lululemon athletica inc. Continues to Gain Momentum with Strong Fourth Quarter and Fiscal Year 2007 Results

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lululemon athletica inc. Continues to Gain Momentum with Strong Fourth Quarter and Fiscal Year 2007 Results

Apr 2, 2008

VANCOUVER, British Columbia, Apr 02, 2008 (BUSINESS WIRE) -- lululemon athletica inc. (NASDAQ: LULU; TSX: LLL) today announced financial results for the quarter and fiscal year ended February 3, 2008.

For the quarter ended February 3, 2008:

-- Net revenue increased 101% to $105.1 million from $52.2 million for the fourth quarter of fiscal 2006. Net revenue from corporate-owned stores was $92.5 million, an increase of 117% from $42.6 million for the fourth quarter of fiscal 2006, with comparable-store sales increasing 41%, or 24% on a constant dollar basis.

-- Gross profit as a percentage of net revenue increased 270 basis points to 54.1% of net revenue from 51.4% of net revenue in the fourth quarter of fiscal 2006.

-- Income from operations was $21.7 million, or 20.6% of revenues, compared to $2.2 million, or 4.2% of revenues, in the fourth quarter of fiscal 2006.

-- Diluted earnings per share was $0.21 on net income of $14.6 million, compared to diluted earnings per share of $0.01 on net income of $0.9 million in the fourth quarter of fiscal 2006. Excluding a one-time legal settlement expense, diluted earnings per share for the fourth quarter of fiscal 2006 were $0.05.

For the fiscal year ended February 3, 2008:

-- Net revenue increased 84% to $274.7 million from $148.9 million for the same period in fiscal 2006. Net revenue from corporate-owned stores was $243.6 million, an increase of 102% from $120.7 million for the same period in fiscal 2006, with comparable-store sales increasing 34%, or 24% on a constant dollar basis.

-- Gross profit as a percentage of net revenue increased 230 basis points to 53.3% of net revenue from 51.0% of net revenue in the twelve months of fiscal 2006.

-- Income from operations was $50.1 million, or 18.2% of revenues, compared to $16.2 million, or 10.9% of revenues, in the twelve months of fiscal 2006.

-- Diluted earnings per share was $0.45 on net income of $30.8 million, compared to diluted earnings per share of $0.11 on net income of $7.7 million for the same period in fiscal 2006. Excluding a one-time charge for the settlement of a lawsuit, diluted earnings per share for fiscal 2006 was $0.18.

Robert Meers, lululemon's CEO stated: "We are extremely pleased with the accelerated growth of our fourth quarter results. We believe that the strong momentum generated in 2007 puts us in great standing for 2008. The Company will continue to deliver innovative performance apparel, a distinctive store experience, and a community-based marketing approach, focusing on U.S. expansion." Mr. Meers continued: "While the current overall consumer environment may be challenging, the increasing loyalty of our guests and our unique positioning in the historically resilient active and healthy-lifestyle market, are providing for continued acceptance of our brand."

Discontinuing Operations in Japan

The Company also announced today that it will be discontinuing its operations in Japan. lululemon athletica opened its first store in Japan in 2005 and has operated in Japan through a joint venture known as lululemon Japan Inc. with Japanese apparel company, Descente, Ltd., since 2006. lululemon Japan Inc. currently has four stores.

Robert Meers, CEO of lululemon athletica commented, "Japan represents less than 1.5% of our revenues but has been taking a disproportionate amount of management time and attention over this past year. After re-evaluating our operating performance in Japan and our priorities, we have concluded our time, attention, and capital resources are best spent focused on our top priorities which are growth in the United States, where we plan to open 35 stores in 2008, and the development of an e-commerce business."

lululemon athletica and Descente are working together to wind down the store operations as soon as possible, with expected completion in Q2 of 2008.

Fiscal Year 2008 Guidance

The Company has previously stated its long-term growth targets of net revenue growth of approximately 25% and diluted EPS growth in excess of 25%. The Company believes 2008 net revenues and diluted EPS growth will exceed these long-term targets.

For fiscal 2008, diluted earnings per share are expected to be in the range of $0.70 to $0.72. This guidance is based on anticipated comparable store sales growth of low teens; or high single digits on a constant dollar basis, and 35 planned new store openings in North America. The Company expects an effective tax rate of approximately 33% for the full year and anticipates diluted weighted average shares outstanding of approximately 71.0 million for 2008. This fiscal 2008 earnings guidance includes a charge of approximately $0.02 per share resulting from the Company's planned closure of its four stores currently operating in Japan.

In a separate news release, lululemon also today announced the appointment of Christine Day, currently Executive Vice President of Retail Operations, to the offices of President and COO and to the role of CEO Designate. Ms. Day will be appointed CEO upon the retirement of Bob Meers on June 30, 2008.

Conference Call Information

A conference call to discuss fourth quarter results is scheduled for today, April 2, 2008, at 9:00 AM Eastern Time. Investors interested in participating in the call are invited to dial (877) 397-0300 approximately ten minutes prior to the start of the call. The conference call will also be webcast live at www.lululemon.com.

About lululemon athletica inc.

lululemon athletica (NASDAQ: LULU; TSX: LLL) is a yoga-inspired athletic apparel company that creates components for people to live longer, healthier and more fun lives. By producing products that help keep people active and stress free, lululemon believes that the world will be a better place. 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, http://www.lululemon.com.

Forward-Looking Statements:

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risks, uncertainties and assumptions, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, both in North America and internationally, the development and introduction of new products, and the implementation of our marketing and branding strategies. In many cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "intends," "estimates," "predicts," "potential" or the negative of these terms or other comparable terminology. These forward-looking 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: the possibility that we may not be able to manage operations at our current size or manage growth effectively; the possibility that we may not be able to identify suitable locations to open new stores or attract customers to our stores; the possibility that we may not be able to successfully expand in the United States or in other markets, or expand into new markets; the possibility that we may not be able to finance our growth and maintain sufficient levels of cash flow; increasing competition, which may cause us to reduce the prices of our products or to increase significantly our marketing efforts to avoid losing market share; the possibility that we may not be able to effectively market and maintain a positive brand image; the possibility that we may not be able to continually innovate and provide our consumers with improved products; and other risk factors detailed in our filings with the Securities and Exchange Commission, including risk factors contained in our final prospectus relating to our initial public offering included in our Registration Statement on Form S-1 (file no. 333-142477) filed with the SEC and other filings we make with the SEC. Our filings with the SEC are available at www.sec.gov http://www.sec.gov. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release and the company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

                                                           Exhibit (1)
lululemon athletica inc.
Condensed Consolidated Statements of Operations
Expressed in thousands of dollars except per share amounts

                      Three        Three        Twelve       Twelve
                      Months       Months       Months       Months
                      Ended        Ended        Ended        Ended
                   January 31,  February 3,  January 31,  February 3,
                       2007         2008         2007         2008

Net revenue        $    52,216  $   105,093  $   148,885  $   274,713

Costs of goods
 sold                   25,395       48,273       72,903      128,411
                   ------------ ------------ ------------ ------------
Gross Profit            26,821       56,820       75,982      146,302
  As a percent of
   revenues               51.4%        54.1%        51.0%        53.3%

Selling, general
 and
 administrative
 expenses               24,656       35,143       59,767       96,177
  As a percent of
   revenues               47.2%        33.4%        40.1%        35.0%
                   ------------ ------------ ------------ ------------
Income from
 operations              2,165       21,676       16,213       50,125
  As a percent of
   revenues                4.2%        20.6%        10.9%        18.2%

Interest expense
 (income), net             (17)        (258)         (94)        (854)
                   ------------ ------------ ------------ ------------

Income before
 income tax              2,182       21,935       16,307       50,979

Provision for
 income taxes            1,349        7,460        8,753       20,471
Non-controlling
 interest                  (54)        (134)        (112)        (334)
                   ------------ ------------ ------------ ------------

Net income         $       887  $    14,609  $     7,666  $    30,842
                   ============ ============ ============ ============

Earnings per
 share:
  Basic            $      0.01  $      0.22  $      0.12  $      0.46
  Diluted          $      0.01  $      0.21  $      0.11  $      0.45

Weighted average
outstanding:
  Basic             65,087,431   67,527,381   65,156,625   66,430,022
  Diluted           65,087,431   70,629,927   69,728,162   69,297,878

                                                           Exhibit (2)
lululemon athletica inc.
Condensed Consolidated Balance Sheets
Expressed in thousands of dollars

                                    January 31, 2007  February 3, 2008
----------------------------------- ----------------  ----------------

ASSETS
Current assets
   Cash and cash equivalents        $         16,029  $         53,339
   Inventories                                26,628            39,092
   Other current assets                        5,836             5,475
                                    ----------------  ----------------
Total current assets                          48,493            97,906

Property and equipment, net                   18,176            44,039

Goodwill and intangible assets, net            2,952             8,124

Other assets                                   2,672             5,023
                                    ----------------  ----------------
Total assets                        $         72,293  $        155,092
                                    ================  ================



LIABILITIES AND STOCKHOLDERS'
 EQUITY
Current liabilities
   Accounts payable                 $          4,935  $          5,200
   Other current liabilities                  17,826            24,902
   Income taxes payable                        9,178             5,720
                                    ----------------  ----------------
Total current liabilities                     31,939            35,822

Other non-current liabilities                  2,975             7,236

Stockholders' equity                          37,379           112,034
                                    ----------------  ----------------
Total liabilities and stockholders'
 equity                             $         72,293  $        155,092
                                    ================  ================

                                                           Exhibit (3)
lululemon athletica inc.
Condensed Consolidated Cash Flow Statements
Expressed in thousands of dollars

                 Three Months Three Months Twelve Months Twelve Months
                    Ended         Ended        Ended         Ended
                 January 31,  February 3,   January 31,   February 3,
                     2007         2008         2007          2008

Cash flow from
 operating
 activities

Net income for
 the year        $       887  $    14,609  $      7,666  $     30,842
Items not
 affecting cash:
  Depreciation
   and
   amortization        1,666        2,847         4,619         8,341
  Deferred
   income tax           (669)        (195)       (3,077)        1,799
  Loss on
   property &
   equipment               -            -           230             -
  Non-cash
   compensation          886        1,132         2,830         5,947
  Non-
   controlling
   interest              (54)        (134)         (112)         (334)
  Changes in
   non-cash
   working
   capital items      15,063        9,372        13,293        (8,504)
                 ------------ ------------ ------------- -------------
                      17,779       27,631        25,449        38,091

Cash flows from
 investing
 activities

Purchase of
 property and
 equipment            (3,711)     (10,937)      (12,838)      (29,676)
Acquisition of
 franchises                -            -          (512)       (5,559)
                 ------------ ------------ ------------- -------------
                      (3,711)     (10,937)      (13,350)      (35,235)

Cash flow from
 financing
 activities

Cash received on
 exercise of
 stock options             -           54             -            54
Amounts received
 from principal
 stockholder
 loan                      -            -           222             -
Amounts received
 from joint
 venture partner           -            -             -           564
Capital stock
 issued for cash           -            -           446        38,350
IPO Costs                  -            -             -        (6,992)
                 ------------ ----------------------------------------
                           -           54           669        31,976

Effect of
 exchange rate
 changes on cash      (1,522)         266          (616)        2,478

Increase in cash
 and cash
 equivalents          12,546       17,014        12,152        37,310

Cash and cash
 equivalents,
 beginning of
 year                  3,483       36,325         3,877        16,029
                 ------------ ------------ ------------- -------------

Cash and cash
 equivalents,
 end of year     $    16,029  $    53,339  $     16,029  $     53,339
                 ------------ ------------ ------------- -------------

SOURCE: lululemon athletica inc.

Investors:
ICR
Joseph Teklits, 203-682-8258
or
Media:
FD
Evan Goetz or Diane Zappas, 212-850-5600

Copyright Business Wire 2008

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