Black Luon Pants Shortage Expected
VANCOUVER, British Columbia -- March 18, 2013
lululemon athletica inc. [NASDAQ: LULU; TSX: LLL] today notified guests that
we expect a shortage in our supply of black Luon pants and crops.
We have determined that certain shipments of product received from our
factories and available in store from March 1, 2013 do not meet our technical
specifications. The items affected are certain styles of women’s bottoms in
our signature black Luon fabric. 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.
Over the past weekend we pulled all of the affected black Luon women’s bottoms
from our stores, showrooms and e-commerce site and are working with our
supplier to replace the fabric and our other manufacturers to replace these
key items as quickly as possible. We believe 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.
“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,” said lululemon CEO Christine Day.
We have used the same manufacturing partner on key fabrics since 2004. This
event is not the result of changing manufacturers or quality of ingredients.
We are working closely with them to understand what happened during the period
this fabric was made.
Guests who purchased black Luon pants after March 1st, either online or in
stores, and believe they have affected product are welcome to return the
product for a full refund or exchange. Please contact our Guest Education
Center at 1-877-263-9300 with questions as to how to return items purchased
through our e-commerce site.
We expect this issue will have a significant impact on our financial results.
Up to March 17, 2013, we were tracking to a comparable-store sales percentage
increase of 11% on a constant dollar basis and expected revenue guidance to be
in a range of $350 million to $355 million for the first quarter of 2013. We
now expect a comparable-store sales percentage increase in the range of 5% to
8% for the first quarter of 2013, resulting in an expected revenue range of
$333 million to $343 million. We are working to determine the impact on our
earnings in the first quarter as well as expected impact for the balance of
2013. We will provide further information during our regularly scheduled
earnings call Thursday March 21st.
The company has posted a FAQ document on its Investor Relations website under
the webcasts, events & presentations link. Please refer to this document for
all questions regarding today’s press release, as the company remains in its
quiet period until fourth quarter, 2012 earnings are reported on March 21,
About lululemon athletica inc.
lululemon athletica (NASDAQ:LULU; TSX:LLL) is a yoga-inspired athletic apparel
company that creates components for people to live long, healthy and fun
lives. By producing products that help keep people active and stress free,
lululemon believes that the world will be a better place. Setting the bar in
technical fabrics and functional designs, lululemon works with yogis and
athletes in local communities for continuous research and product
feedback.For more information, visit www.lululemon.com.
Non-GAAP Financial Measure
Constant-dollar net revenue changes, which exclude the impact of changes in
foreign exchange rates, is not a United States Generally Accepted Accounting
Principle (“GAAP”) performance measure. We provide constant-dollar net revenue
changes because we use the measure to understand the underlying growth rate of
revenue excluding the impact on a quarter-by-quarter basis of changes in
foreign exchange rates, which are not under management’s direct control. We
believe that disclosing net revenue changes on a constant-dollar basis is
useful to investors because it enables them to better understand the level of
growth of our business.
This press release contains “forward-looking statements” within the meaning of
Section27A of the Securities Act of 1933 and Section21E of the Securities
Exchange Act of 1934 that involve risks, uncertainties and assumptions, such
as statements regarding the effect of shipments of products that fail to
comply with our technical specifications or that fail to conform to our
quality control standards, the duration of any shortage of products available
for sale in our stores or for delivery to guests or our ability to obtain
replacement products in a timely manner, any expected loss of net revenue
resulting from the inability to sell those products and related increased
administrative and shipping costs, and our future financial condition or
results of operations. In many cases, you can identify forward-looking
statements by terms such as “may,” “will,” “should,” “expects,” “plans,”
“anticipates,” “outlook,” “believes,” “intends,” “estimates,” “predicts,”
“potential” or the negative of these terms or other comparable terminology.
These forward-looking statements are based on management’s current
expectations but they involve a number of risks and uncertainties. Actual
results and the timing of events could differ materially from those
anticipated in the forward-looking statements as a result of risks and
uncertainties, some of which are described below. You should be aware that our
success depends on the value and reputation of the lululemon athletica brand.
Negative publicity regarding any of our products or our the production methods
of any of our suppliers or manufacturers, including the shipments of defective
product discussed above, could adversely affect our reputation and sales and
force us to locate alternative suppliers or manufacturing sources. Our
expectation regarding the impact of these shipments of products that fail to
comply with our technical specifications may not be correct and the impact on
our revenue and results of operations may be much greater. Furthermore, our
results of operation could be materially harmed if we experience or become
aware of additional shipments of products that fail to comply with our
technical specifications or that fail to conform to our quality standards, or
if we experience a shortage of products available for sale in our stores or
for delivery to guests unless we are able to obtain replacement products in a
timely manner. We also risk the loss of net revenue resulting from the
inability to sell those products and related increased administrative and
shipping costs. Additionally, if defects in the manufacture of our products
are not discovered until after such products are purchased by our guests, our
guests could lose confidence in the technical attributes of our products and
our results of operations could suffer and our business could be harmed. If we
need to replace an existing supplier or manufacturer, we may be unable to
locate additional supplies of fabrics or raw materials or additional
manufacturing capacity on terms that are acceptable to us, or at all, or we
may be unable to locate any supplier or manufacturer with sufficient capacity
to meet our requirements or to fill our orders in a timely manner. Any delays,
interruption or increased costs in the supply of fabric or manufacture of our
products caused by shipments of defective products could have an adverse
effect on our ability to meet customer demand for our products and our results
in lower net revenue and income from operations both in the short and long
term. Additional risk factors are detailed in our Quarterly Report on Form
10-Q for the fiscal quarter ended October 28, 2012, and in our Annual Report
on Form 10-K for the fiscal year ended February 3, 2013, to be filed with the
Securities and Exchange Commission and which will be available at www.sec.gov.
You are urged to consider these factors carefully in evaluating the
forward-looking statements contained herein and are cautioned not to place
undue reliance on such forward-looking statements, which are qualified in
their entirety by these cautionary statements. The forward-looking statements
made herein speak only as of the date of this press release and the company
undertakes no obligation to publicly update such forward-looking statements to
reflect subsequent events or circumstances.
Joseph Teklits / Jean Fontana, 203-682-8200
Alecia Pulman, 203-682-8224
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