Revenue up 21% to $748
millionComparable sales increase 17%, or 18% on a constant
dollar basisDiluted EPS of $0.71, or adjusted diluted EPS of
$0.75
lululemon athletica inc. (NASDAQ:LULU) today announced financial
results for the third quarter ended October 28, 2018.
The summary below provides both GAAP and adjusted non-GAAP
financial measures. The adjusted financial measures exclude the tax
expense recognized during the third quarter of fiscal 2018 related
to the U.S. Tax Cuts and Jobs Act, and the costs and the related
tax effects incurred in connection with the restructuring of the
Company's ivivva operations in third quarter of fiscal 2017.
For the third quarter ended October 28, 2018:
- Net revenue was $747.7 million, an
increase of 21% compared to the third quarter of fiscal 2017. On a
constant dollar basis, net revenue increased 22%.
- Total comparable sales increased 17%,
or increased 18% on a constant dollar basis.
- Comparable store sales increased 6%, or
increased 7% on a constant dollar basis.
- Direct to consumer net revenue
increased 44%, or increased 46% on a constant dollar basis.
- Direct to consumer net revenue
represented 25.3% of total net revenue compared to 21.2% for the
third quarter of fiscal 2017.
- Gross profit was $406.8 million, an
increase of 26% compared to the third quarter of fiscal 2017. Gross
profit increased 26% compared to adjusted gross profit for the
third quarter of fiscal 2017.
- Gross margin was 54.4%, an increase of
240 basis points compared to the third quarter of fiscal 2017.
Gross margin increased 220 basis points compared to adjusted gross
margin for the third quarter of fiscal 2017.
- Income from operations was $135.9
million, an increase of 59% compared to the third quarter of fiscal
2017. Income from operations increased 26% compared to adjusted
income from operations for the third quarter of fiscal 2017.
- Operating margin was 18.2%, an increase
of 440 basis points compared to the third quarter of fiscal 2017.
Operating margin increased 80 basis points compared to adjusted
operating margin for the third quarter of fiscal 2017.
- Income tax expense was $43.5 million
compared to $27.7 million in the third quarter of fiscal 2017 and
the effective tax rate was 31.6% compared to 32.0%. The adjusted
effective tax rate was 27.8% compared to 30.8% in the third quarter
of fiscal 2017.
- Diluted earnings per share were $0.71
compared to $0.43 in the third quarter of fiscal 2017. Adjusted
diluted earnings per share were $0.75 compared to $0.56 for the
third quarter of fiscal 2017.
The Company ended the third quarter of fiscal 2018 with $703.6
million in cash and cash equivalents compared to $650.1 million at
the end of the third quarter of fiscal 2017. Inventories at the end
of the third quarter of fiscal 2018 increased 25% to $496.0 million
compared to $396.9 million at the end of the third quarter of
fiscal 2017. The Company ended the quarter with 426 stores.
Calvin McDonald, Chief Executive Officer, commented: "lululemon
has achieved a high level of success over the past year and has
established a solid foundation to continue to build our future.
It's been exciting to see guests around the world respond so
strongly to our product offerings and improved digital experience.
I look forward to what's ahead for our brand as we strive to exceed
the expectations of our guests."
Stuart Haselden, Chief Operating Officer, also noted: "We're
pleased with our Q3 results and the strong momentum we continue to
see across our business. These results reflect the strategic
investments we've made, and continue to make, to achieve our
long-term growth objectives. I'd like to thank our educators and
teams around the world whose passion and enthusiasm enable this
ongoing standout performance."
Updated Outlook
For the fourth quarter of fiscal 2018, we expect net revenue to
be in the range of $1.115 billion to $1.125 billion based on a
total comparable sales increase in the high-single to low-double
digits on a constant dollar basis. Diluted earnings per share are
expected to be in the range of $1.64 to $1.67 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 $3.235 billion to $3.245 billion based on a total
comparable sales increase in the mid-teens on a constant dollar
basis. Diluted earnings per share are expected to be in the range
of $3.61 to $3.64 for the full year, based on a 30.2% effective tax
rate. Excluding the $5.2 million tax expense recognized during the
third quarter of fiscal 2018 related to the U.S. tax reform,
diluted earnings per share are expected to be in the range of $3.65
to $3.68 for the full year, based on a 29.5% tax rate. The guidance
assumes 134.0 million diluted weighted-average shares outstanding.
The guidance does not reflect potential future repurchases of the
Company's shares or any additional 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 third quarter results is scheduled
for today, December 6, 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,
comparable store sales, direct to consumer net revenue, and China
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, direct to consumer net revenue, and China
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, income tax expense, effective tax rates, and
diluted earnings per share exclude the adjustments related to U.S.
tax reform and the costs and related tax effects recognized in
connection with the restructuring of our ivivva operations. 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;
changes in consumer shopping preferences and shifts in distribution
channels; 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 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 Three Quarters Ended
October 28,2018
October 29,2017
October 28,2018
October 29,2017
Net revenue $ 747,655 $ 619,018 $ 2,120,861 $ 1,720,379 Costs of
goods sold 340,878 297,056 973,157 844,100
Gross profit 406,777 321,962 1,147,704 876,279 As a percent
of net revenue 54.4 % 52.0 % 54.1 % 50.9 % Selling, general and
administrative expenses 270,874 215,367 773,288 640,032 As a
percent of net revenue 36.2 % 34.8 % 36.5 % 37.2 % Asset
impairments and restructuring costs — 21,007 — 36,524 As a percent
of net revenue — % 3.4 % — % 2.1 % Income from operations 135,903
85,588 374,416 199,723 As a percent of net revenue 18.2 % 13.8 %
17.7 % 11.6 % Other income (expense), net 2,044 1,052
6,553 2,771 Income before income tax expense 137,947
86,640 380,969 202,494 Income tax expense 43,534 27,696
115,633 63,593 Net income $ 94,413 $
58,944 $ 265,336 $ 138,901 Basic
earnings per share $ 0.71 $ 0.44 $ 1.98 $ 1.02 Diluted earnings per
share $ 0.71 $ 0.43 $ 1.97 $ 1.02 Basic weighted-average shares
outstanding 132,406 135,364 133,964 136,191 Diluted
weighted-average shares outstanding 133,077 135,578 134,512 136,357
lululemon athletica inc.Condensed
Consolidated Balance Sheets
Unaudited; Expressed in thousands
October 28, 2018 January 28,
2018 October 29, 2017 ASSETS Current
assets Cash and cash equivalents $ 703,607 $ 990,501 $ 650,054
Inventories 495,991 329,562 396,892 Prepaid and receivable income
taxes 76,593 48,948 77,625 Other current assets 87,276
67,271 63,777 Total current assets 1,363,467 1,436,282
1,188,348 Property and equipment, net 531,250 473,642 440,403
Goodwill and intangible assets, net 24,237 24,679 24,476 Deferred
income taxes and other non-current assets 62,057 63,880
67,222 Total assets $ 1,981,011 $ 1,998,483 $
1,720,449
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities Accounts payable $ 153,140 $ 24,646 $ 14,113 Accrued
inventory liabilities 11,446 13,027 23,420 Accrued compensation and
related expenses 85,446 70,141 62,387 Current income taxes payable
24,545 15,700 4,403 Unredeemed gift card liability 63,474 82,668
52,500 Other current liabilities 105,620 86,416
83,754 Total current liabilities 443,671 292,598 240,577
Non-current income taxes payable 54,112 48,268 — Deferred income
tax liability 1,582 1,336 — Other non-current liabilities 74,889
59,321 58,596 Stockholders' equity 1,406,757 1,596,960
1,421,276 Total liabilities and stockholders' equity $
1,981,011 $ 1,998,483 $ 1,720,449
lululemon athletica inc.Condensed
Consolidated Statements of Cash Flows
Unaudited; Expressed in thousands
Three Quarters Ended
October 28,2018
October 29,2017
Cash flows from operating activities Net income $ 265,336 $ 138,901
Adjustments to reconcile net income to net cash provided by
operating activities 51,540 (7,592 ) Net cash provided by
operating activities 316,876 131,309 Net cash used in investing
activities (165,914 ) (120,051 ) Net cash used in financing
activities (406,361 ) (100,707 ) Effect of exchange rate changes on
cash (31,495 ) 4,657 Decrease in cash and cash equivalents
(286,894 ) (84,792 ) Cash and cash equivalents, beginning of period
990,501 734,846 Cash and cash equivalents, end of
period $ 703,607 $ 650,054
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, direct to consumer net revenue, and China
direct to consumer net revenue
The below changes in net revenue, total comparable sales,
comparable store sales, direct to consumer net revenue, and China
direct to consumer net revenue show the net change for the third
quarter of fiscal 2018 compared to the third quarter of fiscal
2017.
Net Revenue
TotalComparableSales1,2
ComparableStore
Sales2
Direct toConsumer
NetRevenue
China Direct toConsumer
NetRevenue
Increase 21 % 17 % 6 % 44 % 71 % Adjustments due to foreign
exchange rate changes 1 1 1 2 5
Increase in constant dollars 22 % 18 % 7 % 46 % 76 % __________ 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 U.S. tax reform and the
restructuring of our ivivva operations and its related tax effects.
Please refer to Notes 7 and 8 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,
2018 for further information on these adjustments.
Quarter Ended October
28, 2018 Quarter Ended October 29, 2017
GAAP Results
U.S. TaxReform
AdjustedResults(Non-GAAP)
GAAP Results
Restructuringof
ivivvaOperationsAdjustments
AdjustedResults(Non-GAAP)
(In thousands, except per share amounts) Gross profit $ 406,777 $ —
$ 406,777 $ 321,962 $ 1,178 $ 323,140 Gross margin 54.4 % — % 54.4
% 52.0 % 0.2 % 52.2 % Income from operations 135,903 — 135,903
85,588 22,186 107,774 Operating margin 18.2 % — % 18.2 % 13.8 % 3.6
% 17.4 % Income before income tax expense 137,947 — 137,947 86,640
22,185 108,825 Income tax expense 43,534 (5,163 ) 38,371 27,696
5,813 33,509 Effective tax rate 31.6 % (3.8 )% 27.8 % 32.0 % (1.2
)% 30.8 % Diluted earnings per share $ 0.71 $ 0.04 $ 0.75 $ 0.43 $
0.13 $ 0.56
Adjusted expected effective tax rate and diluted earnings per
share
Fiscal Year Ending February 3,
2019 Expected effective tax rate 30.2 % Non-GAAP adjustment1
(0.7 ) Adjusted expected effective tax rate 29.5 %
Fiscal Year Ending February 3, 2019
Expected diluted earnings per share range $3.61 to $3.64 Non-GAAP
adjustment1 0.04 Adjusted expected diluted earnings per share range
$3.65 to $3.68 __________ 1 The adjustment relates to U.S.
tax reform. Please refer to Note 8 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, 2018 for further information on the adjustment.
lululemon athletica inc.
Company-operated Store Count and Square Footage1Square Footage
Expressed in Thousands
Number ofStores Open
attheBeginning ofthe Quarter
Number ofStores
OpenedDuring theQuarter
Number ofStores
ClosedDuring theQuarter
Number ofStores Openat
the End ofthe Quarter
4th Quarter 2017 388 16 — 404 1st Quarter 2018 404 7 — 411 2nd
Quarter 2018 411 5 1 415 3rd Quarter 2018 415 11 — 426
Total GrossSquare Feet
atthe Beginningof the Quarter
Gross SquareFeet
AddedDuring theQuarter2
Gross SquareFeet
LostDuring theQuarter2
Total GrossSquare Feet
atthe End of theQuarter
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 3rd Quarter 2018 1,303 52 1 1,354
__________ 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
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Investors:lululemon athletica inc.Howard
Tubin1-604-732-6124orICR, Inc.Joseph Teklits/Caitlin
Morahan1-203-682-8200orMedia:lululemon athletica
inc.Erin Hankinson1-604-732-6124orBrunswick GroupBlake
Sonnenshein1-212-333-3810
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