Lululemon CEO Calvin McDonald to leave, reports third quarter earnings

Lululemon shares jumped more than 9% on Friday, after the company announced its CEO Calvin McDonald will step down.

McDonald’s departure, effective Jan. 31, follows more than a year of underperformance at the athleisure company. 

Lululemon’s board of directors is working with a “leading executive search firm” to identify its next CEO, it said in a news release. McDonald will stay on as a senior advisor through March 31. 

“The timing is right for a change,” McDonald said on a call with analysts, “I’ve described being CEO of Lululemon as my dream job. It truly has lived up to every expectation and given me the opportunity of a lifetime.”

Lululemon’s CFO Meghan Frank and Chief Commercial Officer André Maestrini will serve as interim co-CEOs during the search process. The company’s board chair Marti Morfitt will also take on the expanded role of executive chair. In a statement, she said the company has a strong foundation in place but needs a new leader that can guide it through a transition.

“As we look to the future, the Board is focused on identifying a leader with a track record of driving companies through periods of growth and transformation to guide the company’s next chapter of success,” said Morfitt.

The leadership change follows more than a year of underperformance at Lululemon and calls for change from its founder and its largest independent shareholder Chip Wilson. Two months ago, he took out a full page ad in the Wall Street Journal saying the company is “in a nosedive” and it needed to “stop chasing Wall Street at the expense of customers.” 

Lululemon announced McDonald’s departure on the same day it posted fiscal third-quarter earnings and another round of weak guidance. 

Here’s how the company did compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: $2.59 vs. $2.25 expected
• Revenue: $2.57 billion vs. $2.48 billion expected

The company’s reported net income for the three-month period that ended Nov. 2 was $306.84 million, or $2.59 per share, compared with $351.87 million, or $2.87 per share, a year earlier. 

Sales rose to $2.57 billion, up from $2.40 billion a year earlier. 

For Lululemon’s current quarter, McDonald said the company is “encouraged” by its early performance so far this holiday season — though guidance fell short of Wall Street estimates. It anticipates sales will be between $3.50 billion and $3.59 billion, largely below expectations of $3.60 billion, according to LSEG. 

It’s expecting earnings per share to be between $4.66 and $4.76, well short of expectations of $5.03, according to LSEG. 

In the previous two quarters, Lululemon cut its full-year guidance. On Thursday, more than a month into the final quarter of the year, it raised its full-year expectations.

It now anticipates sales will be between $10.96 billion and $11.05 billion, in line with expectations at the low end, according to LSEG. It expects earnings per share to be between $12.92 and $13.02, roughly…