By Svea Herbst-Bayliss
NEW YORK, May 18 (Reuters) – Lululemon Athletica tried but failed to settle its bitter proxy fight with Chip Wilson as recently as last week when the apparel retailer said its founder made escalating demands, according to a Monday regulatory filing.
The company said it delayed filing its definitive proxy statement in hopes of reaching an agreement with Wilson, who founded the maker of stretchy yoga pants in 1998 and has recently criticized management for having lost the company’s “cool” factor.
Shares are down 62% in the last 12 months as design missteps and fading brand appeal eroded its edge, and it recently hired a new CEO to turn the brand around.
But in its first detailed public rebuttal since the battle began late last year, Lululemon said Wilson, who left the board in 2015, has “outdated perspectives” about how to position Lululemon as well as “troubling conflicts of interest.”
“His actions have been damaging to the brand and harming the very stakeholders he claims to represent: shareholders, guests, and employees. Electing any of Mr. Wilson’s nominees would endorse his misguided perspectives,” the company said in a letter to shareholders.
The company and Wilson have tried for some time to reach an agreement to end Wilson’s effort to seat three directors on the company’s board. Last week the company said Wilson countered its term sheet with proposals that Lululemon described as “a significant departure” from earlier discussions.
Under the counterproposal, Wilson sought to install three directors of his choosing, including the immediate appointment of two of his nominees and a third drawn from a pool he selected. He also asked for quarterly meetings with the company’s incoming CEO, and several directors, the filing showed.
A representative for Wilson, who still owns about 8.6% of the company, was not immediately available for comment.
Shareholders will vote on who sits on the board next month unless the two sides reach an agreement before.
The retailer, which has a market value of $14 billion, on Monday urged shareholders to back its three directors up for election, including former Levi Strauss CEO Chip Bergh, calling them “vastly superior” to Wilson’s picks.
Lululemon, meanwhile, has added two new directors in recent months and named former Nike executive Heidi O’Neill as CEO last month as it tries to revive its growth and stanch the losses in market share.
While some investors have praised incoming CEO O’Neill’s background, shares of the company fell on the news of her appointment.
The company has lost ground to rivals such as Alo Yoga and Vuori, and its challenges culminated in CEO Calvin McDonald’s exit earlier this year.
Shares rose 1.7% to $121.04 on Monday.
In addition to Wilson, activist investor Elliott Investment Management, which built a stake exceeding $1 billion last year, also had ideas of how to take the company forward, urging former Ralph Lauren executive Jane Nielsen be appointed CEO.
Elliott has not spoken publicly about the CEO selection.
(Reporting by Svea Herbst-Bayliss; Editing by David Goodman and David Gaffen)
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