Revenue increased 22% to $1.1
billion
Comparable sales increased 19%, or 18% on a
constant dollar basis
Diluted EPS of $1.10, Adjusted EPS of
$1.16
lululemon athletica inc. (NASDAQ:LULU) today
announced financial results for the third quarter of fiscal
2020.
Calvin McDonald, Chief Executive Officer, stated: "Our third
quarter results demonstrate the strength of lululemon across
channels and markets, both in North America and around the world.
Our product innovations, investments in the e-commerce business,
and strategic acquisition of MIRROR position us well to serve our
guests as their needs evolve across both physical and digital
experiences."
For the third quarter of fiscal 2020, compared to the third
quarter of fiscal 2019
- Net revenue increased 22% to $1.1 billion. On a constant dollar
basis, net revenue increased 21%.
– Net revenue increased 19% in North America,
and increased 45% internationally.
- Total comparable sales increased 19%, or increased 18% on a
constant dollar basis.
– Direct to consumer net revenue increased
94%, or increased 93% on a constant dollar basis.
– Comparable store productivity was 83%, or
82% on a constant dollar basis, representing a comparable store
sales decrease of 17%, or a decrease of 18% on a constant dollar
basis.
- Direct to consumer net revenue represented 42.8% of total net
revenue compared to 26.9% for the third quarter of fiscal
2019.
- Gross profit increased 24% to $627.4 million and gross margin
increased 100 basis points to 56.1%.
- Income from operations increased 17% to $204.9 million.
Adjusted income from operations increased 21% to $213.5
million.
- Operating margin decreased 90 basis points to 18.3%. Adjusted
operating margin decreased 10 basis points to 19.1%.
- Income tax expense increased 17% to $60.7 million. The
effective tax rate for the third quarter of fiscal 2020 was 29.7%
compared to 29.1% for the third quarter of fiscal 2019. The
adjusted effective tax rate was 28.9% for the third quarter of
fiscal 2020.
- Diluted earnings per share were $1.10 compared to $0.96 in the
third quarter of fiscal 2019. Adjusted diluted earnings per share
were $1.16 for the third quarter of fiscal 2020.
- The Company opened nine net new company-operated stores during
the quarter, ending with 515 stores.
The summary above provides both GAAP and adjusted non-GAAP
financial measures. The adjusted financial measures exclude certain
costs incurred in connection with the acquisition of MIRROR, and
the related tax effects.
Meghan Frank, Chief Financial Officer, stated: "Our performance
this quarter was driven by strong omni momentum, with notable
strength in conversion and increased traffic to our e-commerce
sites." Frank continued, "We have planned the fourth quarter based
on multiple performance scenarios and believe we are well
positioned for the holiday season."
Balance sheet highlights
The Company ended the third quarter of fiscal 2020 with $481.6
million in cash and cash equivalents and the capacity under its
committed revolving credit facilities was $697.3 million.
Inventories at the end of the third quarter of fiscal 2020
increased 23% to $771.0 million compared to $627.1 million at the
end of the third quarter of fiscal 2019.
Share repurchase and cancellation of 364-day credit
facility
The Company announced that on December 1, 2020, the board of
directors approved an increase in its share repurchase
authorization from $263.6 million to $500.0 million. The timing,
pricing, and actual number of common shares to be repurchased will
depend upon prevailing market conditions, applicable legal
requirements, and other factors. The repurchase plan has no time
limit.
The Company also announced that on December 4, 2020, it had
given notice to terminate its 364-day unsecured revolving credit
facility. The $300.0 million facility was due to mature on June 28,
2021 and will be terminated without penalty on December 11, 2020.
The Company continues to maintain its unsecured five-year revolving
credit facility of $400.0 million which matures on June 6,
2023.
COVID-19 Pandemic and fiscal 2020 outlook
As a result of the COVID-19 pandemic, all of the Company's
retail locations in North America, Europe, and certain countries in
Asia Pacific were temporarily closed during the first quarter of
fiscal 2020. The Company began reopening its retail locations in
these markets during the second quarter of fiscal 2020 and almost
all locations were open during the third quarter of fiscal 2020.
Subsequent to November 1, 2020, while almost all of the Company's
retail locations have remained open, it has experienced some
temporary closures and is currently operating with tighter capacity
restrictions in certain markets.
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 third quarter results is scheduled
for today, December 10, 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.
Non-GAAP Financial Measures
Constant dollar changes and 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. 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 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 primarily relate to the
acceleration of vesting of certain stock options upon acquisition,
and to deferred consideration of $57.1 million in which is due to
certain MIRROR employees subject to their continued employment
through various vesting dates up to three years from the
acquisition date. These individuals also receive employment
compensation separate from the deferred amounts that is
commensurate with the services they provide and which we consider
to be normal operating expenses within selling, general and
administrative expenses. 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 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; changes in consumer shopping preferences and shifts in
distribution channels; its ability to expand internationally in
light of its limited operating experience and limited brand
recognition in new international markets; 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; its
reliance on and limited control over third-party suppliers to
provide fabrics for and to produce its products; the operations of
many of its suppliers are subject to international and other risks;
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 and South
East Asia; 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; an economic recession, depression, or
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.
lululemon athletica inc.
Condensed Consolidated Statements of
Operations
Unaudited; Expressed in thousands, except
per share amounts
Quarter Ended
Three Quarters Ended
November 1, 2020
November 3, 2019
November 1, 2020
November 3, 2019
Net revenue
$
1,117,426
$
916,138
$
2,672,330
$
2,581,805
Costs of goods sold
490,072
411,094
1,221,073
1,169,245
Gross profit
627,354
505,044
1,451,257
1,412,560
As a percent of net revenue
56.1%
55.1%
54.3%
54.7%
Selling, general and administrative
expenses
411,662
329,208
1,064,172
939,930
As a percent of net revenue
36.8%
35.9%
39.8%
36.4%
Amortization of intangible assets
2,241
7
2,965
7
Acquisition-related expenses
8,531
—
22,040
—
Income from operations
204,920
175,829
362,080
472,623
As a percent of net revenue
18.3%
19.2%
13.5%
18.3%
Other income (expense), net
(580)
1,925
250
6,154
Income before income tax expense
204,340
177,754
362,330
478,777
Income tax expense
60,697
51,772
103,254
131,202
Net income
$
143,643
$
125,982
$
259,076
$
347,575
Basic earnings per share
$
1.10
$
0.97
$
1.99
$
2.67
Diluted earnings per share
$
1.10
$
0.96
$
1.98
$
2.65
Basic weighted-average shares
outstanding
130,318
130,282
130,271
130,420
Diluted weighted-average shares
outstanding
130,924
130,805
130,842
130,975
lululemon athletica inc.
Condensed Consolidated Balance Sheets
Unaudited; Expressed in thousands
November 1,
2020
February 2,
2020
November 3,
2019
ASSETS
Current assets
Cash and cash equivalents
$
481,581
$
1,093,505
$
586,153
Inventories
770,990
518,513
627,102
Prepaid and receivable income taxes
168,272
85,159
126,715
Other current assets
179,970
110,761
111,706
Total current assets
1,600,813
1,807,938
1,451,676
Property and equipment, net
719,880
671,693
656,372
Right-of-use lease assets
714,086
689,664
652,492
Goodwill and intangible assets, net
468,908
24,423
24,478
Deferred income taxes and other
non-current assets
124,233
87,636
70,126
Total assets
$
3,627,920
$
3,281,354
$
2,855,144
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Accounts payable
$
160,779
$
79,997
$
116,281
Accrued inventory liabilities
10,654
6,344
10,074
Other accrued liabilities
190,366
112,641
121,144
Accrued compensation and related
expenses
96,527
133,688
98,442
Current lease liabilities
138,082
128,497
131,385
Current income taxes payable
5,818
26,436
12,351
Unredeemed gift card liability
104,760
120,413
75,025
Other current liabilities
23,892
12,402
10,067
Total current liabilities
730,878
620,418
574,769
Non-current lease liabilities
635,386
611,464
563,925
Non-current income taxes payable
43,150
48,226
48,226
Deferred income tax liability
47,199
43,432
14,190
Other non-current liabilities
8,354
5,596
5,298
Stockholders' equity
2,162,953
1,952,218
1,648,736
Total liabilities and stockholders'
equity
$
3,627,920
$
3,281,354
$
2,855,144
lululemon athletica inc.
Condensed Consolidated Statements of Cash
Flows
Unaudited; Expressed in thousands
Three Quarters Ended
November 1, 2020
November 3, 2019
Cash flows from operating activities
Net income
$
259,076
$
347,575
Adjustments to reconcile net income to net
cash provided by operating activities
(173,672)
(252,469)
Net cash provided by operating
activities
85,404
95,106
Net cash used in investing activities
(616,544)
(212,475)
Net cash used in financing activities
(81,404)
(179,555)
Effect of exchange rate changes on
cash
620
1,757
Decrease in cash and cash equivalents
(611,924)
(295,167)
Cash and cash equivalents, beginning of
period
1,093,505
881,320
Cash and cash equivalents, end of
period
$
481,581
$
586,153
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 compared to the corresponding
period in the prior year.
Quarter Ended November
1, 2020
Net Revenue
Total Comparable
Sales1,2
Comparable Store
Sales2
Direct to Consumer Net
Revenue
Change
22
%
19
%
(17)
%
94
%
Adjustments due to foreign exchange rate
changes
(1)
(1)
(1)
(1)
Change in constant dollars
21
%
18
%
(18)
%
93
%
__________
- Total comparable sales includes comparable store sales and
direct to consumer sales.
- 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 for at least 30 days.
Constant dollar changes in comparable store productivity
The below table shows comparable store sales1 as a percentage of
the net revenue generated from these company-operated stores in the
corresponding period of the prior year.
Quarter Ended November
1, 2020
Comparable store productivity
83
%
Adjustments due to foreign exchange rate
changes
(1)
Comparable store productivity in constant
dollars
82
%
__________
- 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 for at least 30 days.
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 and its
related tax effects. Please refer to Note 3 to the unaudited
consolidated financial statements included in Item 1 of Part I of
our Report on Form 10-Q to be filed with the SEC on or about
December 10, 2020 for further information on these adjustments.
Quarter Ended November 1,
2020
Income from Operations
Operating Margin
Income Tax Expense
Effective Tax Rate
Net Income
Diluted Earnings Per
Share
GAAP results
$
204,920
18.3
%
$
60,697
29.7
%
$
143,643
$
1.10
Transaction and integration costs
1,017
0.1
1,017
0.01
Acquisition-related compensation
7,514
0.7
7,514
0.06
Tax effect of the above
896
(0.8)
(896)
(0.01)
Adjusted results (non-GAAP)
$
213,451
19.1
%
$
61,593
28.9
%
$
151,278
$
1.16
Three Quarters Ended November
1, 2020
Income from Operations
Operating Margin
Income Tax Expense
Effective Tax Rate
Net Income
Diluted Earnings Per
Share
GAAP results
$
362,080
13.5
%
$
103,254
28.5
%
$
259,076
$
1.98
Transaction and integration costs
10,263
0.4
10,263
0.08
Gain on existing investment
(782)
—
(782)
(0.01)
Acquisition-related compensation
12,559
0.5
12,559
0.10
Tax effect of the above
2,862
(0.9)
(2,862)
(0.02)
Adjusted results (non-GAAP)
$
384,120
14.4
%
$
106,117
27.6
%
$
278,254
$
2.13
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
4th Quarter 2019
479
16
4
491
1st Quarter 2020
491
4
6
489
2nd Quarter 2020
489
17
—
506
3rd Quarter 2020
506
11
2
515
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 2019
1,604
87
11
1,680
1st Quarter 2020
1,680
24
12
1,692
2nd Quarter 2020
1,692
65
—
1,757
3rd Quarter 2020
1,757
54
3
1,808
__________
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201210006024/en/
Investors: lululemon athletica inc. Howard Tubin
1-604-732-6124 or ICR, Inc. Joseph Teklits/Caitlin Churchill
1-203-682-8200
Media: lululemon athletica inc. Erin Hankinson
1-604-732-6124 or Brunswick Group Eleanor French 1-415-671-7676
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