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lululemon athletica inc. Announces Third Quarter Fiscal 2016 Results; Board of Directors Authorizes $100 Million Stock Repurchase Program
For the third quarter ended
-
Net revenue increased by 13% to
$544.4 million from$479.7 million in the third quarter of fiscal 2015. - Total comparable sales, which includes comparable store sales and direct to consumer, increased by 7%.
- Comparable store sales increased by 4%.
-
Direct to consumer net revenue increased by 16% to
$104.0 million . -
Gross profit increased by 24% to
$278.4 million , and as a percentage of net revenue gross profit was 51.1% compared to 46.9% in the third quarter of fiscal 2015. -
Income from operations increased by 36% to
$93.0 million from$68.2 million in the third quarter of fiscal 2015, and as a percentage of net revenue was 17.1% compared to 14.2% of net revenue in the third quarter of fiscal 2015. -
Income tax expense increased to
$25.3 million from$12.1 million in the third quarter of fiscal 2015, and the effective tax rate was 27.0% compared to 18.6%. Excluding certain tax and related interest adjustments, the effective tax rate was 31.3% compared to 28.8% in the third quarter of fiscal 2015. -
Diluted earnings per share for the third quarter of fiscal 2016 were
$0.50 compared to$0.38 in the third quarter of fiscal 2015. Excluding certain tax and related interest adjustments, diluted earnings per share were$0.47 for the third quarter of fiscal 2016 compared to$0.35 for the third quarter of fiscal 2015.
The Company ended the third quarter of fiscal 2016 with
The Company also announced that its board of directors has approved a stock repurchase program for up to $100 million of its common shares in the open market at prevailing market prices. The timing and actual number of common shares to be repurchased will depend upon market conditions and other factors, in accordance with Securities and Exchange Commission requirements. The stock repurchase program is intended to create shareholder value by making opportunistic repurchases during periods of favorable market conditions. Shares may be repurchased from time to time on the open market, through block trades or otherwise. Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors.
Updated Outlook
For the fourth quarter of fiscal 2016, we expect net revenue to be in
the range of
For the full fiscal 2016, we now expect net revenue to be in the range
of
Conference Call Information
A conference call to discuss third 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
effective tax rate and diluted earnings per share excluding certain tax
and related interest adjustments, are not
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. 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 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 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 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 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 or unanticipated tax liabilities, capital or
financing needs in
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Thirteen Weeks |
Thirteen Weeks |
Thirty-Nine |
Thirty-Nine |
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Net revenue | $ | 544,416 | $ | 479,693 | $ | 1,554,452 | $ | 1,356,247 | |||||||||
Costs of goods sold | 265,990 | 254,896 | 782,734 | 713,548 | |||||||||||||
Gross profit | 278,426 | 224,797 | 771,718 | 642,699 | |||||||||||||
As a percent of net revenue | 51.1 | % | 46.9 | % | 49.6 | % | 47.4 | % | |||||||||
Selling, general and administrative expenses | 185,451 | 156,619 | 547,195 | 439,906 | |||||||||||||
As a percent of net revenue | 34.1 | % | 32.7 | % | 35.2 | % | 32.4 | % | |||||||||
Income from operations | 92,975 | 68,178 | 224,523 | 202,793 | |||||||||||||
As a percent of net revenue | 17.1 | % | 14.2 | % | 14.4 | % | 15.0 | % | |||||||||
Other income (expense), net | 628 | (2,890 | ) | 720 | (1,519 | ) | |||||||||||
Income before income tax expense | 93,603 | 65,288 | 225,243 | 201,274 | |||||||||||||
Income tax expense | 25,318 | 12,135 | 57,997 | 52,643 | |||||||||||||
Net income | $ | 68,285 | $ | 53,153 | $ | 167,246 | $ | 148,631 | |||||||||
Basic earnings per share | $ | 0.50 | $ | 0.38 | $ | 1.22 | $ | 1.05 | |||||||||
Diluted earnings per share | $ | 0.50 | $ | 0.38 | $ | 1.22 | $ | 1.05 | |||||||||
Basic weighted-average shares outstanding | 137,033 | 140,282 | 137,095 | 141,198 | |||||||||||||
Diluted weighted-average shares outstanding | 137,237 | 140,457 | 137,321 | 141,470 | |||||||||||||
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ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 480,386 | $ | 501,482 | ||||
Inventories | 364,514 | 284,009 | ||||||
Prepaid and receivable income taxes | 123,362 | 91,453 | ||||||
Other current assets | 54,648 | 40,095 | ||||||
Total current assets | 1,022,910 | 917,039 | ||||||
Property and equipment, net | 399,658 | 349,605 | ||||||
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24,567 | 24,777 | ||||||
Deferred income taxes and other non-current assets | 31,805 | 22,656 | ||||||
Total assets | $ | 1,478,940 | $ | 1,314,077 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 9,132 | $ | 10,381 | ||||
Accrued inventory liabilities | 32,146 | 25,451 | ||||||
Accrued compensation and related expenses | 53,641 | 43,524 | ||||||
Income taxes payable | 21,953 | 37,736 | ||||||
Unredeemed gift card liability | 44,173 | 57,736 | ||||||
Other accrued liabilities | 51,663 | 50,676 | ||||||
Total current liabilities | 212,708 | 225,504 | ||||||
Deferred income tax liability | 11,064 | 10,759 | ||||||
Other non-current liabilities | 50,699 | 50,332 | ||||||
Stockholders' equity | 1,204,469 | 1,027,482 | ||||||
Total liabilities and stockholders' equity | $ | 1,478,940 | $ | 1,314,077 | ||||
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Thirty-Nine |
Thirty-Nine |
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Cash flows from operating activities | |||||||||
Net income | $ | 167,246 | $ | 148,631 | |||||
Items not affecting cash | 75,252 | 58,471 | |||||||
Changes in operating assets and liabilities | (145,167 | ) | (181,162 | ) | |||||
Net cash provided by operating activities | 97,331 | 25,940 | |||||||
Net cash used in investing activities | (106,168 | ) | (108,061 | ) | |||||
Net cash used in financing activities | (23,960 | ) | (167,452 | ) | |||||
Effect of exchange rate changes on cash | 11,701 | (11,460 | ) | ||||||
Decrease in cash and cash equivalents | (21,096 | ) | (261,033 | ) | |||||
Cash and cash equivalents, beginning of period | 501,482 | 664,479 | |||||||
Cash and cash equivalents, end of period | $ | 480,386 | $ | 403,446 | |||||
|
Reconciliation of Non-GAAP Financial Measures |
Unaudited |
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 third quarter of fiscal 2016 compared to the third quarter of fiscal 2015.
Change in Net |
Change in |
Change in |
Change in |
||||||
Increase | 13% | 7% | 4% | 16% | |||||
Adjustments due to foreign exchange rate changes | — | — | — | — | |||||
Increase in constant dollars | 13% | 7% | 4% | 16% |
__________ | ||
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. | |
Effective tax rate and diluted earnings per share, excluding tax and related interest adjustments
Thirteen Weeks |
Thirteen Weeks |
Thirty-Nine |
Thirty-Nine |
||||||||||||||
Effective tax rate | 27.0 | % | 18.6 | % | 25.7 | % | 26.2 | % | |||||||||
Tax and related interest adjustments1 | 4.3 | 10.2 | 5.0 | 3.3 | |||||||||||||
Effective tax rate, excluding tax and related interest adjustments | 31.3 | % | 28.8 | % | 30.7 | % | 29.5 | % | |||||||||
Thirteen Weeks |
Thirteen Weeks |
Thirty-Nine |
Thirty-Nine |
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Diluted earnings per share | $ | 0.50 | $ | 0.38 | $ | 1.22 | $ | 1.05 | |||||||||
Tax and related interest adjustments1 | (0.03 | ) | (0.03 | ) | (0.07 | ) | (0.03 | ) | |||||||||
Diluted earnings per share, excluding tax and related interest adjustments | $ | 0.47 | $ | 0.35 | $ | 1.15 | $ | 1.02 | |||||||||
__________ | ||
1 |
These adjustments relate to the Company's transfer pricing
arrangements and the associated 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 |
|
Expected annual effective tax rate and diluted earnings per share, excluding tax and related interest adjustments
Fifty-Two |
|||
Expected effective tax rate | 28.2% | ||
Tax and related interest adjustments1 | 2.7 | ||
Expected effective tax rate, excluding tax and related interest adjustments | 30.9% | ||
Fifty-Two |
|||
Expected diluted earnings per share range |
|
||
Tax and related interest adjustments1 | (0.07) | ||
Diluted earnings per share, excluding tax and related interest adjustments |
|
||
__________ | ||
1 |
These adjustments relate to the Company's transfer pricing
arrangements and the associated 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 |
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Number of |
Number of |
Number of |
Number of |
|||||
4th Quarter 2015 | 354 | 10 | 1 | 363 | ||||
1st Quarter 2016 | 363 | 11 | 1 | 373 | ||||
2nd Quarter 2016 | 373 | 6 | — | 379 | ||||
3rd Quarter 2016 | 379 | 12 | 2 | 389 | ||||
Total Gross |
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Total Gross |
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4th Quarter 2015 | 1,036 | 38 | 3 | 1,071 | ||||
1st Quarter 2016 | 1,071 | 26 | 2 | 1,095 | ||||
2nd Quarter 2016 | 1,095 | 22 | — | 1,117 | ||||
3rd Quarter 2016 | 1,117 | 32 | 5 | 1,144 | ||||
__________ | ||
1 | Store count and square footage summary includes company-operated stores which are branded lululemon or ivivva. Excludes retail locations operated by a third party under a license and supply arrangement. | |
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. | |
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