Shares of Lululemon athletica (NASDAQ:LULU) climbed about 9% in U.S. premarket trading on Friday after the company announced that chief executive Calvin McDonald will step down, alongside an improvement to its full-year profit guidance.
McDonald is expected to depart in January, bringing to an end his seven-year tenure leading the premium athleisure brand. No immediate successor has been named. He will continue to support the business in a senior advisory role through March but will vacate his position on the board.
The Wall Street Journal reported that McDonald’s departure comes as founder Chip Wilson has been quietly laying the groundwork for a potential proxy contest, holding discussions with advisers and prospective investors. The report said Wilson’s dissatisfaction has been partly driven by concerns over Lululemon’s marketing strategy, although it remains unclear whether the leadership change will influence any future proxy challenge.
Commenting on the announcement, analysts at Evercore ISI said “the CEO change shows that the company is adding urgency to stabilize brand issues.” Lululemon shares have fallen more than 49% year to date.
Despite the sharp decline in its share price, the company delivered better-than-expected results for the third quarter and expanded its share repurchase programme. Earnings per share came in at $2.59, exceeding consensus estimates by $0.38. Revenue increased 7% year-on-year to $2.6 billion, ahead of expectations of $2.48 billion. Comparable sales rose 1%, or 2% on a constant-currency basis.
Lululemon’s board also approved an additional $1 billion for share buybacks, lifting the remaining authorisation to approximately $1.6 billion as of 11 December.
Looking ahead, the company raised its full-year earnings outlook, now forecasting earnings per share in the range of $12.92 to $13.02, compared with prior guidance of $12.77 to $12.97. Its full-year revenue target was also increased.
The updated guidance continues to reflect an estimated $210 million impact on operating income from higher U.S. tariffs. Lululemon also reiterated that it expects its annual operating margin to decline by around 390 basis points.