Lululemon announced its Q2 earnings today and it came well ahead of expectations, but things haven't been totally perfect for the company lately.
Oppenheimer analyst Pamela Quintiliano brought up a quality problem that popped up earlier this year.
What happened?
Lululemon tried to push the "color limit" too far. That is, one of its bright neon colors — Paris Pink — had a problem with bleeding. At the time, it sparked quite the controversy among Lululemon customers.
Here's what CEO Christine Day had to say about it on the company's Q2 earnings call:
"Primarily for us it was the bright neons which are very difficult to put on fabric and we pushed the color limit pretty intently. So, we did have bleeding with Paris Pink and a couple of small isolated issues which were very hard pressed to track down in a couple of other colors that were also bright neons that came in the second quarter.
So, because we want to strategically continue to push the envelope with bright colors, we did bring in a color expert who has done an amazing and we've learned a lot of great new tricks from him. So, we're actually very excited about even new capabilities.
So, the silver lining in having an issue with Paris Pink was that it created actually more opportunity for us and so by changing some simple rinse agents and a couple of others things that we've worked on with the manufacturers in the mills, we feel very comfortable now with the product and being able to do our strategic intent, which is push colors and maintain quality."
Day said that it was "not a material event from a pure financial perspective," but it did give Lululemon a chance to work on how it communicates with its customers. The customer base was truly worried about what was going on — especially regarding health concerns.
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