Lululemon’s board tears up peace plan with rebel founder
Chakras are completely out of sync among the board members of global athletics giant Lululemon. They collectively declared open war on the controversial founder who built the fitness-adjacent empire from a yoga studio in Vancouver: Chip Wilson.
But the most surprising thing to emerge from public statements and corporate filings that emerged this week was how close the Lululemon board came to reaching a peace agreement with Wilson.
Wilson’s public criticism of the company dates back more than a decade, but his campaign has now found fertile ground following the group’s recent stumbles, which have seen shares fall more than 40 per cent this year to the lowest levels not seen since 2019.
Underlying sales in the US reversed; This wasn’t helped by the recent “see-through” controversy, with customers taking to social media to criticize the retailer for saying its new yoga tights were so see-through that they showed underwear, or worse.
You might expect this from Kmart’s $7 Anko leggings, but not from Lululemon’s $159 version.
That may explain why Lululemon’s executives are considering backing Wilson, who is the company’s single-largest shareholder but owns less than 10 percent of the business, and his bid to have three nominees on the board by October.
In exchange, Wilson would agree to vote in line with the board’s plans and not disparage them for two years.
The board clearly values their peace.
And who wouldn’t when you have someone as loud and prominent as Wilson, who earlier this year said the company needed a major disruption and suggested “the entire board could resign?”
Lululemon’s board of directors, led by executive chairman Marti Morfitt, was prepared to ignore all of this, but said the peace deal fell through when Wilson made new demands and the sportswear group’s executives lost confidence that he would keep the peace in any deal.
The board’s sudden reversal needed some explanation. And executives were forced to launch an all-out attack on Wilson, explaining why he shouldn’t have any involvement with the company.
This included accusations that he was an unreliable negotiator, “once again abandoning previously agreed terms” and employing “destructive, brand-damaging tactics.”
He also had conflicts of interest due to his outdated views, “distorted understanding of public company management,” and, more importantly, his association with companies he advised that were in direct competition with Lululemon, such as rising archrival Alo Yoga.
“No competent public company board would give a direct competitor as much influence or insight into strategy and future product plans as Mr. Wilson demands,” the executives said.
It’s a remarkable turnaround for the board, which just a week ago was negotiating for itself to gain significant control over the company.
A critique that gets to the heart of what Lululemon should be a business should particularly concern investors and customers.
Lululemon’s board of directors noted one of Wilson’s most controversial comments about the business; this comment led to his removal as chairman in December 2013 and his resignation from the board in 2015.
In response to the first of Lululemon’s trio of ‘see-through’ saga in which the group’s high-tech, high-priced leggings were see-through in some yoga poses, Wilson suggested the problem stemmed from an unwelcome category of customers.
“Some women’s bodies don’t really work for Lululemon’s clothes,” Wilson said. Bloomberg In that case.
This turned into a disaster, with Lululemon later apologizing to its employees and saying it was “sorry for the consequences of my actions” but apparently not to female customers.
US comedian Stephen Colbert roasted Wilson on his TV show, naming the Lululemon founder the “Alpha Dog of the Week” and flippantly suggesting that fat-shaming Lululemon customers was a marketing tactic to buy them more trousers.
This is clearly not a position that Wilson has abandoned.
In 2024, he criticized Lululemon for its approach to “the whole diversity and inclusion thing” and complained that the company was trying to be all things to all people, like casual clothing retailer The Gap.
“You have to make it clear that you don’t want some customers coming in,” he said.
This statement led to further apologies from the company amid calls for a boycott.
Sanity appears to have prevailed, but the interesting part will be how many investors decide to back Wilson and his board candidates rather than the rival trio backed by Lululemon’s executives, including former Levi Strauss boss Chip Bergh.
They’re right to be nervous, as the stock trades more than 65 percent below record highs in 2024.
Wilson, for his part, plays an unusual role as peacemaker: “There’s no reason why we can’t reach a rapid resolution to this struggle,” he said after the board abandoned peace talks.
“The board did not give me detailed information on where our disagreements currently lie, but as of Friday last week we appeared to have full agreement on the main terms.
“I am indecisive and willing to be constructive.”
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Colin Kruger is senior business correspondent for the Sydney Morning Herald and The Age newspapers.Connect via email.
