Lululemon paves way for founder to sell his remaining shares
Chip Wilson left Lululemon Athletica Inc. months ago, but his power as the company’s founder still seems to have sway over its stock.
The Vancouver retailer’s shares slid almost 4 per cent in premarket trading on Thursday after Lululemon laid the groundwork for Wilson to cut his final ties with the company, filing paperwork allowing the entrepreneur to divest his remaining 14 per cent stake. The Nasdaq-traded shares ended the day at $66.07 US, down 70 cents US or 1.5 per cent.
“The divestiture finally eliminates Mr. Wilson’s disruptive influence over the company,” Sam Poser, analyst at Sterne Agee, said in a note to clients Thursday, suggesting investors should take advantage of any dip in the stock as a buying opportunity.
“This filing does absolutely nothing to change our thesis that the initiatives to improve the product and in-store experience are underway and will likely re-establish Lululemon as the pinnacle of the activewear space and the necessary investments are being made in 2015 to support the global growth of the brand.”
The move comes a year after Wilson’s public feud with Lululemon’s board, which saw him vote against the re-election of two returning directors, saying the board was straying from the retailer’s “core values of product and innovation.”
The company averted a proxy war last year when Wilson agreed to sell half his stake in the company to private equity firm Advent Interna- tional for $845 million US. In February, Wilson stepped down from the company’s board in order to focus on growing his family’s budding apparel business, Kit & Ace.
“The prospectus supplement filed by Lululemon simply enables Chip Wilson to sell his shares in the future, if he chooses to do so, on the same basis as any other stockholder,” Terry Fahn, a Wilson spokesman, said in a statement Thursday.
While neither Lululemon nor Wilson would comment further, it would not be surprising if the founder chooses to divest his remaining stake, about 20.1 million shares, worth about $1.3 billion US.
Wilson offered to sell Qemir (pronounced “ka-meer”), a proprietary line of washable cashmere developed in 2013 by his wife Shannon Wilson, to Lululemon three times before the family formed Kit & Ace, but the board rejected it.
Shannon Wilson and stepson JJ Wilson opened the first Kit & Ace store in Vancouver last summer, showcasing men’s and women’s upscale casual clothing made with Qemir. Kit & Ace now has nine stores in the U.S. and Canada and plans to open 25 to 30 more by the end of the year. The Wilson family has invested $7 million in the apparel company and plans to take on about $300 million in debt by 2019 to expand the brand into Europe, Asia and Australia.
It could also be a good time for Wilson to exit: its shares have risen 50 per cent in the last year and some seven per cent this week since Lululemon released firstquarter results on Tuesday that beat analyst expectations, and raised its full-year revenue and earnings forecast.
In the first quarter ended May 3, profit rose to $47.8 million US, or 34 cents per share, from $18.98 million US, or 13 cents per share. Analysts on average were expecting a profit of 33 cents per share.