See-through pants problem causes Lululemon recall

Posted at 6:56 AM, Mar 19, 2013
and last updated 2013-03-19 08:56:35-04

NEW YORK (CNNMoney) — Athletic apparel maker Lululemon Athletica will be hurt by a large recall of black yoga pants that were unintentionally see-through.

“The ingredients, weight and longevity qualities of the pants remain the same, but the coverage does not, resulting in a level of sheerness in some of our women’s black Luon bottoms that falls short of our very high standards,” the company said in a statement late Monday.

Lululemon said the recall, which amounts to 17% of all women’s pants sold in its stores, will cause shortages of this staple and have a significant impact on its financial results.

Before the recall, the company said it was on track for an 11% increase in sales at stores open at least a year, with revenue in the first quarter ending in April expected to come in between $350 million to $355 million. But now it expects only a 5% to 8% sales gain, and revenue of between $333 million to $343 million.

It said the problem occurred despite there being no change in manufacture or the ingredients used to make the fabric.

The store has been a fast-growing success story in retail. It is forecast that sales for the fiscal year that ended in January tripled from the results of just three years earlier. Lululemon said it will give more details on the recall when it reports fiscal fourth-quarter results this Thursday.

While shares were down 13.6% year to date through Monday’s close, that still left shares up more than 40% since the start of 2012, and more than 1,800% over the last four years.

But shares of Vancouver, B.C.-based Lululemon tumbled 7.5% in premarket trading Tuesday. That follows a 3.8% drop in the stock in trading Monday ahead of the company’s announcement of the recall.

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