Activist hedge fund Elliott Management has built a stake of more than $1 billion in Lululemon Athletica, positioning itself as one of the athletic apparel maker’s largest shareholders as it pushes for changes aimed at reviving the struggling brand, a source familiar with the matter told Reuters.
The move comes at a sensitive moment for Lululemon, which is searching for a new chief executive after announcing last week that CEO Calvin McDonald will step down in January following seven years at the helm.
While the stock initially rose on news of his departure, shares are still down roughly 60% from their peak two years ago.
Elliott, one of the world’s most influential activist investors, is also working closely with veteran retail executive Jane Nielsen and views her as a potential candidate to lead the company, the source said.
Elliott sharpens focus on leadership
Nielsen, a former chief financial officer and chief operating officer at Ralph Lauren, has been evaluating Lululemon alongside Elliott for several months, according to people familiar with the discussions.
Elliott sees her as a seasoned retail operator capable of restoring momentum at a brand that once dominated the premium athleisure category.
In a statement to The Wall Street Journal, Nielsen described Lululemon as “one of the most powerful brands in retail,” citing its products, community engagement and global potential, and said she would welcome discussions with the board.
Before joining Ralph Lauren in 2016, Nielsen served as finance chief at Coach, where she helped close underperforming stores and rein in inventory.
Those efforts contributed to a turnaround in North American sales.
At Ralph Lauren, shares more than doubled during her tenure, with profit margins improving as the company reduced discounting and sharpened its brand positioning.
Nielsen left Ralph Lauren at the end of March.
A company under pressure
Lululemon, valued at about $25 billion, has struggled to maintain its edge as competition has intensified.
Newer premium brands such as Alo Yoga have gained ground, while cheaper private-label alternatives have pressured pricing.
Executives have also acknowledged missteps in product execution, denting consumer enthusiasm.
The stock’s sharp decline has left Lululemon trading at valuation multiples below peers such as American Eagle Outfitters and Victoria’s Secret, according to analysts, an unusual position for a brand once seen as a category leader.
Founder and largest shareholder Chip Wilson has publicly criticised the board and management, calling for an urgent CEO search led by new, independent directors with deep company knowledge.
Wilson has blamed McDonald and the board for the weak share price, adding to the pressure on directors as they navigate succession planning.
Boardroom tensions likely
With Elliott now deeply invested, Lululemon may face a prolonged and potentially costly boardroom battle over its future leadership and strategy.
The hedge fund has a track record of pushing for operational and leadership changes across industries and is coming off a busy year that includes a recent investment in PepsiCo and an earlier proxy fight at Phillips 66.
Elliott manages more than $76 billion in assets and has been increasingly active in consumer-facing companies, including Starbucks.
Earlier this month, Pepsi reached an agreement with Elliott that included commitments to cut costs and lower prices.
Lululemon board chair Marti Morfitt has said the company has a strong foundation in place to select its next leader.
However, with activist pressure mounting and the founder demanding swift action, the coming months are likely to be pivotal for the retailer’s strategy, leadership, and long-term direction.
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