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| 8-K - 8-K - lululemon athletica inc. | lulu-20151101x8k.htm |
Exhibit 99.1
LULULEMON ATHLETICA INC. ANNOUNCES THIRD QUARTER FISCAL 2015 RESULTS
Vancouver, British Columbia – December 9, 2015 – lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the third quarter ended November 1, 2015.
For the third quarter ended November 1, 2015:
• | Net revenue for the quarter increased 14% to $479.7 million from $419.4 million in the third quarter of fiscal 2014. |
• | Total comparable sales, which includes comparable store sales and direct to consumer, increased by 9% for the third quarter on a constant dollar basis. |
• | Comparable store sales for the third quarter increased by 6% on a constant dollar basis and direct to consumer revenue increased 21% on a constant dollar basis. |
• | Direct to consumer net revenue increased 16% to $89.3 million, or 18.6% of total Company revenue, in the third quarter of fiscal 2015, an increase from 18.4% of total Company revenues in the third quarter of fiscal 2014. |
• | Gross profit for the quarter increased by 7% to $224.8 million, and as a percentage of net revenue gross profit was 46.9% for the quarter compared to 50.3% in the third quarter of fiscal 2014. |
• | Income from operations for the quarter decreased by 16% to $68.2 million, and as a percentage of net revenue was 14.2% compared to 19.4% of net revenue in the third quarter of fiscal 2014. |
• | The income tax expense for the third quarter of fiscal 2015 was $12.1 million, which includes an income tax recovery of $7.7 million related to the Company's transfer pricing arrangements and taxes associated with the repatriation of foreign earnings. In addition, there was a related net interest expense of $3.6 million. The tax rate excluding these adjustments was 28.8% in the third quarter of fiscal 2015 compared to 27.1% in the third quarter of fiscal 2014. The effective tax rate in the third quarter of fiscal 2015 including these tax and related interest adjustments was 18.6%. |
• | Diluted earnings per share for the third quarter of fiscal 2015 were $0.38 compared to $0.42 in the third quarter of fiscal 2014. Excluding the above tax and related interest adjustments, diluted earnings per share were $0.35 for the third quarter of fiscal 2015. |
• | During the third quarter of fiscal 2015, the Company repurchased 1.6 million shares of the Company's common stock at an average cost of $55.50 per share. |
The Company ended the third quarter of fiscal 2015 with $403.4 million in cash and cash equivalents compared to $633.6 million at the end of the third quarter of fiscal 2014. Inventory at the end of the third quarter of fiscal 2015 totaled $357.8 million compared to $229.9 million at the end of the third quarter of fiscal 2014. The Company ended the quarter with 354 stores.
Laurent Potdevin, lululemon's CEO, stated: "We had a solid quarter in line with our expectations underscored by the combination of our product, guest and community initiatives along with tremendous guest reception to major store openings around the world. I would like to personally thank all of our educators who create amazing experiences for our guests every day."
Mr. Potdevin continued: "We’ve implemented critical organizational changes this quarter and now have in place a complete, world-class management team that is aligned with our strategic global priorities focused on design and dedicated to creating long-term value."
Updated Outlook
For the fourth quarter of fiscal 2015, we expect net revenue to be in the range of $670 million to $685 million based on total comparable sales in the mid-single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $0.75 to $0.78 for the quarter. This guidance assumes 139.0 million diluted weighted-average shares outstanding and a 29.5% tax rate. The guidance does not reflect potential future repurchases of the Company's shares.
For the full fiscal 2015, we now expect net revenue to be in the range of $2.025 billion to $2.040 billion based on total comparable sales in the high single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range
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of $1.81 to $1.84 for the full year, or $1.78 to $1.81 normalized for the tax and related interest adjustments made during the third quarter of fiscal 2015. This guidance assumes 140.9 million diluted weighted-average shares outstanding and a 27.6% tax rate, which includes the above tax adjustments. The guidance does not reflect potential future repurchases of the Company's shares.
Conference Call Information
A conference call to discuss third quarter results is scheduled for today, December 9, 2015, at 9:00 a.m. Eastern time. Those interested in participating in the call are invited to dial 1-877-303-3203 approximately 10 minutes prior to the start of the call. The conference call will also be webcast live at www.lululemon.com. The webcast will be accessible on our website for approximately 30 days after the call.
About lululemon athletica inc.
lululemon athletica inc. (NASDAQ:LULU) is a yoga-inspired athletic apparel company 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
Total comparable sales in constant dollars, comparable store sales in constant dollars, and changes in direct to consumer net revenue in constant dollars, the tax rate excluding certain tax and related interest adjustments, and diluted earnings per share excluding certain tax adjustments are not United States generally accepted accounting principle ("GAAP") performance measures.
We provide constant dollar 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, which are not under management's control. 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 tax rate and diluted earnings per share excluding certain tax and related interest adjustments because of their comparability to our historical information as well as our diluted earnings per share guidance, 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 superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table 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 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; our highly competitive market and increasing competition; increasing product costs and decreasing selling prices; our ability to anticipate consumer preferences
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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; our ability to manage our growth and the increased complexity of our business effectively; 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; 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 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 ability to source our merchandise profitably or at all; 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.
Contacts
Investor Contact:
Joseph Teklits/Caitlin Morahan
ICR, Inc.
203-682-8200
Media Contact:
Alecia Pulman
ICR, Inc.
203-682-8224
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lululemon athletica inc.
Condensed Consolidated Statements of Operations
Unaudited; Expressed in thousands, except per share amounts
Thirteen Weeks Ended November 1, 2015 | Thirteen Weeks Ended November 2, 2014 | Thirty-Nine Weeks Ended November 1, 2015 | Thirty-Nine Weeks Ended November 2, 2014 | |||||||||||||
Net revenue | $ | 479,693 | $ | 419,396 | $ | 1,356,247 | $ | 1,194,722 | ||||||||
Costs of goods sold | 254,896 | 208,308 | 713,548 | 590,583 | ||||||||||||
Gross profit | 224,797 | 211,088 | 642,699 | 604,139 | ||||||||||||
As a percent of net revenue | 46.9 | % | 50.3 | % | 47.4 | % | 50.6 | % | ||||||||
Selling, general and administrative expenses | 156,619 | 129,932 | 439,906 | 385,294 | ||||||||||||
As a percent of net revenue | 32.7 | % | 30.9 | % | 32.4 | % | 32.2 | % | ||||||||
Income from operations | 68,178 | 81,156 | 202,793 | 218,845 | ||||||||||||
As a percent of net revenue | 14.2 | % | 19.4 | % | 15.0 | % | 18.4 | % | ||||||||
Other income (expense), net | (2,890 | ) | 1,814 | (1,519 | ) | 5,347 | ||||||||||
Income before income tax expense | 65,288 | 82,970 | 201,274 | 224,192 | ||||||||||||
Income tax expense | 12,135 | 22,519 | 52,643 | 96,012 | ||||||||||||
Net income | $ | 53,153 | $ | 60,451 | $ | 148,631 | $ | 128,180 | ||||||||
Basic earnings per share | $ | 0.38 | $ | 0.42 | $ | 1.05 | $ | 0.89 | ||||||||
Diluted earnings per share | $ | 0.38 | $ | 0.42 | $ | 1.05 | $ | 0.88 | ||||||||
Basic weighted-average shares outstanding | 140,282 | 143,180 | 141,198 | 144,581 | ||||||||||||
Diluted weighted-average shares outstanding | 140,457 | 143,441 | 141,470 | 144,949 | ||||||||||||
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lululemon athletica inc.
Condensed Consolidated Balance Sheets
Unaudited; Expressed in thousands
November 1, 2015 | February 1, 2015 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 403,446 | $ | 664,479 | ||||
Inventories | 357,753 | 208,116 | ||||||
Prepaid income taxes | 124,776 | 40,547 | ||||||
Other current assets | 42,529 | 37,870 | ||||||
Total current assets | 928,504 | 951,012 | ||||||
Property and equipment, net | 346,705 | 296,008 | ||||||
Goodwill and intangible assets, net | 25,407 | 26,163 | ||||||
Deferred income tax assets and other non-current assets | 20,943 | 23,030 | ||||||
Total assets | $ | 1,321,559 | $ | 1,296,213 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 5,845 | $ | 9,339 | ||||
Accrued inventory liabilities | 40,250 | 22,296 | ||||||
Accrued compensation and related expenses | 44,074 | 29,932 | ||||||
Income taxes payable | 46,829 | 20,073 | ||||||
Unredeemed gift card liability | 35,123 | 46,252 | ||||||
Other accrued liabilities | 36,207 | 31,989 | ||||||
Total current liabilities | 208,328 | 159,881 | ||||||
Deferred income tax liabilities | 3,524 | 3,633 | ||||||
Other non-current liabilities | 49,748 | 43,131 | ||||||
Stockholders' equity | 1,059,959 | 1,089,568 | ||||||
Total liabilities and stockholders' equity | $ | 1,321,559 | $ | 1,296,213 | ||||
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lululemon athletica inc.
Condensed Consolidated Statements of Cash Flows
Unaudited; Expressed in thousands
Thirty-Nine Weeks Ended November 1, 2015 | Thirty-Nine Weeks Ended November 2, 2014 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 148,631 | $ | 128,180 | ||||
Items not affecting cash | 63,576 | 67,955 | ||||||
Other, including net changes in other non-cash balances | (186,267 | ) | (29,294 | ) | ||||
Net cash provided by operating activities | 25,940 | 166,841 | ||||||
Net cash used in investing activities | (108,061 | ) | (89,373 | ) | ||||
Net cash used in financing activities | (167,452 | ) | (131,781 | ) | ||||
Effect of exchange rate changes on cash | (11,460 | ) | (10,754 | ) | ||||
Decrease in cash and cash equivalents | (261,033 | ) | (65,067 | ) | ||||
Cash and cash equivalents, beginning of period | 664,479 | 698,649 | ||||||
Cash and cash equivalents, end of period | $ | 403,446 | $ | 633,582 | ||||
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lululemon athletica inc.
Reconciliation of Non-GAAP Financial Measures
Constant dollar total comparable sales (unaudited)
Thirteen Weeks Ended November 1, 2015 | Thirteen Weeks Ended November 2, 2014 | |||||
Total comparable sales1 | 3 | % | 1 | % | ||
Adjustments due to foreign exchange rate changes | 6 | 2 | ||||
Total comparable sales in constant dollars1 | 9 | % | 3 | % | ||
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1Total comparable sales includes comparable store sales and direct to consumer sales. Comparable store sales reflects net revenue at company-operated stores that have been open for at least 12 months.
Constant dollar comparable store sales (unaudited)
Thirteen Weeks Ended November 1, 2015 | Thirteen Weeks Ended November 2, 2014 | |||||
Comparable store sales1 | — | % | (5 | )% | ||
Adjustments due to foreign exchange rate changes | 6 | 2 | ||||
Comparable store sales in constant dollars1 | 6 | % | (3 | )% | ||
__________
1Comparable store sales reflects net revenue at company-operated stores that have been open for at least 12 months.
Constant dollar changes in direct to consumer revenue (unaudited)
Thirteen Weeks Ended November 1, 2015 | Thirteen Weeks Ended November 2, 2014 | |||||
Change in direct to consumer revenue | 16 | % | 25 | % | ||
Adjustments due to foreign exchange rate changes | 5 | 2 | ||||
Change in direct to consumer revenue in constant dollars | 21 | % | 27 | % | ||
Effective tax rate, excluding tax and related interest adjustments
Thirteen Weeks Ended November 1, 2015 | Thirteen Weeks Ended November 2, 2014 | |||||
Effective tax rate | 18.6 | % | 27.1 | % | ||
Tax and related interest adjustments1 | 10.2 | — | ||||
Effective tax rate, excluding tax and related interest adjustments | 28.8 | % | 27.1 | % | ||
__________
1These adjustments relate to the Company's transfer pricing arrangements and taxes associated with the repatriation of foreign earnings. Please refer to Note 7 to the unaudited interim consolidated financial statements included in Item 1 of Part I of the Company's Report on Form 10-Q to be filed with the SEC on or about December 9, 2015 for an explanation as to the nature of these items.
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Diluted earnings per share, excluding tax and related interest adjustments
Thirteen Weeks Ended November 1, 2015 | Thirteen Weeks Ended November 2, 2014 | |||||||
Diluted earnings per share | $ | 0.38 | $ | 0.42 | ||||
Tax and related interest adjustments1 | (0.03 | ) | — | |||||
Diluted earnings per share, excluding tax and related interest adjustments | $ | 0.35 | $ | 0.42 | ||||
__________
1These adjustments relate to the Company's transfer pricing arrangements and taxes associated with the repatriation of foreign earnings. Please refer to Note 7 to the unaudited interim consolidated financial statements included in Item 1 of Part I of the Company's Report on Form 10-Q to be filed with the SEC on or about December 9, 2015 for an explanation as to the nature of these items.
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lululemon athletica inc.
Store Count and Square Footage1
Thirty-Nine Weeks Ended November 1, 2015
Square Footage Expressed in Thousands
Number of Stores Open at the Beginning of the Quarter | Number of Stores Opened During the Quarter2,4 | Number of Stores Closed During the Quarter2 | Number of Stores Open at the End of the Quarter | |||||||||
1st Quarter | 302 | 14 | — | 316 | ||||||||
2nd Quarter | 316 | 20 | — | 336 | ||||||||
3rd Quarter | 336 | 18 | — | 354 | ||||||||
Total Gross Square Feet at the Beginning of the Quarter | Gross Square Feet Added During the Quarter2,3,4 | Gross Square Feet Lost During the Quarter2,3 | Total Gross Square Feet at the End of the Quarter | |||||||||
1st Quarter | 894 | 37 | — | 931 | ||||||||
2nd Quarter | 931 | 54 | — | 985 | ||||||||
3rd Quarter | 985 | 51 | — | 1,036 | ||||||||
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1Store count and square footage summary includes company-operated stores which are branded lululemon athletica or ivivva athletica.
2Number of stores opened/closed during the quarter that are branded lululemon athletica or ivivva athletica.
3Gross 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.
4Excludes franchises.
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