Lululemon Athletica Scandals

Essay by erozwoodUniversity, Bachelor'sA-, November 2014

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Lululemon Athletica is an athletic apparel company based out of Vancouver British Columbia, Canada. The company was founded in 1998 by Dennis "Chip" Wilson who had been in the skate, surf and snowboard business for over twenty years. He took the first yoga class offered in his area and became excited about the experience. He quickly was immersed in the idea of making his yoga experience the best possible. The cotton clothing that was typically being used Wilson found to be too sweaty and hard to move in. Wilson thought that technical athletic fabrics would be better and from this a design studio and an at night yoga studio were formed. According to the Lululemon Athletica website "Clothing was offered for sale and an underground yoga clothing movement was born. The success of the clothing was dependent on the feedback from yoga instructors who were asked to wear the products and provide their insights" (Lululemon Athletica ).

The first official store was opened in 2000 in a beach area of Vancouver. The store had a goal of making the community healthier but eventually the way that they were going about this was changed but it is still important to their brand today. Lululemon today in 2014 has around 200 retail locations the majority being in North America. They have had great success the Wall Street Journal reported; "Lululemon posted a fourth-quarter profit of $73.5 million or 51 cents a share, up 34% from $54.8 million, or 38 cents a year earlier. Revenue for the quarter jumped 51% to $371.5 million" (Mattoli, 2012). Lululemon rarely discounts products and they often come out with limited editions or colors of their items that have very short releases. They create a demand that is similar to companies like Apple.

Lululemon Athletica's history has not gone by without issues and controversy. In 2005 Wilson who was still CEO spoke at a conference about the merits of child labor. He even recommended it in Vancouver to keep children of families in poverty off of the streets. In 2007 they had a product that claimed to contain seaweed fibers which added some benefits to the person wearing the garment. The New York Times tested the fabrics which claimed to contain 24% seaweed fiber to discover that no seaweed fiber was in the fabric. Lululemon after defending their fabrics and the supplier retracted the statements about seaweed fiber being in the fabric. In 2011 a retail employee brutally murdered another retail employee in a Lululemon retail location outside of Washington DC. She tried to cover up the murder but was eventually sentenced to life in prison. Lululemon has also filed a number of intellectual property lawsuits over designs and patents of clothing. The company has faced issues with fabrics bleeding, swimwear becoming see-thru when wet and their shopping bags containing lead. With all of these problems they have still been successful and have not faced many image issues. The founder has also made other controversial statements beyond his thoughts on child labor over the years. These range from his reason behind the name of the company, statements about birth control and comments on the sizes the company makes not going past 12.

Chip Wilson made another controversial comment after Lululemon had recalled a group of black yoga pants that were too sheer. Then re-released them with more fabric but consumers were still having an issue with sheerness and pilling of fabric. The founder blamed the problem on the size of women's thighs that are using the pants and claimed that the pants are not made for everyone adding more fuel to the fire. This recall of black yoga pants made news headlines everywhere. In March 2013 Lululemon recalled around 17% of their black yoga pants; they were made of a fabric called "full-on luon". The company had found them to be sheer and took action on it and allowed returns outside of their normal policy. Many yoga pant wearers found that more pants that just the specific batch recalled seemed to be sheer when the wearer bent over. According to the Wall Street Journal: "The supplier, Eclat Textile Co. of Taiwan, hit back at Lululemon, saying the clothes it shipped weren't problematic." (Poon & Talley, 2013). The supplier claimed that the fabrics were all to the specification set in place by Lululemon themselves. In July 2013 a lawsuit was filed in Manhattan accusing the company of defrauding shareholders by hiding the defects of the sheer pants. There have been other lawsuits in other areas under the same premise. All the law suits were dealing with shareholders not having all the information about how long the pants were being produced sheer and if there was a reduction in the quality of the product with our letting the shareholders know.

Since being founded in 1998 Lululemon has survived scandal after scandal. Besides having a founder who has a mouth who can get him in trouble, a murder, they have had multiple product issues mostly leading back to quality. Should there be stricter regulations in place for fabric contents that a reported on labels? Should there be labeling of clothing that has the potential to be sheer when worn to protect the consumer? For athletic apparel should there be an industry standard for testing for performance and issues with rips or sheerness? For shareholders should they be made aware if a product is going through a major change that might not be obviously noticeable? These are questions to the issues that Lululemon have faced that are fraudulent when dealing with shareholders and also some ethical issues with clothing sheerness.