(October 2, 2013) — Lululemon Athletica is being sued for allegedly defective, bordering on see-through yoga pants, according to court documents.
Louisiana Sheriffs’ Pension & Relief Fund was named to lead the class action securities litigation against the Vancouver-based company on October 1, accusing the firm of decimating shareholder value by producing sheer exercise pants.
“The fabric used was very thin, overly translucent, and essentially rendered the yoga pants see-through when wearers bent over—which is what those who wear yoga pants do,” one of the case’s complaints alleged. “Customers began complaining in droves. After weeks of upheaval, Lululemon was forced to formally recall see-through yoga pants and offer customers exchanges or refunds. Initially, Lululemon blamed the defect on its manufacturers and suppliers.”
The fund owned about $1.3 million of Lululemon stock and reported to have lost $116,000 on transactions between March 21 and June 20, 2013.
The lawsuit accused Lululemon of fraudulently hiding defects that caused yoga pants to become nearly sheer. It also charged former CEO Christine Day and Chairman Dennis “Chip” Wilson of boosting market share with deep discounting.
Trouble began in March when the company recalled its best-selling item, women’s black yoga pants with Luon fabric, after customer complaints that they lost their opacity, despite its reputation for athletic clothing that could endure many wears and washes.
Three months later, Day was fired, leading to a 17.5% drop in shares and a loss of $1.62 billion market value.
New York district court Judge Katherine Forrest merged two lawsuits filed against Lululemon but said the pension fund, as a “sophisticated institutional investor,” was better leading because it had a larger stake than the other plaintiff.
Earlier this month, Lululemon significantly cut its expected profit and sales for the 2013 fiscal year, blaming delays in delivery from tighter quality control.