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Lululemon's Reaction to Yoga Pants Mishap: Brilliant Marketing

Stocks in this article: LULU TM

NEW YORK ( TheStreet) - "Just bought 15 shares of #lululemon, Pressure their #yoga pants "mistake" may have been the best marketing move ever," tweeted by Dr. Andy Baldwin yesterday.

For all the jokes about yoga pant "transparency" and reasons to use downward dog in headlines and text, the fact remains that Lululemon Athletica (LULU) stepped up when faced with what seems to be yet another crisis with its supply chain.

The latest mishap by the luxury athletic apparel company has to do with its popular Luon pants. The Vancouver-based company announced Monday that it had pulled the product off of store shelves and from its Web site because the "sheerness" of the pant did not meet its standards. Lululemon is offering a refund to anyone who bought from the bad batch (product sold after March 1).

"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," lululemon said in a press release.

As a result, lululemon "notified guests" that it expects a "shortage" in supply of black Luon pants and crop pants until it can rectify the issue. Further, lululemon provided an in-depth FAQ about the issue, essentially a customer-targeted press release, on its Web site.

The pants represent approximately 17% of all women's pants in its stores and the recall will significantly affect first-quarter earnings. The company lowered revenue guidance to between 5% and 8% same-store sales growth from 11% same-store sales growth.

Lululemon shares fell 0.3% on Wednesday to $63.88. The stock is down 5.9% over the past month.

Apparently this is not the first setback that lululemon has had with its suppliers - last summer they had some bleeding problems with the bright colors in its swim line and there have been other issues in the past. So it's clear the expanding company is facing growing pains, especially when it comes to its suppliers keeping up with demand and quality control. And it's clear these are issues that must be addressed since investors will want to know that the company's operations are sound.

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