EX-99.1 2 lulu-20190804xex991.htm EARNINGS RELEASE Exhibit

Exhibit 99.1
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LULULEMON ATHLETICA INC. ANNOUNCES SECOND QUARTER FISCAL 2019 RESULTS
Revenue up 22% to $883 million
Comparable sales increase 15%, or 17% on a constant dollar basis
Diluted EPS of $0.96 for the second quarter
Vancouver, British Columbia – September 5, 2019 – lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the second quarter of fiscal 2019.
For the second quarter ended August 4, 2019:
Net revenue was $883.4 million, an increase of 22% compared to the second quarter of fiscal 2018. On a constant dollar basis, net revenue increased 23%.
Total comparable sales increased 15%, or increased 17% on a constant dollar basis.
Comparable store sales increased 10%, or increased 11% on a constant dollar basis.
Direct to consumer net revenue increased 30%, or increased 31% on a constant dollar basis.
Direct to consumer net revenue represented 24.6% of total net revenue compared to 23.1% for the second quarter of fiscal 2018.
Gross profit was $485.8 million, an increase of 23% compared to the second quarter of fiscal 2018.
Gross margin was 55.0%, an increase of 20 basis points compared to the second quarter of fiscal 2018.
Income from operations was $168.0 million, an increase of 25% compared to the second quarter of fiscal 2018.
Operating margin was 19.0%, an increase of 50 basis points compared to the second quarter of fiscal 2018.
Income tax expense was $44.8 million compared to $40.0 million in the second quarter of fiscal 2018 and the effective tax rate was 26.4% compared to 29.5%.
Diluted earnings per share were $0.96 compared to $0.71 in the second quarter of fiscal 2018.
The Company repurchased 9.6 thousand shares of its own common stock at an average cost of $164.05 per share.
The Company ended the second quarter of fiscal 2019 with $623.7 million in cash and cash equivalents compared to $777.8 million at the end of the second quarter of fiscal 2018. Inventories at the end of the second quarter of fiscal 2019 increased 26% to $494.3 million compared to $392.7 million at the end of the second quarter of fiscal 2018. The Company ended the quarter with 460 stores.
Calvin McDonald, Chief Executive Officer, commented: "We're pleased with the ongoing strength across our business. We continue to make progress in delivering against our Power of Three growth pillars - product innovation, omni-guest experience, and market expansion. Our success demonstrates the significant runway in front of lululemon and I'm grateful to our teams for bringing our vision to life."
Updated Outlook
For the third quarter of fiscal 2019, we expect net revenue to be in the range of $880 million to $890 million based on a total comparable sales increase in the low teens on a constant dollar basis. Diluted earnings per share are expected to be in the range of $0.90 to $0.92 for the quarter. This guidance assumes 131 million diluted weighted-average shares outstanding and a 28% tax rate. The guidance does not reflect potential future repurchases of the Company's shares.
For the full fiscal 2019, we now expect net revenue to be in the range of $3.800 billion to $3.840 billion based on a total comparable sales increase in the low teens on a constant dollar basis. Diluted earnings per share are expected to be in the range of $4.63 to $4.70 for the full year, based on a 27.5% effective tax rate. The guidance assumes 131 million diluted weighted-average shares outstanding. The guidance does not reflect potential future repurchases of the Company's shares.
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 the Company undertakes no duty to update or to continue to provide information with respect

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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.
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. For the second quarter of fiscal 2019, the 13 weeks ended August 4, 2019 are compared to the 13 weeks ended August 5, 2018 rather than July 29, 2018.
Conference Call Information
A conference call to discuss second quarter results is scheduled for today, September 5, 2019, 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 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 better understand the level of growth of our business.
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; our

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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; 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; 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; the operations of many of our suppliers are subject to international and other risks; 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.
Contacts:
Investor Contact:
lululemon athletica inc.
Howard Tubin
1-604-732-6124

or

ICR, Inc.
Joseph Teklits/Caitlin Morahan
1-203-682-8200

Media Contact:
lululemon athletica inc.
Erin Hankinson
1-604-732-6124

or

Brunswick Group
Eleanor French
1-415-671-7676


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lululemon athletica inc.
Condensed Consolidated Statements of Operations
Unaudited; Expressed in thousands, except per share amounts 
 
 
Quarter Ended
 
Two Quarters Ended
 
 
August 4, 2019
 
July 29, 2018
 
August 4, 2019
 
July 29, 2018
Net revenue
 
$
883,352

 
$
723,500

 
$
1,665,667

 
$
1,373,206

Costs of goods sold
 
397,556

 
327,306

 
758,151

 
632,279

Gross profit
 
485,796

 
396,194

 
907,516

 
740,927

As a percent of net revenue
 
55.0
%
 
54.8
%
 
54.5
%
 
54.0
%
Selling, general and administrative expenses
 
317,814

 
261,986

 
610,722

 
502,414

As a percent of net revenue
 
36.0
%
 
36.2
%
 
36.7
%
 
36.6
%
Income from operations
 
167,982

 
134,208

 
296,794

 
238,513

As a percent of net revenue
 
19.0
%
 
18.5
%
 
17.8
%
 
17.4
%
Other income (expense), net
 
1,850

 
1,591

 
4,229

 
4,509

Income before income tax expense
 
169,832

 
135,799

 
301,023

 
243,022

Income tax expense
 
44,842

 
40,029

 
79,430

 
72,099

Net income
 
$
124,990

 
$
95,770

 
$
221,593

 
$
170,923

 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
0.96

 
$
0.71

 
$
1.70

 
$
1.27

Diluted earnings per share
 
$
0.96

 
$
0.71

 
$
1.69

 
$
1.26

Basic weighted-average shares outstanding
 
130,285

 
133,986

 
130,489

 
134,744

Diluted weighted-average shares outstanding
 
130,783

 
134,530

 
131,060

 
135,230



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lululemon athletica inc.
Condensed Consolidated Balance Sheets
Unaudited; Expressed in thousands 
 
 
August 4,
2019
 
February 3,
2019
 
July 29,
2018
ASSETS
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
Cash and cash equivalents
 
$
623,738

 
$
881,320

 
$
777,841

Inventories
 
494,294

 
404,842

 
392,672

Prepaid and receivable income taxes
 
112,572

 
49,385

 
62,203

Other current assets
 
102,409

 
93,735

 
75,321

Total current assets
 
1,333,013

 
1,429,282

 
1,308,037

Property and equipment, net
 
617,090

 
567,237

 
487,546

Right-of-use lease assets
 
657,044

 

 

Goodwill
 
24,184

 
24,239

 
24,255

Deferred income taxes and other non-current assets
 
63,413

 
63,953

 
61,319

Total assets
 
$
2,694,744

 
$
2,084,711

 
$
1,881,157

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
Accounts payable
 
$
110,513

 
$
95,533

 
$
110,523

Accrued inventory liabilities
 
8,778

 
16,241

 
12,597

Accrued compensation and related expenses
 
100,735

 
109,181

 
62,794

Current lease liabilities
 
130,182

 

 

Current income taxes payable
 
5,090

 
67,412

 
3,021

Unredeemed gift card liability
 
79,629

 
99,412

 
64,420

Revolving credit facility
 

 

 
100,000

Other current liabilities
 
117,682

 
112,698

 
95,806

Total current liabilities
 
552,609

 
500,477

 
449,161

Non-current lease liabilities
 
568,311

 

 

Non-current income taxes payable
 
48,226

 
42,099

 
44,078

Deferred income tax liability
 
14,114

 
14,249

 
1,582

Other non-current liabilities
 
4,105

 
81,911

 
66,121

Stockholders' equity
 
1,507,379

 
1,445,975

 
1,320,215

Total liabilities and stockholders' equity
 
$
2,694,744

 
$
2,084,711

 
$
1,881,157



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lululemon athletica inc.
Condensed Consolidated Statements of Cash Flows
Unaudited; Expressed in thousands 
 
 
Two Quarters Ended
 
 
August 4, 2019
 
July 29, 2018
Cash flows from operating activities
 
 
 
 
Net income
 
$
221,593

 
$
170,923

Adjustments to reconcile net income to net cash provided by operating activities
 
(171,551
)
 
39,103

Net cash provided by operating activities
 
50,042

 
210,026

Net cash used in investing activities
 
(131,969
)
 
(89,292
)
Net cash used in financing activities
 
(170,985
)
 
(300,239
)
Effect of exchange rate changes on cash
 
(4,670
)
 
(33,155
)
Decrease in cash and cash equivalents
 
(257,582
)
 
(212,660
)
Cash and cash equivalents, beginning of period
 
881,320

 
990,501

Cash and cash equivalents, end of period
 
$
623,738

 
$
777,841



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lululemon athletica inc.
Reconciliation of Non-GAAP Financial Measures
Unaudited


Constant dollar changes in net revenue
The below changes in net revenue show the change for the quarter ended August 4, 2019 compared to the quarter ended July 29, 2018.
 
 
Net Revenue
Change
 
22
%
Adjustments due to foreign exchange rate changes
 
1

Change in constant dollars
 
23
%

Constant dollar changes in total comparable sales, comparable store sales, direct to consumer net revenue
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 August 4, 2019 are compared to the 13 weeks ended August 5, 2018 rather than July 29, 2018.
 
 
Total Comparable Sales1,2
 
Comparable Store Sales2
 
Direct to Consumer Net Revenue
Change
 
15
%
 
10
%
 
30
%
Adjustments due to foreign exchange rate changes
 
2

 
1

 
1

Change in constant dollars
 
17
%
 
11
%
 
31
%
__________
1Total comparable sales includes comparable store sales and direct to consumer sales.
2Comparable 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.


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lululemon athletica inc.
Company-operated Store Count and Square Footage1 
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
3rd Quarter 2018
 
415

 
11

 

 
426

4th Quarter 2018
 
426

 
16

 
2

 
440

1st Quarter 2019
 
440

 
15

 

 
455

2nd Quarter 2019
 
455

 
5

 

 
460


 
 
Total Gross Square Feet at the Beginning of the Quarter
 
Gross Square Feet Added During the Quarter2
 
Gross Square Feet Lost During the Quarter2
 
Total Gross Square Feet at the End of the Quarter
3rd Quarter 2018
 
1,303

 
52

 
1

 
1,354

4th Quarter 2018
 
1,354

 
77

 
5

 
1,426

1st Quarter 2019
 
1,426

 
40

 

 
1,466

2nd Quarter 2019
 
1,466

 
56

 

 
1,522

 __________
1Company-operated store count and square footage summary excludes retail locations operated by third parties under license and supply arrangements.
2Gross 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.


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