Lululemon CEO resigns. Unspecified conduct 'fell short' of standards.

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Lululemon Athletica, the yoga clothes retailer known for helping create the “athleisure” trend, said Monday that its CEO, Laurent Potdevin, has resigned due to behavior that fell short of the company’s standards.

The Vancouver-based company did not explain the nature of the conduct that led to Potdevin’s abrupt resignation, but suggested in an announcement that it had something to do with how he dealt with employees.

The retailer said it “expects all employees to exemplify the highest levels of integrity and respect for one another,” and Potdevin, 50, failed to meet these standards. He has also stepped down from the company’s Board of Directors, which has begun searching for a new global CEO.

Potdevin will receive a cash payment of $5 million, including $3.35 million upfront and an additional $1.65 over the next 18 months, according to a separation agreement filed with the Securities and Exchange Commission. The company’s shares on Monday dropped 3.5 percent to $74.71 in after hours trading.

With Potdevin’s departure, three senior executives will take on additional responsibilities and report to Glenn Murphy, Lululemon’s executive chairman of the board, the company said.

“While this was a difficult and considered decision, the Board thanks Laurent for his work in strengthening the company and positioning it for the future,” Murphy said in a statement. “Culture is at the core of lululemon, and it is the responsibility of leaders to set the right tone in our organization. Protecting the organization’s culture is one of the Board’s most important duties.”

Lululemon did not say whether the behavior that led to Potdevin’s resignation involved sexual misconduct. In recent months, accusations of sexual misconduct have caused once-powerful executives to lose their jobs in a range of industries, including media, restaurants, fashion, Hollywood and politics.

Potdevin’s resignation did not stem from one specific event, but rather a range of instances involving multiple people, individuals familiar with the situation told Bloomberg and the Associated Press. The misconduct did not relate to the company’s finances or operations, the unnamed sources said.

The shake-up comes after Lululemon had managed to bounce back from a string of problems in recent years. In 2013, the company recalled a line of yoga pants after customers complained that they were see-through. And less than nine months after the “sheergate” controversy, the company’s founder Chip Wilson alienated customers by blaming women’s bodies for concerns over the quality of Lululemon pants.

“Frankly, some women’s bodies just don’t actually work,” Chip Wilson said in an interview with Bloomberg TV. “It’s more really about the rubbing through the thighs, how much pressure is there over a period of time, how much they use it.”

Potdevin, a former Louis Vuitton manager, CEO of Burton Snowboards and president of shoe company Toms, was appointed CEO in December 2013. The move was seen as an attempt by Lululemon to “regain control of its leaders’ brands after several months of C-Suite confusion,” as Fortune magazine wrote at the time. “The new CEO could be the final piece in professionalizing Lululemon.”

In 2015, Wilson stepped away from the athletic apparel company he founded, resigning from the board. And later that year, the company reported a boom in sales in its men’s business and “continued momentum” in its women’s pants business.

Potdevin led an expansion of the company even as the athletic apparel business waned, with brands like Nike and Under Amour reporting slow sales. Lululemon reported strong results for its fiscal third-quarter and set a goal of $4 billion in revenue by 2020, versus $2.6 billion now. Potdevin aimed to expand its e-commerce business and sales abroad.

“The future of retail is bright,” Potdevin said in a June interview with Fortune. “It is different than what we are experiencing today. It is going to have to evolve.”

Murphy, the company’s executive chairman, said in his statement Monday that he is confident the company “can continue to execute on lululemon’s growth strategy and drive global performance.” Lululemon said it is still on track to reach its $4 billion goal.

But analysts say the management turnover at the company is concerning. “It could lead to instability at a time when the company is looking to drive its next leg of growth,” Jefferies analyst Randal Konik said in a report cited by Bloomberg and the AP.

Analyst Neil Saunders, managing director of GlobalData Retail, called the resignation “a blow to Lululemon” and urged the company to clarify reasons for it, according to the AP. Speculation over his behavior, Saunders said, would “ultimately harm the brand.”


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