Company News

UPDATE 2-Lululemon to remove health claims from fabrics

(Recasts with company complying with Competition Bureau order, stock close)

OTTAWA, Nov 16 (Reuters) - Trendy yoga wear retailer Lululemon Athletica LLL.TOLULU.O said on Friday it would comply with a Canadian government agency order to remove clothing labels that claim therapeutic benefits from fabrics said to contain seaweed.

“We are altering the labels on our VitaSea products in our Canadian stores, in cooperation with the Competition Bureau of Canada, to remove references to the therapeutic and performance attributes of the VitaSea technology,” the company said on Friday night.

The Competition Bureau, Canada’s anti-trust agency that also enforces regulations regarding unsubstantiated performance claims for textiles, said it was pleased that Lululemon chose to rectify the situation in a timely manner.

The Bureau said the Canadian company had made a number of unsubstantiated claims in labeling for its VitaSea clothing.

Questionable performance claims include that on contact with moisture the fabric would release minerals and vitamins which would keep skin firm and smooth, enhance blood supply to skin, and detoxify the skin, the Ottawa-based agency said.

Other unsubstantiated claims for VitaSea include that it activates cell metabolism, promotes skin cell regeneration, contains anti-viral or anti-bacterial properties, soothes skin rashes and reduces stress, the agency said.

The bureau will also ensure that Lululemon complies with the order to remove all references to the VitaSea technology from its Web site and any in-store advertising.

“In order to ensure the integrity of our product labeling, we are conducting a review of the therapeutic attributes described on all product hang tags,” Lululemon Chief Executive Robert Meers said in a statement.

Earlier on Friday Meers told Reuters that a New York Times report on lab tests contradicting Lululemon’s seaweed content claims has not hurt sales, but has been distracting.

The newspaper report, prompted by inquiries from an investor short-selling Lululemon shares, raised concerns about the company and sparked declines in its stock. By “shorting” a stock, an investor is betting it will fall.

“People want to trust us,” Meers said in an interview. “I feel good that there was a reaction. I think I’d feel worse if no one cared.”

Shares of the company see-sawed on Friday to close down 30 Canadian cents at C$40.50 on the Toronto Stock Exchange, but up 24 cents at $41.74 on Nasdaq.

Lululemon said lab tests conducted on Wednesday night in Hong Kong confirmed June tests that showed the VitaSea fabric contains fibers that match its clothing content labels. Lululemon had claimed the seaweed fiber releases amino acids, minerals and vitamins into the skin on contact with moisture.

The Vancouver, British Columbia-based company said SGS SA SGSN.VX, a testing and certification group based in Switzerland, runs tests on all its fabrics before each season.

Lululemon said it is offering an exchange on VitaSea products for any dissatisfied customers and now wants to focus on growth plans and the upcoming Christmas shopping season.

Germany’s Smartfiber AG, which developed the SeaCell fiber used in Lululemon’s VitaSea line, ran independent tests in December 2006, the clothier said. Those test confirmed the presence of vitamins, minerals and amino acids in the fabric used by Lululemon manufacturers. (Additional reporting by Robert Melnbardis in Montreal; Editing by Rob Wilson and Braden Reddall) ($1=$0.97 Canadian)