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Company: Lululemon Athletica Inc. (LULU)
Business: Lululemon Athletica is a technical athletic apparel, footwear, and accessories company. The company organizes its operations into four regional markets: the Americas, China Mainland, Asia Pacific (APAC), and Europe and the Middle East (EMEA). It conducts its business through different channels in each market, including the company-operated stores, e-commerce, temporary locations, wholesale, outlets, a re-commerce program, as well as license and supply arrangements. The company offers a comprehensive line of technical athletic apparel, footwear and accessories marketed under the lululemon brand. Its apparel assortment includes items such as shorts, tops and jackets designed for a healthy lifestyle, including athletic activities such as yoga, running, training and most other activities. It also offers apparel designed for being on the move and fitness-inspired accessories. It operates stores in the United States, Canada, China Mainland, Australia, South Korea and others.
Stock Market Value: $23.92B ($203.90 per share)
Lululemon Athletica shares in the past 12 months
Activist: Elliott Investment Management
Ownership: n/a
Average Cost: n/a
Activist Commentary: Elliott is a multi-strategy investment firm that manages approximately $76.1 billion in assets (as of June 30) and is one of the oldest firms of its type under continuous management. Known for its extensive due diligence and resources, Elliott regularly follows companies for years before making an investment. Elliott is the most active of activist investors, engaging with companies across industries and multiple geographies.
What’s happening
On Dec. 18, it was reported that Elliott has taken a more than $1 billion position in Lululemon and is bringing in Jane Nielsen, former CFO and COO of Ralph Lauren, as a potential CEO candidate at the company.
Behind the scenes
Lululemon is a global athletic apparel, footwear, and accessories company, offering pants, shorts, tops, and jackets for activities such as yoga, running and training. While the company remains anchored in its core North America market (~70% of revenue), it has built a significant presence in APAC (~25%), and China specifically (18%), as well as Europe (~5%). In fact, these ancillary markets have grown quite rapidly, with APAC and Europe delivering average compound annual growth rates of 33% and 22% respectively, over the past year. This international expansion has helped drive strong overall topline growth, with sales growing from $8 billion in 2023 to $11.9 billion today. However, in that same period, the company’s share price has gone down from over $500 to now below $220 per share. The problem here lies in North America. Growth in this core market has slowed to low single digits, and now has turned negative, with comparable sales down 5% in the most recent quarter. Further, while the China growth story resonated with investors when North America was showing continued expansion, this narrative on its own in the face of North American core uncertainty is not something that is very appetizing to public market investors.
The root challenges in the North America business can be traced back to 2018, when Calvin McDonald became Lululemon CEO. From the beginning of his tenure, and through the post-Covid period, the company operated in a golden era for athleisure, benefiting from the broad casualization of apparel and enjoying years of outsized growth as the only real large-scale player. While this environment delivered years of share price appreciation, it also masked a series of strategic missteps that would later come back to bite them. First, Lululemon used much of these earnings to pursue new business lines, including its $500 million acquisition of Mirror, as well as the launches of footwear and skincare lines, none of which have generated meaningful shareholder value. Moreover, while these initiatives may have been tolerable on their own during a period of rapid growth, they ultimately distracted management from the core North America business that was key to revenue growth. This loss of focus became especially pronounced in May 2024, when the company’s chief product officer resigned. Since then, product direction and design have widely been perceived to be largely centralized under McDonald. Lululemon has shifted from its historically sleek and highly functional aesthetic toward louder branding and collaborations, such as with Disney, that are not aligned with the core customer. As a result, the company’s brand perception has shifted, allowing competitors like Alo and Vuori to gain momentum and begin taking share, particular among Lululemon’s core customer base of young women. This is a dynamic that is evident to anybody who shops in the category. While store traffic and brand awareness remain high, conversion has deteriorated. These product missteps have been further compounded by broader operational issues in the areas of marketing, supply chain and corporate cost controls. Together, these issues have driven margin pressure, eroded brand momentum in North America, and ultimately contributed to the sharp decline in the company’s stock price. On Dec. 11, 2025, Lululemon announced that McDonald would step down as CEO effective Jan. 31, 2026.
This impending leadership transition is what set the stage for Elliott to disclose a more than $1 billion position in Lululemon and bring in Jane Nielsen, former CFO and COO of Ralph Lauren, as a potential CEO candidate at the company. Lululemon is still a quality product and brand that has somewhat lost its way and needs to be invigorated. It does not need a CEO who knows all the answers (if that exists) but one who will hire the best talent and institute the right processes so management can work as a team of marketers, merchandisers and product developers to come up with the solutions. At the same time by delegating these duties to competent senior executives, Nielsen will be able to also oversee the company’s supply chain and corporate structure to solve the problems there and institute a cost discipline that has been absent. This is what Nielsen has experience doing at both Ralph Lauren and Coach. In 2014, when Nielsen was at Coach, the manufacturer of luxury handbags was losing out to rivals and announced that it expected same-store sales in North America to be down by a high-teens percentage in the coming year. Nielsen told investors that Coach would be back to profitability within two years. Nielsen helped Coach close underperforming stores and get inventory under control and by March 2016, the Coach brand posted its first quarterly sales increase in North America in nearly three years. When Nielsen joined Ralph Lauren in September 2016, sales had stalled and net income had fallen approximately 50% since 2014. In a 2024 article in The Wall Street Journal, Nielsen was quoted as saying, “The brand was bigger and better than the business was showing“ — which is similar to Lululemon today. Nielsen and the leadership team targeted millennial and Gen Z shoppers and overhauled the website and closed stores, leading to an increase of 20% in adjusted operating income.
When an activist comes to a company with an idea or recommendation, they are just as happy if the company takes that recommendation or comes up with a better one. Elliott is not saying that Jane Nielsen is the best person for the job. The firm is saying that she is the best person it knows of for the job, and the firm does extensive and comprehensive diligence and analysis before making a recommendation like this. Elliott cannot name the next CEO. The board does that. And while Elliott would like to see Nielsen as the next CEO, if the board decides on someone else who is equally qualified, Elliott will support that decision. In practicality, whoever the next CEO is will be pseudo-approved by Elliott because we have never seen a qualified CEO with options take a job like this if they knew an activist like Elliott opposed his or her appointment. But Elliott’s presence alone adds a lot of value to the situation which the board should recognize. First, it justifies a sense of urgency, which is needed here. Second, the firm brings to the table a more than qualified CEO candidate who is ready and willing to take on this role. Third, an activist of Elliott’s stature and reputation can give the board cover in whatever decision they make. This third point is particularly important when there is an outspoken founder in the wings like Chip Wilson who has been publicly criticizing board decisions. Without the activist, even a competent and experienced board could compromise on the CEO selection to appease the vocal founder.
This is very similar to Elliott’s recent campaign at Starbucks, another iconic brand facing popularity, competition and image challenges with an outspoken founder not afraid to give his opinion. At Starbucks, Elliott’s efforts quickly culminated in the appointment of Brian Niccol as CEO, now working to reset the company’s strategy and restore investor confidence. Elliott’s presence justified the urgency required and its endorsement of Niccol gave the board the external credibility to act quickly.
Since Elliott engaged Lululemon, on Dec. 29, Chip Wilson has nominated three directors – Marc Maurer, the former co-CEO of On Holding AG; Laura Gentile, former chief marketing officer of ESPN; and Eric Hirshberg, former CEO of Activision, the largest segment of Activision Blizzard – for election to the board at the 2026 annual meeting.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist investments.