Animal-rights group PETA plans to question Lululemon at today’s (June 2) annual meeting about the yogawear chain’s sales of down-filled jackets that PETA claims cause geese to be killed in violent and painful ways.
“For every down-filled jacket on Lululemon’s shelves, birds died terrifying deaths in pollutant-spewing slaughterhouses,” said PETA executive vice-president Tracy Reiman.
“PETA is calling on Lululemon to be a compassionate and environmentally conscious company and exclusively use modern synthetics.”
PETA’s challenge, however, is to be able to ask the questions at the meeting that will be streamed online to shareholders and does not take place in any physical location.
The yogawear maker has come under attack for its decision to save money and hold an online-only meeting because that format makes it harder for critics to voice concerns.
One of those people who are unhappy with the meeting's format is founder Chip Wilson.
Wilson, who is the company's largest shareholder with a 14.2% stake, released an open letter June 1 to make clear he disagrees with how the company is being run.
The company has “lost its way” and is bleeding market share to its competitors, particularly Under Armour and Nike, because of its management team’s poor performance, Wilson said in the letter.
To address this, he said, the company needs to develop a strategy “with urgency” to the reestablish the company’s competitive advantage.
“As a long-term investor in Lululemon, I am uncomfortable with the lack of urgency, stewardship and performance of our great company,” Wilson said in the letter.
“I have not heard a strategy nor seen actions that lead me to believe we will regain our competitive position and secure long-term returns. This is unacceptable and the board needs to understand that I—indeed all shareholders—will be watching closely.”
The worst thing is the company’s poor financial performance; while the company has increased revenue by half a billion dollars, net income has fallen, he said.
Wilson estimated that, three years ago, Lululemon’s stock price (Nasdaq:LULU) was double the value of Under Armour (NYSE:UA). Today it is worth less than half.
Since December 2013, Lululemon shares have fallen 8% while Under Armour shares are up 79% and Nike shares (NYSE:NKE) have risen 45%.
This has taken place, Wilson said, “in the midst of the greatest change in the way people have dressed in the history of the world."
“Under Armour has taken our leadership role, and the market recognizes this with a premium valuation,” he said.
That high valuation means that Under Armour shares trade at twice Lululemon's EBITDA and price-to-earnings multiples, Wilson explained.
“If Lululemon were rewarded with the same multiple as Under Armour’s, our stock would be almost 90% or approximately $8 billion higher today, or another $60 higher per share. Not one incremental dollar of earnings has flowed to the bottom line.”
To address its issues, the company needs to "declassify" the board, said Wilson.
“Why? Because staggered boards result in entrenched directors and management,” he said in the letter.
“If the board that is currently in place cannot implement the changes that are required to increase shareholder value, then shareholders deserve the right to vote on all of the board members and, if they so choose, make a change.
“But this is something prevented by our current staggered Board which only allows us to vote on three directors at a time.”
Wilson also called on management to explain its strategy and spell out what indicators will be used to measure, monitor and guide future performance.
