You can breathe out now, lululemon athletica shareholders. Because according to Lululemon founder Chip Wilson, your favorite yoga apparel specialist is finally back on track. In fact, Wilson feels so comfortable with Lululemon's current direction that he's finally ready to step down from its board of directors.
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"I have achieved the goals I set when I came back," the company's former chairman stated in a press release Monday, "and after careful thought, I believe that now is the right time to step away from the board."
Wilson did more than you may think
That sounds like great news for investors and customers alike. Despite the incredible business he built, many people have been frustrated with Wilson's PR missteps over the years, which most recently include everything from brash, customer-alienating comments to a distracting fight with the board as Lululemon struggled to right its ship in 2014.
Lululemon founder Chip Wilson. Credit: Lululemon.
But if new details in Wilson's latest announcement are any indication, that distraction may be the very reason for Lululemon's recent outperformance.
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Specifically, the press release notes Wilson stepped away from day-to-day management in early 2012 to begin a sabbatical in Australia, but the board called him back in the spring of 2013 to "help handle a crisis that occurred while he was away and position the company [toward] longer-term corporate objectives."
That "crisis" undoubtedly refers to Lululemon's massive sheer-pants recall in early 2013, which affected around 17% of all bottoms in its stores and resulted in inventory issues, causing the company to make significant investments to improve its supply chain and quality assurance for several quarters going forward.
Why the board shake-up was necessary
But according to Wilson, it didn't end there:
Upon returning fromAustralia, I saw that the company had lost its way and was driven by the wrong values. Trying to affect a fundamental shift in direction is hard, and I had to raise a strong voice to make myself heard while taking decisive action to implement change.I am happy to say that I now believe the company has returned to the core values that made it great -- product, brand, and culture -- and is back on track.
After resigning from his position as board chairman in December 2013, and thenpublicly voicing his discontent last June, Wilson effectively called a truce with Lululemon's board by agreeing to standstill provisions for the company's 2015 and 2016 shareholder meetings. Wilson also sold half his stake in the company to private-equity firm Advent International. In exchange, Lululemon agreed to add two new board seats to be populated by Advent employees, one of whom would serve as co-chairman, while the other would serve on its compensation committee. Lululemon also committed to undertaking a corporate governance review.
"The impact of these measures," Wilson now points out, "has been seen in the increase in Lululemon's share price from a low of $36.26 in June 2014 to its current share price -- a change in market capitalization of over $4 billion."
Giving credit where it's due
We should keep in mind this rise has been a financial boon for Wilson, who still owns around 13.85% of Lululemon's outstanding shares, worth a cool $1.3 billion as of this writing. It's naturally in his best interest, then, to say the company is finally back on track. And these aren't just hollow promises, either. Lululemon stock is up 20% over the past month alone, after the companyincreased guidancefor its crucial holiday quarter, indicating that its turnaround is beginning to build momentum.
That's not to say Wilson deserves all the credit. The same day he announced his resignation as chairman, Lululemon eloquently introduced its new CEO, Laurent Potdevin, in a video highlighting his past experience, including three years as president of socially conscious shoe maker Toms, a five-year stint as the CEO of Burton, and the start of his career in 1991 as an executive for luxury juggernaut LVMH. Since then, I've been consistently impressed with Potdevin's long-term vision for the company, and I've had every reason to believe he was a shoo-in for leading Lululemon back to its former glory.
But given the timing of its rise, we shouldn't discount the possibility that Lululemon's turnaround was, at the very least, accelerated by Wilson's efforts to ensure that its executive team placed that long-term vision front and center. In the end, though Wilson's involvement now is "merely" that of a large shareholder, investors should be encouraged that his interests are still firmly aligned with their own.
The article Why lululemon athletica, Inc.'s Founder Is Finally Stepping Down originally appeared on Fool.com.
Steve Symington owns shares of Lululemon Athletica. The Motley Fool recommends Lululemon Athletica. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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