Assessing the true cost of Lululemon’s recall of its hugely popular black Luon pants back in March could take some time yet.

The write-off in the company’s first quarter results announcement was US$17.5m, slightly higher than first envisaged, and leading to an almost flat net profit figure of $47.3m for the quarter, despite a 21% revenue surge.

The revenue shortfall caused by the recall could be as high as $67m, although the company expects that figure to reduce in the second quarter as some Luon product returns to the shelves more quickly than originally thought.

However, the financial impact will continue to be felt for some time yet: CFO John Currie expects gross margin to be below the company’s long-term target of 55% for the full fiscal year, rising from 49.4% in the first quarter to the low 50s in the third quarter and only reaching the mid-50s in the fourth.

The temporary suspension of production linked to the Luon recall has had an adverse impact on autumn production, leading to increased air freight costs in the second half.

And Currie told analysts: “I wouldn’t say we would be completely back to our ideal inventory level by the end of Q2 – that’s a little bit too quick.

“But certainly by Q3, we’ll clear that again – this isn’t a huge backlog and we have the outlets to handle it, and I think we’ll be back in a balanced inventory position by Q3.”

Additional costs will be linked to the necessary tightening of quality control processes, including the recruitment of senior executives: Jennifer Battersby, formerly of Mast, is working with Lululemon as a consultant for five months “to enhance and improve our product processes”, and the company is looking for a senior supply chain/logistic executive and someone to fill an executive vice president product role.

“While we certainly understood the importance of quality control and running a tight sourcing operation, we’re working on upgrading our infrastructure and control,” said company CEO Christine Day.

“The silver lining to this crisis was a big leap forward in our transition to owning our own technical standards and expertise.”

Lululemon, of course, is now also looking for a new CEO, with Day announcing her decision to leave once a successor can be appointed.

Asked by analysts about the reason for her departure, she was coy, saying: “Ok, this was a personal decision of mine, and look it’s never a perfect time to leave a company that you love.

“I’ve had a great run at Lululemon over the past five-and-a-half years and I’m really proud of what the team and I have accomplished.”

But others were less reticent: Howard Tubin, analyst with RBC Capital Markets, said in a note: “We assume Day’s pending departure is in some way related to the sheer pant issue.

“Ms Day’s departure, along with the recent departure of the chief product officer [Sheree Waterson], continues to bring a new level of uncertainty to the Lulu story.”

Lululemon’s black Luon pants – withdrawn because of a fabric sheerness issue back in March – only made a return to stores in early June, meaning that an item responsible for 17% of the company’s revenues had been absent from the market for about 90 days.

Nor is this the first quality control issue for the fast-growing company: certain swim colours in spring 2012 were shipped with sheerness problems, and a line of light-coloured pants on sale earlier this year carried a disclaimer on potential sheerness issues.

In the meantime, Lululemon continues its international expansion, opening two new showrooms in London recently, as well as outlets in Berlin and Singapore.

The company expects to have three showrooms in China by year-end, and has recently launched its e-commerce website in New Zealand.

Day and her successor will be hoping that Lululemon soon starts to make headlines for those reasons, and not because of scandals related to product quality.

But, to judge from Day’s comments to analysts yesterday (10 June), Lululemon is unlikely to change its risk-taking philosophy: “Taking risks means we’ll make a few mistakes along the way, but it’s part of our DNA and has been a driving force behind our success to date,” she said.