Does the CEO of a firm have an impact on sales when he sticks his foot in his mouth and offends the company’s trend sensitive, fashion forward customers? If you are Lululemon Athletica inc. (NASDAQ:LULU), the upscale yoga apparel retailer, there just might be a cause and effect.
Luluemon founder’s televised gaffe
The troubles may have reached a boiling point when Lululemon Athletica inc. (NASDAQ:LULU) founder Chip Wilson made a gaffe on national television where he indicated his tight fitting and somewhat translucent apparel was not appropriate for some customers, an apparent slight at plus sized women. “Lululemon pants don’t work for some women,” Mr. Wilson said, noting that when a woman’s thighs rubbed against each other the fabric may fray. The gaffe went viral and a month later Mr. Wilson announced he would step down in early 2014.
Today the company cut its outlook for the 1st quarter of 2014, nothing that store traffic and sales have recently slid. Lululemon Athletica inc. (NASDAQ:LULU) cut its initial earnings guidance from 78 to 80 cents to 71 to 73 cents due to a low single digit decline in same store sales. It cut the revenue forecast on same store sales from the $535 to $540 million range to $513 to $518 million. Shares dropped close to 8% in the premarket to $54.97, which follows a three month stock slide of 20% since the CEO initially made the public gaffe.
Lululemon had Apple-like following
Lululemon Athletica inc. (NASDAQ:LULU) had benefited from a cult-like, loyal following that rested on a brand image as being cool, fashion forward and high quality. The firm suffered a series of self-inflicted wounds in 2013 that to some appeared as growing pains. In March of 2013 the firm recalled its black yoga pants, a top selling product that represented 17% of sales, because the pants were too revealing, some customers complaining they were in fact see through. The resignation of CEO Christine Day in June surprised many close to the firm, despite the fact that a lynch mob of sorts had been calling for the resignation on social media and the Internet.
Then in November of 2013 Mr. Wilson made his now famous gaffe that appeared to blame the pants ripping in the thigh area after a few wears on larger women. Ironically, as he made these comments the company founders were also discussing the criteria for hiring a new CEO to fit in with the firm’s culture. It appears that offending larger sized women isn’t part of the yoga culture that Lululemon Athletica inc. (NASDAQ:LULU) wishes to promote.