The battle inside Lululemon (NASDAQ:LULU) just escalated. Founder Chip Wilson has moved from quiet frustration to open confrontation, accusing the board of weak governance, strategic drift, and slow engagement. In a sharply worded shareholder letter, Wilson argued that months of private outreach have led nowhere. He is now pushing for sweeping board changes while the company searches for a new CEO. The dispute follows product missteps, slowing U.S. sales, and a stock that has fallen roughly 50% over the past year. Wilson wants a board refresh, immediate declassification of directors, and the creation of a Brand Product Committee. The board says it has acted in good faith and disputes his claims. Investors now face a familiar question in retail activism: Is this necessary tough love from a founder, or destabilizing noise at a fragile moment? The answer could shape leadership, margins, and long-term performance.
Board Governance & Activist Pressure
Wilson owns about 9% of Lululemon. That makes him the company’s largest individual shareholder and gives weight to his critique. In December, he launched a proxy fight to replace three of the company’s nine directors. His nominees include former On Running co-CEO Marc Maurer, former ESPN CMO Laura Gentile, and former Activision CEO Eric Hirshberg. Wilson argues the current board lacks deep brand and creative expertise. He believes this gap has led to strategic drift.
In his latest letter, Wilson said the board has been slow to engage with his proposals. He described private discussions as unproductive and lacking urgency. He is now calling for broader refreshment beyond the initial three seats. Because Lululemon has a staggered board structure, only a portion of directors stand for election each year. Wilson wants immediate declassification so all directors are elected annually. That proposal was not embraced.
The board counters that it has repeatedly asked to interview Wilson’s nominees. It claims Wilson refused to allow meetings unless the board agreed to broader settlement terms. Only one nominee has had preliminary conversations. This dispute over access adds another layer of tension. Governance structure is no longer a technical debate. It has become the front line of a public battle.
Overlay this with Elliott Investment Management’s $1 billion stake and push for change, and the pressure compounds. Wilson is not the only activist voice. The governance debate now sits at the center of Lululemon’s investment case.
Product Execution & Brand Integrity
Wilson’s concerns go beyond board mechanics. He argues the company’s creative engine is strong, but the board has failed to translate that into sustained success. Recent product missteps gave fuel to that argument. The “Get Low” leggings faced criticism for being see-through, forcing a sales pause. The 2024 Breezethrough collection was pulled weeks after launch due to execution issues. For a brand built on technical performance and trust, those moments matter.
Management has acknowledged that product life cycles ran too long in some core franchises. The company plans to raise new style penetration to 35% in Spring 2026. It is shortening development timelines and improving “chase” capabilities to restock winning styles faster. Store tests in Los Angeles and Miami aim to reduce clutter and highlight newness. A redesigned website also aims to elevate storytelling and conversion.
Still, markdowns are up and gross margin has compressed. Q3 gross margin fell 290 basis points year over year. Q4 is expected to see a steeper decline due to tariffs and higher markdowns. Wilson has proposed creating a Brand Product Committee at the board level. That idea was rejected. His view is that brand stewardship deserves formal oversight. The board appears unconvinced that structural change is needed.
The deeper issue is brand integrity. Lululemon built loyalty on innovation and premium positioning. Any erosion in perceived quality can ripple through pricing power. Wilson sees that as an existential risk.
CEO Succession & Strategic Direction
The proxy fight is unfolding during a leadership transition. CEO Calvin McDonald will step down at the end of January. Interim co-CEOs Meghan Frank and Andre Maestrini will guide the company while a search for a permanent leader proceeds. The board says it wants a CEO with experience in growth and transformation. Wilson argues shareholders will struggle to trust a CEO chosen by the current board.
That timing is critical. Lululemon expects 2026 to be an inflection year for product and U.S. performance. The U.S. business declined 3% in Q3. China, by contrast, grew 46%. The gap highlights uneven momentum. Tariffs and the removal of the de minimis provision will weigh on margins next year. Management has warned that negative factors may outweigh positives in 2026 before multiyear efficiency gains take hold.
A new CEO must balance product reinvention, margin protection, and global expansion. Add activist pressure, and the role becomes even more complex. Wilson believes a refreshed board is essential before that leader is selected. The board appears comfortable proceeding under the current structure.
Strategic direction is now intertwined with governance. Decisions about product cadence, store expansion, and international growth will be judged through the lens of this conflict. Stability matters in retail. So does accountability.
Shareholder Value & Stock Performance
Investors have felt the volatility. Lululemon stock is down about 50% over the past 12 months and 11% year to date. Earnings are expected to decline this year, with full-year EPS guided around $13 versus $14.64 last year. Operating margin has compressed, and Q4 is projected to see a roughly 680 basis point decline due largely to tariffs and markdowns.
Valuation has adjusted. On a trailing basis, the stock trades around 2.03x EV to revenue and 7.65x EV to EBITDA. Trailing price-to-earnings sits near 12.8x. Forward P/E is roughly 15x, while forward EV/EBITDA is about 9x. These are far below the high-20s multiples seen in prior years. The market is clearly discounting slower growth and margin pressure.
Wilson likely sees opportunity in that reset. If governance improves and product momentum returns, multiples could expand. But activist campaigns can also create distraction. The board argues it is focused on long-term shareholder interests and ongoing engagement.
Capital returns add another layer. The company has $1 billion in cash, no debt, and $1.6 billion in share repurchase capacity. Financial flexibility exists. The question is whether operational execution will stabilize quickly enough to restore investor confidence.
Final Thoughts: A High-Stakes Moment For A Premium Brand
Chip Wilson’s escalation forces a reckoning. His claims of weak governance and strategic drift resonate with some investors, especially after product missteps and margin compression. His push for declassification and a board refresh reflects frustration with the pace of change. At the same time, leadership turnover and activist tension can create uncertainty during a delicate turnaround.
Lululemon still has strong international growth, solid cash flow, and a powerful brand. Yet U.S. performance needs an inflection. Tariffs will pressure margins in 2026. The board must navigate CEO succession while defending its governance record.
With trailing P/E near 13x and EV/EBITDA under 8x, the stock no longer trades at a premium growth multiple. It reflects skepticism but not collapse. Investors now weigh two paths: founder-driven reform that sharpens accountability, or internal execution that proves the board’s strategy is sound. The outcome will shape not just the next proxy vote, but the next decade of value creation.
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