Lawsuit Says Lululemon’s Mishandled DEI Efforts, Botched Leggings Launch, Led to Dropping Share Price
A Lululemon shareholder is accusing the activewear giant of several management failures that contributed to a falling share price.
In a lawsuit filed in the Southern District of New York on Monday, Lululemon shareholder James Wong alleged that shortcomings in the retailer’s diversity, equity and inclusion programs, as well as concealed inventory issues that led to a botched launch for a new line of leggings, significantly impacted the company’s share price.
In October of 2020, Lululemon launched an “Impact Agenda” that included a focus on the company’s “Inclusion, Diversity, Equity, and Action” (IDEA) efforts through 2025. The long-term strategy included a commitment to invest $75 million into wellbeing programs by 2025 and a goal to expand to full pay equity for its employees by 2022. But according to a recent article from Business of Fashion, which was cited in the lawsuit, Lululemon created culture that was “unwelcoming of Black people.”
“IDEA was not structured so as to meaningfully combat discrimination within Lululemon,” the lawsuit alleged. “And as a result, Lululemon employees continued to experience discriminatory treatment.”
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The article also alleged that Lululemon concealed broader inventory allocation issues, especially in the Americas region. Lululemon’s stock price fell from $478.84 to $403.19 within a day when these issues were revealed in March of 2024, the complaint noted. Eventually, more issues prompted Lululemon to pause the launch of its Breezethrough leggings in July 2024, which also negatively impacted the share price.
“As officers and/or directors of a publicly held company, the Individual Defendants had a duty to promptly disseminate accurate and truthful information regarding the Company’s operations, finances, financial condition, and present and future business prospects so that the market price of the Company’s stock would be based on truthful and accurate information,” the suit said.
FN reached out to Lululemon for a comment.
Lululemon in August reported mixed second-quarter results that missed Wall Street’s revenue expectations for the first time in over two years. The second quarter also saw the fumbled launch of the Breezethrough leggings, which was pulled shortly after introduction when customers complained about how they fit.
