Lululemon Athletica (LULU 1.85%) recently reported earnings, and the company also announced the departure of its CEO, Calvin McDonald. There's been some controversy around whether the business is going in the right direction, with Lululemon's founder often criticizing McDonald's decisions.
Investors appear optimistic that a change is what the business needs, as the stock has been rallying since the news came out. Could this make Lululemon a better stock to buy heading into 2026?
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Who will be the new CEO of Lululemon?
On Dec. 11, Lululemon told its shareholders that McDonald would be stepping down as CEO as of Jan. 31, 2026. His successor hasn't been announced, and the board of directors is working on finding a replacement. In the interim, the company has appointed Meghan Frank and André Maestrini, two executives within the business, as interim co-CEOs.
The position may require someone with not only a strong pedigree in the apparel industry but also a person with thick skin. Lululemon's founder and former CEO Chip Wilson (who is also a major shareholder) has criticized McDonald publicly, even issuing a press release following the leadership announcement, stating that under McDonald there were "years of poor decisions" and a lack of innovation.
Wilson even seemed to claim credit for the change in CEO. "It is clear to me that only under my increasing pressure has the Lululemon board of directors finally started to listen," he said in a press release.
McDonald took over on Aug. 20, 2018, and since then, shares of Lululemon have risen by around 50%; those gains would have been higher if not for the stock's disastrous performance this past year. By comparison, the S&P 500 has risen by 138% during that time frame (returns are as of Dec. 15).
Why Lululemon's problems go deeper than management
Although Lululemon's stock hasn't done terribly well under McDonald's leadership, it's not as simple as putting in a new CEO to fix things. Lululemon is struggling this year as economic conditions are far from ideal. Consumers have less to spend on discretionary items, and expensive yoga pants from Lululemon may simply not rank high on people's shopping lists these days.
While the company's growth rate has been declining, it wasn't all that long ago when it was well into double digits. Blaming the company's problems on the CEO may be a convenient excuse, but the issues likely go far deeper.
LULU Revenue (Quarterly YoY Growth) data by YCharts
In recent years, it's been easier than ever to buy cheap clothing from online retailers. The growing popularity of fast fashion and frequently changing clothes to stay on top of the latest trends is alluring, particularly to younger consumers who can see it as a way to stretch their cash as far as possible. There's only so much innovating an apparel company can really do. Many times, businesses do end up simply competing on price.
NASDAQ: LULU
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Is Lululemon stock a buy heading into 2026?
I don't think the criticism aimed at McDonald is fair, as there are far more significant concerns for Lululemon than who's leading the company. The reality is that it's not going to be easy to win over consumers and convince them to pay more for its high-priced products when there are "dupes" in the market that look similar at a fraction of the price. It's a struggle that is not unlike Nike's, and a change in CEO hasn't exactly set that stock on a tear.
Lululemon has a strong brand, but it may not appeal to as broad a market as it once did. The big test will be if consumers will come back once economic conditions improve. With an uncertain future, I'd hold off on rushing to buy the stock today, as things could still get worse for Lululemon in 2026. A change in CEO is no guarantee that things will go better for the stock next year.
