The Epic Drama at Lululemon

0:00For the last several years, there's been an epic fight over the future of Lulu Lemon. Our colleague Suzanne Capner has been following every twist in turn. Firstly, you've got a founder who just won't walk away, so it's, you know, suffering from a case of founder syndrome. And he has been lobbying criticism at this company from the sidelines for almost a decade. So, if you look at about 30 percent of their men's stuff, it's to me. It's like, it's a poly. I have been comparing that Lulu Lemon to the competition in which Nike and Under Armour, which is really that done a poly. The company's being run so poorly and it's been not just three years, probably four or five years. You know, it kind of reached a pinnacle when he launched a proxy fight against the company. Lulu Lemon founder, Chip Wilson, is launching a proxy fight at the ATHLEASURE company in an effort to shake up the board.

1:00And during all this drama, sales have been slowing. Lulu Lemon really created the ATHLEASURE market. And for a long time, it didn't have many competitors, but in recent years, the categories got a lot more crowded. You have Aloe and Biannoga and Viori and a number of new upstarts that are taking share that are more untrained, that have become more nimble in knowing and predicting what customers want. But the company finally thought it had someone to write the ship. After an exhaustive search, a new CEO started at Lulu Lemon earlier this month. She comes with about 25 years of experience at Nike. Her name is Heidi O'Neill. How did the market receive the news that Heidi O'Neill was going to be the CEO? Well, the market was not happy. Lulu Lemon shares are down about 5% as a company names a new CEO. The company naming the stock price went down quite a bit the day of that announcement.

2:01Lulu Lemon tumbled after an announcing appointment of Heidi O'Neill as the new CEO. She'll take over. Since then, Lulu Lemon stock has kept falling. It's down about 50% this year. What would you say is the question that's hanging over Lulu Lemon now going forward? Who does it want to be? Who is its customer? Who is it targeting? It can't be everything to everyone. It was kind of lashing out in all directions. It needs to focus and figure out who it is and who its customers are. How hard will it be for this new CEO to bend this company back into shape? It's not going to be easy. There's a lot of work to be done. And boy, does she have an uphill battle? Welcome to the journal, our show about money, business, and power. I'm Ryan Knutson. It's Friday, September 25th.

3:03Coming up on the show, the battle over who wears the pants at Lulu Lemon. This episode is presented by Intuit Credit Karma. Relaxation doesn't always look like spa days or fluffy pillows. Sometimes it's simpler than that. It's when those pesky tasks you don't have time for. Like hunting down your credit card perks are handled for you. Like how card optimizer from Intuit Credit Karma brings your card details together in one simple place, so tracking rewards and redeeming benefits is actually easy. You deserve less and more into a credit karma. Download the app to get started. This episode is brought to you by Indeed. The right hire can make or break your company, especially if you're a small business. And relying on luck to find that person isn't really the best strategy. But you know what is, using Indeed Sponsor Jobs. You can use it to boost your job post to make sure it reaches more people with the right

4:04talents, certification, location, and more. Your jobs posted directly on Indeed are 95% more likely to report a hire than non-sponsored jobs. Spend less time searching and more time actually interviewing candidates who check all your boxes. Less stress, less time, more results. When you need the right person to cut through the chaos, this is a job for Indeed Sponsored Jobs. And listeners of this show will get a $75 sponsor job credit to help get your job the premium status it deserves at Indeed.com slash podcast. You can go to Indeed.com slash podcast right now and support the show by saying you heard about Indeed here. Indeed.com slash podcast terms and conditions apply. Hire you now. Then this is a job for Indeed Sponsored Jobs. If you pay close attention to what people are wearing these days, it can feel like everyone's on their way to the gym. People wear stretchy leggings and runner jackets to go shopping, meet friends, grab coffee,

5:04all without any intention of actually working out. The man who set this whole world in motion was Chip Wilson. People have been wearing spandex since the 80s, but he did innovate with the fabric and he created these pants that were so comfortable and so flattering that women didn't want to just wear them to yoga class or to the gym. They'd wear them out socially. But he created this phenomenon that we now call ATHLEASURE. One day in the late 1990s, when Wilson was running a small sports apparel company in Vancouver, he went to a yoga class and he noticed that people weren't wearing the best gear for stretching or absorbing sweat. It sort of opened his eyes to this growing popularity for yoga and he really just saw this market before anybody else did. At one point when I looked at what the woman in yoga were wearing, I went, well I've got a much, much better product than this kind of, because everyone wore really their worst clothing to the gym. Their worst clothing to yoga was, and in yoga though, if it's baggy, then the teacher

6:08can't really see the alignment or position of the body. In 1998, Wilson founded Lulu Lemon. He says that at its core, the company was designed for a single persona, the quote, supergirl. Supergirl is a 32 year old woman who's highly educated, career oriented and health conscious. I call this supergirl supergirls because in the 90s, for the first time, you saw a girl with superheroes like cartoons and so they were wearing Lycra and they were equal in power to men. For the supergirl, Wilson priced the leggings at a premium. A typical pair would run you about 15 bucks, but Lulu Lemon charged close to $100. Despite the high cost, or maybe because of it, the leggings became a hit. It really took off and it was a combination of the product was great, but they also had this community focus where they enlisted yoga teachers and other athletic teachers from

7:14local neighborhoods to be brand ambassadors and they would have yoga classes in their stores and they really had this great of this grassroots following that made for very, very loyal customers. Wilson opened the first Lulu Lemon store in Vancouver in 2000. In the following decades, the company grew into a multi-billion dollar stretchy pant behemoth. In 2005, Wilson stepped down as Lulu Lemon CEO and sold some of his shares. He did sell a big stake to Advent International, a private equity company and he regretted that deal almost from day one and he just felt like Advent and the CEOs they brought in more kind of as he put it later, the type of managers who know how to speak Wall Street but don't know about how to create great innovative products. So he was never quite happy with the direction of the company. Do you think your exit from the company was actually the best thing for the company at the time?

8:18Oh, I'd say no. After he left his CEO and a new person took his place, Wilson stayed on as chairman of the board and he remained very involved with the company. He's also the largest individual shareholder. He used his position as founder to offer unsolicited opinions and make decisions without the sign-off of leadership. Eventually, the Lulu Lemon board stepped in. They gave him guidelines like, quote, don't give people advice unless they ask for it and work through the CEO, not around the CEO. Then, in 2013, the seams really started to split. Lulu Lemon had to recall a line of black pants after customers complained that they were pillion scratchy. But the biggest problem was that the pants were see-through in certain positions. And Chip, in a television interview, suggested that, well, the reason they were see-through is that some women's bodies just aren't right for those pants.

9:19The thing is, is that women will wear seat belts that don't work or they wear a purse that doesn't work or quite sit frankly. Some women's bodies just actually don't work for it. But the suggestion is, you know, some of these women are too heavy to be, or they don't have the right shape to be wearing these pants. And so, that created another problem for the company. At the time, a Lulu Lemon spokeswoman said that the see-through problem wasn't widespread. Soon after he made his comments, Wilson issued an apology. I'm sad for the people Lulu Lemon who I care so much about that have really had to face the brunt of my actions. About a month later, Wilson announced he would step down as chairman. By 2015, he left the board completely, saying that he felt the company was, quote, back on track. In 2018, there was another change over at the top. Lulu Lemon got a new CEO named Calvin McDonald. Calvin was a former Sephora executive.

10:20And during the pandemic, Lulu Lemon did phenomenally well because we were all sitting at home and we wanted comfy clothes and everybody was buying its leggings and its, you know, sweatshirts. And so, sales went up tremendously during the pandemic. And he started opening a lot of stores and put some very aggressive sales goals out there. Under McDonald, the number of physical Lulu Lemon stores grew to 780 worldwide. But to some outside observers, it seemed like the company was losing focus. But move beyond Chip Wilson's supergirl persona. Lulu Lemon started making clothes for new sport categories like tennis and golf. And it entered new brand partnerships. He did a licensing deal with Disney to put Mickey Mouse and other characters on Lulu Lemon products. He did another deal with the National Football League one with the National Hockey League. People were like, Lulu Lemon should be about making innovative product that helps you work out better.

11:20How does wearing a Mickey Mouse sweatshirt do that for me? It started to really muddy the waters and then sales in North America, which had been growing, growing, growing, started declining. New competition like Aloe and Viori have been siphoning away Lulu Lemon's core customers. These new brands were on top of trends, offering more color options, sets, and looser fitting workout clothes. Last year, Lulu Lemon's stock fell so much that it erased over $25 billion in market value. Lulu Lemon didn't seem to really acknowledge the severity of the problem. Chip, on the other hand, was out there telling pretty much anyone who would listen, hey, wake up, there's a problem here. Then Chip Wilson went nuclear. Inside the pages of the Wall Street Journal. Next.

12:28This episode is brought to you by Workday. Guessing is for game shows, not your business, especially when your margin for error is zero. Workday is the enterprise AI platform for HR, finance, and IT, with a deep understanding of your organization's context and guardrails. So every AI action is permission-aware, giving you accuracy 24-7 and the ability to not just get work done, but get it done right. It's a new Workday. Have you ever wondered how movements start? I'm Ashley C. Ford, host of Into the Mix, a Ben and Jerry's podcast about joy and justice. This season, we're talking to unexpected progressive heroes who found purpose in unexpected places. People like Marley Dias, making sure every kid sees themselves in books. Kyle Mesteth, a native skateboarder building a movement for kids nationwide. Joy Aladakoon, whose music moves from protests to daily commute. Find out how they started something bigger than themselves. And listen wherever you get your podcasts. Back in a paid advertisement in the journal this week, Lulu Lemmon founder, Chip Wilson,

13:37likened the decline of the ATH-LISA brand to a plane crash due to a quote, series of mistakes. On October 7th, 2025, Chip Wilson blasted the company he founded in a single full-page ad. The headline of this ad screams in bold type, Lulu Lemmon in a nose dive. And is that a yoga move? I don't think so. I think he's just referring to the fact that it is, you know, in trouble. In ad, Wilson outlined the many things he thought Lulu Lemmon had done wrong. He said that, you know, it's suffering from a CEO who knows how to speak Wall Street. And it has a loss of cool. He compared it to the gap, trying to be all things to all people. The ad also suggested that the company was missing someone like him. Saying quote, a company bereft of a visionary loses its singular voice for product and long-term strategy.

14:38He really wants this for the company to go back to focusing on technical up-power, to be a leader once again in innovating on new fabrics and materials, because that was really what Senator Partt said. Then CEO Calvin McDonald said that he agreed with some of Wilson's points, but he also defended the company and pointed to years of growth under his leadership. Two months after Wilson's ad, McDonald resigned. But that's not enough to satisfy Chip. Chip launches a proxy fight. A proxy fight. A ruthless public battle for control over the company's board. When a powerful shareholder, like Chip Wilson, doesn't like the direction a company is going in, they can nominate their own like-minded board candidates, and then try to convince other shareholders to vote for those candidates, and thereby gain more influence over the company's future. In his proxy fight, Wilson nominated three board members. He's now communicating directly with shareholders, and there are SEC filings on a almost weekly

15:44basis, kind of laying out his case and supporting his nominees and trying to explain to shareholders why they should vote for his nominees. Louis Lemmon fought back, saying that Wilson's perspective was outdated. After months of fighting, the two sides ultimately reached an agreement. Two of Wilson's nominees were appointed to the board, but as part of the deal, he also had to sign a non-despairagement agreement. The document says that Wilson is not allowed to publicly criticize the company for 18 months. During all this, Louis Lemmon was also actively searching for a new CEO. The company considered candidates with experience at other retailers like Ralph Lauren and Abercrombie and Fitch. In April, Louis Lemmon finally announced its choice. And they land on Hideo Neil, who had spent a good part of her career at Nike. But when Louis Lemmon announced the appointment, the company's stock price sank.

16:46And the reason is they saw her as another sort of corporate suit coming in. They didn't feel that she had the turnaround chops to tackle this job. Plus, her tenure at Nike has been a little bit mard with some mistakes. While at Nike, O'Neill spearheaded a direct-to-consumer strategy, pulling the brand out of retailers like Macy's and DSW. But that moved backfired. Nike, since then, kind of went into its own downward spiral. In some ways, there are a lot of parallels to what happened with Nike. They were kind of the big gorilla in the room and they didn't see some of these newer players like Hoka and Ann coming up behind them and they really just kind of lost their footing. So, investors didn't feel like Louis Lemmon was getting someone who was really equipped to do what had to be done. A Louis Lemmon spokesperson said the board stands behind Hideo Neil.

17:47I thought they're confident she's the right choice. It seems like there's a lot of pressure on O'Neill's shoulders. There's a tremendous amount of pressure. It's not an ideal way to start a new job. In retail, turn around and take time because the product cycle is long, so anyone who's expecting to see some quick wins, you know, I think you have to be patient here and give her a chance, but it's going to take a while. So O'Neill started the job earlier this month. How's it all gone so far? Well, she did address the troops that first day and obviously you can imagine starting a new job. She's doing a lot of listening. She's going around meeting with folks. She realizes there's urgency and she's not going to wait to act. She's got a plan. She's going to put an emotion. She hasn't shared what that is publicly yet, but the message was I'm on it.

18:51At Louis Lemmon's headquarters in Vancouver, on her very first day, O'Neill participated in a group activity with her new employees, a yoga class. Before we go, we want to hear from you. Is the economy affecting how you're going to vote in the midterms this year? What economic issues are important to you as you enter the polling booth? Send us a voice note to thejournalatwsj.com. That's thejournalatwsj.com. There's also a link to our email address in the show notes. That's all for today. Friday, September 25th. Thejournal is a co-production of Spotify and the Wall Street Journal. The show is made by Catherine Brewer, Evelyn Fajardo Alvarez, Pia Gaggari, Max Green, Sophie Codner, Matt Kwong, Colin McNulty, Jessica Mendoza, Laura Morris, Enrique Perez,

19:53Delarosa, Sarah Platt, Alan Rodriguez-Aspendosa, Heather Rogers, Katie Shepherd, Pierce Singee, Jiva Kavirma, Catherine Whalen, Tatiana Zemese, and me, Ryan Knudsen. Our engineers are Griffin Tanner, Nathan Singapok, and Peter Leonard. Our theme music is by so wily. Additional music this week from Peter Leonard, Bobby Ward, and Blue Hot Sessions. Fact checking this week by Nicole Pousulka. Thanks for listening. See you on Sunday, when we'll air another episode from our recent live event in New York.

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