Activist Investor Elliott Builds Billion Dollar Stake In Lululemon
Shares of Lululemon are higher in premarket trading after a report that activist investor Elliott Investment Management has built a $1 billion stake in the company and is pushing for a turnaround at the struggling athletic apparel brand.
The Wall Street Journal cites sources familiar with Elliott's move to build a billion-dollar position, making it one of the company's largest shareholders. Elliott is seeking a new CEO to replace Calvin McDonald, who will step down in January.
Elliott has been working with veteran retail executive Jane Nielsen as a potential CEO candidate. Nielsen, a former CFO and COO at Ralph Lauren and a former CFO at Coach, is seen by Elliott as a capable leader to turn the company around. The company has faced mounting criticism over quality issues, brand dilution, and operational missteps. More importantly, it has lost market share in recent years to athletic apparel competitors Vuori and Alo Yoga.
Elliott's Paul Singer must be an admirer of the leggings.
Last week, Lululemon shares moved higher after the company reported a China-led third-quarter beat and announced McDonald's transition.
Goldman analyst Brooke Roach offered her take on earnings and CEO transition:
With investors focused on LULU's ability to drive core US market reacceleration, we believe today's update offers three areas for incremental optimism. (1) Clearer action plan. Today we heard a more formal representation of LULU's three-pillar action plan to drive an inflection. While we believe US growth remains a show-me story after core deceleration more than offset the benefit from incremental newness in 2025, we are encouraged by the more comprehensive plan to improve the store experience and highlight new product launches, as well as management's commentary regarding healthy consumer engagement with new product. (2) Potential for a new leadership perspective. The announced departure of Mr. McDonald offers an opportunity for LULU to bring in a leader who could offer a new perspective on the changes necessary and the urgency with which those changes should be implemented. (3) Recent trends have been modestly stronger, driven by China and margin delivery. China comps were much stronger than expected, and while some of this is due to timing or specific activations, the sequential recovery is notable. Further, margin delivery in the quarter was stronger, and tariff mitigation commentary was modestly better. Stepping back, we acknowledge the strategic initiatives that management is implementing to reinvigorate US growth, and see potential for some improvement as the company accelerates newness to ~35% of the assortment by Spring 26 alongside a faster go-to-market process. That said, this is balanced by an uncertain near-term outlook (timing shifts / post-Thanksgiving slowdown / continued negative US comps), and margin pressure will persist into FY26. Next catalyst is the ICR Conference in early January (holiday sales).
The WSJ report made no mention of when Elliott's traders were buying shares of Lululemon. But with the stock down roughly 68% from its December 2023 peak, it's reasonable to think the position was built over the past several months. Shares are also at Covid lows...
Earlier this year, Elliott took a $4 billion stake in Pepsi as it sought a transformation. In recent months, it took a position in Barrick Mining.