Lululemon’s timing not so sheer here

Chances are you’ve heard about Lululemon’s (LULU) yoga pants controversy that seems to be generating  more headlines than the banking crisis in Cyprus. Then again, it’s a lot easier to explain see-through yoga pants than why Russian oligarchs like to park their cash in Cyprus.

Lululemon, of course, is the upscale purveyor of yoga wear. As someone who manages to practice yoga in pants that cost significantly less than $100, I can’t speak to the pants’ attributes (or their sheerness since I tend to practice at less trendy places). But it’s been interesting to watch from the sidelines. Last night, this story about the company’s dispute with its Taiwanese supplier, was the most popular story on the WSJ’s site. And the stock has been falling over the past two days, ever since Lululemon put out a press release on Monday disclosing the problem.

So when I came across this 8-K that Lululemon filed late Tuesday, I naturally thought it would be a reiteration of the press release. Wrong. That 8-K hasn’t yet been filed. Instead, when I clicked on the link, I found an 8-K announcing enhancements to the company’s executive bonus program. Here’s the key sentence:

“The amendment increases the maximum performance level for each financial performance goal and for each individual performance goal under the Plan from 150% to 200%.”

That’s a fancy way of saying that top executives will see a sharp increase in their bonuses.

To be fair, the filing says the compensation committee made this decision on March 13, about five days before this latest controversy with the sheer pants came to light. But the timing still seems pretty questionable, especially in light of the company’s performance over the past year.

Even more curious is that back in 2011, Lululemon adopted a similar plan, which it filed as an exhibit to the 10-Q filed June 10, 2011. That plan, which called for a maximum of 150% was supposed to last for five years.

Given the spate of headlines and the decline in the stock, the timing seems curious at best and an open invitation to the plaintiff’s bar to start practicing something a bit more aggressive than yoga.