Lululemon: Up to $67M revenue decline on yoga pants

Lululemon Athletica has yanked a version of its

Lululemon Athletica has yanked a version of its popular Luon black yoga pants from store shelves after it found that the sheer material used was revealing too much of its loyal customers. This store is in Manhattan. (Credit: Marie Claire Andrea, 2009)

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Wall Street analysts peppered Lululemon Athletica Inc. executives Thursday with questions about how the yoga-wear retailer is handling a recall of women's pants for being too transparent.

On Monday, Lululemon said some shipments of its black Luon pants were too sheer and didn't meet its standards, and said it was pulling the pants off store shelves.

The Canadian company, with 200 locations, said the withdrawal will cost it lost revenue of $12 million to $17 million in the first quarter and $45 million to $50 million for the rest of the year.

The shortage will reduce fiscal full-year earnings by as much as 27 cents a share, Lululemon said Thursday. Analysts asked CEO Christine Day how employees were handling returns, whether the company was changing suppliers and how the pants made it out of the factory in the first place.

"The truth of the matter is the only way you can actually test for the issue is to put the pants on and bend over," Day said in a conference call. "Just putting the pants on themselves doesn't solve the problem. It passed all of the basic metric tests and the hand-feel is relatively the same, so it was very difficult for the factories to isolate the issue, and it wasn't until we got in the store and started putting it on people that we could actually see the issue."

The problem is a challenge for the retailer, which is able to sell $98 yoga pants and $64 tank tops because of its carefully cultivated reputation for quality. Lululemon, which is offering full refunds or exchanges to customers who bought the pants after March 1, has put store employees on "high alert," hired new quality control executives and is adding suppliers, Day said.

Lululemon faced issues with color-bleeding garments last year, which the company apologized for through a letter on its Facebook page in July.

Luon, which is made from a combination of nylon and Lycra spandex fibers, is manufactured in Vietnam and Taiwan, according to Lululemon's website.

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