Five months after former Lululemon CEO Laurent Potdevin resigned suddenly for what the yogawear company called “conduct” problems, Lululemon Athletica Inc. (Nasdaq:LULU) on July 24 has appointed a new board member and CEO: Calvin McDonald.
McDonald has spent the last five years as president and CEO of the Americas for personal-care-products giant Sephora.
Before that, he spent two years as CEO of the troubled and now defunct department store chain Sears Canada, where one of his bigger moves was the 2012 decision to sell leases for Sears stores in Vancouver, Ottawa and Calgary for $170 million.
His compensation is significant and complicated.
According to a Lululemon filing on Edgar, McDonald will be paid US$1.25 million as an initial base annual salary. He will also be eligible to receive an annual target bonus of 150% of his base salary for the applicable fiscal year if he meets specified financial performance and individual performance goals for that year.
McDonald will also be eligible for annual equity awards equal to approximately US$6 million. He will also separately get restricted share units worth US$6 million that are effective as of August 20, when he officially assumes his role as CEO. Those restricted share units vest in a way that mean that McDonald can cash 33% of them after one year, another 33% of them the following year and 34% of them in the third year, as long as he is still employed by Lululemon. Additional compensation will be a one-time grant of performance share units that are worth US$2 million, effective as of August 20.
Finally, he will also be entitled to expenses up to $600,000 for ending his current employment and shifting to Lululemon.
If McDonald stays at Lululemon, it is likely that he will be among the top 10 paid executives who work for a B.C.-based company. Here is the list for 2018, which Business in Vancouver released this week.
“Calvin McDonald has an impressive track record leading organizations through periods of significant growth and innovation," said Lululemon's board chairman Glenn Murphy in a release.
"He is the ideal match for the Lululemon brand and culture given his strong consumer mindset, performance-driven approach and success developing people. Each member of our Board met him during our thorough process. We’re confident Calvin will maintain the momentum in the business and take Lululemon to new heights.”
Lululemon noted in a release that under McDonald’s leadership, Sephora delivered double-digit percentage growth year after year, expanded its product offerings, created new digital platforms and store experiences and expanded in global markets, including Brazil and Mexico, as it increased its market presence in North and South America.
Lululemon has recently made a point of looking to expand into new markets.
Its most recent earnings report, in May, noted that the company had “strong growth in Europe,” with new stores opening in Germany and the U.K.
Comparable sales in Asia were up more than 50%, thanks largely to strength in China, but the company also opened its third and fourth stores in Korea and it plans to have an e-commerce site online in Korea later this year.
The majority of Lululemon's sales remain in North America, although the exact amount of that continent's dominance is unclear because the company did not break out regional sales around the world.
“I’m joining Lululemon at an exciting time, with the brand’s strong business momentum, guest loyalty and passionate employees," said McDonald, who is 46 years old and was born in Canada and earned a Bachelor of Science degree from the University of Western Ontario, and an MBA from the University of Toronto.
"I look forward to working with the talented team at Lululemon to deliver long-term growth through great product, constant innovation and serving guests however they choose to engage with us, today and into the future.”
Lululemon shares closed down US$2.39, or 1.91%, to US$122.98 during regular trading on July 24. McDonald's appointment was announced after markets closed, and shares rebounded US$1.42, or 1.15%, to US$124.40.
