Lululemon Athletica Inc. reported net earnings rose 36.4 percent and slightly exceeded Wall Street’s targets. Same-store sales soared 20 percent, lifted by a 41 percent hike in online sales. The retailer joined other companies in not providing a forecast for the current fiscal year due to the coronavirus.

For the fourth quarter ended February 2, 2020:

  • Net revenue was $1.4 billion, an increase of 20 percent compared to the fourth quarter of fiscal 2018. Wall Street’s consensus estimate had been $1.38 billion;
  • Total comparable sales increased 20 percent;
  • Comparable store sales increased 9 percent;
  • Direct-to-consumer net revenue increased 41 percent;
  • Gross profit was $810.8 million, an increase of 21 percent compared to the fourth quarter of fiscal 2018;
  • Gross margin was 58.0 percent, an increase of 70 basis points compared to the fourth quarter of fiscal 2018;
  • Income from operations was $416.5 million, an increase of 26 percent compared to the fourth quarter of fiscal 2018;
  • Operating margin was 29.8 percent, an increase of 140 basis points compared to the fourth quarter of fiscal 2018;
  • Income tax expense was $120.6 million compared to $115.8 million in the fourth quarter of fiscal 2018 and the effective tax rate was 28.8 percent compared to 34.6 percent for the fourth quarter of fiscal 2018. The adjusted effective tax rate for the fourth quarter of fiscal 2018 was 26.9 percent;
  • Net earnings rose 36.4 percent to $298.0 million from $218.5 million;
  • Diluted earnings per share were $2.28 compared to $1.65 in the fourth quarter of fiscal 2018. Adjusted diluted earnings per share for the fourth quarter of fiscal 2018 were $1.85. Wall Street’s consensus estimate had been $2.25; and
  • The company repurchased 1.6 thousand shares of its own common stock at an average cost of $194.10 per share in the fourth quarter of fiscal 2019.

For the fiscal year ended February 2, 2020:

  • Net revenue was $4.0 billion, an increase of 21 percent compared to fiscal 2018. On a constant dollar basis, net revenue increased 22 percent;
  • Total comparable sales increased 17 percent, or increased 18 percent on a constant dollar basis;
  • Comparable store sales increased 9 percent, or increased 10 percent on a constant dollar basis;
  • Direct-to-consumer net revenue increased 35 percent;
  • Gross profit was $2.2 billion, an increase of 22 percent compared to fiscal 2018;
  • Gross margin was 55.9 percent, an increase of 70 basis points compared to fiscal 2018;
  • Income from operations was $889.1 million, an increase of 26 percent compared to fiscal 2018;
  • Operating margin was 22.3 percent, an increase of 80 basis points compared to fiscal 2018;
  • Income tax expense was $251.8 million compared to $231.4 million in fiscal 2018 and the effective tax rate was 28.1 percent compared to 32.4 percent for fiscal 2018. The adjusted effective tax rate for fiscal 2018 was 28.0 percent;
  • Diluted earnings per share were $4.93 compared to $3.61 in fiscal 2018. Adjusted diluted earnings per share in fiscal 2018 were $3.84;
  • The company repurchased 1.1 million shares of its own common stock at an average cost of $164.26 per share in fiscal 2019; and
  • The company ended fiscal 2019 with $1.1 billion in cash and cash equivalents compared to $881.3 million at the end of fiscal 2018. Inventories at the end of fiscal 2019 increased by 28 percent to $518.5 million compared to $404.8 million at the end of fiscal 2018. The company ended the year with 491 stores.

Calvin McDonald, CEO, commented: “2019 was a strong year for Lululemon, as our teams executed against our Power of Three growth plan. We are now navigating an extraordinary environment that is currently impacting our business. The strength of our brand and strong financial position will help us manage through the day-to-day while continuing to effectively plan for and invest in our future.” McDonald continued: “I want to thank our people around the globe for the results they delivered in 2019 and for their perseverance and commitment to our brand each and every day.”

COVID-19
The outbreak of COVID-19  has been declared a pandemic by the World Health Organization and continues to spread in the United States, Canada and in many other countries globally. Subsequent to February 2, 2020, in line with recommendations by public health officials and in accordance with governmental authority orders, Lululemon has taken actions to close certain retail locations and to reduce operating hours. The company continues to monitor the situation and work closely with local authorities to prioritize the safety of its employees and customers.

In February 2020, Lululemon temporarily closed all of its retail locations in Mainland China. All but one of the locations has since reopened. In March 2020, the company temporarily closed all of its retail locations in North America, Europe, Malaysia, New Zealand, and temporarily closed its distribution center in Sumner, WA. These locations currently remain closed.

Fiscal 2020 Outlook
Due to the impact that COVID-19 is having across the globe and the rapid and continuous developments, the brand is not providing guidance for fiscal 2020 at this time. It will provide additional updates as the situation warrants.

Shifted Calendar for Comparable Sales
Due to the 53rd week in fiscal 2018, comparable sales are calculated on a one week shifted basis in fiscal 2019. Changes in total comparable sales, comparable store sales and direct-to-consumer net revenue are calculated on a one week shifted basis such that the 13 and 52 weeks ended February 2, 2020 are compared to the 13 and 52 weeks ended February 3, 2019, rather than January 27, 2019.

Photo courtesy Lululemon