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Is Lululemon Athletica CEO Laurent Potdevin the Best Person for the Job?

Laurent Potdevin, chief executive of lululemon athletica , had some big shoes to fill when he took over the helm from Christine Day in 2013. After all, Day created tremendous shareholder value during her more than five years with the yoga apparel company. In fact, during her reign, lululemon's stock price climbed from around $30 to more than $82. Moreover, the company's annual revenue ballooned five times over to break the $1 billion mark while Day was running the company. So far, the same can't be said for Potdevin.

Potdevin officially stepped into his leadership role in January 2014, when the stock was trading at around $57. At the time, the stock was trying to recover from a slew of setbacks, including controversial comments from Lululemon founder Chip Wilson, ,Day's sudden departure, and the 2013 recall of more than 17% of the company's signature luon pants. Therefore, the hope was that bringing in an outsider (cough, Potdevin, cough) would spur change at the company and help Lululemon return to its former greatness.

Instead, Lululemon's stock performance has declined more than 12% since Potdevin took over nearly two years ago. Of course, the recent sell-off in the market has contributed, albeit modestly, to that loss. Nevertheless, investors are left to wonder whether Potdevin is indeed the best man for the job.

A perfect fit (on paper)

If his professional career is any indication, Potdevin should be a home run for the luxury athletic-apparel retailer. He cut his teeth early in the luxury business, working as a manager for Louis Vuitton. A 15-year stint at snowboard company Burton followed, in which he eventually occupied the position of president and CEO, from 2005 through 2010.

Source: Lululemon Athletica.

Most recently, and perhaps most importantly, Potdevin served as president of TOMS Shoes. Similar to Lululemon, TOMS was able to grow from a little-known start-up into a mainstream brand with only grassroots marketing and an advertising budget of shoestring proportions. From a corporate standpoint, TOMS' ethos nicely aligns with Lulu's reputation as a community-centric business -- thus making Potdevin appear a natural fit for the company.

"After a thorough search, Laurent emerged as the natural choice to lead our continued growth and global expansion," said Michael Casey, lead director of the Lululemon Athletica board of directors.

However impressive, Potdevin's pedigree is lacking in one key attribute: retail experience. Unlike his Lululemon predecessor, he doesn't have a strong background in retail. This deficit could perhaps explain Lulu's problem of soaring inventory recently. Inventory ballooned 55% to $280.6 million at the end of the second quarter, up from just $180.5 million in the year-ago period. If this trend continues, it could force the retailer to discount merchandise and thereby depress margins in the process.

Source: Lululemon Athletica.

Still, Potdevin brings some important qualities to the table. His operational acumen and proven track record in building global brands, for example, should help Lululemon as it continues to push overseas into new markets. Strong operational skills are also a bonus, given the retailer's public setbacks with quality control in years past. Moreover, since Potdevin's arrival, we've seen Lulu's " transparency " virtually disappear.

From a retail perspective, Potdevin has a lot working in his favor these days -- most notably the shift toward "athleisure wear." Lululemon is a leader in the athleisure wear category, and the fast-growing pace of this space should help the company boost revenue growth in the quarters ahead, particularly if it can get its inventory in check.

At this point, Potdevin hasn't made any clear mistakes or led the company astray in a Chip Wilson-esque way. However, after nearly two years on the job, his grace period of settling in has expired. It's time investors keep a closer eye on Lululemon's fresh-faced chief executive and the strategies he's implementing to move the company and its stock forward.

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The article Is Lululemon Athletica CEO Laurent Potdevin the Best Person for the Job? originally appeared on Fool.com.

Tamara Rutter owns shares of Lululemon Athletica. The Motley Fool owns shares of and recommends Lululemon Athletica. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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