Today in Business 101: don't show the world your customers' underwear.
Fitness apparel retailer Lululemon sent out a press release Monday announcing that it was pulling its popular women's black Luon yoga pants from stores and the web. The reason, according to the company's press release, was a production problem that led to inferior final products:
"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 our very high standards."
Translation: the company was selling a batch of yoga pants that left little to the imagination. Lululemon insists in its press release that the problem did not result from changing manufacturers or the quality of the materials used in the pants.
The news has led to a dive on Lululemon's stock price Tuesday, which has fallen more than 5 percent to just over $62.
In addition, the glitch will mean a major hit to sales. The company says that the pants represent around 17 percent of all women's bottoms sales in its stores, and that "for the near term, there will be a shortage of these styles available to our guests."
However, one analyst says that the problem could affect much more than 17 percent of the company's total yoga pant stock.
"Typically [retailers] sell 2.5 tops to every bottom. So if you're not selling bottoms or there's a shortage of bottoms, you're missing out on tops business," says Jennifer Black, founder and president of Jennifer Black and Associates, an Oregon-based equity analysis firm.
In short, if women stop coming in for the pants, that means lower sales in other categories of clothing as well. The company is bracing itself for the hit, saying it expects that the problem "will have a significant impact" on first-quarter financial results.
Black also thinks that the see-through pants fiasco has hit at a bad time for the company. She thinks that Lululemon's products have not been "on-trend" in terms of style and color since the start of 2013.
Investor interest in the company seems to have cooled as well. While Lululemon's stock price has grown strongly since 2009, it has fallen nearly 11 percent since the start of this year.
The company releases its fourth-quarter and full-year 2012 earnings report Thursday, so it will be around three more months before investors learn about how the see-through pants affect the company's bottom line. In the meantime, we can all prepare the stories we'll tell our grandchildren about the Great Luon Yoga Pants Shortage of 2013.
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