Updated] ‘Pantsgate’ to hurt Lululemon profit; customers told to ‘bend over’?

Lululemon said its fourth-quarter earnings beat estimates but that its recall of too-sheer pants would hurt fiscal 2013 results.
(Luis Sinco / Los Angeles Times)

Lululemon Athletica’s recall of its too-sheer black yoga pants will cause trouble far into next year, the company said Thursday as it reported fourth-quarter and full-year fiscal earnings.

Already, the issue -- dubbed “Pantsgate” by some on social media -- is inflaming customers claiming to have been mistreated by company associates while trying to return pants without enough rear-end coverage.

Lululemon Addict, a fan site for the brand, posted tales this week of Lululemon sales associates demanding that customers put on the pants and then bend over to determine whether the clothing was see-through enough to warrant a refund.


[Update: Lululemon responded by saying its stores are accepting returns of the pants stocked after March 1, no questions asked.] On its Facebook profile, where customers were complaining of a “disconnect between corporate and the stores,” Lululemon wrote that it is “working with the guests who have reached out ... and following up with their store accordingly.”

Late Monday, the Vancouver company said it had pulled black yoga pants made with Luon fabric -- a mix of nylon and Lyrca spandex fibers – from stores and the Web after deeming them to be too skimpy.

The chain said it was still investigating the problem. Lululemon said it hasn’t switched manufacturers or ingredient quality since 2004.

On Thursday, it expanded on its forecast that the recall would crimp its financials this year. Earnings per share this quarter will be 11 to 12 cents lower, to between 28 and 30 cents a share, because of the recall, the company said. Over the year, the pants crisis is projected to cost the company $57 million to $67 million in lost revenue.

Lululemon reiterated that it expects net revenue for the quarter to fall to between $333 million and $343 million, with the recall shrinking an earlier prediction of $350 million to $355 million. Same-store sales -- an indicator of stability that only measures stores open at least a year -- will rise between 5% and 8%, not 11% as anticipated pre-Pantsgate.

Before the recall, Lululemon’s financials seemed to be going strong. For the fourth quarter, which ended Feb. 3, the company’s earnings soared 49% to $109.4 million, or 75 cents a share.

The results beat analyst expectations. During the same period a year earlier, Lululemon pulled in $73.5 million in profit, or 51 cents a share.

Revenue for the quarter stretched up 31% to $485.5 million, while same store sales got a 10% bump.

Over the full fiscal year, Lululemon grew 37%, going from a $1 billion company to one with $1.37 billion in revenue.

Lululemon stock was volatile in morning trading, but at around 11 a.m. in New York was up roughly a percent, or 63 cents, at $64.51 a share.


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