|Revealing yoga pants expose Lululemon quality problem
Lululemon has yanked its popular black yoga pants from store shelves after it found that the sheer material used was revealing too much of its loyal customers.
The company insisted it had not changed the specifications for the clothing, but is warning of a shortage of the extraordinarily popular clothing items, which make up make up about 17 percent of all women's pants and crop pants in its stores, AP reports.
Shares plunged nearly 8 percent before the opening bell in New York.
Sam Poser of Sterne, Agee & Leach advised clients to take a wait-and-see approach until the problem is resolved, downgraded the company's shares to “neutral.''
There appears to be a “major quality control problem'' in Asia where the ‘Luon’ pants are made, Poser said. While Lululemon has used the same factories to make its fabrics since 2004, he said it doesn't seem as though the company has the proper oversight in place.
Lululemon has been a star for investors, as well as yoga devotees, with shares rocketing from less than US$3 in 2009, to around US$65 this year.
But the announcement comes just before the company posts earnings for the final quarter and full year on Thursday.
Lululemon Athletica Inc., based in Vancouver, British Columbia, cut its first-quarter revenue forecast as a result of the recall. The company now anticipates first-quarter revenue between US$333 million and US$343 million. Its prior guidance was for US$350 million to US$355 million. Analysts polled by FactSet expect revenue of US$352.1 million.