Lululemon Athletica Inc. reported net income rose 30.7 percent in the third quarter on a 30 percent revenue gain. Results topped guidance and the retailer raised its outlook for the year.
Calvin McDonald, Chief Executive Officer, stated: “Our third-quarter results demonstrate the ongoing strength of lululemon and the tremendous growth potential of the business in both the near- and long-term. We are pleased with our early holiday season performance and how the lululemon brand continues to resonate in markets around the world. We are energized by the exciting opportunities ahead, and I’m proud of our teams across the globe for their passion and agility. I want to thank everyone for delivering a strong quarter.”
For the third quarter of 2021, compared to the third quarter of 2020:
- Net revenue increased 30 percent to $1.5 billion. On a constant dollar basis, net revenue increased 28 percent.
- Net revenue increased 28 percent in North America and increased 40 percent internationally.
- Total comparable sales increased 27 percent or increased 26 percent on a constant dollar basis.
- Comparable store sales increased 32 percent or increased 31 percent on a constant dollar basis.
- Direct-to-consumer net revenue increased 23 percent to $586.5 million. On a constant dollar basis, direct-to-consumer net revenue increased 21 percent.
- Direct-to-consumer net revenue represented 40.4 percent of total net revenue compared to 42.8 percent for the third quarter of 2020.
- Gross profit increased 32 percent to $829.4 million and gross margin increased 110 basis points to 57.2 percent.
- Income from operations increased 26 percent to $257.9 million. Adjusted income from operations increased 32 percent to $282.1 million.
- Operating margin decreased 50 basis points to 17.8 percent. Adjusted operating margin increased 30 basis points to 19.4 percent.
- Income tax expense increased 16 percent to $70.2 million. The effective tax rate for the third quarter of 2021 was 27.2 percent compared to 29.7 percent for the third quarter of 2020. The adjusted effective tax rate was 25.1 percent for the third quarter of 2021 compared to 28.9 percent for the third quarter of 2020.
- Diluted earnings per share were $1.44 compared to $1.10 in the third quarter of 2020. Adjusted diluted earnings per share were $1.62 compared to $1.16 in the third quarter of 2020.
- The company repurchased 0.6 million shares of its own common stock at an average price of $405.87 per share for a total cost of $236.4 million.
- The company opened 18 net new company-operated stores during the third quarter, ending with 552 stores.
Sales of $1.5 billion topped Lululemon’s guidance in the range of $1.40 billion to $1.43 billion given when it released second-quarter results. Earnings of $1.44 exceeded guidance in the range of $1.28 to $1.33 and adjusted EPS of $1.62 topped guidance in the range of $1.33 to $1.38.
For the third quarter of 2021, compared to the third quarter of 2019:
- Net revenue increased by $534.3 million, or 58 percent, representing a two-year compound annual growth rate of 26 percent.
- Gross margin increased 210 basis points.
- Operating margin decreased by 140 basis points. Adjusted operating margin increased 20 basis points.
- Diluted earnings per share were $1.44 compared to $0.96 in the third quarter of 2019. Adjusted diluted earnings per share were $1.62 in the third quarter of 2021.
Meghan Frank, CFO, stated: “Our teams continue to execute at a high level, which has enabled our strong Q3 performance and the upward revision to our guidance. We are pleased with these results given the ongoing, industry-wide supply chain issues we continue to navigate. While there are several large volume weeks ahead of us, we feel well-positioned for a strong end to 2021.”
Balance Sheet Highlights
The company ended the third quarter of 2021 with $1.0 billion in cash and cash equivalents and the capacity under its committed revolving credit facility was $396.9 million. Inventories at the end of the third quarter of 2021 increased 22 percent to $943.9 million compared to $771.0 million at the end of the third quarter of 2020.
2021 Outlook
For the fourth quarter of 2021, Lululemon expects net revenue to be in the range of $2.125 billion to $2.165 billion. Diluted earnings per share are expected to be in the range of $3.24 to $3.31 for the quarter and adjusted diluted earnings per share are expected to be in the range of $3.25 to $3.32.
For 2021, net revenue is now expected in the range of $6.250 billion to $6.290 billion. Diluted earnings per share are expected to be in the range of $7.38 to $7.45 for the year and adjusted diluted earnings per share are expected to be in the range of $7.69 to $7.76.
Under its prior guidance, revenue for the year was projected to be in the range of $6.190 billion to $6.260 billion, diluted earnings per share in the range of $7.16 to $7.26, and adjusted diluted earnings per share in the range of $7.38 to $7.48.
Photo courtesy Lululemon/New York Post