UPDATE 1-Lululemon names new CEO; founder Chip Wilson to step down

(Corrects name to "Laurent" from "Lauren" in paragraph 1)

By Ashutosh Pandey

Dec 10 (Reuters) - Yoga-wear retailer Lululemon Athletica Inc, reeling from an embarrassing recall of see-through pants, named Laurent Potdevin as chief executive and said founder Chip Wilson would step down as non-executive chairman.

Potdevin replaces Christine Day, who said in June that she would leave the company once a replacement was found.

Day was behind Lulu's blistering growth and its transition from a niche player to a major retailing force.

Day surprised investors with her decision to quit, which followed the March recall of the see-through black pants. The recall also led to the departure of its chief product officer.

Lululemon was hit with a U.S. lawsuit in July that accused it of defrauding shareholders by hiding defects in the pants and concealing talks that led to the sudden departure of Day.

The company, due to announce third-quarter results on Thursday, trimmed its forecast for full-year sales and profit in September.

Lululemon's shares, which have fallen about 15 percent since Day announced her intention to quit, were up 1.6 percent before the bell on Tuesday.

Potdevin, who takes over in January, was most recently president at retailer TOMS Shoes, which is known for matching every pair of shoes sold with a pair given to poor children.

Prior to TOMS, he was CEO of Burton Snowboards.

Potdevin's immediate challenge will be to deal with the supply chain problems that caused the multimillion-dollar recall. He will also need a strategy to fend off rising competition from retailers including Under Armour Inc, Nike Inc and Gap Inc and its Athleta line.

WILSON STEPS DOWN

Wilson, who founded Lululemon in 1998 and owns about 9 percent of the company, will step down as non-executive chairman prior to the company's annual meeting in June. Wilson will retain a seat on the board.

Michael Casey, a former Starbucks executive and lead director of Lululemon's board for the past six years, will take over as chairman.

Wilson is known to court controversy. He caused a furor last month when he said Lululemon products were wrong for certain body shapes.

In the past, Wilson said he chose the name "Lululemon" because L is not in the Japanese vocabulary. "It's funny to watch them try to say it," he said in a 2004 profile in the National Post Business magazine.

Lululemon shares closed at $70.34 on Monday on the Nasdaq. (Reporting by Rohit T. K. and Chris Peters in Bangalore; Editing by Supriya Kurane and Saumyadeb Chakrabarty)