Lululemon stock price gets a boost as CEO departs and buybacks rise. Is this the start of a turnaround?

Lululemon might just be entering a new—and improved—era. 

On Thursday, December 11, the athleisure apparel company shared a mostly positive third-quarter earnings report and announced the departure of its CEO, Calvin McDonald. 

McDonald will leave Lululemon Athletica on January 31, after seven years in the post. He previously served as CEO of Sephora Americas. 

The last year has been one of underperformance for Lululemon. In October, the company’s controversial founder and largest independent shareholder, Chip Wilson, took out an ad in the Wall Street Journal criticizing Lululemon’s direction.

While he didn’t go as far as to name McDonald, Wilson wrote, “The board insists on operator/finance CEOs who can ‘speak Wall Street,’ rejecting the idea of a product-driven CEO. These types of finance focused CEOs don’t know how to attract or motivate creative talent, and even worse, they think they understand great product when they don’t.” 

Why is McDonald leaving?

In a post-earnings call, McDonald called his time as CEO a “dream job” but that “the timing is right for a change.” He will stay on as a senior adviser through the end of March.

Lululemon has named its CFO, Meghan Frank, and CCO, André Maestrini, as interim co-CEOs while the company searches for a permanent replacement. 

In the announcement, McDonald claimed to have built a foundation for the future: “I believe the outstanding product pipeline we’ve built, and action plan we’ve put into place, will yield positive results, and deliver value to shareholders in the months and years ahead.”

How did Lululemon perform in Q3?

Quarter three was an improvement for Lululemon, with $2.57 billion in revenue, a 7% increase year-over-year (YOY) from compared to $2.4 billion.

It also beat Wall Street’s predicted $2.48 billion, according to consensus estimates cited by CNBC. Lululemon further reported $2.59 earnings per share, above Wall Street’s expected $2.25.

However, this was still lower YOY, compared to $2.87. Lululemon also projected sales below expectations for its current quarter.  

During quarter three, Lululemon bought back one million common stock shares for a total of $189 million.

And the company announced that its board of directors has approved a $1 billion increase to its share repurchase program. As of Thursday, Lululemon had about $1.6 billion still available for its repurchase program. 

Overall, the good outweighed the bad for investors. Lululemon’s shares (Nasdaq: LULU) rose over 9% on Friday in premarket trading. As of Thursday’s close, the stock is down almost 50% year to date.

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