name.

Discounts are additionally anticipated to be greater as it really works to clear out aged product strains. The firm stated it will plan stock items beneath gross sales in 2026.

Interim co-CEO Frank stated on the decision that Lululemon would put money into advertising within the fourth quarter to assist drive visitors and construct model consciousness.

Lululemon now expects annual revenue between $12.92 and $13.02 per share, in contrast with earlier expectations of $12.77 to $12.97 apiece, whereas it additionally raised its annual gross sales goal.

It now sees a $210 million hit to its earnings from operations in 2025 due to tariffs, and reiterated its expectation for annual working margin to lower by about 390 foundation factors.

“(Lululemon) lost share in a increasingly competitive athleisure market and specifically has not been able to successfully address its weakening share of the core women’s pants despite multiple attempts to address that. So that will be a challenge for the new permanent CEO,” stated Matt Jacob, analyst at M Science.

In 2013, then-board chairman Dennis “Chip” Wilson stated that some ladies’s physique shapes “just actually don’t work” with Lululemon yoga pants. Wilson returned to a extra energetic function within the firm in 2013 as Lululemon handled a high-profile recall of its signature yoga pants after complaints mounted that they had been overly see-through.

Wilson stepped down as chairman a month after the remarks.

Lululemon didn’t instantly reply to a Reuters request for remark concerning the proxy struggle report.

For the quarter ended November 2, the corporate reported web income of $2.57 billion, beating estimates of $2.48 billion, in accordance to knowledge compiled by LSEG.