Dennis “Chip” Wilson, the founder of Lululemon Athletica inc. (NASDAQ:LULU) with a 27% stake in the yoga pants retailer, is reportedly working with a team of bankers at Goldman Sachs Group Inc (NYSE:GS) to explore options and demand changes as the stock price of the company has suffered an extended decline.
The Wall Street Journal reported that Wilson is not happy with the strategy of the board of directors of Lululemon Athletica inc. (NASDAQ:LULU) and he might launch a proxy fight to secure additional board seats or partner with a private equity firm to buyout the yoga pants retailer. The report indicated that Wilson hasn’t made any decision.
Prior to the annual meeting of Lululemon Athletica inc (NASDAQ:LULU) on June 11, Wilson criticized the board of directors of the company. According to him, the new chairman and a director were too focused on short-term growth.
Lululemon’s brand is damaged
A strategic acquisition for Lululemon Athletica inc (NASDAQ:LULU) by a large apparel company is unlikely, according to Ben Shamsian, an analyst at Sternee Agee, citing the reason that the brand of the yoga pants retailer was damaged by comments made by Wilson last November.
Shamsian said, “We believe potential partners maybe warded off by Mr. Wilson’s volatility. We do not believe that Mr. Wilson will detach himself from LULU, which leaves us on the sidelines.”
The analysts also emphasized that the free cash flow of Lululemon Athletica inc (NASDAQ:LULU) is not large enough to allow for a significant balance sheet leverage by private equity given its domestic and international growth objectives and fixed cost structure.
Shamsian maintained its Neutral rating for the shares of Lululemon Athletica inc (NASDAQ:LULU).
Wilson previously said in an interview that “some women’s bodies just actually don’t work” for the pants of Lululemon Athletica inc (NASDAQ:LULU). The company has been working to appease customers, resolve its quality problems, defend itself from lawsuits, and deal with the resignations of executives since the interview.
Lululemon stock rises
The stock price of Lululemon Athletica inc (NASDAQ:LULU) was up nearly 3% to $41.40 per share at the time of this writing around 1:51 in the afternoon in New York. The upward movement of the stock was driven by the report that Wilson is seeking strategic options for the company.
Yesterday, a spokesperson for the yoga pants retailer stated that the management and board of directors are “relentlessly innovating to drive global expansion and create value for Lululemon shareholders.”