Who Should Lead Lululemon Next?

Few retail CEO exits are covered by Matt Lauer, but Christine Day’s decision last week to step down from Lululemon for "personal reasons" rated a spot as a topic on last Thursday’s Today Show.

Ms. Day’s announcement last Monday led to an 18 percent one-day drop in Lululemon’s stock. The former Starbucks executive, who has been CEO for the past five years, plans to stay on until a successor is named.

Mr. Lauer questioned whether "the ‘it company’ of exercise apparel had lost its mojo." He pointed out that Ms. Day’s announcement comes months after the chain underwent a "PR nightmare" in recalling thousands of too-shear yoga pants.

Despite the commotion, Lululemon poked fun at the episode later in the week by posting a "CEO Wanted" banner across the front page of its website, with the click through leading to a phony application, filled with yoga jokes.

lululemon ceo

However, finding a successor gets complicated since Ms. Day’s exit remains a mystery. Many doubted it was tied to the recall, given Ms. Day’s exemplary track record. Over her tenure, Lululemon’s annual revenue more than quintupled and profits rose nearly nine times. In 2012, sales per square foot hit a stunning $2,058.

Ms. Day also told Fortune that there was "no difference in strategic vision for the company, we were and are aligned."

Some felt more global experience may be needed as the chain begins its expansion into Europe and Asia.

"She built the (brand) identity," Telsey Advisory Group CEO Dana Telsey said on the Today Show. "Next stop? Global growth"

Other newer challenges facing Lululemon will be developing categories such as golf and running apparel, and men’s overall. Plans to open men’s-only stores were revealed last week. Its Canadian stores may be facing maturity while Nike, Under Armour and Athleta are gunning after its U.S. consumers.

Any successor would have to replicate Ms. Day’s success empowering local managers to design their stores and activate local communities, a feat that established the chain’s culture. Sharp design, merchandising, lifestyle branding and creating scarcity around product have also been part of the formula that has allowed Lululemon to sell yoga gear at two to three times the price of competitors.

Marshal Cohen, chief industry analyst at NPD, told Forbes that the new CEO will have to be "creative in how to deliver the same for less or deliver even more so that you can stay at those higher prices."

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Discussion Questions

How big a blow is Christine Day’s pending exit from Lululemon? What type of CEO does Lululemon need to lead it through its next stage?

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Dick Seesel
Dick Seesel
10 years ago

I noted that Christine Day said she was no longer interested in the personal sacrifices required to work 18-20 hour days at the helm of the company. My immediate reaction was that any CEO working these hours is not managing as effectively as possible. Lululemon may be ready for a CEO that can help move it from a rapid growth phase toward a more mature business model with a strong internal management team.

At the same time, the company continues to have growth options inside the U.S.—not just overseas—perhaps by aligning with a big department store partner to build “shops within stores.” Traditional department stores have not excelled in the activewear business, so this could be a win for both sides.

Gene Hoffman
Gene Hoffman
10 years ago

The impact of Christine Day’s pending exit from Lululemon will be determined by her successor’s unique skills. Day has been a great quarterback for Lululemon, but she lost her hunger to lead. Quite frequently, an equally great QB who is still hungry takes over and the trend continues upward. Remember Bret Favre being replaced by Aaron Rogers?

The next CEO at LULU must have both unique insights and skills, but also a persistent driving force to improve on Christine Day’s great record.

Tom Ryan
Tom Ryan
10 years ago

The news that Day was leaving due to the 18-20 hour workload came from the Wall Street Journal and they later ran a clarification indicating those comments didn’t come from Ms. Day and weren’t the reason she was stepping down. I guess it could be part of the reason for all we know. The following is the clarification from the Journal:

“Corrections & Amplifications
An earlier version of this article reported a person familiar with Ms. Day’s resignation announcement as saying the executive had told Lululemon’s board that the time and travel demands of the CEO job were behind her decision to step down. The person subsequently said that report was not based on the executive’s actual comments; also the company said Ms. Day didn’t make the statements and the reasons cited were not the basis for her decision.”

Phil Rubin
Phil Rubin
10 years ago

Ms. Day had a tremendous amount of success building Lululemon to what it is today. However, the next phase of growth for the company is going to require a fundamentally different approach to managing the business. Ms. Day took great pride in not leveraging customer data and CRM capabilities and relied heavily on traditional store visits and listening to associates and customers. While these latter activities are essential, they are insufficient for sustained growth.

While “Big Data” is not the answer to everything, when it comes to customer data and understanding the business as a result, there is no substitute. If I were on the search team for Lululemon, I’d be looking for a customer-centric leader who is both a keen merchant and a data-driven business manager.

Gordon Arnold
Gordon Arnold
10 years ago

Maybe this will demonstrate the necessity for retail executives to work in a store, doing store things 2 or more days a month on different shifts. They might even take time to look at the stuff for sale while they are there. Yeah, and how about a trip to the warehouse a couple of times a year or a visit to the vendors, or maybe even meet and watch the buyers or those scary IT people just to see if you can learn something.

When you have no current practical awareness at any level of the business, all of your decisions are a guess. It’s only a matter of time and quantity before failure makes change necessary. They need a leader, not a title holder or image setter.

Craig Sundstrom
Craig Sundstrom
10 years ago

Enormous success usually comes from a coalescence of having the right person, with the right vision/abilities at the right time; change any one of these and the magic will be lost. Though I don’t know enough about either Ms. Day or the brand to speculate on how well she would have carried on, I think many of the same questions that will fall on her successor—”is she/he the right person to lead us into the next phase of growth?”—ultimately would have been asked about her too…particularly when the next crisis arrived (and there WILL be a next crisis, there always is). I wish that person well.