Yoga clothing retailer Lululemon was the target of their own customers ire this week after the company admitted they had been selling yoga pants that were see-through.
The company promptly recalled the pants in question, which make up 17 percent of their entire inventory, but the recall opened up a new host of concerns for customers and investors alike.
The problem began when many customers began posting their complaints on the Lululemon website, claiming that the company’s black yoga pants were too transparent. Lululemon pulled the pants from store shelves on Tuesday in response to the complaints.
They posted an open letter to their website explaining the recall: “At the beginning of March, our stores and ecommerce site received some black women's bottoms that didn't meet our high standards,” the statement read. “The materials used in construction were the same but the coverage was not, resulting in increased sheerness. We want you to Down Dog and Crow with confidence and we felt these pants didn't measure up.”
Investors didn’t respond well to the news, as the company’s stock dropped 8 percent before trading the day of the recall, and one analyst stripped the stock of its “buy” rating. Lululemon estimates the recall will result in revenue losses between $12 million and $17 million.
Lululemon also revised their earning estimates downward for the second quarter of 2013, leading many analysts to look at the stock with increased skepticism. The recall directly caused the downward revision, as the pants in question make up 17 percent of the company’s inventory and will likely cause a yoga pants shortage that could drive customers to competitors.
"It looks like they're expecting a return to their glory days by the mid-year," Brian Sozzi, chief equities analyst at NBG Productions, told Reuters. "I can't necessarily believe in that, because for the first time now they've opened the window for competitors."
Lululemon has faced quality control problems before. In July 2012, the company had to explain why dye was leaking from their line of bright-colored yoga pants.
"Delivering the top quality our guests expect is a critical factor in our differentiation in the market place," said Chief Executive Christine Day in a press release Thursday. "We have recently added strong leadership in Quality Control, our Liaison Office and our commercialization and development teams, and expect these people and other investments to solidify our quality consistency and our delivery capabilities.”
Pants from Lululemon typically retail for about $90.