Lululemon Founder Won't Go Down Without a Fight
Over at Lululemon, it looks like there's a civil war brewing.
On one side: Chip Wilson, the yoga retailer's founder, largest shareholder (with a 27 percent stake in the company), former CEO and up until last month, chairman.
On the other: the company's current board, led by newly inducted chairman Michael Casey.
Events came to a head two weeks ago when, just hours before the company's annual shareholder's meeting, Wilson announced that he was voting against the election of two outside board members (including Casey), citing concerns that they board was sacrificing long-term corporate goals for short-term results. "My vote today sends a signal to the financial community that the company must address this imbalance if Lululemon is to fully recover," he said in a statement.
Despite his protest, both board members were re-elected.
Instead of backing down, however, it appears like Wilson is suiting up. He's now working with investment-banking firm Goldman Sachs to gain more control of the company -- either through a proxy fight for board seats or by partnering with a private equity firm to buy out the company, The Wall Street Journal reported.
Related: Lululemon Messes Up... Again
While Wilson has expressed his full support of the new management, the board's infighting places newly-hired chief executive Laurent Potdevin in something of a tricky situation as he tries to turn the company's flagging trajectory around. “Our parents are fighting and it’s awkward,” he said earlier this month.
Lululemon has been in the news quite a bit lately and has learned, in the words of the company's chief financial officer, that the maxim all PR is good PR "isn't always the case." The Vancouver, British Columbia-based athletic retailer had a disastrous 2013. First, the company was forced to recall a line of yoga pants -- losing $67 million revenue -- after the awkward revelation they were essentially see-through. Then in November, Wilson, in a misguided bout of defensive posturing, told Bloomberg TV that "some women's bodies just don't actually work" for the company's clothing, implying that customers without a thigh-gap should take their money elsewhere. (A month later, Wilson announced his resignation and stepped down in June).
These missteps, along with a failure to adapt to changes in consumer demand, have taken a toll on the company's bottom line. Earlier this month, the company reported first-quarter earnings that topped analyst expectations, but lowered its outlook for the second quarter and the full year. Shares of Lululemon are also down more than 34 percent from a year ago.
"As a 27% shareholder in the company, I believe change is now needed at the Board level to increase shareholder value," Wilson wrote. But will declaring a war on the board help the company he founded, or maim it further as it continues to try and recover from last year's recall?
Wilson isn't the only founder plotting to fight the board of his company for more control. Last Wednesday Dov Charney, the founder and CEO of American Apparel, was ousted from the company over accusations of misconduct. (Buzzfeed published Charney's alleged letter of termination, which includes charges of sexual harassment and the misuse of company assets.) In response, Charney is threatening to sue the debt-ridden Los Angeles-based retailer if he isn't reinstated, The Los Angeles Times reported. (Like Wilson, Charney retains a 27 percent stake in the company he founded, which means he could also attempt a takeover with the backing of a private equity firm.)
This spring, RadiumOne's board of directors also fired the company's founder, chief executive and major shareholder Gurbaksh Chahal after he pled guilty to two misdemeanor charges involving a domestic violence incident with his girlfriend. Chahal has since said he plans to sue for "wrongful termination." And back in 2013 George Zimmer, the founder of Men's Wearhouse, exchanged some heated words with the company’s board after they gave him the boot.
Whatever the result, it's shaping up to be a very public showdown at Lululemon -- one that will likely end in more mudslinging than peaceful Namastes.