Lululemon's sheer pant snafu leads to dampened growth, slower shipping

Lululemon (NASDAQ: LULU), the yoga-wear retailer, is still recovering from last year's yoga-pant controversy which led to more quality-control processes that slowed deliveries and damped sales growth.

The company released its fourth quarter earnings, which were flat compared to the same quarter last year. For the quarter ended February 2, Lululemon earned $109.7 million, compared with $109.4 million, a year earlier. The retailer attributed the lower-than-expected earnings to customer fallout following its March 2013 sheer yoga pant snafu.

Lululemon recalled its popular yoga pants in March 2013, when it was discovered the pants were too sheer, thanks to a manufacturing flaw. The pants represented 17 percent of the company's total inventory and millions of dollars in lost sales before returning to stores in June 2013.

But the issue was made worse when the company's founder, Chip Wilson, appeared on Bloomberg TV and said some customers claimed their Lululemon pants were sheer because "some women's bodies just don't actually work" for the clothing. Wilson also alluded to the fact that if women's thighs rub against each other, that kind of friction might affect the pants' durability.

Consumers were outraged at the suggestion that women's bodies, not a faulty product, were responsible for Lululemon quality concerns.

In the year since the yoga pants fiasco, Lululemon's shares slumped 30 percent. The retailer also reported a decline in comparable stores sales, its first such fall since 2009.

Going forward, Lululemon said it will maintain strict quality-control measures as it seeks to aggressively expand its merchandise assortment and store count. The company is adding to the brand's selection of core products with more seasonal clothes, which have sold out more quickly than anticipated, said Tara Poseley, Lululemon's chief product officer, on an earnings call. Lululemon will also push its men's line more aggressively and open three new stores in the U.S. 

In December, the company also named a new CEO, Laurent Potdevin, previously the CEO of Toms Shoes, who took the job when the company was in damage-control mode.

Lululemon has about 250 stores in North America, Australia and New Zealand.

For more:
-See this Lululemon earnings call transcript

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