Lululemon's Split With CEO Said to Involve Employee Relationship

VANCOUVER, Canada — Lululemon Athletica Inc.'s reasons for parting ways with chief executive Officer Laurent Potdevin included a relationship that he had with a subordinate, according to people familiar with the situation.

The employee, who worked as a designer at the yogawear brand, resigned in 2014 but later came back as a contractor, said the people, who asked not to be identified because the matter isn’t public. Her contract wasn’t renewed in 2018, they said. CNBC previously reported on Potdevin’s relationship, saying it was an issue that contributed to the executive’s abrupt departure.

The incident was just a part of the misconduct allegations that led to Potdevin’s resignation, the people said. But it offers a window into Lululemon’s decision-making process ahead of the surprise split with its chief after a four-year tenure. When the apparel company announced the move earlier this week, it cited misbehaviour by the 50-year-old Potdevin but didn’t offer specifics.

“Lululemon expects all employees to exemplify the highest levels of integrity and respect for one another,” the Vancouver-based company said on Monday. “Mr. Potdevin fell short of these standards of conduct.”

The behavior didn’t have anything to do with the company’s finances or operations, people familiar with the situation said earlier this week. The misconduct spanned a range of incidents and involved multiple individuals, according to the people. Lululemon didn’t provide detail because it wanted to protect the privacy of those involved, they said.

Potdevin couldn’t immediately be reached for comment.

Investors have largely taken the shake-up in stride. Though the shares briefly tumbled in late trading on Monday, they gained on Tuesday and Wednesday. Former Gap Inc. chief executive Glenn Murphy, who serves as Lululemon's executive chairman, is helping manage the business while it seeks a new leader. A team of other executives, such as chief operating officer Stuart Haselden, also are taking on additional duties.

“We’re comforted by the fact that the day-to-day operations of the business will continue to be managed by current business leaders, suggesting product and operational continuity,” RBC Capital Markets LLC analyst Brian Tunick said in a note this week. “That said, we’re keeping an eye on any reputational risk to the brand on any further headlines related to Potdevin’s departure.”

By: Lindsey Rupp; editors: Nick Turner, Jonathan Roeder