This Week In Blunders Oct. 5-11
“Most of what we call management consists of making it difficult for people to get their work done.” – W. Edward Deming
Nothing is calm at the yoga wear company that Chip Wilson founded in 1998.
Lululemon Athletica stock is down 67% from its lofty peak of more than $511 per share in September 2023. And on Tuesday, Wilson took out a full-page ad in The Wall Street Journal complaining that Lululemon is “in a nosedive” because it is “losing its soul.”
Wilson, 70, likens the disaster to a plane crash resulting from a compounding series of corporate blunders.
He accuses Lululemon’s board of running off top talent, cheapening store design, resorting to non-technical fabrics, and squandering billions on an ill-fated merger and a “wildly inappropriate Disney collaboration.”
Basically, he says, Lululemon has been run by a bunch of MBAs in suits who can “speak Wall Street” but don’t “understand the product.”
They built their resumes chasing quarterly profits. But they lost the company’s premium brand positioning to Alo Yoga, Vuori, The Gap’s Athleta and even that Sweaty Betty in the U.K.
Instead of considering a single thing Wilson had to say, Lululemon’s board decided to take him to the yoga mat with this statement:
“Chip Wilson does not speak for lululemon, and his comments do not reflect our company views or beliefs. Chip has not been involved with the company since his resignation from the board in 2015 and we are a very different company today.”
Indeed, Wilson stepped down 10 years ago after his bluster became a liability to the brand.
In 2013, he famously blamed certain customers for problems with Lululemon’s yoga pants in a blunder that was widely interpreted as “fat shaming.”
Read More: CEOs Say The Dumbest Things (Business Blunders)
He’s also defended child labor practices abroad, and he once claimed that he named the company with a lot of “Ls” because Japanese people have trouble pronouncing the letter: “It’s funny watching them try to say it.”
Unfortunately for Lululemon’s board, Wilson has been heckling since the day he left and he’s not going away. He and his affiliates still own about 10 million shares or about 8.4% of the company so he maintains every right to complain about its management follies.
To be sure, Lululemon faces a lot of challenges that have nothing to do with Wilson’s complaints, including sweeping tariffs, a weakening consumer base and the inevitable rise of competition. But Wilson may be right. His screed reads like a handbook for all that goes wrong when an artful passion goes corporate.
Instead of reflecting on his observations, Lululemon’s management has accused him of lying. Here’s what a spokesperson told Investing.com:
“He continues to make inaccurate and misleading statements about lululemon, our history, and our Board and leadership team.”
It would be a more credible retort if the spokesperson had identified what the company considered in accurate.
Was it this line?
“Lululemon directors have systematically dismantled the business model and lost employees who held the institutional knowledge that made the company great.”
Trying to cut one’s way to prosperity is a classic MBA blunder, and Lululemon’s stunning decline speaks volumes – even without Wilson’s $200,000 Wall Street Journal ad to point it out for all to see.
In the end, both the board and Wilson have apparently done little to reconcile or even contain themselves, and their public spat is not a good look.
How does a yoga-wear company get this far off balance?
Is JPMorgan Chase really this stupid?
JPMorgan has to pay $115 million in legal fees from the army of lawyers who defended a woman and an accomplice who scammed it out of $175 million.
In 2021, the investment banking giant essentially paid Charlie Javice, 33, this whopping sum for a startup called Frank, whose chief asset was a fake email list.
Read More: JPMorgan Chumps (Business Blunders)
Last week, Javice was sentenced to seven years in prison for this scam. And this week, we learned that a judge has ruled JPMorgan is contractually obligated to pay the massive legal bills to defend Javice and her former colleague Olivier Amar.
The New York Post notes that it took 19 lawyers for Javice and 16 for Amar – all that pricey firepower for guilty verdicts and JPMorgan has to pay.
Theranos fraudster Elizabeth Holmes, by contrast, spent around $30 million for her defense after duping investors with her fake blood-testing company. Talk about inflation.
Read More: A Bloody Mess (Business Blunders)
So not only did JPMorgan Chase strike what looks like the dumbest deal in investment banking history, but it agreed to indemnify the woman who brought it to them. Doh!
The bank now seeks to recover $287.5 million from a restitution order. But best of luck. Javice is required to pay only 10% of her post-prison income over 20 years.
Pass me another bottle of that Ponzi
Once again, the ingenuity of yet another Ponzi scheme is a wonder to behold.
There’s never a shortage of greedy and foolish investors so there’s fresh Ponzi news to write about in almost every edition of This Week In Blunders. Last week it was a cattle Ponzi. This week, it’s a wine Ponzi.
James Wellesley, 59, pleaded guilty after raising nearly $100 million in a scheme that promised to make high-interest-rate loans to wine collectors.
This may be considered bigger than Jesus’s first reported miracle because Wellesley and his co-defendant, Stephen Burton, didn’t even start with water. They just had bottles of bunk.
The pair of swindlers convinced their investors they were holding expensive wines as collateral for loans to high-net-worth collectors.
In a scam that ran from 2017 to 2019, they claimed they held over 25,000 bottles of collectible wines in their Bordeaux Cellars when they only had about 217, according to prosecutors.
Money from new investors went to pay earlier investors, and the pair lined their pockets in classic Ponzi fashion.
They’re now both in custody at Brooklyn’s Metropolitan Detention Center as they await sentencing. Like the old slogan goes: “We will sell no wine before we do our time.”
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