lululemon athletica inc. Announces Second Quarter Fiscal 2021 Results
09/08/2021 - 04:05 PM
Revenue increased 61% to $1.5 billion
Diluted EPS of $1.59 , Adjusted EPS of $1.65
VANCOUVER, British Columbia --(BUSINESS WIRE)--
lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the second quarter of fiscal 2021.
Calvin McDonald , Chief Executive Officer, stated: "Our second quarter results demonstrate the continued momentum across the business, and how we are living into our Power of Three growth plan and Impact Agenda commitments. We launched exciting new products, experienced strength across channels and geographies, and announced new partnerships that will allow us to become a leader in product sustainability." McDonald continued: "I'm inspired every day by our teams around the world for their continued enthusiasm, agility, and commitment to the brand."
The fiscal year ending January 30, 2022 is referred to as "2021" and the fiscal year ended January 31, 2021 is referred to as "2020". 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 second quarter of 2021, compared to the second quarter of 2020:
Net revenue increased 61% to $1.5 billion 56% .
Company-operated stores net revenue increased 142% to $695.1 million
Direct to consumer net revenue increased 8% to $597.4 million 4% .
Net revenue increased 63% in North America , and increased 49% internationally.
Direct to consumer net revenue represented 41.2% of total net revenue compared to 61.4% for the second quarter of 2020.
Gross profit increased 72% to $842.7 million 58.1% .
Income from operations increased 134% to $291.0 million 120% to $299.2 million
Operating margin increased 630 basis points to 20.1% . Adjusted operating margin increased 560 basis points to 20.6% .
Income tax expense increased 123% to $83.1 million 28.5% compared to 30.0% for the second quarter of 2020. The adjusted effective tax rate was 27.9% for the second quarter of 2021 compared to 28.9% for the second quarter of 2020.
Diluted earnings per share were $1.59 compared to $0.66 in the second quarter of 2020. Adjusted diluted earnings per share were $1.65 compared to $0.74 in the second quarter of 2020.
The Company repurchased 0.5 million shares of its own common stock at an average price of $338.41 per share for a total cost of $171.1 million
The Company opened 11 new company-operated stores during the second quarter, ending with 534 stores.
The consolidated statement of operations for the second quarter of 2019 is included in the tables at the end of this release for reference. For the second quarter of 2021, compared to the second quarter of 2019:
Net revenue increased by $567.3 million 64% , representing a two-year compound annual growth rate of 28% .
Gross margin increased 310 basis points.
Operating margin increased 110 basis points. Adjusted operating margin increased 160 basis points.
Diluted earnings per share were $1.59 compared to $0.96 in the second quarter of 2019. Adjusted diluted earnings per share were $1.65 in the second quarter of 2021.
Meghan Frank , Chief Financial Officer, stated: "Our performance in Q2 was driven by a strong response to our product offering, improving productivity in our stores, and sustained strength in e-commerce. While we continue to navigate the COVID-19 environment, including supply chain headwinds, I'm excited with our momentum as we head into the second half of the year and pleased to be able to increase our guidance. I too would like to thank the teams across the globe for enabling our solid financial performance."
Balance sheet highlights
The Company ended the second quarter of 2021 with $1.2 billion $397.2 million 17% to $789.8 million $672.8 million
2021 Outlook
For the third quarter of 2021, we expect net revenue to be in the range of $1.400 billion $1.430 billion $1.28 to $1.33 for the quarter and adjusted diluted earnings per share are expected to be in the range of $1.33 to $1.38 .
For 2021, we expect net revenue to be in the range of $6.190 billion $6.260 billion $7.16 to $7.26 for the year and adjusted diluted earnings per share are expected to be in the range of $7.38 to $7.48 .
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 from the spread of COVID-19. While most of the Company's retail locations are currently open, the Company continues to operate with necessary precautionary measures in place at its retail locations and distribution centers. 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 further 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 second quarter results is scheduled for today, September 8, 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 .
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 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. 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 costs and decreasing selling prices; its ability to anticipate consumer preferences and successfully develop and introduce new, innovative and updated products; the acceptability of its products to guests; its ability to accurately forecast guest demand for its products; changes in consumer shopping preferences and shifts in distribution channels; 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 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; disruptions of its supply chain; its reliance on and limited control over third-party suppliers to provide fabrics for and to produce 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 information 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 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
Second Quarter
First Two Quarters
2021
2020
2019
2021
2020
2019
Net revenue
$
1,450,618
$
902,942
$
883,352
$
2,677,083
$
1,554,904
$
1,665,667
Costs of goods sold
607,932
413,441
397,556
1,134,083
731,001
758,151
Gross profit
842,686
489,501
485,796
1,543,000
823,903
907,516
As a percent of net revenue
58.1%
54.2%
55.0%
57.6%
53.0%
54.5%
Selling, general and administrative expenses
541,317
352,881
317,814
1,037,951
652,464
610,722
As a percent of net revenue
37.3%
39.1%
36.0%
38.8%
42.0%
36.7%
Amortization of intangible assets
2,195
747
—
4,390
770
—
Acquisition-related expenses
8,143
11,464
—
15,807
13,509
—
Income from operations
291,031
124,409
167,982
484,852
157,160
296,794
As a percent of net revenue
20.1%
13.8%
19.0%
18.1%
10.1%
17.8%
Other income (expense), net
96
(344)
1,850
323
830
4,229
Income before income tax expense
291,127
124,065
169,832
485,175
157,990
301,023
Income tax expense
83,053
37,264
44,842
132,145
42,557
79,430
Net income
$
208,074
$
86,801
$
124,990
$
353,030
$
115,433
$
221,593
Basic earnings per share
$
1.60
$
0.67
$
0.96
$
2.71
$
0.89
$
1.70
Diluted earnings per share
$
1.59
$
0.66
$
0.96
$
2.70
$
0.88
$
1.69
Basic weighted-average shares outstanding
130,007
130,245
130,285
130,187
130,248
130,489
Diluted weighted-average shares outstanding
130,490
130,799
130,783
130,742
130,802
131,060
lululemon athletica inc.
Condensed Consolidated Balance Sheets
August 1 ,
2021
January 31 ,
2021
August 2 ,
2020
ASSETS
Current assets
Cash and cash equivalents
$
1,170,041
$
1,150,517
$
522,998
Inventories
789,836
647,230
672,773
Prepaid and receivable income taxes
117,807
139,126
125,019
Other current assets
197,623
187,506
168,965
Total current assets
2,275,307
2,124,379
1,489,755
Property and equipment, net
806,387
745,687
698,514
Right-of-use lease assets
729,621
734,835
725,805
Goodwill and intangible assets, net
462,714
466,957
471,064
Deferred income taxes and other non-current assets
131,069
113,357
108,889
Total assets
$
4,405,098
$
4,185,215
$
3,494,027
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
$
203,546
$
172,246
$
122,767
Accrued inventory liabilities
33,316
14,956
31,675
Other accrued liabilities
269,024
211,911
177,436
Accrued compensation and related expenses
150,331
130,171
84,102
Current lease liabilities
150,087
166,091
147,941
Current income taxes payable
13,743
8,357
75,153
Unredeemed gift card liability
137,021
155,848
106,425
Other current liabilities
24,286
23,598
17,810
Total current liabilities
981,354
883,178
763,309
Non-current lease liabilities
644,734
632,590
632,646
Non-current income taxes payable
38,073
43,150
43,150
Deferred income tax liability
60,010
58,755
46,901
Other non-current liabilities
9,761
8,976
6,919
Stockholders' equity
2,671,166
2,558,566
2,001,102
Total liabilities and stockholders' equity
$
4,405,098
$
4,185,215
$
3,494,027
lululemon athletica inc.
Condensed Consolidated Statements of Cash Flows
First Two Quarters
2021
2020
Cash flows from operating activities
Net income
$
353,030
$
115,433
Adjustments to reconcile net income to net cash provided by operating activities
146,742
(55,371)
Net cash provided by operating activities
499,772
60,062
Net cash used in investing activities
(201,493)
(545,323)
Net cash used in financing activities
(290,767)
(82,157)
Effect of foreign currency exchange rate changes on cash
12,012
(3,089)
Increase (decrease) in cash and cash equivalents
19,524
(570,507)
Cash and cash equivalents, beginning of period
1,150,517
1,093,505
Cash and cash equivalents, end of period
$
1,170,041
$
522,998
lululemon athletica inc.
Reconciliation of Non-GAAP Financial Measures
The below changes show the change for the second quarter of 2021 compared to the second quarter of 2020.
Net Revenue
Direct to
Change
61
%
8
%
Adjustments due to foreign currency exchange rate changes
(5)
(4)
Change in constant dollars
56
%
4
%
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 3. Acquisition included in Item 1 of Part I of our Report on Form 10-Q to be filed with the SEC on or about September 8, 2021 for further information on these adjustments.
Second Quarter 2021
Income from
Operating
Income Tax
Effective Tax
Net Income
Diluted
GAAP results
$
291,031
20.1
%
$
83,053
28.5
%
$
208,074
$
1.59
Transaction and integration costs
1,035
0.1
1,035
0.01
Acquisition-related compensation
7,108
0.4
7,108
0.05
Tax effect of the above
434
(0.6)
(434)
—
Adjusted results (non-GAAP)
$
299,174
20.6
%
$
83,487
27.9
%
$
215,783
$
1.65
First Two Quarters 2021
Income from
Operating
Income Tax
Effective Tax
Net Income
Diluted
GAAP results
$
484,852
18.1
%
$
132,145
27.2
%
$
353,030
$
2.70
Transaction and integration costs
1,531
0.1
1,531
0.01
Acquisition-related compensation
14,276
0.5
14,276
0.11
Tax effect of the above
806
(0.7)
(806)
(0.01)
Adjusted results (non-GAAP)
$
500,659
18.7
%
$
132,951
26.5
%
$
368,031
$
2.81
Second Quarter 2020
Income from
Operating
Income Tax
Effective Tax
Net Income
Diluted
GAAP results
$
124,409
13.8
%
$
37,264
30.0
%
$
86,801
$
0.66
Transaction and integration costs
7,201
0.8
7,201
0.06
Gain on existing investment
(782)
(0.1)
(782)
(0.01)
Acquisition-related compensation
5,045
0.5
5,045
0.04
Tax effect of the above
1,967
(1.1)
(1,967)
(0.01)
Adjusted results (non-GAAP)
$
135,873
15.0
%
$
39,231
28.9
%
$
96,298
$
0.74
First Two Quarters 2020
Income from
Operating
Income Tax
Effective Tax
Net Income
Diluted
GAAP results
$
157,160
10.1
%
$
42,557
26.9
%
$
115,433
$
0.88
Transaction and integration costs
9,246
0.6
9,246
0.07
Gain on existing investment
(782)
(0.1)
(782)
(0.01)
Acquisition-related compensation
5,045
0.4
5,045
0.04
Tax effect of the above
1,967
(0.9)
(1,967)
(0.01)
Adjusted results (non-GAAP)
$
170,669
11.0
%
$
44,524
26.0
%
$
126,975
$
0.97
Expected adjusted earnings per share
Third Quarter
Fiscal 2021
Expected diluted earnings per share range
$1.28 to $1.33
$7.16 to $7.26
MIRROR integration and acquisition-related costs, net of tax
$0.05
$0.22
Expected adjusted earnings per share range (non-GAAP)
$1.33 to $1.38
$7.38 to $7.48
lululemon athletica inc.
Company-operated Store Count and Square Footage1
Square Footage Expressed in Thousands
Number of
Number of
Number of
Number of
3rd Quarter 2020
506
11
2
515
4th Quarter 2020
515
8
2
521
1st Quarter 2021
521
3
1
523
2nd Quarter 2021
523
11
—
534
Total Gross
Gross Square
2
Gross Square
2
Total Gross
3rd Quarter 2020
1,757
54
3
1,808
4th Quarter 2020
1,808
55
5
1,858
1st Quarter 2021
1,858
12
8
1,862
2nd Quarter 2021
1,862
43
—
1,905
__________
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/20210908006037/en/
Investor Contact:
lululemon athletica inc.
Howard Tubin
ICR, Inc.
Joseph Teklits /Caitlin Churchill
Media Contact:
lululemon athletica inc.
Erin Hankinson
Brunswick Group
Eleanor French
Source: lululemon athletica inc.
