Lululemon Athletica Inc. stock dropped 2.76 per cent on Tuesday to $64.08 (U.S.) as the company tried to contain the fallout from another major product failure – this time a problem with the sheerness of yoga pants made with the company’s trademarked Luon fabric.

The recall will affect approximately 17 per cent of all women’s bottoms in Lululemon stores, across different styles.

Last July, the company acknowledged problems with dye bleeding from some brightly coloured pieces.

“Those are two black eyes for a brand that is supposed to stand for quality in the marketplace,” said Brian Sozzi, chief equities analyst at NBG Productions. “It’s a window of opportunity for Lululemon competitors.”

The sheer black pants had been in stores since March 1.

Company representatives are telling customers via Facebook they don’t know how many styles have been affected, and that they are being examined at the company’s distribution centre.

Laura Klauberg, senior vice-president community and brand, apologized to guests for the problem.

“We’re doing everything we can to fix the problem and replace these key items as quickly as possible.”

Credit Suisse analyst Christian Buss said the problem is likely due to the fact that Lululemon has been placing bigger buys to keep shelves better stocked, but the downside is that their quality assurance and quality control have perhaps taken too much of a back seat.

“They risk diluting the consumer’s relationship with the brand over the long term if they can’t prevent these issues from reoccurring,” he told the Star.

Buss said this is the fourth product quality issue Lululemon has had in roughly a year, including the colour bleed, sheerness issues with some bathing suit products in the spring of 2012 and an ongoing sheerness issue with some light-coloured yoga pants.

“While the recall of 17 per cent of bottoms from stores is an obvious negative, we believe recent efforts to shift the product mix away from the company’s signature Luon fabric have helped minimize the damage,” he wrote in a note following Lululemon’s announcement.

The recall was announced as Lululemon prepares to tackle international markets under the helm of CEO Christine Day, who spent 20 years building the Starbucks brand worldwide before taking up the challenge of leading the Vancouver-based athletic-wear company.

Lululemon said in December it is planning a cautious expansion into as many as 15 different countries over the next two years. The company is scheduled to report fourth quarter earnings on March 21.

The company cut its first-quarter revenue forecast as a result of the recall. The company now anticipates first-quarter revenue between $333 million and $343 million. Its prior guidance was for $350 million to $355 million. Analysts polled by FactSet expect revenue of $352.1 million.

It also lowered its first-quarter outlook for comparable store revenues from 11 per cent to 5 per cent and 8 per cent.

Christina Chalmers, Vancouver-based creator of the Lulumum blog, said there have been quality problems with Luon pants since early 2012. She returned a pair of maroon Luon pants in the summer because they were too sheer.

“Their Luon has gradually been getting worse and worse, but this past year, it's been the most startling change. It's sheer, thin and it wears down in the first wash,” she said.

“The Luon that they used to use never did that. It lasted. It was thick and it felt like cotton,” she said. “If you had imperfections, it disguised them. They were magic pants. Now, they show everything.”

Chalmers said she has received scores of emails and comments from readers over the past year complaining about the declining quality of Luon fabric. The sudden recall of only the black colour took her by surprise.

“I was kind of scratching my head, because they've known this problem has been going on for a while, but they're alleging this is something new as of March 1.”

Affected black pants were pulled from store shelves over the weekend. Lululemon is offering full refunds or exchanges to customers.

While Lululemon seems to be indicating that the problem lies with the manufacturer, the Taiwanese supplier said it followed design specifications and the retailer merely misjudged customer tastes.

“Lululemon introduced the product to the market and their customers are not comfortable with its opacity,” Roger Lo, a spokesperson at Eclat Textile Co. Ltd., told Reuters.

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“We checked our orders this morning and indeed, we did follow their instructions to make the product.”

Eclat has been a supplier for Lululemon for more than 10 years.

BMO Capital Markets apparel retail analyst John D. Morris wrote in a note to investors that they would proceed with caution regarding Lululemon.

“In August of last year, we first uncovered quality issues through our consumer research, which leads up to believe that quality issues may not have a quick fix. Our recent work also suggests developing quality issues on the men’s side of the biz.”

Toronto retail consultant Wendy Evans has extensive experience in the field of textiles and quality control. She grew up in a family business, Evans and Evans, that was a manufacturer’s agent of textiles, importing fabrics from around the world into Canada.

Although it closed in the mid-1980s, Evans remembers the myriad ways a textile order can go wrong.

“Making fabrics is both an art and a science, as is dying fabrics and getting the feel right, the textures, the colours and the weights. So, there’s a lot of things that can go awry in the development of the product and its dying and finishing doesn’t always turn out as expected. There were, over the years, certainly differences of opinion between the end user and the mills.

“If you’re trying something new — and it sounds like they are trying something new — it doesn’t always turn out perfectly the first time and you have to innovate in this business,” said Evans.

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With files from Star wire services

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