Averting Proxy Wars: 10 Companies Opting for Activist Investor Settlements

5. Lululemon Athletica (NASDAQ:LULU)

Activist Investor: Chip Wilson/ Elliott Investment Management

Number of Hedge Fund Holders: 51

Lululemon Athletica (NASDAQ:LULU) underperformance drew heightened activist-investor pressure from founder Chip Wilson. The co-founder agitated for changes to improve the retailer’s performance and restore shareholder value.

The activist campaign focused on leadership changes, board composition, product strategy, and restoring Lululemon’s brand appeal amid slowing growth and increased competition from rivals. The stock has already lost nearly 50% in the market year-to-date. Has LULU lost its Mojo?

In May, Wilson, who owns about 8.7% of the company’s outstanding shares, reached an agreement with the company to end a contentious proxy battle over the company’s board composition, leadership, and strategic direction. As part of the deal, the company agreed to appoint Wilson nominees to the board.

Lululemon Athletica also agreed to appoint another independent director with expertise in apparel products and branding. In return, Wilson agreed to customary standstill, voting, and non-disparagement provisions for approximately 18 months. The agreement limits his ability to launch another proxy campaign or publicly criticize the company during the agreed period. Why did Lululemon cut its guidance?

Meanwhile, Lululemon Athletica has yet to reach an agreement with Elliott Investment Management, which holds a stake worth more than $1 billion. The activist investor pushed for former Ralph Lauren executive Jane Nielsen to become CEO, believing her turnaround and operational experience could help revitalize the business.