LULU Stock Declines: Texas Launches Probe Over Potential Presence Of Harmful Chemicals In Its Activewear

• The development comes as Lululemon struggles to revive sales while searching for a new chief executive and facing mounting pressure from its founder.
• Texas’ Attorney General is investigating whether the company misled consumers about the safety, quality, and health impacts of its products.
• LULU stock is down 22% year to date, and retail sentiment on Stocktwits has remained in the ‘bearish’ zone for a week.

Lululemon Athletica, Inc. shares were marginally lower after a volatile start in premarket trading on Tuesday, following Texas Attorney General Ken Paxton's investigation into the athleisure brand ​over the potential presence of "forever chemicals" in its activewear.

The probe will examine whether the company’s athletic apparel contains PFAS (per- ​and polyfluoroalkyl substances). PFAS are linked to health risks, including endocrine disruption, infertility, certain cancers, and other issues.

The AG’s office has issued a Civil Investigative Demand (CID) to the company as part of the investigation into whether it misled consumers about the safety, quality, and health impacts of its products.

To be sure, there is no comprehensive federal ban on PFAS in consumer products like apparel or textiles in the U.S. or Texas, although many states have product-specific bans or required labeling. 

“Americans should not have to worry if they are being deceived when trying to make healthy choices for themselves and their families,” Paxton said, according to a statement from his office. 

“I will not allow any corporation to sell harmful, toxic materials to consumers at a premium price under the guise of wellness and sustainability. If Lululemon has violated Texas law, it will be held accountable.”

Another Woe For LULU

The development comes as Lululemon struggles to revive sales while searching for a new chief executive and facing mounting pressure from its founder, who has criticized the management for months and is pushing for sweeping changes.

Since last October, Lululemon founder Chip Wilson, a major shareholder, has been on a campaign against the company’s board, accusing it of weak oversight and slow engagement as he continues to push for sweeping changes.

The firm, whose market capitalization has declined to nearly $20 billion from its peak of $66.5 billion in December 2023, is currently led on an interim basis by its finance chief and chief commercial officer, following Calvin McDonald's stepping down as CEO earlier this year.

Retail View On LULU Remain Dull 

On Stocktwits, the retail sentiment for LULU remained ‘bearish,’ unchanged over the past seven days, with ‘extremely low’ message volume.

A trader remarked: “LULU Chip’s involvement is only slowing down the search for a new CEO. Lululemon’s management seems unlikely to take his input seriously, but the ongoing conflict is clearly contributing to the delay.”

Year to date, LULU stock has declined 22%.

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