Last updated: March 21, 2013 3:44 pm

Lululemon bent out of shape over recall

Lululemon Athletica, the sportswear brand in crisis over see-through yoga pants, acknowledged that it did not check how its products looked when wearers bent over before shipping millions of pairs that it has been forced to recall.

Christine Day, Lululemon’s chief executive, said the product had passed all initial testing, but added: “The only way you can actually test for the issue is to put the pants on and bend over. Just putting the pants on doesn’t solve the problem.”

She described it as “a very complex thing to test for” as incredulous analysts quizzed the company about supply chain weaknesses on a conference call on Thursday.

Earlier this week, Lululemon, a Canadian group that has become the US’s best-known yoga brand, fell into crisis after discovering that some of its tightfitting yoga pants were too revealing due to the thinness of their fabric.

The crisis has highlighted the quality control risks of managing an international supply chain, particularly for a fast-growing company such as Lululemon that has been racing to expand production to keep up with demand.

The affected products accounted for about 17 per cent of all its women’s pants and the company said on Thursday it was assuming it would have to write off as unusable all affected items in its stores, warehouses, in transit and in factories.

Ms Day said: “We still have to identify exactly where the process broke down.”

Lululemon’s main manufacturer is Eclat Textile of Taiwan, but after the two groups appeared to blame each other earlier this week Ms Day said on Thursday that many companies were involved in its supply chain.

“We don’t want to draw attention to any particular vendor,” she said.

In addition to the product write-off, John Currie, chief financial officer, said the crisis would affect the group’s financial performance through additional testing, freight and management costs and lost revenue due to product shortages.

He expected the group to lose $12m-$17m in revenue in the current quarter and $45m-$50m over the whole year. For the 12 months to February 3 it reported revenue of $1.4bn, up 26 per cent from the previous year. Net income rose 47 per cent to $271m.

We still have to identify exactly where the process broke down

- Christine Day, chief executive, Lululemon

The company could not say when its product line-up in stores would return to normal.

The excessively thin fabric was luon, the group’s signature material, which is made from a combination of nylon and Lycra.

The revealing pants are not Lululemon’s first production problem. Last year, some customers complained that colour from some Lululemon clothing bled when it got wet.

To improve its quality control Ms Day said Lululemon had recently added new staff to its testing and product development teams.

She expressed “deep” regret for the problem and said its store staff had been put on “high alert” to deal with unhappy customers.

Lululemon shares were flat at $63.84 on Thursday morning in New York.

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