Lululemon Founder Deeply Dissatisfied With Firm’s Performance

Poor company performance rarely brings out laudatory reactions and so in some sense the board of Lululemon getting chewed out by firm founder Chip Wilson is not entirely shocking.

But the open letter to shareholders released mid-week was certainly eye-catching.

“Management competence is uninspiring at best. I am not convinced we have the right leadership in place to catalyze the change necessary to win in the current global, multi-channel and dynamic environment,” Wilson wrote.

Wilson is no longer on the board of Lululemon, as he resigned last year, but he owns a 14.2 percent stake in the company, which explains why he is just so irate over a financial performance he referred to as “dismal.”

And, Wilson contends, far from inevitable, given that Nike and Under Armour are successfully doing what they used to do better (and eating up their market share while doing it).

Lululemon defended its performance, naturally.

“As evidenced by our strong operational performance, we have the right board of directors and leadership team in place with the broad and deep expertise necessary to support the execution of our strategic five year plan,” Lululemon said, according to CNBC. “This solid foundation gives us the tools to innovate and create as we deliver long-term sustainable growth for all stakeholders.”

Lululemon has seen its share price fall by 6 percent since Laurent Potdevin arrived as CEO, while shares of Nike and Under Armour have risen 39 percent  and 76 percent, respectively, during that time period. And those big players are far from alone. Athleisure is hot, and a wide variety of brands are attempting to cash in on it.

“Unfortunately, Lululemon has lost its way and I believe a call to action is needed,” Wilson wrote. “I feel strongly that our current board and management team must clearly articulate and execute a strategy with urgency towards regaining Lululemon’s competitive advantage and profitable growth and they must take responsibility … Since this management has been at the helm, Lululemon has grown revenues by half a billion dollars. Yet net income has declined! Not one incremental dollar of earnings has flowed to the bottom line.”

Wilson noted the opinion that Lululemon should declassify its board.

“Shareholders deserve the right to vote on all of the board members and, if they so choose, make a change. But this is something prevented by our current staggered board, which only allows us to vote on three directors at a time.”

Despite the doom and gloom, Lululemon had some good news to report at earnings time, and even managed to beat Wall Street estimates with cost-cutting and supply chain upgrades. Sales were up 17 percent to $704.3 million during the last fiscal quarter, same-store sales were up 5 percent and the firm confirmed its plan to grow revenue by $4 billion over the next five years. They also plan to double earnings in that time.

Perhaps then, Chip Wilson will be feeling a bit less upset.