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- Lululemon CEO Calvin McDonald will step down in January, the company announced on Thursday.
- Interim CEOs Meghan Frank and André Maestrini will lead during the transition.
- Lululemon faces challenges with declining U.S. sales and increased market competition.
NEW YORK — Lululemon Athletica said that CEO Calvin McDonald was leaving the company without a replacement and raised its annual profit forecast, sending shares up about 10% in extended trade on Thursday.
McDonald will step down from Lululemon in January after about seven years at the helm.
However, sales in the U.S. have suffered in recent times, with its stock falling 61% over the last two years. Lululemon, known for its pricey leggings and athleisure clothing, has lost ground to upstart brands such as Alo Yoga as well as private-label replicas, with executives noting that they were disappointed with its product execution.
The Wall Street Journal reported, citing people familiar with the matter, that the company's founder, Chip Wilson, was frustrated with marketing and had been considering a proxy fight.
The company named its finance chief Meghan Frank and chief commercial officer André Maestrini as co-interim CEOs while it searches for a new boss.
The shake-up at the top also is the latest in a string of big changes in C-suites for retailers as they look to capture a younger, more cautious audience and wade through supply chain and operational issues. Lululemon also approved a $1 billion increase to its stock buyback program.
"With the stock down so much, I think investors are satisfied that Lululemon's board is taking aggressive action," said Morningstar Research analyst David Swartz, who nevertheless said McDonald has been a very effective CEO.
Holiday season off to a good start, but concerns persist
While the holiday shopping season was off to a strong start with the Thanksgiving period, demand has slowed since, as consumers continued to trade down in the apparel space, McDonald said on a post-earnings call.
Discounts are also expected to be higher as it works to clean out aged product lines. The company said it would plan inventory units below sales in 2026.
Frank said on the call that Lululemon would invest in marketing in the fourth quarter to help drive traffic and build brand awareness.
Lululemon now expects annual profit between $12.92 and $13.02 per share, compared with previous expectations of $12.77 to $12.97 apiece, while it also raised its annual sales target.
It now sees a $210 million hit to its income from operations in 2025 due to tariffs, and reiterated its expectation for annual operating margin to decrease by about 390 basis points.
"(Lululemon) lost share in a increasingly competitive athleisure market and specifically has not been able to successfully address its weakening share of the core women's pants despite multiple attempts to address that. So that will be a challenge for the new permanent CEO," said Matt Jacob, analyst at M Science.
In 2013, then-board Chairman Dennis "Chip" Wilson said that some women's body shapes "just actually don't work" with Lululemon yoga pants. Wilson returned to a more active role in the company in 2013 as Lululemon dealt with a high-profile recall of its signature yoga pants after complaints mounted that they were overly see-through. Wilson stepped down as chairman a month after the remarks.
Lululemon did not immediately respond to a Reuters request for comment about the proxy fight report.
For the quarter ended Nov. 2, the company reported net revenue of $2.57 billion, beating estimates of $2.48 billion, according to data compiled by LSEG.
