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5 Dumbest Things on Wall Street This Week: March 22

3. Lulu Gets Pantsed

Give us some credit Dumbest fans. Did you really think we would forget about the sheer madness this week at Lululemon (LULU - Get Report)?

The athletic-apparel purveyor announced Monday it was recalling shipments of women's yoga pants with an unacceptably high "level of sheerness" from its stores. And while Lulu says it plans to see the problem through, the company admitted the issue will indeed impact its bottom line. Shares of the company got pantsed on the news, dropping 3% to $64 on Tuesday.

"The ingredients, weight and longevity qualities of the pants remain the same but the coverage does not," said Lulu in a statement.

Speaking of coverage, Wall Street consensus estimate for Lulu's Q1 is $353 million. Unfortunately, Lulu said it now expects lower earnings visibility and fiscal first-quarter sales of $333 million to $343 million, down from an earlier forecast of $350 million to $355 million. Lulu also lowered its first-quarter outlook for comparable store revenues, from 11%, to 5% to 8%.

Visibility. Coverage. Bottom line. See the problem through...Yes! Every single ridiculous pun is intended. You should know that by now.

For the record, Lulu's supplier, Eclat Textile of Taiwan, defended itself against the charges, saying the pants in question went through a certification process approved by the retailer. Eclat Textile CFO Roger Lo told the WSJ that "all the pants were manufactured according to the requirements set out in the contract with Lululemon."

Yes, Roger's knickers are certainly in a twist over this pants controversy, which means that Lulu now has a supplier problem on its hands as well. As for its customers, well, Lulu is offering full refunds or exchanges to anybody who purchased its less than opaque legwear.

One thing that remains clear for Lululemon -- other than its pants of course -- is that the once high-flying yoga stock may be a downward-facing dog until they zip this supply problem up.
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