lululemon athletica, inc.
Jun 8, 2016

lululemon athletica inc. Announces First Quarter Fiscal 2016 Results

VANCOUVER, British Columbia--(BUSINESS WIRE)-- lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the first quarter ended May 1, 2016.

For the first quarter ended May 1, 2016:

The Company ended the first quarter of fiscal 2016 with $550.0 million in cash and cash equivalents compared to $655.9 million at the end of the first quarter of fiscal 2015. Inventories at the end of the first quarter of fiscal 2016 increased by 21% to $286.2 million compared to $236.5 million at the end of the first quarter of fiscal 2015. The Company ended the quarter with 373 stores.

Laurent Potdevin, lululemon's CEO, stated: "We are pleased with our first quarter performance, delivering strong sales results and gross margin that exceeded expectations. We finished the quarter with our inventory levels rebalanced and on track to achieve our goals for the year."

Mr. Potdevin continued: "I'm extremely proud of our teams who have relentlessly built the capabilities and infrastructure necessary to support profitable growth. By continuing to invest in our people and focus on product innovation, we are well on our way to deliver on our five year plan."

Updated Outlook

For the second quarter of fiscal 2016, we expect net revenue to be in the range of $505 million to $515 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 $0.36 to $0.38 for the quarter. This guidance assumes 137.5 million diluted weighted-average shares outstanding and a 30.2% tax rate.

For the full fiscal 2016, we now expect net revenue to be in the range of $2.305 billion to $2.345 billion 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 $2.08 to $2.18 for the full year, or $2.05 to $2.15 normalized for the tax and related interest adjustments made during the first quarter of fiscal 2016. This guidance assumes 137.5 million diluted weighted-average shares outstanding and a 28.9% tax rate, which includes the above tax and related interest adjustments.

Conference Call Information

A conference call to discuss first quarter results is scheduled for today, June 8, 2016, 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

Constant dollar changes in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue, and the effective tax rate and diluted earnings per share excluding certain tax and related interest adjustments, are not United States generally accepted accounting principle ("GAAP") financial measures.

A constant dollar basis assumes the average foreign exchange rates for the current 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 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 effective tax rate and diluted earnings per share excluding certain tax and related interest adjustments because of their comparability to our historical information, 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; our highly competitive market and increasing competition; an economic downturn or economic uncertainty in our key markets; 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; changes in tax laws, capital or financing needs in the United States, or our intentions with respect to the reinvestment of foreign earnings; 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
May 1, 2016

Thirteen Weeks
Ended
May 3, 2015

Net revenue $ 495,516 $ 423,544
Costs of goods sold 256,385   217,667  
Gross profit 239,131 205,877
As a percent of net revenue 48.3 % 48.6 %
Selling, general and administrative expenses 181,542 137,841
As a percent of net revenue 36.6 % 32.5 %
Income from operations 57,589 68,036
As a percent of net revenue 11.6 % 16.1 %
Other (expense) income, net (486 ) 529  
Income before income tax expense 57,103 68,565
Income tax expense 11,767   20,755  
Net income $ 45,336   $ 47,810  
 
Basic earnings per share $ 0.33 $ 0.34
Diluted earnings per share $ 0.33 $ 0.34
Basic weighted-average shares outstanding 137,263 141,967
Diluted weighted-average shares outstanding 137,496 142,337
 
 

lululemon athletica inc.


Condensed Consolidated Balance Sheets

Unaudited; Expressed in thousands

         

    May 1, 2016    

  January 31, 2016  

ASSETS
Current assets
Cash and cash equivalents $ 550,046 $ 501,482
Inventories 286,230 284,009
Prepaid and receivable income taxes 92,095 91,453
Other current assets 42,822 40,095
Total current assets 971,193 917,039
Property and equipment, net 377,813 349,605
Goodwill and intangible assets, net 25,320 24,777
Deferred income taxes and other non-current assets 27,329 22,656
Total assets $ 1,401,655 $ 1,314,077
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 6,443 $ 10,381
Accrued inventory liabilities 21,901 25,451
Accrued compensation and related expenses 35,083 43,524
Income taxes payable 36,892 37,736
Unredeemed gift card liability 50,387 57,736
Other accrued liabilities 51,722 50,676
Total current liabilities 202,428 225,504
Deferred income tax liability 11,382 10,759
Other non-current liabilities 51,620 50,332
Stockholders' equity 1,136,225 1,027,482
Total liabilities and stockholders' equity $ 1,401,655 $ 1,314,077
 
 

lululemon athletica inc.


Condensed Consolidated Statements of Cash Flows

Unaudited; Expressed in thousands

           

Thirteen Weeks
Ended
May 1, 2016

Thirteen Weeks
Ended
May 3, 2015

Cash flows from operating activities
Net income $ 45,336 $ 47,810
Items not affecting cash 22,066 17,955
Changes in operating assets and liabilities (27,668 ) (44,825 )
Net cash provided by operating activities 39,734 20,940
Net cash used in investing activities (26,644 ) (27,936 )
Net cash used in financing activities (13,329 ) (17,041 )
Effect of exchange rate changes on cash 48,803   15,439  
Increase (decrease) in cash and cash equivalents 48,564 (8,598 )
Cash and cash equivalents, beginning of period 501,482   664,479  
Cash and cash equivalents, end of period $ 550,046   $ 655,881  
 
 

lululemon athletica inc.


Reconciliation of Non-GAAP Financial Measures

Unaudited

 
The below changes in net revenue, total comparable sales, comparable store sales, and direct to consumer revenue show the dollar and percentage change compared to the corresponding period in the prior year.
 

Constant dollar changes in net revenue

       
Thirteen Weeks Ended
May 1, 2016
Thirteen Weeks Ended
May 3, 2015
(In thousands)   (Percentage) (In thousands)   (Percentage)
Net revenue increase $ 71,972 17% $ 38,926 10%
Adjustments due to foreign exchange rate changes 7,292

2   

15,208

4   

Net revenue increase in constant dollars $ 79,264 19% $ 54,134 14%
 

Constant dollar changes in total comparable sales

                       

Thirteen Weeks
Ended
May 1, 2016

Thirteen Weeks
Ended
May 3, 2015

Increase in total comparable sales1 6% 2%
Adjustments due to foreign exchange rate changes

2   

4   

Increase in total comparable sales in constant dollars1 8% 6%

__________

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 changes in comparable store sales

         

Thirteen Weeks
Ended
May 1, 2016

Thirteen Weeks
Ended
May 3, 2015

Increase (decrease) in comparable store sales1 3% (5)%
Adjustments due to foreign exchange rate changes

2   

4     

Increase (decrease) in comparable store sales in constant dollars1 5% (1)%

__________

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 net revenue

           

Thirteen Weeks
Ended
May 1, 2016

Thirteen Weeks
Ended
May 3, 2015

Increase in direct to consumer net revenue 17% 27%
Adjustments due to foreign exchange rate changes

1   

4   

Increase in direct to consumer net revenue in constant dollars 18% 31%
 

Effective tax rate, excluding tax and related interest adjustments

         

Thirteen Weeks
Ended
November 1,
2015

Thirteen Weeks
Ended
November 2,
2014

Effective tax rate 20.6% 30.3%
Tax and related interest adjustments1

9.2   

—   

Effective tax rate, excluding tax and related interest adjustments 29.8% 30.3%

__________

1These adjustments relate to the Company's transfer pricing arrangements and the associated plan to repatriate 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 June 8, 2016 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 $ 0.33 $ 0.34
Tax and related interest adjustments1 (0.03 )
Diluted earnings per share, excluding tax and related interest adjustments $ 0.30 $ 0.34

__________

1These adjustments relate to the Company's transfer pricing arrangements and the associated plan to repatriate 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 June 8, 2016 for an explanation as to the nature of these items.
 
 
 

lululemon athletica inc.


Store Count and Square Footage1

Thirteen Weeks Ended May 1, 2016

Square Footage Expressed in Thousands

                               

Number of

Stores Open at

the

Beginning of

the Quarter

Number of

Stores Opened

During the

Quarter3

Number of

Stores Closed

During the

Quarter

Number of

Stores Open

at the End of

the Quarter

1st Quarter 363 11 1 373
 

Total Gross

Square Feet at

the Beginning

of the Quarter

Gross Square

Feet Added

During the

Quarter2,3

Gross Square

Feet Lost

During the

Quarter2

Total Gross

Square Feet at

the End of the

Quarter

1st Quarter 1,071 26 2 1,095

__________

1Store count and square footage summary includes company-operated stores which are branded lululemon athletica or ivivva athletica.
2Gross 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.
3Excludes retail locations operated by a third party under a license and supply arrangement.
 

ICR, Inc.
Investors:
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203-682-8200
or
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