New York City, New York — lululemon athletica inc. announced that Calvin McDonald will step down as CEO effective January 31, amid a challenging period for the athleisure brand. The decision comes after several months of disappointing financial performance, with the company now searching for new leadership to guide it forward.

In a statement, the company’s board of directors revealed they are collaborating with an executive search firm to find McDonald’s successor. He will remain with lululemon as a senior advisor until March 31 to assist during the transition. McDonald reflected on his tenure, expressing pride in the company’s achievements and emphasizing the potential for future growth.

“We have transformed the athletic apparel industry, and I believe the strategies we’ve put in place will ultimately benefit shareholders,” McDonald stated. His commitment to the company remains evident as he pledges support during the upcoming leadership change.

During this transitional period, Meghan Frank, the Chief Financial Officer, and André Maestrini, the Chief Commercial Officer, will serve as interim co-CEOs. Marti Morfitt, the board chair, will additionally take on the role of executive chair during this time. Morfitt acknowledged that lululemon has a solid foundation but underscored the need for a leader adept at steering the company through a pivotal phase.

“This leadership search will focus on finding someone with a proven track record in driving growth and transformation,” Morfitt said. The company’s shares experienced a roughly 10% rise in after-hours trading following the announcement.

The leadership change follows criticisms from founder Chip Wilson and broader concerns about the company’s direction. Wilson recently took out a full-page advertisement emphasizing that lululemon is struggling and advised against prioritizing Wall Street demands over customer satisfaction.

Coinciding with the leadership announcement, lululemon released its fiscal third-quarter earnings report, which reflected ongoing challenges. Earnings per share came in at $2.59, surpassing Wall Street expectations of $2.25, while revenue reached $2.57 billion, exceeding the anticipated $2.48 billion.

However, the company reported a decline in net income compared to the previous year, with net income at $306.84 million, down from $351.87 million. The competitive landscape has intensified, with rival brands like Vuori and Alo Yoga gaining ground as consumer preferences shift, putting additional pressure on lululemon’s traditional offerings.

Though lululemon is focused on expanding its product lines to include more versatile options and reaching a broader international market, the Americas—the company’s largest market—has begun to show signs of decline. The end of the de minimis exemption, which allowed low-value imports to enter the U.S. duty-free, has particularly impacted lululemon’s profitability, with projected tariff costs expected to affect earnings significantly.

As the company prepares for this critical leadership search, the future direction and strategies of lululemon will be closely watched as it navigates a complex retail environment and strives to reconnect with shoppers.