<\/p>\n
\n\tBringing in a new chief executive officer always requires a little balance \u2014 but Lululemon Athletica Inc. is performing the corner office switch on a high wire.\u00a0<\/p>\n
\n\tOn top of all the usual troubles that come with changing the guard at a top-tier brand, the process is unusually complicated.\u00a0<\/p>\n
Calvin McDonald made a quick C-suite exit following a seven-year run as CEO, which was characterized by the kind of dramatic growth that seemed unstoppable, until it stopped.\u00a0\u00a0<\/p>\n
Lululemon\u2019s stock price has fallen back down to Earth from the stratosphere \u2014 with the market capitalization dropping from about $60 billion two years ago to under $20 billion.\u00a0<\/p>\n
Activist investor Elliott Investment Management is pushing for change and advocating for Jane Nielsen, the Ralph Lauren Corp.-veteran, as the next CEO.\u00a0<\/p>\n
And founder Chip Wilson has turned out to be not just the company\u2019s biggest shareholder, but its biggest critic and is now waging a proxy battle to remake the board, which will pick the next CEO.\u00a0<\/p>\n
\n\tWhile sources said Lululemon has been interviewing candidates, and has spent time with Nielsen and others, the process is ongoing and the big reveal is not seen as imminent.\u00a0<\/p>\n
\n\tThat means the company\u2019s fourth-quarter earnings report and conference call with analysts on Tuesday will be something of a platform for some potential internal contenders. They include Meghan Frank, who\u2019s been Lululemon\u2019s chief financial officer since 2020 and is now interim co-CEO along with chief commercial officer Andr\u00e9 Maestrini.<\/p>\n
\n\tIt is Frank who\u2019s been getting the interest \u2014 at least among the betting crowd.\u00a0And Wall Street will be listening closely on the call to see if there\u2019s the voice of a big-time CEO there.<\/p>\n
\n\tAccording to the online prediction site Polymarket, which lets users bet on the outcome of just about anything, Frank is in the lead with a 58 percent chance of becoming CEO. Maestrini has a 32 percent chance and Nielsen is seen as more of a long shot.<\/p>\n
\n\tBut this is a decision that will be made not by the masses, but, as Wilson has pointed out repeatedly, the board.\u00a0<\/p>\n
\n\tIn an open letter last month, the billionaire founder described his campaign as an effort to \u201ccatalyze a quantum of change that is sorely needed\u201d\u00a0at Lululemon.<\/p>\n
\n\t\u201cThe heart of the issue is a disconnect between the company\u2019s creative engine and the board\u2019s strategic oversight of how nonquantifiable power of brand and product translates to brand strength, margin durability, and long-term shareholder value.\u201d<\/p>\n
\n\tBut that\u2019s not the only take.<\/p>\n
\n\tSimon Siegel, an analyst at Guggenheim Partners, said there were two \u201cprimary schools of thought on how to fix Lululemon.\u201d<\/p>\n
\n\tThe first, which aligns with Wilson\u2019s thinking, posits that the brand\u2019s product and messaging are off.\u00a0<\/p>\n
\n\t\u201cTherefore the fix, while easy to say and hard to do, goes back to retail 101: return the focus to the product, have merchandising and storytelling and quality as the be all, end all,\u201d Siegel said. \u201cIf you build it, they will come.\u201d<\/p>\n
\n\tSiegel is not in that camp.\u00a0<\/p>\n
\n\tInstead, he thinks the brand has overstretched itself and drove unhealthy sales with less than ideal product.\u00a0<\/p>\n
\n\t\u201cYou need someone who understands and is willing to take leadership of a company, not announcing growth, but announcing strength, announcing a path to improvement,\u201d Siegel said. \u201cAnd a lot of public company CEOs believe that growth is the air they breathe. And so in scenario two, the business is best equipped to find someone with the will, with the stomach to announce a pullback in sales, a purposeful pullback in sales, to ultimately see the growth.\u201d\u00a0<\/p>\n
\n\tWhile Wilson has been making a lot of the noise, the process has stirred up the question of just what are the skills needed to be CEO and where can they be found.\u00a0<\/p>\n
\n\tThere is a belief among some that it\u2019s an uneasy step from CFO to CEO, that whoever is in the big job needs to be first a product person.\u00a0<\/p>\n
\n\tBoth Nielsen and Frank have done turns as CFOs, for sure, but it\u2019s also a role now that has much more strategic impact than when they were just crushing numbers all day.\u00a0<\/p>\n
\n\tA source friendly with Nielson said she is \u201cthe whole package,\u201d is \u201casking the right questions\u201d and \u201cgets the brand piece.\u201d<\/p>\n
\n\tAnd Joanne Crevoiserat, CEO and former CFO of Coach-parent Tapestry Inc., has proven that knowing one\u2019s way around a spreadsheet is not necessarily a bad thing at the tippy-top.<\/p>\n
\n\tLaurent Vasilescu, an analyst at BNP Paribas, said: \u201cThese CEOs are not designers. They are leaders. They\u2019re running [the company], thinking about the design team, marketing team, the finance team, real estate team. That\u2019s what they are.<\/p>\n
\n\t\u201cAnyone who comes in as CEO, she or he will not be designing the product,\u201d he said. \u201cWhat she or he will need to do is figure out if they have the right design team, right design directive.\u201d\u00a0<\/p>\n
\n\tVasilescu said Lululemon has to boost marketing and also cut back on back office costs.\u00a0<\/p>\n
\n\t\u201cThat is totally in Jane Nielsen\u2019s wheelhouse,\u201d he said. \u201cThat\u2019s what she did at Ralph. She did that. So they need that as well.\u201d<\/p>\n
\n\tSo the company\u2019s fourth-quarter results, when they come out after the market closes on Tuesday, will be the side show.<\/p>\n
\n\tInstead, everyone will be watching for which way the wind is blowing as Lululemon takes to the high wire.<\/p>\n
\n\tThe Bottom Line is a business analysis column written by Evan Clark, deputy managing editor, who has covered the fashion industry since 2000.<\/p>\n
#Challenges #Candidates #Future #Strategy<\/p>\n","protected":false},"excerpt":{"rendered":"
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