UPDATE: Lululemon's CEO has some advice for customers wondering if they ended with a pair of its too-sheer, too-revealing yoga pants.
"The only way that you can actually test for the issue is to put the pants on and bend over," CEO Christine Day said during an earnings call Thursday, as quoted at the Wall Street Journal.
"It wasn't until we got into the store and started putting it on people that we could actually see the issue."
Lululemon announced earlier this week it was pulling its black Luon pants and crops off the shelves because the material was too sheer and transparent. The move is expected to cut deeply into the yoga retailer's sales. But the move came too late to be reflected in Lululemon's most recent earnings report, which came in better than analysts' expectations.
The Canadian Press reports:
Lululemon Athletica Inc. (TSX:LLL), the Vancouver-based retailer of trendy workout gear, admits the recent recall of its black Luon pants will put the pinch on earnings this year, but says keeping customer loyalty is paramount.
"Delivering the top quality our guests expect is a critical factor in our differentiation in the market place," CEO Christine Day said in delivering an upbeat fourth-quarter earnings report Thursday that slightly exceeded the expectations of analysts.
"The fundamentals of our business are strong, we delivered excellent results in 2012, and we plan to continue to earn the loyalty of our customers and shareholders every day going forward."
The company, which operates 211 stores in North America and Australia, said earlier this week it was pulling some of its stretchy black pants from its shelves because of manufacturing problems that made them too sheer.
It was the second quality problem the company has faced recently after earlier experiencing bleeding problems with dyes in some of its clothing, an issue that has since been resolved.
Not so with the problem with the company's propriety black Luon, with Day telling the analysts it wasn't known whether it might be ingredients, specific manufacturers or problems with the manufacturing process.
Lululemon said it has a team working with suppliers to identify and correct issue.
"We are pursuing several hypothesis in parallel with our manufacturing partners to determine the root cause," she said, adding that the pants passed all standard quality assurance tests before shipping.
"The only way that you can actually test for the issue is to put the pants on and bend over," she said.
As it is, the set back is expected to reduce revenue by between US$12 million and US$17 million in the first quarter and drive down estimated earnings per share by 11 to 12 cents.
But overall, Lululemon is expecting to be profitable in the first quarter with diluted earnings of between 28 and 30 cents per share of earnings and between US$333 million and US$343 million of revenue.
However, that's below a pre-announcement consensus estimate of 44 cents per share of earnings and US$352 million of revenue, according to figures compiled by Thomson Reuters.
In the fourth quarter, which ended before the recall, Lululemon did slightly better than analysts had been expecting.
On a per-share basis, Lululemon earned 75 cents in the fourth quarter — a penny above the consensus estimate of 74 cents per share.
Revenue during the key holiday shopping period was also up, rising by 31 per cent year-to-year to US$485.5 million — in line with expectations.
During the comparable period last year, Lululemon — which reports in U.S. currency — had $371.5 million of revenue and $73.9 million or 51 cents per share of net income.
E-commerce revenue grew 85.5 per cent over the year to US$197.3 million representing 14.4 per cent of sales, a figure expected to grow in future.
"E-commerce will be a valuable tool as we expand ours brand's presence around the world and it gives us an exciting opportunity to charter new ground in retail with an integrated footprint to meet the future in ways in which guests shop," Day said.
For all of fiscal 2013, Lululemon expects net revenue to be in the range of US$1.61 billion to US$1.64 billion and diluted earnings per share to be in the range of $1.95 to $1.99.
Lululemon expects to expand with at least store openings in 2013, six in the U.S., one in Canada and one in Australia. Another store opening is expected in Hong Kong within the next 12 months, with openings in London in 2014.
It also plans to establish local community connections and introduces products to a variety of other markets in Europe and Asia through strategic sales, showrooms and e-commerce.
Whole Foods CEO John Mackey wrote in January 2013 that Obamacare wasn't a form socialism -- as he had called it in 2009 -- but <a href="http://www.huffingtonpost.com/2013/01/16/whole-foods-ceo-obamacare-fascism_n_2488029.html?utm_hp_ref=business">"more like fascism."</a>
Despite being known for edgy and controversial clothing, <a href="http://www.washingtonpost.com/blogs/arts-post/post/urban-outfitters-all-its-recent-controversies-explained/2012/03/29/gIQAP2lDjS_blog.html">Urban Outfitters CEO Richard Hayne's</a> support of anti-gay marriage presidential candidate Rick Santorum led to a boycott, according to the Washington Post.
Yoga apparel retailer Lululemon Athletica may have annoyed some of its more egalitarian customers when it included a quote from <a href="http://www.nytimes.com/2011/11/28/business/media/combines-ayn-rand-and-yoga.html?_r=0">Ayn Rand's famously pro-capitalist novel <em>Atlas Shrugged</em> on its bags</a>, the New York Times reported. Founder and chairman Dennis J. Wilson is a known fan of the book.
New Balance customers ran a petition on Change.org after <a href="http://www.huffingtonpost.com/2011/08/10/new-balance-romney-gay-marriage_n_923647.html">Chairman Jim Davis donated $500,000 to pro-Mitt Romney</a> Super PAC Restore Our Future. New Balance's CEO released a statement in response, reaffirming the company's support of gay marriage.
The Coachella Valley Music and Arts Festival is a popular destination for forward-thinking music lovers, but the<a href="http://www.coachellarecordings.com/press-statement/"> brand ran into some hot water</a> when Philip Anschutz, head of its parent company AEG, made <a href="http://thinkprogress.org/election/2012/07/19/543801/consumer-brands-conservative-attack-ads/?mobile=nc">a $50,000 donation to a Boehner-linked Super PAC</a>, according to ThinkProgress.
TOMS shoes founder and CEO Blake Mycoskie found himself called out after speaking at an event hosted by Focus on the Family, an anti-abortion group. Mycoskie later claimed he was unaware of the <a href="http://nymag.com/daily/intelligencer/2011/07/toms_shoes_founder_might_have.html">"full extent of Focus on the Family's beliefs."</a>
Ex-CEO of GoDaddy.com Bob Parsons caused a controversy when he <a href="http://www.huffingtonpost.com/2011/03/31/bob-parsons-godaddy-ceo-elephant-hunt_n_843121.html">uploaded a video of himself hunting an elephant</a>. He was replaced as CEO shortly after.