Lululemon Athletica Inc. reported earnings rose 15.9 percent on a 12 percent revenue gain. Results topped its guidance for sales updated on January 9 while landing in line with earnings guidance.
For the fourth quarter ended January 29, 2017:
• Net revenue increased 12 percent to $789.9 million from $704.3 million in the fourth quarter of fiscal 2015. On a constant dollar basis, net revenue increased 12 percent.
• Total comparable sales, which includes comparable store sales and direct to consumer, increased 8 percent, or by 7 percent on a constant dollar basis.
• Comparable store sales increased 6 percent, or by 6 percent on a constant dollar basis.
• Direct to consumer net revenue increased 12 percent to $164.3 million, or by 12 percent on a constant dollar basis.
• Gross profit increased 21 percent to $427.9 million, and as a percentage of net revenue was 54.2 percent compared to 50.3 percent in the fourth quarter of fiscal 2015.
• Income from operations increased 18 percent to $196.6 million, and as a percentage of net revenue was 24.9 percent compared to 23.6 percent in the fourth quarter of fiscal 2015.
• Income tax expense increased to $61.4 million from $49.8 million in the fourth quarter of fiscal 2015, and the effective tax rate was 31.1 percent compared to 29.8 percent in the fourth quarter of fiscal 2015. Excluding certain tax and related interest adjustments, the effective tax rate was 30.6 percent compared to 29.6 percent in the fourth quarter of fiscal 2015.
• Diluted earnings per share were 99 cents compared to 85 cents in the fourth quarter of fiscal 2015. Excluding certain tax and related interest adjustments, diluted earnings per share were $1 compared to 85 cents for the fourth quarter of fiscal 2015.
On January 9, Lululemon said it now anticipated net revenue in the quarter in the range of $775 million to $785 million, based on a total comparable sales increase in the mid single digits on a constant dollar basis. That compared to previous guidance of net revenue in the range of $765 million to $785 million. The company raised its EPS guidance to the range of 99 cents to $1.01, up from 96 cents to $1.01 previously.
For the fiscal year ended January 29, 2017:
• Net revenue increased 14 percent to $2.3 billion from $2.1 billion in fiscal 2015. On a constant dollar basis, net revenue increased 14 percent.
• Total comparable sales increased 6 percent, or by 7 percent on a constant dollar basis.
• Comparable store sales increased 4 percent, or by 5 percent on a constant dollar basis. company-operated stores which have been open for at least one year averaged sales of $1,521 per square foot.
• Direct to consumer net revenue increased 13 percent to $453.3 million, or 13 percent on a constant dollar basis.
• Gross profit increased 20 percent to $1.2 billion, and as a percentage of net revenue was 51.2 percent compared to 48.4 percent in fiscal 2015.
• Income from operations increased 14 percent to $421.2 million, and as a percentage of net revenue, was 18 percent compared to 17.9 percent in fiscal 2015.
• Income tax expense increased to $119.3 million from $102.4 million in fiscal 2015, and the effective tax rate was 28.2 percent compared to 27.8 percent for fiscal 2015. Excluding certain tax and related interest adjustments, the effective tax rate was 30.7 percent compared to 29.5 percent for fiscal 2015.
• Diluted earnings per share were $2.21 compared to $1.89 in fiscal 2015. Excluding certain tax and related interest adjustments, diluted earnings per share were $2.14 compared to $1.86 in fiscal 2015.
The company ended fiscal 2016 with $734.8 million in cash and cash equivalents compared to $501.5 million at the end of fiscal 2015. Inventories at the end of fiscal 2016 increased by 5 percent to $298.4 million compared to $284 million at the end of fiscal 2015. The company ended the year with 406 stores.
Laurent Potdevin, CEO, Lululemon, commented: “2016 marks a milestone year where our successful execution against long-term strategies returned the company to positive operating income growth for the first time in three years. These results reflect our strong brand and solid foundation now in place to drive our future performance.”
Potdevin added: “Although we’ve had a slow start to 2017, our teams are passionately committed to delivering on our robust plans across product innovation, digital, North America and international as we realize our ambitious vision for the future.”
Fiscal 2017 Outlook
For the first quarter of fiscal 2017, we expect net revenue to be in the range of $510 million to $515 million based on a total comparable sales decrease in the low-single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of 25 cents to 27 cents for the quarter. This guidance assumes 137.3 million diluted weighted-average shares outstanding and a 31.2 percent tax rate. The guidance does not reflect potential future repurchases of the company’s shares.
For the full fiscal 2017, net revenues are expected to be in the range of $2.55 billion to $2.6 billion based on a total comparable sales increase in the low-single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $2.26 to $2.36 for the full year. This guidance assumes 137.5 million diluted weighted-average shares outstanding and a 31.2 percent tax rate. The guidance does not reflect potential future repurchases of the company’s shares.
Photo courtesy Lululemon