Lululemon Athletica, looking to recover both some lost business and reputation after an embarrassing snafu resulted in virtually see-through yoga pants, just hired a new chief product officer formerly employed by Sears Holding Corp.
Tara Poseley, recently president of apparel for Kmart (owned by Sears), has garnered a sterling reputation in the retail industry for her deep knowledge of merchandising, branding and product design. She will be replacing Sheree Waterson, who resigned on the heels of the yoga pant debacle.
Last June the company was forced to recall its black “luon pants,” its best selling pair of yoga pants, after it was mistakenly produced so sheer it was nearly transparent. The modesty of fitness conscious soccer mom’s all over was apparently offended. Reportedly, the mistake costs the company tens of millions of dollars. Former CEO Christine Day was forced to resign after the fiasco.
The company has been in turmoil ever since. The luon pant shortage certainly left its mark; inventory at the end of the quarter equaled $163 million, in comparison to last year’s $125.4 million.
For the last fiscal quarter ending August 4th, Lululemon had a profit of $56.5 million, slightly lower than last year’s $57.2 million. Same store sales were up 8 percent on a constant-dollar basis and revenue spiked by an impressive 22 percent to $344.5 million.
Still, Lululemon’s revenue gains were eaten up by rising costs. Gross margin shrank to 54% from 55.1% as a result of a 25% increase in input costs. It has adjusted its expectations for per-share earnings down from $1.94 to $1.97 on revenue of $1.63 billion to $1.64 billion, to $1.96 to $2.01 a share on $1.65 billion to $1.67 billion in revenue. A weakened Canadian dollar has been a thorn in its side as well.
Day is still acting as CEO until the company can find a suitable replacement. Day spoke highly of Poseley, even going as far to surmise that she could be the “successor to my successor.”