Lululemon Athletica inc. (LULU): The Company’s Product Goof Results in Resignation

Since last month’s announced recall of its overly sheer yoga pants, Lululemon Athletica inc. (NASDAQ:LULU)‘s stock has fallen 6%. That’s not bad for a company that’s anticipating a $12 million to $17 million decline in revenue and a 3- to 6-percentage-point hit on comparable-store sales growth. Yesterday, the company took a further step to put the problem behind it, announcing the departure of its chief product officer, Sheree Waterson, and releasing an update on the future production of the luon fabric that makes Lululemon Athletica inc. (NASDAQ:LULU) pants what they are.

Lululemon Athletica inc. (LULU)

Changes at the top
Waterson’s departure shouldn’t come as a huge surprise. While the company hasn’t acknowledged that she is leaving due to the pants problem, it’s all but certain that’s the case. The company’s statement on the future of luon production was released literally moments before the announcement of her departure.

Waterson’s tenure at Lululemon Athletica inc. (NASDAQ:LULU) was only five years, but during that time, the company grew substantially on the back of work that she oversaw. Prior to her time at Lululemon Athletica inc. (NASDAQ:LULU), Waterson was president at Speedo. While the recent misstep caused significant damage to the brand and to the company, her departure will be a loss for investors and customers.

What to do with all these pants
The company’s product news should meet a better reception than its organizational change announcement. Lululemon Athletica inc. (NASDAQ:LULU) claims that the fabric being produced was at the low end of the quality tolerance scale, and that the company had failed to account for certain variables when it designed the tests for the fabric. As a result of the findings, Lululemon is bringing in a new management team and is going to add observers to factories where the fabric is produced.

All of that is welcome news to investors and consumers. But the changes may not be enough to offset the momentum swing that could draw customers away from Lululemon and to its competitors.

Taking the business?
Both NIKE, Inc. (NYSE:NKE) and Under Armour Inc (NYSE:UA) have made moves in the past few weeks to highlight their yoga products. The promotions range from giving the products space on the homepage to promoting them on Facebook. The business would be especially useful for Under Armour, which has been trying to increase its women’s business for years.

Lululemon Athletica inc. (NASDAQ:LULU) investors would do well to watch the news out of Under Armour Inc (NYSE:UA) and NIKE, Inc. (NYSE:NKE) to see if those companies gain any measurable business due to the product recall. If they do, then it could mean bad news for Lululemon down the line. Both companies produce similar products at a lower price point, and if Lululemon loses its reputation for high quality, customers might jump ship.

The article Lululemon Product Goof Results in Resignation originally appeared on Fool.com.

Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends lululemon athletica, Nike, and Under Armour. The Motley Fool owns shares of Nike and Under Armour.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!