Grace Fusillo-Lombardi was at a yoga class at her downtown Toronto gym about a month ago when she finally saw for herself why some Lululemon pants were making women blush.
"There was a woman in front of me and I could see right through," she says. "She was wearing a thong. And I immediately thought, that's what they're talking about."
Ms. Fusillo-Lombardi doesn't know whether the woman's yoga pants were from the batch recalled in the spring, or whether they were newer versions of Lululemon's trademark "Luon Pants," re-engineered to be less transparent though still drawing comments.
Ms. Fusillo-Lombardi and her 16-year-old daughter Alessandra were surprised to see such sheer pants after the recall and the widespread publicity.
Both are diehard fans of the Vancouver-based company, she said last week as she emerged from a Lululemon outlet at a popular Toronto mall, but they're more cautious now when they shop.
Some customers interviewed had no concerns after the restocking of Lululemon's shelves with newer pants, but others still do, and they've let the company know, based on the comments on the company's website.
It's yet another issue for the company, which is recovering from the initial setback and is trying to fill key positions, including that of chief executive officer after the resignation of Christine Day, a popular CEO who plans to leave when her replacement is found.
This latest issue was brought to light by the New York-based analyst Liz Dunn of Macquarie Capital, who scoured those comments – she wears the pants herself – and found that some customers are still complaining about "sheerness." Ms. Dunn warns that quality issues could "erode LULU's brand perception." Referring to the company by its U.S. stock symbol, she said that the majority of comments on Lululemon's website remain positive, and she's a fan herself, but is concerned about the persistence of complaints from some customers.
"We see a narrow window of opportunity for LULU to really fix quality," Ms. Dunn said in a report based on her reading of 597 reviews by shoppers. "Otherwise, customers may jump ship to competing brands."
A scan of those comments backs up Ms. Dunn's findings.
When the problem first arose, Lululemon yanked too-sheer pants off its shelves, tightened up quality testing and put its own employees in the factories for oversight, while explaining the issue to customers. Quality testing "has never been better than it is now," it says.
"The majority of feedback about the return of our black Luon bottoms has been positive and our Luon is meeting all of our updated quality standards," Lululemon says. "We're seeing a few negative comments online which may be because guests don't have the benefit of doing an in-store fit session with one of our educators to make sure the fit is right for them."
Some women still complain that their underwear is visible when they bend over, said Ms. Dunn, who has slashed her 12-month price target on Lululemon shares to $62 (U.S.) from $74.
Part of the issue appears to be the difference in models.
"The company has told customers that certain products (like those made for running) are not made for bending and if you bend, they may be sheer," Ms. Dunn said.
"Other products (like those made for yoga) are not made for sweating and if you sweat heavily, they may not wick as expected. If the average LULU customer is like most women I know, they grab a pair of pants/crops and go."
Other analysts have a brighter outlook.
Camilo Lyon of Canaccord Genuity, for example, has a price target of $87 on the stock, saying that "we continue to fundamentally believe the demand for the brand has not ebbed and the growth opportunity both domestically and internationally is robust."
Christian Buss of Credit Suisse agrees that "the product quality issues are short-term in nature and they seem to be addressing them adequately."
Word from the yoga mat is mixed.
"When I first started buying them in '08 they were pretty opaque," said Carolyn Beauchesn, a self-confessed Lululemon addict who writes a popular blog about the brand from Orange, Calif. "You could do deep squats and your underwear wouldn't show through."
Lululemon is one of those rare brands that have been able to strike an emotional chord with customers. So it's likely most will give Lululemon the benefit of the doubt while it works on the issue, said Maureen Atkinson, senior partner for retail consulting firm J.C. Williams Group.
"It's probably not fair to say it's cultish, but that's probably about as close as you can get to what it means to the people who shop there," she said.
Of course, Lululemon is juggling other issues at the same time amid ongoing concerns over Ms. Day's departure.
"Part of the long-term growth story is related to their international expansion," said Mr. Buss. "Christine Day had a lot of credibility in trying to build a global brand out of Lululemon. Losing that expertise adds risk to that growth profile, which adds risk to the long-term value of the business. "