Lululemon Athletica Inc., the popular high-end maker of trendy yoga clothes, took a few knocks this week after it said Monday that it had to recall black pants making up about 17 percent of its women’s bottoms due to subpar product coming out of its Taiwanese supplier, Eclat Textile Co.
The company’s stock, which topped $70 this month, fell as low of $62 on Tuesday. On Wednesday its stock dipped slightly, shedding 20 cents to close at $63.88.
Eclat, which makes stretchy black Luon pants dubbed the “Wunder Under,” delivered a March 1 batch that was too “sheer,” according to the Vancouver-based company. The product was pulled from its shelves two weeks later, causing Lululemon to issue a statement admitting that the recall would have a “significant impact” on its financial results.
Lululemon, which reports fourth-quarter earnings Thursday, said until March 17, same-store sales were up 11 percent and revenue guidance was anticipated to be in the $350 million to $355 million range for the first quarter. Now it expects same-store sales to rise between 5 percent and 7 percent and for sales to be between $333 million and $343 million.
Wall Street was expecting $349.8 million in sales in the first quarter.
Analysts and media outlets pounced on Lululemon’s misstep, wondering if the brand with the cult following of self-professed “Luluheads” would lose dollars to competitors such as Nike Inc., The Gap’s Athleta and Under Armour Inc. or the host of independent niche yoga brands that have flooded the market in recent years.
“It’s too soon to say honestly, but my suspicion is that [the recall] will have very limited impact on the brand,” said William Blair & Co. retail analyst Sharon Zackfia, who said that the recall impacted only 5 or 6 percent of its overall product.
“The amount of customers touched by this [incident] was very small,” the analyst added. “The biggest issue, if there is any issue, is the lack of product. If they don’t see the ‘Wonder Under’ that they love, do they go somewhere else?”
Despite Wall Street “chatter,” Zackfia said “there’s nothing” in Lululemon’s financials that indicates the brand is losing market share.
“Lulu did about $1,000 per square foot in Canada in the fourth quarter alone, which is roughly three times what an average retailer does in the full year,” the analyst offered.
With stellar same-store sales trends that are up 35 percent on a two-year basis, Lululemon has been one of retail’s stronger growth stories during the downturn.
Nonetheless, the first half of 2013 will likely be somewhat of a humbling moment for Lululemon. Analysts said second-half strategies such as merchandising optimization and the integration of iPads in stores for consumers to order out-of-stock product online would help drive growth.
But in regards to Lululemon’s dearth of Wunder Under pants, Wall Street and Luluheads alike will have to wait for chief executive officer Christine Day to address that issue today — and expect the stock to react accordingly.
Breaking News: @louisvuitton's men's artistic director @mrkimjones is leaving the French fashion house after nearly 7 years. Jones joined Louis Vuitton in 2011, following a three year tenure as creative director of British luxury goods brand Alfred Dunhill. Jones is to exit Louis Vuitton after showing his fall 2018 collection for the brand in Paris on Thursday. Read the full exclusive story on WWD.com. Link in bio. #wwdnews #wwdfashion
For men’s fall 2018, @giuseppezanotti drew on elements from streetwear, sport, biker, combat and rock ‘n’ roll. Pictured here are a pair of shoes from the collection, featuring zippers, rhinestones, and silver hardware. Head to WWD.com to see a roundup of the accessories from Milan’s men’s fall 2018 shows. #wwdfashion (📷: Andrea Delb)
To celebrate the 25th anniversary of @ralphlauren’s snowboarding collection, the brand is mining its archives. The iconic brand is reintroducing vintage styles and dropping new designs for a color capsule that will be available in Ralph Lauren stores and @openingceremony on January 25. The capsule will consist of 10 pieces, including the Snow Beach Pullover, pictured here, which is a collector’s item that rapper Raekwon wore in Wu-Tang Clan’s “Can It Be All So Simple” video. #wwdfashion (📷: Tom Gould)
For @rochasofficial’s pre-fall 2018 collection, creative director Alessandro Dell’Acqua channeled the sophisticated and intriguing Catherine Denevue in the film “Belle de Jour.” Polished collarless coats, midi skirts, suits and ’60s graphic motifs were all featured in the collection, adding a sense of discreet luxury. See the rest of the photos on WWD.com #wwdfashion
“We tried to produce clothing of that couture quality, but the most daunting part was that we only had a matter of days [to do it],” said costume designer Lou Eyrich, who recreated Gianni Versace’s iconic looks for @americancrimestoryfx. Eyrich searched online retailers and vintage shops for original pieces from the design house and for @penelopecruzoficial, who plays Donatella Versace. Head to WWD.com to read how she created the Versace world. #wwdfashion
Only three months after her stellar debut catwalk season, @kaiagerber has inked her first big design collaboration –– with @karllagerfeld. The collection blends Lagerfeld’s Parisian chic aesthetic and the model’s signature West Coast casual style via RTW, accessories, footwear and more. The #KarlLagerfeldxKaia collection will launch in September with a series of events. Get all the details on WWD.com. #wwdnews #wwdfashion
Harrods plans to remove the famous statue of Princess Diana and Dodi Al Fayed from the bottom of the Egyptian escalators and hand it back to Mohamed Al-Fayed. “We are very proud to have played our role in celebrating the lives of Diana, Princess of Wales and Dodi Al Fayed at Harrods and to have welcomed people from around the world to visit the memorial for the past 20 years,” said Michael Ward, Harrods managing director. “With the announcement of the new official memorial statue to Diana, Princess of Wales at Kensington Palace, we feel that the time is right to return this memorial to Mr. Al Fayed and for the public to be invited to pay their respects at the palace.” More on the news, with reporting by @loreleimarfil, at WWD.com. #wwdnews