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Who Should Lead Lululemon Next?

June 17, 2013Written by Tom Ryan

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.

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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