Lululemon Sued for Fraud Over Sheer Yoga Pants, CEO Exit

July 6
7:19 AM 2013

The CEO of Lululemon Athletica Inc. suddenly decided to resign from her position. Three weeks after, the district court in Manhattan received a lawsuit from one of the company's shareholders.

The lawsuit was filed by Houssam Alkhoury, who owns 7,500 Lululemon shares. The lawsuit charged Lululemon's CEO Christine Day and Chairman Dennis "Chip" Wilson of defrauding shareholders with sheer yoga pants. The defective yoga pants led to a costly recall and the sudden resignation of Day, who stated the reason to be personal.

The company was known for selling athletic clothes that would withstand the wear and tear of many years of usage. The said yoga pants departed from this standard for being too sheer. The mentioned yoga pants contained the company's proprietary Luon fabric.

In effect, the Vancouver, British Columbia-based company had to conduct a costly recall. The reduction in profits caused by the recall could be up to Can$40 million.

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