Breakout

Lululemon's New CEO Will Put Embarrassments in the Rearview

Jeff Macke
Breakout

With the resignation of chairman and founder Chip Wilson and the appointment of Laurent Potdevin as its new CEO, embattled athletic apparel company Lululemon (LULU) hopes to restore some shine to its once pristine reputation in the yoga community. In March a problem with Lululemon’s trademark Luon fabric made its yoga pants see through. The problem led to a massive recall and the eventual resignation CEO Christine Day. Last month Lululemon founder Chip Wilson attributed another batch of quality issues to the customers themselves. Some women had bodies that simply didn’t “work with” Lululemon clothing, Wilson explained adding that pilling reported by some customers was caused by “friction” from hefty thighs rubbing together more than designers had anticipated.

Potdevin’s credentials suggest he has the chops to put Lululemon’s tone-deaf customer relations and see-through pants problems in the rearview. He comes to Lululemon with a background at the high-end fashion parent company of Louis Vuitton and at Burton Snowboards where he served as CEO from 2005 - 2010. Most recently Potdevin was at socially conscious shoe brand TOMS. On paper Potdevin’s background is a dream combination of big ticket fashion, technical performance and social awareness. According to Brain Sozzi of Belus Capital Advisors the appointment will do much to assuage the concerns of Lululemon’s alienated customer base.

“The core Lululemon consumer will come back to the store,” Sozzi says in the attached clip. “They’re big on social media, they’re all about saving the earth. I think it’s positve that they got that man in there and they wave ‘bye bye’ to Chip Wilson who has basically destroyed the brand over the past three months.”

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Lululemon charges higher prices than other athletic apparel brands like Nike (NKE) and Under Armour (UA).  Lulu is still able to grow the bottom line because its product is the best in the industry in terms of durability and aesthetics. Unfortunately expansion has become an issue, in large part as a result of Lululemon’s refusal to market directly to men or carry a size range that works for middle America.

For the most part Wilson’s resignation does remove the scarlet letter that’s been haunting Lululemon of late. The company didn’t need or particularly want a high profile CEO. If Potdevin is to take Lululemon to the next level he’s going to need to take that technical proficiency and operational stability beyond the undersized core base of Lululemon.  

The Anti-Abercrombie

Lululemon’s moves stand in sharp contrast to Abercrombie & Fitch (ANF) which yesterday announced that longtime CEO Mike Jeffries would be staying on beyond next February first when his contract expires.  Jeffries new contract pays him a base salary of $1.5 million plus long-term incentives and potential bonuses that add another $10 million. Adding insult to injury Jeffries was given a $200,000 budget for personal use of the company jet.

Activist investors have been pushing for Abercrombie to drop the 69 year-old Jeffries after same store sales sagged badly and the company was slow to respond. Jeffries is infamous for his controversial ad campaigns and stated desire to make clothing for “cool kids.”  Abercrombie offers little to no product for heavy set customers. It’s heavily logoed and plaid designs seem badly out of step with current fashions. Jeffries has shown little capacity for rapid change, announcing several months ago that the company would test carrying XL goods for female customers in one division in March.

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