Lululemon Is A Dog, No Matter Who Runs It

"Chip Wilson, founder and largest shareholder, has pressed for change at Lululemon Athletica Inc. ( NASDAQ: LULU | LULU Price Prediction). He recently sent a letter to other shareholders, which said, "Your investment in Lululemon Athletica Inc. is in trouble. The current board of directors of Lululemon simply does not understand this business and, as a result, shareholders have suffered." He has said he wants three new directors on the board."

"Lululemon has taken its own public position. It said it would not support Wilson's efforts to change the board, and added that shareholders should not "endorse his misguided perspectives." There have been "settlement" talks between Wilson and the company. They have fallen apart, so the winner will be determined in a proxy battle. From the perspective of investors, "what barks like a dog and acts like a dog, is a dog.""

"In the most recent quarter, revenue was up only 1% to $3.6 billion. EPS fell to $5.01 from $6.15 in the same period last year. What drove investors to distraction was that the company forecast revenue would rise as little as 1% in the first quarter of this year."

"Pessimists about the company's future say the popularity of its clothing lines and accessories has come and gone. Apparently, competitors Alo Yoga and Athleta have taken much of its market share. Among the reasons Lululemon has done poorly is its failure to evolve."

A fight over control of Lululemon has not led to stock gains. The founder and largest shareholder, Chip Wilson, argues the board does not understand the business and wants three new directors. Elliott Investment Management has also pushed for change. Lululemon opposes Wilson’s efforts and warns shareholders not to endorse his views. Settlement talks have failed, so a proxy battle will decide the outcome. Financial results show slow growth, with revenue up only 1% and earnings per share falling year over year. The company forecast similarly low revenue growth for the next quarter. Concerns include loss of popularity and market share to competitors, along with failure to evolve.

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