Lululemon CEO McDonald to step down, shares jump 10%
Lululemon Athletica (LULU) announced that CEO Calvin McDonald will be stepping down in January after leading the company for about seven years. The company also raised its annual profit forecast, causing shares to rise by around 10% in after-hours trading on Thursday.
However, Lululemon has faced challenges recently, particularly in the U.S., where sales have been weak. Over the last two years, its stock has fallen by 61%. The brand, known for its expensive leggings and athleisure clothing, has lost market share to newer brands like Alo Yoga and private-label competitors. Executives have expressed disappointment with the company’s product offerings.
According to the Wall Street Journal, sources close to the matter revealed that founder Chip Wilson was frustrated with the company’s marketing strategy and had even considered launching a proxy fight. In the meantime, Lululemon appointed CFO Meghan Frank and Chief Commercial Officer André Maestrini as co-interim CEOs while they search for a permanent replacement.
This leadership change is part of a broader trend in the retail industry, as companies try to appeal to younger, more cautious shoppers while managing supply chain and operational challenges. Lululemon also approved a $1 billion increase to its stock buyback program.
David Swartz, an analyst at Morningstar Research, believes investors are pleased with the company’s response to the leadership change, despite McDonald’s successful tenure as CEO.
Although the holiday shopping season started off well during the Thanksgiving period, McDonald mentioned that demand has slowed down recently, as consumers continue to opt for more affordable options in the apparel sector. Discounts are expected to rise as Lululemon works to clear out older inventory. The company has planned to keep its inventory levels below sales expectations for 2026.
Interim CEO Frank added that Lululemon plans to invest more in marketing during the fourth quarter to drive traffic and raise brand awareness.
Lululemon now expects annual profits to be between $12.92 and $13.02 per share, up from its previous forecast of $12.77 to $12.97 per share. It has also raised its annual sales target. However, the company warned of a $210 million hit to its 2025 income due to tariffs and forecast a 390-basis-point decline in its operating margin for the year.
Matt Jacob, an analyst at M Science, pointed out that Lululemon has lost ground in the increasingly competitive athleisure market, particularly in its core women’s pants segment. Despite multiple efforts to address this, the company has struggled to regain market share. This will be a key challenge for the new permanent CEO.
In 2013, former chairman Dennis “Chip” Wilson made controversial remarks about certain women’s body types not being suited for Lululemon’s yoga pants. He later returned to a more active role as the company dealt with a major recall of its signature yoga pants due to transparency issues. Wilson stepped down as chairman shortly after the comments.
