Lululemon Athletica Inc. on Thursday announced earnings per share for the second quarter ended August 4 of 96 cents, beating analysts’ expectations by 7 cents. Revenue of $883.4 million marked a 22 percent bump from the same period a year ago and beat Wall Street’s estimates by $38.3 million.

Comparable sales grew 15 percent, or increased 17 percent on a constant dollar basis, from the year-ago quarter. Financial highlights from the quarter include:

  • Net revenue was $883.4 million, an increase of 22 percent compared to the second quarter of fiscal 2018. On a constant dollar basis, net revenue increased 23 percent.
  • Total comparable sales increased 15 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 30 percent or increased 31 percent on a constant dollar basis.
  • Direct-to-consumer net revenue represented 24.6 percent of total net revenue compared to 23.1 percent for the second quarter of fiscal 2018.
  • Gross profit was $485.8 million, an increase of 23 percent compared to the second quarter of fiscal 2018.
  • Gross margin was 55 percent, an increase of 20 basis points compared to the second quarter of fiscal 2018.
  • Income from operations was $168 million, an increase of 25 percent compared to the second quarter of fiscal 2018.
  • Operating margin was 19 percent, an increase of 50 basis points compared to the second quarter of fiscal 2018.
  • Income tax expense was $44.8 million compared to $40 million in the second quarter of fiscal 2018 and the effective tax rate was 26.4 percent compared to 29.5 percent.
  • Diluted earnings per share were $0.96 compared to $0.71 in the second quarter of fiscal 2018.
  • The company repurchased 9.6 thousand shares of its own common stock at an average cost of $164.05 per share.

The company ended the second quarter of fiscal 2019 with $623.7 million in cash and cash equivalents compared to $777.8 million at the end of the second quarter of fiscal 2018. Inventories at the end of the second quarter of fiscal 2019 increased 26 percent to $494.3 million compared to $392.7 million at the end of the second quarter of fiscal 2018. The company ended the quarter with 460 stores.

Calvin McDonald, CEO, said: “We’re pleased with the ongoing strength across our business. We continue to make progress in delivering against our Power of Three growth pillars – product innovation, omni-guest experience, and market expansion. Our success demonstrates the significant runway in front of Lululemon and I’m grateful to our teams for bringing our vision to life.”

Updated Outlook

For the third quarter of fiscal 2019, we expect net revenue to be in the range of $880 million to $890 million based on a total comparable sales increase in the low teens on a constant dollar basis. Diluted earnings per share are expected to be in the range of $0.90 to $0.92 for the quarter. This guidance assumes 131 million diluted weighted-average shares outstanding and a 28 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 $3.8 billion to $3.840 billion based on a total comparable sales increase in the low teens on a constant dollar basis. Diluted earnings per share are expected to be in the range of $4.63 to $4.70 for the full year, based on a 27.5 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.

The guidance and outlook forward-looking statements made in this press release are based on management’s expectations as of the date of this press release and the company undertakes no duty to update or to continue to provide information with respect to any forward-looking statements or risk factors, whether as a result of new information or future events or circumstances or otherwise. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of risks and uncertainties, including those stated below.

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 second quarter of fiscal 2019, the 13 weeks ended August 4, 2019, are compared to the 13 weeks ended August 5, 2018, rather than July 29, 2018.

Photo courtesy Lululemon Athletica Inc.