The Epic Drama at Lululemon

Ryan Knutson (0:05)

For the last several years, there's been an epic fight over the future of Lululemon. Our colleague Suzanne Kapner has been following every twist and turn.

Suzanne Kapner (0:18)

Firstly, you've got a founder who just won't walk away, so it's suffering from a case of founder syndrome, and he has been lobbing criticism at this company from the sidelines for almost a decade.

Chip Wilson (0:32)

So if you look at about 30 percent 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 is being run so poorly and it's been not just three years, probably four or five years.

Suzanne Kapner (0:49)

You know, it kind of reached a pinnacle when he launched a proxy fight against the company.

SPEAKER_4 (0:53)

Lululemon founder Chip Wilson is launching a proxy fight at the Athleisure Company in an effort to shake up the board.

Ryan Knutson (1:00)

And during all this drama, sales have been slowing.

Suzanne Kapner (1:04)

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 Aloe and Beyond Yoga and Viori 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.

Ryan Knutson (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. Her name is Heidi O'Neill.

How did the market receive the news that Heidi O'Neill was going to be the CEO?

Suzanne Kapner (1:49)

Well, the market was not happy.

SPEAKER_4 (1:53)

Lululemon shares are down about 5% as the company names a new CEO.

SPEAKER_5 (1:57)

The company naming...

Suzanne Kapner (1:57)

The stock price went down quite a bit the day of that announcement.

SPEAKER_6 (2:01)

Lululemon tumbled after an announcing appointment of Heidi O'Neill as the new CEO.

Ryan Knutson (2:08)

Since 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.

Suzanne Kapner (2:20)

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.

Ryan Knutson (2:34)

How hard will it be for this new CEO to bend this company back into shape?

Suzanne Kapner (2:40)

It's not going to be easy.

There's a lot of work to be done. And boy, does she have an uphill battle.

Ryan Knutson (2:49)

Welcome to The Journal, our show about money, business, and power. I'm Ryan Knutson. It's Friday, September 25th.

Coming up on the show, the battle over who wears the pants at Lululemon.

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