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lululemon athletica inc. Announces First Quarter Fiscal 2018 Results
Revenue up 25% to
Comparable sales increase 20%, or 19% on a constant dollar basis
Diluted EPS of
The summary below provides both GAAP and adjusted non-GAAP financial
measures. In connection with the restructuring of its ivivva operations,
the Company recognized pre-tax costs totaling
For the first quarter ended
-
Net revenue was
$649.7 million , an increase of 25% compared to the first quarter of fiscal 2017. On a constant dollar basis, net revenue increased 23%. -
Total comparable sales increased 20%, or increased 19% on a constant
dollar basis.
- Comparable store sales increased 8%, or increased 6% on a constant dollar basis.
- Direct to consumer net revenue increased 62%, or increased 60% on a constant dollar basis.
-
Gross profit was
$344.7 million , an increase of 34% compared to the first quarter of fiscal 2017. Gross profit increased 31% compared to adjusted gross profit for the first quarter of fiscal 2017. - Gross margin was 53.1%, an increase of 370 basis points compared to the first quarter of fiscal 2017. Gross margin increased 270 basis points compared to adjusted gross margin for the first quarter of fiscal 2017.
-
Income from operations was
$104.3 million , an increase of 130% compared to the first quarter of fiscal 2017. Income from operations increased 65% compared to adjusted income from operations for the first quarter of fiscal 2017. - Operating margin was 16.1%, an increase of 740 basis points compared to the first quarter of fiscal 2017. Operating margin increased 400 basis points compared to adjusted operating margin for the first quarter of fiscal 2017.
-
Income tax expense was
$32.1 million compared to$15.1 million in the first quarter of fiscal 2017 and the effective tax rate was 29.9% compared to 32.6%. The adjusted effective tax rate in the first quarter of fiscal 2017 was 30.8%. -
Diluted earnings per share were
$0.55 compared to$0.23 in the first quarter of fiscal 2017. Adjusted diluted earnings per share for the first quarter of fiscal 2017 were$0.32 .
The Company ended the first quarter of fiscal 2018 with
Updated Outlook
For the second quarter of fiscal 2018, we expect net revenue to be in
the range of
For the full fiscal 2018, we now expect net revenue to be in the range
of
The guidance and outlook forward-looking statements made in this press release are based on management's expectations as of the date of this press release and the Company undertakes no duty to update or to continue to provide information with respect to any forward-looking statements or risk factors, whether as a result of new information or future events or circumstances or otherwise. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of risks and uncertainties, including those stated below.
Conference Call Information
A conference call to discuss first quarter results is scheduled for
today,
About
Non-GAAP Financial Measures
Constant dollar changes in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue, and the adjusted financial results are non-GAAP financial measures.
A constant dollar basis assumes the average foreign exchange rates for the 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 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. 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.
Adjusted gross profit, gross margin, income from operations, operating margin, effective tax rates, and diluted earnings per share exclude the costs recognized in connection with the restructuring of our ivivva operations and its related tax effects. We believe these adjusted financial measures are useful to investors as the adjustments do not directly relate to our ongoing business operations and therefore do not contribute to a meaningful evaluation of the trend in our operating performance. Furthermore, we do not believe the adjustments are reflective of our expectations of our future operating performance and believe these non-GAAP measures are useful to investors because of their comparability to our historical information.
The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or with greater prominence to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the section 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 includes estimates, projections, statements relating
to our business plans, objectives, and expected operating results that
are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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 also include our guidance and outlook
statements. These 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; the acceptability of our
products to our guests; our highly competitive market and increasing
competition; 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; 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
guest 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 have
technology-based systems function effectively and grow our e-commerce
business globally; 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 guest expectations if
we have problems with our distribution system; imitation by our
competitors; our ability to protect our intellectual property rights;
the continued service of our senior management and our ability to
identify and attract our next Chief Executive Officer; changes in tax
laws or unanticipated tax liabilities; our ability to manage our growth
and the increased complexity of our business effectively; our ability to
cancel store leases if an existing or new store is not profitable; our
ability to source our merchandise profitably or at all if new trade
restrictions are imposed or existing trade restrictions become more
burdensome; increasing labor costs and other factors associated with the
production of our products in South and
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Condensed Consolidated Statements of Operations Unaudited; Expressed in thousands, except per share amounts |
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Quarter Ended | ||||||||||
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Net revenue | $ | 649,706 | $ | 520,307 | ||||||
Costs of goods sold | 304,973 | 263,412 | ||||||||
Gross profit | 344,733 | 256,895 | ||||||||
As a percent of net revenue | 53.1 | % | 49.4 | % | ||||||
Selling, general and administrative expenses | 240,428 | 199,141 | ||||||||
As a percent of net revenue | 37.0 | % | 38.3 | % | ||||||
Asset impairments and restructuring costs | — | 12,331 | ||||||||
As a percent of net revenue | — | % | 2.4 | % | ||||||
Income from operations | 104,305 | 45,423 | ||||||||
As a percent of net revenue | 16.1 | % | 8.7 | % | ||||||
Other income (expense), net | 2,918 | 907 | ||||||||
Income before income tax expense | 107,223 | 46,330 | ||||||||
Income tax expense | 32,070 | 15,084 | ||||||||
Net income | $ | 75,153 | $ | 31,246 | ||||||
Basic earnings per share | $ | 0.55 | $ | 0.23 | ||||||
Diluted earnings per share | $ | 0.55 | $ | 0.23 | ||||||
Basic weighted-average shares outstanding | 135,502 | 137,037 | ||||||||
Diluted weighted-average shares outstanding | 135,931 | 137,192 | ||||||||
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Condensed Consolidated Balance Sheets Unaudited; Expressed in thousands |
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2018 |
2018 |
2017 |
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ASSETS | |||||||||||||
Current assets | |||||||||||||
Cash and cash equivalents | $ | 966,571 | $ | 990,501 | $ | 698,289 | |||||||
Inventories | 373,445 | 329,562 | 303,950 | ||||||||||
Prepaid and receivable income taxes | 46,927 | 48,948 | 76,231 | ||||||||||
Other current assets | 65,912 | 67,271 | 54,211 | ||||||||||
Total current assets | 1,452,855 | 1,436,282 | 1,132,681 | ||||||||||
Property and equipment, net | 472,262 | 473,642 | 398,833 | ||||||||||
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24,361 | 24,679 | 24,248 | ||||||||||
Deferred income taxes and other non-current assets | 62,227 | 63,880 | 53,572 | ||||||||||
Total assets | $ | 2,011,705 | $ | 1,998,483 | $ | 1,609,334 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||
Current liabilities | |||||||||||||
Accounts payable | $ | 16,255 | $ | 24,646 | $ | 8,533 | |||||||
Accrued inventory liabilities | 19,861 | 13,027 | 20,610 | ||||||||||
Accrued compensation and related expenses | 54,261 | 70,141 | 39,076 | ||||||||||
Current income taxes payable | 19,445 | 15,700 | 26,951 | ||||||||||
Unredeemed gift card liability | 69,510 | 82,668 | 59,398 | ||||||||||
Lease termination liabilities | 5,523 | 6,427 | — | ||||||||||
Other current liabilities | 82,486 | 79,989 | 51,405 | ||||||||||
Total current liabilities | 267,341 | 292,598 | 205,973 | ||||||||||
Non-current income taxes payable | 44,078 | 48,268 | — | ||||||||||
Deferred income tax liability | 1,582 | 1,336 | 6,950 | ||||||||||
Other non-current liabilities | 62,470 | 59,321 | 48,724 | ||||||||||
Stockholders' equity | 1,636,234 | 1,596,960 | 1,347,687 | ||||||||||
Total liabilities and stockholders' equity | $ | 2,011,705 | $ | 1,998,483 | $ | 1,609,334 | |||||||
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Condensed Consolidated Statements of Cash Flows Unaudited; Expressed in thousands |
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Quarter Ended | ||||||||||
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Cash flows from operating activities | ||||||||||
Net income | $ | 75,153 | $ | 31,246 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities | (39,316 | ) | (11,846 | ) | ||||||
Net cash provided by operating activities | 35,837 | 19,400 | ||||||||
Net cash used in investing activities | (34,314 | ) | (19,879 | ) | ||||||
Net cash provided by (used in) financing activities | 1,900 | (14,487 | ) | |||||||
Effect of exchange rate changes on cash | (27,353 | ) | (21,591 | ) | ||||||
Decrease in cash and cash equivalents | (23,930 | ) | (36,557 | ) | ||||||
Cash and cash equivalents, beginning of period | 990,501 | 734,846 | ||||||||
Cash and cash equivalents, end of period | $ | 966,571 | $ | 698,289 | ||||||
Reconciliation of Non-GAAP Financial Measures
Unaudited;
Expressed in thousands, except per share amounts
Constant dollar changes in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue
The below changes in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue show the net change for the first quarter of fiscal 2018 compared to the first quarter of fiscal 2017.
Net Revenue |
Total |
Comparable |
Direct to |
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Increase | 25 | % | 20 | % | 8 | % | 62 | % | ||||||
Adjustments due to foreign exchange rate changes | (2 | ) | (1 | ) | (2 | ) | (2 | ) | ||||||
Increase in constant dollars | 23 | % | 19 | % | 6 | % | 60 | % |
__________ | |
1 |
Total comparable sales includes comparable store sales and direct to consumer sales. |
2 |
Comparable store sales reflects net revenue from company-operated stores that have been open for at least 12 months, or open for at least 12 months after being significantly expanded. |
Adjusted financial measures
The following table reconciles adjusted financial measures with the most
directly comparable measures calculated in accordance with GAAP. The
adjustments relate to the restructuring of our ivivva operations and its
related tax effects. Please refer to Note 6 to the unaudited interim
consolidated financial statements included in Item 1 of Part I of our
Report on Form 10-Q to be filed with the
Quarter Ended |
Quarter Ended |
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GAAP Results | Adjustments |
Adjusted |
GAAP Results |
Restructuring |
Adjusted |
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(In thousands, except per share amounts) | |||||||||||||||||||||||||||
Gross profit | $ | 344,733 | $ | — | $ | 344,733 | $ | 256,895 | $ | 5,419 | $ | 262,314 | |||||||||||||||
Gross margin | 53.1 | % | — | % | 53.1 | % | 49.4 | % | 1.0 | % | 50.4 | % | |||||||||||||||
Income from operations | 104,305 | — | 104,305 | 45,423 | 17,750 | 63,173 | |||||||||||||||||||||
Operating margin | 16.1 | % | — | % | 16.1 | % | 8.7 | % | 3.4 | % | 12.1 | % | |||||||||||||||
Income before income tax expense | 107,223 | — | 107,223 | 46,330 | 17,750 | 64,080 | |||||||||||||||||||||
Income tax expense | 32,070 | — | 32,070 | 15,084 | 4,684 | 19,768 | |||||||||||||||||||||
Effective tax rate | 29.9 | % | — | % | 29.9 | % | 32.6 | % | (1.8 | )% | 30.8 | % | |||||||||||||||
Diluted earnings per share | $ | 0.55 | $ | — | $ | 0.55 | $ | 0.23 | $ | 0.09 | $ | 0.32 | |||||||||||||||
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Company-operated Store Count and Square Footage1 Square Footage Expressed in Thousands |
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Number of |
Number of |
Number of |
Number of |
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2nd Quarter 2017 | 411 | 11 | 1 | 421 | |||||||||
3rd Quarter 2017 | 421 | 17 | 50 | 388 | |||||||||
4th Quarter 2017 | 388 | 16 | — | 404 | |||||||||
1st Quarter 2018 | 404 | 7 | — | 411 | |||||||||
Total Gross |
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Total Gross |
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2nd Quarter 2017 | 1,204 | 37 | 3 | 1,238 | |||||||||
3rd Quarter 2017 | 1,238 | 43 | 89 | 1,192 | |||||||||
4th Quarter 2017 | 1,192 | 70 | — | 1,262 | |||||||||
1st Quarter 2018 | 1,262 | 15 | — | 1,277 | |||||||||
__________ | |
1 | Company-operated store count and square footage summary excludes retail locations operated by third parties under license and supply arrangements. |
2 | Gross 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. |
3 |
On |
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