When Lululemon pulled their black yoga pants from shelves back in March 2013 because they were too see through, the Robson Street store in Vancouver, BC posted a cheeky response on their front window: “we want to be transparent with you.”
Well, apparently the well-known yoga apparel company isn’t being transparent enough – and this has irked some investors. Shareholder Houssam Alkhoury of Natick, Mass. has filed a lawsuit against Lululemon, accusing the company of hiding defects in their yoga pants and concealing talks that lead to the departure of CEO Christine Day. Reuters reports:
[The lawsuit] contended that Lululemon, Day, and company founder and Chairman Dennis “Chip” Wilson hid defects in the yoga pants, which resulted in part from cost-cutting, and that the company was forced to sell them at a discount to preserve market share.
[It] also said that before announcing Day’s departure on June 10, Lululemon concealed “serious discussions” about her job status and the potential to replace her.
Lululemon shares fell 17.5 percent on June 11, wiping out about $1.62 billion of market value, Reuters data and a regulatory filing show.
The lawsuit accused Lululemon of knowingly making disclosures, or failing to make necessary disclosures, that caused its share price to be artificially inflated, resulting in shareholder losses once the truth became known. (via Huffington Post)
Considering that Lululemon estimates that the see-through pants recall could reduce 2013 profits by $40 million, it’s no wonder that shareholders are upset. Perhaps Lululemon’s yen for controversy and drama has gone a little too far.
Lululemon hasn’t made public comments on the lawsuit to any media outlets.