The Epic Drama at Lululemon

The Journal.

The episode details the intense internal and external struggles facing Lululemon, ranging from a long-standing conflict with founder Chip Wi

Key takeaways

• Founder Chip Wilson launched a proxy fight to influence the board and criticized management's direction.
• Lululemon's expansion into non-core categories like Disney and NFL partnerships is seen as muddying its brand identity.

Main topics

• Founder vs. Board conflict
• Athleisure market competition

Notable quotes

Lululemon in a nosedive.

Conclusion

The episode highlights the difficulty of managing a brand transition w

Transcript preview

Speaker 4 (0:05) For the last several years, there's been an epic fight over the future of Lululemon. Our colleague Suzanne Kappner has been following every twist and turn. Speaker 5 (0:17) Firstly, you've got a founder who just won't walk away. So it's, you know, suffering from a case of founder syndrome. And he has been lobbing criticism at this company from the sidelines for almost a decade. Speaker 3 (0:32) So if you look at about 30 % of their men's stuff, it's to me, it's like, it's appalling. I have been comparing the Lululemon to the competition in which Nike and Under Armour, which is really they've done appalling. The company's being run so poorly and it's been not just three years, probably four or five years. Speaker 5 (0:48) You know, it kind of reached a pinnacle when he launched a proxy fight against the company. Lululemon founder Chip Wilson is launching a proxy fight at the athleisure company in an effort to shake up the board. Speaker 4 (1:00) And during all this drama, sales have been slowing. Speaker 5 (1:03) Lululemon really created the athleisure market. And for a long time, it didn't have many competitors. But in recent years, the category has gotten a lot more crowded. You have Allo and Beyond Yoga and Viore and a number of new upstarts that are taking share, that are more on trend, that have become more nimble in knowing and predicting what customers want. Speaker 4 (1:28) But the company finally thought it had someone to right the ship. After an exhaustive search, a new CEO started at Lululemon earlier this month. She comes with about 25 years of experience at Nike. Speaker 2 (1:41) Her Speaker 4 (1:41) name is Heidi O'Neill. How did the market receive the news that Heidi O'Neill was going to be the CEO? Speaker 5 (1:49) Well, the market Speaker 1 (1:50) was Speaker 5 (1:50) not happy. Speaker 1 (1:52) Lululemon shares are down about 5 % as a company names a new CEO. The Speaker 5 (1:57) stock price went down quite a bit the day of that announcement. Lululemon tumbled after an announcing appointment of Heidi O'Neill as the new CEO. Since Speaker 4 (2:07) then, Lululemon's stock has kept falling. It's down about 50 % this year. What would you say is the question that's hanging over Lululemon now going forward? Speaker 5 (2:19) Who does it want to be? Who is its customer? Who is it targeting? It can't be everything to everyone. It was kind of lashing out in all directions. It needs to focus and figure out who it is and who its customers are. Speaker 4 (2:33) How hard will it be for this new CEO to bend this company back into shape? Speaker 5 (2:39) It's not going to be easy. There's a lot of work to be done. And boy, does she have an uphill battle. Speaker 4 (2:49) Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudson. It's Friday, September 25th. Coming up on the show, the battle over who wears the pants at Lululemon. Speaker 4 (3:23) If you pay close attention to what people are wearing these days, it can feel like everyone's on their way to the gym. People wear stretchy leggings and runner jackets to go shopping, meet friends, grab coffee, all without any intention of actually working out. The man who set this whole world in motion was Chip Wilson. Speaker 5 (3:43) People have been wearing spandex since the 80s, but he did innovate with the fabric. And he created these pants that were so comfortable and so flattering that women didn't want to just wear them to yoga class or to the gym. They'd wear them out socially. It just, he created this phenomenon that we now call athleisure. Speaker 4 (4:00) One day in the late 1990s, when Wilson was running a small sports apparel company in Vancouver, he went to a yoga class. And he noticed that people weren't wearing the best gear for stretching or absorbing sweat. Speaker 5 (4:14) It sort of opened his eyes to this growing popularity for yoga. And he really just,