Lululemon Athletica Inc. beat consensus earnings estimates in the fourth quarter thanks to net revenue and same-store sales growth of 15 and 5 percent respectively, but disappointed investors with updates to its forecasts for the first quarter and full year.
The Canadian fitness apparel brand reported net revenue increased 16 percent to $602.5 million in the fourth quarter ended Feb. 1, up from $521.0 million in the fourth quarter of 2013 and in line with Wall Street expectations. Total comparable sales, which includes comparable store sales and direct to consumer, increased by 5 percent, or 8 percent on a currency-neutral basis.
Direct-to-consumer net revenue increased 17 percent to $114.5 million, or 19.0 percent of total company net revenue, in the fourth quarter of fiscal 2014, an increase from 18.8 percent of total company net revenue in the fourth quarter of fiscal 2013.
Gross profit increased by 11 percent to $310.0 million, but slipped to 51.5 percent of net revenue compared to 53.5 percent in the fourth quarter of fiscal 2013.
Income from operations for the quarter increased by 2 percent to $157.2 million, and as a percentage of net revenue was 26.1 percent compared to 29.6 percent of net revenue in the fourth quarter of fiscal 2013.
The effective tax rate for the quarter was 30.3 percent compared to 29.5 percent the fourth quarter of fiscal 2013.
Diluted earnings per share for the quarter were $0.78 on net income of $110.9 million, compared to diluted earnings per share of $0.75 on net income of $109.7 million in the fourth quarter of fiscal 2013. Consensus estimates on Wall Street called for $0.73 cents per share.
During the fourth quarter of fiscal 2014, the company repurchased 0.4 million shares of the company's common stock at an average cost of $43.30 per share.
“Our solid performance in the fourth quarter builds on the momentum that began in the third quarter and reflects improved traffic and a strong guest response,” said Lululemon CEO Laurent Potdevin. “2014 was a critical year when we strengthened our leadership team and made important investments in our product pipeline, guest experience, brand, and community engagement. In 2015, we expect to substantially complete this foundational work and accelerate our investments in innovation to drive sustainable global growth as we continue to lead the market that we created.”
Updated Outlook
For the first quarter of fiscal 2015, Lululemon expects net revenue to be in the range of $413 million to $418 million compared with the $442 million average of 30 analysts who follow the company. The new forecast is based on a total comparable sales increase in the low single digits on a currency neutral basis. Diluted earnings per share are expected to be in the range of $0.31 to $0.33 for the quarter, or well below the $0.39 average estimate of 32 analysts. The new guidance assumes 142.3 million diluted weighted-average shares outstanding and a 30.2 percent tax rate. The guidance does not reflect potential future repurchases of the company's shares.
For the full fiscal 2015, net revenue is expected to be in the range of $1.97 billion to $2.02 billion based on a total comparable sales increase in the mid single digits on a currency-neutral basis, or $300 million short of the average of analysts' expectations. Diluted earnings per share are expected to be in the range of $1.85 to $1.90 for the full year, compared to consensus estimate of $2.06. This guidance assumes 142.6 million diluted weighted-average shares outstanding and a 30.2 percent tax rate. The guidance does not reflect potential future repurchases of the company's shares.
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Lululemon Athletica Inc.
Expressed in thousands, except per share amounts |
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Thirteen Weeks Ended February 1, 2015 |
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Thirteen Weeks Ended February 2, 2014 |
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Fifty-Two Weeks Ended February 1, 2015 |
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Fifty-Two Weeks Ended February 2, 2014 |
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(unaudited) |
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(unaudited) |
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Net revenue |
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$ |
602,491 |
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$ |
520,993 |
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$ |
1,797,213 |
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$ |
1,591,188 |
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Costs of goods sold |
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292,450 |
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242,203 |
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883,033 |
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751,112 |
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Gross profit |
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310,041 |
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278,790 |
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914,180 |
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840,076 |
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| As a percent of net revenue |
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51.5 | % |
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53.5 | % |
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50.9 | % |
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52.8 | % | ||||
Selling, general and administrative expenses |
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152,853 |
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124,643 |
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538,147 |
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448,718 |
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| As a percent of net revenue |
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25.4 | % |
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23.9 | % |
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30.0 | % |
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28.2 | % | ||||
Income from operations |
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157,188 |
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154,147 |
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376,033 |
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391,358 |
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| As a percent of net revenue |
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26.1 | % |
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29.6 | % |
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20.9 | % |
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24.6 | % | ||||
Other income (expense), net |
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1,755 |
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1,519 |
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7,102 |
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5,768 |
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Income before provision for income taxes |
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158,943 |
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155,666 |
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383,135 |
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397,126 |
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Provision for income taxes |
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48,090 |
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45,974 |
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144,102 |
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117,579 |
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Net income |
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$ |
110,853 |
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$ |
109,692 |
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$ |
239,033 |
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$ |
279,547 |
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Basic earnings per share |
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$ |
0.78 |
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$ |
0.75 |
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$ |
1.66 |
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$ |
1.93 |
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Diluted earnings per share |
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$ |
0.78 |
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$ |
0.75 |
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$ |
1.66 |
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$ |
1.91 |
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Basic weighted-average shares outstanding |
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141,999 |
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145,235 |
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