LULU
$48.80
Lululemon Athletica
($.71)
(1.43%)
Earnings Details
4th Quarter January 2017
Wednesday, March 29, 2017 4:05:10 PM
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Summary

Lululemon Athletica Misses

Lululemon Athletica (LULU) reported 4th Quarter January 2017 earnings of $1.00 per share on revenue of $789.9 million. The consensus earnings estimate was $1.01 per share on revenue of $784.7 million. The Earnings Whisper number was $1.03 per share. Revenue grew 12.2% on a year-over-year basis.

The company said it expects first quarter earnings of $0.25 to $0.27 per share on revenue of $510.0 million to $515.0 million and fiscal 2018 earnings of $2.26 to $2.36 per share on revenue of $2.55 billion to $2.60 billion. The current consensus earnings estimate is $0.39 per share on revenue of $559.5 million for the quarter ending April 30, 2017 and $2.58 per share on revenue of $2.63 billion for the year ending January 31, 2018.

Lululemon Athletica Inc is a designer and retailer of technical athletic apparel operating primarily in North America and Australia. Its yoga-inspired apparel is marketed under the lululemon athletica and ivivva athletica brand names.

Results
Reported Earnings
$1.00
Earnings Whisper
$1.03
Consensus Estimate
$1.01
Reported Revenue
$789.9 Mil
Revenue Estimate
$784.7 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

lululemon athletica inc. Announces Fourth Quarter and Full Year Fiscal 2016 Results

lululemon athletica inc. (LULU) today announced financial results for the fourth quarter and fiscal year ended January 29, 2017.

For the fourth quarter ended January 29, 2017:

Net revenue increased 12% to $789.9 million from $704.3 million in the fourth quarter of fiscal 2015. On a constant dollar basis, net revenue increased 12%.

Total comparable sales, which includes comparable store sales and direct to consumer, increased 8%, or by 7% on a constant dollar basis.

Comparable store sales increased 6%, or by 6% on a constant dollar basis.

Direct to consumer net revenue increased 12% to $164.3 million, or by 12% on a constant dollar basis.

Gross profit increased 21% to $427.9 million, and as a percentage of net revenue was 54.2% compared to 50.3% in the fourth quarter of fiscal 2015.

Income from operations increased 18% to $196.6 million, and as a percentage of net revenue was 24.9% compared to 23.6% in the fourth quarter of fiscal 2015.

Income tax expense increased to $61.4 million from $49.8 million in the fourth quarter of fiscal 2015, and the effective tax rate was 31.1% compared to 29.8% in the fourth quarter of fiscal 2015. Excluding certain tax and related interest adjustments, the effective tax rate was 30.6% compared to 29.6% in the fourth quarter of fiscal 2015.

Diluted earnings per share were $0.99 compared to $0.85 in the fourth quarter of fiscal 2015. Excluding certain tax and related interest adjustments, diluted earnings per share were $1.00 compared to $0.85 for the fourth quarter of fiscal 2015.

For the fiscal year ended January 29, 2017:

Net revenue increased 14% to $2.3 billion from $2.1 billion in fiscal 2015. On a constant dollar basis, net revenue increased 14%.

Total comparable sales increased 6%, or by 7% on a constant dollar basis.

Comparable store sales increased 4%, or by 5% on a constant dollar basis. Company-operated stores which have been open for at least one year averaged sales of $1,521 per square foot.

Direct to consumer net revenue increased 13% to $453.3 million, or 13% on a constant dollar basis.

Gross profit increased 20% to $1.2 billion, and as a percentage of net revenue was 51.2% compared to 48.4% in fiscal 2015.

Income from operations increased 14% to $421.2 million, and as a percentage of net revenue, was 18.0% compared to 17.9% in fiscal 2015.

Income tax expense increased to $119.3 million from $102.4 million in fiscal 2015, and the effective tax rate was 28.2% compared to 27.8% for fiscal 2015. Excluding certain tax and related interest adjustments, the effective tax rate was 30.7% compared to 29.5% for fiscal 2015.

Diluted earnings per share were $2.21 compared to $1.89 in fiscal 2015. Excluding certain tax and related interest adjustments, diluted earnings per share were $2.14 compared to $1.86 in fiscal 2015.

The Company ended fiscal 2016 with $734.8 million in cash and cash equivalents compared to $501.5 million at the end of fiscal 2015. Inventories at the end of fiscal 2016 increased by 5% to $298.4 million compared to $284.0 million at the end of fiscal 2015. The Company ended the year with 406 stores.

Laurent Potdevin, CEO, lululemon, commented: "2016 marks a milestone year where our successful execution against long-term strategies returned the company to positive operating income growth for the first time in three years. These results reflect our strong brand and solid foundation now in place to drive our future performance."

Mr. Potdevin added: "Although we’ve had a slow start to 2017, our teams are passionately committed to delivering on our robust plans across product innovation, digital, North America and international as we realize our ambitious vision for the future."

Fiscal 2017 Outlook

For the first quarter of fiscal 2017, we expect net revenue to be in the range of $510 million to $515 million based on a total comparable sales decrease in the low-single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $0.25 to $0.27 for the quarter. This guidance assumes 137.3 million diluted weighted-average shares outstanding and a 31.2% tax rate. The guidance does not reflect potential future repurchases of the Company’s shares.

For the full fiscal 2017, we expect net revenue to be in the range of $2.550 billion to $2.600 billion based on a total comparable sales increase in the low-single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $2.26 to $2.36 for the full year. This guidance assumes 137.5 million diluted weighted-average shares outstanding and a 31.2% tax rate. The guidance does not reflect potential future repurchases of the Company’s shares.

Conference Call Information

A conference call to discuss fiscal 2016 results is scheduled for today, March 29, 2017, 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. (LULU) is a healthy lifestyle inspired athletic apparel company for yoga, running, training, and most other sweaty pursuits, 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 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; 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 the United States, or our intentions with respect to the reinvestment of foreign earnings; 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; 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 source our merchandise profitably or at all; 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 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
Thirteen Weeks
Fifty-Two Weeks
Fifty-Two Weeks
Ended January
Ended January
Ended January
Ended January
29, 2017
31, 2016
29, 2017
31, 2016
Net revenue
$ 789,940
$ 704,276
$ 2,344,392
$ 2,060,523
Costs of goods sold
362,041
349,809
1,144,775
1,063,357
Gross profit
427,899
354,467
1,199,617
997,166
As a percent of net revenue
54.2 %
50.3 %
51.2 %
48.4 %
Selling, general and administrative expenses
231,270
188,184
778,465
628,090
As a percent of net revenue
29.3 %
26.7 %
33.2 %
30.5 %
Income from operations
196,629
166,283
421,152
369,076
As a percent of net revenue
24.9 %
23.6 %
18.0 %
17.9 %
Other income (expense), net
857
938
1,577
(581 )
Income before income tax expense
197,486
167,221
422,729
368,495
Income tax expense
61,351
49,805
119,348
102,448
Net income
$ 136,135
$ 117,416
$
303,381
$
266,047
Basic earnings per share
$
0.99
$
0.85
$
2.21
$
1.90
Diluted earnings per share
$
0.99
$
0.85
$
2.21
$
1.89
Basic weighted-average shares outstanding
137,059
138,076
137,086
140,365
Diluted weighted-average shares outstanding
137,245
138,240
137,302
140,610
lululemon athletica inc.
Condensed Consolidated Balance Sheets
Unaudited; Expressed in thousands
January 29,
January 31,
2017
2016
ASSETS
Current assets
Cash and cash equivalents
$
734,846
$
501,482
Inventories
298,432
284,009
Prepaid and receivable income taxes
81,190
91,453
Other current assets
48,269
40,095
Total current assets
1,162,737
917,039
Property and equipment, net
423,499
349,605
Goodwill and intangible assets, net
24,557
24,777
Deferred income taxes and other non-current assets
46,748
22,656
Total assets
$ 1,657,541
$
1,314,077
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable
$
24,846
$
10,381
Accrued inventory liabilities
8,601
25,451
Accrued compensation and related expenses
55,238
43,524
Income taxes payable
30,290
37,736
Unredeemed gift card liability
70,454
57,736
Other accrued liabilities
52,020
50,676
Total current liabilities
241,449
225,504
Deferred income tax liability
7,262
10,759
Other non-current liabilities
48,857
50,332
Stockholders’ equity
1,359,973
1,027,482
Total liabilities and stockholders’ equity
$ 1,657,541
$
1,314,077
lululemon athletica inc.
Condensed Consolidated Statements of Cash Flows
Unaudited; Expressed in thousands
Fifty-Two
Fifty-Two
Weeks Ended
Weeks Ended
January 29,
January 31,
2017
2016
Cash flows from operating activities
Net income
$ 303,381
$ 266,047
Items not affecting cash
81,135
92,436
Changes in operating assets and liabilities
603
(59,743 )
Net cash provided by operating activities
385,119
298,740
Net cash used in investing activities
(149,511 )
(143,487 )
Net cash used in financing activities
(25,338 )
(273,693 )
Effect of exchange rate changes on cash
23,094
(44,557 )
Increase (decrease) in cash and cash equivalents
233,364
(162,997 )
Cash and cash equivalents, beginning of year
$ 501,482
$ 664,479
Cash and cash equivalents, end of year
$ 734,846
$ 501,482

lululemon athletica inc.

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 fourth quarter of fiscal 2016 compared to the fourth quarter of fiscal 2015.

Change in Total
Change in
Change in Direct
Change in Net
Comparable
Comparable
to Consumer Net
Revenue
Sales(1,2)
Store Sales(2)
Revenue
Increase
12 %
8 %
6 %
12 %
Adjustments due to foreign exchange rate changes
--
(1 )
--
--
Increase in constant dollars
12 %
7 %
6 %
12 %

The below changes in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue show the net change for fiscal 2016 compared to fiscal 2015.

Change in Total
Change in
Change in Direct to
Change in
Comparable
Comparable
Consumer Net
Net Revenue
Sales(1,2)
Store Sales(2)
Revenue
Increase
14 %
6 %
4 %
13 %
Adjustments due to foreign exchange rate changes
--
1
1
--
Increase in constant dollars
14 %
7 %
5 %
13 %

__________

(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
Fifty-Two Weeks
Fifty-Two Weeks
Ended January
Ended January
Ended January
Ended January
29, 2017
31, 2016
29, 2017
31, 2016
Effective tax rate
31.1 %
29.8 %
28.2 %
27.8 %
Tax and related interest adjustments(1)
(0.5 )
(0.2 )
2.5
1.7
Effective tax rate, excluding tax and related interest adjustments
30.6 %
29.6 %
30.7 %
29.5 %
Thirteen Weeks
Thirteen Weeks
Fifty-Two Weeks
Fifty-Two Weeks
Ended January
Ended January
Ended January
Ended January
29, 2017
31, 2016
29, 2017
31, 2016
Diluted earnings per share
$ 0.99
$
0.85
$
2.21
$
1.89
Tax and related interest adjustments(1)
0.01
--
(0.07 )
(0.03 )
Diluted earnings per share, excluding tax and related interest
$ 1.00
$
0.85
$
2.14
$
1.86
adjustments

__________

(1)These adjustments relate to the Company’s transfer pricing arrangements and taxes associated with the repatriation of foreign earnings. Please refer to Note 15 to the audited consolidated financial statements included in Item 8 of Part II of the Company’s Report on Form 10-K to be filed with the SEC on or about March 29, 2017 for an explanation as to the nature of these items.

lululemon athletica inc.
Store Count and Square Footage(1)
Fifty-Two Weeks Ended January 29, 2017
Square Footage Expressed in Thousands
Number of
Number of
Number of
Number of
Stores Open at
Stores Opened
Stores Closed
Stores Open
the Beginning
During the
During the
at the End of
of the Quarter
Quarter
Quarter
the Quarter
1st Quarter
363
11
1
373
2nd Quarter
373
6
--
379
3rd Quarter
379
12
2
389
4th Quarter
389
17
--
406
Total Gross Square
Gross Square
Gross Square
Total Gross
Feet at the
Feet Added
Feet Lost
Square Feet at
Beginning of the
During the
During the
the End of the
Quarter
Quarter(2)
Quarter(3)
Quarter
1st Quarter
1,071
26
2
1,095
2nd Quarter
1,095
22
--
1,117
3rd Quarter
1,117
32
5
1,144
4th Quarter
1,144
47
1
1,190

__________

(1)Store count and square footage summary includes company-operated stores which are branded lululemon and ivivva. (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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SOURCE: lululemon athletica inc.

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