John Ransom
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High-end yoga retailer Lululemon has downgraded its outlook for 2013 based on supply problems after a recall of too sheer yoga pants hit the company in June. 

The recall has already shaken up the top brass in the company. The board is currently looking for a new CEO. The old CEO will leave as soon as the new CEO is hired.

In the meantime the rapidly growing company is taking a breather in profit expansion.

Reports Reuters:

For the 2013 fiscal year, which ends in February, Lululemon expects net revenue of $1.625 billion to $1.635 billion, down from its previous forecast of $1.645 billion to $1.665 billion.

The company trimmed its forecast for full-year earnings per share to $1.94 to $1.97 from the previous $1.96 to $2.01.

Lululemon forecast third-quarter net revenue of $370 million to $375 million, and diluted earnings per share of 39 cents to 41 cents.

The company has traded down from a high in June, With the stock price almost literally falling off a cliff has seen in the chart below.

LULU Chart

LULU data by YCharts

But in some respects I think people have this whole too shear yoga pants thing incorrect.

I checked the company's website and the wonder underpants retail for between $82 and $92.

On a hunch I checked eBay and found some wonder underpants retailing for $130. Given the fact that the young lady modeling it was practically wearing a trenchcoat I'm guessing that they're very sheer.

That's between $38 and $48 premium for too sheer yoga pants.

Perhaps the company ought to be dusting off the pants in the recall bin and selling those too.

On Ransom Notes Radio today, during Stocks in the News, we put a "buy" on Lululemon based on the supply disruptions and the downward price action:


Lululemon’s stock price is on the low end of a medium-term trading range between $62 and $82.  Traders and aggressive growth investors should jump in here.  Everyone else should be cautious with this volatile stock.

You can check out more Stocks in the News here.

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John Ransom

John Ransom is the Finance Editor for Townhall Finance.