Sept. 12 - Lululemon's expensive mistakes are costing it sales, and its warning on future earnings has investors souring on the stock. Bobbi Rebell reports.
Things at Lululemon are anything but Zen-like. The embarrassing luon see-through pants fiasco from last spring is still haunting them and their search for a new leader is dragging on. And on Thursday, they cut their outlook for the current quarter and the year- deliveries of fall merchandise have been late- and those delays could continue into February. Macquarie Capital's Liz Dunn is not impressed: SOUNDBITE: LIZ DUNN, SENIOR ANALYST, MACQUARIE CAPITAL (ENGLISH) SAYING: "They are talking about sewing and re-instating quality for many of the luon products across the range so it seems as though that is still ongoing but I think what was troubling for me in the quarter was the fact that the sales trends did not reaccelerate when they got those black luon pants back in stock." Lululemon stock took a dive on the news- a rude awakening for a stock that has been a high flyer over the past few years. Status conscious yoga devotee's routinely shelling out over $100 for those famous Luon pants- and around $60 for the high fashion tops. Its reputation has been hit hard by the luon recall- and has created opportunity for the competition- including Gap's Athleta brand. That said, the company is expanding into new sports, and new international markets. But it's already been several months since CEO Christine Day announced she was stepping down- and the company is still just narrowing down a list of candidates to replace her- a leadership vacuum that could leave those plans on shaky ground: SOUNDBITE: LIZ DUNN, SENIOR ANALYST, MACQUARIE CAPITAL (ENGLISH) SAYING: "They talked about how they are proceeding internationally and the pace of growth and that new leadership may want to change that. And so it does really speak to the longer term strategic direction of the company and some of their tactical decisions and I think they really need to fill that slot as well as some of the other key roles. That's my biggest challenge for the stock." Dunn adds that while consumer spending overall has been weak this fall, many of Lulu's problems have been self inflicted.