Analysts: Toms Exec Could Take Lululemon Into Shoes

With a new footwear executive at the helm, Lululemon Athletica Inc. is well positioned to enter the shoe space, analysts said.

The Canadian firm today announced former Toms Shoes President Laurent Potdevin will take the CEO post beginning in January. The company had spent the past several months in limbo after Christine Day announced her resignation in June; Day will remain at the company through the end of the year.

Potdevin had been president of Toms for the past two-and-a-half years, after serving as CEO of Burton from 2005 through 2010.


“I’m really happy for him. It’s a great opportunity,” said Blake Mycoskie, founder and CEO of Toms. “I’m proud that Toms created that platform for him to…go to a business the size of Lululemon. It says a lot about how people view Toms in the marketplace. At the same time I think it’s better for Toms, with me being back at the helm as CEO and president. Laurent did a great job of building a really strong leadership team and I get to have that team to myself now. He leaves the company in a really good place.”

Buckingham Research Associates analyst John Zolidis lauded the incoming CEO’s deep athletic background, which could pave the way for Lululemon to make its first foray into footwear. “We could easily envision sandals and flip-flops being added to the assortment. We believe this would be an easy win for the company,” Zolidis said.

Other market watchers noted Toms and Lululemon share similarities.

“In the last five years, Toms has become one of the fastest-growing global footwear brands while also spurring a movement toward conscientious consumerism, indicating a solid cultural fit with Lululemon,” said Canaccord Genuity analyst Camilo Lyon. “At minimum, this announcement removes the overhang around who will lead the company into its next phase of growth and should be viewed positively, as Lululemon has a strong brand leader at the helm.”

Potdevin’s strong track record with global brands is expected to help Lululemon achieve its full international growth potential over the next few years, market watchers said. But questions remain about whether he will be able to match the retail and real estate expertise that Day brought to the table.

“While it’s positive that [the company] has hired a new CEO, his lack of public company experience and lack of retail experience may offset what appears to be a strong operational background at better brands,” said Sam Poser, an analyst at Sterne Agee.

More than $2.6 billion of value was wiped off the stock in two days of trading after Day’s resignation in June, and the stock has since regained about 30 percent of those losses.

Shares are currently trading at around 29 times 2014 earnings’ estimates, according to Factset. “We believe the stock should trade at 20 times our 2014 earnings per share estimate, at least until it’s clear if the new CEO will get the company going on the right track,” Poser said.

Separately, the company announced Chip Wilson will step down from his role as non-executive chairman in June 2014, but will retain a seat on the board.

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