lululemon athletica inc. reported net revenue increased 101% to $105.1 million from $52.2 million for the fourth quarter of fiscal 2006. Net revenue from corporate-owned stores was $92.5 million, an increase of 117% from $42.6 million for the fourth quarter of fiscal 2006, with comparable-store sales increasing 41%, or 24% on a constant dollar basis.
Diluted earnings per share was 21 cents on net income of $14.6 million, compared to diluted earnings per share of a penny on net income of $0.9 million in the fourth quarter of fiscal 2006. Excluding a one-time legal settlement expense, diluted earnings per share for the fourth quarter of fiscal 2006 were 5 cents.
For the fiscal year ended February 3, 2008:
- Net revenue increased 84% to $274.7 million from $148.9 million for the same period in fiscal 2006. Net revenue from corporate-owned stores was $243.6 million, an increase of 102% from $120.7 million for the same period in fiscal 2006, with comparable-store sales increasing 34%, or 24% on a constant dollar basis.
- Gross profit as a percentage of net revenue increased 230 basis points to 53.3% of net revenue from 51.0% of net revenue in the twelve months of fiscal 2006.
- Income from operations was $50.1 million, or 18.2% of revenues, compared to $16.2 million, or 10.9% of revenues, in the twelve months of fiscal 2006.
- Diluted earnings per share was 45 cents on net income of $30.8 million, compared to diluted earnings per share of 11 cents on net income of $7.7 million for the same period in fiscal 2006. Excluding a one-time charge for the settlement of a lawsuit, diluted earnings per share for fiscal 2006 was 18 cents.
Discontinuing Operations in Japan
The company also announced that it will be discontinuing its operations in Japan. lululemon athletica opened its first store in Japan in 2005 and has operated in Japan through a joint venture known as lululemon Japan Inc. with Japanese apparel company, Descente, Ltd., since 2006. lululemon Japan Inc. currently has four stores.
Robert Meers, CEO of lululemon athletica commented, “Japan represents less than 1.5% of our revenues but has been taking a disproportionate amount of management time and attention over this past year. After re-evaluating our operating performance in Japan and our priorities, we have concluded our time, attention, and capital resources are best spent focused on our top priorities which are growth in the United States, where we plan to open 35 stores in 2008, and the development of an e-commerce business.”
lululemon athletica and Descente are working together to wind down the store operations as soon as possible, with expected completion in Q2 of 2008.
Fiscal Year 2008 Guidance
The company has previously stated its long-term growth targets of net revenue growth of approximately 25% and diluted EPS growth in excess of 25%. The company believes 2008 net revenues and diluted EPS growth will exceed these long-term targets.
For fiscal 2008, diluted earnings per share are expected to be in the range of 70 cents to 72 cents. This guidance is based on anticipated comparable store sales growth of low teens; or high single digits on a constant dollar basis, and 35 planned new store openings in North America. The company expects an effective tax rate of approximately 33% for the full year and anticipates diluted weighted average shares outstanding of approximately 71.0 million for 2008. This fiscal 2008 earnings guidance includes a charge of approximately $0.02 per share resulting from the companys planned closure of its four stores currently operating in Japan.
In a separate news release, lululemon reported the appointment of Christine Day, currently EVP of Retail Operations, to the offices of president and COO and to the role of CEO designate. Ms. Day will be appointed CEO upon the retirement of Bob Meers on June 30, 2008.
“Christine is a seasoned retail industry executive who has a proven track record in high growth retail and who truly understands our unique brand and guest experience,“ said Bob Meers, CEO of lululemon. “I have the utmost confidence that lululemon will thrive under Christines leadership as it enters its next phase of growth.“
Ms. Day said, “lululemon has an extraordinary brand with a loyal and growing following around the globe who have embraced our yoga inspired apparel and unique store experience. I am excited to be taking on this important role in shaping lululemons future. Together, and building on Bobs accomplishments, we will create new opportunities for growth while carefully maintaining the values and culture for which this Company is so well known.“
Mr. Meers will retire from his position as CEO of lululemon on June 30, 2008. He will serve as an advisor until the end of the Companys 2008 fiscal year. Mr. Meers joined lululemon in December 2005 and was instrumental in establishing the strategic platform for the lululemon brand and its growth throughout North America and internationally. He assembled the senior management team and, under his leadership, led the company through its IPO in July 2007.
Chip Wilson, chairman of the board, founder and chief designer of product, said, “Bob Meers was tremendous in taking the original lululemon vision and creating a company with the infrastructure and expertise to grow in the United States. On behalf of everyone at lululemon, I would like to thank Bob for his outstanding leadership.“
Mr. Wilson continued, “I am excited to have Christine lead our company. Through her extensive experience at Starbucks, she knows how to take a culturally-rich company through rapid growth to reach its full potential. I look forward to working with Christine as we enter into this new, exciting era for lululemon.“
lululemon athletica inc. Condensed Consolidated Statements of Operations Expressed in thousands of dollars except per share amounts | ||||||||||||||||
Three Months Ended
| Three Months Ended | Twelve Months Ended | Twelve Months Ended | |||||||||||||
January 31, 2007 | February 3, 2008 | January 31, 2007 | February 3, 2008 | |||||||||||||
| Net revenue | $ | 52,216 | $ | 105,093 | $ | 148,885 | $ | 274,713 | ||||||||
| Costs of goods sold | 25,395 | 48,273 | 72,903 | 128,411 | ||||||||||||
| Gross Profit | 26,821 | 56,820 | 75,982 | 146,302 | ||||||||||||
| As a percent of revenues | 51.4 | % | 54.1 | % | 51.0 | % | 53.3 | % | ||||||||
| Selling, general and administrative expenses | 24,656 | 35,143 | 59,767 | 96,177 | ||||||||||||
| As a percent of revenues | 47.2 | % | 33.4 | % | 40.1 | % | 35.0 | % | ||||||||
| Income from operations | 2,165 | 21,676 | 16,213 | 50,125 | ||||||||||||
| As a percent of revenues | 4.2 | % | 20.6 | % | 10.9 | % | 18.2 | % | ||||||||
| Interest expense (income), net | (17 | ) | (258 | ) | (94 | ) | (854 | ) | ||||||||
| Income before income tax | 2,182 | 21,935 | 16,307 | 50,979 | ||||||||||||
| Provision for income taxes | 1,349 | 7,460 | 8,753 | 20,471 | ||||||||||||
| Non-controlling interest | (54 | ) | (134 | ) | (112 | ) | (334 | |||||||||
