Lululemon’s (LULU) founder and former CEO, Chip Wilson, recently slammed the apparel company’s leadership and blamed its board of directors for poor decisions that have dragged down the brand and stock price. In a full-page ad in The Wall Street Journal, he stated that Lululemon’s directors have “systematically dismantled” the business model that made it successful, driven away experienced employees, and made its stock price fall 54% this year. Wilson also criticized the $500 million purchase of Mirror and called its Disney (DIS) partnership “wildly inappropriate.”
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In a separate interview with CNBC, Wilson said that once he left, the company leaned too heavily on algorithms to follow trends instead of relying on creative leadership. He argued that this approach left Lululemon unable to stand out in today’s tough market. As a result, Wilson suggested that big changes may be needed, such as teaming up with an activist investor to replace the current board or even taking the company private, which is something that retailers like Burlington Stores (BURL) and BJ’s Wholesale Club (BJ) did before returning to the public market stronger.
Unsurprisingly, Lululemon responded by saying that Wilson hasn’t been involved in a decade and continues to make misleading claims. Nevertheless, it doesn’t change the fact that Lululemon’s rival, Aritzia (ATZAF), has gained 71% this year and grown revenue faster with more affordable products. At the same time, competitors like NikeSkims (NKE), Alo, Vuori, and Athleta (GAP) are closing in.
Is LULU Stock a Good Buy?
Turning to Wall Street, analysts have a Hold consensus rating on LULU stock based on three Buys, 20 Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average LULU price target of $198.95 per share implies 18.4% upside potential.
