Following the announcement of a Q1 $17.5M write-off on a recall of their popular workout pants, CEO Christine Day will step down.Coming as unfortunate news for a company on the rise, Lululemon's stock took a 17% tumble this morning due to supply chain management issues that were largely avoidable.
Lululemon (LULU) CEO Christine Day announced on Monday, June 10th that she will be stepping down once a suitable replacement is found. This news comes in conjunction with Lululemon's posting of a $17.5 Million write-off on the highly publicized March 2013 recall of over 17% of their popular Luon leggings.
The company offered full refunds to customers who purchased affected products with their nylon-lycra blend fabric made after March 1st because they were found to be see-through when customers bent down. Now that the cost of this recall is known, the company's stock is down nearly 17% this morning combined with news of Day's resignation announcement.
This news shocked the apparel industry and wall street analysts alike. Over the past 5 years under Day's leadership, Lululemon has tripled revenues to over $1.3 Billion and now has over 200 locations worldwide.
The Importance of Effective Supply Chain Management
Lululemon placed blame for the see-through leggings on a Tiawanese supplier, Eclat Textile which denies any wrongdoing. Eclat claims that all products shipped to Lululemon underwent the company's approved tests & quality control measures and that nothing has changed in the manufacturing process of these products.
This story highlights the importance of supply chain management for global apparel brands. For quite some time, consumers have taken to blogs and widely acknowledged the tendency of Lululemon yoga pants to be at least somewhat see-through when the wearer bends down. The company's unwillingness to address this major supply chain issue on their own terms is what lead to the massive recall and eventual resignation announcement of CEO Christine Day.
Whether the blame is on Lululemon or their suppliers, the undeniable fact remains that stronger preventative quality control measures would have made this mishap largely avoidable.
Source: (Fortune | Aaron Harris / Bloomberg)