Lululemon stock drops, rebounds after report
CTV.ca News Staff
Published Wednesday, November 14, 2007 7:55PM EST
Lululemon Athletica Inc. shares went on a rollercoaster ride Wednesday after a U.S. newspaper report questioned the Vancouver-based clothing line's claim that some of its apparel is made with seaweed.
Early Wednesday, shares dropped by more than seven per cent to $37.88, before ending the day up 3.1 per cent, $42.80.
Lululemon Athletica Inc. shares took a hit Wednesday after a U.S. newspaper report questioned the Vancouver-based clothing line's claim that some of its apparel is made with seaweed.
By afternoon trading, the company's stock had fallen 20 cents, or 4.8 per cent, to $39.50. Earlier in the day, it had sunk as low as $37.88.
Lululemon shares had soared since the company went public last summer. But that changed after The New York Times reported some of the company's advertising claims "may not be true."
The company sells yoga-wear under the VitaSea brand, which claims to be partially made of seaweed.
Product promotion claims the seaweed "releases marine amino acids, minerals and vitamins into the skin upon contact with moisture."
The newspaper said it commissioned a laboratory test of a Lululemon shirt made of VitaSea and reviewed a similar test conducted by another lab.
The Times said both lab tests came to the same conclusion that, "there was no significant difference in mineral levels between the VitaSea fabric and cotton T-shirts."
The label on the Lululemon shirt tested by the newspaper said the shirt contained 70 per cent cotton, six per cent spandex and 24 per cent seaweed. A blue racer-back tank top, it was tested against a gray T-shirt made by U.S. clothing company J. Crew.
Lululemon executives said they did not actually test the clothing themselves but were relying on claims made by their supplier, according to BNN's Michael Kane.
When told about the findings, company founder and chief product designer Dennis Wilson told the newspaper he could not refute the New York Times' report.
"If you actually put it on and wear it, it is different from cotton," Wilson told the Times. "That's my only test of it.
The newspaper commissioned the test after an investor -- who is shorting the stock, betting it will fall -- provided the newspaper with the initial lab test.
With files from The Canadian Press