Lululemon Athletica Inc. slightly raised its full-year guidance after reporting first-quarter earnings jumped 28.5 percent in the first quarter on a 14 percent comparable-stores sales gain. Both earnings and sales topped guidance, highlighted by a 33 percent hike in online revenues.

For the first quarter ended May 5, 2019:

  • Net revenue was $782.3 million, an increase of 20 percent compared to the first quarter of fiscal 2018. On a constant dollar basis, net revenue increased 22 percent. Guidance had called for sales in the range of $740 million to $750 million.
  • Based on a shifted calendar, total comparable sales increased 14 percent or increased 16 percent on a constant dollar basis. Guidance had called for comps ahead in the low-double digits on a constant dollar basis.
  • Comparable store sales increased 6 percent, or increased 8 percent on a constant dollar basis.
  • Direct to consumer net revenue increased 33 percent or increased 35 percent on a constant dollar basis.
  • Direct to consumer net revenue represented 26.8 percent of total net revenue compared to 24.3 percent for the first quarter of fiscal 2018.
  • Gross profit was $421.7 million, an increase of 22 percent compared to the first quarter of fiscal 2018.
  • Gross margin was 53.9 percent, an increase of 80 basis points compared to the first quarter of fiscal 2018.
  • Income from operations was $128.8 million, an increase of 23 percent compared to the first quarter of fiscal 2018.
  • Operating margin was 16.5 percent, an increase of 40 basis points compared to the first quarter of fiscal 2018.
  • Income tax expense was $34.6 million compared to $32.1 million in the first quarter of fiscal 2018 and the effective tax rate was 26.4 percent compared to 29.9 percent.
  • Diluted earnings per share were $0.74 compared to $0.55 in the first quarter of fiscal 2018. Guidance had called for EPS in the range of 68 cents to 70 cents.

The company ended the first quarter of fiscal 2019 with $576.2 million in cash and cash equivalents compared to $966.6 million at the end of the first quarter of fiscal 2018. Inventories at the end of the first quarter of fiscal 2019 increased 19 percent to $443.0 million compared to $373.4 million at the end of the first quarter of fiscal 2018. The company ended the quarter with 455 stores.

Calvin McDonald, chief executive officer, commented: “Lululemon continues to see strong momentum across the entire business. I’m inspired by our teams who are executing at high levels, and I want to thank everyone across the globe for their passion and dedication to the brand. I look forward to the opportunities ahead of us, and delivering on our Power of Three five-year vision.”

Updated Outlook

For the second quarter of fiscal 2019, Lululemon expects net revenue to be in the range of $825 million to $835 million based on a total comparable sales increase in the low double digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $0.86 to $0.88 for the quarter. This guidance assumes 131 million diluted weighted-average shares outstanding and a 28 percent tax rate. The guidance does not reflect potential future repurchases of the company’s shares.

For the full fiscal 2019, Lululemon now expects net revenue to be in the range of $3.730 billion to $3.770 billion based on a total comparable sales increase in the low double digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $4.51 to $4.58 for the full year, based on a 28 percent effective tax rate.

The guidance assumes 131 million diluted weighted-average shares outstanding. The guidance does not reflect potential future repurchases of the company’s shares.

Previously, Lululemon had expected revenue to be in the range of $3.700 billion to $3.740 billion based on a total comparable sales increase in the low-double digits on a constant dollar basis. EPS was expected to land in the range of $4.48 to $4.55.

Photo courtesy Lululemon