Lululemon Athletica Inc. on Wednesday reported total comparable sales for the third quarter ended November 3 increased 16 percent, or 17 percent on a constant dollar basis.

Comparable store sales increased 10 percent, or 11 percent on a constant dollar basis, while direct-to-consumer net revenue increased 29 percent, or 30 percent on a constant dollar basis.

The summary below provides both GAAP and adjusted non-GAAP financial measures. The adjusted financial measures exclude the tax expense recognized during the third quarter of fiscal 2018 related to the U.S. Tax Cuts and Jobs Act.

For the third quarter ended November 3, 2019:

  • Net revenue was $916.1 million, an increase of 23 percent compared to the third quarter of fiscal 2018. On a constant dollar basis, net revenue increased 23 percent.
  • Total comparable sales increased 16 percent, or increased 17 percent on a constant dollar basis.
    – Comparable store sales increased 10 percent, or increased 11 percent on a constant dollar basis.
    – Direct to consumer net revenue increased 29 percent, or increased 30 percent on a constant dollar basis.
  • Direct to consumer net revenue represented 26.9 percent of total net revenue compared to 25.3 percent for the third quarter of fiscal 2018.
  • Gross profit was $505 million, an increase of 24 percent compared to the third quarter of fiscal 2018.
  • Gross margin was 55.1 percent, an increase of 70 basis points compared to the third quarter of fiscal 2018.
  • Income from operations was $175.8 million, an increase of 29 percent compared to the third quarter of fiscal 2018.
  • Operating margin was 19.2 percent, an increase of 100 basis points compared to the third quarter of fiscal 2018.
  • Income tax expense was $51.8 million compared to $43.5 million in the third quarter of fiscal 2018 and the effective tax rate was 29.1 percent compared to 31.6 percent. The adjusted effective tax rate for the third quarter of fiscal 2018 was 27.8 percent.
  • Diluted earnings per share were $0.96 compared to $0.71 in the third quarter of fiscal 2018. Adjusted diluted earnings per share for the third quarter of fiscal 2018 were $0.75.
  • The company repurchased 44.5 thousand shares of its own common stock at an average cost of $179.71 per share.

The company ended the third quarter of fiscal 2019 with $586.2 million in cash and cash equivalents compared to $703.6 million at the end of the third quarter of fiscal 2018. Inventories at the end of the third quarter of fiscal 2019 increased 26 percent to $627.1 million compared to $496 million at the end of the third quarter of fiscal 2018. The company ended the quarter with 479 stores.

Calvin McDonald, CEO, commented: “We’re proud of the continued momentum in our business as we live into our vision to be an experiential brand. We are successfully executing on our Power of Three growth plan as we create authentic connections with new and existing guests around the world. I’d like to thank our amazing teams for achieving this strong level of performance.”

Updated Outlook

For the fourth quarter of fiscal 2019, we expect net revenue to be in the range of $1.315 billion to $1.330 billion based on a total comparable sales increase in the low double digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $2.10 to $2.13 for the quarter. This guidance assumes 131 million diluted weighted-average shares outstanding and a 28.5 percent tax rate. The guidance does not reflect potential future repurchases of the company’s shares.

For the full fiscal 2019, we now expect net revenue to be in the range of $3.895 billion to $3.910 billion based on a total comparable sales increase in the mid teens on a constant dollar basis. Diluted earnings per share are expected to be in the range of $4.75 to $4.78 for the full year, based on a 28 percent effective tax rate. The guidance assumes 131 million diluted weighted-average shares outstanding. The guidance does not reflect potential future repurchases of the company’s shares.

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. For the third quarter of fiscal 2019, the 13 weeks ended November 3, 2019 are compared to the 13 weeks ended November 4, 2018 rather than October 28, 2018.