Lululemon is making headlines with its recent leadership change. CEO Calvin McDonald will step down on January 31 after over a year of struggle for the company. The board is already on the hunt for his replacement with the help of an executive search firm. McDonald will remain a senior advisor until the end of March.
“It’s time for a change,” McDonald expressed during a call with analysts. He described leading Lululemon as a dream job and emphasized that he’s proud of his time with the company.
In the meantime, the company’s Chief Financial Officer Meghan Frank and Chief Commercial Officer André Maestrini will serve as interim co-CEOs. Marti Morfitt, the board chair, is also stepping in as executive chair. She stated that the company has a solid foundation but definitely needs a fresh direction.
Shares of Lululemon jumped about 10% in after-hours trading, signaling market approval of the change. This shift comes after a period of disappointing results and growing calls for change, notably from founder Chip Wilson, who recently criticized the company’s current direction in a full-page ad.
On the same day as this announcement, Lululemon reported its third-quarter results, which included both wins and setbacks. Here’s how the numbers stacked up against analyst forecasts:
- Earnings per share: $2.59 vs. $2.25 expected
- Revenue: $2.57 billion vs. $2.48 billion expected
Although revenue grew from $2.40 billion the previous year, the net income of $306.84 million fell short compared to $351.87 million in 2022.
Looking ahead, McDonald expressed cautious optimism about the holiday season but noted that sales projections are still below Wall Street’s expectations. The company anticipates sales of between $3.50 billion and $3.59 billion for the current quarter, while analysts had expected upwards of $3.60 billion. Their earnings guidance also fell short, with estimates now being between $4.66 and $4.76 per share.
Over the past year, Lululemon has faced various challenges, including consumer trends shifting away from yoga wear and the impact of tariffs. Many shoppers are now drawn to denim instead. Also, newer competitors like Vuori and Alo Yoga have been gaining traction, complicating Lululemon’s position in the athleisure market.
To counter this, the company is expanding beyond workout gear. It is now offering shoes, jackets, and more casual work pants to reach a broader audience. Interestingly, while the Americas market has struggled—down 2% in the last quarter—international sales soared by 33%, with comparable sales up 18%.
This shift represents a broader trend where many brands are looking to global markets for growth. For Lululemon, navigating these challenges effectively will be crucial as they search for a new leader to steer the company into its next chapter.
As the company recalibrates its strategy and leadership, it will be interesting to see how they adapt to the changing preferences of consumers and the competitive landscape. For those interested in a deeper understanding of Lululemon’s financial performance and market strategies, you can check out the latest analysis from Bloomberg.
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