For ailing Lululemon, going private might not be a stretch
The company has essentially no net debt and still generated $1bn in free cash flow last year
It is over a decade since Chip Wilson, founder of Lululemon, suggested that some customers really did not belong in his company’s garments. This was, it’s fair to say, the wrong response to complaints that Lululemon’s yoga pants were too sheer. Yet Wilson has not stopped having opinions — or thinking he has the solution to the group’s problems.
The athleisure mogul stepped down from Lululemon in 2013, but still owns 7 per cent of its stock. He has also spent recent months battling the company to put his three suggestions for directors on the board. On Wednesday, Lululemon agreed to admit two of those candidates. In return, Wilson must stop bad-mouthing the company for 18 months.
Wilson’s public criticisms may have been unwelcome and even possibly unhelpful, but they weren’t unfounded. Shares of Lululemon have fallen 75 per cent from the peak levels hit in 2023. Its founder’s beef has been that the once aspirational marque has become too diluted and basic. A partnership with Walt Disney, for example, does suggest a drift in brand values.
Lululemon’s management concedes its merchandising must improve; a new chief executive will join from Nike shortly. But since Wilson left, annual sales have gone from $2bn to $11bn. There is no simple solution to the challenge of retaining a gilded brand when the market is also under attack from buzzy newcomers such as Vuori and Alo, and public market investors want to see sustained growth.
Shrinking, though, is Lululemon’s near-term reality. Like-for-like sales in its core Americas market fell by 3 per cent in 2025. Analysts expect a 5 per cent contraction in 2026, according to Visible Alpha. More worryingly, its balance of inventories grew by a whopping 18 per cent, a sign that its apparel is not moving as it should, and is a drain on its cash.
When Lululemon was growing, Wall Street proved a huge booster. At the beginning of 2021, the stock had quadrupled in three years, and the company was trading at 50 times estimated year-ahead earnings. That figure has cratered at about 10 times now.
Wilson will now have eyes in the boardroom looking out for his, and all other shareholders’, interests. And if that isn’t enough? Lululemon has essentially no net debt and still generated $1bn in free cash flow last year, suggesting a buyout isn’t out of the question. Wilson’s claim that some customers weren’t meant for his clothing was tin-eared. Apply the premise to Lululemon and the stock market, and it might make more sense.