Canadian yoga-inspired athletic apparel company lululemon athletica, Inc. (LULU, LLL.TO) announced Monday the recall of its signature black Luon fabric yoga pants and crops from stores, showrooms and online website in a move that will impact its financial results for the first quarter. The company lowered its revenue and comparable-store sales guidance for the first quarter after the recall that stemmed from the detection of fabric quality issues.
"We regret any inconvenience this has caused for our guests. It is always our first priority to protect the quality of our fabrics that keep our guest so loyal to our products. We will accept nothing less than the very highest quality we are known for," lululemon CEO Christine Day said in a statement.
The Vancouver, Canada-based company now expects revenues in a range of $333 million to $343 million on comparable-store sales growth of 5 to 8 percent on a constant dollar basis.
The company had previously anticipated revenues between $350 million and $355 million on comparable-store sales growth of 11 percent on a constant dollar basis.
On average, seven analysts polled by Thomson Reuters expected the company to report revenues of $352.38 million for the first quarter.
However, the company added that it was still working to determine the impact of the recall on its first-quarter as well as full-year 2013 earnings. The company expects to provide further information on the impact of the recall during its fourth quarter earnings call scheduled on March 21.
The company believes that the "affected items represented approximately 17% of all women's bottoms in our stores and for the near term there will be a shortage of these styles available to our guests."
The products on recall are certain styles of women's bottoms in the company's signature black Luon fabric which were available in store from March 1, 2013. The company said the recalled products have the same ingredients, weight and longevity qualities, but the coverage does not result in the same level of sheerness and falls short of its technical specifications and very high standards.
The company noted that it is already in the process of getting the affected fabric or products replaced by the manufacturers and suppliers after pulling them off the store shelves and website over the past weekend. The company revealed that it is using the same manufacturing partner on key fabrics since 2004.
Meanwhile, lululemon athletica has advised customers who have already bought the recalled items to return the product for a full refund or exchange if they have an affected product.
LULU closed Monday's regular trading session at $65.90, down $2.58 or 3.77% on a volume of 4.02 million shares. The stock lost a further $3.90 or 5.92% in after-hours trading. LLL.TO closed on the Toronto Stock Exchange at C$67.50, down C$2.31 or 3.31% on a volume of 0.20 million shares.
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