Revenue increased 19% to $2.2 billion
Comparable sales increased 13%, or increased 14% on a constant
dollar basis GAAP EPS of $1.96, Adjusted EPS of
$2.53
lululemon athletica inc. (NASDAQ:LULU) today announced financial
results for the third quarter of fiscal 2023.
Calvin McDonald, Chief Executive Officer, stated: "This was
another strong quarter for lululemon as our innovative product
offerings and community activations continued to powerfully
resonate with our guests globally. As we enter the holiday season,
we are pleased with our early performance and are well-positioned
to deliver for our guests in the fourth quarter. I am energized by
the significant opportunities ahead, and would like to thank our
incredible teams around the world for their continued passion and
commitment to our brand."
The adjusted non-GAAP financial measures below exclude certain
inventory provisions, asset impairments, and restructuring costs
recognized in relation to lululemon Studio, and the related income
tax effects of these items.
For the third quarter of 2023, compared to the third quarter of
2022:
- Net revenue increased 19% to $2.2 billion.
- Net revenue increased 12% in North America, and increased 49%
internationally.
- Total comparable sales increased 13%, or 14% on a constant
dollar basis.
- Comparable store sales increased 9%.
- Direct to consumer net revenue increased 18%, or 19% on a
constant dollar basis.
- Direct to consumer net revenue represented 41% of total net
revenue compared to 41% for the third quarter of 2022.
- Gross profit increased 21% to $1.3 billion. Adjusted gross
profit increased 23% to $1.3 billion.
- Gross margin increased 110 basis points to 57.0%. Adjusted
gross margin increased 220 basis points to 58.1%.
- Income from operations decreased 4% to $338.1 million. Adjusted
income from operations increased 24% to $436.3 million.
- Operating margin decreased 370 basis points to 15.3%. Adjusted
operating margin increased 80 basis points to 19.8%.
- Income tax expense increased 2% to $99.2 million. The effective
tax rate for the third quarter of 2023 was 28.5% compared to 27.6%
for the third quarter of 2022. The adjusted effective tax rate was
28.1% for the third quarter of 2023.
- The Company has entered into a partnership with Peloton
Interactive, Inc. for the provision of digital fitness content and
will no longer produce its own content for the lululemon Studio
Mirror. While the Company will continue to service and support
existing subscribers, it has ceased selling the Mirror hardware.
The Company recognized post-tax asset impairment and other charges
related to lululemon Studio totaling $72.1 million during the third
quarter.
- Diluted earnings per share were $1.96 compared to $2.00 in the
third quarter of 2022. Adjusted diluted earnings per share were
$2.53 in the third quarter of 2023.
- The Company opened 14 net new company-operated stores during
the third quarter, ending with 686 stores.
Meghan Frank, Chief Financial Officer, stated: "Our third
quarter performance, which exceeded our expectations on the top-
and bottom-line, reflects the ongoing strength of our business
model and our teams' ability to successfully execute at a high
level amid an uncertain macro environment. As we look to the end of
our fiscal year and into 2024, we remain focused on driving
long-term growth and creating value for all our stakeholders."
Stock Repurchase Program
During the third quarter of 2023, the Company repurchased 0.6
million shares of its own common stock at an average price of
$380.88 per share for a cost of $210.8 million. As of October 29,
2023, the Company had $243.2 million of authorization remaining on
its previously authorized stock repurchase program.
On November 29, 2023, the board of directors approved an
additional stock repurchase program for up to $1.0 billion of the
Company's common shares.
Balance Sheet Highlights
The Company ended the third quarter of 2023 with $1.1 billion in
cash and cash equivalents and the capacity under its committed
revolving credit facility was $393.4 million.
Inventories at the end of the third quarter of 2023 decreased 4%
to $1.664 billion compared to $1.742 billion at the end of the
third quarter of 2022.
2023 Outlook
For the fourth quarter of 2023, the Company expects net revenue
to be in the range of $3.135 billion to $3.170 billion,
representing growth of 13% to 14%. Diluted earnings per share are
expected to be in the range of $4.85 to $4.93 for the quarter. This
assumes a tax rate of approximately 30%.
For 2023, the Company expects net revenue to be in the range of
$9.549 billion to $9.584 billion, representing growth of 18%.
Diluted earnings per share are expected to be in the range of
$11.77 to $11.85 for the year, and excluding certain inventory
provisions, asset impairments, and restructuring costs recognized
in relation to lululemon Studio, and their related tax effects,
adjusted diluted earnings per share are expected to be in the range
of $12.34 to $12.42. This assumes a tax rate of approximately
29.5%.
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 does not incorporate future unknown
impacts, including macroeconomic trends. 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.
Power of Three ×2
The Company's Power of Three ×2 growth plan calls for a doubling
of the business from 2021 net revenue of $6.25 billion to $12.5
billion by 2026. The key pillars of the plan are product
innovation, guest experience, and market expansion and the growth
strategy includes a plan to double men's, double direct to
consumer, and quadruple international net revenue relative to
2021.
Conference Call Information
A conference call to discuss third quarter results is scheduled
for today, December 7, 2023, 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:
https://corporate.lululemon.com/investors/news-and-events/events-and-presentations.
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 technical athletic
apparel, footwear, and accessories company for yoga, running,
training, and most other activities, creating transformational
products and experiences that build meaningful connections,
unlocking greater possibility and wellbeing for all. Setting the
bar in innovation of fabrics and functional designs, lululemon
works with yogis and athletes in local communities around the world
for continuous research and product feedback. For more information,
visit lululemon.com.
Non-GAAP Financial Measures
Constant dollar changes and adjusted financial results are
non-GAAP financial measures. A constant dollar basis assumes the
average foreign currency exchange rates for the period remained
constant with the average foreign currency 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 currency exchange rates.
Adjusted gross profit, gross margin, income from operations,
operating margin, income tax expense, effective tax rates, net
income, and diluted earnings per share exclude certain inventory
provisions, asset impairments, and restructuring costs recognized
in relation to lululemon Studio, the gain on disposal of assets for
the sale of an administrative office building, and the related
income tax effects of these items.
The Company believes these adjusted financial measures are
useful to investors as they provide supplemental information that
enable evaluation of the underlying trend in its operating
performance, and enable a comparison to its historical financial
information. Further, due to the finite and discrete nature of
these items, it does not consider them to be normal operating
expenses that are necessary to run the business, or impairments or
disposal gains that are expected to arise in the normal course of
its operations.
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; changes in consumer shopping preferences
and shifts in distribution channels; the acceptability of its
products to guests; its highly competitive market and increasing
competition; increasing 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; its ability to
expand in light of its limited operating experience and limited
brand recognition in new international markets and new product
categories; 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;
disruptions of its supply chain; its reliance on a relatively small
number of vendors to supply and manufacture a significant portion
of its products; 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 technology systems; its
compliance with privacy and data protection laws; 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 or regional health
events such as the current COVID-19 pandemic and related
government, private sector, and individual consumer responsive
actions; global economic and political conditions; 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 patents 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.
The fiscal year ending January 28, 2024 is referred to as
"2023", the fiscal year ended January 29, 2023 is referred to as
"2022".
Condensed Consolidated Statements of Operations Unaudited;
Expressed in thousands, except per share amounts
Third Quarter
First Three Quarters
2023
2022
2023
2022
Net revenue
$
2,204,218
$
1,856,889
$
6,414,175
$
5,338,680
Costs of goods sold
947,554
818,037
2,708,195
2,373,959
Gross profit
1,256,664
1,038,852
3,705,980
2,964,721
As a percent of net revenue
57.0
%
55.9
%
57.8
%
55.5
%
Selling, general and administrative
expenses
842,795
684,236
2,407,683
1,954,340
As a percent of net revenue
38.2
%
36.8
%
37.5
%
36.6
%
Impairment of assets and restructuring
costs
74,501
—
74,501
—
Amortization of intangible assets
1,253
2,189
5,010
6,579
Gain on disposal of assets
—
—
—
(10,180
)
Income from operations
338,115
352,427
1,218,786
1,013,982
As a percent of net revenue
15.3
%
19.0
%
19.0
%
19.0
%
Other income (expense), net
9,842
331
25,229
454
Income before income tax expense
347,957
352,758
1,244,015
1,014,436
Income tax expense
99,243
97,288
363,293
279,447
Net income
$
248,714
$
255,470
$
880,722
$
734,989
Basic earnings per share
$
1.97
$
2.00
$
6.94
$
5.75
Diluted earnings per share
$
1.96
$
2.00
$
6.92
$
5.74
Basic weighted-average shares
outstanding
126,460
127,511
126,892
127,736
Diluted weighted-average shares
outstanding
126,770
127,820
127,218
128,089
lululemon athletica inc.
Condensed Consolidated Balance Sheets Unaudited; Expressed in
thousands
October 29,
2023
January 29,
2023
October 30,
2022
ASSETS
Current assets
Cash and cash equivalents
$
1,091,138
$
1,154,867
$
352,624
Inventories
1,663,617
1,447,367
1,741,716
Prepaid and receivable income taxes
300,258
185,641
196,385
Other current assets
309,886
371,578
343,456
Total current assets
3,364,899
3,159,453
2,634,181
Property and equipment, net
1,413,918
1,269,614
1,122,490
Right-of-use lease assets
1,048,607
969,419
946,687
Goodwill and intangible assets, net
23,912
46,105
451,234
Deferred income taxes and other
non-current assets
170,928
162,447
154,844
Total assets
$
6,022,264
$
5,607,038
$
5,309,436
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Accounts payable
$
309,324
$
172,732
$
300,870
Accrued liabilities and other
392,949
399,223
357,365
Accrued compensation and related
expenses
250,479
248,167
184,122
Current lease liabilities
217,138
207,972
188,110
Current income taxes payable
27,231
174,221
80,947
Unredeemed gift card liability
213,256
251,478
171,659
Other current liabilities
37,737
38,405
39,762
Total current liabilities
1,448,114
1,492,198
1,322,835
Non-current lease liabilities
950,954
862,362
850,373
Non-current income taxes payable
15,864
28,555
28,555
Deferred income tax liability
53,833
55,084
50,884
Other non-current liabilities
27,650
20,040
17,585
Stockholders' equity
3,525,849
3,148,799
3,039,204
Total liabilities and stockholders'
equity
$
6,022,264
$
5,607,038
$
5,309,436
lululemon athletica inc.
Condensed Consolidated Statements of Cash Flows Unaudited;
Expressed in thousands
First Three Quarters
2023
2022
Cash flows from operating activities
Net income
$
880,722
$
734,989
Adjustments to reconcile net income to net
cash provided by (used in) operating activities
31,344
(814,790
)
Net cash provided by (used in) operating
activities
912,066
(79,801
)
Net cash used in investing activities
(445,325
)
(386,862
)
Net cash used in financing activities
(510,583
)
(399,428
)
Effect of foreign currency exchange rate
changes on cash and cash equivalents
(19,887
)
(41,156
)
Increase (decrease) in cash and cash
equivalents
(63,729
)
(907,247
)
Cash and cash equivalents, beginning of
period
1,154,867
1,259,871
Cash and cash equivalents, end of
period
$
1,091,138
$
352,624
lululemon athletica inc.
Reconciliation of Non-GAAP Financial Measures Unaudited;
Expressed in thousands, except per share amounts
Constant dollar changes
The below changes show the change for the third quarter of 2023
compared to the third quarter of 2022.
Net Revenue
Total Comparable
Sales(1),(2)
Comparable Store
Sales(2)
Direct to Consumer Net
Revenue
Change
19
%
13
%
9
%
18
%
Adjustments due to foreign currency
exchange rate changes
—
1
—
1
Change in constant dollars
19
%
14
%
9
%
19
%
__________________________
(1)
Total comparable sales includes comparable
store sales and direct to consumer net revenue.
(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.
Adjusted financial measures
The following tables reconcile adjusted financial measures with
the most directly comparable measures calculated in accordance with
GAAP. The 2023 adjustments relate to certain inventory provisions,
asset impairments, and restructuring costs recognized in relation
to lululemon Studio and their related tax effects. The 2022
adjustments relate to the gain on sale of an administrative office
building and its related tax effects. Please refer to Note 3.
Impairment of Assets and Restructuring Costs and Note 4. Gain on
Disposal of Assets included in Item 1 of Part I of the Company's
Report on Form 10-Q to be filed with the SEC on or about December
7, 2023 for further information on the nature of these amounts.
Third Quarter 2023
Gross Profit
Gross Margin
Income from Operations
Operating Margin
Income Tax Expense
Effective Tax Rate
Net Income
Diluted Earnings Per
Share
GAAP results
$
1,256,664
57.0
%
$
338,115
15.3
%
$
99,243
28.5
%
$
248,714
$
1.96
lululemon Studio charges:
lululemon Studio obsolescence
provision
23,709
1.1
23,709
1.1
23,709
0.19
Impairment of assets
44,186
2.0
44,186
0.35
Restructuring costs
30,315
1.4
30,315
0.24
Tax effect of the above
26,085
(0.4
)
(26,085
)
(0.21
)
23,709
1.1
98,210
4.5
26,085
(0.4
)
72,125
0.57
Adjusted results (non-GAAP)
$
1,280,373
58.1
%
$
436,325
19.8
%
$
125,328
28.1
%
$
320,839
$
2.53
First Three Quarters
2023
Gross Profit
Gross Margin
Income from Operations
Operating Margin
Income Tax Expense
Effective Tax Rate
Net Income
Diluted Earnings Per
Share
GAAP results
$
3,705,980
57.8
%
$
1,218,786
19.0
%
$
363,293
29.2
%
$
880,722
$
6.92
lululemon Studio charges:
lululemon Studio obsolescence
provision
23,709
0.3
23,709
0.3
23,709
0.19
Impairment of assets
44,186
0.7
44,186
0.35
Restructuring costs
30,315
0.5
30,315
0.24
Tax effect of the above
26,085
(0.2
)
(26,085
)
(0.21
)
23,709
0.3
98,210
1.5
26,085
(0.2
)
72,125
0.57
Adjusted results (non-GAAP)
$
3,729,689
58.1
%
$
1,316,996
20.5
%
$
389,378
29.0
%
$
952,847
$
7.49
First Three Quarters
2022
Income from Operations
Operating Margin
Income Tax Expense
Effective Tax Rate
Net Income
Diluted Earnings Per
Share
GAAP results
$
1,013,982
19.0
%
$
279,447
27.5
%
$
734,989
$
5.74
Gain on disposal of assets
(10,180
)
(0.2
)
(10,180
)
(0.08
)
Tax effect of the above
(1,661
)
0.2
1,661
0.01
Adjusted results (non-GAAP)
$
1,003,802
18.8
%
$
277,786
27.7
%
$
726,470
$
5.67
Expected adjusted earnings per share
Fiscal 2023
Expected diluted earnings per share
range
$11.77 to $11.85
Impairment of assets and restructuring
costs, net of tax
0.57
Expected adjusted earnings per share range
(non-GAAP)
$12.34 to $12.42
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
4th Quarter 2022
623
34
2
655
1st Quarter 2023
655
10
3
662
2nd Quarter 2023
662
12
2
672
3rd Quarter 2023
672
15
1
686
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
4th Quarter 2022
2,390
189
4
2,575
1st Quarter 2023
2,575
64
7
2,632
2nd Quarter 2023
2,632
64
5
2,691
3rd Quarter 2023
2,691
109
3
2,797
__________________________
(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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231207219376/en/
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 lululemon athletica inc. Madi Wallace
1-604-732-6124
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