Shares in Lululemon Athletica (NASDAQ:LULU) rose sharply after reports that activist investor Elliott Investment Management has built a stake worth more than $1 billion in the athletic apparel group and is seeking to influence strategic and leadership changes.
According to a Wall Street Journal report published on Wednesday, citing people familiar with the situation, Elliott has become one of Lululemon’s largest shareholders and is actively pushing for changes at a time when the company is facing slowing growth and uncertainty at the top. The report said Elliott is also backing a potential candidate for chief executive.
Lululemon stock climbed around 4.5% in premarket trading on Thursday by 04:19 ET following the news.
The development comes as the Vancouver-based retailer prepares for a leadership transition. Lululemon announced last week that current Chief Executive Calvin McDonald will step down in January after sustained criticism over product quality issues, increased discounting, and concerns that the brand has “lost its cool.”
The Journal reported that Elliott has been working closely with Jane Nielsen, a seasoned retail executive who previously held senior roles at Ralph Lauren and Coach, and whom the activist investor views as a potential CEO contender.
Elliott’s growing involvement adds to mounting pressure from Lululemon founder Chip Wilson, who has publicly called for swift changes at the company and has been vocal about the CEO succession process.