Lululemon stunned the market on Friday after announcing that longtime CEO Calvin McDonald will leave the company at the end of January. Shares jumped more than 9 percent on the news, a signal that Wall Street has been impatient for strategic change after more than a year of sluggish performance in the company’s most important region, the Americas.
The move is set to take effect on January 31. McDonald will remain as a senior advisor through March 31 while the board searches for a permanent successor. The athleisure retailer said it has hired a leading executive search firm to guide the process.
McDonald described the job as a career highlight, telling analysts, “I’ve described being CEO of Lululemon as my dream job. It truly has lived up to every expectation and given me the opportunity of a lifetime.”
The interim leadership team will consist of CFO Meghan Frank and Chief Commercial Officer André Maestrini, who will act as co CEOs during the transition. Board chair Marti Morfitt will also serve in an expanded role as executive chair. Morfitt said Lululemon has a strong foundation but needs a leader capable of steering the company through a period of transformation. She added, “As we look to the future, the Board is focused on identifying a leader with a track record of driving companies through periods of growth and transformation to guide the company’s next chapter of success.”
A leadership change driven by pressure, underperformance and public criticism
The decision follows a prolonged period of uneven results and criticism from founder Chip Wilson, who remains the company’s largest independent shareholder. Wilson escalated pressure two months ago with a full page ad in the Wall Street Journal claiming the brand was “in a nosedive” and needed to “stop chasing Wall Street at the expense of customers.”
While the company has continued to grow revenue overall, its U.S. business has weakened, its product lineup has lost some of its former iconic momentum and competition in the premium athleisure category has surged.
Lululemon announced McDonald’s upcoming departure on the same day it released third quarter earnings and delivered softer guidance that missed Street expectations.
Third quarter results were mixed despite beating expectations
Here is how the company performed compared with Wall Street estimates from LSEG:
• Earnings per share: $2.59 vs. $2.25 expected
• Revenue: $2.57 billion vs. $2.48 billion expected
Despite the beat, net income fell to $306.84 million, or $2.59 per share, compared to $351.87 million, or $2.87 per share, a year prior. Revenue rose 7 percent from the previous year.
The company told investors that early holiday season performance has been solid, but not enough to meaningfully lift expectations. Lululemon now forecasts fourth quarter revenue between $3.50 billion and $3.59 billion, falling short of analyst expectations of $3.60 billion. It expects earnings per share between $4.66 and $4.76, also below the $5.03 anticipated by analysts.
McDonald acknowledged that momentum softened following the strong Thanksgiving weekend. “I also want to acknowledge we’ve seen trends slow a bit since Thanksgiving, which we’ve taken into account in our Q4 guidance,” he said. He added that U.S. revenue in the fourth quarter is still expected to improve modestly from the third quarter.
Full year guidance improved, but margin pressures remain a real challenge
Although Lululemon trimmed guidance in the two previous quarters, the company raised its full year forecast this week. It now expects revenue between $10.96 billion and $11.05 billion and earnings per share between $12.92 and $13.02. Both figures are essentially in line with analyst expectations.
One of the biggest profit headwinds has been tariffs. In September, Lululemon estimated tariffs would reduce annual profit by $240 million, largely due to the elimination of the de minimis exemption that previously allowed low value packages to enter the United States without duties. After negotiating new terms with suppliers and other cost saving efforts, the company now expects the impact to be $210 million.
Americas slump persists while international growth carries the company
Lululemon’s largest and most profitable region, the Americas, has been shrinking. During the third quarter:
• Americas revenue fell 2 percent
• Comparable sales in the Americas declined 5 percent
International markets continue to be the company’s growth engine:
• International revenue rose 33 percent
• International comparable sales climbed 18 percent
Lululemon has been trying to diversify its business by offering new products such as footwear, outerwear and casual apparel. While this expansion has broadened its reach, international growth and store openings are doing most of the heavy lifting rather than organic growth in the core North American market.
A changing competitive landscape and evolving consumer tastes
Lululemon is no longer the only premium athleisure name with cultural momentum. Upstarts like Vuori and Alo Yoga have been aggressively expanding with fresh designs and strong influencer marketing. At the same time, consumer trends have shifted. After years of dominating closets globally, yoga pants are losing ground to denim and non athleisure apparel.
The brand has attempted to push further into categories like shoes and professional casual wear to reach new shoppers. Investors have been looking for clearer evidence that these initiatives can offset declining demand in the Americas.
What this means for investors
A CEO transition at a major retailer is not a small event. For Lululemon investors, this shift signals several things:
• The board is not satisfied with the trajectory of the core market. Revenue growth in the Americas has been negative for multiple quarters.
• The company is betting on fresh leadership to re accelerate innovation and brand heat. A new CEO may reset priorities, refresh product strategy and reevaluate store and international expansion plans.
• Margin pressures from tariffs and promotions remain real. Even with updated tariff estimates, annual profit will take a significant hit.
• International strength is a bright spot, but uneven growth could continue. The next CEO will need a plan to stabilize U.S. demand without losing international momentum.
Lululemon remains one of the strongest brands in the athleisure space, but the market has changed and competitors are far more aggressive than during its peak dominance. Investors will now focus on who is selected as the next CEO and how quickly the company can reignite product relevance and recover lost share in the Americas.
About Author
