Lululemon stands at a “crossroads” in the new year as the apparel brand with Canadian roots faces a combination of continued competition, a CEO set to step down, and a U.S. investor firm reportedly about to become one of its largest shareholders, experts say.
The Wall Street Journal, The Canadian Press, Reuters and CNBC have all reported over the last two weeks, citing sources, that Elliott Investment Management has taken a $1-billion stake in the company.
Global News has not independently confirmed those reports and a request for comment to both Elliott Investment Management and Lululemon went unanswered.
But both a retail analyst and an investing expert say a new investor firm shareholder could play a key role in the direction Lululemon takes in the coming year.
This also comes as the stock price has been up and down over the past year, as the company faces continued challenges from similar apparel brands, and ahead of the Winter Olympics in February 2026, where Lululemon is once again the official apparel provider for Team Canada.
“They had a time of incredible growth,” retail analyst Bruce Winder says. “But over the last, I’m going to say two years, a year and a half maybe, you started to see some cracks show.”
What started as humble beginnings selling stretchy yoga pants at a single location on a Vancouver street corner in 1998 has evolved into a global apparel brand.
Now, Lululemon sells yoga pants among hundreds of other items, including a full range of athletic apparel designed for a wide variety of sports and casual scenarios, as well as equipment, shoes and even winter jackets.
The COVID-19 pandemic especially drove up sales of “athleisure” clothing, which became popular as social distancing led many people to stay home.
Lululemon is also the main apparel sponsor for Canada’s 2026 Olympic team again in Italy.
That all comes as the brand faces competition from the likes of Alo Yoga, Nike and Under Armour, which continue to nibble away at Lululemon’s hold over the yoga pants market.
Costco has been selling alleged “dupes” of Lululemon’s patented products at a fraction of the cost, with a lawsuit launched by Lululemon currently underway.
The ongoing challenges come as consumers across North America and other parts of the world are facing strain, with multiple polls and surveys over recent months showing costs are a growing concern for consumers.
Get daily National news
Get the day’s top news, political, economic, and current affairs headlines, delivered to your inbox once a day.
Earlier this month, Lululemon reported quarterly earnings that showed that sales in North America continued to fall, but international sales remained strong, especially in China.
“Given the competitive environment, we know guests are looking for value,” CEO Calvin MacDonald said in the earnings call to shareholders after those results were released.
The company’s chief financial officer, Meghan Frank, also spoke on the call and said Lululemon is “closely monitoring where the competitive landscape goes.” She went on to say that when it comes to the outlook for operating profits in 2026, “it is fair to assume that the negatives will outweigh the positives.”
MacDonald also announced he plans to step down at the end of January 2026.
“Calvin McDonald did a really good job his first few years, but the athleisure market has become significantly more competitive. You have some serious competitors now who are giving them (Lululemon) a run for their money,” Winder says.
“And when product doesn’t work in that space, bad things happen, sales go down, and then the scariest thing is Wall Street starts to lose faith. And when Wall Street loses faith, it’s very bad.”
So far in 2025, shares of Lululemon have fluctuated, including a drop in value by more than 40 per cent as of Dec. 29.
Since the news of the CEO stepping down and the reports of Elliott getting involved earlier in December, the stock has ticked up by about 15 per cent since Dec. 1 — although still within that bigger year-to-date decline.
“The recent earnings report was decent, which drove the stock a little bit higher, but I think more importantly than that were two non-financial items,” says Josh Sheluk, a portfolio manager and chief investment officer at Verecan Capital Management.
“First was they are replacing their CEO at the end of January, and the second was a fairly material stake taken in the company by an activist investor, Elliott Management. That drove the stock higher last week — it’s a perception that these two moves will add some value to the company going forward.”
Elliott Investment Management is considered by investing experts like Sheluk to be an “activist” hedge fund group.
“‘Activist’ just means that you’re a little more vocal in terms of the direction of the company,” Sheluk says.
Elliott Management has reportedly amassed a stake of more than US$1 billion in Lululemon, and is lining up a potential CEO candidate as it pushes to revive the struggling athletic apparel retailer, multiple U.S. media outlets have reported, citing a source.
Elliott has been working closely for months with veteran retail executive Jane Nielsen, former chief financial officer and chief operations officer at Ralph Lauren, and views her as a potential CEO candidate, some of those reports have noted.
With a $1-billion stake in Lululemon, Elliott Management now owns about four per cent of the company — roughly half of Dennis J “Chip” Wilson, who is the founder of Lululemon and still the largest individual shareholder.
According to the Securities and Exchange Commission in the United States, Wilson owns just over eight per cent of Lululemon’s stock.
And the potential for differing views there could set a test for where the brand will go next, Winder says.
“You have potentially two separate forces now. You have Chip, who wants to get back to their roots of high-end product innovation, and ‘don’t worry about Wall Street,’” Winder says.
“Then you have Elliott, who’s the opposite and probably wants to do things that will increase short-term share gains, and may or may not be best for the company long term. Activist investors tend to look for limping companies that are underperforming — low-hanging fruit.”
Elliott recently took large stakes in PepsiCo as well as Southwest Airlines, and pushed for changes at those companies following periods of weak performance.
Sheluk says what tends to draw the attention of Elliott Management is “a big, big stock pullback,” like the recent drop in value for Lululemon over the past year or so.
“Any time that you have a meaningful correction in the value of a company, I think that is an opportunity, at least potentially, for there to be a turnaround. You can look at a company like Lulu that still has a lot of potential for growth,” Sheluk says.
“So you have a lot things that line up pretty well for an attractive investment if they can shift what seems to be more of a branding issue and a branding perception issue at the moment.”
A new CEO to replace MacDonald has yet to be named, but whoever steps into the seat will likely have to steer Lululemon in a direction that will keep both consumers and shareholders happy.
“It’s always challenging because you don’t want to stray too far from the core brand, but at the same time, sometimes it’s necessary to add extra things to your repertoire. And I think that’s what Lulu is struggling with at the moment,” Sheluk says.
“‘Do I stay tried and true to my core brand and in the way that it has been derived in the past? Or do I start to look at other opportunities to sort of broaden the scope of that brand?’”
“I don’t know what the right answer is. I think that Lulu is kind of at a crossroads between those two things at the moment.”
— with a file from Reuters
Read the full article here
