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lululemon athletica inc. Announces Third Quarter Fiscal 2017 Results
Board of Directors Authorizes
The Company reported diluted earnings per share 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 third quarter ended
-
Net revenue was
$619.0 million , an increase of 14% compared to the third quarter of fiscal 2016. On a constant dollar basis, net revenue increased 12%. -
Total comparable sales increased 8%, or increased 7% on a constant
dollar basis.
- Comparable store sales increased 2%, or increased 1% on a constant dollar basis.
- Direct to consumer net revenue increased 26%, or increased 25% on a constant dollar basis.
-
Gross profit was
$322.0 million , an increase of 16% compared to the third quarter of fiscal 2016. Adjusted gross profit was$323.1 million , an increase of 16%. - Gross margin was 52.0%, an increase of 90 basis points compared to the third quarter of fiscal 2016. Adjusted gross margin was 52.2%, an increase of 110 basis points.
-
Income from operations was
$85.6 million , a decrease of 8% compared to the third quarter of fiscal 2016. Adjusted income from operations increased$14.8 million , or 16%, to$107.8 million . - Operating margin was 13.8%, a decrease of 330 basis points compared to the third quarter of fiscal 2016. Adjusted operating margin was 17.4%, an increase of 30 basis points.
-
Income tax expense was
$27.7 million compared to$25.3 million in the third quarter of fiscal 2016 and the effective tax rate was 32.0% compared to 27.0%. The adjusted effective tax rate was 30.8% compared to 31.3% in the third quarter of fiscal 2016. -
Diluted earnings per share were
$0.43 compared to$0.50 in the third quarter of fiscal 2016. Adjusted diluted earnings per share were$0.56 compared to$0.47 for the third quarter of fiscal 2016. -
The Company repurchased 0.1 million shares of its own common stock at
an average cost of $60.27 per share, completing the previous
$100 million stock repurchase program which commenced inDecember 2016 .
The Company ended the third quarter of fiscal 2017 with
The Company also announced that its board of directors has approved a new stock repurchase program for up to $200 million of its common shares in the open market at prevailing market prices, including under plans complying with the provisions of Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934. The timing and actual number of common shares to be repurchased will depend upon market conditions, eligibility to trade, and other factors, in accordance with Securities and Exchange Commission requirements, and the repurchase program is expected to be completed in two years. 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
In connection with the restructuring of the ivivva operations, we expect
to recognize total pre-tax costs of between
For the fourth quarter of fiscal 2017, we expect net revenue to be in
the range of
For the full fiscal 2017, 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 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 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, its related tax effects, and certain discrete items related to our transfer pricing arrangements and taxes on repatriation of foreign earnings. 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 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 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; 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 | Three Quarters Ended | |||||||||||||||
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Net revenue | $ | 619,018 | $ | 544,416 | $ | 1,720,379 | $ | 1,554,452 | ||||||||
Costs of goods sold | 297,056 | 265,990 | 844,100 | 782,734 | ||||||||||||
Gross profit | 321,962 | 278,426 | 876,279 | 771,718 | ||||||||||||
As a percent of net revenue | 52.0 | % | 51.1 | % | 50.9 | % | 49.6 | % | ||||||||
Selling, general and administrative expenses | 215,367 | 185,451 | 640,032 | 547,195 | ||||||||||||
As a percent of net revenue | 34.8 | % | 34.1 | % | 37.2 | % | 35.2 | % | ||||||||
Asset impairments and restructuring costs | 21,007 | — | 36,524 | — | ||||||||||||
As a percent of net revenue | 3.4 | % | — | % | 2.1 | % | — | % | ||||||||
Income from operations | 85,588 | 92,975 | 199,723 | 224,523 | ||||||||||||
As a percent of net revenue | 13.8 | % | 17.1 | % | 11.6 | % | 14.4 | % | ||||||||
Other income (expense), net | 1,052 | 628 | 2,771 | 720 | ||||||||||||
Income before income tax expense | 86,640 | 93,603 | 202,494 | 225,243 | ||||||||||||
Income tax expense | 27,696 | 25,318 | 63,593 | 57,997 | ||||||||||||
Net income | $ | 58,944 | $ | 68,285 | $ | 138,901 | $ | 167,246 | ||||||||
Basic earnings per share | $ | 0.44 | $ | 0.50 | $ | 1.02 | $ | 1.22 | ||||||||
Diluted earnings per share | $ | 0.43 | $ | 0.50 | $ | 1.02 | $ | 1.22 | ||||||||
Basic weighted-average shares outstanding | 135,364 | 137,033 | 136,191 | 137,095 | ||||||||||||
Diluted weighted-average shares outstanding | 135,578 | 137,237 | 136,357 | 137,321 |
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Condensed Consolidated Balance Sheets Unaudited; Expressed in thousands |
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2017 |
2017 |
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ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 650,054 | $ | 734,846 | |||
Inventories | 396,892 | 298,432 | |||||
Prepaid and receivable income taxes | 77,625 | 81,190 | |||||
Other current assets | 63,777 | 48,269 | |||||
Total current assets | 1,188,348 | 1,162,737 | |||||
Property and equipment, net | 440,403 | 423,499 | |||||
|
24,476 | 24,557 | |||||
Deferred income taxes and other non-current assets | 67,222 | 46,748 | |||||
Total assets | $ | 1,720,449 | $ | 1,657,541 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities | |||||||
Accounts payable | $ | 14,113 | $ | 24,846 | |||
Accrued inventory liabilities | 23,420 | 8,601 | |||||
Accrued compensation and related expenses | 62,387 | 55,238 | |||||
Income taxes payable | 4,403 | 30,290 | |||||
Unredeemed gift card liability | 52,500 | 70,454 | |||||
Lease termination liabilities | 12,164 | — | |||||
Other accrued liabilities | 71,590 | 52,561 | |||||
Total current liabilities | 240,577 | 241,990 | |||||
Deferred income tax liability | — | 7,262 | |||||
Other non-current liabilities | 58,596 | 48,316 | |||||
Stockholders' equity | 1,421,276 | 1,359,973 | |||||
Total liabilities and stockholders' equity | $ | 1,720,449 | $ | 1,657,541 |
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Condensed Consolidated Statements of Cash Flows Unaudited; Expressed in thousands |
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Three Quarters Ended | ||||||||
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Cash flows from operating activities | ||||||||
Net income | $ | 138,901 | $ | 167,246 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | (7,592 | ) | (68,587 | ) | ||||
Net cash provided by operating activities | 131,309 | 98,659 | ||||||
Net cash used in investing activities | (120,051 | ) | (106,168 | ) | ||||
Net cash used in financing activities | (100,707 | ) | (25,288 | ) | ||||
Effect of exchange rate changes on cash | 4,657 | 11,701 | ||||||
(Decrease) increase in cash and cash equivalents | (84,792 | ) | (21,096 | ) | ||||
Cash and cash equivalents, beginning of period | 734,846 | 501,482 | ||||||
Cash and cash equivalents, end of period | $ | 650,054 | $ | 480,386 |
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 third quarter of fiscal 2017 compared to the third quarter of fiscal 2016.
Net Revenue |
Total |
Comparable |
Direct to |
|||||
Increase | 14% | 8% | 2% | 26% | ||||
Adjustments due to foreign exchange rate changes | (2) | (1) | (1) | (1) | ||||
Increase in constant dollars | 12% | 7% | 1% | 25% |
__________
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:
Quarter Ended |
Quarter Ended |
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GAAP Results |
Adjustments |
Adjusted |
GAAP Results |
Adjustments |
Adjusted |
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Gross profit1 | $ | 321,962 | $ | 1,178 | $ | 323,140 | $ | 278,426 | $ | — | $ | 278,426 | ||||||||||||
Gross margin1 | 52.0 | % | 0.2 | % | 52.2 | % | 51.1 | % | — | % | 51.1 | % | ||||||||||||
Income from operations1,2 | 85,588 | 22,186 | 107,774 | 92,975 | — | 92,975 | ||||||||||||||||||
Operating margin1,2 | 13.8 | % | 3.6 | % | 17.4 | % | 17.1 | % | — | % | 17.1 | % | ||||||||||||
Income before income tax |
86,640 | 22,185 | 108,825 | 93,603 | 186 | 93,789 | ||||||||||||||||||
Income tax expense3,4 | 27,696 | 5,813 | 33,509 | 25,318 | 4,005 | 29,323 | ||||||||||||||||||
Effective tax rate3,4 | 32.0 | % | (1.2 | )% | 30.8 | % | 27.0 | % | 4.3 | % | 31.3 | % | ||||||||||||
Diluted earnings per |
$ | 0.43 | $ | 0.13 | $ | 0.56 | $ | 0.50 | $ | (0.03 | ) | $ | 0.47 |
__________
1 |
During the third quarter of fiscal 2017, we recognized costs
totaling |
|
2 |
During the third quarter of fiscal 2017, we recognized asset
impairment and restructuring costs related to the restructuring of
our ivivva operations totaling |
|
3 | The adjustments in the third quarter of fiscal 2016 relate to our transfer pricing arrangements, the associated repatriation of foreign earnings, and net interest costs. These adjustments were recorded in income tax expense and other income (expense), net. | |
4 | The adjustment to income tax expense for the third quarter of fiscal 2017 represents the tax effect of the ivivva related restructuring adjustments, calculated based on the expected annual tax rate of the applicable tax jurisdictions. |
Please refer to Notes 6 and 7 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
Adjusted expected gross margin, effective tax rate, and diluted earnings per share
Fiscal Year Ending |
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Expected gross margin | 51.9% to 52.4% | |||
Non-GAAP adjustments1 | 0.3 | |||
Adjusted expected gross margin | 52.2% to 52.7% | |||
Fiscal Year Ending |
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Expected effective tax rate | 30.9% | |||
Non-GAAP adjustments1 | (0.5) | |||
Adjusted expected effective tax rate | 30.4% | |||
Quarter Ending |
Fiscal Year Ending |
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Expected diluted earnings per share range |
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Non-GAAP adjustments1 | 0.01 | 0.25 | ||
Adjusted expected diluted earnings per share range |
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__________
1 |
These adjustments relate to the restructuring of our ivivva
operations. 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 |
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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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4th Quarter 2016 | 389 | 17 | — | 406 | ||||
1st Quarter 2017 | 406 | 5 | — | 411 | ||||
2nd Quarter 2017 | 411 | 11 | 1 | 421 | ||||
3rd Quarter 2017 | 421 | 17 | 50 | 388 | ||||
Total Gross |
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Total Gross |
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4th Quarter 2016 | 1,144 | 47 | 1 | 1,190 | ||||
1st Quarter 2017 | 1,190 | 14 | — | 1,204 | ||||
2nd Quarter 2017 | 1,204 | 37 | 3 | 1,238 | ||||
3rd Quarter 2017 | 1,238 | 43 | 89 | 1,192 |
__________
1 |
Store count and square footage summary includes company-operated
stores which are branded |
|
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 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20171206006211/en/
Investor:
203-682-8200
or
Media:
Brunswick
Laura
Buchanan / Ash Spielgelberg
+44 7974 982492 / 214-205-6805
or
lululemon athletica
inc.
+44 7983 026340
Source:
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