Lululemon founder Dennis “Chip” Wilson is ratcheting up the heat in his quest to get three independent directors elected to the company’s board.
As reported, Wilson, who still owns more than 8 percent of the brand, has been vocal about the direction of the company, sniping publicly that it is “in a nosedive.” In December, he put forth three directors — former On Holding AG co-chief executive officer Marc Maurer, former ESPN chief marketing officer and founder of espnW Laura Gentile, and former Activision CEO and former Deutsch LA co-CEO and chief creative officer Eric Hirshberg — stating that Lululemon needs visionary creative leadership to thrive and that the “current board lacks these skills.”
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On Friday, he wrote a letter to shareholders saying that despite pursuing “private, constructive dialogues with the Lululemon board of directors for the past few months,” his “attempts toward a sensible solution have not been reciprocated.”
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He said the “heart of the issue is a disconnect between the company’s creative engine and the board’s strategic oversight of how nonquantifiable power of brand and product translates to brand strength, margin durability and long-term shareholder value.”
He cited that the stock has lost nearly half of its value over the past five years, costing shareholders roughly $20 billion, and “there is an existing crisis” to hire a permanent chief executive officer after Calvin McDonald stepped down from that role on Jan. 31 and has not been replaced.
Wilson went on to detail some of what he termed as attempts at resolution over the past several months. One of the candidates he put forward — he did not specify which one — met with the board on Feb. 24, more than 70 days after being put forth as an alternative, but “the response was weak and insufficient.”
He said the board indicated “some openness” to “director refreshment,” but “over a period of multiple years.”
Lululemon took issue with some of Wilson’s claims, putting out a statement in response on Friday, saying: “We have continued to engage with Mr. Wilson in good faith over the past few months, including numerous meetings, with the goal of having a productive dialogue with him. We disagree with Mr. Wilson’s characterization of his interactions with the board. The board has repeatedly requested the opportunity to interview Mr. Wilson’s director nominees. However, Mr. Wilson had indicated he would not allow the board to meet with these individuals unless the board agreed to a full set of settlement terms. To date, Mr. Wilson has only allowed one nominee, Marc Maurer, to have preliminary conversations with the board, which the board has welcomed. It is unfortunate that Mr. Wilson has been unwilling to have a constructive dialogue toward a reasonable resolution.”
Wilson also claimed the board rejected his proposal to create a brand product committee, a move that has been embraced by Amer Sports and led its brands, Wilson and Arc’teryx, “to deliver cutting-edge performance” and the company to become one of the best-performing consumer goods stocks.
Lululemon’s reponse did not address this suggestion.
Wilson also cited concern about the board’s independence since the director who oversees the nomination procedure, David Mussafer, is a candidate for election this year. “How can shareholders trust his independent judgment of nominees who are poised to remove him from the board in a proxy contest,” Wilson asked.
He concluded the letter by saying that his “passion for Lululemon is not rooted in nostalgia or my past with the company. It is grounded in a deep understanding of the brand’s origin, an undeniably unique long-term perspective on its competitive positioning and a conviction that Lululemon’s best years remain ahead, provided we make the right strategic and governance changes imminently.”
Lululemon said the board “remains open to engaging with Mr. Wilson as well as the company’s other shareholders and will continue to take actions that we believe are in the best interests of all of the company’s shareholders.”
Wilson is not the only threat to Lululemon’s current management. Activist investor Elliott Investment Management acquired a $1 billion stake in the company last year.
Last month, the company said it expects fourth-quarter profits and sales to be at the high end of prior forecasts, with fourth-quarter revenue expected to be between $3.50 billion and $3.59 billion, and earnings per share in the range of $4.66 to $4.76.