Settlement talks collapsed last week after Wilson demanded the right to appoint 3 directors and full reimbursement for his campaign
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Lululemon $LULU fired back at founder Chip Wilson on Monday in a shareholder letter, calling his perspectives "outdated" and his conflicts of interest "troubling," and urging investors to reject the three board nominees he has put forward ahead of the company's June 25 annual meeting.
Settlement negotiations broke down last week, prompting Lululemon to go public with what marks its first significant response to Wilson since his proxy campaign intensified at the end of last year, according to Reuters. According to Lululemon, it held off on submitting its definitive proxy filing while pursuing a negotiated resolution, only for Wilson to respond with terms the company described as "a significant departure from what had been discussed." Wilson had demanded the appointment of three directors of his choosing, quarterly meetings with the incoming CEO, and full reimbursement of his campaign costs. Lululemon rejected the terms.
The shareholder letter included pointed criticism of Wilson's grasp of the company's current position: "Mr. Wilson has shown that he does not have a full understanding of the business today or the brand's future potential and remains intractably focused on the past. His vision for Lululemon appears to be frozen in time, viewing Lululemon through the lens of a founder who has been outside the boardroom for over a decade and away from any operating responsibility within the company for nearly 15 years."
Since departing the chairmanship in 2013 — a role he held after founding the company in 1998 — Wilson has repeatedly targeted Lululemon's board and argued the brand has shed the cultural cachet that once defined it. He nominated three directors — former ESPN CMO Laura Gentile, former Activision $ATVI CEO Eric Hirshberg, and former On co-CEO Marc Maurer — arguing the company needs more creative leadership. Wilson did not respond to requests for comment.
The company's preferred slate consists of Chip Bergh, who led Levi Strauss as CEO, Esi Eggleston Bracey, Unilever's former chief growth and marketing officer, and Teri List, who previously served as Gap $GPS's top finance executive — a group Lululemon argued is substantially better suited for the board. None of Wilson's three candidates have served on a public company board, Lululemon said, and their collective experience in the apparel and retail sectors is thin. The company also raised concerns about Maurer, noting that his equity in On — a competing brand — amounts to tens of millions of dollars and constitutes a considerable portion of his personal wealth.
The company also defended incoming CEO Heidi O'Neill, whose appointment Wilson has criticized. Among her accomplishments cited by the board: growing Nike $NKE's women's category from the ground up into a multi-billion-dollar operation and driving down product lead times — work Lululemon said reflects the "unique balance of creativity and operational discipline" it needs at the top. Tapped for the top job a month ago, O'Neill brings nearly three decades of Nike experience and is expected to formally assume the CEO role this coming September.
Shares have tumbled roughly 43% since the start of the year, a decline that reflects a confluence of pressures including import tariffs, a cautious consumer environment, and intensifying rivalry from athleisure upstarts like Vuori and Alo Yoga. At the time of its fourth-quarter earnings report in March, management cautioned that the dual headwinds of elevated tariffs and the ongoing boardroom dispute with Wilson posed risks to the company's financial outlook.
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