lululemon athletica, inc.
Dec 11, 2014

lululemon athletica inc. Announces Third Quarter Fiscal 2014 Results

VANCOUVER, British Columbia--(BUSINESS WIRE)-- lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the third quarter ended November 2, 2014.

For the third quarter ended November 2, 2014:

For the thirty-nine weeks ended November 2, 2014:

The Company ended the third quarter of fiscal 2014 with $633.6 million in cash and cash equivalents compared to $600.7 million at the end of the third quarter of fiscal 2013. Inventory at the end of the third quarter of fiscal 2014 totaled $229.9 million compared to $209.1 million at the end of the third quarter of fiscal 2013. The Company ended the quarter with 289 stores.

Laurent Potdevin, lululemon's CEO, stated: "I am pleased that our third quarter results demonstrated sequential improvements as the quarter progressed, with all key facets of our business - brand, guest experience, and product - contributing to our momentum." Mr. Potdevin continued: "I am confident that our strong team, coupled with strategic investments into our core business areas, have already made a positive impact and place us on a strong trajectory for further global growth."

Updated Outlook

For the fourth quarter of fiscal 2014, we expect net revenue to be in the range of $570 million to $585 million based on a total comparable sales increase in the low single digits on a constant dollar basis. The sales outlook relative to previous guidance is expected to be impacted by approximately $15 million due to the combined impact of West Coast port delays, a lower Canadian dollar, and delayed store openings. Diluted earnings per share are expected to be in the range of $0.65 to $0.69 for the quarter. This guidance assumes 142.6 million diluted weighted-average shares outstanding and a 30.2% tax rate. The guidance does not reflect potential future repurchases of the Company's shares.

For the full fiscal 2014, we now expect net revenue to be in the range of $1.765 billion to $1.780 billion based on a total comparable sales increase in the low single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $1.53 to $1.57 for the full year, or $1.74 to $1.78 normalized for the non-recurring tax adjustment incurred in the first quarter of fiscal 2014 related to the repatriation of foreign earnings that will be used to fund the share buyback program. This guidance assumes 144.3 million diluted weighted-average shares outstanding and a 37.9% tax rate, which includes the above tax adjustment, or 29.4% before the tax adjustment. The guidance does not reflect potential future repurchases of the Company's shares.

Conference Call Information

A conference call to discuss third quarter results is scheduled for today, December 11, 2014, at 9:00 a.m. Eastern time. Those interested in participating in the call are invited to dial 1-877-303-3203 approximately 10 minutes prior to the start of the call. The conference call will also be webcast live at www.lululemon.com. The webcast will be accessible on our website for approximately 30 days after the call.

About lululemon athletica inc.

lululemon athletica (NASDAQ:LULU) is a yoga-inspired athletic apparel company that creates components for people to live long, healthy and 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, visit www.lululemon.com.

Non-GAAP Financial Measures

Total comparable sales in constant dollars, comparable store sales in constant dollars, changes in direct to consumer revenue in constant dollars, diluted earnings per share excluding the non-recurring tax adjustment, and the tax rate excluding the non-recurring tax adjustment are not United States generally accepted accounting principle ("GAAP") performance measures.

We provide constant dollar total comparable sales, comparable store sales, and changes in direct to consumer revenue because we use these measures to understand the underlying growth rate of revenue excluding the impact of changes in foreign exchange rates, which are not under management's control. 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.

We disclose normalized diluted earnings per share and the normalized tax rate because of their comparability to our historical information as well as our diluted earnings per share guidance, which we believe are useful to investors.

The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table 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 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 and our prospects and strategies for future growth. 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 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, including any negative publicity regarding our products or the production methods of our suppliers or manufacturers; the acceptability of our products to our guests, including receiving products that comply with our technical specifications and quality standards; 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; our exposure to various types of litigation; 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 customer demand for our products; any unforeseen disruption of our information systems; any material disruption of our information systems; our ability to manage our growth and the increased complexity of our business effectively; 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 highly competitive market and increasing competition; our ability to deliver our products to the market and to meet customer expectations if we have problems with our distribution system; our ability to protect our intellectual property rights; our ability to cancel store leases if an existing or new store is not profitable; increasing labor costs and other factors associated with the production of our products in China or other countries; our ability to successfully open new store locations in a timely manner; our ability to comply with trade and other regulations; the continued service of our senior management; seasonality; fluctuations in foreign currency exchange rates; the operations of many of our suppliers are subject to international and other risks; our ability to source our merchandise profitably or at all; 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

 
Thirteen Weeks Thirteen Weeks Thirty-Nine Thirty-Nine
Ended Ended Weeks Ended Weeks Ended
November 2, November 3, November 2, November 3,
2014 2013 2014 2013
Net revenue $ 419,396 $ 379,900 $ 1,194,722 $ 1,070,195
Costs of goods sold 208,308   175,294   590,583   508,909  
Gross profit 211,088 204,606 604,139 561,286
As a percent of net revenue 50.3 % 53.9 % 50.6 % 52.4 %
Selling, general and administrative expenses 129,932 112,270 385,294 324,075
As a percent of net revenue 30.9 % 29.6 % 32.2 % 30.2 %
Income from operations 81,156 92,336 218,845 237,211
As a percent of net revenue 19.4 % 24.3 % 18.4 % 22.2 %
Other income (expense), net 1,814   1,453   5,347   4,249  
Income before provision for income taxes 82,970 93,789 224,192 241,460
Provision for income taxes 22,519   27,678   96,012   71,605  
Net income $ 60,451   $ 66,111   $ 128,180   $ 169,855  
Basic earnings per share $ 0.42 $ 0.46 $ 0.89 $ 1.17
Diluted earnings per share $ 0.42 $ 0.45 $ 0.88 $ 1.16
Basic weighted-average shares outstanding 143,180 145,120 144,581 144,806
Diluted weighted-average shares outstanding 143,441 146,014 144,949 145,967
 
   
lululemon athletica inc.
 

Condensed Consolidated Balance Sheets

Unaudited; Expressed in thousands

 
November 2, February 2,
2014 2014
ASSETS
Current assets
Cash and cash equivalents $ 633,582 $ 698,649
Inventories 229,861 188,790
Other current assets 81,214   58,100
Total current assets 944,657 945,539
Property and equipment, net 301,841 255,603
Goodwill and intangible assets, net 27,458 28,201
Deferred income taxes and other non-current assets 10,531   23,045
Total assets $ 1,284,487   $ 1,252,388
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 9,545 $ 12,647
Accrued inventory purchases 42,484 15,415
Other current liabilities 92,605 87,383
Income taxes payable 3,116   769
Total current liabilities 147,750 116,214
Deferred income tax liability 11,376 3,977
Other non-current liabilities 40,100 35,515
Stockholders' equity 1,085,261   1,096,682
Total liabilities and stockholders' equity $ 1,284,487   $ 1,252,388
 
   
lululemon athletica inc.
 

Condensed Consolidated Statements of Cash Flows

Unaudited; Expressed in thousands

 
Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
November 2, November 3,
2014 2013
Cash flows from operating activities
Net income $ 128,180 $ 169,855
Items not affecting cash 67,512 60,830
Other, including net changes in other non-cash balances (28,851 ) (135,879 )
Net cash provided by operating activities 166,841 94,806
Net cash used in investing activities (89,373 ) (71,945 )
Net cash (used in) provided by financing activities (131,781 ) 8,654
Effect of exchange rate changes on cash (10,754 ) (20,949 )
(Decrease) increase in cash and cash equivalents (65,067 ) 10,566
Cash and cash equivalents, beginning of period $ 698,649   $ 590,179  
Cash and cash equivalents, end of period $ 633,582   $ 600,745  
 

       
lululemon athletica inc.
 

Reconciliation of Non-GAAP Financial Measures

Constant dollar total comparable sales (unaudited)

 
Thirteen Weeks Thirteen Weeks Thirty-Nine Thirty-Nine
Ended Ended Weeks Ended Weeks Ended
November 2, November 3, November 2, November 3,
2014 2013 2014 2013
Total comparable sales (GAAP)1 1 % 8 % (1 )% 10 %
Adjustments due to foreign exchange rate changes 2 % 2 % 2 % 2 %
Total comparable sales in constant dollars1 3 % 10 % 1 % 12 %
 

1 Total comparable sales includes comparable store sales and direct to consumer sales. Comparable store sales reflects net revenue at corporate-owned stores that have been open for at least 12 months.

 

Constant dollar comparable store sales (unaudited)

       
Thirteen Weeks Thirteen Weeks Thirty-Nine Thirty-Nine
Ended Ended Weeks Ended Weeks Ended
November 2, November 3, November 2, November 3,
2014 2013 2014 2013
 
Comparable store sales (GAAP)1 (5 )% 2 % (6 )% 5 %
Adjustments due to foreign exchange rate changes 2 % 3 % 2 % 2 %
Comparable store sales in constant dollars1 (3 )% 5 % (4 )% 7 %
 

1 Comparable store sales reflects net revenue at corporate-owned stores that have been open for at least 12 months.

 

Constant dollar changes in direct to consumer revenue (unaudited)

       
Thirteen Weeks Thirteen Weeks Thirty-Nine Thirty-Nine
Ended Ended Weeks Ended Weeks Ended
November 2, November 3, November 2, November 3,
2014 2013 2014 2013
Change in direct to consumer revenue (GAAP) 25 % 37 % 25 % 39 %
Adjustments due to foreign exchange rate changes 2 % 3 % 2 % 1 %
Change in direct to consumer revenue in constant dollars 27 % 40 % 27 % 40 %
 

Diluted earnings per share, excluding the non-recurring tax adjustment (unaudited)

   
Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
November 2, November 3,
2014 2013
Diluted earnings per share (GAAP) $ 0.88 $ 1.16
Non-recurring tax adjustment 0.22  

-

Diluted earnings per share, excluding the non-recurring tax adjustment $ 1.10 $ 1.16
 

Diluted tax rate, excluding the non-recurring tax adjustment (unaudited)

   
Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
November 2, November 3,
2014 2013
Tax rate (GAAP) 42.8 % 29.7 %
Non-recurring tax adjustment (13.9 )%

-

%
Tax rate, excluding the non-recurring tax adjustment 28.9 % 29.7 %
 
       
lululemon athletica inc.
 

Store Count and Square Footage1

Thirty-Nine Weeks Ended November 2, 2014

Square Footage Expressed in Thousands

 
Number of Number of Number of Number of
Stores Open at Stores Opened Stores Closed Stores Open
the Beginning of During the During the at the End of the
the Quarter

Quarter2

Quarter2

Quarter
1st Quarter 254 9

-

263
2nd Quarter 263 8 1 270
3rd Quarter 270 19

-

289
 
       
Total Gross Gross Square Gross Square Total Gross
Square Feet at Feet Added Feet Lost Square Feet at
the Beginning of During the During the the End of the
the Quarter

Quarter2,3

Quarter2,3

Quarter
1st Quarter 740 24

-

764
2nd Quarter 764 26 3 787
3rd Quarter 787 61

-

848
 

1 Store count and square footage summary includes corporate-owned stores which are branded lululemon athletica or ivivva athletica.

2 Number of stores opened/closed during the quarter that are branded lululemon athletica or ivivva athletica.

3 Gross square feet added/lost during the quarter includes net square foot additions for corporate-owned stores which have been renovated or relocated in the quarter.

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Source: lululemon athletica inc.

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