By  on November 15, 2007

Lululemon Athletica Inc.'s stock price fell by as much as 9 percent before recovering Wednesday in the aftermath of a New York Times report that the yogawear firm's VitaSea line does not appear to contain the seaweed benefits its educational tags and content label claim.

Shares fell $3.75, or 9 percent, to $39.75 in early Nasdaq trading, but closed up 79 cents, or almost 2 percent, at $44.29.

The newspaper said it received a tip from a Lululemon investor, who was shorting its stock, that a lab test showed there was little difference in the mineral levels of a shirt from Lululemon's VitaSea line, which purports to be made of 24 percent Seacell seaweed along with cotton and Lycra spandex, and cotton T-shirts. The Times commissioned a separate lab test to compare the contents of a cotton J. Crew T-shirt with a VitaSea-line shirt. The test confirmed no significant difference in mineral levels, though it could not rule out the presence of seaweed entirely.

In a statement issued Wednesday after the markets closed, the company said: "Lululemon is a company of integrity that strives to maintain a culture of transparency and openness. We stand behind our products. All of our products go through rigorous testing, including our VitaSea fabric, and that process has been in place for a year. We are taking this situation seriously and will provide full information to further clarify this matter as soon as we receive it."

Lululemon has built its reputation around health, wellness, a positive attitude and the idea of social responsibility. Although it does not advertise those mantras in traditional ways, its reusable bags and in-store information communicate those messages to its yoga-practicing consumers.

According to the tags on Lululemon's VitaSea garments, the seaweed fiber releases amino acids, minerals and vitamins into the skin upon contact with moisture. Seacell, owned by German-based Smartfiber, is said to have provided the seaweed fiber to Lululemon, but Lululemon had not independently tested VitaSea, the Times said.

The Vancouver-based company, which did an estimated $150 million in sales last year and has about 60 retail stores, issued an initial public offering in July, raising $327.6 million with 18.2 million shares of common stock priced at $18 each. Since then, shares have traded between $24.92 and $60.70 — its high in late October.

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