It hasn’t been long since the storm following Lululemon Athletica Inc.’s LULU yoga-pants recall calmed down, that the company issued another product recall. However, this time the recall is not associated with any wardrobe malfunction.
Sources revealed that Lululemon is recalling nearly 318,000 tops for women, on grounds of these being injurious to wearers’ eyes and faces. This is because the tops have an elastic draw cord around the neck or hood area, along with a metal/plastic tip, which can hurt on being pulled, or released after being stuck on something.
Unfortunately, seven people have filed complaints to the U.S. Consumer Product Safety Commission, claiming that these tops have caused injuries to their faces and eyes. Also, per sources, Lululemon has recorded five such cases in Canada and one in the U.S.
Further, Lululemon has sold nearly 185,000 and 133,000 of such tops in Canada and U.S., respectively, from 2008 beginning through 2014 end. Consequently, regulators suggested that customers should stop wearing these tops. Also, they are advised to either ask the company for a drawstrings replacement or totally remove the elastic cord.
Lululemon underwent a similar situation in the past, which in fact weighed significantly on the company’s performance and reputation. In Mar 2013, Lululemon was compelled to pull back its black Luon pants and crops from its stores and website due to material issues which posed risks of wardrobe malfunctions.
Apart from tainting the company’s reputation, the recall had a major impact on its fiscal 2013 financial results. Moreover, shares of the company had witnessed a considerable slump following the debacle.
However, analysts don’t expect the current recall to have any material effect on Lululemon’s financials, which is also evident from the marginal upward movement of this Zacks Rank #3 (Hold) company’s share price, despite the news.
Hence, we prefer to wait and see what’s in store for Lululemon after its second major clothing recall.
Stocks to Consider
Better-ranked stocks in the textile-apparel industry include G-III Apparel Group, Ltd. GIII, with a Zacks Rank #1 (Strong Buy), Columbia Sportswear Company COLM and Hanesbrands Inc. HBI, each carrying a Zacks Rank #2 (Buy).
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