Lululemon launches search to replace longtime CEO

Lululemon launches search to replace longtime CEO

Lululemon Athletica is looking for a new chief executive, an abrupt move that spooked investors and sent the yoga-clothes maker's stock down 14% in late trading.

 

Chief Executive Christine Day, who has run the company since 2008, said she would step down as soon as a replacement is found. Her departure comes three months after the maker of popular yoga gear was forced to make an expensive and embarrassing recall of its top-selling pants.

The company didn't explain why it is parting ways with Ms. Day, who has had one of the stronger runs in retailing, using sharp design and planned scarcity to build a cultlike following for pricey yoga gear.

Ms. Day said the time is right to find a leader to drive the next phase of the company's growth. The CEO informed fellow Lululemon directors of her plans last Friday, she said.

The board has formed a search committee for a new CEO.

"This was a personal decision of mine," Ms. Day said. "It's never a perfect time to leave a company you love." She also plans to step down from the board.

Ms. Day received compensation valued at $4.28 million for the company's 2012 fiscal year, including salary, stock and options awards.

The 51-year-old joined Lululemon in January 2008 and oversaw its retail operations before becoming CEO in June that year. Over her tenure, Lululemon's annual revenue more than quintupled to $1.37 billion, profits rose nearly nine times to $271 million, and the stock climbed more than five times higher.

But the past few months have been marred by a recall that was a black eye for a brand that has long touted itself as premium. Lululemon announced in March that it was pulling yoga pants from its stores after finding they became too transparent when wearers bent over.

The incident followed a string of quality problems a year earlier and cost the company tens of millions of dollars. The company's stock price fell, and Lululemon Chief Product Officer Sheree Waterson left her post in April.

Lululemon had seemed to put the incident behind it. The company began restocking the pants in recent weeks, and its shares have rebounded sharply. At Monday's close, Lululemon's stock had risen by 25% since the company disclosed the problem with the pants on March 18.

Reflecting costs from the recall, Lululemon's profit for the three months ended May 5 edged up 1.5% to $47.3 millionfrom $46.6 million a year earlier, even as revenue jumped 21% to $345.8 million, the company said Monday.

When asked by an analyst what she plans to do after leaving, Ms. Day said she is not "distracting myself" with other things and will be focused on running Lululemon until a new CEO is found.

Lululemon executives said yoga pants won't be fully back in stock until the end of the company's second quarter. The company is now looking to hire separate people to oversee its product design and merchandising, and supply chain functions.

Publicity about the pants problem resulted in "curiosity traffic" to Lululemon online and physical stores in recent months, company executives said. Ms. Day said that type of customer traffic was "unproductive," because most of it didn't lead to sales.

Source: WSJ