If Only Johnson & Johnson (JNJ) Could Bottle This and Sell It

At a recent William Blair conference, Day likened Lululemon and her situation to Burberry, where the company’s former chief executive, Rose Marie Bravo, left in haste in 2006. Why wouldn’t Day grab onto the culture at J&J — which retained its top executive — instead of relying on Burberry as the benchmark? Clearly, the athletic apparel company has more in common with the Burberry brand, but doesn’t corporate crisis transcend industry? If J&J’s handling of a corporate crisis was the standard, perhaps Day wouldn’t be packing up her desk.

In addition to Day’s spot, there were other management defections in logistics and design after the luon fiasco. There is growth on the horizon but I would wait until there is more certainty about the company’s leadership before investing.


Lululemon’s sales per square foot reached $2,058 in 2012 and its top- and bottom-line results have been rising for five years. The company is implementing a five-year plan and has a 10-year vision. Part of this initiative involves a push into the men’s market, where the company’s penetration is growing. By 2016 Lululemon should launch its maiden standalone men’s store. The company also created a new mobile app to propel its e-commerce ambitions.

Face of the company

Over at The Men’s Wearhouse, Inc. (NYSE:MW), the board of directors terminated founder and chairman George Zimmer. The future is uncertain and uncertainty is generally not good for a stock.

The company postponed its shareholder meeting so that Zimmer wouldn’t be able to participate in the re-nomination of board members, according to the company’s statement.

Zimmer issued a response that was published on CNBC stating that in recent months, he had expressed concerns to the board about the direction in which the company was heading. Reports suggest Zimmer was opposed to the attempts to unload the company’s under-performing K&G brand, a segment that has been weighing on same-store sales performance. The board’s response was to  fire him.

Over four decades, Zimmer is not only a key executive but he has become the face of the company.

“.. the extended loss of the services of Mr. Zimmer or other key personnel could have a material adverse effect on the securities markets’ view of our prospects and materially harm our business.” – The Men’s Wearhouse 2012 10K

The stock pulled back about 2% in response to the management shakeup. There could be further investor backlash, and I would sit out of this stock for now.

According to Stifel Nicolaus analyst Richard Jaffe, the board might be looking to also replace Zimmer as spokesman in an attempt to appeal to a younger demographic. Incidentally, the company has been spending more on advertising, which contributed to a near 6% increase in its SG&A expenses in the first quarter.


As a specialty retailer, Men’s is especially vulnerable to the economy, including consumer spending and consumer sentiment, and those economic headwinds continue to blow.