Lululemon shares slide on downgrade as gaffes, CEO search weigh

Thu Nov 14, 2013 2:42pm EST
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By Solarina Ho

TORONTO Nov 14 (Reuters) - High-end yoga-wear retailer Lululemon's shares fell nearly 5 percent to its weakest level in a month on Thursday after an analyst downgraded the stock following fresh blows to the company's reputation as it hunts for a new chief executive officer.

The company, which recalled its popular black luon yoga pants in March because they were too see-through, recently faced new customer complaints that some products were too susceptible to pilling - the small, unsightly balls of fibers that form on fabric from wear and tear.

In addition, Lululemon founder Chip Wilson raised a furor in a media interview last week when he said "some women's bodies just actually don't work" for the clothing, adding that "it's really about the rubbing through the thighs, how much pressure is there over a period of time."

Wilson said in a video message that he was "really sad" about the repercussions of his comments. But he did not retract his original statements.

"We have thought Lulu has been walking a tightrope for months, and now we believe it will fall off," Sterne Agee analyst, Sam Poser, wrote in a research note where he downgraded the company to "underperform" from neutral and lowered his 2014 estimates.

"The product problems, the lack of leadership, and the mouth of the chairman will likely continue to alienate existing customers, making it tough to attract new customers."

Lulu has been looking for a new chief executive officer since June, when Christine Day said she would step down.

This is not Wilson's first controversial comment. In a December 2004 profile in the National Post Business magazine, he said he chose the name "Lululemon" because L is not in the Japanese vocabulary.   Continued...