Not All Transparency is Good – 3/21/13

Too-sheer yoga pants a pain for Lululemon

Not All Transparency is GoodLululemon has yanked its popular black yoga pants from store shelves and its online site after it found that the sheer material used was revealing too much of its loyal customers.

The see-through yoga garb is the latest in a series of quality glitches that threaten to alienate the retailer’s hard-core fan base.

And investors usually like transparency, but not in this case. Shares of Lululemon Athletica Inc. fell 2.8 percent Tuesday to $64.08.

Lululemon Athletica Inc. said it first began to understand the extent of the problem on March 11 as part of its weekly call with store managers, who voiced worries about sheerness. Lululemon did not immediately respond to Associated Press queries about whether the problem was discovered when customers started to return the Luon pants, the latest batch of which went on sale at the beginning of the month.

But Faye Landes, an analyst at Cowen & Co., believes customers reported the problem to store managers, who in turn reported back to management.

‘‘If this is indeed the case, we suspect a serious lapse in [the company’s] supply chain, quality control, and vendor management, and specifically in its quality assurance program,’’ she said.

Lululemon warns the recall could lead to short supplies and will hurt first-quarter revenue. The Luon pants, made from nylon and Lycra fibers, are one of the retailer’s staples and account for about 17 percent of women’s pants in its stores. The company is offering full refunds or exchanges.

The debacle marks the fourth quality problem in the last year for Lululemon, said Credit Suisse analyst Christian Buss.

The Vancouver company had sheerness problems with certain swimsuits for spring 2012. And some pants currently on sale carry this disclaimer: ‘‘You may experience sheerness with some of our bright coloured bottoms because of the lightweight nature of the fabric.”

The company also has had problems with bright dyes bleeding.

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