Yesterday after swim class Katie pointed at a large woman changing next to us and said:
"She has BIG underpants!"
I looked over and she did indeed have large underpants on. I just said: "Yes, she is wearing underpants. We all wear underpants."
Katie: "No mom. I said she has BIG UNDERPANTS!"
Ceci looks over now: "Those are BIG WHITE underpants!"
Now the whole row is snorting trying not make eye contact with the big white underpants or anyone else because we'll all lose it.
No more damage control can be done at this point. I just give the smile and shoulder shrug I've done many times.