Revenue up 25% to $724 million
Comparable sales increase 20%, or 19% on a
constant dollar basis
Diluted EPS of $0.71 for the second
quarter
lululemon athletica inc. (NASDAQ:LULU) today announced financial
results for the second quarter ended July 29, 2018.
Glenn Murphy, Chairman of the Board, commented: "We are very
pleased with the consistent performance of our business. On behalf
of the Board, I want to welcome Calvin McDonald to lululemon and
thank our management team for delivering these incredible
results."
The summary below provides both GAAP and adjusted non-GAAP
financial measures. The adjusted financial measures exclude the
costs incurred in connection with the restructuring of the
Company's ivivva operations in second quarter of fiscal 2017, and
their related tax effects.
For the second quarter ended July 29, 2018:
- Net revenue was $723.5 million, an
increase of 25% compared to the second quarter of fiscal 2017. On a
constant dollar basis, net revenue increased 24%.
- Total comparable sales increased 20%,
or increased 19% on a constant dollar basis.
- Comparable store sales increased 10%,
or increased 10% on a constant dollar basis.
- Direct to consumer net revenue
increased 48%, or increased 47% on a constant dollar basis. During
the second quarter of fiscal 2017, we held an online warehouse
sale. Excluding the impact of this sale, direct to consumer net
revenue increased 66%, or increased 65% on a constant dollar
basis.
- Gross profit was $396.2 million, an
increase of 33% compared to the second quarter of fiscal 2017.
Gross profit increased 32% compared to adjusted gross profit for
the second quarter of fiscal 2017.
- Gross margin was 54.8%, an increase of
360 basis points compared to the second quarter of fiscal 2017.
Gross margin increased 320 basis points compared to adjusted gross
margin for the second quarter of fiscal 2017.
- Income from operations was $134.2
million, an increase of 95% compared to the second quarter of
fiscal 2017. Income from operations increased 81% compared to
adjusted income from operations for the second quarter of fiscal
2017.
- Operating margin was 18.5%, an increase
of 670 basis points compared to the second quarter of fiscal 2017.
Operating margin increased 570 basis points compared to adjusted
operating margin for the second quarter of fiscal 2017.
- Income tax expense was $40.0 million
compared to $20.8 million in the second quarter of fiscal 2017 and
the effective tax rate was 29.5% compared to 29.9%. The adjusted
effective tax rate in the second quarter of fiscal 2017 was
29.6%.
- Diluted earnings per share were $0.71
compared to $0.36 in the second quarter of fiscal 2017. Adjusted
diluted earnings per share for the second quarter of fiscal 2017
were $0.39.
- The Company repurchased 3.4
million shares of its own common stock at an average cost
of $121.08 per share.
The Company ended the second quarter of fiscal 2018 with $777.8
million in cash and cash equivalents compared to $721.2 million at
the end of the second quarter of fiscal 2017. Inventories at the
end of the second quarter of fiscal 2018 increased 24% to $392.7
million compared to $316.4 million at the end of the second quarter
of fiscal 2017. The Company ended the quarter with 415 stores.
Stuart Haselden, Chief Operating Officer, commented: "We’re
pleased to see the great results of Q2 across all parts of our
business now extending into the current quarter. This ongoing
success positions us to achieve our 2020 goals and beyond. Above
all, we want to thank our educators and teams around the world who
make this possible."
Calvin McDonald, Chief Executive Officer, also noted: "I’m
excited to work with the leadership team to build upon this
considerable success. We have an incredible growth trajectory
in front of us, given the strength of the brand and our
people."
Updated Outlook
For the third quarter of fiscal 2018, we expect net revenue to
be in the range of $720 million to $730 million based on a total
comparable sales increase in the low teens on a constant dollar
basis. Diluted earnings per share are expected to be in the range
of $0.65 to $0.67 for the quarter. This guidance assumes 133.0
million diluted weighted-average shares outstanding and a 30% tax
rate. The guidance does not reflect potential future repurchases of
the Company's shares or any adjustments which may be recognized in
connection with the U.S. tax reform.
For the full fiscal 2018, we now expect net revenue to be in the
range of $3.185 billion to $3.235 billion based on a total
comparable sales increase in the low teens on a constant dollar
basis. Diluted earnings per share are expected to be in the range
of $3.45 to $3.53 for the full year. This guidance assumes 134.0
million diluted weighted-average shares outstanding and a 30% tax
rate. The guidance does not reflect potential future repurchases of
the Company's shares or any adjustments which may be recognized in
connection with the U.S. tax reform. Fiscal 2018 is a 53 week
year.
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 second quarter results is scheduled
for today, August 30, 2018, 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, creating transformational products and
experiences which enable people to live a life they
love. 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,
Asia total comparable sales, comparable store sales, direct to
consumer net revenue, and direct to consumer net revenue excluding
the online warehouse sale, 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,
Asia total comparable sales, comparable store sales, direct to
consumer net revenue, and direct to consumer net revenue excluding
the online warehouse sale 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, income tax expense, effective tax rates, and
diluted earnings per share exclude the costs recognized in
connection with the restructuring of our ivivva operations and its
related tax effects. 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 includes estimates, projections, statements
relating to our 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 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; 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 Two Quarters Ended
July 29, 2018 July 30, 2017 July 29,
2018 July 30, 2017 Net revenue $ 723,500 $
581,054 $ 1,373,206 $ 1,101,361 Costs of goods sold 327,306
283,632 632,279 547,044 Gross profit 396,194
297,422 740,927 554,317 As a percent of net revenue 54.8 % 51.2 %
54.0 % 50.3 % Selling, general and administrative expenses 261,986
225,524 502,414 424,665 As a percent of net revenue 36.2 % 38.8 %
36.6 % 38.6 % Asset impairments and restructuring costs — 3,186 —
15,517 As a percent of net revenue — % 0.6 % — % 1.3 % Income from
operations 134,208 68,712 238,513 114,135 As a percent of net
revenue 18.5 % 11.8 % 17.4 % 10.4 % Other income (expense), net
1,591 812 4,509 1,719 Income before
income tax expense 135,799 69,524 243,022 115,854 Income tax
expense 40,029 20,813 72,099 35,897 Net
income $ 95,770 $ 48,711 $ 170,923 $ 79,957
Basic earnings per share $ 0.71 $ 0.36 $ 1.27 $ 0.59
Diluted earnings per share $ 0.71 $ 0.36 $ 1.26 $ 0.58 Basic
weighted-average shares outstanding 133,986 136,171 134,744 136,604
Diluted weighted-average shares outstanding 134,530 136,303 135,230
136,747
lululemon athletica inc.
Condensed Consolidated Balance Sheets
Unaudited; Expressed in thousands
July 29, January 28, July
30, 2018 2018 2017 ASSETS Current
assets Cash and cash equivalents $ 777,841 $ 990,501 $ 721,212
Inventories 392,672 329,562 316,368 Prepaid and receivable income
taxes 62,203 48,948 66,161 Other current assets 75,321
67,271 67,281 Total current assets 1,308,037 1,436,282
1,171,022 Property and equipment, net 487,546 473,642 426,961
Goodwill and intangible assets, net 24,255 24,679 24,749 Deferred
income taxes and other non-current assets 61,319 63,880
64,191 Total assets $ 1,881,157 $ 1,998,483 $
1,686,923
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities Accounts payable $ 110,523 $ 24,646 $ 19,049 Accrued
inventory liabilities 12,597 13,027 21,292 Accrued compensation and
related expenses 62,794 70,141 47,920 Current income taxes payable
3,021 15,700 6,519 Unredeemed gift card liability 64,420 82,668
56,170 Revolving credit facility 100,000 — — Other current
liabilities 95,806 86,416 73,341 Total current
liabilities 449,161 292,598 224,291 Non-current income taxes
payable 44,078 48,268 — Deferred income tax liability 1,582 1,336
7,668 Other non-current liabilities 66,121 59,321 57,155
Stockholders' equity 1,320,215 1,596,960 1,397,809
Total liabilities and stockholders' equity $ 1,881,157 $
1,998,483 $ 1,686,923
lululemon athletica inc.
Condensed Consolidated Statements of Cash
Flows
Unaudited; Expressed in thousands
Two Quarters Ended July 29, 2018
July 30, 2017 Cash flows from operating activities Net
income $ 170,923 $ 79,957 Adjustments to reconcile net income to
net cash provided by operating activities 39,103 22,081
Net cash provided by operating activities 210,026 102,038
Net cash used in investing activities (89,292 ) (49,889 ) Net cash
used in financing activities (300,239 ) (91,910 ) Effect of
exchange rate changes on cash (33,155 ) 26,127 Decrease in
cash and cash equivalents (212,660 ) (13,634 ) Cash and cash
equivalents, beginning of period 990,501 734,846 Cash
and cash equivalents, end of period $ 777,841 $ 721,212
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,
Asia total comparable sales, comparable store sales, direct to
consumer net revenue, and direct to consumer net revenue excluding
the online warehouse sale
The below changes in net revenue, total comparable sales, Asia
total comparable sales, comparable store sales, direct to consumer
net revenue, and direct to consumer net revenue excluding the
online warehouse sale show the net change for the second quarter of
fiscal 2018 compared to the second quarter of fiscal 2017.
Net Revenue
TotalComparableSales1,2
Asia TotalComparableSales1,2
ComparableStore Sales2
Direct toConsumer NetRevenue
Direct toConsumer NetRevenue Excludingthe OnlineWarehouse Sale
Increase 25 % 20 % 55 % 10 % 48 % 66 % Adjustments due to foreign
exchange rate changes (1 ) (1 ) (5 ) — (1 ) (1 ) Increase in
constant dollars 24 % 19 % 50 % 10 % 47 % 65 %
__________
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. The adjustments relate to the restructuring of our ivivva
operations and its related tax effects. Please refer to Note 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 August 30, 2018 for further information on
these adjustments.
Quarter Ended Quarter Ended July 29,
2018 July 30, 2017
GAAP Results
Adjustments
AdjustedResults(Non-GAAP)
GAAP Results
Restructuringof ivivvaOperationsAdjustments
Adjusted Results(Non-GAAP)
(In thousands, except per share
amounts)
Gross profit $ 396,194 $ — $ 396,194 $ 297,422 $
2,244
$ 299,666 Gross margin 54.8 % — % 54.8 % 51.2 % 0.4 % 51.6 % Income
from operations 134,208 — 134,208 68,712 5,430 74,142 Operating
margin 18.5 % — % 18.5 % 11.8 % 1.0 % 12.8 % Income before income
tax expense 135,799 — 135,799 69,524 5,430 74,954 Income tax
expense 40,029 — 40,029 20,813 1,390 22,203 Effective tax rate 29.5
% — % 29.5 % 29.9 % (0.3 )% 29.6 % Diluted earnings per share $
0.71 $ — $ 0.71 $ 0.36 $ 0.03 $ 0.39
lululemon athletica
inc.
Company-operated Store Count and Square
Footage(1)
Square Footage Expressed in Thousands
Number of StoresOpen at theBeginning of the
Quarter
Number of StoresOpenedDuring the
Quarter
Number of StoresClosedDuring the
Quarter
Number of StoresOpen at the
End of the Quarter
3rd Quarter 20172 421 17 50 388 4th Quarter 2017 388 16 — 404 1st
Quarter 2018 404 7 — 411 2nd Quarter 2018 411 5 1 415
Total GrossSquare
Feetat theBeginning of theQuarter
Gross Square FeetAdded During theQuarter(3)
Gross Square FeetLost During theQuarter(3)
Total GrossSquare Feetat the End
of theQuarter
3rd Quarter 20172 1,238 43 89 1,192 4th Quarter 2017 1,192 70 —
1,262 1st Quarter 2018 1,262 15 — 1,277 2nd Quarter 2018 1,277 29 3
1,303
__________
1
Company-operated store count and square
footage summary excludes retail locations operated by third parties
under license and supply arrangements.
2
The store closures during the third
quarter of fiscal 2017 include 48 ivivva branded company-operated
stores that closed on August 20, 2017 as part of the restructuring
of the Company's ivivva operations. The Company's seven remaining
ivivva branded stores remain in operation.
3
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/20180830005775/en/
Investors:lululemon athletica inc.Howard Tubin,
1-604-732-6124orICR, Inc.Joseph Teklits/Caitlin Morahan,
1-203-682-8200orMedia:lululemon athletica inc.Erin
Hankinson, 1-604-732-6124orBrunswick GroupAsh Spiegelberg,
1-214-254-3790
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