By Joel Jose
April 23 (Reuters) – Lululemon Athletica’s shares fell 4% in premarket trade on Thursday, after the struggling retailer announced former top Nike executive Heidi O’Neill as its next CEO, ending a months-long search marked by pressure from an activist investor and the company’s founder.
O’Neill, who spent more than 25 years at Nike, will join Lululemon as CEO in September, arriving as the company navigates weak sales, increased competition from trendier upstarts such as Alo and Vuori and a continuing proxy fight with its founder Chip Wilson.
Its stock price has tumbled 38% in the last 12 months, trimming its market value down to $18.8 billion.
Analysts at Needham and Evercore ISI attributed the sharp decline to the appointment of O’Neill instead of activist investor Elliott Investment Management’s choice of veteran retail executive Jane Nielsen.
“Skeptics will likely focus on the negative results at the Nike DTC business that O’Neill was running most recently at the end of her Nike tenure,” analysts at Evercore said.
Elliott, which has a roughly $1 billion stake in Lululemon, has been pushing for the appointment of a new CEO, compounding scrutiny from Wilson, who owns about 4.3% of the company.
Wilson has previously said the brand has lost its “cool” factor and is waging a proxy fight to install his three director candidates at the annual meeting later this year.
Wilson and Elliott did not immediately respond to a Reuters request for comment.
“Ms O’Neill may bring much-needed product experience to drive a brand reset. But for now, the core issues remain: an ongoing proxy fight that adds uncertainty and sky-high productivity that remains far from bottoming,” according to Jefferies analysts.
O’Neill, who left Nike in September, played a key role in resetting the brand, cutting product development timelines and getting products to market faster, Lululemon said in a statement.
(Reporting by Joel Jose in Bengaluru; Editing by Janane Venkatraman)
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