Lululemon Athletica Inc.
), a leading yoga-inspired athletic apparel and accessories
retailer, posted better-than-expected third-quarter 2012 results
with earnings per share of 39 cents, ahead of the Zacks Consensus
Estimate of 37 cents. Quarterly earnings also increased 44.4%
from 27 cents earned in the year-ago quarter.
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The company's strong performance in the third quarter was
attributed to its unparalleled execution, robust community
engagement, attractive product and continued strength in
Quarter in detail
Lululemon's quarterly revenue of $316.5 million was up 37% from
$230.2 million in the year-ago quarter. Moreover, quarterly
revenue also surpassed the Zacks Consensus Estimate of $305
million. Revenue growth in the quarter mainly rode on an 18%
upside in comparable-store sales and 89% surge in
Direct-to-Consumer revenue. Direct-to-Consumer revenue of $45.1
million in the third quarter represented about 14.3% of total
Gross profit during the quarter increased 36% to $175.3 million
from the prior-year quarter. However, gross margin contracted 40
basis points to 55.4% compared with 55.8% in the prior quarter,
primarily due to increased cost of goods sold as a percentage of
Operating income increased 35% to $80.6 million compared with
$59.7 million a year ago while operating margin contracted 40
basis points to 25.5%.
Lululemon exited the third quarter of 2012 with cash and cash
equivalents of $439.4 million, an improvement of 58.7% from the
end of the third quarter of 2011. Inventories at quarter end
summed up to $164.7 million versus $129.2 million last year.
Stockholders' equity came in at $767.8 million. Besides, the
company is free from any long-term debts.
As of the nine months ended October 28, 2012, cash flow from
operating activities was $113.2 million compared with $53.5
million at the end of the prior-year period.
During the third quarter, the company opened 12 new stores,
bringing the total store count to 201 stores in North America and
Australia at the end of the quarter.
For fourth quarter 2012, management estimates to generate net
revenues of $475 to $480 million. Comps are expected to rise in
the high single-digits range in constant currency for the
upcoming quarter. Therefore, the company expects fourth quarter
earnings in the range of 71 cents to 73 cents per share. The
company also guided shares outstanding of 145.9 million and a tax
rate of 29.4% in the fourth quarter.
For fiscal 2012, management expects revenue in the range of
$1.360 billion to $1.365 billion. Based on this assumption, the
company anticipates earnings between $1.81 and $1.83 per share
for fiscal 2012. Moreover, the company anticipates shares
outstanding of 145.8 million and a tax rate of 29.0%.
We believe that Lululemon's strategic initiatives coupled with
e-commerce business will boost both its top and bottom lines.
Lululemon mainly competes with
Under Armour Inc.
). The company has a Zacks #3 Rank, which translates into a
short-term 'Hold' rating. Currently, we are retaining our
long-term 'Outperform' recommendation on the stock.