Almost steady success for Canadian Lululemon

Almost steady success for Canadian Lululemon

Canadian lululemon athletica continued its success stream also in the fourth fiscal quarter (per February 3), the company is a yoga oriented lifestyle company, mainly operating in North America and Australia. However, the 2013 results will be affected through the call back of deficient quality pants withdrawn from the stores on March 18, 2013

The quarterly net revenue increased 31 % to CND 485.5 million (CND 371.5 million). The 2012 quarter consisted of 14 weeks (13 weeks). Net sales include therefore an additional week, however comparable store sales calculations exclude the supplemental week.

Comparable store sales for the fourth quarter increased 10 % on a constant dollar basis. This increase excludes corporate store sales of 18.7 million for the 14th week of the quarter.

Direct to consumer revenue increased 56 % to CND 78.3 million or 16.1 % of net revenue (13.5 %). This increase includes USD 4.2 million of net revenue for the additional week in 2012.

Gross profit for the quarter increased by 31 % to CND 274.5 million and represented 56.5 % (56.3 % ) of net revenue gross profit. Income from operations was 31 % up, and totalled CND 152.6 million, or 31.4 % (31.2 %) of net revenue. Tax rates were 29 % (36.5 %) and are reflecting the ongoing impact of revised intercompany pricing agreements.

For the total fiscal year of 2012 net revenue for the 54 (53) weeks increased 37 % to CND 1.4 billion (CND 1.0 billion) , and comparable store sales were up 16 % on a constant dollar basis or totalling CND 2058 per square foot. Direct to consumer revenue increased 86 % to CND 197.3 million, or 14.4 % (10.6 %) of net revenue. Gross profit was up 34 % to CND 762.8 million (CND 569.4 million), or 55.7 % (56.9 %). Income from operation increased by 31 % to CND 376.4 million (CND 287.0 million), however the share of gross revenue decreased from 28.7 % to 27.5 %. The company owned 211 stores branded lululemon athletic and ivivva athletic, and 10 stores were added in the last quarter.

Christine Day, CEO of the company stated “The fundamentals of our business are strong, we delivered excellent result in 2012, and we plan to continue to earn the loyalty of our customers and shareholders every day going forward. On March 18, 2013 the company however pulled a selection of is black Luon pants from the stores, because delivering the top quality our guests expect is a critical factor in our differentiation in the market place. Our proprietary fabric, black Luon, is a very technical and sensitive product to manufacture. We have a long history with our manufacturers, and as we have in the past, we are working closely with them to resolve the current issues. We have a team on site collaborating with them to identify the root cause. We have recently added strong leadership in Quality control, our Liason Office and our commercialisation and development teams and expect these people and other investments to solidify our quality consistency and our delivery capabilities.

And the outlook for 2013: Revenue is expected in the range of CND 1615 million to CND 1640 million. This outlook reflects the current expectations of the impact from the black Luon issue, including lost revenue in the range of CND 57 to CND 67 million, additional costs expected to be incurred and the write down of affected product on hand and expected to be received during the first half of 2013. In the first quarter of 2013 the management expects net revenues in the range of CND 333 to CND 343 million on comparable store sales percentage + 5 to 8 % on a constant dollar basis. The impact from the black Luon issue, including lost revenue in the range of CND 12 to 17 million plus additional costs and write down are expected to take place in the first half of 2013.

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