lululemon Issues luon Production Update, Says Chief Product Officer to Leave

lululemon athletica inc. (NASDAQ: LULU) today provided an update onits black luon production issues.After an evaluation of lululemon's previously disclosed black luon productionissues, the company concluded that the current specification and testingprotocols for the signature fabric luon that were developed in 2006 have notmaterially changed. However, production of luon is a complex process with anumber of different inputs, and fabric is the key factor. While the fabricinvolved may have met testing standards, it was on the low end of lululemon'stolerance scale and we have found that our testing protocols were incompletefor some of the variables in fabric characteristics. When combined with subtlestyle changes in pattern, the resulting end product had an unacceptable levelof sheerness.lululemon had taken steps prior to the black luon issue to bolster itsinternal product expertise, including the addition of senior levelcapabilities in quality, raw materials and production. This new team wasinstrumental in determining the root cause of the issue and has initiatedthree work streams to address what we believe are the contributing causes.Work streams and actions include:1. Testing & processes: lululemon's quality team is assessing all luonproducts in the production pipeline according to newly implemented rigoroustesting and quality processes that includes revised specifications for modulus(stretch), weight and tolerances.2. Factory oversight: lululemon employees have been stationed in factories tomonitor and test products and will educate internal teams and manufacturingpartners on new testing standards and methodologies.3. Leadership and structure: lululemon is building a stronger internalstructure with new leadership and cross-functional team capability that webelieve will create a more robust organization to support our long-term growthstrategy.“Our stand for differentiation is the quality of our product. We have beenbuilding capacity in the product organization, and we recognize that continuedinvestment in this segment of the business is required to support our future,”said lululemon CEO Christine Day. “We are committed to continually developingbest in class fabrics, and are committed to only putting product in our storesthat meets our stringent standards.”Based on our evaluation to date, there is no change to the company's firstquarter and fiscal 2013 earnings guidance that was provided on March 21^st,2013.Separately, the company said:In conjunction with a reorganization of our product organization, ChiefProduct Officer Sheree Waterson will be leaving lululemon effective April 15,2013. “We appreciate the many contributions that Sheree made during her timewith lululemon, particularly in the area of design,” said lululemon's CEOChristine Day.