Lululemon's failure to communicateNovember 8, 2013: 4:46 PM ET
With a wild-card founder and complex offerings, the company struggles to win over the crop of haters that arose after last spring's product recall.
FORTUNE -- Thursday, Lululemon founder and chairman Chip Wilson blamed his company's customers for the retailer's product issues. "Quite frankly some women's bodies just actually don't work for it," he said on Bloomberg TV, referring to sheerness and pilling in Lululemon's famed yoga pants.
Lululemon (LULU) survived the springtime recall of a massive batch of its black Luon stretchy pants, but the mishap left the Canadian brand bruised. The stock's down almost 10% this year and CEO Christine Day, who announced her resignation in June, is waiting for a new chief to be named so she can leave the company. (Barclays analyst Robert Drbul asked Day about her future career plans during Lululemon's Q2 earnings call. She remarked: "If I could get an end date, I'd be happier to answer that question.")
Full-on Luon, a new generation of pants that took two years to develop, launched in July to positive reviews. The company hoped the new line would remind guests of its ability to make great products -- and customers hoped their derrieres would once again be covered. Yet Lululemon is now facing another round of product complaints -- and Wilson's television comments miffed many women who were already irritated by the company's missteps over the last year.
Wilson's known for his "Chip-isms," a term used to describe the founder's unconventional and sometimes uncouth behavior. When Fortune headed to Lululemon's Vancouver headquarters in July, the company made it clear that, despite his role as chairman, Wilson is not an official company spokesperson. Smartly so, as this isn't the first time his words sparked controversy.
In 2009, he penned an essay about Lululemon's success. The invention of the pill, he wrote, led to the era of the divorced "Power Woman," who birthed the "Super Girl." Influenced by Saturday morning cartoons, these girls grew into well-educated, athletic, and fashionable women who practiced yoga to deal with stress. From time to time the piece resurfaces, and the company's critics often use it to peg Wilson as sexist. (Two versions of the post can be read on the company website and in Wilson's e-book, 40,000 Days and Then You're Dead.)
His rationale behind the naming of his company also rings offensive. In his book, Wilson explains that the word Lululemon has no real meaning, but instead stems from his desire to have a company name containing as many Ls as possible. He previously sold Homeless Skateboards, a division of his first company Westbeach, to a Japanese buyer for a large sum and thought the brand's appeal stemmed from the "L" in the name – the "L" sound doesn't exist in Japanese, he says, which emphasized its Western roots. Wilson was hopeful that the three Ls in Lululemon would one day net him three times as much as the Westbeach sale.
Senior management's relationship with Wilson is complex. While Lululemon employees respect and somewhat worship the founder's product genius, there's a definite desire to put public relations space between the company and the man who created it. At the same time, Lululemon's employees often agree with Wilson's exclusionary comments, albeit more subtly. Their products are not for everyone, and they're okay with that.
In July, SVP of design and creation Deanne Schweitzer told Fortune that Lululemon's size range doesn't mesh with North American standards. The company purposely stays away from vanity sizing and recommends that guests spend time in the store trying on Lululemon's offerings. It wants its pants to be the denim of the yoga world; the styles are extremely dependent on customers' body types and their athletic activities. "If your dress size is a four, it doesn't mean you're a four at Lululemon," Schweitzer told Fortune. Even within the company's size chart, thin and tight fabrics may require a bigger size than thicker ones.
MORE: Do you speak Lululemon?
Schweitzer's team designs for a determined muse (Ocean is a fit, educated, and affluent 32-year-old woman married to 34-year-old Duke, who inspires the men's line) and she wants Lululemon's clothing to be aspirational; you'll never see her designing for a 55-year-old soccer mom. That doesn't mean soccer moms can't wear the products. It just means the company doesn't have them in mind during the creation process.
Lululemon's future success lies heavily on better communication. Schweitzer is confident in her design approach, and the production team believes that all serious product bugs have been sorted. Lululemon's educators -- salespeople, for non-Lululemon lingo speakers -- are tasked with informing store guests about products' fabric and use specifics. Wilson constantly talks about Lululemon as a technology company. Its clothing is highly technical, from the patterns to the fabrics, and activity-specific. The fact that customers are still complaining about sheerness -- and the company's reiteration that it's just a sizing issue -- points to a disconnect between the buyer and her knowledge of the offerings. And that lack of education is Lululemon's fault, not that of its customers.
Without Day as the face of the company, Lululemon will struggle to control Wilson and his unpredictable mouth from smearing its image. Better education will decrease product complaints, but a brand associated with a polarizing, unfiltered leader can quickly lose its appeal. Just ask Abercrombie and Fitch.