| NEW YORK
NEW YORK Feb 19 Lululemon Athletica Inc
says its nearly year-long struggle with bad publicity
linked to slowing growth and a messy product recall did not
reflect any corporate intent to defraud shareholders, and that
an expanded lawsuit suggesting otherwise should be thrown out of
In a filing on Tuesday night in the U.S. District Court in
Manhattan, the Canadian yoga wear retailer said it promptly
addressed quality control problems as they became apparent, and
updated investors in real time about the impact.
It acknowledged that comments in November by founder and
Chairman Dennis "Chip" Wilson that some women's body shapes
"just actually don't work" with Lululemon yoga pants prompted
much negative press.
But it said none of this meant it owes shareholders money.
"While all of this makes for interesting reading," the
company said, "it does not constitute securities fraud."
Lululemon is seeking to dismiss an amended lawsuit accusing
it of misleading and defrauding shareholders between Sept. 7,
2012 and Jan. 10, 2014, just before shares of the company fell
to a two-year low after the company issued its second lowered
earnings forecast in a month.
Hannah Ross, a partner at Bernstein Litowitz Berger &
Grossmann, which represents investors led by the Louisiana
Sheriffs' Pension & Relief Fund, declined to comment on the
filing. The fund is based in Baton Rouge, Louisiana.
Shareholders accused Lululemon of hiding defects in its
black luon pants, which were recalled; concealing its inability
to address quality shortfalls; using deep discounting to boost
market share, and concealing plans to replace Christine Day as
Last month, Day stepped aside and was replaced as chief
executive by former TOMS Shoes president Laurent Potdevin.
Wilson is stepping down this year as non-executive chairman. Day
and Wilson are defendants in the shareholder lawsuit.
Wilson, in a separate filing on Tuesday, said he had last
held a management role at Lululemon in January 2012, and that
allegations that he "dipped in and out of daily affairs" did not
show he knew about, or was complicit in, any fraud.
He also said his alleged sales of $184 million of Lululemon
stock during the class period was not fraudulent, as the lawsuit
contended, because they were made under a prearranged trading
plan and not suspicious in timing or quantity.
Last month, after Lululemon issued the second reduced
earnings forecast, Chief Financial Officer John Currie called
the quality issues "a real wake-up call" and admitted that 2013
was a tough year.
"You always hear the phrase that any PR is good PR. What we
learned is that's not always the case," he said. "We're taking
it seriously. Like, we get it."
The case is In re: Lululemon Securities Litigation, U.S.
District Court, Southern District of New York, No. 13-04596.