lululemon athletica inc. Announces First Quarter Fiscal 2018 Results
Revenue up 25% to $650 million
Comparable sales increase 20%, or 19% on a constant dollar basis
Diluted EPS of $0.55 for the first quarter
lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the first quarter ended April 29, 2018.
The summary below provides both GAAP and adjusted non-GAAP financial measures. In connection with the restructuring of its
ivivva operations, the Company recognized pre-tax costs totaling $17.7 million in the first quarter of fiscal 2017. The adjusted
financial measures for the first quarter of fiscal 2017 exclude these charges and their related tax effects. The results for the
first quarter of fiscal 2018 did not include any costs related to the restructuring of the ivivva operations.
For the first quarter ended April 29, 2018:
- Net revenue was $649.7 million, an increase of 25% compared to the first quarter of fiscal 2017. On a
constant dollar basis, net revenue increased 23%.
- Total comparable sales increased 20%, or increased 19% on a constant dollar basis.
- Comparable store sales increased 8%, or increased 6% on a constant dollar basis.
- Direct to consumer net revenue increased 62%, or increased 60% on a constant dollar basis.
- Gross profit was $344.7 million, an increase of 34% compared to the first quarter of fiscal 2017.
Gross profit increased 31% compared to adjusted gross profit for the first quarter of fiscal 2017.
- Gross margin was 53.1%, an increase of 370 basis points compared to the first quarter of fiscal 2017.
Gross margin increased 270 basis points compared to adjusted gross margin for the first quarter of fiscal 2017.
- Income from operations was $104.3 million, an increase of 130% compared to the first quarter of
fiscal 2017. Income from operations increased 65% compared to adjusted income from operations for the first quarter of fiscal
2017.
- Operating margin was 16.1%, an increase of 740 basis points compared to the first quarter of fiscal
2017. Operating margin increased 400 basis points compared to adjusted operating margin for the first quarter of fiscal
2017.
- Income tax expense was $32.1 million compared to $15.1 million in the first quarter of fiscal 2017
and the effective tax rate was 29.9% compared to 32.6%. The adjusted effective tax rate in the first quarter of fiscal 2017 was
30.8%.
- Diluted earnings per share were $0.55 compared to $0.23 in the first quarter of fiscal 2017. Adjusted
diluted earnings per share for the first quarter of fiscal 2017 were $0.32.
The Company ended the first quarter of fiscal 2018 with $966.6 million in cash and cash equivalents compared to $698.3 million
at the end of the first quarter of fiscal 2017. Inventories at the end of the first quarter of fiscal 2018 increased 23% to $373.4
million compared to $303.9 million at the end of the first quarter of fiscal 2017. The Company ended the quarter with 411
stores.
Glenn Murphy, Executive Chairman of the Board, commented: "We are pleased with our continued strong results for the first
quarter of 2018. This successful start to the year reaffirms our strategic priorities and I would like to thank our team for their
passion and commitment to connecting with guests around the world."
Stuart Haselden, Chief Operating Officer, also noted: "Our first quarter results reflect the ongoing strength of our business
and our continued focus on product innovation, global growth, digital acceleration, and, most importantly, investing in our people.
Our momentum remains strong and we are optimistic for 2018 and beyond."
Updated Outlook
For the second quarter of fiscal 2018, we expect net revenue to be in the range of $660 million to $665 million based on a total
comparable sales increase in the high single digits on a constant dollar basis. Diluted earnings per share are expected to be in
the range of $0.46 to $0.48 for the quarter. This guidance assumes 136.3 million diluted weighted-average shares outstanding and a
30.0% tax rate. The guidance does not reflect potential future repurchases of the Company's shares or any adjustments which may be
recognized in connection with the U.S. tax reform.
For the full fiscal 2018, we now expect net revenue to be in the range of $3.040 billion to $3.075 billion based on a total
comparable sales increase in the high single digits on a constant dollar basis. Diluted earnings per share are expected to be in
the range of $3.10 to $3.18 for the full year. This guidance assumes 136.3 million diluted weighted-average shares outstanding and
a 30.0% tax rate. The guidance does not reflect potential future repurchases of the Company's shares or any adjustments which may
be recognized in connection with the U.S. tax reform. Fiscal 2018 is a 53 week year.
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 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 first quarter results is scheduled for today, May 31, 2018, 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 in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue, and
the 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. We provide constant dollar changes in net revenue, total comparable sales,
comparable store sales, and 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.
Adjusted gross profit, gross margin, income from operations, operating margin, effective tax rates, and diluted earnings per
share exclude the costs recognized in connection with the restructuring of our ivivva operations and its related tax effects. We
believe these adjusted financial measures are useful to investors as the adjustments do not directly relate to our ongoing business
operations and therefore do not contribute to a meaningful evaluation of the trend in our operating performance. Furthermore, we do
not believe the adjustments are reflective of our expectations of our future operating performance and believe these non-GAAP
measures are useful to investors because of their comparability to our historical information.
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 our 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 our 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:
our ability to maintain the value and reputation of our brand; the acceptability of our products to our guests; 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 guest 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; our ability to
have technology-based systems function effectively and grow our e-commerce business globally; 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 guest expectations if we have problems with
our distribution system; imitation by our competitors; our ability to protect our intellectual property rights; the continued
service of our senior management and our ability to identify and attract our next Chief Executive Officer; changes in tax laws or
unanticipated tax liabilities; 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; our ability to source our merchandise profitably or
at all if new trade restrictions are imposed or existing trade restrictions become more burdensome; increasing labor costs and
other factors associated with the production of our products in South and South East Asia; the operations of many of our suppliers
are subject to international and other risks; our ability to successfully open new store locations in a timely manner; our ability
to comply with trade and other regulations; seasonality; fluctuations in foreign currency exchange rates; conflicting trademarks
and the prevention of sale of certain products; our exposure to various types of litigation; actions of activist stockholders;
anti-takeover provisions in our 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, 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
|
| |
|
|
|
|
Quarter Ended |
|
|
|
|
April 29, 2018 |
|
April 30, 2017 |
| Net revenue |
|
|
|
$ |
649,706 |
|
|
$ |
520,307 |
|
| Costs of goods sold |
|
|
|
304,973 |
|
|
263,412 |
|
| Gross profit |
|
|
|
344,733 |
|
|
256,895 |
|
| As a percent of net revenue |
|
|
|
53.1 |
% |
|
49.4 |
% |
| Selling, general and administrative expenses |
|
|
|
240,428 |
|
|
199,141 |
|
| As a percent of net revenue |
|
|
|
37.0 |
% |
|
38.3 |
% |
| Asset impairments and restructuring costs |
|
|
|
— |
|
|
12,331 |
|
| As a percent of net revenue |
|
|
|
— |
% |
|
2.4 |
% |
| Income from operations |
|
|
|
104,305 |
|
|
45,423 |
|
| As a percent of net revenue |
|
|
|
16.1 |
% |
|
8.7 |
% |
| Other income (expense), net |
|
|
|
2,918 |
|
|
907 |
|
| Income before income tax expense |
|
|
|
107,223 |
|
|
46,330 |
|
| Income tax expense |
|
|
|
32,070 |
|
|
15,084 |
|
| Net income |
|
|
|
$ |
75,153 |
|
|
$ |
31,246 |
|
|
|
|
|
|
|
|
| Basic earnings per share |
|
|
|
$ |
0.55 |
|
|
$ |
0.23 |
|
| Diluted earnings per share |
|
|
|
$ |
0.55 |
|
|
$ |
0.23 |
|
| Basic weighted-average shares outstanding |
|
|
|
135,502 |
|
|
137,037 |
|
| Diluted weighted-average shares outstanding |
|
|
|
135,931 |
|
|
137,192 |
|
|
|
|
|
|
|
|
|
|
| |
|
lululemon athletica inc.
|
|
Condensed Consolidated Balance Sheets
Unaudited; Expressed in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 29,
2018 |
|
January 28,
2018 |
|
April 30,
2017 |
| ASSETS |
|
|
|
|
|
|
|
|
| Current assets |
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
|
|
$ |
966,571 |
|
|
$ |
990,501 |
|
|
$ |
698,289 |
| Inventories |
|
|
|
373,445 |
|
|
329,562 |
|
|
303,950 |
| Prepaid and receivable income taxes |
|
|
|
46,927 |
|
|
48,948 |
|
|
76,231 |
| Other current assets |
|
|
|
65,912 |
|
|
67,271 |
|
|
54,211 |
| Total current assets |
|
|
|
1,452,855 |
|
|
1,436,282 |
|
|
1,132,681 |
| Property and equipment, net |
|
|
|
472,262 |
|
|
473,642 |
|
|
398,833 |
| Goodwill and intangible assets, net |
|
|
|
24,361 |
|
|
24,679 |
|
|
24,248 |
| Deferred income taxes and other non-current assets |
|
|
|
62,227 |
|
|
63,880 |
|
|
53,572 |
| Total assets |
|
|
|
$ |
2,011,705 |
|
|
$ |
1,998,483 |
|
|
$ |
1,609,334 |
| LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
|
|
|
| Accounts payable |
|
|
|
$ |
16,255 |
|
|
$ |
24,646 |
|
|
$ |
8,533 |
| Accrued inventory liabilities |
|
|
|
19,861 |
|
|
13,027 |
|
|
20,610 |
| Accrued compensation and related expenses |
|
|
|
54,261 |
|
|
70,141 |
|
|
39,076 |
| Current income taxes payable |
|
|
|
19,445 |
|
|
15,700 |
|
|
26,951 |
| Unredeemed gift card liability |
|
|
|
69,510 |
|
|
82,668 |
|
|
59,398 |
| Lease termination liabilities |
|
|
|
5,523 |
|
|
6,427 |
|
|
— |
| Other current liabilities |
|
|
|
82,486 |
|
|
79,989 |
|
|
51,405 |
| Total current liabilities |
|
|
|
267,341 |
|
|
292,598 |
|
|
205,973 |
| Non-current income taxes payable |
|
|
|
44,078 |
|
|
48,268 |
|
|
— |
| Deferred income tax liability |
|
|
|
1,582 |
|
|
1,336 |
|
|
6,950 |
| Other non-current liabilities |
|
|
|
62,470 |
|
|
59,321 |
|
|
48,724 |
| Stockholders' equity |
|
|
|
1,636,234 |
|
|
1,596,960 |
|
|
1,347,687 |
| Total liabilities and stockholders' equity |
|
|
|
$ |
2,011,705 |
|
|
$ |
1,998,483 |
|
|
$ |
1,609,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
lululemon athletica inc.
|
|
Condensed Consolidated Statements of Cash Flows
Unaudited; Expressed in thousands
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
|
|
April 29, 2018 |
|
April 30, 2017 |
| Cash flows from operating activities |
|
|
|
|
|
|
| Net income |
|
|
|
$ |
75,153 |
|
|
$ |
31,246 |
|
| Adjustments to reconcile net income to net cash provided by operating
activities |
|
|
|
(39,316 |
) |
|
(11,846 |
) |
| Net cash provided by operating activities |
|
|
|
35,837 |
|
|
19,400 |
|
| Net cash used in investing activities |
|
|
|
(34,314 |
) |
|
(19,879 |
) |
| Net cash provided by (used in) financing activities |
|
|
|
1,900 |
|
|
(14,487 |
) |
| Effect of exchange rate changes on cash |
|
|
|
(27,353 |
) |
|
(21,591 |
) |
| Decrease in cash and cash equivalents |
|
|
|
(23,930 |
) |
|
(36,557 |
) |
| Cash and cash equivalents, beginning of period |
|
|
|
990,501 |
|
|
734,846 |
|
| Cash and cash equivalents, end of period |
|
|
|
$ |
966,571 |
|
|
$ |
698,289 |
|
|
|
|
|
|
|
|
|
|
|
|
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 in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue show the
net change for the first quarter of fiscal 2018 compared to the first quarter of fiscal 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue |
|
Total
Comparable
Sales 1,2
|
|
Comparable
Store Sales 2
|
|
Direct to
Consumer Net
Revenue
|
| Increase |
|
|
|
25 |
% |
|
20 |
% |
|
8 |
% |
|
62 |
% |
| Adjustments due to foreign exchange rate changes |
|
|
|
(2 |
) |
|
(1 |
) |
|
(2 |
) |
|
(2 |
) |
| Increase in constant dollars |
|
|
|
23 |
% |
|
19 |
% |
|
6 |
% |
|
60 |
% |
| __________ |
|
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. |
|
|
Adjusted financial measures
The following table reconciles adjusted financial measures with the most directly comparable measures calculated in accordance
with GAAP. The adjustments relate to the restructuring of our ivivva operations and its related tax effects. Please refer to Note 6
to the unaudited interim 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 May 31, 2018 for further information on these adjustments.
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
April 29, 2018 |
|
|
Quarter Ended
April 30, 2017 |
|
|
|
|
GAAP Results |
|
Adjustments |
|
Adjusted
Results
(Non-GAAP)
|
|
|
GAAP Results |
|
Restructuring
of ivivva
Operations
Adjustments
|
|
Adjusted
Results
(Non-GAAP)
|
|
|
|
|
(In thousands, except per share amounts) |
| Gross profit |
|
|
|
$ |
344,733 |
|
|
$ |
— |
|
|
$ |
344,733 |
|
|
|
$ |
256,895 |
|
|
$ |
5,419 |
|
|
$ |
262,314 |
|
| Gross margin |
|
|
|
53.1 |
% |
|
— |
% |
|
53.1 |
% |
|
|
49.4 |
% |
|
1.0 |
% |
|
50.4 |
% |
| Income from operations |
|
|
|
104,305 |
|
|
— |
|
|
104,305 |
|
|
|
45,423 |
|
|
17,750 |
|
|
63,173 |
|
| Operating margin |
|
|
|
16.1 |
% |
|
— |
% |
|
16.1 |
% |
|
|
8.7 |
% |
|
3.4 |
% |
|
12.1 |
% |
| Income before income tax expense |
|
|
|
107,223 |
|
|
— |
|
|
107,223 |
|
|
|
46,330 |
|
|
17,750 |
|
|
64,080 |
|
| Income tax expense |
|
|
|
32,070 |
|
|
— |
|
|
32,070 |
|
|
|
15,084 |
|
|
4,684 |
|
|
19,768 |
|
| Effective tax rate |
|
|
|
29.9 |
% |
|
— |
% |
|
29.9 |
% |
|
|
32.6 |
% |
|
(1.8 |
)% |
|
30.8 |
% |
| Diluted earnings per share |
|
|
|
$ |
0.55 |
|
|
$ |
— |
|
|
$ |
0.55 |
|
|
|
$ |
0.23 |
|
|
$ |
0.09 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
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 3
|
|
Number of
Stores Open
at the End of
the Quarter
|
| 2nd Quarter 2017 |
|
|
|
411 |
|
|
11 |
|
|
1 |
|
|
421 |
| 3rd Quarter 2017 |
|
|
|
421 |
|
|
17 |
|
|
50 |
|
|
388 |
| 4th Quarter 2017 |
|
|
|
388 |
|
|
16 |
|
|
— |
|
|
404 |
| 1st Quarter 2018 |
|
|
|
404 |
|
|
7 |
|
|
— |
|
|
411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 3
|
|
Total Gross
Square Feet at
the End of the
Quarter
|
| 2nd Quarter 2017 |
|
|
|
1,204 |
|
|
37 |
|
|
3 |
|
|
1,238 |
| 3rd Quarter 2017 |
|
|
|
1,238 |
|
|
43 |
|
|
89 |
|
|
1,192 |
| 4th Quarter 2017 |
|
|
|
1,192 |
|
|
70 |
|
|
— |
|
|
1,262 |
| 1st Quarter 2018 |
|
|
|
1,262 |
|
|
15 |
|
|
— |
|
|
1,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| __________ |
| 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. |
| 3 |
On August 20, 2017, as part of the restructuring of its ivivva operations, the
Company closed 48 of its 55 ivivva branded company-operated stores. The seven remaining ivivva branded stores remain in
operation. |
Investors:
lululemon athletica inc.
Howard Tubin, 1-604-732-6124
or
ICR, Inc.
Joseph Teklits/Caitlin Morahan
1-203-682-8200
or
Media:
lululemon athletica inc.
Erin Hankinson, 1-604-732-6124
or
Brunswick Group
Ash Spiegelberg, 1-214-254-3790
View source version on businesswire.com: https://www.businesswire.com/news/home/20180531006384/en/