New Lululemon CEO faces multiple challenges in rebuilding company’s edge

Former Nike executive Heidi O’Neill takes over as chief executive of Vancouver-based Lululemon Athletica Inc. on Tuesday, inheriting a 28-year-old athleisure retailer facing pressure on several fronts.

York University governance, law and ethics professor Richard Leblanc said O’Neill must manage competing expectations from stakeholders, customers, employees, investors, founder Chip Wilson, board members and competitors. Lululemon’s revenues have been shrinking, while its Nasdaq-listed stock has fallen from about US$500 in December 2023 to roughly US$100 recently.

The company has faced criticism over a lack of new styles, temporarily removed a leggings line that was too see-through and abandoned another that gave customers’ backsides a whale-tail appearance. Wilson had publicly criticized the company’s direction and its inability to keep up with newer rivals Alo and Vuori before agreeing in May to pause his public attacks on the brand.

Lululemon declined to make O’Neill available for an interview. It referred to comments by interim chief executive Meghan Frank, who told analysts the company expects O’Neill to take a deep dive into the business and assess its strategy and current action plan.

O’Neill’s early priorities include building relationships with a fractured board. Wilson secured two new board members in exchange for an 18-month pause in his public criticism, and has been promised a third director with apparel product and brand experience by Oct. 1, though that person has not been named. Leblanc said board and chief executive alignment will be critical.

She will also need to rebuild the company’s ranks. BNP Paribas Equity Research senior analyst Laurent Vasilescu said employees left for nearby rivals such as Arc’teryx after last year’s layoffs partly affected Lululemon’s headquarters, and that the past year’s turmoil worsened that trend. In August, the company lost its chief artificial intelligence and technology officer after less than a year, its chief strategy officer after 14 years, and was preparing for its chief communications officer’s departure shortly before O’Neill’s arrival.

GlobalData managing director Neil Saunders said Lululemon needs to restore its innovative edge through products emphasizing fit and comfort, new fabrics and technology, and more fashion in its designs. He also said some stores need refreshing. Analysts worry the company may have reached saturation in North America after recent quarterly revenue declines, while competition has intensified and athleisure spending slowed.

Saunders said O’Neill helped transform Nike’s women’s business into a multibillion-dollar growth driver, reduce product-development timelines and accelerate releases. Leblanc said investors, after waiting months for a chief executive appointment and for O’Neill to begin, will want a turnaround plan quickly.