Lululemon Athletica reported third-quarter earnings rose 15.2 percent to $66.1 million, or 46 cents a share. Net revenue for the quarter increased 20 percent to $379.9 million from $316.5 million in the third quarter of fiscal 2012. Comparable stores sales for the third quarter increased by 5 percent on a constant dollar basis.
Results were ahead of its guidance given when it released second-quarter earnings on Sept. 12 calling for earnings between 39 to 41 cents a share.
Direct to consumer revenue in the quarter increased 37 percent to $62.0 million, or 16.3 percent of total company revenues, in the third quarter of fiscal 2013, an increase from 14.3 percent of total Company revenues in the third quarter of fiscal 2012.
Gross profit for the quarter increased 17 percent to $204.6 million, and as a percentage of net revenue gross profit decreased to 53.9 percent for the quarter from 55.4 percent in the third quarter of fiscal 2012.
Income from operations for the quarter increased 14.6 percent to $92.3 million, and as a percentage of net revenue was 24.3 percent compared to 25.5 percent of net revenue in the third quarter of fiscal 2012.
The tax rate for the quarter was 29.5 percent compared to 30.1 percent a year ago.
Diluted earnings per share for the quarter were $0.45 on net income of $66.1 million, compared to diluted earnings per share of $0.39 on net income of $57.3 million in the third quarter of fiscal 2012.
For the thirty-nine weeks ended November 3, 2013:
Net revenue for the first three quarters of fiscal 2013 increased 21 percent to $1,070.2 million from $884.9 million in the same period of fiscal 2012.
Comparable stores sales for the first three quarters of fiscal 2013 increased by 7 percent on a constant dollar basis.
Direct to consumer revenue increased 39 percent to $165.3 million, or 15.5 percent of total company revenues, in the first three quarters of fiscal 2013, an increase from 13.4 percent of total company revenues in the first three quarters of fiscal 2012.
Gross profit for the first three quarters of fiscal 2013 increased 15 percent to $561.3 million, and as a percentage of net revenue gross profit was 52.4 percent for the first three quarters as compared to 55.2 percent in the same period of fiscal 2012.
Income from operations for the first three quarters of fiscal 2013 increased 6 percent to $237.2 million, and as a percentage of net revenue was 22.2 percent as compared to 25.3 percent of net revenue in the same period of fiscal 2012.
The effective tax rate for the first three quarters of fiscal 2013 was 29.7 percent compared to 28.7 percent a year ago.
Diluted earnings per share for the first three quarters of fiscal 2013 were $1.16 on net income of $169.9 million, compared to diluted earnings per share of $1.11 on net income of $161.2 million the same period of fiscal 2012.
The company ended the third quarter of fiscal 2013 with $600.7 million in cash and cash equivalents compared to $439.4 million at the end of the third quarter of fiscal 2012. Inventory at the end of the third quarter of fiscal 2013 totaled $206.2 million compared to $164.7 million at the end of the third quarter of fiscal 2012. The company ended the quarter with 247 stores in North America and Australia.
Christine Day, Lululemon's CEO, stated: “We are proud of our third quarter results, with sales in line with our expectation and earnings ahead of our guidance and rebounding to a double digit growth rate.” Ms. Day continued: “This so far has been a year of challenges, learning, and growth for Lululemon, and while our outlook for the fourth quarter is being impacted by both macro and execution issues, I believe that the investments we are making in the business combined with the team in place create a strong platform for growth in the years ahead.”
Updated Outlook
For the fourth quarter of fiscal 2013, Lululemon said it expects net revenue to be in the range of $535 million to $540 million based on flat comparable-store sales on a constant-dollar basis. Diluted earnings per share are expected to be in the range of 78 to 80 cents for the quarter. This assumes 146.0 million diluted weighted-average shares outstanding and a tax rate of 30.0 percent.
For the full fiscal 2013, Lululemon said it now expects net revenue to be in the range of $1.605 billion to $1.610 billion and diluted earnings per share are expected to be in the range of $1.94 to $1.96 for the full year. This assumes 146.0 million diluted weighted-average shares outstanding and a tax rate of 30.0 percent.
Previously, Lululemon expected net revenue to be in the range of $1.625 billion to $1.635 billion and diluted earnings per share in the range of $1.94 to $1.97 for the full year.
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Condensed Consolidated Statements of Operations |
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Expressed in thousands, except per share amounts |
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Thirteen Weeks |
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Thirty-Nine |
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Ended |
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Thirteen Weeks |
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Weeks Ended |
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Thirty-Nine | ||||||||
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November 3, |
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Ended |
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November 3, |
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Weeks Ended | ||||||||
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2013 |
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October 28, 2012 |
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2013 |
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October 28, 2012 | ||||||||
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(unaudited) |
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(unaudited) |
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(unaudited) |
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(unaudited) |
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Net revenue |
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$ |
379,900 |
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$ |
316,537 |
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$ |
1,070,195 |
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$ |
884,869 |
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Costs of goods sold |
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175,294 |
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141,237 |
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508,909 |
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396,550 |
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Gross profit |
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204,606 |
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175,300 |
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561,286 |
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488,319 |
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| As a percent of net revenue |
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53.9 | % |
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55.4 | % |
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52.4 | % |
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55.2 | % | ||||
Selling, general and administrative expenses |
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112,270 |
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94,689 |
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324,075 |
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264,455 |
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| As a percent of net revenue |
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29.6 | % |
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29.9 | % |
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30.2 | % |
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29.9 | % | ||||
Income from operations |
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92,336 |
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80,611 |
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237,211 |
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223,864 |
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| As a percent of net revenue |
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24.3 | % |
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25.5 | % |
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22.2 | % |
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25.3 | % | ||||
Other income (expense), net |
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1,453 |
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1,424 |
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4,249 |
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3,500 |
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Income before provision for income taxes |
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93,789 |
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82,035 |
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241,460 |
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227,364 |
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Provision for income taxes |
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27,678 |
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24,655 |
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71,605 |
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65,308 |
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Net income |
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66,111 |
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57,380 |
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169,855 |
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162,056 |
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Net income attributable to non-controlling interest |
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– |
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64 |
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– |
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875 |
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Net income attributable to lululemon athletica inc. |
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$ |
66,111 |
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$ |
57,316 |
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$ |
169,855 |
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$ |
161,181 |
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Basic earnings per share |
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$ |
0.46 |
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$ |
0.40 |
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$ |
1.17 |
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$ |
1.12 |
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Diluted earnings per share |
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$ |
0.45 |
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$ |
0.39 |
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$ |
1.16 |
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$ |
1.11 |
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Basic weighted-average shares outstanding |
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145,120 |
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144,057 |
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144,806 |
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143,903 |
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Diluted weighted-average shares outstanding |
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146,014 |
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145,748 |
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145,967 |
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145,750 |
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