Last week, the Wall Street Journal reported that global specialty retailer Lululemon Athletica warned stockholders that the current fiscal quarter got off to a weak start because deliveries of its fall lineup of merchandise were delayed due to what was described as “hangover” stemming from a previous embarrassing recall of women’s yoga pants earlier this year.
Our readers may recall that in late March, Supply Chain Matters called our attention to this rather visible and potentially expensive supply chain related snafu. This global B2C online and brick and mortar retailer was forced to both recall and stop selling its most popular line of summer yoga pants after discovering that the “sheerness’ of the fabric allowed too much to be seen underneath. The CEO was compelled to publically apologize to customers for the problem and a short time later, announced her desire to step down from her CEO role due to personal reasons. The affected women’s yoga pants, which sold for a premium price, accounted for nearly 17 percent of all women’s pants sold by the company. The glitch itself involved a proprietary signature fabric which was termed Luon which apparently was the center of the quality problem.
Three months after this highly visible incident the online and global presence retailer indicated that it was begging to overcome its crisis, and that supplies of its Black Luon yoga pants were beginning to be made available but full inventory recovery was not expected until end of the company’s fiscal second quarter. A more important described learning was described as the loyalty of customers to the brand, in spite of the snafu. Customers apparently applauded the decision to remove poor quality and were willing to wait for the replacement inventory. Apparently these all remain as work in progress.
Also in June, executives indicated a new awareness as to the importance of end-to-end supply chain quality control and the running of a tight sourcing operation. Investments described as $4.5 million were identified for areas including the hiring of raw material specification and quality control teams and separate executives to lead both product design, merchandising and supply chain functions.
The latest WSJ report indicates that Lululemon was saddled with summer inventory well into the current fall selling season, and is now challenged with late product delivery for the fall lineup. In its fiscal quarter that ended August 4th, the company reported a $0.8M decline in profitability from the year earlier quarter because of lingering charges. Revenues however, were reported as increasing 22 percent. The retailer now expects late product deliveries to continue through the end of the company’s fiscal year ending in early February.
As this retailer continues to grapple with the effects of the earlier supply chain snafu, it provides yet another reminder to retailers of the overall importance of investing in supply chain leadership and capability. Lulu will no doubt eventually overcome its current supply chain related challenges and the lessons learned, like many others across industry settings will again reinforce our mantra that supply chains and their end-to-end capabilities absolutely matter.