Lululemon Athletica picked a former top Nike executive as its next chief executive as the athletic apparel retailer known for its stretchy yoga pants faces pressure from its founder and a large activist investor to revive its struggling business, the company said on Wednesday.
Heidi O’Neill who had been President, Consumer, Product & Brand at athletic footwear and apparel company Nike will join Lululemon in September as CEO. She will replace Calvin McDonald who stepped down amid heavy pressure at the end of January.
Lululemon’s stock price has tumbled 38% in the last 12 months, shrinking the Vancouver, British Columbia-head quartered company’s market value to $18.8 billion, as American sales contracted last year.
Customer tastes have shifted to competitors like Alo Yoga and Vuori and cheaper versions of the company’s athletic wear are appealing to more price conscious consumers.
Investors reacted poorly to the news sending the stock price down more than 6% in after hours trading, erasing roughly $1 billion in stock market value.
O’Neill, who left Nike in September, had spent 25 years at the company and played a key role in resetting the brand, cutting product development timelines and getting products to market faster, Lululemon said in a statement.
“Heidi is a rare kind of leader,” Netflix Co-CEO Ted Sarandos who sits on the Spotify board with O’Neill said about her. “She is obsessed with the consumer, grounded in data, and unafraid to reinvent how things have always been done. Her track record at Nike shows a deep understanding of what people want and how fast their expectations are changing.”
Late last year activist investor Elliott Investment Management built a roughly $1 billion investment inLululemon and signaled its intention to find a new CEO, backing veteran retail executive Jane Nielsen, who had been a chief financial officer at Ralph Lauren.
Elliott’s calls compounded problems for a board already facing pressure from Lululemon founder and former chief executive Chip Wilson. Wilson, who owns roughly 4.3% of the company and criticized management for having lost the brand’s “cool” factor, is waging a board fight where he hopes investors will install his three director candidates at the annual meeting later this year.
Last month Wilson said “Until meaningful change in the boardroom has taken place, success for the new CEO could be a perpetual struggle.” The company last month appointed Chip Bergh, a former president and CEO of Levi Strauss & Co to join Lululemon’s 10-person board.
Some industry analysts agree fresh blood is needed on the board to revive the struggling brand. While the company remains profitable and has a loyal customer base, sales growth has tapered off since the pandemic when demand for athleisure wear surged.
“The culture is not what it was … We want a CEO who is passionate, can engage with employees, and preferably one with product experience,” Jefferies analysts wrote. “Clearly fresh perspective is needed given the sizable underperformance in fundamentals and the stock price over the last few years.”
Finance chief Meghan Frank and chief commercial officer André Maestrini have been running the company as interim co-CEOs and will continue to serve until O’Neill joins, the company said. Director Martha Morfitt took on the expanded role of executive chair in December.
Chip Wilson founded Lululemon in 1998 and stepped away from daily operations in 2012. He caused an uproar when he suggested that some women’s bodies “don’t work” for the brand and resigned as chairman in late 2013 following a recall of see-through yoga pants.
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