* Louisiana sheriffs' fund to lead lawsuit over disclosures
* Canadian company faulted over quality control, discounts
By Jonathan Stempel
Oct 1 A Louisiana pension fund will lead U.S.
litigation accusing Lululemon Athletica Inc of
fraudulently hiding defects that caused yoga pants to become
nearly sheer, and concealing talks that led to the surprise
departure of its chief executive.
U.S. District Judge Katherine Forrest in Manhattan on
Tuesday said the Louisiana Sheriffs' Pension & Relief Fund,
which owned about $1.3 million of Lululemon stock, will handle
the litigation on behalf of shareholders.
Lululemon has long been known for making athletic clothing
that could withstand many years of wear and washes.
But trouble surfaced in March when the Vancouver, British
Columbia-based company recalled its top-selling item, women's
black yoga pants containing its proprietary Luon fabric, after
determining the pants were too sheer.
Less than three months later, Lululemon on June 10 announced
the departure of Chief Executive Christine Day. Its shares fell
17.5 percent the next day, wiping out $1.62 billion of market
value, Reuters data and a regulatory filing show.
Two lawsuits filed in Manhattan blamed the defective pants
on cost-cutting, and accused Lululemon, Day and Chairman Dennis
"Chip" Wilson of hiding the defects, using deep discounting to
boost market share, and concealing plans to replace Day.
Forrest combined the lawsuits and said the Louisiana fund
should lead the case because it had a larger financial stake
than the other plaintiff, Houssam Alkhoury of Natick,
Massachusetts, and was a "sophisticated institutional investor"
with experience leading similar lawsuits.
The Baton Rouge-based fund plans to seek class-action status
for shareholders between March 21, when full-year results were
announced, and June 10. It said it lost $116,000 on transactions
in that period. The fund's law firm is Bernstein Litowitz Berger
& Grossmann, a shareholder class-action specialist.
A lead plaintiff is entitled to direct litigation and
negotiate a settlement on behalf of other shareholders.
On Sept. 12, Lululemon reduced its forecast for fiscal 2013
profit and sales, citing delivery delays resulting from tighter
quality control. Day remains at the company's
helm while Lululemon searches for a successor.
The case is In re: Lululemon Securities Litigation, U.S.
District Court, Southern District of New York, No. 13-04596.