Yoga clothing manufacturer and retailer Lululemon (LULU) shares seems ready to bounce back, according to some. But a major basic problem behind a previous 43 percent drop from a 52-week high still appears to be active: antagonizing customers, the very people responsible for the company's success in the first place.
Lululemon has apparently tried to prevent customers from reselling the clothing online. Some customers told Business Insider that company representatives had contacted them after trying to sell Lululemon brand clothing on eBay. The company reportedly also admitted that it has blocked some customers from buying online if it saw a pattern of buying products and reselling them at a higher price -- an activity that's likely legal.
The maker of popular line of workout gear had seen its share price climb to a high of $82.50 by mid-2013, which meant it had shown some resilience. In March of last year, Lululemon had to recall 17 percent of its yoga pants because the nylon-and-lycra fabric blend had become so thin that the clothing turned transparent when someone bent over -- something that'll often happen during yoga exercises.
It wasn't the first product problem Lululemon had, some of which went back to 2007. Lululemon blamed a supplier, which countered that the products went through a certification process designed by Lululemon.
The company reformulated the fabric, which then started garnering complaints of piling, a consumer reaction one might expect for clothing that commanded upwards of $98 a pair. So, company founder Chip Wilson blamed women's fat thighs. He apologized, but the damage was done and he would ultimately resign in December.
His remarks were just another PR debacle for Lululemon last year. There were the allegations that it actively tried to put off plus-size consumers. The company would eventually admit that the parade of gaffes had hurt its results.
Now, just as Lululemon seemed ready to shrug off the mistakes and improve operations -- and the stock price -- come allegations of trying to control what people do with the clothing after they've purchased it. In the absence of an explicit licensing agreement -- like the one Monsanto (MON) uses with farmers who purchase its genetically modified seeds -- people have a right to buy a product and then resell it. This isn't a case where they're selling counterfeit goods.
Even with the increased optimism about the stock in some quarters, a Janney Montgomery Scott analyst downgraded Lululemon from buy to neutral at the end of January. The shares are under pressure for additional reasons, such as potential market saturation, competition from other big brands and a reduction in fourth-quarter expectations.
But antagonizing the people who are willing to spend so much for what you sell can't help.