Lululemon's Founder Trashes Under Armour's 'Inferior' Business Model

Chip Wilson, Lululemon Athletica inc. LULU's founder who no longer sits on the board, paid for bus shelter ads in February that encouraged Lululemon to acquire rival Under Armour Inc UAA.

"Lululemon's business model is to have no debt and $1 billion in the bank to be ready for an extraordinary opportunity," the ad reads. "Under Armour is now weak. They have junk bond debt, too much inventory and technology purchases they cannot monetize. Buy Under Armour and bring it our original culture and ‘money making' business model."

Wilson Was Trolling?

Speaking as a guest on CNBC Thursday, Wilson was asked by Scott Wapner if a better M&A deal would be for a rival to acquire Lululemon, rather than Lululemon acquire Under Armour.

Wilson went on to say his bus ad was a "joke" to prove Lululemon is a better business than Under Armour, which he characterized as an "inferior wholesale model" business that's hurting from Sports Authority's store closures and sitting on excess inventory.

Wapner went on to ask how it is that Under Armour's seven-year streak of demonstrating 20 percent or more revenue growth (until the most recent quarter) makes it a bad company.

Wilson said Under Armour's wholesale business model in which the odds of "someone going bankrupt is exceedingly good." And when that happens, as it did with Sports Authority, Under Armour is stuck sitting on what could be a whole year's supply of goods that was destined for the now bankrupt retailer.

See Also:

Lululemon An Example Of Sticking To What's Working For Too Long?

Sports Authority's Loss Isn't Dick's Sporting Goods' Gains