Fourth quarter revenue increased 24% to $1.7
billion Comparable sales increased 21%, or 20% on a constant
dollar basis Diluted EPS of $2.52, Adjusted EPS of
$2.58
lululemon athletica inc. (NASDAQ:LULU) today announced financial
results for the fourth quarter and fiscal year ended January 31,
2021.
Calvin McDonald, Chief Executive Officer, stated: "I'm proud of
how we navigated this past year and delivered for our employees,
guests and shareholders. Our continued growth demonstrates the
strength of lululemon -- before, during and as the pandemic
subsides. We are still in the early innings of our growth, fueled
by exciting innovations that create even more opportunity into the
future. All of us on the leadership team have so much gratitude for
our teams and their agility during these unprecedented times."
We refer to the fiscal year ended January 31, 2021 as "2020" and
the fiscal year ended February 2, 2020 as "2019." 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 fourth quarter of 2020, compared to the fourth quarter
of 2019:
- Net revenue increased 24% to $1.7 billion. On a constant dollar
basis, net revenue increased 22%.
- Net revenue increased 21% in North America and increased 47%
internationally.
- Total comparable sales increased 21%, or increased 20% on a
constant dollar basis.
- Direct to consumer net revenue increased 94%, or increased 92%
on a constant dollar basis.
- Comparable store productivity was 72%, or 71% on a constant
dollar basis, representing a comparable store sales decrease of
28%, or a decrease of 29% on a constant dollar basis.
- Direct to consumer net revenue represented 52% of total net
revenue compared to 33% for the fourth quarter of 2019.
- Gross profit increased 25% to $1.0 billion, and gross margin
increased 60 basis points to 58.6%.
- Income from operations increased 10% to $457.9 million.
Adjusted income from operations increased 12% to $465.7
million.
- Operating margin decreased 330 basis points to 26.5%. Adjusted
operating margin decreased 290 basis points to 26.9%.
- Income tax expense increased 5% to $127.2 million. The
effective tax rate for the fourth quarter of 2020 was 27.8%
compared to 28.8% for the fourth quarter of 2019. The adjusted
effective tax rate was 27.4% for the fourth quarter of 2020.
- Diluted earnings per share were $2.52 compared to $2.28 in the
fourth quarter of 2019. Adjusted diluted earnings per share for the
fourth quarter of 2020 were $2.58.
- The Company opened six net new company-operated stores during
the quarter, ending with 521 stores.
For 2020 compared to 2019:
- Net revenue increased 11% to $4.4 billion. On a constant dollar
basis, net revenue increased 10%.
- Direct to consumer net revenue increased 101%, and increased
101% on a constant dollar basis.
- Company operated store net revenue decreased 34%.
- Net revenue increased 8% in North America and increased 31%
internationally.
- Direct to consumer net revenue represented 52% of total net
revenue compared to 29% for 2019.
- Gross profit increased of 11% to $2.5 billion, and gross margin
increased of 10 basis points to 56.0%.
- Income from operations decreased 8% to $820.0 million. Adjusted
income from operations decreased 4% to $849.8 million.
- Operating margin decreased 370 basis points to 18.6%. Adjusted
operating margin decreased 300 basis points to 19.3%.
- Income tax expense decreased 8% to $230.4 million. The
effective tax rate was 28.1% for each of 2020 and 2019. The
adjusted effective tax rate was 27.5% for 2020.
- Diluted earnings per share were $4.50 compared to $4.93 in
2019. Adjusted diluted earnings per share were $4.70 in 2020.
- The Company repurchased 0.4 million shares of its own common
stock at an average cost of $172.70 per share in 2020.
- The Company opened 30 net new company-operated stores during
the year, ending with 521 stores.
Meghan Frank, Chief Financial Officer, stated: "In response to
the COVID-19 pandemic, our teams reacted quickly to ensure we met
the evolving needs of our guests. We pulled forward investments in
our direct-to-consumer channel, completed our first acquisition,
and tightly managed expenses while also supporting our people.
These measures contributed to our strong fourth quarter results,
including growing revenue by 24%, and are helping fuel our even
stronger top-line growth projections for 2021. I'd like to thank
our teams around the globe for their dedication to lululemon and
I'm confident in the long-term trajectory of our business."
Balance sheet highlights
The Company ended 2020 with $1.2 billion in cash and cash
equivalents compared to $1.1 billion at the end of 2019. It had
$397.6 million of capacity under its committed revolving credit
facility at the end of 2020. Inventories at the end of 2020
increased by 25% to $647.2 million compared to $518.5 million at
the end of 2019.
Fiscal 2021 Outlook
For the first quarter of fiscal 2021, we expect net revenue to
be in the range of $1.100 billion to $1.130 billion. Diluted
earnings per share are expected to be in the range of $0.81 to
$0.85 for the quarter and adjusted earnings per share are expected
to be in the range of $0.86 to $0.90.
For fiscal 2021, we expect net revenue to be in the range of
$5.550 billion to $5.650 billion. Diluted earnings per share are
expected to be in the range of $6.10 to $6.25 for the year and
adjusted earnings per share are expected to be in the range of
$6.30 to $6.45.
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, tighter capacity restrictions
and other precautionary measures are in place in most markets.
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 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 2020 results is scheduled for
today, March 30, 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 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 believes that investors would typically 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 during the
first two quarters of 2020, the Company believes total comparable
sales and comparable store sales on a full year basis 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 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 Asia 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; climate change, and related
legislative and regulatory responses; increased scrutiny regarding
its environmental, social, and governance, or sustainability
responsibilities; 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
Fourth Quarter
Fiscal Year
2020
2019
2020
2019
Net revenue
$
1,729,550
$
1,397,491
$
4,401,879
$
3,979,296
Costs of goods sold
716,816
586,665
1,937,888
1,755,910
Gross profit
1,012,734
810,825
2,463,991
2,223,386
As a percent of net revenue
58.6
%
58.0
%
56.0
%
55.9
%
Selling, general and administrative
expenses
544,831
394,316
1,609,003
1,334,247
As a percent of net revenue
31.5
%
28.2
%
36.6
%
33.5
%
Amortization of intangible assets
2,195
23
5,160
29
Acquisition-related expenses
7,802
—
29,842
—
Income from operations
457,905
416,487
819,986
889,110
As a percent of net revenue
26.5
%
29.8
%
18.6
%
22.3
%
Other income (expense), net
(886
)
2,129
(636
)
8,283
Income before income tax expense
457,018
418,616
819,350
897,393
Income tax expense
127,181
120,595
230,437
251,797
Net income
$
329,837
$
298,021
$
588,913
$
645,596
Basic earnings per share
$
2.53
$
2.29
$
4.52
$
4.95
Diluted earnings per share
$
2.52
$
2.28
$
4.50
$
4.93
Basic weighted-average shares
outstanding
130,340
130,311
130,289
130,393
Diluted weighted-average shares
outstanding
130,956
130,896
130,871
130,955
lululemon athletica inc.
Condensed Consolidated Balance Sheets
Unaudited; Expressed in thousands
January 31, 2021
February 2, 2020
ASSETS
Current assets
Cash and cash equivalents
$
1,150,517
$
1,093,505
Inventories
647,230
518,513
Prepaid and receivable income taxes
139,126
85,159
Other current assets
187,506
110,761
Total current assets
2,124,379
1,807,938
Property and equipment, net
745,687
671,693
Right-of-use lease assets
734,835
689,664
Goodwill and intangible assets, net
466,957
24,423
Deferred income taxes and other
non-current assets
113,357
87,636
Total assets
$
4,185,215
$
3,281,354
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Accounts payable
$
172,246
$
79,997
Accrued inventory liabilities
14,956
6,344
Other accrued liabilities
211,911
112,641
Accrued compensation and related
expenses
130,171
133,688
Current lease liabilities
166,091
128,497
Current income taxes payable
8,357
26,436
Unredeemed gift card liability
155,848
120,413
Other current liabilities
23,598
12,402
Total current liabilities
883,178
620,418
Non-current lease liabilities
632,590
611,464
Non-current income taxes payable
43,150
48,226
Deferred income tax liability
58,755
43,432
Other non-current liabilities
8,976
5,596
Stockholders' equity
2,558,566
1,952,218
Total liabilities and stockholders'
equity
$
4,185,215
$
3,281,354
lululemon athletica inc.
Condensed Consolidated Statements of Cash
Flows
Unaudited; Expressed in thousands
Fiscal Year
2020
2019
Cash flows from operating activities
Net income
$
588,913
$
645,596
Adjustments to reconcile net income to net
cash provided by operating activities
214,423
23,720
Net cash provided by operating
activities
803,336
669,316
Net cash used in investing activities
(695,532
)
(278,408
)
Net cash used in financing activities
(80,788
)
(177,173
)
Effect of exchange rate changes on
cash
29,996
(1,550
)
Increase in cash and cash equivalents
57,012
212,185
Cash and cash equivalents, beginning of
year
$
1,093,505
$
881,320
Cash and cash equivalents, end of year
$
1,150,517
$
1,093,505
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,
direct to consumer net revenue, comparable store sales, and
comparable store productivity.
The below changes show the change for the fourth quarter of 2020
compared to fourth quarter of 2019.
Net Revenue
Total Comparable
Sales(1),(2)
Direct to Consumer Net
Revenue
Comparable Store
Sales(2)
Comparable Store
Productivity(3)
Change
24
%
21
%
94
%
(28
)%
72
%
Adjustments due to foreign exchange rate
changes
(2
)
(1
)
(2
)
(1
)
(1
)
Change in constant dollars
22
%
20
%
92
%
(29
)%
71
%
____________
(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 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.
(3)
Comparable store productivity is
calculated as comparable store sales as a percentage of the net
revenue generated from these company-operated stores in the
corresponding period of the prior year.
The below changes show the change for 2020 compared to 2019.
Net Revenue
Direct to Consumer Net
Revenue
Change
11
%
101
%
Adjustments due to foreign exchange rate
changes
(1
)
—
Change in constant dollars
10
%
101
%
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 6. Acquisition included
in Item 8 of Part II of our Report on Form 10-K to be filed with
the SEC on or about March 30, 2021 for further information on these
adjustments.
Fourth Quarter 2020
Income from Operations
Operating Margin
Income Tax Expense
Effective Tax Rate
Net Income
Diluted Earnings Per
Share
GAAP results
$
457,905
26.5
%
$
127,181
27.8
%
$
329,837
$
2.52
Transaction and integration costs
285
—
285
—
Acquisition-related compensation
7,517
0.4
7,517
0.06
Tax effect of the above
270
(0.4
)
(270
)
—
Adjusted results (non-GAAP)
$
465,707
26.9
%
$
127,451
27.4
%
$
337,369
$
2.58
Fiscal 2020
Income from Operations
Operating Margin
Income Tax Expense
Effective Tax Rate
Net Income
Diluted Earnings Per
Share
GAAP results
$
819,986
18.6
%
$
230,437
28.1
%
$
588,913
$
4.50
Transaction and integration costs
10,548
0.2
10,548
0.08
Gain on existing investment
(782
)
—
(782
)
(0.01
)
Acquisition-related compensation
20,076
0.5
20,076
0.15
Tax effect of the above
3,133
(0.6
)
(3,133
)
(0.02
)
Adjusted results (non-GAAP)
$
849,828
19.3
%
$
233,570
27.5
%
$
615,622
$
4.70
Expected adjusted earnings per share
First Quarter Fiscal
2021
Fiscal 2021
Expected diluted earnings per share
range
$0.81 to $0.85
$6.10 to $6.25
MIRROR integration and acquisition-related
costs, net of tax
$0.05
$0.20
Expected adjusted earnings per share range
(non-GAAP)
$0.86 to $0.90
$6.30 to $6.45
lululemon athletica inc. Company-operated Store Count and
Square Footage(1) 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
First Quarter
491
4
6
489
Second Quarter
489
17
—
506
Third Quarter
506
11
2
515
Fourth Quarter
515
8
2
521
Total Gross Square Feet at the
Beginning of the Quarter
Gross Square Feet Added During
the Quarter(2)
Gross Square Feet Lost During
the Quarter(2)
Total Gross Square Feet at the
End of the Quarter
First Quarter
1,680
24
12
1,692
Second Quarter
1,692
65
—
1,757
Third Quarter
1,757
54
3
1,808
Fourth Quarter
1,808
55
5
1,858
____________
(1)
Company-operated store count and square
footage summary excludes retail locations operated by third parties
under license and supply arrangements.
(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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210330005963/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. Hilary Strath
1-604-218-1958 or Brunswick Group Eleanor French 1-415-671-7676
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