News Summary

  • Lululemon announced on Thursday thatCEO Calvin McDonald will step down at the end of January. The news comes as Lululemon's business in its largest market, North America, shows signs of slowing.
  • The company's board of directors, in conjunction with an executive search firm, is conducting a "comprehensive search" to identify a new chief executive. McDonald will continue to serve as an advisor until March of next year and assist the board with the transition.
  • CFO Meghan Frank and Chief Commercial Officer André Maestrini will serve as interim co-CEOs following McDonald's departure. Board Chair Marti Morfitt will expand her responsibilities immediately, assuming the role of Executive Chair to assist with strategic execution.

In-Depth Analysis

Lululemon is bidding farewell to McDonald, who led the company through a period of rapid growth, but the brand now faces challenges inmaintaining consumer relevance, with demand in its largest region continuing to decline.

The company released its earnings report on Thursday,with revenue up 7% year-over-year to $2.6 billion, but sales in the Americas region fell 2% during the quarter. Overall comparable store sales increased 1%, while the Americas region saw a 5% decline.

Morfitt said in a statement: "On behalf of the Board and the entire organization, I want to thank Calvin for his vision in building lululemon into one of the strongest brands in retail. During his tenure, Calvin led lululemon to impressive revenue growth, resonating with customers globally through differentiated products and experiences. We are grateful for Calvin's many contributions and appreciate his continued support in the coming months to facilitate a seamless transition."

McDonald has served as Lululemon's CEO since 2018, helping the company triple its annual revenue during his tenure and significantly expand into international markets. According to an SEC filing submitted Thursday, he will receive$3.05 million from Lululemon, plus $2.1 million in severance and a fiscal 2025 bonus.

Frank, in her role as co-CEO, will receive an annual salary of $950,000, a retention bonus of $1.5 million, and equity awards valued at $4 million. Maestrini, who wasjust appointed Chief Commercial Officer last month, will receive a retention bonus of $750,000 and equity awards valued at $4 million due to his expanded responsibilities. The company stated that these two executives "bring extensive global retail experience and a proven track record of driving growth at Lululemon."

McDonald described his time at Lululemon as "the highlight of my career" and said the brand still has tremendous potential ahead.

McDonald said: "I believe the strong product pipeline we have built and the action plans we have developed will yield positive results and create value for shareholders in the coming months and years. I am committed to fully supporting the transition and helping the leadership team execute the strategy in my advisory role."