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Updated: Tue, 26 Nov 2013 09:10:00 GMT | By Kate Wilkinson

After its see-through pants debacle, Lululemon is at a crossroads

One position filled, but still no CEO


 (© Photo: Richard Lam/CP)

(Photo: Richard Lam/CP)

With a new chief product officer and more proprietary fabric mills in the wings, Lululemon Athletica is working to get back on track after a few shaky months plagued by supply-chain issues. Tara Poseley, a former K-Mart and Gap executive, will fill the role previously occupied by Sheree Waterson, who stepped down from the post when it came to light in March that certain stock of Lululemon's classic yoga pants were see-through.

The Vancouver-based company recognized the pants debacle to be more than a public-relations problem. It sought to immediately overhaul the production of its premium athletic wear, and get an additional mill prepped for producing its signature luon material. The technical specifics and quality control required of Lululemon's luon producers has led to delays in getting inventory on the shelves. In a September conference call, company executives said fall stock had been delayed by three to four weeks, sparking concern as to whether the retailer would be ready for the holiday shopping season.

According to Canaccord Genuity analyst Camilo Lyon, though, the company is proceeding more quickly than anticipated to get an additional luon mill up and running. Suppliers have also been producing a new version of Lululemon's signature material, called "full-on luon"-a thicker, heavier fabric that should put any concerns about translucence to rest. However new complaints flared up on the company's Facebook page in October over sheerness and pilling with its premium-priced pants.

Uncertainty lingers too around CEO Christine Day's yet-to-be-named replacement. Her decision to step down, pending the naming of her successor, came in June. Lyon says the company has been vetting CEO candidates, but when it came down to details, at least two balked at making the permanent move to Vancouver. And so the headhunt continues.

"It seems like it's a pretty prolonged search," says Liz Dunn, an analyst with Macquarie Securities. "I do think that's a bit of a risk, because until we know who this person is, it's hard to know what kind of strategies they'll want to put in place."

Still, others believe it's best for Lululemon to take its time and find the right fit for the company, rather than risk any changes to the valued corporate culture built by Day and founder Chip Wilson. Says Lyon: "I'd much rather they get the right person, who's going to be there for 10 years, than adhere to an arbitrary Wall Street timeline."

Watch Behind the seams: Full on Luon TM fabric

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