Sportswear Brands Embrace The Era Of Fast CEO Turnover: Lululemon's McDonald Latest To Join Exit Parade’

• Rising competition from Alo Yoga and Vuori has reduced customer visits to Lululemon stores in recent years, forcing the company to rethink its strategy.
• In November, Lululemon announced the departure of Celeste Burgoyne, who then served as the President of the Americas.
• A dearth of product innovation and life cycles of product offerings lasting longer than needed has hurt Lululemon.

One of the most noticeable trends in today’s sportswear world is that boards are quick to spot failures and push for change—even when it means replacing a CEO.

Joining Nike, Puma, and Under Armour, Lululemon announced on Thursday that its CEO, Calvin McDonald, is leaving the company at the end of January. Under him, the company’s sales have grown steadily, and China has become the sportswear maker’s second largest market, but the positives don’t outdo the recent mishaps.

A dearth of product innovation, product offerings with life cycles that last longer than needed, and a bunch of rising small competitors have eaten into Lululemon’s market share, hurting the company’s sales and profits alike.

McDonald Leaves LULU After 7 Years At Helm

With McDonald’s as CEO, Lululemon’s investor day almost looked like a classic Hollywood band ready to take on the world with their latest release, but this was four years ago, when all was good for the company.

In recent years, rising competition from Alo Yoga and Vuori has reduced customer visits to Lululemon stores, leaving the company to figure out its strategy, going from a favourite yoga pants brand to a less-preferred one now.

And looks like McDonald’s has not been able to steer Lululemon around completely, with Wall Street analysts noting that even the latest releases have not resonated with customers.

“In my conversations with the board, we carefully considered what's ahead for the company and for my own journey. Together, we agreed that the timing is right for a change as we near the end of our five-year plan cycle,” McDonald said during a post-earnings call.

“I've described being CEO of Lululemon as my dream job. It truly has lived up to every expectation and given me the opportunity of a lifetime,” McDonald said on Thursday.

The company said that CFO Meghan Frank and Chief Commercial Officer Andre Maestrini are appointed as interim co-CEOs while Lululemon looks for a successor to McDonald.

In November, Lululemon announced the departure of Celeste Burgoyne, its President of the Americas. Lululemon then said that, given Burgoyne’s departure, it has decided to consolidate regional leadership across the company. The company named Andre Maestrini as President and Chief Commercial Officer.

But analysts had then called the change a negative, given that Maestrini is based in London. Now with the CEO exiting, it’s the third high-profile executive departure at Lululemon in a year and a half.

In November, the Wall Street Journal noted that Lululemon founder Chip Wilson has been publicly trolling the board and McDonald, while blaming a “loss of cool” on the kind of CEO who can “speak Wall Street” but is killing innovation. 

Nike Reinstated Company Veteran Last Year As CEO

Previous Nike CEO John Donahoe focused on pushing the direct-to-consumer strategy, souring relationships with retailers that cost the company sales. And like Lululemon today, Nike faced a lack of innovation, with overproduced lines such as Air Force 1s.

Tension and concerns had built up as the sportswear giant was now losing market share consistently and also shelf space at the likes of Dick’s Sporting Goods and Foot Locker to nascent brands such as On, and also the one that decided to pursue innovation and comfort, Hoka.

Nike promptly replaced Donahoe with company veteran Elliott Hill, who took the helm in October last year and has since worked to rebuild wholesale relationships and fast-track new launches to beat out the competition.

Under Hill, the stock has regained some of the lost value and is seeing a pull in consumer demand for its Pegasus and Vomero running shoes. Nike has also partnered with Kim Kardashian’s Skims to launch NikeSKIMS, under which the companies will release athleisure for women, a demographic that Nike let slip to others, including Lululemon.

Puma Followed Nike In Naming A New CEO

In April this year, Puma said that its Supervisory Board had appointed Arthur Hoeld as CEO, effective in July. The previous CEO, Arne Freundt, and the board mutually agreed that he would step down due to differing views on strategy execution. He left the company after being in various leading positions for 14 years.

Hoeld is a former Adidas executive credited with transforming the Adidas “Originals” division, generating more than 7 billion Euros in sales. He had joined Adidas in 1998 and held various leadership positions within the sports company.

The move came as Puma struggled to boost revenue and profit, while, much like Nike, it was losing market share. However, Puma’s well-known competitor, Adidas, has seen strong growth owing to the Samba and Gazelle sneakers, which pulled it out of a slump.

Puma and Adidas' rivalry dates back 75 years and is rooted in the conflict between two brothers, Adolf Dassler, the founder of Adidas, and Rudolf Dassler, who founded Puma.

Under Armour Brings Back Founder Kevin Plank

The company was the first to kick off a change at the helm in the sportswear industry, bringing back its founder, Kevin Plank, in February last year. Plank founded Under Armour in 1996 and served as CEO until 2019. He replaced Stephanie Linnartz, who had been in the role for just over a year.

Under Plank, Under Armour has turned to cost-cutting, full-price sales and also parted ways with Stephen Curry, calling it quits after over a decade-long partnership between the NBA star and the company.

How Are Retail Users Are Reacting?

Retail sentiment on Lululemon jumped to ‘extremely bullish’ from ‘neutral’ territory compared to a month ago, with message volumes at ‘extremely high’ levels, according to data from Stocktwits.

A user on Stocktwits noted that Lululemon could report “great earnings for the fourth quarter.”

Sentiment on Nike also improved to ‘extremely bullish’ from ‘neutral’ territory a month ago, while on Under Armour, retail sentiment dipped to ‘bearish’ from ‘bullish’ one month back.

Shares of Lululemon have lost more than half of their value so far this year, while Nike’s stock has declined over 8% and Under Armour shares have fallen nearly 47% year-to-date.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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