Lululemon reaches truce with founder Wilson but sales challenges linger, Jefferies says

Lululemon Athletica Inc (NASDAQ:LULU) has resolved a potential proxy battle with founder Chip Wilson, but the athleisure retailer still faces significant operational headwinds that analysts say must play out before the stock finds a true bottom, according to Jefferies.

The Vancouver-based company on Wednesday announced a cooperation agreement with Wilson, who holds roughly 8.7% of outstanding common shares. Under the deal, two of his three director nominees will join the board following the company's 2026 annual meeting: Laura Gentile, former CMO of ESPN, and Marc Mauer, former Co-CEO of On Holding. A third nominee, Eric Hershberg, former CEO of Activision, was not selected.

Lululemon also agreed to appoint an additional director with product and brand expertise in apparel by October 2026.

Wilson, in turn, agreed to standstill, non-disparagement, and voting provisions for approximately 18 months.

Jefferies called the resolution a clear positive, noting it removes proxy battle risk and improves investor visibility.

Yet analysts cautioned that the proxy resolution does not address the deeper issues weighing on the brand. Product design and merchandising deterioration has pushed core premium customers toward rivals, including Alo and Vuori, with purchase consideration turning negative in March, down 2% year-over-year, and declining a further 4% in April.

A leadership gap adds to the near-term uncertainty. Incoming CEO Heidi O'Neill is not expected to start until September, and Wilson's new board members will not join until after the June annual meeting, meaning Jefferies does not anticipate material strategic changes until spring 2027.

The most critical metric Jefferies is watching is sales per square foot. Despite a roughly 9% decline, Lululemon's 2025 figure stood at $1,426 per square foot, still approximately four times the mall average. North America sales per store also fell 9% in 2025 to $7.6 million, but remain well above pre-COVID levels of $6.1 million, suggesting further normalization is likely.

Jefferies said the company continues to expand its store base and open larger formats, which increases fixed-cost risk at a time when the brand is under pressure. Without a reset in core product, tighter inventory discipline, and a credible plan to stabilize the Americas business, the bank sees continued downside risk as traffic and brand momentum weaken.

Shares of Lululemon were up around 3.8% on Wednesday afternoon.

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