Yoga Pants Proving To Be Costly For Lululemon Athletica Inc (NASDAQ:LULU)

Posted by admin October 3, 2013 0 Comment 1702 views

Lululemon Athletica Inc (NASDAQ:LULU) has come under a great deal of flak with reference to some yoga pants that were manufactured by the company. And now a Louisiana pension fund will be at the fore of the United States litigation that alleges that the company hid the defects in the yoga pants. The defects caused the pants to become almost sheer. The other allegation is that Lululemon Athletica Inc (NASDAQ:LULU) also hid details about the talks that resulted in the chief executive exiting the company.

Too sheer to wear

Louisiana Sheriffs’ Pension & Relief Fund owns around $1.3m of the company’s stock. On Tuesday, Manhattan’s U.S. District Judge Katherine Forrest said that the fund will lead the litigation of behalf of the rest of the shareholders. The company is known for its athletic clothing that is manufactured to withstand years of washes and wear. This particular issue came up in March this year when the company recalled the women’s black yoga-pants that it had manufactured. Incidentally, these are one of its top-selling products. These pants contained Luon fabric which is the company’s proprietary material after it realized that the pants were actually too sheer.

Within less than 3 months post this; the company announced that Christine Day, the CEO has left the company. This announcement took place on 10 June and the very next day the company’s shares plunged 17.5% and erased $1.62B of Lululemon Athletica inc (NASDAQ:LULU)’s market capitalization.

The 2 suits that have been filed in the Manhattan court allege that the company had cut costs in the manufacture of these pants and that Day and Dennis Wilson, the Chairman were aware about this and yet hid these defects.

Wednesday’s trading

In Wednesday’s trading, Lululemon Athletica Inc (NASDAQ:LULU) rose by 0.81%. The shares opened at a price of $73.10, climbed to an intraday high of $75.25 and dipped to a close of $74.46.

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