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Struggling retailerLululemon Athletica Inc. forecast a second-straight year of profit declines, further pressuring a brand that’s dealing with product mishaps while searching for a new chief executive officer.
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The midpoint of the athleisure company’s sales forecast also missed the average of estimates compiled by Bloomberg.
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Tuesday’s earnings report did little to assuage investor concerns that Lululemon can recapture the growth it was once known for. The company didn’t announce a new CEO, as some had expected, even though it did name a long-time apparel executive to its board.
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The next CEO “will be instrumental in determining whether a turnaround can take hold,” Bloomberg Intelligence analyst Poonam Goyal wrote in a research note.
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Shares of Lululemon fell as much as 2.2 per cent in premarket trading on Wednesday. The stock has declined 23 per cent this year through Tuesday’s close, much steeper than the drop of the S&P 500 Index over the same period.
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The performance gives founder Chip Wilson added fuel as he calls for strategic changes and an overhaul of the company’s board. Lululemon has also recently found itself back in an uncomfortably familiar position: facing backlash for poor-quality clothing that is too sheer for comfort. And sales have been hit by increasing competition from newer brands like Alo Yoga and Vuori.
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Lululemon reported net revenue in the Americas fell four per cent in the fourth quarter. While Goyal said the international business remains strong, “that isn’t enough to counter United States weakness.”
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The company is focused on improving full-priced sales in the Americas after seeing more demand for markdown items last year, executives said on Tuesday. Lululemon is also increasing new product launches and enhancing the in-store experience.
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“We know we must improve our performance in North America,” chief financial officer Meghan Frank, who’s also serving as interim co-CEO, said during the company’s call with analysts.
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The company is looking for a permanent chief executive after Calvin McDonald exited the role earlier this year. In addition to Frank, chief operating officer André Maestrini is serving as interim co-CEO.
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New Director
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On Tuesday, Lululemon named former Levi Strauss & Co. chief executive Chip Bergh to its board. He led Levi from 2011 through 2024, and oversaw the denim’s company initial public offering in 2019. If elected by shareholders, he’ll replace David Mussafer, a long-time director who doesn’t plan to stand for re-election after his current term. Wilson, the founder, has raised questions about Mussafer’s objectivity.
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Wilson, who no longer has a role with the company, began his campaign for changes at Lululemon last fall, criticizing management in a full-page ad in the Wall Street Journal. Since then, he has continued to speak out while nominating three other director candidates for the board. He has called for changes to the board before a new CEO is hired.
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