Dive Brief:
- Lululemon has named 28-year Nike veteran Heidi O’Neill as its next CEO effective Sept. 8, the company announced Wednesday. She will also join the board at that time.
- Meghan Frank and André Maestrini, who have been leading the company as co-CEOs, will continue to do so in the interim and then return to their previous roles as CFO and chief commercial officer, respectively.
- The appointment comes three months after former CEO Calvin McDonald stepped down in the midst of softening sales in North America and heavy criticism from founder Chip Wilson.
Dive Insight:
Lululemon has found its next CEO at rival Nike. O’Neill, who left Nike last May as part of a restructuring under CEO Elliott Hill, takes the reins at Lululemon during a critical juncture.
The activewear brand, widely credited with popularizing athleisure, has run into roadblocks in recent years as consumer demand in the U.S. has slowed. McDonald acknowledged that the retailer’s product had become too predictable, a criticism echoed by Wilson and external observers.
“The brand is in unchartered waters today, unable to comp positive in 12+ months with the US market negative and struggling due to a lack of innovation on core product and increasing competition from new entrants (namely Alo Yoga and Vuori, as well as others),” Wells Fargo analysts wrote in December.
At Nike, O’Neill held a series of influential roles, including overseeing U.S. apparel and, most recently, serving as president of consumer, product and brand. She helped grow the company from $9 billion to roughly $45 billion and “played a central role in overseeing the company’s product pipeline, brand voice, and operations, as well as in shaping its connection with consumers and athletes worldwide,” according to Lululemon’s announcement.
In addition to Nike, O’Neill brings experience from Dockers and has served on the board of companies including Spotify and Hyatt.
“Heidi is an inspiring leader and proven, consumer-driven brand strategist, with a rare ability to both imagine a new future for a brand and to create the structure and processes to deliver on that vision,” Marti Morfitt, executive chair of Lululemon’s board of directors, said in a statement.
The chair stressed that Lululemon conducted “an extensive search” for the retailer’s next CEO; the search was a hotly contested topic in recent months. Elliott Investment Management in December acquired a more than $1 billion stake in the athleisure brand and pushed the retailer to name Ralph Lauren veteran Jane Nielsen as its next CEO. Wilson also weighed in with his own thoughts on the requirements for a new CEO.
“We selected Heidi because of the breadth of her experience, her demonstrated success delivering breakthrough ideas and initiatives at scale, and her ability to be a knowledgeable change and growth agent,” Morfitt said.
GlobalData Managing Director Neil Saunders called O’Neill “an obvious choice” for the CEO role, given her extensive experience in the activewear space and proven track record growing Nike’s apparel business.
“This will allow her to hit the ground running as she has an intimate knowledge of how the industry works and has deep connections to all aspects of it from product design to supply chains,” Saunders said. “There will be some, mostly activist investors, who see O’Neill as something of a safe and traditional choice. This argument is partly valid as a lot of cultural change is needed at Lululemon in order to improve performance.”
“However, in our view, O’Neill is her own person who will come with an agenda of change,” he said.
For her part, O’Neill said she plans to build on the foundation Lululemon has already established, including plans “to accelerate product breakthroughs, deepen the brand’s cultural relevance, and unlock growth in markets around the world.”
“The task ahead is a significant one but it can be undertaken from a position of relative stability,” Saunders said. “Despite its lack of growth in North America over recent years, Lululemon is not a terrible business: share losses have been modest, and it is still generating growth. The challenge will be to inject more energy and restore Lululemon as one of the leaders in terms of product innovation.”
O’Neill will be based in Vancouver and make a salary of $1.4 million, per an SEC filing. She will be eligible for a target performance bonus of up to 200% of her annual salary and annual equity awards of about $10 million of which 60% will be performance-vesting restricted stock units.
