VANCOUVER – Shareholders of Lululemon Athletica Inc. (Nasdaq:LULU) have re-elected two directors that the company’s founder and largest shareholder Chip Wilson voted against in an apparent boardroom backlash, the latest controversy to come to light at the struggling yoga wear retailer.
Hours before the vote on Wednesday, Wilson, a director who owns 27 per cent of the company’s shares, announced he voted against chairman Michael Casey, who had just replaced him in that role months earlier, and director RoAnn Costin, a private equity executive.
Wilson said he felt change was needed at the board level to boost the company’s lagging share price.
“While I am excited about the new management team that I helped put in place, I am concerned that the board is not aligned with the core values of product and innovation on which Lululemon was founded and on which the company thrived,” Wilson stated.
He said there is a “palpable imbalance in board representation, which is heavily weighted towards short-term results at the expense of product, culture and brand and longer-term corporate goals.”
The outspoken and often controversial Wilson said his vote against the two directors sends a signal to the financial community that Lululemon must address the board member issue if the company is to recover.
Casey, Costin and Lululemon’s new chief executive Laurent Potdevin were up for re-election this year. Lululemon has a staggered board concept, which means only some of the 12 board members are elected each year, instead of everyone at once.
However, the majority of shareholders didn’t agree with Wilson’s position, and neither did the company.
“Contrary to Mr. Wilson’s assertions, Lululemon’s board members are aligned with the company’s core values and possess the necessary expertise to successfully lead Lululemon forward,” the company said in a statement released before the annual meeting.
It added that Lululemon aims to “strengthen the company’s foundation, focus its product engine on innovation, and accelerate sustainable and controlled global expansion.”
Wilson, who came to the meeting at a swanky downtown Vancouver hotel dressed causally in a pair of blue pants and light-coloured T-shirt, did not comment after the board election results were released. He left through a side door as soon as the meeting ended.
The detailed results of Wednesday’s vote will be made public on Thursday, according to a company spokesperson.
It was the first annual meeting for Potdevin, the former president of Toms Shoes.
Potdevin told the gathering of about 50 shareholders that he was “proud” to be part of Lululemon, saying his team is “very focused and hard at work” to grow the company.
Lululemon has been trying to shift the attention back to its products and the deeply ingrained yoga culture that has defined the company.
Potdevin was hired late last year in the aftermath of the company’s supply chain problems related to a style of yoga pants that had fabric, which was criticized as being too sheer.
That was followed by a public relations gaffe, when Wilson said in a TV interview in early November that, “some women’s bodies just actually don’t work” for Lululemon’s tight-fitting pants. He issued a video apology on Lululemon’s YouTube video channel a few days later, which quickly went viral.
Wilson resigned as board chair in December and was replaced by Casey.
Shares of the company have been steadily sinking over the past year, and are down more than 40 per cent from their 52-week high of US$77.75 on the Nasdaq in early October, closed at $44.30 on Wednesday.
The company is scheduled to release its first-quarter earnings on Thursday.
Analysts are forecasting earnings per share to come in at 32 cents (U.S.), and revenues of $381.2-million, up 10 per cent from a year earlier, according to S&P Capital IQ.
Andrew Burns, an analyst at D. A. Davidson & Co. in Portland, Or., said he believes the company has the potential to stabilize its financial results later this year.
“If I look at what they’ve done since (Wilson) announced he was stepping off the board, they’ve ramped up their product quality team, they’ve attempted to reinvigorate the design process as they were the clear leader three years ago in the space,” Burns said.
“They’re plucking away on their turnaround strategy and need a couple more quarters to see if it works or not.”
Newly re-elected chairman Casey dismissed rumours that surfaced this week that the company may be a takeover target.
“As a general policy we don’t comment,” he told shareholders at the meeting Wednesday. “In this case I can clearly state we haven’t received any overtures from any company in that regard.”
— with files from David Friend in Toronto.