Lululemon proxy conflict with Chip Wilson goes public, units annual assembly

Lululemon is displaying its enamel. 

The Vancouver, British Columbia-based athleticwear firm is taking its battle with activist founder Chip Wilson public, writing in a letter to shareholders on Monday he has “outdated views” and “troubling conflicts of curiosity” that may derail its turnaround plan, supplies reviewed by CNBC present. 

The letter, Lululemon’s first main public response to Wilson since his proxy battle ramped up late final yr, comes after settlement talks with the retailer’s founder fell aside final week, the supplies present. The missive lays out why the corporate’s technique, its incoming CEO Heidi O’Neill and board nominees are finally greatest for shareholders because it urged them to vote in its favor and set June 25 because the date for its long-awaited annual assembly. 

“Wilson, who stopped serving on the Board over a decade in the past for well-documented causes, has been attacking the corporate and the Board for a few years, damaging the model and hurting shareholders. He has now put ahead three opposing nominees in an try and regain elevated affect over the corporate that he has coveted since he left,” the letter, seen by CNBC, states. 

“Your Board firmly believes that changing any of lululemon’s administrators with Mr. Wilson’s much less certified nominees would endorse his misguided views, deprive the corporate of crucial expertise and experience, and danger derailing our progress in an particularly pivotal time for our enterprise and group.” 

Wilson, Lululemon’s largest particular person shareholder with a 8.97% stake, issued a press launch afterward Monday saying he thought he and Lululemon had been in settlement as of Friday, and there may be “no cause” why they cannot “attain a decision to this struggle shortly.”

“The Board has not offered me with element on the place our disagreements lie proper now … I stay undeterred and keen to be constructive. I’m assured within the skillsets of our extremely certified impartial nominees that convey unmatched model and advertising and marketing experience,” mentioned Wilson. “I stand able to do what’s greatest for all shareholders of lululemon with this marketing campaign, be it a vote or decision with the board.”

Lululemon’s enterprise has been underneath strain for round two years, significantly within the Americas, its largest market, because it navigates the affect of tariffs, a shaky U.S. shopper and a product assortment that is did not wow customers in the identical means it as soon as did. It has additionally confronted steep competitors within the athleisure house from upstarts like Vuori and Alo Yoga as the worldwide athleisure market began to chill.

When reporting fiscal fourth-quarter earnings in March, Lululemon issued weak fiscal 2026 steering and warned greater tariffs and its proxy battle with Wilson would weigh on its backside line. As of Friday’s shut, the corporate’s shares are down virtually 43% this yr.

Wilson, who based Lululemon in 1998, stepped down as CEO in 2005 however stayed on as chairman till 2013 when he departed after blaming a recall of its trademark black pants on prospects. He instructed Bloomberg on the time, “Some girls’s our bodies do not work for the pants.”

“It is actually concerning the rubbing by means of the thighs, how a lot strain is there over a time period,” he mentioned.

Wilson has been a frequent critic of the model within the years since, however ramped up his assaults late final yr as Lululemon’s challenges had been mounting. His largest gripe has been the corporate’s board of administrators, whom he blames for his determination to step down as chair in 2013, and has been lobbying each the corporate and shareholders to get behind his slate of nominees.

In response, Lululemon has asserted that its management is why the model has been capable of scale into an $11 billion retailer, and contended Wilson is aligned with direct rivals together with Alo Yoga and Vuori, who Wilson has admitted to advising, safety filings present.

At Lululemon’s annual assembly subsequent month, shareholders can be introduced with two units of director choices for election that either side are betting can assist flip the corporate round. Shareholders can vote to elect the retailer’s nominees, former Levi Strauss CEO Chip Bergh, former Unilever Chief Progress and Advertising and marketing Officer Esi Eggleston Bracey, and serial board member and former Hole finance chief Teri Checklist. Or, they’ll go for Wilson’s nominees, former ESPN Chief Advertising and marketing Officer Laura Gentile, former Activision CEO Eric Hirshberg and former On co-CEO Marc Maurer. 

Wilson has mentioned the retailer’s downward slide is a results of “deprioritizing artistic excellence on the altar of effectivity.” The answer, he contended in a letter to shareholders final week, is “extra confirmed, artistic leaders” within the boardroom. 

“Our three nominees all perceive what it takes to foster a artistic, targeted and profitable enterprise that delivers superior returns by means of artistic excellence – in design, expertise and execution,” Wilson wrote. “[They] have all led organizations that solely succeed once they out-create their rivals, they usually know what it takes to create an impressed, artistic group and assist it thrive.” 

Final week, Lululemon made a ultimate try and resolve its proxy contest with Wilson and attain a settlement settlement, supplies seen by CNBC present. It provided to nominate two of Wilson’s nominees following the annual assembly, up from a earlier provide of 1, and agreed to nominate a 3rd new director not from his slate however topic to his approval. The corporate additionally mentioned it might create an advisory model product council that would come with Wilson’s third nominee not appointed to the board.

In response, Wilson upped his calls for, asking for the suitable to exchange administrators if his nominees stopped serving on the board and full reimbursement for his marketing campaign by the corporate, amongst different requests, the supplies present. Lululemon rejected that supply and settlement talks fell aside.

In his information launch, Wilson mentioned he agreed to the phrases of Lululemon’s settlement provide “in precept” whereas different objects he proposed had been “to align to market commonplace phrases, similar to alternative rights and expense reimbursement.”

“These are quite common phrases – a lot in order that they’re included in no less than 14 of the final 20 settlement agreements that different shoppers of lululemon’s counsel have entered into in comparable conditions,” he mentioned

In its letter, Lululemon is contending that its nominees are “vastly superior” to Wilson’s and the election of any one of many founder’s picks “would lead to a big degradation of your Board’s expertise and experience, together with the lack of deep business and company governance expertise in addition to monetary experience that’s required for a public firm.” 

It criticized Gentile, Hirshberg and Maurer for having no public firm board expertise and both no or little time working in attire and retail. 

It identified that Maurer, who a couple of yr in the past stepped down because the co-CEO of On, a direct competitor to Lululemon, nonetheless has a private stake in his former firm value tens of thousands and thousands of {dollars}, making up “a substantial portion of his internet value.” 

The corporate additionally got here to the protection of its incoming CEO, who’s slated to take the helm in September after virtually 30 years at Nike

When Lululemon introduced final month O’Neill was its alternative as its subsequent CEO, Wall Avenue offered off the inventory on issues she was partially accountable for a few of the challenges Nike is at the moment dealing with. There are additionally issues that she will not be beginning within the job for a number of months, pushing out the timeline to restoration additional than some traders had hoped, particularly given Lululemon’s lengthy lead occasions for merchandise. 

“A close to 30-year veteran of [Nike] just isn’t the image of transformative, creative-first management that may instill shareholder confidence in at the moment’s world,” Wilson wrote in a letter to shareholders on April 29. “Shareholders are proper to query if she has the product skillset or historical past of worth creation that’s wanted to revitalize lululemon.” 

In response, the retailer mentioned in its letter to shareholders that O’Neill is “the best government to guide” the corporate and brings a “distinctive stability of creativity and operational self-discipline required at this pivotal second.” 

“Because the Board initiated the CEO search, we established standards that encompassed each turnaround and development expertise. We acknowledge there are components of lululemon’s enterprise that want a reset, however that shouldn’t be the top sport. The lululemon model stays essentially sturdy and there may be important potential to innovate and evolve product and interact our communities to scale the enterprise even additional throughout actions and internationally,” Lululemon wrote.

“Through the months-long interview course of, Ms. O’Neill distinguished herself by means of a uncommon mixture of deep business, product, and model expertise in addition to her sturdy monitor document of each transformation and development at scale. She demonstrated a capability to obviously articulate the lululemon model’s essence and future alternative, whereas additionally bringing a realistic, execution-oriented mindset,” the corporate added within the letter.

Lululemon pointed to O’Neill’s a few years of expertise main Nike’s attire enterprise by means of a interval of fast development and her time spent lowering product lead occasions and resetting the model previous to her departure. 

“O’Neill established and constructed Nike’s Ladies’s enterprise and grew it right into a multi-billion-dollar franchise,” Lululemon mentioned. “And he or she led necessary digital transformations as an early digital champion and innovator, throughout a interval of fast digital commerce gross sales development of greater than 65%.”