Is LULU Stock a Buy After the CEO Announced His Resignation?
Key Points
Lululemon stock is down more than 40% in the past five years.
The brand's founder and former CEO, Chip Wilson, has been outspoken in his criticisms of company leadership and the board of directors.
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Calvin McDonald's nearly seven-year tenure as the chief executive officer of Lululemon Athletica (NASDAQ: LULU) can be compared to a pair of luxury yoga pants that don't quite fit: Uncomfortable at best, and an expensive mistake at worst. McDonald will step down from the company's helm at the end of January 2026, and, thus far, the stock has responded positively to this announced change in leadership. Shares of Lululemon surged more than 6.5% from the announcement as of close on Dec. 17.
A lot of criticism and calls for change
A renewed energy is now benefiting Lululemon. Elliott Investment Management even went so far as to build its equity stake in the company to more than $1 billion after the announcement of McDonald's resignation. The private-equity fund is pushing its own candidate, former Ralph Lauren executive Jane Nielsen, to take over as CEO in the new year. The activist founder of Lululemon, Chip Wilson, has also been outspoken in his criticisms of the company, claiming that "years of bad decisions" regarding product and execution have eroded the brand and shareholder value.
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Image source: Getty Images.
Lululemon stock has declined by more than 40% over the past five years. The premium athleisure retailer has struggled to maintain market share in an increasingly competitive landscape.
Lululemon needs to reclaim its cool
It's not all bad news, though. Lululemon's balance sheet is quite strong. Its revenues far exceed its debt load, and it expects to end 2025 with approximately $11 billion in net revenue.
Lululemon's stock remains attractive compared to other sports brands, such as Nike and Adidas. Lululemon has a higher earnings per share (EPS), hovering around $14, and a lower price-to-earnings (P/E) ratio of about 15 than both Nike and Adidas. The stock is currently trading about halfway between its 52-week low and high.
Ultimately, whether Lululemon stock is a buy now depends on execution risk. If the company and a new CEO can recapture its essence as the leader of "cool" in athleisure, a rebound in the stock could be imminent.
Should you buy stock in Lululemon Athletica Inc. right now?
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Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica Inc. and Nike. The Motley Fool has a disclosure policy.
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