Lululemon Athletica Inc.s problem isnt just that a batch of its black yoga pants were made too sheer and had to be recalled the popular retailer is now downgrading its financial predictions and watching its stock do a downward dog.
The Vancouver, British Columbia, company said late Monday that it pulled the womens pants from its stores and e-commerce sites over the weekend after learning that the material was too revealing. The Luon fabric is produced in Vietnam and Taiwan and made with a mix of nylon and Lycra spandex fibers.
In a lengthy FAQ posted on its website, the chain said it was still investigating how a batch of too-skimpy pants was allowed to reach stores in early March. Lululemon hasnt changed its manufacturers or ingredient quality since 2004, it said.
Or, in the companys words: The ingredients, weight and longevity qualities of the womens black Luon bottoms remain the same but the coverage does not, resulting in a level of sheerness in some of our womens black Luon bottoms that fall short of our very high standards.
Lululemon is now offering affected customers full refunds or exchanges while also warning of an impending shortage of black yoga pants. The recalled apparel makes up 17 percent of the womens pants and crop pants Lululemon sells in stores.
But more than practitioners poses are being affected Lululemon said the issue will have a significant impact on its financials.
The company lowered its initial expectations, which had been an 11 percent increase in same-store sales and revenue between $350 million and $355 million for its first fiscal quarter. Now Lululemon is projecting a 5 percent to 8 percent rise in same-store sales and revenue between $333 million and $343 million.
The company will release fourth-quarter and full-year earnings on Thursday. Analyst Sam Poser of Sterne Agee downgraded Lululemons shares to a neutral rating from buy, telling investors to back off until quality-control concerns are alleviated.
Lululemon had been riding a recent surge in demand for womens athletic wear, along with competitors such as Gap Inc.s Athleta, Under Armour Inc. and even mass-market retailers such as Forever 21 and Victorias Secret.
Lululemon shares fell $1.82 Tuesday, or 2.8 percent, to $64.08.