Lululemon Sued Over Diversity Program, Launch of Leggings Line

Lululemon Athletica Inc. and it officers are facing a shareholder suit in federal court alleging that the company’s failure to adopt a workable diversity program and to timely launch a new line of leggings caused its stock price to plummet.

Shareholder James Wong alleges in a complaint filed Monday in the US District Court for the Southern District of New York that Lululemon announced in 2020 that it adopted a program called “Inclusion, Diversity, Equity, and Action” that would reflect the diversity of the communities it served. The program wasn’t structured to be successful and company employees continued to face discrimination, the suit says.

An article was published in the Business of Fashion in 2023 titled “At Lululemon, Being Black is ‘Off-Brand,’” accusing IDEA of protecting the company’s image, the complaint says. After the article was published, the company’s stock price lost $4.90, it says

The individual defendants also created issues with the company’s inventory allocation methods, the complaint says. The truth about the inventory issues emerged in March 2024 when the company announced that its growth in its Americas region was stagnant, it says.

When the inventory issues were made public, Lululemon’s stock price dropped from $478.84 to $403.19, the complaint says. In July 2024, when the company announced that inventory allocation problems would require delaying the launch of its Breezethrough leggings, the company’s stock dropped from $281.37 to $272.06 per share, it says. The next day, the stock price dropped to $247.32 per share, it says.

The shareholders’ derivative suit accuses the defendants of making false statements about the company’s diversity program and its inventory allocation issues in the press and in its annual reports to the Securities and Exchange Commission. It says the defendants committed various forms of securities fraud, breached their fiduciary duty, were unjustly enriched, and wasted corporate assets.

The complaint seeks an award of compensatory and punitive damages against the individual defendants, jointly and severally, an accounting from them, and interest. It also asks the court to order Lululemon to take the steps necessary to prevent similar behavior in the future.

Lululemon didn’t immediately respond to a request for comment.

Rosen Law Firm PA represents Wong.

The case is Wong v. McDonald, S.D.N.Y., No. 1:24-cv-08752, complaint filed 11/18/24.