lululemon athletica's Founder Makes Sense for Once

Lululemon's founder Chip Wilson had some harsh words for the company's board -- but in this case, he's right.

Jun 12, 2014 at 11:55AM

Michael Casey served near the top of the Starbucks management structure for 10 years, ending his run in 2007. He now serves on the lululemon athletica's (NASDAQ:LULU) board as chairman, and yesterday, the company's founder called him out. Chip Wilson, founder and embarrassing public speaker, voted against Casey's reappointment to the board, saying that the board is currently "heavily weighted toward short-term results at the expense of product, culture and brand and longer-term corporate goals."

I have almost no love for Wilson, but if the results of the last few years are anything to go by -- and they are, in fact, the only thing to go by -- Wilson has a point here. Lululemon's business has been crushed by its lack of quality control, its poor community management, and its muddled communications.

Wilson and Casey, a feud wrapped in luon
It's important to reiterate that Wilson is no saint. The only reason that Casey is currently chairman is that Wilson had to step down last year after effectively saying that Lululemon wasn't made for overweight -- or maybe even normal-weight -- women. It wasn't the first slip-up for Wilson, who founded Lululemon in 1998, later saying in an interview that he named it Lululemon because he thought Japanese speakers would stumble over the l's, adding a mystique to the brand.

Casey hasn't said anything quite so idiotic or crass, but he's also failed to stop Lululemon from imploding. Sales have fallen 35% over the past 12 months, and are down 36% since Casey took over on the board. Much of the fall has been out of his hands, and other heads have rolled for the sheer-fabric issues that plagued Lululemon last year.

Lululemon's future in jeopardy
Wilson put his 27% stake in Lululemon in a vote against Casey and director RoAnn Costin due to his belief that they were taking the business in the wrong direction. In his letter condemning the board, Wilson was quick to praise the management team that is now in place -- a team that Wilson helped build and which includes CEO Laurent Potdevin.

The board quickly rose to defend itself, and yesterday the company released a statement, saying, "Contrary to Mr. Wilson's assertions, lululemon's Board members are aligned with the Company's core values and possess the necessary expertise to successfully lead lululemon forward."

"Forward" is the key term here, as for the past year Lululemon has been going backward -- it's had to work to recapture its old customers. What "forward" means is the distinction that Wilson is trying to make in his vote against the board. "Forward" needs to mean reengaging the community and rebuilding its infrastructure. What Lululemon seems to be focused on is simply rolling out more new products.

Wilson shouldn't be anyone's hero, but I think he's right on this. On Lululemon's last earnings call, Potdevin said, "Product has always been paramount to our success, and will remain at the very epicenter of all we do." That ignores, or at least diminishes, the role that community engagement plays at Lululemon. Without that piece of the puzzle back in place, Lululemon simply isn't going to get back on top.

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Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends lululemon athletica and Starbucks. The Motley Fool owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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