lululemon athletica, inc.
Dec 9, 2015

lululemon athletica inc. Announces Third Quarter Fiscal 2015 Results

VANCOUVER, British Columbia--(BUSINESS WIRE)-- lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the third quarter ended November 1, 2015.

For the third quarter ended November 1, 2015:

The Company ended the third quarter of fiscal 2015 with $403.4 million in cash and cash equivalents compared to $633.6 million at the end of the third quarter of fiscal 2014. Inventory at the end of the third quarter of fiscal 2015 totaled $357.8 million compared to $229.9 million at the end of the third quarter of fiscal 2014. The Company ended the quarter with 354 stores.

Laurent Potdevin, lululemon's CEO, stated: "We had a solid quarter in line with our expectations underscored by the combination of our product, guest and community initiatives along with tremendous guest reception to major store openings around the world. I would like to personally thank all of our educators who create amazing experiences for our guests every day."

Mr. Potdevin continued: "We've implemented critical organizational changes this quarter and now have in place a complete, world-class management team that is aligned with our strategic global priorities focused on design and dedicated to creating long-term value."

Updated Outlook

For the fourth quarter of fiscal 2015, we expect net revenue to be in the range of $670 million to $685 million based on total comparable sales in the mid-single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $0.75 to $0.78 for the quarter. This guidance assumes 139.0 million diluted weighted-average shares outstanding and a 29.5% tax rate. The guidance does not reflect potential future repurchases of the Company's shares.

For the full fiscal 2015, we now expect net revenue to be in the range of $2.025 billion to $2.040 billion based on total comparable sales in the high single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $1.81 to $1.84 for the full year, or $1.78 to $1.81 normalized for the tax and related interest adjustments made during the third quarter of fiscal 2015. This guidance assumes 140.9 million diluted weighted-average shares outstanding and a 27.6% tax rate, which includes the above tax adjustments. 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 9, 2015, 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 inc. (NASDAQ:LULU) is a yoga-inspired athletic apparel company with products that create transformational experiences for people to live happy, healthy, fun lives. 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, and changes in direct to consumer net revenue in constant dollars, the tax rate excluding certain tax and related interest adjustments, and diluted earnings per share excluding certain tax adjustments 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 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, 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 the tax rate and diluted earnings per share excluding certain tax and related interest adjustments because of their comparability to our historical information as well as our diluted earnings per share guidance, which we believe is 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 highly competitive market and increasing competition; 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; our ability to safeguard against security breaches with respect to our information technology 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 ability to deliver our products to the market and to meet customer expectations if we have problems with our distribution system; imitation by our competitors; 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 South and South East Asia; 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; our exposure to various types of litigation; actions of activist stockholders; 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
Ended
November 1,
2015

 

Thirteen Weeks
Ended
November 2,
2014

 

Thirty-Nine
Weeks Ended
November 1,
2015

 

Thirty-Nine
Weeks Ended
November 2,
2014

Net revenue $ 479,693 $ 419,396 $ 1,356,247 $ 1,194,722
Costs of goods sold 254,896   208,308   713,548   590,583  
Gross profit 224,797 211,088 642,699 604,139
As a percent of net revenue 46.9 % 50.3 % 47.4 % 50.6 %
Selling, general and administrative expenses 156,619 129,932 439,906 385,294
As a percent of net revenue 32.7 % 30.9 % 32.4 % 32.2 %
Income from operations 68,178 81,156 202,793 218,845
As a percent of net revenue 14.2 % 19.4 % 15.0 % 18.4 %
Other income (expense), net (2,890 ) 1,814   (1,519 ) 5,347  
Income before income tax expense 65,288 82,970 201,274 224,192
Income tax expense 12,135   22,519   52,643   96,012  
Net income $ 53,153   $ 60,451   $ 148,631   $ 128,180  
 
Basic earnings per share $ 0.38 $ 0.42 $ 1.05 $ 0.89
Diluted earnings per share $ 0.38 $ 0.42 $ 1.05 $ 0.88
Basic weighted-average shares outstanding 140,282 143,180 141,198 144,581
Diluted weighted-average shares outstanding 140,457 143,441 141,470 144,949
 
 

lululemon athletica inc.
Condensed Consolidated Balance Sheets
Unaudited; Expressed in thousands

 
    November 1, 2015   February 1, 2015
ASSETS
Current assets
Cash and cash equivalents $ 403,446 $ 664,479
Inventories 357,753 208,116
Prepaid income taxes 124,776 40,547
Other current assets 42,529   37,870
Total current assets 928,504 951,012
Property and equipment, net 346,705 296,008
Goodwill and intangible assets, net 25,407 26,163
Deferred income tax assets and other non-current assets 20,943   23,030
Total assets $ 1,321,559   $ 1,296,213
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 5,845 $ 9,339
Accrued inventory liabilities 40,250 22,296
Accrued compensation and related expenses 44,074 29,932
Income taxes payable 46,829 20,073
Unredeemed gift card liability 35,123 46,252
Other accrued liabilities 36,207   31,989
Total current liabilities 208,328 159,881
Deferred income tax liabilities 3,524 3,633
Other non-current liabilities 49,748 43,131
Stockholders' equity 1,059,959   1,089,568
Total liabilities and stockholders' equity $ 1,321,559   $ 1,296,213
 
 

lululemon athletica inc.
Condensed Consolidated Statements of Cash Flows
Unaudited; Expressed in thousands

 
   

Thirty-Nine Weeks
Ended
November 1, 2015

 

Thirty-Nine Weeks
Ended
November 2, 2014

Cash flows from operating activities
Net income $ 148,631 $ 128,180
Items not affecting cash 63,576 67,955
Other, including net changes in other non-cash balances (186,267 ) (29,294 )
Net cash provided by operating activities 25,940 166,841
Net cash used in investing activities (108,061 ) (89,373 )
Net cash used in financing activities (167,452 ) (131,781 )
Effect of exchange rate changes on cash (11,460 ) (10,754 )
Decrease in cash and cash equivalents (261,033 ) (65,067 )
Cash and cash equivalents, beginning of period 664,479   698,649  
Cash and cash equivalents, end of period $ 403,446   $ 633,582  
 
 

lululemon athletica inc.
Reconciliation of Non-GAAP Financial Measures

 

Constant dollar total comparable sales (unaudited)

 
   

Thirteen Weeks
Ended
November 1,
2015

 

Thirteen Weeks
Ended
November 2,
2014

Total comparable sales1 3 % 1 %
Adjustments due to foreign exchange rate changes 6   2  
Total comparable sales in constant dollars1 9 % 3 %
 
__________
1Total comparable sales includes comparable store sales and direct to consumer sales. Comparable store sales reflects net revenue at company-operated stores that have been open for at least 12 months.
 
 

Constant dollar comparable store sales (unaudited)

 
   

Thirteen Weeks
Ended
November 1,
2015

 

Thirteen Weeks
Ended
November 2,
2014

Comparable store sales1 % (5 )%
Adjustments due to foreign exchange rate changes 6   2  
Comparable store sales in constant dollars1 6 % (3 )%
 
 
__________
1Comparable store sales reflects net revenue at company-operated stores that have been open for at least 12 months.
 
 

Constant dollar changes in direct to consumer revenue (unaudited)

 
   

Thirteen Weeks
Ended
November 1,
2015

 

Thirteen Weeks
Ended
November 2,
2014

Change in direct to consumer revenue 16 % 25 %
Adjustments due to foreign exchange rate changes 5   2  
Change in direct to consumer revenue in constant dollars 21 % 27 %
 
 

Effective tax rate, excluding tax and related interest adjustments

 
   

Thirteen Weeks
Ended
November 1,
2015

 

Thirteen Weeks
Ended
November 2,
2014

Effective tax rate 18.6 % 27.1 %
Tax and related interest adjustments1 10.2    
Effective tax rate, excluding tax and related interest adjustments 28.8 % 27.1 %
 
__________
1These adjustments relate to the Company's transfer pricing arrangements and taxes associated with the repatriation of foreign earnings. Please refer to Note 7 to the unaudited interim consolidated financial statements included in Item 1 of Part I of the Company's Report on Form 10-Q to be filed with the SEC on or about December 9, 2015 for an explanation as to the nature of these items.
 
 

Diluted earnings per share, excluding tax and related interest adjustments

 
   

Thirteen Weeks
Ended
November 1,
2015

 

Thirteen Weeks
Ended
November 2,
2014

Diluted earnings per share $ 0.38 $ 0.42
Tax and related interest adjustments1 (0.03 )
Diluted earnings per share, excluding tax and related interest adjustments $ 0.35 $ 0.42
 
__________
1These adjustments relate to the Company's transfer pricing arrangements and taxes associated with the repatriation of foreign earnings. Please refer to Note 7 to the unaudited interim consolidated financial statements included in Item 1 of Part I of the Company's Report on Form 10-Q to be filed with the SEC on or about December 9, 2015 for an explanation as to the nature of these items.
 
 

lululemon athletica inc.
Store Count and Square Footage1
Thirty-Nine Weeks Ended November 1, 2015
Square Footage Expressed in Thousands

 
   

Number of
Stores Open at
the
Beginning of
the Quarter

 

Number of
Stores Opened
During the
Quarter2,4

 

Number of
Stores Closed
During the
Quarter2

 

Number of
Stores Open
at the End of
the Quarter

1st Quarter 302 14 316
2nd Quarter 316 20 336
3rd Quarter 336 18 354
 

Total Gross
Square Feet at
the Beginning
of the Quarter

Gross Square
Feet Added
During the
Quarter2,3,4

Gross Square
Feet Lost
During the
Quarter2,3

Total Gross
Square Feet
at the End of the
Quarter

1st Quarter 894 37 931
2nd Quarter 931 54 985
3rd Quarter 985 51 1,036
 
__________
1Store count and square footage summary includes company-operated stores which are branded lululemon athletica or ivivva athletica.
2Number of stores opened/closed during the quarter that are branded lululemon athletica or ivivva athletica.
3Gross square feet added/lost during the quarter includes net square foot additions for company-operated stores which have been renovated or relocated in the quarter.
4Excludes franchises.
 

ICR, Inc.
Investor Contact:
Joseph Teklits/Caitlin Morahan, 203-682-8200
or
Media Contact:
Alecia Pulman, 203-682-8224

Source: lululemon athletica inc.

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