Lululemon shows teeth.
The Vancouver-based sportswear company is taking its battle publicly against activist founder Chip Wilson, writing in a letter to shareholders Monday that it has “outdated perspectives” and “troubling conflicts of interest” that will derail its turnaround plan, according to documents reviewed by the CNBC show.
The letter, Lululemon’s first major public response to Wilson since escalating its proxy battle late last year, comes after settlement negotiations with the retailer’s founder collapsed last week, according to documents reviewed by CNBC. The missive explains why the company’s strategy, its new CEO Heidi O’Neill and board nominees are ultimately best for shareholders, as it urges them to vote in favor and sets June 25 as the date for its long-awaited annual meeting.
“Wilson, who ceased serving on the board more than a decade ago for well-documented reasons, has been attacking the company and the board for many years, damaging the brand and harming shareholders. He has now put forward three opposing candidates in an effort to regain the increased influence over the company he has coveted since his departure,” said the letter, seen by CNBC.
“Your board firmly believes that replacing any of Lululemon’s directors with less qualified nominees than Mr. Wilson would endorse his flawed outlook, deprive the company of critical skills and expertise, and risk derailing our progress at a particularly pivotal time for our company and organization.”
Wilson did not immediately respond to a request for comment.
Lululemon’s business has been under pressure for about two years, particularly in the continental United States, its largest market, as it deals with the impact of tariffs, a fragile American consumer and a product assortment that has failed to impress shoppers in the same way as before. It also faced stiff competition in athletics from newcomers like Vuori and Alo Yoga, as the global athletics market began to cool.
When reporting its fourth-quarter financial results in March, Lululemon issued weak guidance for fiscal 2026 and warned that higher pricing and its proxy battle with Wilson would weigh on its financial results. As of Friday’s close, shares were down nearly 43% this year.
Wilson, who founded Lululemon in 1998, stepped down as CEO in 2005 but remained chairman until 2013, when he left after blaming customers for the recall of his trademark black pants. He told Bloomberg at the time: “Some women’s bodies are not suitable for pants.”
“It’s really about the friction in the thighs, the pressure over a period of time,” he said.
Wilson has frequently criticized the brand in the years since, but he stepped up his attacks late last year as Lululemon’s challenges mounted. His biggest gripe is with the company’s board, which he blames for his decision to resign as chairman in 2013, and has pressured the company and shareholders to support his slate of candidates.
In response, Lululemon claimed that its leadership was the reason the brand was able to grow into an $11 billion retailer, and argued that Wilson was aligned with direct competitors, including Alo Yoga and Vuori, which Wilson admitted to advising, according to security documents.
At Lululemon’s annual meeting next month, shareholders will be presented with two sets of board election options that both parties believe will help turn the company around. Shareholders can vote to elect the retailer’s nominees, the former Levi Strauss CEO Chip Bergh, former Unilever Esi Eggleston Bracey, Director of Growth and Marketing, and Serial and Former Board Member Gap Chief Financial Officer Teri List. Or, they can go with Wilson’s nominees, former ESPN CMO Laura Gentile, former Activision CEO Eric Hirshberg and former On co-CEO Marc Maurer.
Wilson said the retailer’s downfall was the result of “prioritizing creative excellence over the altar of efficiency”. The solution, he argued in a letter to shareholders last week, lies in “more proven and creative leaders” on the board.
“Our three candidates all understand what it takes to foster a creative, focused and successful business that generates superior returns through creative excellence – in design, technology and execution,” Wilson wrote. “[They] have all led organizations that only succeed when they outperform their competitors, and they know what it takes to build an inspired, creative organization and help it thrive.
Last week, Lululemon made a final attempt to resolve its proxy fight with Wilson and reach a settlement agreement, according to documents viewed by CNBC. He proposed appointing two of Wilson’s nominees after the annual meeting, up from one previously proposed, and agreed to appoint a third new director not from his list but subject to his approval. The company also announced it would create a branded products advisory board that would include Wilson’s third non-appointee to the board.
In response, Wilson increased his demands, asking for the right to replace directors if his nominees cease serving on the board and full reimbursement for his campaign from the company, among other demands, documents viewed by the CNBC show. Lululemon rejected this offer and settlement negotiations broke down.
Now, Lululemon argues in the letter that its nominees are “vastly superior” to Wilson’s and that electing one of the founder’s picks “would result in a significant degradation of the experience and expertise of your board of directors, including the loss of deep industry and corporate governance experience as well as the financial expertise required for a public company.”
He criticized Gentile, Hirshberg and Maurer for having no experience serving on a public company board and having little or no experience in the apparel and retail industry.
He pointed out that Maurer, who stepped down about a year ago as co-CEO of On, a direct competitor to Lululemon, still owns a personal stake in his former company worth tens of millions of dollars, representing “a considerable portion of his net worth.”
The company also came to the defense of its new CEO, who is expected to take the helm in September after nearly 30 years in the role. Nike
When Lululemon announced last month that O’Neill was its next CEO, Wall Street sold its shares, fearing it was partly responsible for some of the challenges Nike currently faces. There are also concerns that she may not take office for several months, which would push the recovery timeline further than some investors had hoped, especially given Lululemon’s long delivery times for goods.
“A nearly 30-year veteran of [Nike] is not the symbol of transformative and creative leadership that can inspire shareholder confidence in today’s world,” Wilson wrote in an April 29 letter to shareholders. “Shareholders are right to question whether it has the product skills or value creation history needed to revitalize lululemon. »
In response, the retailer said in its letter to shareholders that O’Neill is “the ideal executive to lead” the company and brings “a unique balance of creativity and operational discipline required at this pivotal time.”
“When the Board initiated the search for a CEO, we established criteria encompassing both turnaround and growth experience. We recognize that parts of Lululemon’s business need a reset, but that should not be the end game. The Lululemon brand remains fundamentally strong and there is significant potential to innovate and evolve products and engage our communities to further grow the company across all businesses and to internationally,” Lululemon wrote.
“During the months-long interview process, Ms. O’Neill distinguished herself with a rare combination of deep industry, product and brand experience, as well as her strong track record of large-scale transformation and growth. She has demonstrated the ability to clearly articulate the essence of the lululemon brand and future opportunities, while bringing a pragmatic, execution-driven mindset,” the company added in the letter.
Lululemon highlighted O’Neill’s many years of experience leading Nike’s apparel business during a period of rapid growth, as well as the time she spent reducing product delivery times and resetting the brand before her departure.
“O’Neill created and grew Nike’s women’s business and grew it into a multi-billion dollar franchise,” Lululemon said. “And she has led significant digital transformations as a digital champion and innovator, during a period of rapid digital commerce sales growth of more than 65%.”