Lululemon CEO dumped over code of conduct lapse
Ousted executive’s transgressions not detailed
TORONTO • Lululemon, a brand that based its corporate ethos around personal development and communal fitness classes, shocked the industry late Monday when it announced CEO Laurent Potdevin had resigned for breaching the retailer’s code of conduct.
“Lululemon expects all employees to exemplify the highest levels of integrity and respect for one another, and Mr. Potdevin fell short of these standards of conduct,” said a statement from the retailer announcing Potdevin’s immediate resignation from the board and from his role as CEO, a position he had held for the last four years.
It’s not a cheap exit: in a regulatory filing after markets closed Monday, Lululemon said it had agreed to pay Potdevin payments totalling US$5 million as part of his separation agreement, dated Feb. 2.
The executive’s transgressions were not detailed by the company, but it was clear that the conduct breach was not related to the company’s operations. Lululemon said it has begun a search to replace Potdevin, who was CEO of Toms Shoes and Burton Snowboards before taking up the helm at the Vancouver-based athleticwear company.
“While this was a difficult and considered decision, the board thanks Laurent for his work in strengthening the company and positioning it for the future,” said a statement from Glenn Murphy, who was promoted to executive chairman of Lululemon amid the shakeup, from his prior role as chairman.
“Culture is at the core of Lululemon, and it is the responsibility of leaders to set the right tone in our organization. Protecting the organization’s culture is one of the board’s most important duties.”
Three of the company’s senior executives — Celeste Burgoyne, executive vice-president, Americas; chief operating officer Stuart Haselden and Sun Choe, senior vice-president of merchandising — will take on added responsibilities in the interim period and report directly to Murphy, a former CEO of both Gap Inc. and Shoppers Drug Mart.
During his tenure, Potdevin vastly expanded the brand’s online business, its technical athletic clothing and its menswear line, finding sales success with the 2015 launch of ABC pants, an “anti-ball crushing” line of stretchy garments.
The company anticipates menswear will account for a quarter of its business by the time it hits an estimated US$4 billion in sales by 2020.
In an intemperate year for apparel retailers, Lululemon has had solid sales and its MR. POTDEVIN FELL SHORT OF (LULULEMON’S) STANDARDS OFCONDUCT. shares have risen 16 per cent over the past year.
“(Potdevin’s) innovative approach and his clear sense of Lululemon’s values and essence is one of the reasons the company has enjoyed continued success, even while other sporting brands struggle to generate growth,” said Neil Saunders, managing director of GlobalData Retail, said in a published comment after the announcement.
“Lululemon owes it to investors and to customers, to be clear about the reasons Mr. Potdevin was made to depart. As a company that prides itself on transparency and openness, we would expect it to have an honest conversation with stakeholders. Failure to do so will likely lead to speculation which could ultimately harm the brand.”
The company also reaffirmed its guidance for its fiscal fourth-quarter and year-end results, due on March 27.