Lululemon Athletica Inc.
), a leading yoga-inspired athletic apparel and accessories
retailer, posted better-than-expected fourth-quarter fiscal 2012
results with earnings per share of 75 cents, ahead of the Zacks
Consensus Estimate of 74 cents. Quarterly earnings also increased
47.1% from 51 cents earned in the year-ago comparable quarter,
primarily driven by robust sales growth along with improved
Quarter in detail
Lululemon's quarterly revenue of $485.5 million was up 30.7%
from $371.5 million in the comparable year-ago quarter and inched
past the Zacks Consensus Estimate of $485.0 million. Revenue
growth in the quarter mainly rode on a 10% upside in
comparable-store sales and a 56% increase in Direct-to-Consumer
revenue. Direct-to-Consumer revenue of $78.3 million in the
fourth quarter represented about 16.1% of total revenue.
Gross profit during the quarter increased 31% to $274.5
million from the prior-year quarter. Gross margin expanded 20
basis points to 56.5% compared with 56.3% in the fourth quarter
of fiscal 2011 primarily due to improved product margin and lower
occupancy and depreciation expenses as a percentage of sales.
Selling, general & administrative (SG&A) expenses
increased 31.1% to $121.9 million compared with $93.0 million in
the same period of fiscal 2011, while as a percentage of sales it
remained flat year over year at 25.1%. The dollar increase in
SG&A expenses was mainly due to higher compensation and
operating costs related to new store openings.
During the quarter, the company's operating income increased
31.4% to $152.6 million compared with $116.1 million a year ago,
primarily driven by strong top-line growth. Consequently,
operating margin improved 20 basis points to 31.4%.
We believe that Lululemon's strong performance in the fourth
quarter was attributable to its unparalleled execution, robust
community engagement, attractive product and continued strength
in direct-to-consumer business.
Lululemon, which competes with
New York & Co
Abercrombie & Fitch Co
Ascena Retail Group Inc
), exited fiscal 2012 with cash and cash equivalents of $590.2
million, up 44.2% from fiscal 2011 level. Inventories at the end
of the fiscal year summed up to $155.2 million versus $104.1
million in fiscal 2011. Stockholders' equity came in at $887.3
million. In addition, the company is free from any long-term
Lululemon exited fiscal 2012, ended Feb 3, 2013, with cash
flow from operating activities of $280.1 million compared with
$203.6 million at the end of fiscal 2011.
During the fourth quarter, the company opened 10 new stores,
bringing the total store count to 211 stores in North America and
Australia at the end of fiscal 2012.
On Mar 18, Lululemon recalled its black Luon pants and crops
from stores and its website. The company noted that the products
that were shipped to stores on Mar 1 had quality related issues,
and thus had to be recalled.
Management stated that the product recall would significantly
hurt its top and bottom line in the first quarter of fiscal 2013.
Consequently, Lululemon lowered its sales forecast for the
quarter. The company now expects its comparable-store sales
(comps) to increase between 5% and 8%, down from the previous
projection of 11%.
Following the recall, this Zacks Rank #4 (Sell) company
lowered its sales forecast range to $333-$343 million from its
earlier projected range of $350-$355 million. Moreover, the
company is expecting to report first-quarter fiscal 2013 earnings
in between 28 cents and 30 cents per share. The product
recall is likely to negatively affect Lululemon's first-half
fiscal 2013 earnings per share by 11-12 cents.
For fiscal 2013, the company is expecting revenue to come in
the band of $1.615 billion to $1.640 billion and earnings are
anticipated to remain in between $1.95 and $1.99 per share.
Lululemon designs, manufactures, and distributes athletic
apparel for women and men. The company offers a line of apparel
and accessories, including fitness pants, shorts, tops, and
jackets designed for athletic pursuits, such as yoga, dance,
running, and general fitness under the lululemon athletica brand
name. Its fitness-related accessories comprise an array of items,
such as bags, socks, underwear, yoga mats, instructional yoga
DVDs, water bottles, and headbands. The company sells its
products through a chain of corporate-owned and operated retail
stores, independent franchises and a network of wholesale
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