lululemon CEO’s departure highlights pressure in the athleisure market
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Calvin McDonald will step down as chief executive of lululemon at the end of January, marking the end of a tenure that began in 2018 and was marked by significant international growth and brand expansion. His departure comes at a moment when the company is under pressure to win back investors and reinvigorate sales in its largest market.
McDonald, who described the role as his dream job, will stay on as a senior adviser through the end of March while the company’s board begins its search for a successor. In the interim, lululemon’s chief financial officer Meghan Frank and chief commercial officer André Maestrini will serve as co-CEOs. Board chair Marti Morfitt will also take on an expanded role as executive chair.
“The timing is right for a change,” McDonald told analysts on a call following the announcement. While lululemon remains profitable and is expanding overseas, sales in North America are falling and market share is increasingly challenged by newer entrants and changing consumer habits.
Pressure from investors and founders
The leadership shift follows a very public critique from lululemon’s founder and largest shareholder Chip Wilson. In October, Wilson took out a full-page ad in a national newspaper accusing the company of focusing too heavily on Wall Street metrics at the expense of customer loyalty and product appeal. He described the business as being in a “nosedive” and demanded structural change.
While McDonald’s departure was not officially linked to Wilson’s comments, the timing reflects investor concern over the brand’s direction and its slowing domestic momentum. In the most recent quarter, revenue in the Americas declined 2 percent and comparable store sales dropped 5 percent. Meanwhile, international sales grew 33 percent, with comparable international sales up 18 percent.
lululemon’s board said it will work with an executive search firm to identify a new leader who can guide the company through its next chapter. According to Morfitt, the board is looking for someone with a track record in both transformation and growth.
Strong international sales offset domestic weakness
lululemon’s fiscal third-quarter results beat Wall Street expectations on both the top and bottom lines. The company reported earnings per share of $2.59 on revenue of $2.57 billion. Analysts had expected $2.25 per share on $2.48 billion in sales. However, net income for the quarter fell to $306.8 million from $351.9 million a year earlier, indicating pressures on margins and costs.
Despite some momentum during the Thanksgiving holiday period, McDonald acknowledged that demand had slowed in the weeks that followed. The company issued guidance for the current quarter that came in slightly below analyst expectations. It expects sales between $3.50 billion and $3.59 billion and earnings per share between $4.66 and $4.76, compared to expectations of $5.03.
For the full fiscal year, lululemon raised its revenue outlook slightly and now expects sales between $10.96 billion and $11.05 billion. It maintained guidance for earnings per share between $12.92 and $13.02.
The company’s results underscore a shift in consumer preferences. Once synonymous with premium yoga pants and leggings, lululemon now faces steeper competition from brands such as Vuori, Alo Yoga and even traditional retailers expanding into activewear. There is also evidence that shoppers are shifting back toward denim and everyday wear, putting pressure on the athleisure category.
Tariffs and expansion plans add complexity
Beyond sales performance, lululemon faces structural headwinds. One significant issue is the end of the de minimis exemption, which allowed low-value packages to enter the U.S. without tariffs. The change has impacted lululemon more than its peers, and the company expects the new tariff structure to reduce its annual profits by $210 million, even after renegotiating with vendors and implementing cost-saving measures.
As lululemon works to offset challenges in its core market, it has increased its focus on global expansion and product diversification. In addition to its international store growth, the company has pushed into adjacent categories such as footwear, outerwear and business-casual styles. These segments are still gaining traction and have not yet matched the profitability of the brand’s traditional offerings.
McDonald’s tenure will be remembered for more than just earnings figures. Under his leadership, lululemon acquired fitness startup Mirror in a $500 million deal and expanded its presence in China and Europe. While the Mirror acquisition has yet to yield major returns, it marked a push into digital and connected fitness, an area now seen as saturated.
As the search for a new chief executive begins, analysts will be watching how lululemon addresses stagnation in the Americas and whether a new strategic direction will emerge. The next leader will face a balancing act between maintaining the brand’s loyal following and adapting to a more price-sensitive, trend-driven market.
lululemon’s stock rose more than 9 percent following the announcement of McDonald’s departure, suggesting investors may be optimistic about a change in leadership. Whether that optimism is warranted will depend on how the company responds to evolving consumer behaviors and macroeconomic pressures.
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