Board of Directors Authorizes $200 Million
Stock Repurchase Program
lululemon athletica inc. (NASDAQ:LULU) today announced financial
results for the third quarter ended October 29, 2017.
The Company reported diluted earnings per share of $0.43 for the
third quarter of fiscal 2017. Excluding the impact of the ivivva
restructuring that was announced on June 1, 2017, the Company
reported adjusted diluted earnings per share of $0.56.
The summary below provides both GAAP and adjusted non-GAAP
financial measures. In connection with the restructuring of its
ivivva operations, the Company recognized pre-tax costs totaling
$22.2 million in the third quarter of fiscal 2017. The adjusted
financial measures exclude the impact of the ivivva restructuring
and the related tax effects, and also exclude certain discrete tax
items which were recognized during the third quarter of fiscal
2016.
For the third quarter ended October 29, 2017:
- Net revenue was $619.0 million, an
increase of 14% compared to the third quarter of fiscal 2016. On a
constant dollar basis, net revenue increased 12%.
- Total comparable sales increased 8%, or
increased 7% on a constant dollar basis.
- Comparable store sales increased 2%, or
increased 1% on a constant dollar basis.
- Direct to consumer net revenue
increased 26%, or increased 25% on a constant dollar basis.
- Gross profit was $322.0 million, an
increase of 16% compared to the third quarter of fiscal 2016.
Adjusted gross profit was $323.1 million, an increase of 16%.
- Gross margin was 52.0%, an increase of
90 basis points compared to the third quarter of fiscal 2016.
Adjusted gross margin was 52.2%, an increase of 110 basis
points.
- Income from operations was $85.6
million, a decrease of 8% compared to the third quarter of fiscal
2016. Adjusted income from operations increased $14.8 million, or
16%, to $107.8 million.
- Operating margin was 13.8%, a decrease
of 330 basis points compared to the third quarter of fiscal 2016.
Adjusted operating margin was 17.4%, an increase of 30 basis
points.
- Income tax expense was $27.7 million
compared to $25.3 million in the third quarter of fiscal 2016 and
the effective tax rate was 32.0% compared to 27.0%. The adjusted
effective tax rate was 30.8% compared to 31.3% in the third quarter
of fiscal 2016.
- Diluted earnings per share were $0.43
compared to $0.50 in the third quarter of fiscal 2016. Adjusted
diluted earnings per share were $0.56 compared to $0.47 for the
third quarter of fiscal 2016.
- The Company repurchased 0.1
million shares of its own common stock at an average cost
of $60.27 per share, completing the previous $100 million
stock repurchase program which commenced in December 2016.
The Company ended the third quarter of fiscal 2017 with $650.1
million in cash and cash equivalents compared to $480.4 million at
the end of the third quarter of fiscal 2016. Inventories at the end
of the third quarter of fiscal 2017 increased 9% to $396.9 million
compared to $364.5 million at the end of the third quarter of
fiscal 2016. The Company ended the quarter with 388 stores.
The Company also announced that its board of directors has
approved a new stock repurchase program for up to $200
million of its common shares in the open market at prevailing
market prices, including under plans complying with the provisions
of Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act
of 1934. The timing and actual number of common shares to be
repurchased will depend upon market conditions, eligibility to
trade, and other factors, in accordance with Securities and
Exchange Commission requirements, and the repurchase program
is expected to be completed in two years. The stock repurchase
program is intended to create shareholder value by making
opportunistic repurchases during periods of favorable market
conditions. Shares may be repurchased from time to time on the open
market, through block trades or otherwise. Purchases may be started
or stopped at any time without prior notice depending on market
conditions and other factors.
Laurent Potdevin, CEO, lululemon, commented: "Our teams
powerfully delivered robust results across both store and digital
channels this quarter, driving a further acceleration in our
business. The strength of our Q3 earnings supports our unique
position as the global brand defining an active, mindful
lifestyle."
Mr. Potdevin added: "As we start the holiday season, I'm
energized by our momentum and we are increasing guidance to reflect
this performance. I'm grateful for the enthusiasm I see every day
across our collective as we remain on our path to delivering $4
billion in revenue in 2020."
Updated Outlook
In connection with the restructuring of the ivivva operations,
we expect to recognize total pre-tax costs of between $45.0 million
and $50.0 million in fiscal 2017, inclusive of $45.4 million
recognized during the first three quarters of fiscal 2017. This
primarily relates to long-lived asset impairment and lease
termination costs.
For the fourth quarter of fiscal 2017, we expect net revenue to
be in the range of $870 million to $885 million based on a total
comparable sales increase in the mid-single digits on a constant
dollar basis. Diluted earnings per share are expected to be in the
range of $1.18 to $1.21 for the quarter. Excluding the impact of
the ivivva restructuring, we expect adjusted diluted earnings per
share to be in the range of $1.19 to $1.22 for the quarter. This
guidance assumes 135.6 million diluted weighted-average shares
outstanding and a 30.4% tax rate. The guidance does not reflect
potential future repurchases of the Company's shares.
For the full fiscal 2017, we now expect net revenue to be in the
range of $2.590 billion to $2.605 billion based on a total
comparable sales increase in the mid-single digits on a constant
dollar basis. Diluted earnings per share are expected to be in the
range of $2.20 to $2.23 for the full year. Excluding the impact of
the ivivva restructuring, we expect adjusted diluted earnings per
share to be in the range of $2.45 to $2.48 for the year. This
guidance assumes 136.2 million diluted weighted-average shares
outstanding and a 30.9% tax rate, or 30.4% excluding the tax effect
of the ivivva restructuring. 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 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.
Conference Call Information
A conference call to discuss third quarter results is scheduled
for today, December 6, 2017, 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:
http://investor.lululemon.com/events.cfm. 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 healthy lifestyle
inspired athletic apparel company for yoga, running, training, and
most other sweaty pursuits, with products that create
transformational experiences for people to live happy, healthy, fun
lives. Setting the bar in technical fabrics and functional
designs, lululemon works with yogis and athletes in local
communities for continuous research and product feedback. For
more information, visit www.lululemon.com.
Non-GAAP Financial Measures
Constant dollar changes in net revenue, total comparable sales,
comparable store sales, and direct to consumer net revenue, and the
adjusted financial results, are non-GAAP financial measures.
A constant dollar basis assumes the average foreign exchange
rates for the period remained constant with the average foreign
exchange rates for the same period of the prior year. We provide
constant dollar changes in net revenue, total comparable sales,
comparable store sales, and direct to consumer net revenue, because
we use these measures to understand the underlying growth rate of
net revenue excluding the impact of changes in foreign exchange
rates. We believe that disclosing these measures on a constant
dollar basis is useful to investors because it enables them to
better understand the level of growth of our business.
Adjusted gross profit, gross margin, income from operations,
operating margin, effective tax rates, and diluted earnings per
share exclude the costs recognized in connection with the
restructuring of our ivivva operations, its related tax effects,
and certain discrete items related to our transfer pricing
arrangements and taxes on repatriation of foreign earnings. We
believe these adjusted financial measures are useful to investors
as the adjustments do not directly relate to our ongoing business
operations and therefore do not contribute to a meaningful
evaluation of the trend in our operating performance. Furthermore,
we do not believe the adjustments are reflective of our
expectations of our future operating performance and believe these
non-GAAP measures are useful to investors because of their
comparability to our historical information.
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 contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 that
involve risks, uncertainties and assumptions, such as statements
regarding our future financial condition or results of operations
and our prospects and strategies for future growth. 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 our 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: our ability to maintain the value and reputation of our
brand; the acceptability of our products to our guests; our highly
competitive market and increasing competition; our reliance on and
limited control over third-party suppliers to provide fabrics for
and to produce our products; an economic downturn or economic
uncertainty in our key markets; increasing product costs and
decreasing selling prices; our ability to anticipate consumer
preferences and successfully develop and introduce new, innovative
and updated products; our ability to accurately forecast guest
demand for our products; our ability to safeguard against security
breaches with respect to our information technology systems; any
material disruption of our information systems; our ability to have
technology-based systems function effectively and grow our
e-commerce business globally; the fluctuating costs of raw
materials; our ability to expand internationally in light of our
limited operating experience and limited brand recognition in new
international markets; our ability to deliver our products to the
market and to meet guest expectations if we have problems with our
distribution system; imitation by our competitors; our ability to
protect our intellectual property rights; changes in tax laws or
unanticipated tax liabilities; our ability to manage our growth and
the increased complexity of our business effectively; our ability
to cancel store leases if an existing or new store is not
profitable; our ability to source our merchandise profitably or at
all if new trade restrictions are imposed or existing trade
restrictions become more burdensome; increasing labor costs and
other factors associated with the production of our products in
South and South East Asia; the operations of many of our suppliers
are subject to international and other risks; our ability to
successfully open new store locations in a timely manner; our
ability to comply with trade and other regulations; the continued
service of our senior management; seasonality; fluctuations in
foreign currency exchange rates; higher than anticipated costs and
our ability to realize the benefits associated with the
restructuring of our ivivva business; conflicting trademarks and
the prevention of sale of certain products; our exposure to various
types of litigation; actions of activist stockholders;
anti-takeover provisions in our certificate of incorporation and
bylaws; 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, our 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 we undertake 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.
Condensed Consolidated Statements of
Operations
Unaudited; Expressed in thousands, except
per share amounts
Quarter Ended Three Quarters Ended
October 29,2017
October 30,2016
October 29,2017
October 30,2016
Net revenue $ 619,018 $ 544,416 $ 1,720,379 $ 1,554,452 Costs of
goods sold 297,056 265,990 844,100 782,734
Gross profit 321,962 278,426 876,279 771,718 As a percent of
net revenue 52.0 % 51.1 % 50.9 % 49.6 % Selling, general and
administrative expenses 215,367 185,451 640,032 547,195 As a
percent of net revenue 34.8 % 34.1 % 37.2 % 35.2 % Asset
impairments and restructuring costs 21,007 — 36,524 — As a percent
of net revenue 3.4 % — % 2.1 % — % Income from operations 85,588
92,975 199,723 224,523 As a percent of net revenue 13.8 % 17.1 %
11.6 % 14.4 % Other income (expense), net 1,052 628
2,771 720 Income before income tax expense 86,640
93,603 202,494 225,243 Income tax expense 27,696 25,318
63,593 57,997 Net income $ 58,944 $
68,285 $ 138,901 $ 167,246 Basic
earnings per share $ 0.44 $ 0.50 $ 1.02 $ 1.22 Diluted earnings per
share $ 0.43 $ 0.50 $ 1.02 $ 1.22 Basic weighted-average shares
outstanding 135,364 137,033 136,191 137,095 Diluted
weighted-average shares outstanding 135,578 137,237 136,357 137,321
lululemon athletica inc.
Condensed Consolidated Balance Sheets
Unaudited; Expressed in thousands
October 29, 2017 January 29,
2017 ASSETS Current assets Cash and cash equivalents
$ 650,054 $ 734,846 Inventories 396,892 298,432 Prepaid and
receivable income taxes 77,625 81,190 Other current assets 63,777
48,269 Total current assets 1,188,348 1,162,737 Property and
equipment, net 440,403 423,499 Goodwill and intangible assets, net
24,476 24,557 Deferred income taxes and other non-current assets
67,222 46,748 Total assets $ 1,720,449 $ 1,657,541
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities
Accounts payable $ 14,113 $ 24,846 Accrued inventory liabilities
23,420 8,601 Accrued compensation and related expenses 62,387
55,238 Income taxes payable 4,403 30,290 Unredeemed gift card
liability 52,500 70,454 Lease termination liabilities 12,164 —
Other accrued liabilities 71,590 52,561 Total current
liabilities 240,577 241,990 Deferred income tax liability — 7,262
Other non-current liabilities 58,596 48,316 Stockholders' equity
1,421,276 1,359,973 Total liabilities and stockholders'
equity $ 1,720,449 $ 1,657,541
lululemon athletica inc.
Condensed Consolidated Statements of Cash
Flows
Unaudited; Expressed in thousands
Three Quarters Ended
October 29,2017
October 30,2016
Cash flows from operating activities Net income $ 138,901 $ 167,246
Adjustments to reconcile net income to net cash provided by
operating activities (7,592 ) (68,587 ) Net cash provided by
operating activities 131,309 98,659 Net cash used in investing
activities (120,051 ) (106,168 ) Net cash used in financing
activities (100,707 ) (25,288 ) Effect of exchange rate changes on
cash 4,657 11,701 (Decrease) increase in cash and
cash equivalents (84,792 ) (21,096 ) Cash and cash equivalents,
beginning of period 734,846 501,482 Cash and cash
equivalents, end of period $ 650,054 $ 480,386
lululemon athletica inc.
Reconciliation of Non-GAAP Financial MeasuresUnaudited;
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 in net revenue, total comparable sales,
comparable store sales, and direct to consumer net revenue show the
net change for the third quarter of fiscal 2017 compared to the
third quarter of fiscal 2016.
Net Revenue
TotalComparableSales1,2
ComparableStoreSales2
Direct toConsumer
NetRevenue
Increase 14% 8% 2% 26% Adjustments due to foreign exchange rate
changes (2) (1) (1) (1) Increase in constant dollars 12% 7% 1% 25%
__________
1 Total comparable sales includes comparable store sales and
direct to consumer sales. 2 Comparable store sales reflects net
revenue from company-operated stores that have been open for at
least 12 months, or open for at least 12 months after being
significantly expanded.
Adjusted financial measures
The following table reconciles adjusted financial measures with
the most directly comparable measures calculated in accordance with
GAAP:
Quarter Ended October 29, 2017
Quarter Ended October 30, 2016
GAAP Results
Adjustments
AdjustedResults(Non-GAAP)
GAAP Results
Adjustments
AdjustedResults(Non-GAAP)
Gross profit1 $ 321,962 $ 1,178 $ 323,140 $ 278,426 $ — $ 278,426
Gross margin1 52.0 % 0.2 % 52.2 % 51.1 % — % 51.1 % Income from
operations1,2 85,588 22,186 107,774 92,975 — 92,975 Operating
margin1,2 13.8 % 3.6 % 17.4 % 17.1 % — % 17.1 %
Income before income taxexpense1,2,3
86,640 22,185 108,825 93,603 186 93,789 Income tax expense3,4
27,696 5,813 33,509 25,318 4,005 29,323 Effective tax rate3,4 32.0
% (1.2 )% 30.8 % 27.0 % 4.3 % 31.3 %
Diluted earnings pershare1,2,3,4
$ 0.43 $ 0.13 $ 0.56 $ 0.50 $ (0.03 ) $ 0.47
__________
1
During the third quarter of fiscal 2017, we recognized costs
totaling $1.2 million within cost of goods sold related to the
restructuring of our ivivva operations. 2 During the third quarter
of fiscal 2017, we recognized asset impairment and restructuring
costs related to the restructuring of our ivivva operations
totaling $21.0 million. 3 The adjustments in the third quarter of
fiscal 2016 relate to our transfer pricing arrangements, the
associated repatriation of foreign earnings, and net interest
costs. These adjustments were recorded in income tax expense and
other income (expense), net. 4 The adjustment to income tax expense
for the third quarter of fiscal 2017 represents the tax effect of
the ivivva related restructuring adjustments, calculated based on
the expected annual tax rate of the applicable tax jurisdictions.
Please refer to Notes 6 and 7 to the unaudited interim
consolidated financial statements included in Item 1 of Part I of
our Report on Form 10-Q to be filed with the SEC on or about
December 6, 2017 for further explanation as to the nature of
these items.
Adjusted expected gross margin, effective tax rate, and diluted
earnings per share
Fiscal Year Ending January 28,
2018
Expected gross margin 51.9% to 52.4% Non-GAAP adjustments1 0.3
Adjusted expected gross margin 52.2% to 52.7%
Fiscal Year
Ending January 28, 2018 Expected effective tax rate
30.9% Non-GAAP adjustments1 (0.5) Adjusted expected effective tax
rate 30.4%
Quarter Ending January 28,
2018
Fiscal Year Ending January 28,
2018
Expected diluted earnings per share range $1.18 to $1.21 $2.20 to
$2.23 Non-GAAP adjustments1 0.01 0.25 Adjusted expected diluted
earnings per share range $1.19 to $1.22 $2.45 to $2.48
__________
1 These adjustments relate to the restructuring of our
ivivva operations. Please refer to Note 6 to the unaudited interim
consolidated financial statements included in Item 1 of Part I of
our Report on Form 10-Q to be filed with the SEC on or about
December 6, 2017 for further explanation as to the nature of these
items.
lululemon athletica inc.
Store Count and Square Footage1
Square Footage Expressed in Thousands
Number ofStores Open
attheBeginning ofthe Quarter
Number ofStores
OpenedDuring theQuarter
Number ofStores
ClosedDuring theQuarter3
Number ofStores Openat
the End ofthe Quarter
4th Quarter 2016 389 17 — 406 1st Quarter 2017 406 5 — 411 2nd
Quarter 2017 411 11 1 421 3rd Quarter 2017 421 17 50 388
Total GrossSquare Feet
atthe Beginningof the Quarter
Gross SquareFeet
AddedDuring theQuarter2
Gross SquareFeet
LostDuring theQuarter2, 3
Total GrossSquare Feet
atthe End of theQuarter
4th Quarter 2016 1,144 47 1 1,190 1st Quarter 2017 1,190 14 — 1,204
2nd Quarter 2017 1,204 37 3 1,238 3rd Quarter 2017 1,238 43 89
1,192
__________
1 Store count and square footage summary includes
company-operated stores which are branded lululemon or ivivva.
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. 3 On
August 20, 2017, as part of the restructuring of its ivivva
operations, the Company closed 48 of its 55 ivivva branded
company-operated stores. The seven remaining ivivva branded stores
remain in operation and are not expected to close.
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version on businesswire.com: http://www.businesswire.com/news/home/20171206006211/en/
Investor:ICR, Inc.Joseph Teklits/Caitlin
Morahan203-682-8200orMedia:BrunswickLaura
Buchanan / Ash Spielgelberg+44 7974 982492 /
214-205-6805orlululemon athletica inc.Allison Reid, VP
Corporate Communications+44 7983 026340
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