Monday, June 23, 2014

Globe and Mail: Wilson Exploring a Buyout or Selling His Holdings

The Globe and Mail reports:

"The Chip Wilson is talking with bankers at Goldman Sachs Group Inc. in considering a host of options, including teaming with a private-equity firm to mount a buyout or selling his holdings in the company, a source familiar with the situation said Sunday."

"With about a 28-per-cent stake in the company, Mr. Wilson tried unsuccessfully almost two weeks ago to remove two members from the board of directors, including the chairman who recently replaced him in that position."

"Mr. Wilson, who still sits on the board, says he wants the company to focus more on long-term objectives and product innovation rather than just short-term results."

"Mr. Wilson, in his attempt to refocus the retailer on product and innovation, is talking to Goldman Sachs about his options, the source said. “But we haven’t signed a deal with Goldman Sachs yet … There’s no signed deal with any financial institution … Nothing has been finalized.”"

"Retail analyst Jennifer Black said Lululemon customers are growing impatient with the “lack of newness” and “lack of depth” among the merchandise." [Preach it, sister. Of all the analysts who follow lululemon Jennifer Black is the one who best understands how we consumers relate to the brand. I think that's because she's also a customer.]

"The retailer is working on a singular new inventory system that is expected to be operational by mid or late 2015, she noted.
Lululemon has “much ground to make up from a technology perspective,” Ms. Black added. She said it cannot track customer purchases or number of transactions and lacks data to understand its most loyal customers and reward them accordingly. The company is building a loyalty program expected to go live some time in 2015, she said." [From what I understand, a lot of the technology deficits are due to Wilson's focus on product only. However, I don't totally buy that. Day was CEO for a number of years, she could have pushed that aspect.]
I have zero financial background but I can't think this is a good thing. I mean, I think going back to being private would be good since it would take the focus off stock price and profits at the expense of product but this is a huge distraction for management who are trying to fix the mess Day left behind.
(Thanks to Ms. M. for the heads up)

Update - More from the Wall Street Journal:

"The founder could launch a proxy fight to win additional board seats or partner with a private-equity firm in a buyout, another person familiar with the matter said. Alternatively, he could sell his stake, this person said. So far, Mr. Wilson hasn't made any decisions on further steps, said a different person familiar with his thinking who wouldn't elaborate on what is under consideration."

"Mr. Wilson's stated frustration isn't so much with the management, led by new Chief Executive Laurent Potdevin, which he supports, but with the strategic direction set by the board. Mr. Wilson founded the company in 1998 by creating innovative designs using high-quality fabrics, and he wants the company to return to its roots by making product development a higher priority, the person said. He had expressed his dissatisfaction to the board on several occasions before going public with his concerns."

Is all this meddling a ploy to help out the new Kit and Ace company?


MB. said...

As someone who's been in various store roles the last couple years...I'm very happy to see this.

Anonymous said...

This whatever loyalty program comes too late, because I' m just planning on quit Lululemon and spend my $ somewhere else. Too bad, but I guess I'm not the only one though.

LuluAddict said...

MB - See which aspect? Chip trying to take the company back to private or selling his holdings altogether? I find it hard to believe he would totally let it go.

LuluAddict said...

My personal feeling is that it would be good if they went back to being private. As for Wilson being involved, he is a huge creative presence who made the company so him being involved creatively would not be bad, would most likely be good - creatively, but they definitely need to upgrade the support systems - inventory, website, QC, etc. It would be wonderful if they could bring back manufacturing to North America. They could turn out product that much faster.

Anonymous said...

Curious that Wilson said he wanted LLM to focus and return to long term objectives. Haha, maybe he meant HIS long term objectives, because I can't imagine any company not having them in the first place.

The only winner will be… Goldman Sachs who get to charge millions advising Wilson.

Some weird non-brand related stuff was on the Kit & Ace FB, about gangsters having integrity but no morals… he must be referring to the Board Members. LOL.

Anonymous said...

Like Chip Wilson or not - we have Lululemon because of his vision, boldness and innovation. I would applaud a take-over by Chip. I want my Lululemon back to where it was and I too am getting tired of waiting ;)

Anonymous said...

I don't think lululemon is going back to it's original, it has grown too big. It may just change altogether.
Going back to private is an interesting idea. I still think that out of all the brands out there, splits 59, lorna jane, athleta etc. Lulu seems to be my go to brand. I have been curious about sweaty betty and yogasmoga, but I keep coming back to lulu.


MB. said...

LA--him trying to take the company back to private, I should have specified.

Educators and store teams have been noticing the decline in quality for years, as well as all the behind the scenes product pull backs and changes.

One recent example: discontinuing the Game on Boxers. Probably the best rated men's item, and now they're replacing it with a new boxer that's made from a less soft, cheaper material, and is a shorter boxer (less material). Still charging the same price, of course. As if $24 for boxers wasn't enough, LLL is going "lean" crazy and cutting corners at the expense of long term value and their consumers.

We've been seeing a lot of other stuff like that this year, like the cropped CRB that was initially the same price as the regular CRB, vinyasa light scarves that are also $48 despite being MUCH thinner than regular vinyasas...

In general, Christine Day has put an empahsis on more "trendy" things and high price point items like TONS of jackets because that's where high profits are, despite knowing the LLL base consumers want more high quality basics (tanks, crops).

Just my 2 cents.

Anonymous said...

maybe he's just trying to get the stock price back up before he sells his shares, like the workout gear, don't get their "no customer database" and not helping you find items at another store that might have your size.

LuluAddict said...

@MB - totally agree.