Lululemon's Sizes Do Not Fit All

Lululemon Athletica suffered a public relations disaster earlier this year. It had to recall some black yoga pants that turned out to be sheer in the posterior -- exactly the area many Lululemon fans claim the yoga retailers' pants improved.

Maybe some investors don't know too much about fashion, but it's easy to see why that might be a seriously bad scene for trust. It was also easily the butt of jokes, and I'm sure it wasn't amusing for anyone who actually bought the defective pants.

One set of shareholders has recently filed a class action lawsuit against the retailer, making particularly damning claims. They contend the company didn't disclose the defective pants, and that the disaster happened because management was trying to reduce costs and boost profit margins despite decreased quality -- a terrible business move. From a high-end yoga retailer, that move could leave lasting damage to the brand, and also implies the company was scrambling to raise its profitability.

Around the same time, longtime CEO Christine Day's resigned. CEO resignations can theoretically be good news for struggling companies in some cases, but in this one, Day had steered the company through quite a successful run.

Now, Lululemon's got a whole other PR issue to contend with. It's come to more widespread knowledge that the yoga retailer's merchandise selection doesn't stretch beyond size 12. In other words, it's targeting women of certain smaller sizes and leaving many others searching elsewhere for active clothing. It's probably also leaving many of those frustrated potential shoppers insulted, too.

A catty cult?
I've had my moments in which I wasn't quite convinced that super-pricy yoga pants made sense (shouldn't sweats do the trick?). Obviously, though, given Lululemon's success, many women are willing to pay a pretty penny for yoga attire, particularly if it makes certain body parts look good.

True, companies have every right to choose a target demographic. Some stores cater only to plus-sized women. Some target teens, and some look to lure baby boomers. Still, there's a fine line between demographic aims and insulting misses.

Size is a sensitive subject these days. Everybody knows that slender and occasionally disturbingly skinny has defined "beautiful" for quite some time now, and many believe it's mean and unfair.

A company that equates "size" and "fitness" related to an activity meant to be healthy, fit, positive and therefore good for everyone is basically implying that some don't deserve to be part of the skinny-girl club, at least with Lululemon's cabal.

Sizing up the others
So how are rivals handling yoga and fitness clothing? They're doing a better job than the cult-like Lululemon, as it turns out.

Gap's Athleta website lacks the cultish posturing, and its size chart illustrates that it has yoga and other fitness attire for sizes 0 through 20. In fact, its advice is practical: "We're dedicated to giving you a product that DOES MORE than just look good. Enhance your performance by choosing the right fit, fabric, and features so you can take your game to the next level."

Another rival, VF's Lucy activewear, includes sizes 00 through 18. Yet another, prAna, offers a narrower size chart, but its choices still reach size 16.

Here's another reason Lululemon's behind the curve. There's an increasing push for fashion to acknowledge that being a size 12 or over isn't something to be ashamed of. More consumer brands are realizing that "normal" or plus-sized women are beautiful, too. H&M recently used size 12 model Jennie Runk in a plus-size swimwear ad, which displayed a beautiful, curvy woman in a bathing suit. The average American woman is a size 14, in fact. Women come in all shapes and sizes.

This stock is not a beautiful investment
Beauty is in the eye of the beholder, there are many forms of "beautiful," and, most of all, pretty is as pretty does. It's sad to think that some people still have to be convinced that plus-sized women are just as attractive as thin ones. At different times in history, curves and heavier weights were considered incredibly attractive.

For example, Marilyn Monroe was no waif. She is still one of the most popular icons of beauty, yet still the definition of beauty has emphasized thin.

The ridiculous part of this from an investing standpoint is that if the average American woman indeed wears a size 14, Lululemon is actually shutting out a significant portion of the market. If more women shun its stores because of budgetary constraints or even the sizing controversy, and other women can't find any clothing there that fits, this stock is even more overvalued than one might think.

Lululemon's forward price-to-earnings ratio is a hefty 27, compared with Gap's 14 and VF's 16. Although neither of those companies is an apple-to-apples comparison, since both have many brands and concepts under their umbrellas, the diversity also makes them more than one-trick ponies.

Gap and VF may not have the most torrid growth in the world in the last 12 months, but both have displayed solid growth in sales and profits. VF's profitability is particularly impressive. They're also arguably more stable than Lululemon on many levels. Gap's not always the hippest game in town, but it's a stable company with recognizable concepts, and VF has incredibly strong brands including Timberland, The North Face, Smart Wool, and many more.

We're learning about some less attractive factors regarding Lululemon, as a retailer and as an investment. Lululemon leaves some women out, so maybe investors should leave Lululemon alone.

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The article Lululemon's Sizes Do Not Fit All originally appeared on Fool.com.

Alyce Lomax has no position in any stocks mentioned. The Motley Fool recommends lululemon athletica. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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