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Lululemon Athletica NASDAQ: LULU-Q

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lululemon athletica inc. Announces Fourth Quarter and Full Year Fiscal 2019 Results

BusinessWire - Thu Mar 26, 3:05PM CDT

--Full year revenue of $4.0 billion

lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the fourth quarter and fiscal year ended February 2, 2020.

The summary below provides both GAAP and adjusted non-GAAP financial measures. The adjusted financial measures exclude the amounts recognized in connection with U.S. tax reform and taxes on the repatriation of foreign earnings during fiscal 2018.

For the fourth quarter ended February 2, 2020:

Net revenue was $1.4 billion, an increase of 20% compared to the fourth quarter of fiscal 2018.Total comparable sales increased 20%.Comparable store sales increased 9%.Direct to consumer net revenue increased 41%.Gross profit was $810.8 million, an increase of 21% compared to the fourth quarter of fiscal 2018.Gross margin was 58.0%, an increase of 70 basis points compared to the fourth quarter of fiscal 2018.Income from operations was $416.5 million, an increase of 26% compared to the fourth quarter of fiscal 2018.Operating margin was 29.8%, an increase of 140 basis points compared to the fourth quarter of fiscal 2018.Income tax expense was $120.6 million compared to $115.8 million in the fourth quarter of fiscal 2018 and the effective tax rate was 28.8% compared to 34.6% for the fourth quarter of fiscal 2018. The adjusted effective tax rate for the fourth quarter of fiscal 2018 was 26.9%.Diluted earnings per share were $2.28 compared to $1.65 in the fourth quarter of fiscal 2018. Adjusted diluted earnings per share for the fourth quarter of fiscal 2018 were $1.85.The Company repurchased 1.6 thousand shares of its own common stock at an average cost of $194.10 per share in the fourth quarter of fiscal 2019.

For the fiscal year ended February 2, 2020:

Net revenue was $4.0 billion, an increase of 21% compared to fiscal 2018. On a constant dollar basis, net revenue increased 22%.Total comparable sales increased 17%, or increased 18% on a constant dollar basis.Comparable store sales increased 9%, or increased 10% on a constant dollar basis.Direct to consumer net revenue increased 35%.Gross profit was $2.2 billion, an increase of 22% compared to fiscal 2018.Gross margin was 55.9%, an increase of 70 basis points compared to fiscal 2018.Income from operations was $889.1 million, an increase of 26% compared to fiscal 2018.Operating margin was 22.3%, an increase of 80 basis points compared to fiscal 2018.Income tax expense was $251.8 million compared to $231.4 million in fiscal 2018 and the effective tax rate was 28.1% compared to 32.4% for fiscal 2018. The adjusted effective tax rate for fiscal 2018 was 28.0%.Diluted earnings per share were $4.93 compared to $3.61 in fiscal 2018. Adjusted diluted earnings per share in fiscal 2018 were $3.84.The Company repurchased 1.1 million shares of its own common stock at an average cost of $164.26 per share in fiscal 2019.

The Company ended fiscal 2019 with $1.1 billion in cash and cash equivalents compared to $881.3 million at the end of fiscal 2018. Inventories at the end of fiscal 2019 increased by 28% to $518.5 million compared to $404.8 million at the end of fiscal 2018. The Company ended the year with 491 stores.

Calvin McDonald, Chief Executive Officer, commented: "2019 was a strong year for lululemon, as our teams executed against our Power of Three growth plan. We are now navigating an extraordinary environment, which is currently impacting our business. The strength of our brand and strong financial position will help us manage through the day-to-day, while continuing to effectively plan for and invest in our future." McDonald continued: "I want to thank our people around the globe for the results they delivered in 2019, and for their perseverance and commitment to our brand each and every day."

COVID-19 Coronavirus

The outbreak of the COVID-19 coronavirus has been declared a pandemic by the World Health Organization and continues to spread in the United States, Canada, and in many other countries globally. Subsequent to February 2, 2020, in line with recommendations by public health officials and in accordance with governmental authority orders, we have taken actions to close certain retail locations and to reduce operating hours. We continue to monitor the situation and work closely with local authorities to prioritize the safety of our people and guests.

In February 2020, we temporarily closed all of our retail locations in Mainland China. All but one of these locations have since reopened. In March 2020, we temporarily closed all of our retail locations in North America, Europe, Malaysia, New Zealand, and we temporarily closed our distribution center in Sumner, WA. These locations currently remain closed.

Fiscal 2020 Outlook

Due to the impact that COVID-19 is having across the globe, and the rapid and continuous developments, we are not providing guidance for fiscal 2020 at this time. We will provide additional updates as the situation warrants.

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. Changes in total comparable sales, comparable store sales, and direct to consumer net revenue are calculated on a one week shifted basis such that the 13 and 52 weeks ended February 2, 2020 are compared to the 13 and 52 weeks ended February 3, 2019 rather than January 27, 2019.

Conference Call Information

A conference call to discuss fiscal 2019 results is scheduled for today, March 26, 2020, at 4:30 p.m. Eastern time. Those interested in participating in the call are invited to dial 1-800-319-4610 or 1-604-638-5340, if calling internationally, approximately 10 minutes prior to the start of the call. A live webcast of the conference call will be available online at: http://investor.lululemon.com/events.cfm. A replay will be made available online approximately two hours following the live call for a period of 30 days.

About lululemon athletica inc.

lululemon athletica inc. (NASDAQ:LULU) is a healthy lifestyle inspired athletic apparel company for yoga, running, training, and most other sweaty pursuits, creating transformational products and experiences which enable people to live a life they love. Setting the bar in technical fabrics and functional designs, lululemon works with yogis and athletes in local communities for continuous research and product feedback. For more information, visit www.lululemon.com.

Non-GAAP Financial Measures

Constant dollar changes in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue, and the adjusted financial results are non-GAAP financial measures.

A constant dollar basis assumes the average foreign exchange rates for the period remained constant with the average foreign exchange rates for the same period of the prior year. We provide constant dollar changes in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue because we use these measures to understand the underlying growth rate of net revenue excluding the impact of changes in foreign exchange rates. We believe that disclosing these measures on a constant dollar basis is useful to investors because it enables them to understand the level of growth of our business.

Adjusted income tax expense, effective tax rates, and diluted earnings per share exclude the amounts recognized in connection with U.S. tax reform and taxes on repatriation of foreign earnings. We believe these adjusted financial measures are useful to investors in evaluating the trend in our operating performance as the adjustments do not directly relate to our ongoing business operations. Furthermore, we do not believe the adjustments are reflective of our expectations of our future operating performance and believe these non-GAAP measures are useful to investors because of their comparability to our historical information.

The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or with greater prominence to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the section captioned "Reconciliation of Non-GAAP Financial Measures" included in the accompanying financial tables, which includes more detail on the GAAP financial measure that is most directly comparable to each non-GAAP financial measure, and the related reconciliations between these financial measures.

Forward-Looking Statements:

This press release includes estimates, projections, statements relating to our business plans, objectives, and expected operating results that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In many cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "outlook," "believes," "intends," "estimates," "predicts," "potential" or the negative of these terms or other comparable terminology. These forward-looking statements also include our guidance and outlook statements. These statements are based on management's current expectations but they involve a number of risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in the forward-looking statements as a result of risks and uncertainties, which include, without limitation: our ability to maintain the value and reputation of our brand; the acceptability of our products to our guests; the recent COVID-19 coronavirus outbreak and related government, private sector, and individual consumer responsive actions; our highly competitive market and increasing competition; our reliance on and limited control over third-party suppliers to provide fabrics for and to produce our products; suppliers or manufacturers not complying with our Vendor Code of Ethics or applicable laws; the operations of many of our suppliers are subject to international and other risks; an economic downturn or economic uncertainty in our key markets; increasing product costs and decreasing selling prices; our ability to anticipate consumer preferences and successfully develop and introduce new, innovative and updated products; our ability to accurately forecast guest demand for our products; our ability to safeguard against security breaches with respect to our information technology systems; any material disruption of our information systems; our ability to have technology-based systems function effectively and grow our e-commerce business globally; changes in consumer shopping preferences and shifts in distribution channels; the fluctuating costs of raw materials; our ability to expand internationally in light of our limited operating experience and limited brand recognition in new international markets; global economic and political conditions and global events such as health pandemics; our ability to deliver our products to the market and to meet guest expectations if we have problems with our distribution system; imitation by our competitors; our ability to protect our intellectual property rights; our ability to source and sell our merchandise profitably or at all if new trade restrictions are imposed or existing trade restrictions become more burdensome; changes in tax laws or unanticipated tax liabilities; our ability to manage our growth and the increased complexity of our business effectively; our ability to cancel store leases if an existing or new store is not profitable; increasing labor costs and other factors associated with the production of our products in South and South East Asia; our ability to successfully open new store locations in a timely manner; our ability to comply with trade and other regulations; the service of our senior management; seasonality; fluctuations in foreign currency exchange rates; conflicting trademarks and the prevention of sale of certain products; our exposure to various types of litigation; actions of activist stockholders; anti-takeover provisions in our certificate of incorporation and bylaws; and other risks and uncertainties set out in filings made from time to time with the United States Securities and Exchange Commission and available at www.sec.gov, including, without limitation, our most recent reports on Form 10-K and Form 10-Q. You are urged to consider these factors carefully in evaluating the forward-looking statements contained herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by these cautionary statements. The forward-looking statements made herein speak only as of the date of this press release and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances, except as may be required by law.

lululemon athletica inc.
Condensed Consolidated Statements of Operations
Unaudited; Expressed in thousands, except per share amounts
                                                                      Quarter Ended                                                                                    Fiscal Year Ended
                                                                  ------------------------------------------------------------------------------------------                            ------------------------------------------------------------------------------------------
                                          February 2,                             February 3,                             February 2,                             February 3,
                                                                                   2020                                                       2019                                                       2020                                                       2019
                                                                  -----------------------------------                        -----------------------------------                        -----------------------------------                        -----------------------------------
Net revenue                                         $ 1,397,491          $ 1,167,458          $ 3,979,296          $ 3,288,319  
Costs of goods sold                                     586,665              498,875            1,755,910            1,472,032  
                                                                  ---------------  --------------------                      ---------------  --------------------                      ---------------  --------------------                      ---------------  --------------------
Gross profit                                            810,826              668,583            2,223,386            1,816,287  
                                                           58.0 %                                  57.3 %                                  55.9 %                                  55.2 %
    As a percent of net revenue
Selling, general and administrative expenses            394,339              337,163            1,334,276            1,110,451  
                                                           28.2 %                                  28.9 %                                  33.5 %                                  33.8 %
    As a percent of net revenue
                                                                  ---------------  --------------------                      ---------------  --------------------                      ---------------  --------------------                      ---------------  --------------------
Income from operations                                  416,487              331,420              889,110              705,836  
                                                           29.8 %                                  28.4 %                                  22.3 %                                  21.5 %
    As a percent of net revenue
Other income (expense), net                               2,129                2,861                8,283                9,414  
                                                                  ---------------  --------------------                      ---------------  --------------------                      ---------------  --------------------                      ---------------  --------------------
Income before income tax expense                        418,616              334,281              897,393              715,250  
Income tax expense                                      120,595              115,816              251,797              231,449  
                                                                  ---------------  --------------------                      ---------------  --------------------                      ---------------  --------------------                      ---------------  --------------------
Net income                                          $   298,021          $   218,465          $   645,596          $   483,801  
                                                                  ====== ========= ====================                      ====== ========= ====================                      ====== ========= ====================                      ====== ========= ====================
                                                                                            
Basic earnings per share                            $      2.29          $      1.66          $      4.95          $      3.63  
Diluted earnings per share                          $      2.28          $      1.65          $      4.93          $      3.61  
Basic weighted-average shares outstanding               130,311              131,878              130,393              133,413
lululemon athletica inc.
Condensed Consolidated Balance Sheets
Unaudited; Expressed in thousands
                                                February 2,                             February 3,
                                                                                         2020                                                       2019
                                                                        -----------------------------------                        ------------------------------------
ASSETS                                                                     
Current assets                                                             
                                                          $ 1,093,505           $   881,320  
    Cash and cash equivalents
                                                              518,513               404,842  
    Inventories
                                                               85,159                49,385  
    Prepaid and receivable income taxes
                                                              110,761                93,735  
    Other current assets
                                                                        ---------------  --------------------                      ----------------  --------------------
Total current assets                                        1,807,938             1,429,282  
Property and equipment, net                                   671,693               567,237  
Right-of-use lease assets                                     689,664        --  
Goodwill and intangible assets, net                            24,423                24,239  
Deferred income taxes and other non-current assets             87,636                63,953  
                                                                        ---------------  --------------------                      ----------------  --------------------
Total assets                                              $ 3,281,354           $ 2,084,711  
                                                                        ====== ========= ====================                      ======= ========= ====================
LIABILITIES AND STOCKHOLDERS' EQUITY                                       
Current liabilities                                                        
                                                          $    79,997           $    95,533  
    Accounts payable
                                                                6,344                16,241  
    Accrued inventory liabilities
                                                              133,688               109,181  
    Accrued compensation and related expenses
                                                              128,497        --  
    Current lease liabilities
                                                               26,436                67,412  
    Current income taxes payable
                                                              120,413                99,412  
    Unredeemed gift card liability
                                                              125,043               112,698  
    Other current liabilities
                                                                        ---------------  --------------------                      ----------------  --------------------
Total current liabilities                                     620,418               500,477  
Non-current lease liabilities                                 611,464        --  
Non-current income taxes payable                               48,226                42,099  
Deferred income tax liability                                  43,432                14,249  
Other non-current liabilities                                   5,596                81,911  
Stockholders' equity                                        1,952,218             1,445,975  
                                                                        ---------------  --------------------                      ----------------  --------------------
lululemon athletica inc.
Condensed Consolidated Statements of Cash Flows
Unaudited; Expressed in thousands
                                                                                                          Fiscal Year Ended
                                                                                                          --------------------------------------------------------------------------------------
                                                                                 February 2,                           February 3,
                                                                                                                          2020                                                     2019
                                                                                                          ---------------------------------                        ---------------------------------
Cash flows from operating activities                                                                       
                                                                                            $ 645,596          $ 483,801  
    Net income
                                                                                               23,720            258,978  
    Adjustments to reconcile net income to net cash provided by operating activities
                                                                                                          -------------  --------------------                      -------------  --------------------
Net cash provided by operating activities                                                     669,316            742,779  
Net cash used in investing activities                                                        (278,408 )                            (242,794 )
Net cash used in financing activities                                                        (177,173 )                            (590,214 )
Effect of exchange rate changes on cash                                                        (1,550 )                             (18,952 )
                                                                                                          -------------  --------------------                      -------------  --------------------
Increase (decrease) in cash and cash equivalents                                              212,185           (109,181 )
Cash and cash equivalents, beginning of year                                                $ 881,320          $ 990,501  
                                                                                                          ------ ------- --------------------                      ------ ------- --------------------

lululemon athletica inc.Reconciliation of Non-GAAP Financial MeasuresUnaudited; Expressed in thousands, except per share amounts

Constant dollar changes in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue

The below changes in net revenue show the net change for the fourth quarter of fiscal 2019 compared to the fourth quarter of fiscal 2018. Due to the 53rd week in fiscal 2018, the below changes in total comparable sales, comparable store sales, and direct to consumer net revenue are calculated on a one week shifted basis such that the 13 weeks ended February 2, 2020 are compared to the 13 weeks ended February 3, 2019 rather than January 27, 2019.

Change in Net                           Change in                             Change in                             Change in
                                                                                     Revenue                                                   Total                                                 Comparable                                                Direct to
                                                                                                                                            Comparable                                             Store Sales(2)                                            Consumer Net
                                                                                                                                            Sales(1,2)                                                                                                          Revenue
                                                                      ----------------------------------                       ----------------------------------                       ----------------------------------                       ----------------------------------
Change                                                         20 %                                  20 %                                   9 %                                  41 %
Adjustments due to foreign exchange rate changes   --     --     --     --  
                                                                      -------------- --------------------                      -------------- --------------------                      -------------- --------------------                      -------------- --------------------

The below changes in net revenue show the net change for fiscal 2019 compared to fiscal 2018. Due to the 53rd week in fiscal 2018, the below changes in total comparable sales, comparable store sales, and direct to consumer net revenue are calculated on a one week shifted basis such that the 52 weeks ended February 2, 2020 are compared to the 52 weeks ended February 3, 2019 rather than January 27, 2019.

Change in Net                  Change in                     Change in                          Change in
                                                                                 Revenue                                          Total                                         Comparable                                             Direct to
                                                                                                                               Comparable                                     Store Sales(2)                                         Consumer Net
                                                                                                                               Sales(1,2)                                                                                               Revenue
                                                                      --------------------------                       -------------------------                       ---------------------------                       ----------------------------------
Change                                                 21 %                         17 %                            9 %                                  35 %
Adjustments due to foreign exchange rate changes        1         1           1     --  
                                                                      ------ --------------------                      ----- --------------------                      ------- --------------------                      -------------- --------------------
__________
  (1) Total comparable sales includes comparable store sales and direct to consumer sales.

Adjusted financial measures

The following tables reconcile adjusted financial measures with the most directly comparable measures calculated in accordance with GAAP. The adjustments relate to the amounts recognized in connection with U.S. tax reform and taxes on repatriation of foreign earnings. Please refer to Note 15 to the audited consolidated financial statements included in Item 8 of Part II of our Report on Form 10-K to be filed with the SEC on or about March 26, 2020 for further information on these adjustments.

Quarter Ended February 3, 2019
                                          -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                  GAAP                                                     Adjustments                                                  Adjusted
                                                       Amounts                                                                                                                                                       Amounts
                                                                                                                                                                                                                   (Non-GAAP)
                                                                                               -----------------------------------------------------------------------------
                                                                       U.S. Tax             
                                                                                                                                 Reform
                                                                                               -------------------- -----------------------------
                                                                               (In thousands, except per share amounts)
Income tax expense      $ 115,816                        $ (23,714 )                       $ (2,301 )      $ 89,801  
Effective tax rate           34.6 %                                              (7.0 )%                          (0.7 )%         26.9 %
Fiscal Year Ended February 3, 2019
                                          --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                  GAAP                                                     Adjustments                                                  Adjusted
                                                       Amounts                                                                                                                                                       Amounts
                                                                                                                                                                                                                   (Non-GAAP)
                                                                                               -----------------------------------------------------------------------------
                                                                       U.S. Tax             
                                                                                                                                 Reform
                                                                                               -------------------- -----------------------------
                                                                               (In thousands, except per share amounts)
Income tax expense      $ 231,449                        $ (23,714 )                       $ (7,464 )      $ 200,271  
Effective tax rate           32.4 %                                              (3.3 )%                          (1.1 )%          28.0 %

lululemon athletica inc.Company-operated Store Count and Square Footage(1)Square Footage Expressed in Thousands

Number of                     Number of                         Number of                         Number of
                                                   Stores Open                                     Stores Opened                                        Stores Closed                                         Stores Open
                                                     at the                                         During the                                           During the                                          at the End of
                                                  Beginning of                                        Quarter                                              Quarter                                            the Quarter
                                                   the Quarter
                                          --------------------------                       --------------------------                       ----------------------------------                       --------------------------
1st Quarter               440         15     --        455  
2nd Quarter               455          5     --        460  
3rd Quarter               460         21                  2        479
Total Gross                   Gross Square                      Gross Square                       Total Gross
                                                 Square Feet at                                      Feet Added                                            Feet Lost                                         Square Feet at
                                                  the Beginning                                      During the                                           During the                                         the End of the
                                                 of the Quarter                                      Quarter(2)                                           Quarter(2)                                             Quarter
                                          ---------------------------                       --------------------------                       ----------------------------------                       ---------------------------
1st Quarter              1,426         40     --       1,466  
2nd Quarter              1,466         56     --       1,522  
3rd Quarter              1,522         87                  5       1,604
__________
  (1) Company-operated store count and square footage summary excludes retail locations operated by third parties under license and supply arrangements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200326005653/en/

SOURCE: lululemon athletica inc.

Investors: 
lululemon athletica inc.
Howard Tubin
1-604-732-6124
or
ICR, Inc.
Joseph Teklits/Caitlin Churchill
1-203-682-8200


Media: 
lululemon athletica inc.
Erin Hankinson
1-604-732-6124
or
Brunswick Group
Eleanor French
1-415-671-7676

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