A Tear in the Fabric at Lululemon Athletica

Company founder taking aim at board members.
5:21 | 06/11/14

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Transcript for A Tear in the Fabric at Lululemon Athletica
I'm Michelle president New Yorkers Wall Street's shuts its doors on Wednesday June 11 -- -- story stuck. Today a look at lululemon that -- and athletic apparel maker is caught up in another controversy. This -- a little bit more complicated. Than those seen through yoga pants. Here with his yoga mat water bottles and explain what's going on -- -- task at Yahoo! finance you've got it. All right I got I got the -- water bottle of my yoga mat being clean right now -- that's yes my story just finished up. There's a court battle brewing at lululemon break it down forests. Well chip Wilson who's the founder of the company and still the largest shareholder. At the -- means they voted against. Michael Casey he's the chairman and one other port director basically saying that the company is focusing too much on -- short term performance not the long term value of the company that. That he thinks it should be in this was. A big surprise -- lululemon they didn't see this coming and definitely a major issue when your founder and your largest shareholder. Is saying that he is and -- chairman of the board to be chairman of the board. And there are certainly been some back and forth let's -- the full screens and see what each side is saying. First founder chip Wilson accusing the board of not being aligned. With the company's core values. An accusation the -- immediately defended itself against. Let's see what investors are sane as we take a look at that today lululemon stock chart. -- on the stock to get hit today that about a half percent and down tape I should note but it deftly got hit. By this internal battle that's going on again again chip Wilson. If he was just the founder or just the largest shareholder would be a problem that he's opposed to the -- but the fact that he's both. Makes it seem like you could have a lot more. Let's say distractions for the ball word and its leadership in the -- leadership by in the months ahead because -- chip Wilson he's on the he's done. Trying to rattle cages that we will let minutes it's going to be a major issue it's a concern for shareholders clearly as you're seeing -- action today. Not quite as -- moment but how powerful is he in this and -- aborted -- Well the board can't ignore. It again he's -- largest shareholder. And Healy you know he only has 47% of the vote but that's a big block of stock right there and if you can get other big shareholders to alignment him. Then you could see the board. Taken out entirely mean. -- -- an activist shareholder. Yes and the guys like Phil black men are -- like -- -- taken nine or 10% stake in the company and get it to make substantial changes. This is someone with a 27% stake and again he's the founder of the company. And obviously there's a lot of shareholders if you've been new lemon for along time you think Jim Wilson's hero -- and part of the issue of the stock is down about 50%. And -- last year and a half or so going back to the see through pants and some other issues that had and so. This is -- company that's been struggling of late for sure -- and this is knocking out. And on its website -- says its original intent is to quote elevate the world from mediocrity to greatness. So what happens next here for the company what -- they need to do internally as well as for their public -- rebel. One next their same store sales numbers are direct tomorrow -- they -- -- the mediocre so that's not good they really have they have to turn. Around the ship in terms of of sales and an offering. Clothing and accessories that that people want a body Wear red hot brand a couple years ago and they've really fallen on some hard times. They they have that new leadership in -- CEO relatively new CEO. I'm and the question is can -- Placate chip Wilson and get him to give them more time more breathing room to put whatever new strategy they're gonna do you into place or is it -- -- be more of this kind of in fighting. At the company. And look we've seen a lot of crazy stuff and corporate and are here in recent years you could see Alex -- both in trying to go out and and -- the whole company to get prided there's lot of money out there and private equity right now and maybe we'll see -- come into play. But the core business has been struggling -- that and that's the real that's the real problem. And do we know why the core businesses struggling it is a higher and athletic shop I mean yoga pants you can buy them. A lot more inexpensively elsewhere but it also has a good following. It does is a very loyal following I think they they stumbled certainly with a see through pants and chip Wilson made some really televised comments. Where he seemed to blame the -- your pants on the customer as opposed to the product. You know. I think the issue is that they they basically establish this whole new market for casual athletic Wear and now there's a lot more competition -- Under armour and some other brands have come out -- our products that are. From what I can tell as good if not better and -- cost less that puts you -- -- very difficult position so they have a premium brand. But there there are fewer and fewer people these days who are really willing to pay a premium. Just for the brand we didn't get -- -- of of equal or. Even better quality for another name -- like Nike certainly is is equality brand as well. We've got your water bottle -- -- one of those by the way and I -- seriously biased but. Here I'll see you there thanks -- -- out of Yahoo! finance thanks for joining and a and -- watching stories -- stay with abcnews.com for your latest headlines I'm Michelle Franzen -- New York.

This transcript has been automatically generated and may not be 100% accurate.

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