Lululemon Recovers From Stretch Pants Fiasco

Joe Goldman |

LululemonTo the appeasement of shareholders and yoga aficionados alike, Lululemon Athletica, Inc.'s (LULU) popular black “Luon” yoga pants are returning to shelves starting this month. According to the Lululemon website, the company has fixed the Luon problem and will begin restocking inventory throughout the month of June.

This past March, the product line was removed from shelves following a manufacturing and design defect. Lululemon became aware that its Luon pants were not being produced up to its standards, as they were made so thin that they became transparent when stretched.

The recall could not have come at a less opportune time for Lululemon. The company was in the midst of its growth phase and warned that it could lose up to $40M in profit over the fiscal year as a result of the recall. Additionally, Lululemon’s Chief Product Officer Sheree Waterson stepped down during the controversy. She had been with the company since 2008 and helped establish Lululemon as a successful brand.

The recall also allowed competitors such as Nike to gain stronger positioning in the yoga pants market. Thus, the stock plummeted 12% in March.

However, Lululemon stock has roared back in recent months. On May 21, LULU hit a 52-week high of $82.47. Currently trading at $79.29, LULU is up around 27% since its recall lows.

The recall could have crippled Lululemon’s growth rate and stock price, but customer loyalty has remained strong. The recall also gave Lululemon the opportunity to restructure its internal product organization and become more efficient.

Once the Luon pants fully returns to shelves, Lululemon’s expansion phase will be once again in full force.

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Companies

Symbol Name Price Change % Volume
CPS Cooper-Standard Holdings Inc. 100.56 -0.97 -0.96 167,245
LULU lululemon athletica inc. 63.51 -1.01 -1.57 1,516,051

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