lululemon athletica inc. Announces Fourth Quarter and Full Year Fiscal 2018 Results

Posted on by vbodmer
  • Board of Directors authorizes CAD 500.0 Million Stock Repurchase Programme
  • Fourth quarter revenue up 26 % to CAD 1.2 billion
  • Comparable sales increase 16 %, or 17 % on a constant dollar basis
  • Diluted EPS of CAD 1.65, or adjusted diluted EPS of CAD 1.85

lululemon athletica inc. (NASDAQ:LULU) announced financial results for the fourth quarter and fiscal year ended February 3, 2019.

The summary below provides both GAAP and adjusted non-GAAP financial measures. The adjusted financial measures exclude the amounts recognized in connection with U.S. tax reform, taxes on the repatriation of foreign earnings, and the restructuring of our ivivva operations and its related tax effects during fiscal 2018 and fiscal 2017.

For the fourth quarter ended February 3, 2019:

  • Net revenue was CAD 1.2 billion, an increase of 26% compared to the fourth quarter of fiscal 2017. On a constant dollar basis, net revenue increased 27%.
  • Excluding net revenue from the 53rd week of fiscal 2018, total comparable sales increased 16%, or increased 17% on a constant dollar basis.
  • Comparable store sales increased 6%, or increased 7% on a constant dollar basis.
  • Direct to consumer net revenue increased 37%, or increased 39% on a constant dollar basis.
  • Gross profit was CAD 668.6 million, an increase of 28% compared to the fourth quarter of fiscal 2017. It increased 28% compared adjusted gross profit in the fourth quarter of fiscal 2017.
  • Gross margin was 57.3%, an increase of 100 basis points compared to the fourth quarter of fiscal 2017. It increased 110 basis points compared to adjusted gross margin in the fourth quarter of fiscal 2017.
  • Income from operations was CAD 331.4 million, an increase of 29% compared to the fourth quarter of fiscal 2017. It increased 28% compared to adjusted income from operations in the fourth quarter of fiscal 2017.
  • Operating margin was 28.4%, an increase of 80 basis points compared to the fourth quarter of fiscal 2017. It increased 60 basis points compared to adjusted operating income in the fourth quarter of fiscal 2017.
  • Income tax expense was CAD 115.8 million compared to CAD 137.7 million in the fourth quarter of fiscal 2017 and the effective tax rate was 34.6% compared to 53.5%. The adjusted effective tax rate was 26.9% compared to 30.6% in the fourth quarter of fiscal 2017.
  • Diluted earnings per share were CAD 1.65 compared to CAD 0.88 in the fourth quarter of fiscal 2017. Adjusted diluted earnings per share were CAD 1.85 compared to CAD 1.33 for the fourth quarter of fiscal 2017.
  • The Company repurchased 1.5 million shares of its own common stock at an average cost of CAD 120.99 per share in the fourth quarter of fiscal 2018.

For the fiscal year ended February 3, 2019:

  • Net revenue was CAD 3.3 billion, an increase of 24 % compared to fiscal 2017. On a constant dollar basis, net revenue increased 25 %.
  • Excluding net revenue from the 53rd week of fiscal 2018, total comparable sales increased 18%, or increased 18 % on a constant dollar basis.
  • Comparable store sales increased 7 %, or increased 8 % on a constant dollar basis.
  • Direct to consumer net revenue increased 45 %, or increased 46 % on a constant dollar basis.
  • Company-operated stores which have been open for at least one year averaged sales of CAD 1,579 per square foot.
  • Gross profit was CAD 1.8 billion, an increase of 30 % compared to fiscal 2017. It increased 29 % compared to adjusted gross profit in fiscal 2017.
  • Gross margin was 55.2 %, an increase of 240 basis points compared to fiscal 2017. It increased 210 basis points compared to adjusted gross margin in fiscal 2017.
  • Income from operations was CAD 705.8 million, an increase of 55 % compared to fiscal 2017. It increased 40 % compared to adjusted income from operations in fiscal 2017.
  • Operating margin was 21.5 %, an increase of 430 basis points compared to fiscal 2017. It increased of 250 basis points compared to adjusted operating margin in fiscal 2017.
  • Income tax expense was CAD 231.4 million compared to CAD 201.3 million in fiscal 2017 and the effective tax rate was 32.4 % compared to 43.8 % for fiscal 2017. The adjusted effective tax rate was 28.0 % compared to 30.5 % for fiscal 2017.
  • Diluted earnings per share were CAD 3.61 compared to CAD 1.90 in fiscal 2017. Adjusted diluted earnings per share were CAD 3.84 compared to CAD 2.59 in fiscal 2017.
  • The Company repurchased 4.9 million shares of its own common stock at an average cost of CAD 121.10 per share in fiscal 2018.

The Company ended fiscal 2018 with CAD 881.3 million in cash and cash equivalents compared to CAD 990.5 million at the end of fiscal 2017. Inventories at the end of fiscal 2018 increased by 23 % to CAD 404.8 million compared to CAD 329.6 million at the end of fiscal 2017. The Company ended the year with 440 stores.

The Company also announced that its board of directors has approved an additional stock repurchase program for up to CAD 500.0 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, or in privately negotiated transactions. 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 favourable 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.

Calvin McDonald, Chief Executive Officer, commented: “lululemon has delivered one of its strongest years yet, a result of broad-based strength across the business. I am thrilled that we achieved several of our 2020 goals ahead of schedule, and want to thank our teams for their passion, hard work and connection with our guests every day. We are energized to build upon our momentum and to seize the many opportunities ahead for lululemon around the world.”

Fiscal 2019 Outlook

For the first quarter of fiscal 2019, we expect net revenue to be in the range of CAD 740 million to CAD 750 million based on a total comparable sales increase in the low-double digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of CAD 0.68 to CAD 0.70 for the quarter. This guidance assumes 132 million diluted weighted-average shares outstanding and a 28 % tax rate. The guidance does not reflect potential future repurchases of the Company’s shares.

For the full fiscal 2019, we expect net revenue to be in the range of CAD 3.700 billion to CAD 3.740 billion based on a total comparable sales increase in the low-double digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of CAD 4.48 to CAD 4.55 for the full year.

This guidance assumes 132 million diluted weighted-average shares outstanding and a 28 % tax rate. The guidance does not reflect potential future repurchases of the Company’s shares.

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 http://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, income tax expense, effective tax rates, and diluted earnings per share exclude the amounts recognized in connection with U.S. tax reform, taxes on repatriation of foreign earnings, 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.

www.lululemon.com