Commodities: lululemon 3Q EPS 43c >LULU

Press Release: lululemon athletica inc. Announces Third Quarter Fiscal 2017 Results

lululemon athletica inc. Announces Third Quarter Fiscal 2017 Results

Board of Directors Authorizes $200 Million Stock Repurchase Program

VANCOUVER, British Columbia--(BUSINESS WIRE)--December 06, 2017-- 
 

lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the third quarter ended October 29, 2017.

The Company reported diluted earnings per share of $0.43 for the third quarter of fiscal 2017. Excluding the impact of the ivivva restructuring that was announced on June 1, 2017, the Company reported adjusted diluted earnings per share of $0.56.

The summary below provides both GAAP and adjusted non-GAAP financial measures. In connection with the restructuring of its ivivva operations, the Company recognized pre-tax costs totaling $22.2 million in the third quarter of fiscal 2017. The adjusted financial measures exclude the impact of the ivivva restructuring and the related tax effects, and also exclude certain discrete tax items which were recognized during the third quarter of fiscal 2016.

For the third quarter ended October 29, 2017:

   -- Net revenue was $619.0 million, an increase of 14% compared to the third 
      quarter of fiscal 2016. On a constant dollar basis, net revenue increased 
      12%. 
 
   -- Total comparable sales increased 8%, or increased 7% on a constant dollar 
      basis. 
 
          -- Comparable store sales increased 2%, or increased 1% on a constant 
             dollar basis. 
 
          -- Direct to consumer net revenue increased 26%, or increased 25% on 
             a constant dollar basis. 
 
   -- Gross profit was $322.0 million, an increase of 16% compared to the third 
      quarter of fiscal 2016. Adjusted gross profit was $323.1 million, an 
      increase of 16%. 
 
   -- Gross margin was 52.0%, an increase of 90 basis points compared to the 
      third quarter of fiscal 2016. Adjusted gross margin was 52.2%, an 
      increase of 110 basis points. 
 
   -- Income from operations was $85.6 million, a decrease of 8% compared to 
      the third quarter of fiscal 2016. Adjusted income from operations 
      increased $14.8 million, or 16%, to $107.8 million. 
 
   -- Operating margin was 13.8%, a decrease of 330 basis points compared to 
      the third quarter of fiscal 2016. Adjusted operating margin was 17.4%, an 
      increase of 30 basis points. 
 
   -- Income tax expense was $27.7 million compared to $25.3 million in the 
      third quarter of fiscal 2016 and the effective tax rate was 32.0% 
      compared to 27.0%. The adjusted effective tax rate was 30.8% compared to 
      31.3% in the third quarter of fiscal 2016. 
 
   -- Diluted earnings per share were $0.43 compared to $0.50 in the third 
      quarter of fiscal 2016. Adjusted diluted earnings per share were $0.56 
      compared to $0.47 for the third quarter of fiscal 2016. 
 
   -- The Company repurchased 0.1 million shares of its own common stock at an 
      average cost of $60.27 per share, completing the previous $100 million 
      stock repurchase program which commenced in December 2016. 
 

The Company ended the third quarter of fiscal 2017 with $650.1 million in cash and cash equivalents compared to $480.4 million at the end of the third quarter of fiscal 2016. Inventories at the end of the third quarter of fiscal 2017 increased 9% to $396.9 million compared to $364.5 million at the end of the third quarter of fiscal 2016. The Company ended the quarter with 388 stores.

The Company also announced that its board of directors has approved a new stock repurchase program for up to $200 million of its common shares in the open market at prevailing market prices, including under plans complying with the provisions of Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934. The timing and actual number of common shares to be repurchased will depend upon market conditions, eligibility to trade, and other factors, in accordance with Securities and Exchange Commission requirements, and the repurchase program is expected to be completed in two years. The stock repurchase program is intended to create shareholder value by making opportunistic repurchases during periods of favorable market conditions. Shares may be repurchased from time to time on the open market, through block trades or otherwise. Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors.

Laurent Potdevin, CEO, lululemon, commented: “Our teams powerfully delivered robust results across both store and digital channels this quarter, driving a further acceleration in our business. The strength of our Q3 earnings supports our unique position as the global brand defining an active, mindful lifestyle.”

Mr. Potdevin added: “As we start the holiday season, I’m energized by our momentum and we are increasing guidance to reflect this performance. I’m grateful for the enthusiasm I see every day across our collective as we remain on our path to delivering $4 billion in revenue in 2020.”

Updated Outlook

In connection with the restructuring of the ivivva operations, we expect to recognize total pre-tax costs of between $45.0 million and $50.0 million in fiscal 2017, inclusive of $45.4 million recognized during the first three quarters of fiscal 2017. This primarily relates to long-lived asset impairment and lease termination costs.

For the fourth quarter of fiscal 2017, we expect net revenue to be in the range of $870 million to $885 million based on a total comparable sales increase in the mid-single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $1.18 to $1.21 for the quarter. Excluding the impact of the ivivva restructuring, we expect adjusted diluted earnings per share to be in the range of $1.19 to $1.22 for the quarter. This guidance assumes 135.6 million diluted weighted-average shares outstanding and a 30.4% tax rate. The guidance does not reflect potential future repurchases of the Company’s shares.

For the full fiscal 2017, we now expect net revenue to be in the range of $2.590 billion to $2.605 billion based on a total comparable sales increase in the mid-single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $2.20 to $2.23 for the full year. Excluding the impact of the ivivva restructuring, we expect adjusted diluted earnings per share to be in the range of $2.45 to $2.48 for the year. This guidance assumes 136.2 million diluted weighted-average shares outstanding and a 30.9% tax rate, or 30.4% excluding the tax effect of the ivivva restructuring. 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 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 third quarter results is scheduled for today, December 6, 2017, 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, with products that create transformational experiences for people to live happy, healthy, fun lives. 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, and the 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. 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.

Adjusted gross profit, gross margin, income from operations, operating margin, effective tax rates, and diluted earnings per share exclude the costs recognized in connection with the restructuring of our ivivva operations, its related tax effects, and certain discrete items related to our transfer pricing arrangements and taxes on repatriation of foreign earnings. We believe these adjusted financial measures are useful to investors as the adjustments do not directly relate to our ongoing business operations and therefore do not contribute to a meaningful evaluation of the trend in our operating performance. Furthermore, we do not believe the adjustments are reflective of our expectations of our future operating performance and believe these non-GAAP measures are useful to investors because of their comparability to our historical information.

Press Release: lululemon athletica inc. Announces -2-

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 contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risks, uncertainties and assumptions, such as statements regarding our future financial condition or results of operations and our prospects and strategies for future growth. 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 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; 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; 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; our ability to source our merchandise profitably or at all if new trade restrictions are imposed or existing trade restrictions become more burdensome; 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 continued service of our senior management; seasonality; fluctuations in foreign currency exchange rates; higher than anticipated costs and our ability to realize the benefits associated with the restructuring of our ivivva business; 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.

 
lululemon athletica inc. 
 
Condensed Consolidated Statements of Operations 
 Unaudited; Expressed in thousands, except per share amounts 
 
                          Quarter Ended              Three Quarters Ended 
                    --------------------------  ------------------------------ 
                    October 29,   October 30,    October 29,     October 30, 
                        2017          2016           2017            2016 
                    ------------  ------------  --------------  -------------- 
Net revenue         $619,018      $544,416      $1,720,379      $1,554,452 
Costs of goods 
 sold                297,056       265,990         844,100         782,734 
                    --------      --------      ----------      ---------- 
Gross profit         321,962       278,426         876,279         771,718 
   As a percent of 
    net revenue         52.0%         51.1%           50.9%           49.6% 
Selling, general 
 and 
 administrative 
 expenses            215,367       185,451         640,032         547,195 
   As a percent of 
    net revenue         34.8%         34.1%           37.2%           35.2% 
Asset impairments 
 and restructuring 
 costs                21,007            --          36,524              -- 
   As a percent of 
    net revenue          3.4%           --%            2.1%             --% 
                    --------      --------      ----------      ---------- 
Income from 
 operations           85,588        92,975         199,723         224,523 
   As a percent of 
    net revenue         13.8%         17.1%           11.6%           14.4% 
Other income 
 (expense), net        1,052           628           2,771             720 
                    --------      --------      ----------      ---------- 
Income before 
 income tax 
 expense              86,640        93,603         202,494         225,243 
Income tax expense    27,696        25,318          63,593          57,997 
                    --------      --------      ----------      ---------- 
Net income          $ 58,944      $ 68,285      $  138,901      $  167,246 
                     =======       =======       =========       ========= 
 
Basic earnings per 
 share              $   0.44      $   0.50      $     1.02      $     1.22 
Diluted earnings 
 per share          $   0.43      $   0.50      $     1.02      $     1.22 
Basic 
 weighted-average 
 shares 
 outstanding         135,364       137,033         136,191         137,095 
Diluted 
 weighted-average 
 shares 
 outstanding         135,578       137,237         136,357         137,321 
 
 
lululemon athletica inc. 
 
Condensed Consolidated Balance Sheets 
 Unaudited; Expressed in thousands 
 
                                             October 29,    January 29, 
                                                 2017           2017 
                                            -------------  ------------- 
ASSETS 
Current assets 
  Cash and cash equivalents                  $    650,054   $    734,846 
  Inventories                                     396,892        298,432 
  Prepaid and receivable income taxes              77,625         81,190 
  Other current assets                             63,777         48,269 
                                            -------------  ------------- 
Total current assets                            1,188,348      1,162,737 
Property and equipment, net                       440,403        423,499 
Goodwill and intangible assets, net                24,476         24,557 
Deferred income taxes and other 
 non-current assets                                67,222         46,748 
                                            -------------  ------------- 
Total assets                                 $  1,720,449   $  1,657,541 
                                                =========      ========= 
LIABILITIES AND STOCKHOLDERS' EQUITY 
Current liabilities 
  Accounts payable                           $     14,113   $     24,846 
  Accrued inventory liabilities                    23,420          8,601 
  Accrued compensation and related 
   expenses                                        62,387         55,238 
  Income taxes payable                              4,403         30,290 
  Unredeemed gift card liability                   52,500         70,454 
  Lease termination liabilities                    12,164             -- 
  Other accrued liabilities                        71,590         52,561 
                                            -------------  ------------- 
Total current liabilities                         240,577        241,990 
Deferred income tax liability                          --          7,262 
Other non-current liabilities                      58,596         48,316 
Stockholders' equity                            1,421,276      1,359,973 
                                            -------------  ------------- 
Total liabilities and stockholders' equity   $  1,720,449   $  1,657,541 
                                                =========      ========= 
 
 
lululemon athletica inc. 
 
Condensed Consolidated Statements of Cash Flows 
 Unaudited; Expressed in thousands 
 
                                               Three Quarters Ended 
 

Press Release: lululemon athletica inc. Announces -3-

                                          ------------------------------ 
                                           October 29,     October 30, 
                                               2017            2016 
                                          -------------  --------------- 
Cash flows from operating activities 
  Net income                               $   138,901    $   167,246 
  Adjustments to reconcile net income to 
   net cash provided by operating 
   activities                                   (7,592)       (68,587) 
                                          ------------   ------------ 
Net cash provided by operating 
 activities                                    131,309         98,659 
Net cash used in investing activities         (120,051)      (106,168) 
Net cash used in financing activities         (100,707)       (25,288) 
Effect of exchange rate changes on cash          4,657         11,701 
                                          ------------   ------------ 
(Decrease) increase in cash and cash 
 equivalents                                   (84,792)       (21,096) 
Cash and cash equivalents, beginning of 
 period                                        734,846        501,482 
                                          ------------   ------------ 
Cash and cash equivalents, end of period   $   650,054    $   480,386 
                                              ========       ======== 
 
 

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, comparable store sales, and direct to consumer net revenue

The below changes in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue show the net change for the third quarter of fiscal 2017 compared to the third quarter of fiscal 2016.

 
                                   Total     Comparable    Direct to 
                                 Comparable     Store     Consumer Net 
                   Net Revenue   Sales(1,2)   Sales(2)      Revenue 
                   -----------  -----------  ----------  ------------- 
Increase                   14%           8%          2%            26% 
Adjustments due 
 to foreign 
 exchange rate 
 changes                   (2)          (1)         (1)            (1) 
                   -----------  -----------  ----------  ------------- 
Increase in 
 constant 
 dollars                   12%           7%          1%            25% 
 
 

__________

 
(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 months, or open for at least 
       12 months after being significantly expanded. 
 
 

Adjusted financial measures

The following table reconciles adjusted financial measures with the most directly comparable measures calculated in accordance with GAAP:

 
                                  Quarter Ended                                Quarter Ended 
                                 October 29, 2017                             October 30, 2016 
                   -------------------------------------------  ------------------------------------------- 
                                                    Adjusted                                     Adjusted 
                                                     Results                                      Results 
                   GAAP Results    Adjustments     (Non-GAAP)   GAAP Results    Adjustments     (Non-GAAP) 
                   ------------  ---------------  ------------  ------------  ---------------  ------------ 
Gross profit(1)    $321,962       $   1,178       $323,140      $278,426       $      --       $278,426 
Gross margin(1)        52.0%            0.2%          52.2%         51.1%             --%          51.1% 
Income from 
 operations(1,2)     85,588          22,186        107,774        92,975              --         92,975 
Operating 
 margin(1,2)           13.8%            3.6%          17.4%         17.1%             --%          17.1% 
Income before 
 income tax 
 expense(1,2,3)      86,640          22,185        108,825        93,603             186         93,789 
Income tax 
 expense(3,4)        27,696           5,813         33,509        25,318           4,005         29,323 
Effective tax 
 rate(3,4)             32.0%           (1.2)%         30.8%         27.0%            4.3%          31.3% 
Diluted earnings 
 per 
 share(1,2,3,4)    $   0.43       $    0.13       $   0.56      $   0.50       $   (0.03)      $   0.47 
 
 

__________

 
(1)    During the third quarter of fiscal 2017, we recognized costs totaling 
       $1.2 million within cost of goods sold related to the restructuring of 
       our ivivva operations. 
(2)    During the third quarter of fiscal 2017, we recognized asset impairment 
       and restructuring costs related to the restructuring of our ivivva 
       operations totaling $21.0 million. 
(3)    The adjustments in the third quarter of fiscal 2016 relate to our 
       transfer pricing arrangements, the associated repatriation of foreign 
       earnings, and net interest costs. These adjustments were recorded in 
       income tax expense and other income (expense), net. 
(4)    The adjustment to income tax expense for the third quarter of fiscal 
       2017 represents the tax effect of the ivivva related restructuring 
       adjustments, calculated based on the expected annual tax rate of the 
       applicable tax jurisdictions. 
 
 

Please refer to Notes 6 and 7 to the unaudited interim consolidated financial statements included in Item 1 of Part I of our Report on Form 10-Q to be filed with the SEC on or about December 6, 2017 for further explanation as to the nature of these items.

Adjusted expected gross margin, effective tax rate, and diluted earnings per share

 
                                                        Fiscal Year Ending 
                                                         January 28, 2018 
                                                        ------------------ 
Expected gross margin                                       51.9% to 52.4% 
Non-GAAP adjustments(1)                                                0.3 
                                                        ------------------ 
Adjusted expected gross margin                              52.2% to 52.7% 
 
                                                        Fiscal Year Ending 
                                                         January 28, 2018 
                                                        ------------------ 
Expected effective tax rate                                          30.9% 
Non-GAAP adjustments(1)                                              (0.5) 
                                                        ------------------ 
Adjusted expected effective tax 
 rate                                                                30.4% 
 
                                      Quarter Ending    Fiscal Year Ending 
                                      January 28, 2018   January 28, 2018 
                                     -----------------  ------------------ 
Expected diluted earnings per 
share range                           $1.18 to $1.21      $2.20 to $2.23 
Non-GAAP adjustments(1)                    0.01                0.25 
                                     -----------------  ------------------ 
Adjusted expected diluted earnings    $1.19 to $1.22      $2.45 to $2.48 
 per share range 
 
 

__________

 
(1)    These adjustments relate to the restructuring of our ivivva operations. 
       Please refer to Note 6 to the unaudited interim consolidated financial 
       statements included in Item 1 of Part I of our Report on Form 10-Q to 
       be filed with the SEC on or about December 6, 2017 for further 
       explanation as to the nature of these items. 
 
 
lululemon athletica inc. 
 
Store Count and Square Footage(1) 
 Square Footage Expressed in Thousands 
 
                Number of     Number of                    Number of 
               Stores Open      Stores       Number of    Stores Open 
                  at the        Opened     Stores Closed   at the End 
               Beginning of   During the    During the       of the 
               the Quarter     Quarter      Quarter(3)      Quarter 
               ------------  ------------  -------------  ------------ 
4(th) Quarter 
 2016                   389            17             --           406 
1(st) Quarter 
 2017                   406             5             --           411 
2(nd) Quarter 
 2017                   411            11              1           421 
3(rd) Quarter 
 2017                   421            17             50           388 
 
               Total Gross                 Gross Square   Total Gross 
               Square Feet   Gross Square    Feet Lost    Square Feet 
                  at the      Feet Added    During the     at the End 
               Beginning of   During the    Quarter(2,       of the 
               the Quarter    Quarter(2)        3)          Quarter 
               ------------  ------------  -------------  ------------ 
4(th) Quarter 
 2016                 1,144            47              1         1,190 
1(st) Quarter 
 2017                 1,190            14             --         1,204 
2(nd) Quarter 
 2017                 1,204            37              3         1,238 
3(rd) Quarter 
 2017                 1,238            43             89         1,192 
 
 

Press Release: lululemon athletica inc. Announces -4-

__________

 
(1)    Store count and square footage summary includes company-operated stores 
       which are branded lululemon or ivivva. 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. 
(3)    On August 20, 2017, as part of the restructuring of its ivivva 
       operations, the Company closed 48 of its 55 ivivva branded 
       company-operated stores. The seven remaining ivivva branded stores 
       remain in operation and are not expected to close. 
 
 

View source version on businesswire.com: http://www.businesswire.com/news/home/20171206006211/en/

 
    CONTACT:    Investor: 
 

ICR, Inc.

Joseph Teklits/Caitlin Morahan

203-682-8200

or

Media:

Brunswick

Laura Buchanan / Ash Spielgelberg

or

lululemon athletica inc.

Allison Reid, VP Corporate Communications

Press Release: lululemon athletica inc. Announces Third Quarter Fiscal 2017 Results

lululemon athletica inc. Announces Third Quarter Fiscal 2017 Results

Board of Directors Authorizes $200 Million Stock Repurchase Program

VANCOUVER, British Columbia--(BUSINESS WIRE)--December 06, 2017-- 
 

lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the third quarter ended October 29, 2017.

The Company reported diluted earnings per share of $0.43 for the third quarter of fiscal 2017. Excluding the impact of the ivivva restructuring that was announced on June 1, 2017, the Company reported adjusted diluted earnings per share of $0.56.

The summary below provides both GAAP and adjusted non-GAAP financial measures. In connection with the restructuring of its ivivva operations, the Company recognized pre-tax costs totaling $22.2 million in the third quarter of fiscal 2017. The adjusted financial measures exclude the impact of the ivivva restructuring and the related tax effects, and also exclude certain discrete tax items which were recognized during the third quarter of fiscal 2016.

For the third quarter ended October 29, 2017:

   -- Net revenue was $619.0 million, an increase of 14% compared to the third 
      quarter of fiscal 2016. On a constant dollar basis, net revenue increased 
      12%. 
 
   -- Total comparable sales increased 8%, or increased 7% on a constant dollar 
      basis. 
 
          -- Comparable store sales increased 2%, or increased 1% on a constant 
             dollar basis. 
 
          -- Direct to consumer net revenue increased 26%, or increased 25% on 
             a constant dollar basis. 
 
   -- Gross profit was $322.0 million, an increase of 16% compared to the third 
      quarter of fiscal 2016. Adjusted gross profit was $323.1 million, an 
      increase of 16%. 
 
   -- Gross margin was 52.0%, an increase of 90 basis points compared to the 
      third quarter of fiscal 2016. Adjusted gross margin was 52.2%, an 
      increase of 110 basis points. 
 
   -- Income from operations was $85.6 million, a decrease of 8% compared to 
      the third quarter of fiscal 2016. Adjusted income from operations 
      increased $14.8 million, or 16%, to $107.8 million. 
 
   -- Operating margin was 13.8%, a decrease of 330 basis points compared to 
      the third quarter of fiscal 2016. Adjusted operating margin was 17.4%, an 
      increase of 30 basis points. 
 
   -- Income tax expense was $27.7 million compared to $25.3 million in the 
      third quarter of fiscal 2016 and the effective tax rate was 32.0% 
      compared to 27.0%. The adjusted effective tax rate was 30.8% compared to 
      31.3% in the third quarter of fiscal 2016. 
 
   -- Diluted earnings per share were $0.43 compared to $0.50 in the third 
      quarter of fiscal 2016. Adjusted diluted earnings per share were $0.56 
      compared to $0.47 for the third quarter of fiscal 2016. 
 
   -- The Company repurchased 0.1 million shares of its own common stock at an 
      average cost of $60.27 per share, completing the previous $100 million 
      stock repurchase program which commenced in December 2016. 
 

The Company ended the third quarter of fiscal 2017 with $650.1 million in cash and cash equivalents compared to $480.4 million at the end of the third quarter of fiscal 2016. Inventories at the end of the third quarter of fiscal 2017 increased 9% to $396.9 million compared to $364.5 million at the end of the third quarter of fiscal 2016. The Company ended the quarter with 388 stores.

The Company also announced that its board of directors has approved a new stock repurchase program for up to $200 million of its common shares in the open market at prevailing market prices, including under plans complying with the provisions of Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934. The timing and actual number of common shares to be repurchased will depend upon market conditions, eligibility to trade, and other factors, in accordance with Securities and Exchange Commission requirements, and the repurchase program is expected to be completed in two years. The stock repurchase program is intended to create shareholder value by making opportunistic repurchases during periods of favorable market conditions. Shares may be repurchased from time to time on the open market, through block trades or otherwise. Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors.

Laurent Potdevin, CEO, lululemon, commented: “Our teams powerfully delivered robust results across both store and digital channels this quarter, driving a further acceleration in our business. The strength of our Q3 earnings supports our unique position as the global brand defining an active, mindful lifestyle.”

Mr. Potdevin added: “As we start the holiday season, I’m energized by our momentum and we are increasing guidance to reflect this performance. I’m grateful for the enthusiasm I see every day across our collective as we remain on our path to delivering $4 billion in revenue in 2020.”

Updated Outlook

In connection with the restructuring of the ivivva operations, we expect to recognize total pre-tax costs of between $45.0 million and $50.0 million in fiscal 2017, inclusive of $45.4 million recognized during the first three quarters of fiscal 2017. This primarily relates to long-lived asset impairment and lease termination costs.

For the fourth quarter of fiscal 2017, we expect net revenue to be in the range of $870 million to $885 million based on a total comparable sales increase in the mid-single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $1.18 to $1.21 for the quarter. Excluding the impact of the ivivva restructuring, we expect adjusted diluted earnings per share to be in the range of $1.19 to $1.22 for the quarter. This guidance assumes 135.6 million diluted weighted-average shares outstanding and a 30.4% tax rate. The guidance does not reflect potential future repurchases of the Company’s shares.

For the full fiscal 2017, we now expect net revenue to be in the range of $2.590 billion to $2.605 billion based on a total comparable sales increase in the mid-single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $2.20 to $2.23 for the full year. Excluding the impact of the ivivva restructuring, we expect adjusted diluted earnings per share to be in the range of $2.45 to $2.48 for the year. This guidance assumes 136.2 million diluted weighted-average shares outstanding and a 30.9% tax rate, or 30.4% excluding the tax effect of the ivivva restructuring. 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 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 third quarter results is scheduled for today, December 6, 2017, 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, with products that create transformational experiences for people to live happy, healthy, fun lives. 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, and the 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. 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.

Adjusted gross profit, gross margin, income from operations, operating margin, effective tax rates, and diluted earnings per share exclude the costs recognized in connection with the restructuring of our ivivva operations, its related tax effects, and certain discrete items related to our transfer pricing arrangements and taxes on repatriation of foreign earnings. We believe these adjusted financial measures are useful to investors as the adjustments do not directly relate to our ongoing business operations and therefore do not contribute to a meaningful evaluation of the trend in our operating performance. Furthermore, we do not believe the adjustments are reflective of our expectations of our future operating performance and believe these non-GAAP measures are useful to investors because of their comparability to our historical information.

Press Release: lululemon athletica inc. Announces -2-

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 contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risks, uncertainties and assumptions, such as statements regarding our future financial condition or results of operations and our prospects and strategies for future growth. 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 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; 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; 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; our ability to source our merchandise profitably or at all if new trade restrictions are imposed or existing trade restrictions become more burdensome; 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 continued service of our senior management; seasonality; fluctuations in foreign currency exchange rates; higher than anticipated costs and our ability to realize the benefits associated with the restructuring of our ivivva business; 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.

 
lululemon athletica inc. 
 
Condensed Consolidated Statements of Operations 
 Unaudited; Expressed in thousands, except per share amounts 
 
                          Quarter Ended              Three Quarters Ended 
                    --------------------------  ------------------------------ 
                    October 29,   October 30,    October 29,     October 30, 
                        2017          2016           2017            2016 
                    ------------  ------------  --------------  -------------- 
Net revenue         $619,018      $544,416      $1,720,379      $1,554,452 
Costs of goods 
 sold                297,056       265,990         844,100         782,734 
                    --------      --------      ----------      ---------- 
Gross profit         321,962       278,426         876,279         771,718 
   As a percent of 
    net revenue         52.0%         51.1%           50.9%           49.6% 
Selling, general 
 and 
 administrative 
 expenses            215,367       185,451         640,032         547,195 
   As a percent of 
    net revenue         34.8%         34.1%           37.2%           35.2% 
Asset impairments 
 and restructuring 
 costs                21,007            --          36,524              -- 
   As a percent of 
    net revenue          3.4%           --%            2.1%             --% 
                    --------      --------      ----------      ---------- 
Income from 
 operations           85,588        92,975         199,723         224,523 
   As a percent of 
    net revenue         13.8%         17.1%           11.6%           14.4% 
Other income 
 (expense), net        1,052           628           2,771             720 
                    --------      --------      ----------      ---------- 
Income before 
 income tax 
 expense              86,640        93,603         202,494         225,243 
Income tax expense    27,696        25,318          63,593          57,997 
                    --------      --------      ----------      ---------- 
Net income          $ 58,944      $ 68,285      $  138,901      $  167,246 
                     =======       =======       =========       ========= 
 
Basic earnings per 
 share              $   0.44      $   0.50      $     1.02      $     1.22 
Diluted earnings 
 per share          $   0.43      $   0.50      $     1.02      $     1.22 
Basic 
 weighted-average 
 shares 
 outstanding         135,364       137,033         136,191         137,095 
Diluted 
 weighted-average 
 shares 
 outstanding         135,578       137,237         136,357         137,321 
 
 
lululemon athletica inc. 
 
Condensed Consolidated Balance Sheets 
 Unaudited; Expressed in thousands 
 
                                             October 29,    January 29, 
                                                 2017           2017 
                                            -------------  ------------- 
ASSETS 
Current assets 
  Cash and cash equivalents                  $    650,054   $    734,846 
  Inventories                                     396,892        298,432 
  Prepaid and receivable income taxes              77,625         81,190 
  Other current assets                             63,777         48,269 
                                            -------------  ------------- 
Total current assets                            1,188,348      1,162,737 
Property and equipment, net                       440,403        423,499 
Goodwill and intangible assets, net                24,476         24,557 
Deferred income taxes and other 
 non-current assets                                67,222         46,748 
                                            -------------  ------------- 
Total assets                                 $  1,720,449   $  1,657,541 
                                                =========      ========= 
LIABILITIES AND STOCKHOLDERS' EQUITY 
Current liabilities 
  Accounts payable                           $     14,113   $     24,846 
  Accrued inventory liabilities                    23,420          8,601 
  Accrued compensation and related 
   expenses                                        62,387         55,238 
  Income taxes payable                              4,403         30,290 
  Unredeemed gift card liability                   52,500         70,454 
  Lease termination liabilities                    12,164             -- 
  Other accrued liabilities                        71,590         52,561 
                                            -------------  ------------- 
Total current liabilities                         240,577        241,990 
Deferred income tax liability                          --          7,262 
Other non-current liabilities                      58,596         48,316 
Stockholders' equity                            1,421,276      1,359,973 
                                            -------------  ------------- 
Total liabilities and stockholders' equity   $  1,720,449   $  1,657,541 
                                                =========      ========= 
 
 
lululemon athletica inc. 
 
Condensed Consolidated Statements of Cash Flows 
 Unaudited; Expressed in thousands 
 
                                               Three Quarters Ended 
 

Press Release: lululemon athletica inc. Announces -3-

                                          ------------------------------ 
                                           October 29,     October 30, 
                                               2017            2016 
                                          -------------  --------------- 
Cash flows from operating activities 
  Net income                               $   138,901    $   167,246 
  Adjustments to reconcile net income to 
   net cash provided by operating 
   activities                                   (7,592)       (68,587) 
                                          ------------   ------------ 
Net cash provided by operating 
 activities                                    131,309         98,659 
Net cash used in investing activities         (120,051)      (106,168) 
Net cash used in financing activities         (100,707)       (25,288) 
Effect of exchange rate changes on cash          4,657         11,701 
                                          ------------   ------------ 
(Decrease) increase in cash and cash 
 equivalents                                   (84,792)       (21,096) 
Cash and cash equivalents, beginning of 
 period                                        734,846        501,482 
                                          ------------   ------------ 
Cash and cash equivalents, end of period   $   650,054    $   480,386 
                                              ========       ======== 
 
 

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, comparable store sales, and direct to consumer net revenue

The below changes in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue show the net change for the third quarter of fiscal 2017 compared to the third quarter of fiscal 2016.

 
                                   Total     Comparable    Direct to 
                                 Comparable     Store     Consumer Net 
                   Net Revenue   Sales(1,2)   Sales(2)      Revenue 
                   -----------  -----------  ----------  ------------- 
Increase                   14%           8%          2%            26% 
Adjustments due 
 to foreign 
 exchange rate 
 changes                   (2)          (1)         (1)            (1) 
                   -----------  -----------  ----------  ------------- 
Increase in 
 constant 
 dollars                   12%           7%          1%            25% 
 
 

__________

 
(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 months, or open for at least 
       12 months after being significantly expanded. 
 
 

Adjusted financial measures

The following table reconciles adjusted financial measures with the most directly comparable measures calculated in accordance with GAAP:

 
                                  Quarter Ended                                Quarter Ended 
                                 October 29, 2017                             October 30, 2016 
                   -------------------------------------------  ------------------------------------------- 
                                                    Adjusted                                     Adjusted 
                                                     Results                                      Results 
                   GAAP Results    Adjustments     (Non-GAAP)   GAAP Results    Adjustments     (Non-GAAP) 
                   ------------  ---------------  ------------  ------------  ---------------  ------------ 
Gross profit(1)    $321,962       $   1,178       $323,140      $278,426       $      --       $278,426 
Gross margin(1)        52.0%            0.2%          52.2%         51.1%             --%          51.1% 
Income from 
 operations(1,2)     85,588          22,186        107,774        92,975              --         92,975 
Operating 
 margin(1,2)           13.8%            3.6%          17.4%         17.1%             --%          17.1% 
Income before 
 income tax 
 expense(1,2,3)      86,640          22,185        108,825        93,603             186         93,789 
Income tax 
 expense(3,4)        27,696           5,813         33,509        25,318           4,005         29,323 
Effective tax 
 rate(3,4)             32.0%           (1.2)%         30.8%         27.0%            4.3%          31.3% 
Diluted earnings 
 per 
 share(1,2,3,4)    $   0.43       $    0.13       $   0.56      $   0.50       $   (0.03)      $   0.47 
 
 

__________

 
(1)    During the third quarter of fiscal 2017, we recognized costs totaling 
       $1.2 million within cost of goods sold related to the restructuring of 
       our ivivva operations. 
(2)    During the third quarter of fiscal 2017, we recognized asset impairment 
       and restructuring costs related to the restructuring of our ivivva 
       operations totaling $21.0 million. 
(3)    The adjustments in the third quarter of fiscal 2016 relate to our 
       transfer pricing arrangements, the associated repatriation of foreign 
       earnings, and net interest costs. These adjustments were recorded in 
       income tax expense and other income (expense), net. 
(4)    The adjustment to income tax expense for the third quarter of fiscal 
       2017 represents the tax effect of the ivivva related restructuring 
       adjustments, calculated based on the expected annual tax rate of the 
       applicable tax jurisdictions. 
 
 

Please refer to Notes 6 and 7 to the unaudited interim consolidated financial statements included in Item 1 of Part I of our Report on Form 10-Q to be filed with the SEC on or about December 6, 2017 for further explanation as to the nature of these items.

Adjusted expected gross margin, effective tax rate, and diluted earnings per share

 
                                                        Fiscal Year Ending 
                                                         January 28, 2018 
                                                        ------------------ 
Expected gross margin                                       51.9% to 52.4% 
Non-GAAP adjustments(1)                                                0.3 
                                                        ------------------ 
Adjusted expected gross margin                              52.2% to 52.7% 
 
                                                        Fiscal Year Ending 
                                                         January 28, 2018 
                                                        ------------------ 
Expected effective tax rate                                          30.9% 
Non-GAAP adjustments(1)                                              (0.5) 
                                                        ------------------ 
Adjusted expected effective tax 
 rate                                                                30.4% 
 
                                      Quarter Ending    Fiscal Year Ending 
                                      January 28, 2018   January 28, 2018 
                                     -----------------  ------------------ 
Expected diluted earnings per 
share range                           $1.18 to $1.21      $2.20 to $2.23 
Non-GAAP adjustments(1)                    0.01                0.25 
                                     -----------------  ------------------ 
Adjusted expected diluted earnings    $1.19 to $1.22      $2.45 to $2.48 
 per share range 
 
 

__________

 
(1)    These adjustments relate to the restructuring of our ivivva operations. 
       Please refer to Note 6 to the unaudited interim consolidated financial 
       statements included in Item 1 of Part I of our Report on Form 10-Q to 
       be filed with the SEC on or about December 6, 2017 for further 
       explanation as to the nature of these items. 
 
 
lululemon athletica inc. 
 
Store Count and Square Footage(1) 
 Square Footage Expressed in Thousands 
 
                Number of     Number of                    Number of 
               Stores Open      Stores       Number of    Stores Open 
                  at the        Opened     Stores Closed   at the End 
               Beginning of   During the    During the       of the 
               the Quarter     Quarter      Quarter(3)      Quarter 
               ------------  ------------  -------------  ------------ 
4(th) Quarter 
 2016                   389            17             --           406 
1(st) Quarter 
 2017                   406             5             --           411 
2(nd) Quarter 
 2017                   411            11              1           421 
3(rd) Quarter 
 2017                   421            17             50           388 
 
               Total Gross                 Gross Square   Total Gross 
               Square Feet   Gross Square    Feet Lost    Square Feet 
                  at the      Feet Added    During the     at the End 
               Beginning of   During the    Quarter(2,       of the 
               the Quarter    Quarter(2)        3)          Quarter 
               ------------  ------------  -------------  ------------ 
4(th) Quarter 
 2016                 1,144            47              1         1,190 
1(st) Quarter 
 2017                 1,190            14             --         1,204 
2(nd) Quarter 
 2017                 1,204            37              3         1,238 
3(rd) Quarter 
 2017                 1,238            43             89         1,192 
 
 

Press Release: lululemon athletica inc. Announces -4-

__________

 
(1)    Store count and square footage summary includes company-operated stores 
       which are branded lululemon or ivivva. 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. 
(3)    On August 20, 2017, as part of the restructuring of its ivivva 
       operations, the Company closed 48 of its 55 ivivva branded 
       company-operated stores. The seven remaining ivivva branded stores 
       remain in operation and are not expected to close. 
 
 

View source version on businesswire.com: http://www.businesswire.com/news/home/20171206006211/en/

 
    CONTACT:    Investor: 
 

ICR, Inc.

Joseph Teklits/Caitlin Morahan

203-682-8200

or

Media:

Brunswick

Laura Buchanan / Ash Spielgelberg

or

lululemon athletica inc.

Allison Reid, VP Corporate Communications