lululemon Announces luon Production Update

  lululemon Announces luon Production Update

Business Wire

VANCOUVER, British Columbia -- April 03, 2013

lululemon athletica inc. (NASDAQ: LULU) (TSX: LLL) today provided an update on
its black luon production issues.

After an evaluation of lululemon’s previously disclosed black luon production
issues, the company concluded that the current specification and testing
protocols for the signature fabric luon that were developed in 2006 have not
materially changed. However, production of luon is a complex process with a
number of different inputs, and fabric is the key factor. While the fabric
involved may have met testing standards, it was on the low end of lululemon’s
tolerance scale and we have found that our testing protocols were incomplete
for some of the variables in fabric characteristics. When combined with subtle
style changes in pattern, the resulting end product had an unacceptable level
of sheerness.

lululemon had taken steps prior to the black luon issue to bolster its
internal product expertise, including the addition of senior level
capabilities in quality, raw materials and production. This new team was
instrumental in determining the root cause of the issue and has initiated
three work streams to address what we believe are the contributing causes.

Work streams and actions include:

1. Testing & processes: lululemon’s quality team is assessing all luon
products in the production pipeline according to newly implemented rigorous
testing and quality processes that includes revised specifications for modulus
(stretch), weight and tolerances.

2. Factory oversight: lululemon employees have been stationed in factories to
monitor and test products and will educate internal teams and manufacturing
partners on new testing standards and methodologies.

3. Leadership and structure: lululemon is building a stronger internal
structure with new leadership and cross-functional team capability that we
believe will create a more robust organization to support our long-term growth
strategy.

“Our stand for differentiation is the quality of our product. We have been
building capacity in the product organization, and we recognize that continued
investment in this segment of the business is required to support our future,”
said lululemon CEO Christine Day. “We are committed to continually developing
best in class fabrics, and are committed to only putting product in our stores
that meets our stringent standards.”

Based on our evaluation to date, there is no change to the company’s first
quarter and fiscal 2013 earnings guidance that was provided on March 21^st,
2013.

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.

Forward-Looking Statements:

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.

Contact:

ICR, Inc.
Investors:
Joseph Teklits / Jill Gaul, 203-682-8200
or
Media:
Alecia Pulman, 203-682-8224
lululemonPR@icrinc.com
 
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