lululemon athletica inc. Announces Third Quarter Fiscal 2019 Result

  • Revenue up 23% to CAD 916 million
  • Comparable sales increase 16%, or 17% on a constant dollar basis
  • Diluted EPS of CAD 0.96 for the third quarter

lululemon athletica inc. (NASDAQ:LULU) on December 11, 2019, announced financial results for the third quarter of fiscal 2019.

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.

For the third quarter ended November 3, 2019:

  • Net revenue was CAD 916.1 million, an increase of 23% compared to the third quarter of fiscal 2018. On a constant dollar basis, net revenue increased 23%.
  • Total comparable sales increased 16%, or increased 17% on a constant dollar basis.
  • Comparable store sales increased 10%, or increased 11% on a constant dollar basis.
  • Direct to consumer net revenue increased 29%, or increased 30% on a constant dollar basis.
  • Direct to consumer net revenue represented 26.9% of total net revenue compared to 25.3% for the third quarter of fiscal 2018.
  • Gross profit was CAD 505.0 million, an increase of 24% compared to the third quarter of fiscal 2018.
  • Gross margin was 55.1%, an increase of 70 basis points compared to the third quarter of fiscal 2018.
  • Income from operations was CAD 175.8 million, an increase of 29% compared to the third quarter of fiscal 2018.
  • Operating margin was 19.2%, an increase of 100 basis points compared to the third quarter of fiscal 2018.
  • Income tax expense was CAD 51.8 million compared to CAD 43.5 million in the third quarter of fiscal 2018 and the effective tax rate was 29.1% compared to 31.6%. The adjusted effective tax rate for the third quarter of fiscal 2018 was 27.8%.
  • Diluted earnings per share were CAD 0.96 compared to CAD 0.71 in the third quarter of fiscal 2018. Adjusted diluted earnings per share for the third quarter of fiscal 2018 were CAD 0.75.
  • The Company repurchased 44.5 thousand shares of its own common stock at an average cost of CAD 179.71 per share.

The Company ended the third quarter of fiscal 2019 with CAD 586.2 million in cash and cash equivalents compared to CAD 703.6 million at the end of the third quarter of fiscal 2018. Inventories at the end of the third quarter of fiscal 2019 increased 26% to CAD 627.1 million compared to CAD 496.0 million at the end of the third quarter of fiscal 2018. The Company ended the quarter with 479 stores.

Calvin McDonald, Chief Executive Officer, commented: “We’re proud of the continued momentum in our business as we live into our vision to be an experiential brand. We are successfully executing on our Power of Three growth plan as we create authentic connections with new and existing guests around the world. I’d like to thank our amazing teams for achieving this strong level of performance.”

Updated Outlook

For the fourth quarter of fiscal 2019, we expect net revenue to be in the range of CAD 1.315 billion to CAD 1.330 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 2.10 to CAD 2.13 for the quarter. This guidance assumes 131 million diluted weighted-average shares outstanding and a 28.5% tax rate. The guidance does not reflect potential future repurchases of the Company’s shares.

For the full fiscal 2019, we now expect net revenue to be in the range of CAD 3.895 billion to CAD 3.910 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 CAD 4.75 to CAD 4.78 for the full year, based on a 28% effective tax rate. The guidance assumes 131 million diluted weighted-average shares outstanding. 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.

Shifted Calendar for Comparable Sales

Due to the 53rd week in fiscal 2018, comparable sales are calculated on a one week shifted basis in fiscal 2019. For the third quarter of fiscal 2019, the 13 weeks ended November 3, 2019 are compared to the 13 weeks ended November 4, 2018 rather than October 28, 2018.

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, direct to consumer net revenue, and 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 income tax expense, effective tax rates, and diluted earnings per share exclude the amounts recognized in connection with the U.S. tax reform. 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

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