Lululemon's Founder Dennis Wilson Is Making His Frustration With the Company's Board Clear. 3 Key Takeaways for Investors.

Lululemon Athletica (NASDAQ: LULU) is a major force in the athleisure category. The clothing company and retailer has a large and growing store footprint, and yet the stock has fallen by around 40% over the past five years and is more than 60% below its high-water mark over that span. That decline has occurred despite ongoing revenue and earnings growth.

The company's former CEO, Dennis Wilson, isn't happy, and he's speaking up. In a recent letter to Lululemon's shareholders, he laid out his concerns.

Here are three key takeaways.

Image source: Getty Images.

1. Dennis Wilson is a disgruntled former employee and a big stockholder

Wilson's ire has to be taken in context. Although he founded the retailer, he was ousted as CEO in 2013. It was not a pretty period for the company, and it is likely that Wilson views the current board of directors and leadership as mismanaging "his" company. That's the negative view of this situation, but it has to be considered because it can help justify a potentially adversarial approach from the board.

The flip side is that Wilson is still a large shareholder and has a legitimate concern about the stock's value. His wealth has declined materially, along with every other shareholder's. That he can complain in this way and get media attention for it means that shareholders have someone in their corner. That remains true even if Wilson's motivations go beyond those of a normal shareholder.

2. Wilson's requests aren't unreasonable

Wilson's big complaint is that the board doesn't have broad enough board representation that is relevant to the company's operation. Given that he founded the company, Wilson has a deep understanding of the company and the brand he created. If he believes the board needs new blood, including members with brand, creative, and marketing skills, it is probably worth strong consideration.

Simply put, you should think deeply about Wilson's concerns even if the company pushes back.

3. Change takes time

Wilson claims that Lululemon isn't being responsive. Lululemon claims it is.

It is an ugly fight at this point, and while dramatic, nothing is likely to change in the near term. Board battles, which is what this amounts to, can drag on for a long time, and, for better or worse, Wilson is not operating from a position of strength. While he is a large shareholder, there is only so much he can do beyond complaining loudly.

In the end, Wilson's letter alone is not a reason to buy or sell Lululemon stock. However, it could help inform your thinking about the company. The stock's price-to-sales, price-to-earnings, and price-to-book value ratios are all below their five-year averages, which suggests it is cheap. However, it might be cheap for a reason.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica Inc. The Motley Fool has a disclosure policy.