lululemon athletica inc.(NASDAQ:LULU) today announced financial results for the third quarter ended October 28, 2018.
The summary below provides both GAAP and adjusted non-GAAP financial measures. The adjusted financial measures exclude the tax expense recognized during the third quarter of fiscal 2018 related to the U.S. Tax Cuts and Jobs Act, and the costs and the related tax effects incurred in connection with the restructuring of the Company’s ivivva operations in third quarter of fiscal 2017.
For the third quarter ended October 28, 2018:
- Net revenue was$747.7 million, an increase of 21% compared to the third quarter of fiscal 2017. 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 6%, or increased 7% on a constant dollar basis.
- Direct to consumer net revenue increased 44%, or increased 46% on a constant dollar basis.
- Direct to consumer net revenue represented 25.3% of total net revenue compared to 21.2% for the third quarter of fiscal 2017.
- Gross profit was$406.8 million, an increase of 26% compared to the third quarter of fiscal 2017. Gross profit increased 26% compared to adjusted gross profit for the third quarter of fiscal 2017.
- Gross margin was 54.4%, an increase of 240 basis points compared to the third quarter of fiscal 2017. Gross margin increased 220 basis points compared to adjusted gross margin for the third quarter of fiscal 2017.
- Income from operations was$135.9 million, an increase of 59% compared to the third quarter of fiscal 2017. Income from operations increased 26% compared to adjusted income from operations for the third quarter of fiscal 2017.
- Operating margin was 18.2%, an increase of 440 basis points compared to the third quarter of fiscal 2017. Operating margin increased 80 basis points compared to adjusted operating margin for the third quarter of fiscal 2017.
- Income tax expense was$43.5 million compared to $27.7 million in the third quarter of fiscal 2017 and the effective tax rate was 31.6% compared to 32.0%. The adjusted effective tax rate was 27.8% compared to 30.8% in the third quarter of fiscal 2017.
- Diluted earnings per share were$0.71 compared to $0.43 in the third quarter of fiscal 2017. Adjusted diluted earnings per share were $0.75 compared to $0.56 for the third quarter of fiscal 2017.
The Company ended the third quarter of fiscal 2018 with $703.6 million in cash and cash equivalents compared to $650.1 million at the end of the third quarter of fiscal 2017. Inventories at the end of the third quarter of fiscal 2018 increased 25% to $496.0 million compared to $396.9 million at the end of the third quarter of fiscal 2017. The Company ended the quarter with 426 stores.
Calvin McDonald, Chief Executive Officer, commented: “lululemon has achieved a high level of success over the past year and has established a solid foundation to continue to build our future. It’s been exciting to see guests around the world respond so strongly to our product offerings and improved digital experience. I look forward to what’s ahead for our brand as we strive to exceed the expectations of our guests.”
Stuart Haselden, Chief Operating Officer, also noted: “We’re pleased with our Q3 results and the strong momentum we continue to see across our business. These results reflect the strategic investments we’ve made, and continue to make, to achieve our long-term growth objectives. I’d like to thank our educators and teams around the world whose passion and enthusiasm enable this ongoing standout performance.”
Updated Outlook
For the fourth quarter of fiscal 2018, we expect net revenue to be in the range of $1.115 billion to $1.125 billion based on a total comparable sales increase in the high-single to low-double digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $1.64 to $1.67 for the quarter. This guidance assumes 133.0 million diluted weighted-average shares outstanding and a 30% tax rate. The guidance does not reflect potential future repurchases of the Company’s shares or any adjustments which may be recognized in connection with the U.S tax reform.
For the full fiscal 2018, we now expect net revenue to be in the range of $3.235 billion to $3.245 billionbased on a total comparable sales increase in the mid-teens on a constant dollar basis. Diluted earnings per share are expected to be in the range of $3.61 to $3.64 for the full year, based on a 30.2% effective tax rate. Excluding the $5.2 million tax expense recognized during the third quarter of fiscal 2018 related to the U.S. tax reform, diluted earnings per share are expected to be in the range of $3.65 to $3.68 for the full year, based on a 29.5% tax rate. The guidance assumes 134.0 million diluted weighted-average shares outstanding. The guidance does not reflect potential future repurchases of the Company’s shares or any additional adjustments which may be recognized in connection with the U.S tax reform. Fiscal 2018 is a 53 week year.
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 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.
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.
