Lululemon sinks as CEO hire fails to impress investors
Lululemon Athletica shares in the United States fell to their lowest level since March 2020 as investors were reassured by the embattled athletic apparel maker’s decision to bring in a CEO from Nike, which has struggled with a turnaround.
The appointment of Heidi O’Neill, most recently president of consumer, product and brand at Nike, ends a months-long search under pressure from Chip Wilson, an activist investor and founder of Lululemon.
“Given O’Neill’s long tenure at Nike, we do not expect the market to respond positively to this appointment, as it dovetails with the brand developing many challenges parallel to those currently facing LULU,” BTIG analyst Janine Stichter said.
Lululemon shares fell nearly 12 percent in early trading Thursday.
O’Neill, who left Nike last year after more than 25 years amid a management shakeup, will join in September and will be tasked with stemming Lululemon’s market share losses and revamping its image.
Nike’s shares hit their lowest level in more than a decade earlier this month after CEO Elliott Hill warned of a sharp drop in sales and continued weakness in China; This disappointed analysts and investors who thought that the fortunes of the famous sportswear giant would be revived.
Lululemon has also recently dealt with product recalls for some of its pricey leggings and has tried to stabilize inventory levels while dealing with increased competition from upstart brands like Alo Yoga and Vuori in the US.
Chip Wilson, who owns about 4.3 percent of the company, continues to believe the board should be overhauled before the CEO is chosen, a source familiar with the founder’s thinking told Reuters.
Wilson is waging a proxy war to appoint three executive candidates and said earlier this year that any CEO nominee chosen by the current board would have his support.
Elliott did not respond to Reuters’ request for comment.
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