Revenue increased 18% to $2.2 billion
Comparable sales increased 11%, or increased 13% on a constant
dollar basis Diluted EPS of $2.68
lululemon athletica inc. (NASDAQ:LULU) today announced financial
results for the second quarter of fiscal 2023.
Calvin McDonald, Chief Executive Officer, stated: "Our Q2
results highlight the ongoing strength of the business amid a
dynamic operating environment. I am proud of how our teams continue
to deliver on our vision and offer an exciting pipeline of new
products and experiences to our guests around the world. Our
continued ability to gain market share and bring new customers into
the brand illustrates the significant runway ahead for
lululemon."
The adjusted non-GAAP financial measures below exclude the gain
on the sale of an administrative office building in 2022 and the
related tax effects.
For the second quarter of 2023, compared to the second quarter
of 2022:
- Net revenue increased 18% to $2.2 billion, or increased 20% on
a constant dollar basis.
- Net revenue increased 11% in North America, and increased 52%
internationally.
- Total comparable sales increased 11%, or 13% on a constant
dollar basis.
- Comparable store sales increased 7%, or 9% on a constant dollar
basis.
- Direct to consumer net revenue increased 15%, or 17% on a
constant dollar basis.
- Direct to consumer net revenue represented 40% of total net
revenue compared to 42% for the second quarter of 2022.
- Gross profit increased 23% to $1.3 billion and gross margin
increased 230 basis points to 58.8%.
- Income from operations increased 19% to $479.3 million.
Adjusted income from operations increased 23%.
- Operating margin increased 20 basis points to 21.7%. Adjusted
operating margin increased 80 basis points.
- Income tax expense increased 30% to $145.0 million. The
effective tax rate for the second quarter of 2023 was 29.8%
compared to 27.9% for the second quarter of 2022. The adjusted
effective tax rate was 28.2% for the second quarter of 2022.
- Diluted earnings per share were $2.68 compared to $2.26 in the
second quarter of 2022. Adjusted diluted earnings per share were
$2.20 in the second quarter of 2022.
- The Company repurchased 0.5 million shares of its own common
stock at an average price of $370.99 per share for a cost of $191.7
million.
- The Company opened 10 net new company-operated stores during
the second quarter, ending with 672 stores.
Meghan Frank, Chief Financial Officer, stated: "Our performance
remained strong in Q2 as both revenue and EPS exceeded our
expectations. Our ongoing momentum is a reflection of our portfolio
approach to growth, differentiated business model, and innovative
product assortment. We are excited about our opportunities in the
second half of the year and look forward to continue delivering on
our Power of Three ×2 growth plan."
Balance sheet highlights
The Company ended the second quarter of 2023 with $1.1 billion
in cash and cash equivalents and the capacity under its committed
revolving credit facility was $393.6 million.
Inventories at the end of the second quarter of 2023 increased
14% to $1.7 billion compared to $1.5 billion at the end of the
second quarter of 2022.
2023 Outlook
For the third quarter of 2023, the Company expects net revenue
to be in the range of $2.165 billion to $2.190 billion,
representing growth of 17% to 18%. Diluted earnings per share are
expected to be in the range of $2.23 to $2.28 for the quarter. This
assumes a tax rate of approximately 30.5%.
For 2023, the Company expects net revenue to be in the range of
$9.510 billion to $9.570 billion, representing growth of 17% to
18%. Diluted earnings per share are expected to be in the range of
$12.02 to $12.17 for the year. This assumes a tax rate of
approximately 30%.
The guidance does not reflect potential future repurchases of
the Company's shares.
The guidance and outlook forward-looking statements made in this
press release are based on management's expectations as of the date
of this press release and does not incorporate future unknown
impacts, including macroeconomic trends. The Company undertakes no
duty to update or to continue to provide information with respect
to any forward-looking statements or risk factors, whether as a
result of new information or future events or circumstances or
otherwise. Actual results and the timing of events could differ
materially from those anticipated in these forward-looking
statements as a result of risks and uncertainties, including those
stated below.
Power of Three ×2
The Company's Power of Three ×2 growth plan calls for a doubling
of the business from 2021 net revenue of $6.25 billion to $12.5
billion by 2026. The key pillars of the plan are product
innovation, guest experience, and market expansion and the growth
strategy includes a plan to double men's, double direct to
consumer, and quadruple international net revenue relative to
2021.
Conference Call Information
A conference call to discuss second quarter results is scheduled
for today, August 31, 2023, at 4:30 p.m. Eastern time. Those
interested in participating in the call are invited to dial
1-800-319-4610 or 1-604-638-5340, if calling internationally,
approximately 10 minutes prior to the start of the call. A live
webcast of the conference call will be available online at:
https://corporate.lululemon.com/investors/news-and-events/events-and-presentations.
A replay will be made available online approximately two hours
following the live call for a period of 30 days.
About lululemon athletica inc.
lululemon athletica inc. (NASDAQ:LULU) is a technical athletic
apparel, footwear, and accessories company for yoga, running,
training, and most other activities, creating transformational
products and experiences that build meaningful connections,
unlocking greater possibility and wellbeing for all. Setting the
bar in innovation of fabrics and functional designs, lululemon
works with yogis and athletes in local communities around the world
for continuous research and product feedback. For more information,
visit lululemon.com.
Non-GAAP Financial Measures
Constant dollar changes and adjusted financial results are
non-GAAP financial measures. A constant dollar basis assumes the
average foreign currency exchange rates for the period remained
constant with the average foreign currency exchange rates for the
same period of the prior year. The Company provides constant dollar
changes in its results to help investors understand the underlying
growth rate of net revenue excluding the impact of changes in
foreign currency exchange rates.
Adjusted income from operations, operating margin, income tax
expense, effective tax rates, net income, and diluted earnings per
share exclude the gain on disposal of assets for the sale of an
administrative office building and its related income tax effects
in 2022.
The Company believes these adjusted financial measures are
useful to investors as they provide supplemental information that
enable evaluation of the underlying trend in its operating
performance, and enable a comparison to its historical financial
information. Further, due to the finite and discrete nature of this
item, it does not consider it to be a disposal gain that is
expected to arise in the normal course of its operations.
Management uses these adjusted financial measures and constant
currency metrics internally when reviewing and assessing financial
performance.
The presentation of this financial information is not intended
to be considered in isolation or as a substitute for, or with
greater prominence to, the financial information prepared and
presented in accordance with GAAP. For more information on these
non-GAAP financial measures, please see the section captioned
"Reconciliation of Non-GAAP Financial Measures" included in the
accompanying financial tables, which includes more detail on the
GAAP financial measure that is most directly comparable to each
non-GAAP financial measure, and the related reconciliations between
these financial measures.
Forward-Looking Statements:
This press release includes estimates, projections, statements
relating to the Company's business plans, objectives, and expected
operating results that are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. In many cases, you can identify
forward-looking statements by terms such as "may," "will,"
"should," "expects," "plans," "anticipates," "outlook," "believes,"
"intends," "estimates," "predicts," "potential" or the negative of
these terms or other comparable terminology. These forward-looking
statements also include the Company's guidance and outlook
statements. These statements are based on management's current
expectations but they involve a number of risks and uncertainties.
Actual results and the timing of events could differ materially
from those anticipated in the forward-looking statements as a
result of risks and uncertainties, which include, without
limitation: the Company's ability to maintain the value and
reputation of its brand; changes in consumer shopping preferences
and shifts in distribution channels; the acceptability of its
products to guests; its highly competitive market and increasing
competition; increasing costs and decreasing selling prices; its
ability to anticipate consumer preferences and successfully develop
and introduce new, innovative and updated products; its ability to
accurately forecast guest demand for its products; its ability to
expand in light of its limited operating experience and limited
brand recognition in new international markets and new product
categories; its ability to manage its growth and the increased
complexity of its business effectively; its ability to successfully
open new store locations in a timely manner; seasonality;
disruptions of its supply chain; its reliance on a relatively small
number of vendors to supply and manufacture a significant portion
of its products; suppliers or manufacturers not complying with its
Vendor Code of Ethics or applicable laws; its ability to deliver
its products to the market and to meet guest expectations if it has
problems with its distribution system; increasing labor costs and
other factors associated with the production of its products in
South Asia and South East Asia; its ability to safeguard against
security breaches with respect to its technology systems; its
compliance with privacy and data protection laws; any material
disruption of its information systems; its ability to have
technology-based systems function effectively and grow its
e-commerce business globally; climate change, and related
legislative and regulatory responses; increased scrutiny regarding
its environmental, social, and governance, or sustainability
responsibilities; an economic recession, depression, or downturn or
economic uncertainty in its key markets; global or regional health
events such as the current COVID-19 pandemic and related
government, private sector, and individual consumer responsive
actions; global economic and political conditions; its ability to
source and sell its merchandise profitably or at all if new trade
restrictions are imposed or existing trade restrictions become more
burdensome; changes in tax laws or unanticipated tax liabilities;
its ability to comply with trade and other regulations;
fluctuations in foreign currency exchange rates; imitation by its
competitors; its ability to protect its intellectual property
rights; conflicting trademarks and patents and the prevention of
sale of certain products; its exposure to various types of
litigation; and other risks and uncertainties set out in filings
made from time to time with the United States Securities and
Exchange Commission and available at www.sec.gov, including,
without limitation, its most recent reports on Form 10-K and Form
10-Q. You are urged to consider these factors carefully in
evaluating the forward-looking statements contained herein and are
cautioned not to place undue reliance on such forward-looking
statements, which are qualified in their entirety by these
cautionary statements. The forward-looking statements made herein
speak only as of the date of this press release and the Company
undertakes no obligation to publicly update such forward-looking
statements to reflect subsequent events or circumstances, except as
may be required by law.
lululemon athletica inc.
The fiscal year ending January 28, 2024 is referred to as
"2023", the fiscal year ended January 29, 2023 is referred to as
"2022".
Condensed Consolidated Statements of Operations Unaudited;
Expressed in thousands, except per share amounts
Second Quarter
First Two Quarters
2023
2022
2023
2022
Net revenue
$
2,209,165
$
1,868,328
$
4,209,957
$
3,481,791
Costs of goods sold
910,654
812,852
1,760,641
1,555,922
Gross profit
1,298,511
1,055,476
2,449,316
1,925,869
As a percent of net revenue
58.8
%
56.5
%
58.2
%
55.3
%
Selling, general and administrative
expenses
817,375
662,253
1,564,888
1,270,104
As a percent of net revenue
37.0
%
35.4
%
37.2
%
36.5
%
Amortization of intangible assets
1,879
2,195
3,757
4,390
Gain on disposal of assets
—
(10,180
)
—
(10,180
)
Income from operations
479,257
401,208
880,671
661,555
As a percent of net revenue
21.7
%
21.5
%
20.9
%
19.0
%
Other income (expense), net
7,362
145
15,387
123
Income before income tax expense
486,619
401,353
896,058
661,678
Income tax expense
145,016
111,832
264,050
182,159
Net income
$
341,603
$
289,521
$
632,008
$
479,519
Basic earnings per share
$
2.69
$
2.27
$
4.97
$
3.75
Diluted earnings per share
$
2.68
$
2.26
$
4.96
$
3.74
Basic weighted-average shares
outstanding
126,969
127,619
127,108
127,848
Diluted weighted-average shares
outstanding
127,263
127,906
127,442
128,224
lululemon athletica inc.
Condensed Consolidated Balance Sheets Unaudited; Expressed in
thousands
July 30, 2023
January 29,
2023
July 31, 2022
ASSETS
Current assets
Cash and cash equivalents
$
1,107,530
$
1,154,867
$
498,831
Inventories
1,660,753
1,447,367
1,462,076
Prepaid and receivable income taxes
224,916
185,641
166,438
Other current assets
330,734
371,578
259,749
Total current assets
3,323,933
3,159,453
2,387,094
Property and equipment, net
1,367,172
1,269,614
1,059,859
Right-of-use lease assets
1,079,198
969,419
867,901
Goodwill and intangible assets, net
42,380
46,105
453,776
Deferred income taxes and other
non-current assets
179,775
162,447
152,081
Total assets
$
5,992,458
$
5,607,038
$
4,920,711
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Accounts payable
$
298,914
$
172,732
$
259,927
Accrued liabilities and other
399,178
399,223
345,105
Accrued compensation and related
expenses
192,289
248,167
153,381
Current lease liabilities
216,837
207,972
196,259
Current income taxes payable
20,576
174,221
50,815
Unredeemed gift card liability
216,116
251,478
172,666
Other current liabilities
42,460
38,405
29,057
Total current liabilities
1,386,370
1,492,198
1,207,210
Non-current lease liabilities
976,736
862,362
757,865
Non-current income taxes payable
15,864
28,555
28,555
Deferred income tax liability
55,258
55,084
53,271
Other non-current liabilities
24,748
20,040
16,012
Stockholders' equity
3,533,482
3,148,799
2,857,798
Total liabilities and stockholders'
equity
$
5,992,458
$
5,607,038
$
4,920,711
lululemon athletica inc.
Condensed Consolidated Statements of Cash Flows Unaudited;
Expressed in thousands
First Two Quarters
2023
2022
Cash flows from operating activities
Net income
$
632,008
$
479,519
Adjustments to reconcile net income to net
cash provided by (used in) operating activities
(109,795
)
(625,137
)
Net cash provided by (used in) operating
activities
522,213
(145,618
)
Net cash used in investing activities
(283,660
)
(224,944
)
Net cash used in financing activities
(305,651
)
(384,576
)
Effect of foreign currency exchange rate
changes on cash and cash equivalents
19,761
(5,902
)
Increase (decrease) in cash and cash
equivalents
(47,337
)
(761,040
)
Cash and cash equivalents, beginning of
period
1,154,867
1,259,871
Cash and cash equivalents, end of
period
$
1,107,530
$
498,831
lululemon athletica inc.
Reconciliation of Non-GAAP Financial Measures Unaudited;
Expressed in thousands, except per share amounts
Constant dollar changes in net revenue, total comparable sales,
comparable store sales, and direct to consumer net revenue
The below changes show the change for the second quarter of 2023
compared to the second quarter of 2022.
Net Revenue
Total Comparable
Sales(1),(2)
Comparable Store
Sales(2)
Direct to Consumer Net
Revenue
Change
18
%
11
%
7
%
15
%
Adjustments due to foreign currency
exchange rate changes
2
2
2
2
Change in constant dollars
20
%
13
%
9
%
17
%
______________
(1)
Total comparable sales includes comparable
store sales and direct to consumer net revenue.
(2)
Comparable store sales reflects net
revenue from company-operated stores that have been open for at
least 12 full fiscal months, or open for at least 12 full fiscal
months after being significantly expanded. Comparable store sales
exclude sales from stores which have been temporarily relocated for
renovations or have been temporarily closed.
Adjusted financial measures
The following tables reconcile adjusted financial measures with
the most directly comparable measures calculated in accordance with
GAAP. The 2022 adjustments relate to the gain on sale of an
administrative office building and its related tax effects. Please
refer to Note 3. Gain on Disposal of Assets included in Item 1 of
Part I of the Company's Report on Form 10-Q to be filed with the
SEC on or about August 31, 2023 for further information on these
adjustments.
Second Quarter 2022
Income from Operations
Operating Margin
Income Tax Expense
Effective Tax Rate
Net Income
Diluted Earnings Per
Share
GAAP results
$
401,208
21.5
%
$
111,832
27.9
%
$
289,521
$
2.26
Gain on disposal of assets
(10,180
)
(0.6
)
(10,180
)
(0.07
)
Tax effect of the above
(1,661
)
0.3
1,661
0.01
Adjusted results (non-GAAP)
$
391,028
20.9
%
$
110,171
28.2
%
$
281,002
$
2.20
First Two Quarters
2022
Income from Operations
Operating Margin
Income Tax Expense
Effective Tax Rate
Net Income
Diluted Earnings Per
Share
GAAP results
$
661,555
19.0
%
$
182,159
27.5
%
$
479,519
$
3.74
Gain on disposal of assets
(10,180
)
(0.3
)
(10,180
)
(0.08
)
Tax effect of the above
(1,661
)
0.2
1,661
0.01
Adjusted results (non-GAAP)
$
651,375
18.7
%
$
180,498
27.7
%
$
471,000
$
3.67
lululemon athletica inc.
Company-operated Store Count and Square Footage(1) Square
Footage Expressed in Thousands
Number of Stores Open at the
Beginning of the Quarter
Number of Stores Opened During
the Quarter
Number of Stores Closed During
the Quarter
Number of Stores Open at the
End of the Quarter
3rd Quarter 2022
600
25
2
623
4th Quarter 2022
623
34
2
655
1st Quarter 2023
655
10
3
662
2nd Quarter 2023
662
12
2
672
Total Gross Square Feet at the
Beginning of the Quarter
Gross Square Feet Added During
the Quarter(2)
Gross Square Feet Lost During
the Quarter(2)
Total Gross Square Feet at the
End of the Quarter
3rd Quarter 2022
2,258
139
7
2,390
4th Quarter 2022
2,390
189
4
2,575
1st Quarter 2023
2,575
64
7
2,632
2nd Quarter 2023
2,632
64
5
2,691
______________
(1)
Company-operated store count and square
footage summary excludes retail locations operated by third parties
under license and supply arrangements.
(2)
Gross square feet added/lost during the
quarter includes net square foot additions for company-operated
stores which have been renovated or relocated in the quarter.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230831618885/en/
Investors: lululemon athletica inc. Howard Tubin
1-604-732-6124 or ICR, Inc. Joseph Teklits/Caitlin Churchill
1-203-682-8200
Media: lululemon athletica inc. Erin Hankinson
1-604-732-6124 or lululemon athletica inc. Madi Wallace
1-604-732-6124
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