Revenue declined 17% to $652 million
Diluted EPS of $0.22 for the first
quarter
lululemon athletica inc. (NASDAQ:LULU) today announced financial
results for the first quarter of fiscal 2020.
As a result of the COVID-19 pandemic, all of the Company's
stores in North America, Europe, and certain countries in Asia
Pacific were closed for a significant portion of the quarter.
Subsequent to May 3, 2020, the Company began reopening its retail
locations in these markets in line with the guidance from local
authorities. As of June 10, 2020, 295 of its company-operated
stores were open.
For the first quarter ended May 3, 2020:
- Net revenue was $652.0 million, a decrease of 17% compared to
the first quarter of fiscal 2019. On a constant dollar basis, net
revenue decreased 16%.
- Direct to consumer net revenue increased 68%, or increased 70%
on a constant dollar basis.
- Direct to consumer net revenue represented 54.0% of total net
revenue compared to 26.8% for the first quarter of fiscal
2019.
- Gross profit was $334.4 million, a decrease of 21% compared to
the first quarter of fiscal 2019.
- Gross margin was 51.3%, a decrease of 260 basis points compared
to the first quarter of fiscal 2019.
- Income from operations was $32.8 million, a decrease of 75%
compared to the first quarter of fiscal 2019.
- Operating margin was 5.0%, a decrease of 1,150 basis points
compared to the first quarter of fiscal 2019.
- Income tax expense was $5.3 million compared to $34.6 million
in the first quarter of fiscal 2019 and the effective tax rate was
15.6% compared to 26.4% for the first quarter of fiscal 2019.
- Diluted earnings per share were $0.22 compared to $0.74 in the
first quarter of fiscal 2019.
- The Company repurchased 0.4 million shares of its own common
stock at an average cost of $172.68 per share.
The Company ended the first quarter of fiscal 2020 with $823.0
million in cash and cash equivalents and the capacity under its
committed revolving credit facility was $398.2 million. The Company
had $576.2 million in cash and cash equivalents at the end of the
first quarter of fiscal 2019. Inventories at the end of the first
quarter of fiscal 2020 increased 41% to $625.8 million compared to
$443.0 million at the end of the first quarter of fiscal 2019. The
Company ended the quarter with 489 stores.
Calvin McDonald, Chief Executive Officer commented: "I'm proud
of how lululemon has navigated these unexpected and unprecedented
times. We are learning more every day about our guests -- how they
enjoy interacting with us online and what makes them comfortable as
stores reopen." McDonald continued: "Our strong digital business
demonstrates the strength of our guest connection and the long-term
opportunity to create further Omni experiences going forward."
COVID-19 Pandemic
The outbreak of a novel strain of coronavirus ("COVID-19") was
declared a global pandemic by the World Health Organization in
March 2020. The spread of COVID-19 has caused public health
officials to recommend precautions to mitigate the spread of the
virus, especially when congregating in heavily populated areas,
such as malls and lifestyle centers. Government authorities in
certain markets in which the Company operates have also issued
orders that require the closure of non-essential businesses and
people to remain at home.
The Company has taken actions to close retail locations and to
reduce operating hours, and it continues to monitor the situation
and work closely with local authorities to prioritize the safety of
its people and guests. In February 2020, the Company temporarily
closed all of it retail locations in Mainland China. All of these
locations have since reopened. In March 2020, it temporarily closed
all of its retail locations in North America, Europe, and certain
countries in Asia Pacific. Subsequent to May 3, 2020, the Company
began reopening its retail locations in these markets in line with
the guidance from local authorities. As of June 10, 2020, 295 of
its company-operated stores were open.
The Company's retail locations and distribution centers are
operating with precautionary measures in place such as reduced
operating hours, physical distancing, enhanced cleaning and
sanitation, and maximum occupancy levels.
The Company remains confident in the long-term growth
opportunities and its Power of Three growth plan and believes that
it has sufficient cash and cash equivalents, and available capacity
under its revolving credit facilities, to meet its liquidity needs.
As of May 3, 2020, the Company had cash and cash equivalents of
$823.0 million and the capacity under its committed revolving
credit facility was $398.2 million.
Fiscal 2020 Outlook
Due to the impact that COVID-19 is having across the globe, and
the rapid and continuous developments, the Company is not providing
detailed financial guidance for fiscal 2020 at this time.
Conference Call Information
A conference call to discuss first quarter results is scheduled
for today, June 11, 2020, 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 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.
Comparable Store Sales and Total Comparable Sales
The Company typically believes that investors would find
comparable store sales and total comparable sales useful in
assessing the performance of its business. As the temporary store
closures from COVID-19 have resulted in a significant number of
stores being removed from its comparable store base, the Company
believes total comparable sales and comparable store sales are not
currently representative of the underlying trends of its business.
The Company does not believe these metrics are currently useful to
investors in understanding performance, therefore it has not
included these metrics in this press release.
Non-GAAP Financial Measures
Constant dollar changes in net revenue and direct to consumer
net revenue 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. The Company
provides constant dollar changes in net revenue and direct to
consumer net revenue because it uses these measures to understand
the underlying growth rate of net revenue excluding the impact of
changes in foreign exchange rates. The Company believes 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 its business.
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: its 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; the acceptability of its products to its guests; its
highly competitive market and increasing competition; 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;
the operations of many of its suppliers are subject to
international and other risks; an economic recession, depression,
or downturn or economic uncertainty in its key markets; increasing
product costs and decreasing selling prices; its ability to
anticipate consumer preferences and successfully develop and
introduce new, innovative and updated products; its ability to
accurately forecast guest demand for its products; its ability to
safeguard against security breaches with respect to its information
technology systems; any material disruption of its information
systems; its ability to have technology-based systems function
effectively and grow its e-commerce business globally; changes in
consumer shopping preferences and shifts in distribution channels;
the fluctuating costs of raw materials; its ability to expand
internationally in light of its limited operating experience and
limited brand recognition in new international markets; global
economic and political conditions and global events such as health
pandemics; its ability to deliver its products to the market and to
meet guest expectations if it has problems with its distribution
system; imitation by its competitors; its ability to protect its
intellectual property rights; 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 manage its growth and the increased complexity of its business
effectively; its 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 its products in South and
South East Asia; its ability to successfully open new store
locations in a timely manner; its ability to comply with trade and
other regulations; the service of its senior management;
seasonality; fluctuations in foreign currency exchange rates;
conflicting trademarks and the prevention of sale of certain
products; its exposure to various types of litigation; actions of
activist stockholders; anti-takeover provisions in its certificate
of incorporation and bylaws; 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.
lululemon athletica inc.
Condensed Consolidated Statements of
Operations
Unaudited; Expressed in thousands, except
per share amounts
Quarter Ended
May 3, 2020
May 5, 2019
Net revenue
$
651,962
$
782,315
Costs of goods sold
317,560
360,595
Gross profit
334,402
421,720
As a percent of net revenue
51.3
%
53.9
%
Selling, general and administrative
expenses
301,651
292,908
As a percent of net revenue
46.3
%
37.4
%
Income from operations
32,751
128,812
As a percent of net revenue
5.0
%
16.5
%
Other income (expense), net
1,174
2,379
Income before income tax expense
33,925
131,191
Income tax expense
5,293
34,588
Net income
$
28,632
$
96,603
Basic earnings per share
$
0.22
$
0.74
Diluted earnings per share
$
0.22
$
0.74
Basic weighted-average shares
outstanding
130,251
130,694
Diluted weighted-average shares
outstanding
130,803
131,337
lululemon athletica inc.
Condensed Consolidated Balance Sheets
Unaudited; Expressed in thousands
May 3, 2020
February 2, 2020
May 5, 2019
ASSETS
Current assets
Cash and cash equivalents
$
823,006
$
1,093,505
$
576,241
Inventories
625,849
518,513
443,006
Prepaid and receivable income taxes
89,316
85,159
82,200
Other current assets
156,374
110,761
70,137
Total current assets
1,694,545
1,807,938
1,171,584
Property and equipment, net
659,265
671,693
582,738
Right-of-use lease assets
731,883
689,664
626,974
Goodwill and intangible assets, net
24,044
24,423
24,094
Deferred income taxes and other
non-current assets
92,049
87,636
57,630
Total assets
$
3,201,786
$
3,281,354
$
2,463,020
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Accounts payable
$
78,940
$
79,997
$
88,258
Accrued inventory liabilities
9,860
6,344
8,900
Accrued compensation and related
expenses
69,455
133,688
75,286
Current lease liabilities
144,646
128,497
127,180
Current income taxes payable
28,729
26,436
9,377
Unredeemed gift card liability
105,286
120,413
85,215
Other current liabilities
194,580
125,043
108,726
Total current liabilities
631,496
620,418
502,942
Non-current lease liabilities
639,242
611,464
537,758
Non-current income taxes payable
48,226
48,226
38,090
Deferred income tax liability
40,764
43,432
13,834
Other non-current liabilities
6,271
5,596
3,676
Stockholders' equity
1,835,787
1,952,218
1,366,720
Total liabilities and stockholders'
equity
$
3,201,786
$
3,281,354
$
2,463,020
lululemon athletica inc.
Condensed Consolidated Statements of Cash
Flows
Unaudited; Expressed in thousands
Quarter Ended
May 3, 2020
May 5, 2019
Cash flows from operating activities
Net income
$
28,632
$
96,603
Adjustments to reconcile net income to net
cash used in operating activities
(149,875
)
(159,406
)
Net cash used in operating activities
(121,243
)
(62,803
)
Net cash used in investing activities
(45,626
)
(63,908
)
Net cash used in financing activities
(90,587
)
(170,292
)
Effect of exchange rate changes on
cash
(13,043
)
(8,076
)
Decrease in cash and cash equivalents
(270,499
)
(305,079
)
Cash and cash equivalents, beginning of
period
1,093,505
881,320
Cash and cash equivalents, end of
period
$
823,006
$
576,241
lululemon athletica inc.
Reconciliation of Non-GAAP Financial Measures Unaudited
Constant dollar changes in net revenue and direct to consumer
net revenue
The below changes in net revenue show the change compared to the
corresponding period in the prior year.
Quarter Ended May 3,
2020
Net Revenue
Direct to Consumer Net
Revenue
Change
(17
)%
68
%
Adjustments due to foreign exchange rate
changes
1
2
Change in constant dollars
(16
)%
70
%
lululemon athletica inc.
Company-operated Store Count and Square
Footage1
Square Footage Expressed in Thousands
Number of Stores Open at the
Beginning of the Quarter
Number of Stores Opened During
the Quarter
Number of Stores Closed During
the Quarter
Number of Stores Open at the
End of the Quarter
2nd Quarter 2019
455
5
—
460
3rd Quarter 2019
460
21
2
479
4th Quarter 2019
479
16
4
491
1st Quarter 2020
491
4
6
489
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
2nd Quarter 2019
1,466
56
—
1,522
3rd Quarter 2019
1,522
87
5
1,604
4th Quarter 2019
1,604
87
11
1,680
1st Quarter 2020
1,680
24
12
1,692
__________
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.
As of May 3, 2020, all of the Company's retail locations in
North America, Europe, and certain countries in Asia Pacific were
temporarily closed as a result of COVID-19.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200611005830/en/
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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