As corporate turnarounds go, Lululemon Athletica is a curious case.
The Vancouver company, one of the world’s leading apparel marketers, posted record profits and revenues in fiscal 2025.
Its 780 stores in more than 30 countries and a robust e-commerce division rang up $10.6 billion (U.S.) in sales last year. (All figures in U.S. dollars.)
That Lululemon is synonymous with comfortable women’s leggings, yoga togs and workout apparel accounts for its stock market value of about $26 billion.
That’s more than the combined market caps of rivals Aritzia, Under Armour and Columbia Sportswear.
And that’s after a plunge in Lululemon stock in the past year by more than 40 per cent, after sales growth slowed in the U.S., Lululemon’s biggest market.
Calvin McDonald announced his resignation as Lululemon’s CEO last month.
Complicating Lululemon’s search for a replacement CEO is a proxy battle launched by company founder Chip Wilson.
Wilson owns about eight per cent of Lululemon’s stock and seeks to install three candidates on the company’s board before it decides on a new CEO.
And Elliott Investment Management L.P., the powerful activist investor based in West Palm Beach, Fla., has teed up its own prospective Lululemon CEO after buying about $1 billion worth of Lululemon stock.
Elliott has successfully pushed for boardroom shakeups at Canadian National Railway, Suncor Energy, Starbucks and other firms.
Elliott’s CEO candidate for Lululemon is Jane Nielsen, whose product discipline as a top executive at Ralph Lauren earned her the sobriquet “The Sheriff.”
Whoever next takes the helm, it’s not difficult to speculate on the turnaround strategy they are likely to adopt.
Lululemon needs to refresh an apparel lineup that has grown stale. McDonald admitted in September that Lululemon offerings had “become too predictable.”
Lululemon must also accelerate the speed at which it gets its newest offerings into stores.
Where it gets tricky is the “loss of cool” Lululemon has suffered, according to Wilson.
And it’s true that the apparel trade thinks Lululemon is suffering an identity crisis.
In recent years, Lululemon has strayed from Wilson’s original success formula in its partnerships with Walt Disney and the National Football League, among other diversions.
Wilson has been dismayed by Mickey Mouse and Dallas Cowboys logos added to Lululemon apparel.
And employees despair over Lululemon’s embrace of non-workout apparel, including cheap synthetic sweaters.
Lululemon has scored some recent hits, including a line of belt bags that went viral and a risky bet that paid off on men’s “ABC pants” (anti-ball-crushing) — so named because of a stretchy panel in the crotch.
But many women balk at buying office wear like sweaters, blouses and skirts at Lululemon, a merchant they associate with non-formal wear.
In short, too many of Lululemon’s prospective customers no longer know what the brand stands for.
Lululemon’s drift away from its core competence of women’s activewear has allowed new rivals focused on that segment to eat into its market share, notably in Lululemon’s all-important U.S. market.
Former Lululemon loyalists have switched to Alo Yoga, Vuori and other brands that specialize in workout sets and jogging gear.
Lululemon has become so big that keeping its multinational distribution channel filled with alluring goods is a challenge.
“Bigger is not always better and becoming preoccupied with quarterly profits and the stock price over creativity speaks to problems at most big corporations in America,” legendary apparel merchant Mickey Drexler told the Wall Street Journal when asked about Lululemon.
Drexler would know, having built up Gap to an unmanageable size, in which its ubiquity degraded its chic. Gap has recovered its relevance with consumers in recent years under a new CEO, as has Abercrombie & Fitch.
As it happens, Wison and Elliott want more attention to the stock price from Lululemon’s next CEO.
But whoever has the task of turning around Lululemon might be best advised to look back at the formula Wilson devised when he started the company 28 years ago.
The early Lululemon identified a niche for women’s activewear and created a brand that targeted young, educated women looking for smart apparel for their athletic and casual lives.
The population of such women is still enormous at Lululemon’s more than 400 outlets in the U.S. and Canada and its 150 stores in China.
Until recent years, Lululemon knew its customers, a basic in business success. They were focused on fitness, personal health and stylish comfort.
For most of its history, Lululemon has brilliantly designed women’s apparel that works in more than one of those worlds, most commonly garments for both fitness and casual or leisure wear.
It seems too simplistic to suggest that a huge enterprise needs only return to its roots to enjoy a second wave of even greater success.
But for Lululemon, fixing the company might indeed be as straightforward as that.
