+

Cookies on the Business Insider India website

Business Insider India has updated its Privacy and Cookie policy. We use cookies to ensure that we give you the better experience on our website. If you continue without changing your settings, we\'ll assume that you are happy to receive all cookies on the Business Insider India website. However, you can change your cookie setting at any time by clicking on our Cookie Policy at any time. You can also see our Privacy Policy.

Close
HomeQuizzoneWhatsappShare Flash Reads
 

Lululemon needs a new CEO, and analysts say there's a clear frontrunner for the job

Feb 9, 2018, 01:03 IST

AP Photo/Jason DeCrow

Advertisement
  • Lululemon's CEO abruptly resigned Monday. The company released a statement suggesting he had engaged in poor conduct.
  • It is now searching for a replacement CEO but will be run by three members of senior management during the interim period.
  • Analysts say industry veteran Stefan Larsson is the frontrunner for the job.

Lululemon is hiring.

This week, the athletics apparel company lost its CEO after Laurent Potdevin abruptly resigned. The company released a statement that suggested Potdevin had engaged in poor conduct but did not specify how exactly, sending the industry into a frenzy. Sources close to the situation later confirmed that Potdevin's relationship with a former employee was one contributing factor of several.

Advertisement

Now everyone's wondering: who will replace him?

"In our view, the lead candidate is Stefan Larsson, the former CEO of Ralph Lauren," Canaccord Genuity wrote in a note to investors on Tuesday.

Larsson, who, in addition to roles as CEO at Ralph Lauren and as global president of Old Navy, spent a decade and a half at H&M, is poised to become the new CEO, analysts say. Larsson left Ralph Lauren in February 2017 after less that two years at the company, and since then he has been tied up in a non-compete agreement that expires in May 2018.

He did not immediately respond to Business Insider's request for comment, and a spokesperson for Lululemon declined to comment on the speculation.

Larsson has a history of resuscitating brands - he's been credited with H&M's rapid expansion in the US and for rescuing Old Navy.

Advertisement

Old Navy had become a victim of H&M's success, which was leading the way in fast-fashion retail. Gap Inc.'s CEO at the time, Glen Murphy, hired Larsson in 2012 to turn the business around. Murphy is now the executive chairman of Lululemon and is expected to have a leading role in the hiring of its new CEO.

He clearly has a great appreciation for Larsson: "Stefan is a rising star within apparel retail, with proven experience in the value sector. He's tackled some of the most complex challenges in our industry and has a deep appreciation for the need to balance great product and operational excellence," Murphy said in a statement after hiring Larsson in 2012.

Larsson completely overhauled Old Navy's business, cutting the supply chain and hiring talent from Coach, Nike, and Reebok to make the clothes more fashionable.

"Using what he learned at H&M, he did a better job of matching supply and demand," Bridget Weishaar, a retail analyst at Morningstar, told The New York Times in 2015. "He realized that people who were buying cheap clothes still wanted to look good."

Old Navy has become its parent company's saving grace. While Gap Inc. has reported negative same-store sales growth for the past two years, independently, the Old Navy brand has seen positive same-store sales growth for the past five years.

Advertisement

Business Insider/Mary Hanbury

A brieft stint at Ralph Lauren

Three years later, Larsson was called in to help Ralph Lauren with its turnaround efforts, and he took over from the longtime CEO and founder of the business, Ralph Lauren himself.

Larsson launched an initiative that was similar to what he did at Old Navy: he proposed reducing inventory, speeding up the supply chain from 15 to nine months, and scaling back on discounting.

But his proposals didn't sit well with Lauren, and the two leaders disagreed on the creative direction of the company. Larsson left after one and a half years with a reported $10 million in cash severance.

"Stefan and I share a love and respect for the DNA of this great brand, and we both recognize the need to evolve. However, we have found that we have different views on how to evolve the creative and consumer-facing parts of the business," Lauren said in a statement in February 2017.

Advertisement

Larsson would be joining Lululemon at a critical time for the brand as it expands overseas and tries to make further gains in its home market, Neil Saunders, managing director of the retail consulting firm GlobalData Retail, wrote in a note to clients this week.

The brand has faced increased competition in recent years as other apparel stores cash in on the athleisure trend, but analysts say it could be headed for a comeback. The company released stronger-than-expected holiday sales in January and subsequently increased its top-end estimate for net revenue in the fourth quarter by $30 million, from $885 million to $915 million.

But it needs a leader.

"It is crucial that the right person is selected, but it is equally important that the task is undertaken with urgency so that Lululemon doesn't lose momentum," Saunders wrote.

NOW WATCH: The healthiest things you can get at McDonald's

You are subscribed to notifications!
Looks like you've blocked notifications!
Next Article