Lululemon’s Stumbles and Blunders

Lululemon | BCBusiness

Lululemon may not have had a banner year for good press, but the numbers tell a different story

Despite splashing the headlines with unfavourable news in 2013—see-through pants, a resigning CEO, a loose-lipped founder—Lululemon Athletica Inc. managed to climb from the number 29 spot to the number 25 spot on our annual list of B.C.’s Top 100 Companies, increasing its revenue from $1.4 billion to $1.6 billion.

The first piece of regrettable news for the company came on March 18, when it announced that a March 1 shipment of its black Luon pants and crops did not meet technical specifications and fell short of the company’s “very high standards”; in other words, it had released to stores a bunch of see-through pants. Customers who bought pants after March 1 were invited to contact the company for returns, but the backlash was widespread and well publicized, and Lululemon’s share price dropped five per cent following the announcement.

Without missing a beat, in a move befitting the laidback yoga clothier, some of its retail storefronts emblazoned their windows with tongue-in-cheek signage, including “Sheerness: Your Boyfriend’s Design Feedback,” and “We Want to Be Transparent with You” in front of underwear-bearing mannequins. Stock prices bounced back later that week, but analysts estimated that the snafu cost the company in the neighbourhood of $67 million in lost sales.

On April 3, in separate press releases, Lululemon issued an update on the sheer-pants debacle and its production cause, and announced that its chief product officer, Sheree Waterson, would be leaving the company.

Later in June, along with confirming CEO Christine Day’s resignation, the company announced that it would delist from the Toronto Stock Exchange, sending its share price on the Nasdaq exchange down 15 per cent to US$69.33 by the following morning.

Day said she was resigning due to personal reasons, but news media and analysts speculated otherwise. “The fact of the matter is, these have been trying times at the company and I think that there are some in the Lululemon community that have not been a fan of Christine Day,” Elizabeth Dunn, senior analyst at Macquarie Securities, told the Business News Network. “There are some Lulu loyalists who have complained, actually quite loudly, about senior leadership with the thought that there’s been a move to profits over quality.”

The search for a new CEO was on, but before good news could break, the company made international headlines in November when founder and board chair Chip Wilson went public, blaming customers’ bodies for fabric pilling. “Quite frankly, some women’s bodies just actually don’t work for it,” he said of the company’s yoga pants in an interview on Bloomberg TV. “It’s really about the rubbing through the thighs,” he continued. Many considered his remarks insensitive and “fat-shaming,” and matters were only made worse when Wilson issued a video apology, not to the public as expected, but to employees for having to deal with the backlash.

It didn’t come as much of a surprise, then, that Wilson stepped down from his post as chair of the board (but retained a seat on the board of directors) about a month after the “thighs” scandal. The news, however, was buried underneath the announcement that Lululemon had appointed Laurent Potdevin as the company’s new CEO, replacing Day, who would remain on the board until the end of the fiscal year. Potdevin was most recently president of Toms Shoes.

“As we move into 2014, we are reflecting on our learnings with humility, and are entirely focused on our future,” said Potdevin in a prepared statement, alluding to the trying year the company had just undergone. “2014 is an investment year with an emphasis on strengthening our foundation, reigniting our product engine and accelerating sustainable and controlled global expansion.”