LULU
$314.65
Lululemon Athletica
$6.72
2.18%
Earnings Details
Quarter January 2021
Tuesday, March 30, 2021 4:05:00 PM
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Summary

Lululemon Athletica Misses

Lululemon Athletica (LULU) reported Quarter January 2021 earnings of $2.58 per share on revenue of $1.7 billion. The consensus earnings estimate was $2.49 per share on revenue of $1.7 billion. The Earnings Whisper number was $2.59 per share. Revenue grew 23.8% on a year-over-year basis.

The company said it expects first quarter earnings of $0.86 to $0.90 per share on revenue of $1.10 million to $1.13 million and fiscal year earnings of $6.10 to $6.25 per share on revenue of $5.55 billion to $5.65 billion. The current consensus estimate is earnings of $0.84 per share on revenue of $993.88 million for the quarter ending April 30, 2021 and earnings of $6.65 per share on revenue of $5.43 billion for the year ending January 31, 2022.

Lululemon Athletica Inc is a designer and retailer of technical athletic apparel operating primarily in North America and Australia. Its yoga-inspired apparel is marketed under the lululemon athletica and ivivva athletica brand names.

Results
Reported Earnings
$2.58
Earnings Whisper
$2.59
Consensus Estimate
$2.49
Reported Revenue
$1.73 Bil
Revenue Estimate
$1.66 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

lululemon athletica inc. Announces Fourth Quarter and Full Year Fiscal 2020 Results

Fourth quarter revenue increased 24% to $1.7 billion
Comparable sales increased 21%, or 20% on a constant dollar basis
Diluted EPS of $2.52, Adjusted EPS of $2.58

VANCOUVER, British Columbia--(BUSINESS WIRE)--lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the fourth quarter and fiscal year ended January 31, 2021.

Calvin McDonald, Chief Executive Officer, stated: "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 opportunity into the future. All of us on the leadership team have so much gratitude for our teams and their agility during these unprecedented times."

We refer to the fiscal year ended January 31, 2021 as "2020" and the fiscal year ended February 2, 2020 as "2019." The adjusted non-GAAP financial measures below exclude certain costs incurred in connection with the acquisition of MIRROR, and the related tax effects.

For the fourth quarter of 2020, compared to the fourth quarter of 2019:

  • Net revenue increased 24% to $1.7 billion. On a constant dollar basis, net revenue increased 22%.
    • Net revenue increased 21% in North America and increased 47% internationally.
  • Total comparable sales increased 21%, or increased 20% on a constant dollar basis.
    • Direct to consumer net revenue increased 94%, or increased 92% on a constant dollar basis.
    • Comparable store productivity was 72%, or 71% on a constant dollar basis, representing a comparable store sales decrease of 28%, or a decrease of 29% on a constant dollar basis.
  • Direct to consumer net revenue represented 52% of total net revenue compared to 33% for the fourth quarter of 2019.
  • Gross profit increased 25% to $1.0 billion, and gross margin increased 60 basis points to 58.6%.
  • Income from operations increased 10% to $457.9 million. Adjusted income from operations increased 12% to $465.7 million.
  • Operating margin decreased 330 basis points to 26.5%. Adjusted operating margin decreased 290 basis points to 26.9%.
  • Income tax expense increased 5% to $127.2 million. The effective tax rate for the fourth quarter of 2020 was 27.8% compared to 28.8% for the fourth quarter of 2019. The adjusted effective tax rate was 27.4% for the fourth quarter of 2020.
  • Diluted earnings per share were $2.52 compared to $2.28 in the fourth quarter of 2019. Adjusted diluted earnings per share for the fourth quarter of 2020 were $2.58.
  • The Company opened six net new company-operated stores during the quarter, ending with 521 stores.

For 2020 compared to 2019:

  • Net revenue increased 11% to $4.4 billion. On a constant dollar basis, net revenue increased 10%.
    • Direct to consumer net revenue increased 101%, and increased 101% on a constant dollar basis.
    • Company operated store net revenue decreased 34%.
    • Net revenue increased 8% in North America and increased 31% internationally.
  • Direct to consumer net revenue represented 52% of total net revenue compared to 29% for 2019.
  • Gross profit increased of 11% to $2.5 billion, and gross margin increased of 10 basis points to 56.0%.
  • Income from operations decreased 8% to $820.0 million. Adjusted income from operations decreased 4% to $849.8 million.
  • Operating margin decreased 370 basis points to 18.6%. Adjusted operating margin decreased 300 basis points to 19.3%.
  • Income tax expense decreased 8% to $230.4 million. The effective tax rate was 28.1% for each of 2020 and 2019. The adjusted effective tax rate was 27.5% 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.
  • The Company opened 30 net new company-operated stores during the year, ending with 521 stores.

Meghan Frank, Chief Financial Officer, stated: "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%, 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

The Company 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% to $647.2 million compared to $518.5 million at the end of 2019.

Fiscal 2021 Outlook

For the first quarter of fiscal 2021, we expect 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, we expect 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.

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 does not incorporate future unknown impacts from the spread of COVID-19. While most of the Company's retail locations are currently open, tighter capacity restrictions and other precautionary measures are in place in most markets. Further resurgences in COVID-19, including from variants could cause additional restrictions, including temporarily closing all or some of our retail locations again, result in lower consumer demand, and cause disruption in our supply chain. 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.

Conference Call Information

A conference call to discuss 2020 results is scheduled for today, March 30, 2021, 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.

Comparable Store Sales and Total Comparable Sales

The Company believes that investors would typically find comparable store sales and total comparable sales useful in assessing the performance of its business. As the temporary store closures from COVID-19 have resulted in a significant number of stores being removed from its comparable store base during the first two quarters of 2020, the Company believes total comparable sales and comparable store sales on a full year basis are not currently representative of the underlying trends of its business. The Company does not believe these metrics are currently useful to investors in understanding performance, therefore it has not included these metrics in this press release.

Non-GAAP Financial Measures

Constant dollar changes and 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. The Company provides constant dollar changes in its results to help investors understand the underlying growth rate of net revenue excluding the impact of changes in foreign exchange rates.

Adjusted income from operations, operating margin, income tax expense, effective tax rates, net income, and diluted earnings per share exclude items related to the MIRROR acquisition. We exclude transaction, integration costs, the gain on lululemon's previous investment in MIRROR, certain acquisition-related compensation costs, and the related income tax effects of these items. The acquisition-related compensation costs primarily relate to the acceleration of vesting of certain stock options upon acquisition, and to deferred consideration of $57.1 million in which is due to certain MIRROR employees subject to their continued employment through various vesting dates up to three years from the acquisition date. These individuals also receive employment compensation separate from the deferred amounts that is commensurate with the services they provide and which we consider to be normal operating expenses within selling, general and administrative expenses. We believe these adjusted financial measures are useful to investors as they provide supplemental information that enable evaluation of the underlying trend in our operating performance, and enable a more consistent comparison to our historical financial information. Further, due to the finite and discrete nature of these costs, we do not consider them to be normal operating expenses that are necessary to operate the MIRROR business and we do not expect them to recur beyond the expiry of the related vesting periods. Management uses these adjusted financial measures and constant currency metrics internally when reviewing and assessing financial performance.

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 the Company's 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 the Company's 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: the Company's ability to maintain the value and reputation of its brand; the current COVID-19 coronavirus pandemic and related government, private sector, and individual consumer responsive actions; its highly competitive market and increasing competition; increasing product costs and decreasing selling prices; its ability to anticipate consumer preferences and successfully develop and introduce new, innovative and updated products; its ability to accurately forecast guest demand for its products; changes in consumer shopping preferences and shifts in distribution channels; its ability to expand internationally in light of its limited operating experience and limited brand recognition in new international markets; its ability to realize the potential benefits and synergies sought with the acquisition of MIRROR; its ability to manage its growth and the increased complexity of its business effectively; its ability to successfully open new store locations in a timely manner; seasonality; its reliance on and limited control over third-party suppliers to provide fabrics for and to produce its products; the operations of many of its suppliers are subject to international and other risks; suppliers or manufacturers not complying with its Vendor Code of Ethics or applicable laws; its ability to deliver its products to the market and to meet guest expectations if it has problems with its distribution system; increasing labor costs and other factors associated with the production of its products in South Asia and South East Asia; its ability to safeguard against security breaches with respect to its information technology systems; any material disruption of its information systems; its ability to have technology-based systems function effectively and grow its e-commerce business globally; climate change, and related legislative and regulatory responses; increased scrutiny regarding its environmental, social, and governance, or sustainability responsibilities; an economic recession, depression, or downturn or economic uncertainty in its key markets; global economic and political conditions and global events such as health pandemics; its ability to source and sell its 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; its ability to comply with trade and other regulations; fluctuations in foreign currency exchange rates; imitation by its competitors; its ability to protect its intellectual property rights; conflicting trademarks and the prevention of sale of certain products; its exposure to various types of litigation; 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, its 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 the Company undertakes 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

 

 

Fourth Quarter

 

Fiscal Year

 

 

2020

 

2019

 

2020

 

2019

Net revenue

 

$

1,729,550

 

 

$

1,397,491

 

 

$

4,401,879

 

 

$

3,979,296

 

Costs of goods sold

 

716,816

 

 

586,665

 

 

1,937,888

 

 

1,755,910

 

Gross profit

 

1,012,734

 

 

810,825

 

 

2,463,991

 

 

2,223,386

 

As a percent of net revenue

 

58.6

%

 

58.0

%

 

56.0

%

 

55.9

%

Selling, general and administrative expenses

 

544,831

 

 

394,316

 

 

1,609,003

 

 

1,334,247

 

As a percent of net revenue

 

31.5

%

 

28.2

%

 

36.6

%

 

33.5

%

Amortization of intangible assets

 

2,195

 

 

23

 

 

5,160

 

 

29

 

Acquisition-related expenses

 

7,802

 

 

 

 

29,842

 

 

 

Income from operations

 

457,905

 

 

416,487

 

 

819,986

 

 

889,110

 

As a percent of net revenue

 

26.5

%

 

29.8

%

 

18.6

%

 

22.3

%

Other income (expense), net

 

(886

)

 

2,129

 

 

(636

)

 

8,283

 

Income before income tax expense

 

457,018

 

 

418,616

 

 

819,350

 

 

897,393

 

Income tax expense

 

127,181

 

 

120,595

 

 

230,437

 

 

251,797

 

Net income

 

$

329,837

 

 

$

298,021

 

 

$

588,913

 

 

$

645,596

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

2.53

 

 

$

2.29

 

 

$

4.52

 

 

$

4.95

 

Diluted earnings per share

 

$

2.52

 

 

$

2.28

 

 

$

4.50

 

 

$

4.93

 

Basic weighted-average shares outstanding

 

130,340

 

 

130,311

 

 

130,289

 

 

130,393

 

Diluted weighted-average shares outstanding

 

130,956

 

 

130,896

 

 

130,871

 

 

130,955

 

lululemon athletica inc.

Condensed Consolidated Balance Sheets

Unaudited; Expressed in thousands

 

 

January 31,
2021

 

February 2,
2020

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

1,150,517

 

 

$

1,093,505

 

Inventories

 

647,230

 

 

518,513

 

Prepaid and receivable income taxes

 

139,126

 

 

85,159

 

Other current assets

 

187,506

 

 

110,761

 

Total current assets

 

2,124,379

 

 

1,807,938

 

Property and equipment, net

 

745,687

 

 

671,693

 

Right-of-use lease assets

 

734,835

 

 

689,664

 

Goodwill and intangible assets, net

 

466,957

 

 

24,423

 

Deferred income taxes and other non-current assets

 

113,357

 

 

87,636

 

Total assets

 

$

4,185,215

 

 

$

3,281,354

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable

 

$

172,246

 

 

$

79,997

 

Accrued inventory liabilities

 

14,956

 

 

6,344

 

Other accrued liabilities

 

211,911

 

 

112,641

 

Accrued compensation and related expenses

 

130,171

 

 

133,688

 

Current lease liabilities

 

166,091

 

 

128,497

 

Current income taxes payable

 

8,357

 

 

26,436

 

Unredeemed gift card liability

 

155,848

 

 

120,413

 

Other current liabilities

 

23,598

 

 

12,402

 

Total current liabilities

 

883,178

 

 

620,418

 

Non-current lease liabilities

 

632,590

 

 

611,464

 

Non-current income taxes payable

 

43,150

 

 

48,226

 

Deferred income tax liability

 

58,755

 

 

43,432

 

Other non-current liabilities

 

8,976

 

 

5,596

 

Stockholders' equity

 

2,558,566

 

 

1,952,218

 

Total liabilities and stockholders' equity

 

$

4,185,215

 

 

$

3,281,354

 

lululemon athletica inc.

Condensed Consolidated Statements of Cash Flows

Unaudited; Expressed in thousands

 

 

Fiscal Year

 

 

2020

 

2019

Cash flows from operating activities

 

 

 

 

Net income

 

$

588,913

 

 

$

645,596

 

Adjustments to reconcile net income to net cash provided by operating activities

 

214,423

 

 

23,720

 

Net cash provided by operating activities

 

803,336

 

 

669,316

 

Net cash used in investing activities

 

(695,532

)

 

(278,408

)

Net cash used in financing activities

 

(80,788

)

 

(177,173

)

Effect of exchange rate changes on cash

 

29,996

 

 

(1,550

)

Increase in cash and cash equivalents

 

57,012

 

 

212,185

 

Cash and cash equivalents, beginning of year

 

$

1,093,505

 

 

$

881,320

 

Cash and cash equivalents, end of year

 

$

1,150,517

 

 

$

1,093,505

 

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

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

The below changes show the change for the fourth quarter of 2020 compared to fourth quarter of 2019.

 

 

Net Revenue

 

Total
Comparable
Sales(1),(2)

 

Direct to
Consumer Net
Revenue

 

Comparable
Store Sales(2)

 

Comparable
Store
Productivity(3)

Change

 

24

%

 

21

%

 

94

%

 

(28

)%

 

72

%

Adjustments due to foreign exchange rate changes

 

(2

)

 

(1

)

 

(2

)

 

(1

)

 

(1

)

Change in constant dollars

 

22

%

 

20

%

 

92

%

 

(29

)%

 

71

%

____________

(1)

 

Total comparable sales includes comparable store sales and direct to consumer sales.

(2)

 

Comparable store sales reflects net revenue from company-operated stores that have been open for at least 12 full fiscal months, or open for at least 12 full fiscal months after being significantly expanded. Comparable store sales exclude sales from stores which have been temporarily relocated for renovations or have been temporarily closed.

(3)

 

Comparable store productivity is calculated as comparable store sales as a percentage of the net revenue generated from these company-operated stores in the corresponding period of the prior year.

The below changes show the change for 2020 compared to 2019.

 

 

Net Revenue

 

Direct to
Consumer Net
Revenue

Change

 

11

%

 

101

%

Adjustments due to foreign exchange rate changes

 

(1

)

 

 

Change in constant dollars

 

10

%

 

101

%

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 acquisition of MIRROR and its related tax effects. Please refer to Note 6. Acquisition included in Item 8 of Part II of our Report on Form 10-K to be filed with the SEC on or about March 30, 2021 for further information on these adjustments.

 

 

Fourth Quarter 2020

 

 

Income from
Operations

 

Operating
Margin

 

Income Tax
Expense

 

Effective Tax
Rate

 

Net Income

 

Diluted
Earnings Per
Share

GAAP results

 

$

457,905

 

 

26.5

%

 

$

127,181

 

 

27.8

%

 

$

329,837

 

 

$

2.52

 

Transaction and integration costs

 

285

 

 

 

 

 

 

 

 

285

 

 

 

Acquisition-related compensation

 

7,517

 

 

0.4

 

 

 

 

 

 

7,517

 

 

0.06

 

Tax effect of the above

 

 

 

 

 

270

 

 

(0.4

)

 

(270

)

 

 

Adjusted results (non-GAAP)

 

$

465,707

 

 

26.9

%

 

$

127,451

 

 

27.4

%

 

$

337,369

 

 

$

2.58

 

 

 

Fiscal 2020

 

 

Income from
Operations

 

Operating
Margin

 

Income Tax
Expense

 

Effective Tax
Rate

 

Net Income

 

Diluted
Earnings Per
Share

GAAP results

 

$

819,986

 

 

18.6

%

 

$

230,437

 

 

28.1

%

 

$

588,913

 

 

$

4.50

 

Transaction and integration costs

 

10,548

 

 

0.2

 

 

 

 

 

 

10,548

 

 

0.08

 

Gain on existing investment

 

(782

)

 

 

 

 

 

 

 

(782

)

 

(0.01

)

Acquisition-related compensation

 

20,076

 

 

0.5

 

 

 

 

 

 

20,076

 

 

0.15

 

Tax effect of the above

 

 

 

 

 

3,133

 

 

(0.6

)

 

(3,133

)

 

(0.02

)

Adjusted results (non-GAAP)

 

$

849,828

 

 

19.3

%

 

$

233,570

 

 

27.5

%

 

$

615,622

 

 

$

4.70

 

Expected adjusted earnings per share

 

 

First Quarter
Fiscal 2021

 

Fiscal 2021

Expected diluted earnings per share range

 

$0.81 to $0.85

 

$6.10 to $6.25

MIRROR integration and acquisition-related costs, net of tax

 

$0.05

 

$0.20

Expected adjusted earnings per share range (non-GAAP)

 

$0.86 to $0.90

 

$6.30 to $6.45

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

 

 

Number of
Stores Open
at the
Beginning of
the Quarter

 

Number of
Stores Opened
During the
Quarter

 

Number of
Stores Closed
During the
Quarter

 

Number of
Stores Open
at the End of
the Quarter

First Quarter

 

491

 

 

4

 

 

6

 

 

489

 

Second Quarter

 

489

 

 

17

 

 

 

 

506

 

Third Quarter

 

506

 

 

11

 

 

2

 

 

515

 

Fourth Quarter

 

515

 

 

8

 

 

2

 

 

521

 

 

 

Total Gross
Square Feet at
the Beginning
of the Quarter

 

Gross Square
Feet Added
During the
Quarter(2)

 

Gross Square
Feet Lost
During the
Quarter(2)

 

Total Gross
Square Feet at
the End of the
Quarter

First Quarter

 

1,680

 

 

24

 

 

12

 

 

1,692

 

Second Quarter

 

1,692

 

 

65

 

 

 

 

1,757

 

Third Quarter

 

1,757

 

 

54

 

 

3

 

 

1,808

 

Fourth Quarter

 

1,808

 

 

55

 

 

5

 

 

1,858

 

____________

(1)

 

Company-operated store count and square footage summary excludes retail locations operated by third parties under license and supply arrangements.

(2)

 

Gross square feet added/lost during the quarter includes net square foot additions for company-operated stores which have been renovated or relocated in the quarter.

 

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.
Hilary Strath
1-604-218-1958
or
Brunswick Group
Eleanor French
1-415-671-7676

Source: lululemon athletica inc.