Please ensure Javascript is enabled for purposes of website accessibility

Lululemon Gives Chip Wilson the Boot -- and Why These 2 Companies Should Follow Suit

By Melinda Melendez - Dec 13, 2013 at 10:15AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Lululemon hopes to turn its bad year around with the exit of Chip Wilson and former CEO Christine Day. J.C. Penney and Abercrombie & Fitch could do the same, but they need a change at the top.

Lululemon Athletica (LULU 5.20%) announced big changes in leadership that could put the company on the path to recovery in 2014. J.C. Penney (JCPN.Q) could also see a major change in leadership in the upcoming year, or will the company opt to keep the devil it knows like Abercrombie & Fitch (ANF 1.34%)?

Lululemon announced that co-founder Chip Wilson will resign as chairman of the beleaguered sportswear company. Wilson will be replaced with Michael Casey as the new chairman of the board.

Lululemon has had a rocky year. In early 2013, the company was forced to recall 17% of its ubiquitous yoga pants -- its premier product that commands prices nearing $100. Fast forward to a couple of months ago when Wilson offended and alienated a number of Lululemon's customers with some poorly chosen words, shifting the blame for the recall from shoddy merchandise to the shape of women's bodies. Wilson then proceeded to throw gas on the fire by posting a video apology on YouTube that did little to smooth things over with his female customer base.

This summer, longtime CEO Christine Day announced that she would be leaving the company after nearly six years. Lululemon finally announced that Laurent Potdevin would be stepping in as the new CEO. Potdevin spent years as the president of Toms Shoes and as manager of LVMH Moet Hennessy Louis Vuitton, so presumably he knows how to handle luxury brands.

These two moves should do much to restore faith in both investors and customers that the brand will move forward with a renewed commitment to quality in 2014.

Will it be too late for Abercrombie to follow suit?
While Lululemon's moves to replace Wilson and Day seem to be in the nick of time, Abercrombie & Fitch is holding on to its mouthy CEO, Mike Jeffries, despite nearly two years of dwindling sales.

Jeffries, who has repeatedly drawn the ire of potential customers for his comments regarding the exclusive nature of the formerly trendy brand, has signed on for another year as CEO of Abercrombie. While Jeffries has made several comments alienating plus-size consumers, the retailer hopes to boost sales with a new plus-size e-commerce site.

Reconciling its CEO's image of exclusion with a seemingly desperate attempt to gain new devotees that the company intentionally alienated could prove to be an insurmountable task for Abercrombie. With Jeffries contract  to remain CEO until at least February 2015, the promise of new blood could come too late for this brand.

Can J.C. Penney stage a comeback with new leadership?
While the ink dries on Jeffries' new contract, by contrast, no one seems to want to sign on J.C. Penney's dotted line.

After Ron Johnson's ill-fated year and a half at the helm was a bitter failure, Mike Ullman stepped back in as "interim" CEO and has remained in the position since April of this year.

J.C. Penney has seemingly shifted back to its old, comfortable routine, promoting "door busters" and coupons -- a tactic Johnson tried to eliminate to the dismay of longtime customers. Bringing back Ullman was probably the company's best move at a time when J.C. Penney was lacking in revenue and needing to restore its customers' confidence.

Let's not forget, however, that J.C. Penney was not doing well when the company initially replaced Ullman with Johnson, hoping to blow the dust off its image. While Johnson's attempt to turn J.C. Penney into the Apple Store didn't work out, he was successful at improving the image of the retailer with trendier clothing and sleeker-looking sales floors.

J.C. Penney's next CEO should seek to capitalize on those improvements by combining them with the tried-and-true sales tactics that appeal to J.C. Penney's existing customer base.


Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

J. C. Penney Company, Inc. Stock Quote
J. C. Penney Company, Inc.
Abercrombie & Fitch Co. Stock Quote
Abercrombie & Fitch Co.
$32.52 (1.34%) $0.43
Lululemon Athletica Inc. Stock Quote
Lululemon Athletica Inc.
$309.29 (5.20%) $15.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.