Lululemon CEO McDonald to step down, shares rise 10%

LULULEMON Athletica said that CEO Calvin McDonald was leaving the company without a replacement and raised its annual profit forecast, sending shares up about 10 per cent in extended trade on Thursday.

McDonald will step down from Lululemon in January after about seven years at the helm. The Wall Street Journal reported, citing people familiar with the matter, that the company’s founder Chip Wilson was frustrated with marketing and had been considering a proxy fight.

Known for its pricey leggings and athleisure clothing, Lululemon’s sales have struggled in the US as it lost ground to upstart brands such as Alo Yoga as well as private-label replicas, with executives noting in September that they were disappointed with its results and product execution in the country.

The shakeup at the top also is the latest in a string of big changes in C-suites for retailers as they look to capture a younger, more cautious audience and wade through supply chain and operational issues. The company also approved a US$1 billion increase to its stock buyback programme.

The company named its finance chief Meghan Frank and chief commercial officer André Maestrini as co-interim CEOs while it searches for a new boss. Lululemon did not immediately respond to a Reuters request for comment about the proxy fight report.

“Lululemon has struggled lately by its usual standards so that’s probably part of the CEO change,” said David Swartz, analyst at Morningstar Research, who nevertheless said McDonald had been a very effective CEO.

“Lululemon’s hyper-growth days are clearly in the past — and that is unable to change any time soon. However, thanks to a bargain basement valuation, CEO shakeup, and a promising start to the holiday season, bottom fishers are taking a shot at the stock,” said Andrew Rocco, stock strategist at Zacks Investment Research.

Lululemon now expects annual profit between US$12.92 and US$13.02 per share, compared with previous expectations of US$12.77 to US$12.97 apiece, while it also raised its annual sales target.

It now sees a US$210 million hit to its income from operations in 2025 due to tariffs, and reiterated its expectation for annual operating margin to decrease by about 390 basis points.

For the quarter ended Nov 2, the company reported net revenue of US$2.57 billion, beating estimates of US$2.48 billion, according to data compiled by LSEG.

Executives also noted a strong start to the holiday shopping season with the Thanksgiving holiday period, but said that demand has slowed since.

Interim co-CEO Frank said on a post-earnings call that Lululemon would invest in marketing in the fourth quarter to help drive traffic and build brand awareness. Discounts are also expected to be higher as it works to clean out aged inventory. REUTERS

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