Lululemon Athletica Inc. reported earnings soared 76.1 percent in its second quarter, to $38.4 million, or 26 cents a share, from $21.8 million, or 15 cents, a year ago. Revenues jumped 39 percent to $212.3 million from $152.2 million in the second quarter of fiscal 2010. Comps increased 20 percent on a constant dollar basis.
Direct to consumer revenue increased 93 percent to $18.6 million, or 8.8 percent of total company revenues, in the second quarter of fiscal 2011, an increase from 6.3 percent of total company revenues in the second quarter of fiscal 2010.
Gross profit for the quarter increased 52 percent to $122.1 million, and as a percentage of net revenue gross profit increased to 57.5 percent for the quarter from 52.8 percent in the second quarter of fiscal 2010.
Income from operations for the quarter increased 74 percent to $59.5 million, and as a percentage of net revenue was 28.0 percent compared to 22.5 percent of net revenue in the second quarter of fiscal 2010.
The tax rate for the quarter was 35.7 percent compared to 40.3 percent a year ago. The decrease resulted from a revision to management's plans for repatriation of unremitted earnings of the Canadian operating subsidiary.
For the twenty-six weeks ended July 31, 2011:
- Net revenue for the first two quarters increased 37 percent to $399.1 million from $290.5 million in the same period of fiscal 2010.
- Comparable stores sales for the first two quarters increased by 18 percent on a constant dollar basis.
- Direct to consumer revenue increased 72 percent to $32.4 million, or 8.1 percent of total company revenues, in the first two quarters of fiscal 2011, an increase from 6.5 percent of total company revenues in the first two quarters of fiscal 2010.
- Gross profit for the quarter increased 50 percent to $231.8 million, and as a percentage of net revenue gross profit increased to 58.1 percent for the first two quarters from 53.2 percent in the same period of fiscal 2010. The increase included 140 basis points from the non-recurring adjustment for the recognition of input tax credits in the first quarter of fiscal 2011.
- Income from operations for the first two quarters increased 67 percent to $111.2 million, and as a percentage of net revenue was 27.9 percent compared to 23.0 percent of net revenue in the same period of fiscal 2010.
- The tax rate for the first two quarters was 36.0 percent compared to 40.1 percent a year ago. The decrease resulted from a revision to management's plans for repatriation of unremitted earnings of the Canadian operating subsidiary.
- Presented on a post-split basis, diluted earnings per share for the first two quarters were $0.49 on net income of $71.8 million, compared to diluted earnings per share of $0.29 on net income of $41.4 million in the same period of fiscal 2010. The increase included $0.02 in diluted earnings per share from the non-recurring adjustment for the recognition of input tax credits in the first quarter of fiscal 2011.
Christine Day, Lululemon's CEO stated: “Our business remained very healthy through the second quarter, as strong sales productivity and operating margins grew pre-tax income by more than 60 percent. Our success is based on running a healthy brand focused business. We are confident that we are well positioned to manage successfully through the current economic environment while sensibly pursuing our future opportunities.”
Updated Outlook
For the third quarter of fiscal 2011, the company said it expects net revenue to be in the range of $225 million to $230 million based on a comparable-store sales percentage increase in the low to mid-teens on a constant-dollar basis. Diluted earnings per share are expected to be in the range of 22 cents to 24 cents for the quarter. That compares to 18 cents a share earned a year ago.
For the full fiscal 2011, we now expect net revenue to be in the range of $930 million to $950 million and diluted earnings per share are expected to be in the range of $1.10 to $1.14 for the full year. This assumes 145.4 million diluted weighted-average shares outstanding and a tax rate of 36 percent.
When it reported first-quarter results, it had projected FY2011 revenue to be in the range of $915 million to $930 million and diluted earnings per share are expected to be in the range of $1.05 to $1.08 for the full year.
Thirteen Weeks Ended | Thirteen Weeks Ended | Twenty-Six Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||
| July 31, 2011 (unaudited) | August 1, 2010 (unaudited) | July 31, 2011 (unaudited) | August 1, 2010 (unaudited) | |||||||||||||
| Net revenue | $ | 212,323 | $ | 152,208 | $ | 399,103 | $ | 290,505 | ||||||||
| Costs of goods sold | 90,251 | 71,910 | 167,346 | 135,850 | ||||||||||||
| Gross profit | 122,072 | 80,298 | 231,757 | 154,655 | ||||||||||||
| As a percent of net revenue | 57.5 | % | 52.8 | % | 58.1 | % | 53.2 | % | ||||||||
| Selling, general and administrative expenses | 62,589 | 46,055 | 120,587 | 87,938 | ||||||||||||
| As a percent of net revenue | 29.5 | % | 30.2 | % | 30.2 | % | 30.3 | % | ||||||||
Income from operations | 59,483 | 34,243 | 111,170 | 66,717 | ||||||||||||
| As a percent of net revenue | 28.0 | % | 22.5 | % | 27.9 | % | 23.0 | % | ||||||||
| Other income (expense), net | 597 | 2,092 | 1,501 | 2,254 | ||||||||||||
| Income before provision for income taxes | 60,080 | 36,335 | 112,671 | 68,971 | ||||||||||||
| Provision for income taxes | 21,462 | 14,628 | 40,537 | 27,676 | ||||||||||||
| Net income | 38,618 | 21,707 | 72,134 | 41,295 | ||||||||||||
Net income (loss) attributable to non-controlling interest | 239 | (85 | ) | 383 | (85 | ) | ||||||||||
| Net income attributable to lululemon athletica inc. | $ | 38,379 | $ | 21,792 | $ | 71,751 | $ | 41,380 | ||||||||
| Basic earnings per share | $ | 0.27 | $ | 0.15 | $ | 0.50 | $ | 0.29 | ||||||||
| Diluted earnings per share | $ | 0.26 | $ | 0.15 | $ | 0.49 | $ | 0.29 | ||||||||
| Basic weighted-average shares outstanding | 143,163 | 141,640 | 142,961 | 141,416 | ||||||||||||
| Diluted weighted-average shares outstanding | 145,228 | 143,500 | 145,108 | 143,384 | ||||||||||||
