Lululemon Athletica Inc. inched past Wall Street’s expectations in the fourth quarter, but projected only modest growth for this year.
But none of that seemed to really matter.
Lululemon — a onetime activewear speed demon that’s fallen off its stride — is in that rare position where investors don’t care so much about the numbers, but are waiting for the name.
Former chief executive officer Calvin McDonald exited in January as the company came under pressure on multiple fronts, leaving the top job up for grabs.
Chief financial officer Meghan Frank and president and commercial officer André Maestrini are serving as interim co-CEOs while the company sorts out its next step.
And everybody seems to have an idea about how to take that step.
Activist investor Elliott Investment Management has been pushing to install Ralph Lauren vet Jane Nielsen in the top job. And the very vocal founder Chip Wilson, also a large shareholder, is trying to remake the board with a proxy battle, getting more product-savvy people installed who can then pick the right CEO.
No permanent CEO was named on Tuesday, but the company did inject a new voice into the conversation, adding Chip Bergh, former president and CEO of Levi Strauss & Co., to its board.
During the annual meeting later this year, Bergh will stand for election in lieu of David Mussafer, who plans to exit as a director.
“Chip Bergh is an industry leader with a proven record of guiding successful transformations, overseeing the growth of some of the world’s most iconic brands, and driving value creation at global, category-defining companies,” said Marti Morfitt, executive chair of Lululemon.
Morfitt said the appointment was “the result of a process that began with our last board skills assessment, and reflects our commitment to thoughtful, ongoing refreshment. We remain focused on progressing the search for Lululemon’s next CEO, overseeing the development and execution of the company’s plans, and taking steps to drive long-term, sustainable growth and shareholder value creation.”
Until a new CEO is in place, Lululemon will be in something of a holding pattern.
In the fourth-quarter ended Feb. 1, net revenues increased by 1 percent to $3.6 billion. Excluding an extra week in the year-ago period, revenues were up 6 percent for the quarter, a 4 percent gain on a constant currency basis. Comparable sales increased 3 percent.
Analysts expected a modest 1 percent drop in sales overall, according to Yahoo Finance.
But the company is clearly still struggling in its home market.
Revenues in the Americas fell 4 percent while the international division shot up 17 percent. Income from operations slipped 22 percent to $812.3 million while operating margin fell 660 basis points to 22.3 percent. Diluted earnings per share tallied $5.01 compared, down from $6.14 a year earlier, but ahead of the $4.78 analysts forecast. Inventories ended the year up 18 percent with a 6 percent increase on a unit basis.
This year, Lululemon forecast that sales would increase 2 to 4 percent to a range of $11.35 billion to $11.5 billion. Diluted EPS are slated to slip from $13.26 this past year to a range of $12.10 to $12.30.
Investors traded shares of the company down 0.6 percent to $158.40 in after-hours trading.
Frank, speaking to analysts on a conference call for the first time as interim co-CEO, said: “We recognize there is more work to be done, and we have been course-correcting on a number of fronts, but we are encouraged by the guests’ response to our recent new product drops and activations.”
Lululemon’s “action plan” revolves around product creation, product activation and enterprise enablement.
“We’ve been course-correcting where needed to restore and protect our brand health over time,” Frank said. “A top priority for the management team as we enter the year is returning to full-price sales growth in North America through a series of steps that include the inflection of product newness and reducing the level of markdowns, SKU reduction, and the rebalancing of inventory levels.”
