By Liana Baker and Lily Meier

(Bloomberg) -- Activist investor Elliott Investment Management has built a stake of more than $1 billion in Lululemon Athletica Inc., according to a person familiar with the matter, as the struggling retailer faces a strategic overhaul amid its chief executive officer’s exit.

Elliott has been working for months with retail executive Jane Nielsen — a former chief financial officer and chief operating officer at Ralph Lauren — on Lululemon, said the person, who asked to remain unnamed as the matter is private.

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The Wall Street Journal, which first reported on the news, said Nielsen is viewed by the activist as a potential CEO candidate. The company is searching for a replacement for current CEO Calvin McDonald, who will step down from the role at the end of January.

A representative for Elliott declined to comment. Lululemon didn’t immediately respond to a request for comment.

Shares of Lululemon rose more than 5% in early trading before the market opens in New York. The stock has rallied, rising about 11%, since Friday when the athletic-wear maker boosted its full-year outlook and announced that McDonald would depart.

The Vancouver-based company’s growth has slowed in recent quarters and that trend is expected to continue, according to analyst estimates. Sales growth is near the lowest level since the company went public in 2007 as Lululemon faces fierce competition from upstarts including Alo Yoga and Vuori, as well as knockoffs from lower-priced retailers.

Lululemon’s shares have fallen 46% this year, giving the company a market value of $24 billion.

(Updates with premarket shares in fifth paragraph.)

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