‘See-Through’ Pants Will Wallop Lululemon Athletica Inc. (LULU)’s Bottom Line

Many of those who participate in yoga are said to be open minded, free spirited and have a liberal attitude. After all, yoga is all about opening up a heart and experiencing a connection with the whole of universe. But even in yoga, some things are sacred. Nontransparent pants are one of those things.

So when yoga apparel retailer Lululemon Athletica Inc. (NASDAQ:LULU) received a March 1 shipment of pants that use its signature fabric Luon, and found a hitch that caused the pants to be sheer, the company pulled down the pants from shelves and off of mannequins, and offered refunds to unknowing customers.

“The ingredients, weight and longevity qualities of the pants remain the same but the coverage does not, resulting in a level of sheerness in some of our women’s black Luon bottoms that falls short of over very high standards,” Lululemon said in a statement.

The snafu, affecting some 17% of the company’s pants it had in stock, could hit Lululemon’s bottom — er — bottom line, hard. The glitch will reduce projected Q1 sales to $333 million to $343 million, down from the previously expected $350 million to $355 million.

Investors didn’t take this sitting down. Shares slumped more than 6% following the announcement after hours March 18, on top on the 4% lost intraday. Shares were stripped another 2% the following day.

The pants problem comes at a trying time for the upscale retailer. Over the last several weeks, Lulelemon shares have lunged from a 52-week high of $81.09 to around $62.

Over the last three years, despite a loyal following of affluent customers with plenty of disposable income who continued to spend at stores amid the economic downturn, Lululemon Athletica Inc. (NASDAQ:LULU) has not shown much much in the way of capital return. Revenue and growth rates have waned. Estimates for the next two fiscal years also look weak.