Lululemon Athletica’s shares jumped $32.95, or 9.6 percent, to $376.92 Wednesday, following a strong fiscal fourth quarter and full-year forecast that came in well above expectations.
The yoga-themed retailer said it earned an adjusted $3.37 a share, excluding non-recurring items, on revenue that jumped 23 percent year-over-year to $2.13 billion. Analysts were looking for EPS of $3.27 on revenue of $2.13 billion.
For the full year of 2022, Lululemon expects to earn between $9.15 and $9.35 on revenue of $7.49 billion to $7.62 billion. Wall Street’s consensus estimate had called for EPS of $7.69 and revenue of $6.26 billion.
In addition, Lululemon authorized a $1 billion stock repurchase program.
“Once again, we delivered revenue growth in excess of our Power of Three targets, and we grew adjusted earnings per share of 31 percent compared to last year and 22 percent on a two-year CAGR basis,” said Calvin McDonald, CEO, on a call with analysts. “Looking at our full-year results, I am particularly proud that we crossed the $6 billion in annual revenue milestone, and we accomplished this despite the ongoing challenges in the macro-environment. And we have seen our momentum continue and accelerate as we enter the first quarter. Our guidance calls for 24 percent to 26 percent top-line growth and 19 percent to 23 percent adjusted EPS growth in the quarter. For 2022 overall, we are also guiding to another strong year for the company, and I am optimistic about our performance and opportunities going forward as we continue to build upon our unique strengths and bring technical innovation to our guests.”
In the fourth quarter ended January 30, revenue increased 23 percent to $2.1 billion. On a constant dollar basis, net revenue increased 23 percent. Compared to the fourth quarter of 2019, revenue in the latest quarter expanded 52 percent.
On January 10, the Vancouver-based chain announced that it expected the company’s net revenue to be toward the low end of its range of $2.125 billion to $2.165 billion for the fourth quarter. The retailer blamed the arrival of the Omicron variant, including increased capacity constraints, more limited staff availability and reduced operating hours in certain locations.
By region, net revenue in the fourth quarter increased 21 percent in North America and increased 35 percent internationally.
Total comparable sales increased 22 percent. Comparable store sales increased 32 percent. Direct-to-consumer (DTC) net revenue increased 17 percent or increased 16 percent on a constant dollar basis. DTC net revenue represented 49 percent of total net revenue compared to 52 percent for the fourth quarter of 2020;
Gross margins decreased 50 basis points to 58.1 percent. The deleverage relative to 2020 was driven by increased air freight expenses. The gross margin increase of 10 basis points relative to 2019 was driven by 120 basis points of leverage on occupancy, depreciation, product team, DTC, costs and 20 basis points of favorability in foreign exchange, which was partially offset by a 130-basis-point decrease in product margin.
Income from operations increased 29 percent to $590.6 million. Adjusted income from operations increased 27 percent to $592.0 million.
Operating margin increased 120 basis points to 27.7 percent. The adjusted operating margin increased 90 basis points to 27.8 percent.
Diluted earnings per share were $3.36 compared to $2.52 in the fourth quarter of 2020. Adjusted diluted earnings per share for the fourth quarter of 2021 were $3.37 compared to $2.58 in the fourth quarter of 2020. Earnings were $2.28 in the fourth quarter of 2019.
On January 10, Lululemon said it expected reported EPS and adjusted EPS to be toward the low end of its ranges of $3.24 to $3.31 and $3.25 to $3.32, respectively.
Broad-Based Growth In Fourth Quarter
McDonald said momentum remained on the upswing across all major categories in the quarter, with women’s revenue increasing 20 percent, men’s growing 28 percent, and accessories up 33 percent, all on a two-year CAGR basis.
“In quarter 4, we continued to leverage the Science of Feel to fuel product newness and innovation, our guests responded well to our holiday merchandise assortment, and we saw positive response to outerwear, second layers, and technical shorts for both women and men,” said McDonald. “Looking forward, our product pipeline remains robust, and I am excited for the innovations we are bringing to market in 2022.”
Some highlights include Lululemon’s multi-year partnership with the Canadian Olympic Committee and the Canadian Paralympic Committee. The CEO said, “I am excited by the reaction to our product in the buzz this partnership created for our brand, notably both inside and outside of Canada. Partnering with Team Canada is a unique opportunity for us to build awareness for Lululemon on the global stage and to support some of the world’s most elite athletes. We are off to a great start.”
Lululemon, also this month, launched its first footwear collection.
“We have received a very broad-based positive reaction to our unique women’s first positioning,” said McDonald. “In development for more than four years and leveraging our 20-plus years of designing and creating performance gear for women, we revealed our first three styles of technical athletic shoes and one performance slide to the market. The first of our four styles, Blissfeel, began selling on March 22 in North America and Mainland China, and the U.K. will launch shortly.”
Other coming product innovations include new silhouettes added to its Scuba and Define hoodies and sweatshirt collections. With employees returning to its offices, an expansion of the company’s On The Move collection is forecasted with new styles of tops and bottoms for men and women to arrive during 2022.
Lululemon will also launch its first tennis collection available in stores and online this week, while its first golf collection will ship to stores next week. Said McDonald, “We have ample opportunity to bring new technical solutions to our guests, and I am pleased with how our product pipeline looks going forward.”
Full Year Sales Jump 57 Percent
Revenue increased 57 percent for the full year, representing a two-year compound annual growth rate of 25 percent. Gross margin expanded 180 basis points.
Operating margin decreased by 100 basis points, and adjusted operating margin decreased 30 basis points. Reported EPS was $7.49 compared to $4.93 in 2019. Adjusted EPS was $7.79 in 2021. EPS was $4.93 in 2019.
Meghan Frank, CFO, said: “Our results were driven by consistently strong performance across our products, channels, and regions. In addition, for both the fourth quarter and full year, we delivered revenue growth above our Power of Three goals, despite the continued impact of COVID-19 and global supply chain issues. We are pleased to see our momentum continue at the start of 2022 and are optimistic about our performance for the year ahead.”
Fiscal 2022 Outlook
For the first quarter of fiscal 2022, Lululemon expects net revenue to be in the range of $1.525 billion to $1.550 billion, representing a growth of 24 percent to 26 percent. EPS is expected in the range of $1.38 to $1.43 for the quarter. Adjusted EPS was $1.16 in the year-ago period.
For fiscal 2022, Lululemon expects net revenue to be in the range of $7.490 billion to $7.615 billion, representing a growth of 20 percent to 22 percent. EPS is expected to be in the range of $9.15 to $9.35 for the year, which compares to $7.79.
Photo courtesy Lululemon