How activist Elliott can help reinvigorate athleisure giant Lululemon

Company: Lululemon Athletica Inc. (LULU)

Business: Lululemon Athletica is a technical athletic apparel, footwear and accessories company. The company organizes its operations in four regional markets: the Americas, Mainland China, Asia Pacific (APAC) and Europe and the Middle East (EMEA). It conducts its business through different channels in each market, including company-operated stores, e-commerce, pop-up locations, wholesale, point-of-sale, remerchandising program and licensing and supply arrangements. The company offers a comprehensive line of technical athletic apparel, footwear and accessories marketed under the lululemon brand. Their clothing range includes items such as shorts, tops and jackets designed for a healthy lifestyle, including athletic activities such as yoga, running, training and many other activities. It also offers clothing designed for on-the-go and fitness-inspired accessories. It has stores in the United States, Canada, Mainland China, Australia, South Korea and other countries.

Stock Market Value: $23.92 Billion ($203.90 per share)

Activist: Elliott Investment Management

Ownership: no

Average Cost: no

Activist Comment: Elliott is a multi-strategy investment firm managing approximately $76.1 billion in assets (as of June 30) and is one of the oldest firms of its kind under continuous management. Known for its extensive due diligence and resources, Elliott regularly monitors companies for years before investing. Elliott is the most active among activist investors, engaging with companies across industries and geographies.

what’s going on

On December 18, it was reported that Elliott had taken a more than $1 billion position in Lululemon, bringing in former Ralph Lauren CFO and COO Jane Nielsen to the company as a potential CEO candidate.

behind the scenes

Lululemon is a global athletic apparel, footwear and accessories company offering pants, shorts, tops and jackets for activities like yoga, running and workouts. While the company maintains its presence in its core North American market (~70% of revenue), it has established a significant presence in Asia Pacific (~25%), particularly in China (18%) and Europe (~5%). In fact, these ancillary markets have grown quite rapidly; APAC and Europe average Last year, compound annual growth rates were 33% and 22%, respectively. This international expansion has helped drive strong overall top-line growth, with sales rising from $8 billion in 2023 to $11.9 billion today. However, during the same period, the company’s share price fell from over $500 to now below $220 per share. The problem here is in North America. Growth in this core market has slowed to low single digits and has now turned negative, with like-for-like sales down 5% in the latest quarter. Moreover, while China’s growth story resonates with investors as North America continues to expand, that story alone is not very enticing for public market investors in the face of North America’s fundamental uncertainty.

Fundamental challenges in the North American business can be traced back to 2018, when Calvin McDonald became CEO of Lululemon. From the beginning of his tenure and throughout the post-Covid period, the company has operated in a golden age of sportswear; It benefited from the widespread casualization of ready-to-wear and enjoyed years of massive growth as the only truly large-scale player. While this environment caused share prices to appreciate over the years, it also masked a series of strategic missteps that would come back to bite them later. First, Lululemon used most of those earnings to pursue new business lines. $500 million acquisition of Mirroralongside footwear and skincare product launches, none of which have created meaningful shareholder value. Moreover, while these initiatives may have been acceptable on their own during a period of rapid growth, they ultimately distracted management from the core North American business that was key to revenue growth. This loss of focus became especially evident when the company closed in May 2024. chief product officer resigns. Since then, there has been a perception that product management and design have been largely centralized under McDonald. Lululemon has transitioned from its historically sleek and highly functional aesthetic to more vocal branding and collaborations that don’t align with the core customer, like with Disney. As a result, the company’s brand perception shifted, allowing competitors like Alo and Vuori to gain momentum and begin to gain share, especially among Lululemon’s core customer base of young women. This is a dynamic evident to anyone who shops in this category. While store traffic and brand awareness remained high, conversion worsened. These product missteps were exacerbated by broader operational problems in marketing, supply chain and corporate cost controls. Together, these issues increased margin pressure, eroded brand momentum in North America, and ultimately contributed to the sharp decline in the company’s stock price. On December 11, 2025, Lululemon will acquire McDonald’s step back He will serve as CEO from January 31, 2026.

This impending leadership transition is what set the stage for Elliott to announce a more than $1 billion position in Lululemon and bring in Jane Nielsen, former CFO and COO of Ralph Lauren, to the company as a potential CEO candidate. Lululemon is still a quality product and brand that has lost its way a bit and needs to be revitalized. It doesn’t need a CEO who has all the answers (if any), but one who will hire the best talent and establish the right processes so that management can work as a team of marketers, salespeople, and product developers to find solutions. By delegating these tasks to competent senior managers, Nielsen will also be able to supervise the company’s supply chain and corporate structure, solve the problems here and create a missing cost discipline. Nielsen has experience producing at both Ralph Lauren and Coach. In 2014, when Nielsen was at Coach, the luxury handbag maker was losing out to rivals and announced that it expected same-store sales in North America to decline by a high percentage next year. Nielsen told investors Coach would return to profitability within two years. Nielsen helped Coach close underperforming stores and control inventory, and by March 2016, the Coach brand reported its first quarterly sales growth in North America in nearly three years. When Nielsen joined Ralph Lauren in September 2016, sales had stalled and net income had fallen nearly 50% since 2014.. In an article dated 2024 Wall StreetJournalNielsen was quoted as saying: “The brand was bigger and better than the business showed“ – similar to today’s Lululemon. Nielsen and its leadership team targeted millennials and Gen Zers, overhauled the website and closed stores; this led to a 20% increase in adjusted operating income.

When an activist comes to a company with an idea or advice, he or she is equally happy if the company takes that advice or comes up with a better one. Elliott isn’t saying Jane Nielsen is the best person for the job. The company says he is the best person it knows for the job and conducts a thorough and comprehensive review and analysis before making such a recommendation. Elliott can’t name the next CEO. The board does this. While Elliott would like to see Nielsen as the next CEO, Elliott would support that decision if the board chooses someone else who is equally qualified. In practice, whoever the next CEO is will be nominally approved by Elliott because we have never seen a qualified CEO with options take a job like this, even if they know that an activist like Elliott opposes his appointment. But Elliott’s presence alone adds a lot of value to the situation that the board must accept. First, it justifies the sense of urgency needed here. Second, the firm brings to the table a more than qualified CEO candidate who is ready and willing to take on the role. Third, an activist of Elliott’s stature and stature can provide the board with reassurance in their decision. This third point is especially important when there is an outspoken founder in the wings, such as Chip Wilson, who publicly criticizes board decisions. Without activists, even a competent and experienced board may compromise on CEO selection to appease the vocal founder.

This is very similar to Elliott’s last campaign at Starbucks; Another iconic brand facing the challenges of popularity, competition and image, with an outspoken founder who isn’t afraid to speak his mind. Elliott’s efforts at Starbucks quickly culminated in the appointment of Brian Niccol as CEO; Brian Niccol is currently working to reset the company’s strategy and restore investor confidence. Elliott’s presence justified the urgency required, and his endorsement of Niccol gave the board external credibility to act quickly.

Since Elliott hired Lululemon on Dec. 29, Chip Wilson has nominated three executives: Marc Maurer, former co-CEO of On Holding AG; Laura Gentile, former chief marketing officer of ESPN; and Eric Hirshberg, former CEO of Activision, Activision Blizzard’s largest segment, is about to be elected to the board of directors at its 2026 annual meeting.

Ken Squire is the founder and president of 13D Monitor, a corporate research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, an investment fund that invests in a portfolio of activist investments.