Lululemon: A Sheer Debacle in Risk Management

Lululemon: A Sheer Debacle in Risk Management

David F. Larcker, Sarah M. Larcker, Brian Tayan
Stanford Closer Look Series. June

In March 2013, Lululemon Athletica removed its inventory of women’s black yoga pants from its stores because recent shipments of the product were “too sheer.”

For a company reliant on a reputation for quality, the news was devastating. Worse, the recall set off a series of PR related disasters that were largely of the company’s own making.

We examine these events in greater detail, and ask:

  • Why are companies so ill-prepared to manage risk?
  • How can companies develop a reliable way to track and respond to risk?
  • How can companies better manage social media risk?
  • When do risk-related matters become a board-level issue?