3/21/13

Q4 web sales rise 56% at Lululemon, despite pants problems

Excessively see-through pants force a recall that will dim earnings.

Katie Evans , Managing Editor, International Research

Transparency can be good and bad.

While those who work hard for a toned physique often like to show it off in chic apparel, most don’t like to give onlookers too much of a show, athletic apparel retailer Lululemon revealed in its fiscal Q4 and full-year earnings report today.

The retailer announced on Monday it had to pull a line of pants made from its own material, called Luon, from its stores after shoppers complained that the fabric was too sheer, including across the rear. Lululemon, No. 162 in the Internet Retailer Top 500 Guide is offering full refunds or exchanges on the pants, which are one of its product staples, but said today that its pants problems may hurt its bottom line in the next few quarters. It forecasts losing between $12 million and $17 million in revenue in Q1 and $57 million to $67 million overall in fiscal 2013 as a result of the recall and pants shortages as it works out the fabric issues with its suppliers.

“We pulled a selection of our black Luon pants from our stores,” says Christine Day, Lululemon CEO. “Delivering the top quality our guests expect is a critical factor in our differentiation in the marketplace. Our proprietary fabric, black Luon, is a very technical and sensitive product to manufacture. We have a long history with our manufacturers and, as we have in the past, we are working closely with them to resolve the current issues. We have a team on site collaborating with them to identify the root cause.”

Despite its derriere dilemma, online sales grew more than 50% year-over year in Q4 for Lululemon.

For the fourth quarter ended Feb. 3, Lululemon reports:

For the full year, Lululemon reports:

Topics:

athletic apparel, Christine Day, financials, LuLuLemon, online apparel sales, product defect, Q4 earnings, Top 500

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