Lululemon Athletica announced on Feb. 5 that its chief executive, Laurent Potdevin, had resigned because of unspecified behavior issues.
The Canadian company did not explain the nature of the conduct that led to his sudden resignation, but said in a statement that it “expects all employees to exemplify the highest levels of integrity and respect for one another, and Mr. Potdevin fell short of these standards of conduct.”
However, sources familiar with the situation told CNBC that he had a multi-year relationship with a designer at the company he oversaw, and this was one of the issues that contributed to his departure. He had rehired her after he joined the company in 2014.
Lululemon's board said it has started a search for a new, highly experienced global CEO. In the meantime, Glenn Murphy, chairman of the board and former head of Gap, will take the helm on an interim basis as executive chairman. He reportedly has no interest in becoming long-term CEO, and the search for a replacement is expected to take 6 to 12 months.
Other appointments were made by Lululemon at the same time. Celeste Burgoyne, executive vice president for the Americas, will oversee all brand-facing aspects of the global business across all channels. Stuart Haselden, chief operating officer, will have responsibility for operations related to finance, supply chain, people and technology. In addition, Sun Choe, senior vice president of merchandising, will guide all aspects of product development, design, innovation and merchandising.
Lululemon also confirmed its updated guidance for the fourth quarter of 2017, with revenues expected to range between $905 million and $915 million.
The company's shares went up sharply on Tuesday. Many analysts seem satisfied with the resignation, having issues with the way Potdevin headed the company. Some described his four-year stint at the helm of Lululemon as volatile. On the other hand, analysts seemingly have a good opinion of Murphy, who has a proven track record at Gap. In addition, the updated guidance gave them another reason to remain confident in the future of the group.
The company agreed to pay Potdevin a $3.35 million lump sum cash payment, plus a $1.65 million cash payment to be distributed in installments over an 18-month period, according to a filing with the U.S. Securities and Exchange Commission.