Lululemon Athletica reported earnings in the fourth quarter ended January 31 improved 13 percent on an adjusted basis as same-store sales gained 21 percent. Both sales and earnings topped Wall Street targets.

Calvin McDonald, CEO, said: “I’m proud of how we navigated this past year and delivered for our employees, guests and shareholders. Our continued growth demonstrates the strength of Lululemon before, during and as the pandemic subsides. We are still in the early innings of our growth, fueled by exciting innovations that create even more opportunities in the future. All of us on the leadership team have so much gratitude for our teams and their agility during these unprecedented times.”

Fourth-quarter 2020 Compared To Fourth-Quarter 2019

  • Net revenue increased 24 percent to $1.7 billion. Wall Street’s consensus estimate had been $1.66 billion. On a constant dollar basis, net revenue increased 22 percent;
  • Net revenue increased 21 percent in North America and increased 47 percent internationally;
  • Total comparable sales increased 21 percent or increased 20 percent on a constant dollar basis;
  • DTC net revenue increased 94 percent or increased 92 percent on a constant dollar basis;
  • Comparable store productivity was 72 percent, or 71 percent on a constant dollar basis, representing a comparable store sales decrease of 28 percent, or a decrease of 29 percent on a constant dollar basis;
  • DTC net revenue represented 52 percent of total net revenue compared to 33 percent for the fourth quarter of 2019;
  • Gross profit increased 25 percent to $1.0 billion, and gross margin increased 60 basis points to 58.6 percent;
  • Income from operations increased 10 percent to $457.9 million. Adjusted income from operations increased 12 percent to $465.7 million;
  • Operating margin decreased 330 basis points to 26.5 percent. Adjusted operating margin decreased 290 basis points to 26.9 percent;
  • Income tax expense increased 5 percent to $127.2 million. The effective tax rate for the fourth quarter of 2020 was 27.8 percent compared to 28.8 percent for the fourth quarter of 2019. The adjusted effective tax rate was 27.4 percent for the fourth quarter of 2020;
  • Earnings reached $329.8 million, or $2.52,  compared to $298.0 million, or $2.28, in the fourth quarter of 2019;
  • Adjusted diluted earnings preached $337.4 million, or $2.58, representing a gain of 13.2 percent.  Wall Street’s consensus estimate was $2.49; and
  • The company opened six net new company-operated stores during the quarter, ending with 521 stores.

On January 11, Lululemon said it now expected the growth rate in net revenue in the fourth quarter to be at the high end of its mid-to-high-teens expectation. The company also, at the time, said it expected the growth rate in adjusted diluted earnings per share to now be at the high end of its mid-single-digits expectation.

2020 Compared To 2019

  • Net revenue increased 11 percent to $4.4 billion. On a constant dollar basis, net revenue increased 10 percent;
  • DTC net revenue increased 101 percent and increased 101 percent on a constant dollar basis;
  • Company-operated store net revenue decreased 34 percent;
  • Net revenue increased 8 percent in North America and increased 31 percent internationally;
  • Direct to consumer net revenue represented 52 percent of total net revenue compared to 29 percent for 2019.
  • Gross profit increased 11 percent to $2.5 billion, and gross margin increased 10 basis points to 56.0 percent;
  • Income from operations decreased 8 percent to $820.0 million. Adjusted income from operations decreased 4 percent to $849.8 million;
  • Operating margin decreased 370 basis points to 18.6 percent. Adjusted operating margin decreased 300 basis points to 19.3 percent;
  • Income tax expense decreased 8 percent to $230.4 million. The effective tax rate was 28.1 percent for each of 2020 and 2019. The adjusted effective tax rate was 27.5 percent for 2020;
  • Diluted earnings per share were $4.50 compared to $4.93 in 2019. Adjusted diluted earnings per share were $4.70 in 2020′
  • The company repurchased 0.4 million shares of its own common stock at an average cost of $172.70 per share in 2020; and
  • The company opened 30 net new company-operated stores during the year, ending with 521 stores.

Meghan Frank, CFO, said: “In response to the COVID-19 pandemic, our teams reacted quickly to ensure we met the evolving needs of our guests. We pulled forward investments in our direct-to-consumer channel, completed our first acquisition and tightly managed expenses while also supporting our people. These measures contributed to our strong fourth-quarter results, including growing revenue by 24 percent, and are helping fuel our even stronger top-line growth projections for 2021. I’d like to thank our teams around the globe for their dedication to Lululemon and I’m confident in the long-term trajectory of our business.”

Balance Sheet Highlights
LULU ended 2020 with $1.2 billion in cash and cash equivalents compared to $1.1 billion at the end of 2019. It had $397.6 million of capacity under its committed revolving credit facility at the end of 2020. Inventories at the end of 2020 increased by 25 percent to $647.2 million compared to $518.5 million at the end of 2019.

Fiscal 2021 Outlook
For the first quarter of fiscal 2021, Lululemon expects net revenue to be in the range of $1.100 billion to $1.130 billion. Diluted earnings per share are expected to be in the range of $0.81 to $0.85 for the quarter and adjusted earnings per share are expected to be in the range of $0.86 to $0.90.

For fiscal 2021, Lululemon expects net revenue to be in the range of $5.550 billion to $5.650 billion. Diluted earnings per share are expected to be in the range of $6.10 to $6.25 for the year and adjusted earnings per share are expected to be in the range of $6.30 to $6.45.

Photo courtesy Lululemon