lulu-20211209
0001397187false00013971872021-12-092021-12-09

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
December 9, 2021
Date of Report (Date of earliest event reported)
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lululemon athletica inc.
(Exact name of registrant as specified in its charter)
 
Delaware001-3360820-3842867
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
1818 Cornwall Avenue
Vancouver, British Columbia
Canada, V6J 1C7
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: (604732-6124
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $0.005 per shareLULUNasdaq Global Select Market
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐



Item 2.02.Results of Operations and Financial Condition.
On December 9, 2021, lululemon athletica inc. (the "Company") issued a press release announcing its financial results for the third quarter ended October 31, 2021 and certain other information. A copy of the Company's press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. As previously announced, the Company has scheduled a conference call for 4:30 p.m. Eastern time on December 9, 2021 to discuss its financial results.
Item 9.01.Financial Statements and Exhibits.
 (d) Exhibits.
Exhibit No.  Description
99.1  



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
lululemon athletica inc.
Dated: December 9, 2021/s/ MEGHAN FRANK
Meghan Frank
Chief Financial Officer



EXHIBIT INDEX
 
Exhibit No.  Description
99.1  Press release issued on December 9, 2021.

Document

Exhibit 99.1

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LULULEMON ATHLETICA INC. ANNOUNCES THIRD QUARTER FISCAL 2021 RESULTS
Revenue increased 30% to $1.5 billion
Diluted EPS of $1.44, Adjusted EPS of $1.62
Vancouver, British Columbia – December 9, 2021 – lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the third quarter of fiscal 2021.
Calvin McDonald, Chief Executive Officer, stated: "Our third quarter results demonstrate the ongoing strength of lululemon and the tremendous growth potential of the business in both the near- and long-term. We are pleased with our early holiday season performance and how the lululemon brand continues to resonate in markets around the world. We are energized by the exciting opportunities ahead, and I'm proud of our teams across the globe for their passion and agility – I want to thank everyone for delivering a strong quarter."
The fiscal year ending January 30, 2022 is referred to as "2021" and the fiscal year ended January 31, 2021 is referred to as "2020". The adjusted non-GAAP financial measures below exclude certain costs incurred in connection with the acquisition of MIRROR, and the related tax effects.
For the third quarter of 2021, compared to the third quarter of 2020:
Net revenue increased 30% to $1.5 billion. On a constant dollar basis, net revenue increased 28%.
Net revenue increased 28% in North America, and increased 40% internationally.
Total comparable sales increased 27%, or increased 26% on a constant dollar basis.
Comparable store sales increased 32%, or increased 31% on a constant dollar basis.
Direct to consumer net revenue increased 23% to $586.5 million. On a constant dollar basis, direct to consumer net revenue increased 21%.
Direct to consumer net revenue represented 40.4% of total net revenue compared to 42.8% for the third quarter of 2020.
Gross profit increased 32% to $829.4 million and gross margin increased 110 basis points to 57.2%.
Income from operations increased 26% to $257.9 million. Adjusted income from operations increased 32% to $282.1 million.
Operating margin decreased 50 basis points to 17.8%. Adjusted operating margin increased 30 basis points to 19.4%.
Income tax expense increased 16% to $70.2 million. The effective tax rate for the third quarter of 2021 was 27.2% compared to 29.7% for the third quarter of 2020. The adjusted effective tax rate was 25.1% for the third quarter of 2021 compared to 28.9% for the third quarter of 2020.
Diluted earnings per share were $1.44 compared to $1.10 in the third quarter of 2020. Adjusted diluted earnings per share were $1.62 compared to $1.16 in the third quarter of 2020.
The Company repurchased 0.6 million shares of its own common stock at an average price of $405.87 per share for a total cost of $236.4 million.
The Company opened 18 net new company-operated stores during the third quarter, ending with 552 stores.
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The consolidated statement of operations for the third quarter of 2019 is included in the tables at the end of this release for reference. For the third quarter of 2021, compared to the third quarter of 2019:
Net revenue increased by $534.3 million, or 58%, representing a two-year compound annual growth rate of 26%.
Gross margin increased 210 basis points.
Operating margin decreased 140 basis points. Adjusted operating margin increased 20 basis points.
Diluted earnings per share were $1.44 compared to $0.96 in the third quarter of 2019. Adjusted diluted earnings per share were $1.62 in the third quarter of 2021.
Meghan Frank, Chief Financial Officer, stated: "Our teams continue to execute at a high level, which has enabled our strong Q3 performance and the upward revision to our guidance. We are pleased with these results given the ongoing, industry-wide supply chain issues we continue to navigate. While there are several large volume weeks ahead of us, we feel well positioned for a strong end to 2021."
Balance sheet highlights
The Company ended the third quarter of 2021 with $1.0 billion in cash and cash equivalents and the capacity under its committed revolving credit facility was $396.9 million. Inventories at the end of the third quarter of 2021 increased 22% to $943.9 million compared to $771.0 million at the end of the third quarter of 2020.
2021 Outlook
For the fourth quarter of 2021, we expect net revenue to be in the range of $2.125 billion to $2.165 billion. Diluted earnings per share are expected to be in the range of $3.24 to $3.31 for the quarter and adjusted diluted earnings per share are expected to be in the range of $3.25 to $3.32.
For 2021, we expect net revenue to be in the range of $6.250 billion to $6.290 billion. Diluted earnings per share are expected to be in the range of $7.38 to $7.45 for the year and adjusted diluted earnings per share are expected to be in the range of $7.69 to $7.76.
The guidance does not reflect potential future repurchases of the Company's shares.
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 does not incorporate future unknown impacts from the spread of COVID-19. While most of the Company's retail locations are currently open, the Company continues to operate with precautionary measures in place, as appropriate. Further resurgences in COVID-19, including from variants could cause additional restrictions, including temporarily closing all or some of our retail locations again, result in lower consumer demand, and cause further disruption in our supply chain. 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, December 9, 2021, at 4:30 p.m. Eastern time. Those interested in participating in the call are invited to dial 1-800-319-4610 or 1-604-638-5340, if calling internationally, approximately 10 minutes prior to the start of the call. A live webcast of the conference call will be available online at: http://investor.lululemon.com/events.cfm. A replay will be made available online approximately two hours following the live call for a period of 30 days.
About lululemon athletica inc.
lululemon athletica inc. (NASDAQ:LULU) is a healthy lifestyle inspired athletic apparel company for yoga, running, training, and most other sweaty pursuits, creating transformational products and experiences which enable people to live a life they
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love. 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 and adjusted financial results are non-GAAP financial measures. A constant dollar basis assumes the average foreign currency exchange rates for the period remained constant with the average foreign currency exchange rates for the same period of the prior year. The Company provides constant dollar changes in its results to help investors understand the underlying growth rate of net revenue excluding the impact of changes in foreign currency exchange rates.
Adjusted income from operations, operating margin, income tax expense, effective tax rates, net income, and diluted earnings per share exclude items related to the MIRROR acquisition. We exclude transaction, integration costs, the gain on lululemon's previous investment in MIRROR, certain acquisition-related compensation costs, and the related income tax effects of these items. The acquisition-related compensation costs include accelerated expenses related to the transition of the former MIRROR Chief Executive Officer to an advisory role. We believe these adjusted financial measures are useful to investors as they provide supplemental information that enable evaluation of the underlying trend in our operating performance, and enable a more consistent comparison to our historical financial information. Further, due to the finite and discrete nature of these costs, we do not consider them to be normal operating expenses that are necessary to operate the MIRROR business and we do not expect them to recur beyond the expiry of the related vesting periods. Management uses these adjusted financial measures and constant currency metrics internally when reviewing and assessing financial performance.
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 the Company's 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 the Company's 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: the Company's ability to maintain the value and reputation of its brand; the current COVID-19 coronavirus pandemic and related government, private sector, and individual consumer responsive actions; its highly competitive market and increasing competition; increasing costs and decreasing selling prices; its ability to anticipate consumer preferences and successfully develop and introduce new, innovative and updated products; the acceptability of its products to guests; its ability to accurately forecast guest demand for its products; changes in consumer shopping preferences and shifts in distribution channels; its ability to expand in light of its limited operating experience and limited brand recognition in new international markets and new product categories; its ability to realize the potential benefits and synergies sought with the acquisition of MIRROR; its ability to manage its growth and the increased complexity of its business effectively; its ability to successfully open new store locations in a timely manner; seasonality; disruptions of its supply chain; its reliance on and limited control over third-party suppliers to provide fabrics for and to produce its products; suppliers or manufacturers not complying with its Vendor Code of Ethics or applicable laws; its ability to deliver its products to the market and to meet guest expectations if it has problems with its distribution system; increasing labor costs and other factors associated with the production of its products in South Asia and South East Asia; its ability to safeguard against security breaches with respect to its information technology systems; its compliance with privacy and data protection laws; any material disruption of its information systems; its ability to have technology-based systems function effectively and grow its e-commerce business globally; climate change, and related legislative and regulatory responses; increased scrutiny regarding its environmental, social, and governance, or sustainability responsibilities; an economic recession, depression, or
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downturn or economic uncertainty in its key markets; global economic and political conditions and global events such as health pandemics; its ability to source and sell its merchandise profitably or at all if new trade restrictions are imposed or existing trade restrictions become more burdensome; changes in tax laws or unanticipated tax liabilities; its ability to comply with trade and other regulations; fluctuations in foreign currency exchange rates; imitation by its competitors; its ability to protect its intellectual property rights; conflicting trademarks and the prevention of sale of certain products; its exposure to various types of litigation; 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, its 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 the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances, except as may be required by law.
Contacts:
Investor Contact:
lululemon athletica inc.
Howard Tubin
1-604-732-6124
or
ICR, Inc.
Joseph Teklits/Caitlin Churchill
1-203-682-8200

Media Contact:
lululemon athletica inc.
Erin Hankinson
1-604-732-6124
or
Brunswick Group
Eleanor French
1-415-671-7676

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lululemon athletica inc.
Condensed Consolidated Statements of Operations
Unaudited; Expressed in thousands, except per share amounts 
Third Quarter
First Three Quarters
202120202019202120202019
Net revenue$1,450,421 $1,117,426 $916,138 $4,127,504 $2,672,330 $2,581,805 
Costs of goods sold621,028 490,072 411,094 1,755,111 1,221,073 1,169,245 
Gross profit829,393 627,354 505,044 2,372,393 1,451,257 1,412,560 
As a percent of net revenue57.2%56.1%55.1%57.5%54.3%54.7%
Selling, general and administrative expenses545,124 411,708 329,208 1,583,075 1,064,172 939,930 
As a percent of net revenue37.6%36.8%35.9%38.4%39.8%36.4%
Amortization of intangible assets2,195 2,195 6,585 2,965 
Acquisition-related expenses24,127 8,531 — 39,934 22,040 — 
Income from operations257,947 204,920 175,829 742,799 362,080 472,623 
As a percent of net revenue17.8%18.3%19.2%18.0%13.5%18.3%
Other income (expense), net15 (580)1,925 338 250 6,154 
Income before income tax expense257,962 204,340 177,754 743,137 362,330 478,777 
Income tax expense70,174 60,697 51,772 202,319 103,254 131,202 
Net income$187,788 $143,643 $125,982 $540,818 $259,076 $347,575 
Basic earnings per share$1.45 $1.10 $0.97 $4.16 $1.99 $2.67 
Diluted earnings per share$1.44 $1.10 $0.96 $4.14 $1.98 $2.65 
Basic weighted-average shares outstanding129,684 130,318 130,282 130,019 130,271 130,420 
Diluted weighted-average shares outstanding130,189 130,924 130,805 130,557 130,842 130,975 

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lululemon athletica inc.
Condensed Consolidated Balance Sheets
Unaudited; Expressed in thousands 
October 31,
2021
January 31,
2021
November 1,
2020
ASSETS
Current assets
Cash and cash equivalents$993,591 $1,150,517 $481,581 
Inventories943,900 647,230 770,990 
Prepaid and receivable income taxes140,582 139,126 168,272 
Other current assets233,221 187,506 179,970 
Total current assets2,311,294 2,124,379 1,600,813 
Property and equipment, net876,489 745,687 719,880 
Right-of-use lease assets789,381 734,835 714,086 
Goodwill and intangible assets, net460,559 466,957 468,908 
Deferred income taxes and other non-current assets134,284 113,357 124,233 
Total assets$4,572,007 $4,185,215 $3,627,920 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable$227,067 $172,246 $160,779 
Accrued inventory liabilities10,038 14,956 10,654 
Other accrued liabilities 314,394 211,911 190,366 
Accrued compensation and related expenses181,863 130,171 96,527 
Current lease liabilities175,445 166,091 138,082 
Current income taxes payable43,199 8,357 5,818 
Unredeemed gift card liability137,656 155,848 104,760 
Other current liabilities28,358 23,598 23,892 
Total current liabilities1,118,020 883,178 730,878 
Non-current lease liabilities684,460 632,590 635,386 
Non-current income taxes payable38,073 43,150 43,150 
Deferred income tax liability60,374 58,755 47,199 
Other non-current liabilities12,625 8,976 8,354 
Stockholders' equity2,658,455 2,558,566 2,162,953 
Total liabilities and stockholders' equity$4,572,007 $4,185,215 $3,627,920 

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lululemon athletica inc.
Condensed Consolidated Statements of Cash Flows
Unaudited; Expressed in thousands 
First Three Quarters
20212020
Cash flows from operating activities
Net income$540,818 $259,076 
Adjustments to reconcile net income to net cash provided by operating activities117,306 (173,672)
Net cash provided by operating activities658,124 85,404 
Net cash used in investing activities(313,438)(616,544)
Net cash used in financing activities(523,197)(81,404)
Effect of foreign currency exchange rate changes on cash21,585 620 
Decrease in cash and cash equivalents(156,926)(611,924)
Cash and cash equivalents, beginning of period1,150,517 1,093,505 
Cash and cash equivalents, end of period$993,591 $481,581 

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lululemon athletica inc.
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 show the change for the third quarter of 2021 compared to the third quarter of 2020.
Net Revenue
Total Comparable Sales1,2
Comparable Store Sales2
Direct to Consumer Net Revenue
Change30 %27 %32 %23 %
Adjustments due to foreign currency exchange rate changes(2)(1)(1)(2)
Change in constant dollars28 %26 %31 %21 %
__________
(1)Total comparable sales includes comparable store sales and direct to consumer net revenue.
(2)Comparable store sales reflects net revenue from company-operated stores that have been open for at least 12 full fiscal months, or open for at least 12 full fiscal months after being significantly expanded. Comparable store sales exclude sales from stores which have been temporarily relocated for renovations or have been temporarily closed.


Adjusted financial measures
The following tables reconcile adjusted financial measures with the most directly comparable measures calculated in accordance with GAAP. The adjustments relate to the acquisition of MIRROR, including accelerated expenses related to the transition of the former MIRROR Chief Executive Officer to an advisory role, and its related tax effects. Please refer to Note 3. Acquisition included in Item 1 of Part I of our Report on Form 10-Q to be filed with the SEC on or about December 9, 2021 for further information on these adjustments.
Third Quarter 2021
Income from OperationsOperating MarginIncome Tax ExpenseEffective Tax RateNet IncomeDiluted Earnings Per Share
GAAP results$257,947 17.8 %$70,174 27.2 %$187,788 $1.44 
Transaction and integration costs328 — 328 — 
Acquisition-related compensation23,799 1.6 23,799 0.18 
Tax effect of the above611 (2.1)(611)— 
Adjusted results (non-GAAP)$282,074 19.4 %$70,785 25.1 %$211,304 $1.62 
First Three Quarters 2021
Income from OperationsOperating MarginIncome Tax ExpenseEffective Tax RateNet IncomeDiluted Earnings Per Share
GAAP results$742,799 18.0 %$202,319 27.2 %$540,818 $4.14 
Transaction and integration costs1,859 — 1,859 0.02 
Acquisition-related compensation38,075 1.0 38,075 0.29 
Tax effect of the above1,417 (1.2)(1,417)(0.01)
Adjusted results (non-GAAP)$782,733 19.0 %$203,736 26.0 %$579,335 $4.44 
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Third Quarter 2020
Income from OperationsOperating MarginIncome Tax ExpenseEffective Tax RateNet IncomeDiluted Earnings Per Share
GAAP results$204,920 18.3 %$60,697 29.7 %$143,643 $1.10 
Transaction and integration costs1,017 0.1 1,017 0.01 
Acquisition-related compensation7,514 0.7 7,514 0.06 
Tax effect of the above896 (0.8)(896)(0.01)
Adjusted results (non-GAAP)$213,451 19.1 %$61,593 28.9 %$151,278 $1.16 
First Three Quarters 2020
Income from OperationsOperating MarginIncome Tax ExpenseEffective Tax RateNet IncomeDiluted Earnings Per Share
GAAP results$362,080 13.5 %$103,254 28.5 %$259,076 $1.98 
Transaction and integration costs10,263 0.4 10,263 0.08 
Gain on existing investment(782)— (782)(0.01)
Acquisition-related compensation12,559 0.5 12,559 0.10 
Tax effect of the above2,862 (0.9)(2,862)(0.02)
Adjusted results (non-GAAP)$384,120 14.4 %$106,117 27.6 %$278,254 $2.13 

Expected adjusted earnings per share
Fourth Quarter
Fiscal 2021
Fiscal 2021
Expected diluted earnings per share range
$3.24 to $3.31
$7.38 to $7.45
MIRROR integration and acquisition-related costs, net of tax$0.01
$0.31
Expected adjusted earnings per share range (non-GAAP)
$3.25 to $3.32
$7.69 to $7.76
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lululemon athletica inc.
Company-operated Store Count and Square Footage1
Square Footage Expressed in Thousands

Number of Stores Open at the Beginning of the QuarterNumber of Stores Opened During the QuarterNumber of Stores Closed During the QuarterNumber of Stores Open at the End of the Quarter
4th Quarter 2020
515 521 
1st Quarter 2021
521 523 
2nd Quarter 2021
523 11 — 534 
3rd Quarter 2021
534 19 552 

 Total Gross Square Feet at the Beginning of the Quarter
Gross Square Feet Added During the Quarter2
Gross Square Feet Lost During the Quarter2
Total Gross Square Feet at the End of the Quarter
4th Quarter 2020
1,808 55 1,858 
1st Quarter 2021
1,858 12 1,862 
2nd Quarter 2021
1,862 43 — 1,905 
3rd Quarter 2021
1,905 97 — 2,002 
 __________
1Company-operated store count and square footage summary excludes retail locations operated by third parties under license and supply arrangements.
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.


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