UPDATE 5-Lululemon founder turns on board, votes against new chairman
(Adds vote results, details of situation)
By Allison Martell and Euan Rocha
TORONTO, June 11 (Reuters) - Lululemon Athletica Inc's founder and biggest shareholder, Chip Wilson, lashed out at the yogawear retailer's board on Wednesday, saying the company's new chairman and another director are too focused on short-term growth and that he had voted against them in board elections.
Just hours ahead of the company's annual meeting in Vancouver, Wilson issued a press release praising Lululemon's new management team, but saying the board is "heavily weighted towards short-term results at the expense of product, culture and brand and longer-term corporate goals."
Wilson, who remains on the board and owns a 27 percent stake in the company, said he had voted not to elect Lululemon's new chairman, Michael Casey, or director RoAnn Costin.
Spots on Lululemon's board are awarded to nominees who receive the most votes. With no alternative candidates to Casey or Costin, there was no way for Wilson's vote to change the outcome of the meeting. Lululemon said all board nominees had been elected, but did not immediately release vote counts.
The company, which is pursuing international expansion in the face of growing competition, said in a statement that its board and management are committed to shareholder value.
"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," the statement said.
Vancouver-based Lululemon has been struggling in the aftermath of an embarrassing recall of see-through yoga pants announced in March 2013. Once a market darling thanks to its rapid sales growth, it is expected to report little or no gains in same-store sales when it releases financial results on Thursday morning.
Lululemon's stock, which has fallen about 50 percent in the past 12 months, is now one of the most heavily shorted among companies reporting earnings in North America this week.
Lululemon said in December that Wilson had decided to step down as chairman before the annual meeting, and that Casey would take his place.
A source familiar with boardroom discussions at Lululemon said differences at the board level have been simmering for months, but directors only became aware that Wilson was voting his shares against the two directors on Tuesday.
Wilson's choice for a new chairman was not immediately clear.
"I think the guy's upset that he got sent to the back of the bus and this is his opportunity to lash out a bit," said Sterne Agee analyst Sam Poser.
A source familiar with the matter said, however, that Wednesday's move was not a knee-jerk reaction on Wilson's part and that he has a series of options lined up.
The source said Wilson chose this route to try to spur the board to act without a full blown proxy battle. He added that although Wilson has yet to finalize his next step, there are more moves to come.
In his press release, Wilson said Lululemon asked him last year to return from his home in Australia to help deal with quality problems, and that he had overseen Lululemon's recent management shakeup.
Late in 2013, Chief Executive Laurent Potdevin was recruited to revive the company's fortunes. His appointment, and Wilson's resignation as chairman, came after comments made by Wilson deepened a public relations debacle Lululemon faced over the sheer fabric used in some of its yoga pants.
Asked in a November television interview about problems with the fabric, Wilson said it was not holding up because some customers' thighs rubbed together, adding that "some women's bodies just actually don't work" for Lulu's clothing.
The comments sparked an uproar, in part because of the perception that Wilson was blaming quality issues on customers. The company later released a video apology.
Casey, a former Starbucks Corp executive, and Costin, president of a Boston-based private equity company, have been members of Lululemon's board since 2007.
Best known for popularizing form-fitting yoga pants, Lululemon has grown rapidly in recent years. It had 254 stores in North America and Australia as of early February, up from 137 stores in early 2011. It also has smaller showrooms testing markets in Europe and Asia, and recently opened its first store in London.
Affluent, active women were the company's first target market, but it now sells men's clothing and running gear, and is experimenting with casual streetwear and apparel for other sports.
The company's manifesto advises readers to "dance, sing, floss and travel," and also "visualize your eventual demise," because "it can have an amazing effect on how you live in the moment".
Lululemon's shares closed down 2.6 percent at $44.30. (Additional reporting by Susan Taylor and Solarina Ho in Toronto, and Ashutosh Pandey in Bangalore; Editing by Don Sebastian, Sofina Mirza-Reid and Peter Galloway)