Lululemon names former Nike executive O’Neill its next CEO

[VANCOUVER] Lululemon Athletica named Heidi O’Neill its new chief executive officer as the athletic retailer looks to move beyond a turbulent period of slowing growth and investor unrest.

O’Neill, who previously spent nearly three decades at sneaker giant Nike, will start on Sep 8, with Lululemon’s interim leaders, Meghan Frank and André Maestrini, returning to their previous roles, board chairman Marti Morfitt said in a letter seen by Bloomberg on Wednesday (Apr 22).

Once considered a candidate for the top job at Nike, O’Neill is faced with the task of trying to drive growth at a company that is losing dominance in an athleisure category it helped create. Recent product mishaps, including selling leggings that were see-through, and a disappointing sales outlook have left investors questioning whether Lululemon can pull itself out of a rut.

Shares of Lululemon fell as much as 4.6 per cent in premarket trading on Thursday. The stock had fallen more than 21 per cent this year as of Wednesday’s close.

The appointment of O’Neill, previously president of consumer, product and brand at Nike, continues Lululemon’s tradition of “out-of-left-field CEO picks,” William Blair analyst Sharon Zackfia said in a note.

“A 26-year Nike veteran, O’Neill was not a name bandied around on Wall Street given no prior public company CEO experience,” Zackfia wrote.

“Although she brings a significant breadth of knowledge in women’s performance apparel and her experience accelerating speed-to-market is particularly welcome at Lululemon where lead times have ballooned to about 24 months,” she added.

O’Neill’s Linkedin profile states that she helped to triple revenue in Nike’s women’s business and spearheaded initiatives like the company’s collaboration with Kim Kardashian’s Skims label.

The appointment of O’Neill will “come as a surprise to many investors, based on our discussions,” Simeon Siegel, an analyst at Guggenheim Securities, wrote in a note. He said that while he looked forward to hearing O’Neill’s diagnosis of Lululemon’s issues and “potential fixes”, he believes a “necessary revenue reset” could cause negative revisions in the second half.

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“We fear Lululemon remains a strong, but overstretched brand,” he added.

The Vancouver-based company, whose last permanent CEO Calvin McDonald left in January, has ceded share to upstarts like Alo Yoga and Vuori. In its last quarter, it reported its slowest sales growth since the company went public in 2007.

Lululemon’s founder, Chip Wilson, who no longer has a formal role with the company but is one of its biggest shareholders, has publicly criticised the brand and pushed for changes on its board.

Meanwhile, Elliott Investment Management, which has built a stake of more than US$1 billion, preferred former Ralph Lauren Corp. executive Jane Nielsen for Lululemon’s top job.

The initial stock reaction could reflect O’Neill’s start date – nearly five months out – and investors’ lack of familiarity with the executive, according to William Blair’s Zackfia.

“It’s also unclear whether O’Neill was plucked from retirement, yielding uncertainty as to how long her leadership stint at Lululemon may last,” she said. BLOOMBERG