Business news : Lululemon See Q4 Earnings Climb 48 Percent; Warns on Q1

Lululemon Athletica Inc. reported revenues for the fourth quarter increased 31 percent to $485.5 million from $371.5 million in the fourth quarter of fiscal 2011. Comparable stores sales for the fourth quarter increased by 10 percent on a constant dollar basis. Earnings jumped 48.8 percent.

The fourth quarter of fiscal 2012 consisted of 14 weeks while the fourth quarter of fiscal 2011 consisted of 13 weeks. The comp increase excludes corporate store sales of $18.7 million for the 14th week of the quarter.

Direct to consumer revenue increased 56 percent to $78.3 million, or 16.1 percent of net revenue, in the fourth quarter of fiscal 2012, from 13.5 percent of net revenue in the same period last year. This increase includes $4.2 million of net revenue from the 14th week of the quarter.

Gross profit for the quarter increased by 31 percent to $274.5 million, and as a percentage of net revenue gross profit increased to 56.5 percent for the quarter from 56.3 percent in the fourth quarter of fiscal 2011.

Income from operations for the quarter increased by 31 percent to $152.6 million, and as a percentage of net revenue was 31.4 percent compared to 31.2 percent of net revenue in the fourth quarter of fiscal 2011.

The tax rate for the quarter was 29.0 percent compared to 36.5 percent a year ago. The lower effective rate reflects the ongoing impact of revised intercompany pricing agreements.

Diluted earnings per share for the quarter were $0.75 on net income of $109.4 million, compared to diluted earnings per share of $0.51 on net income of $73.5 million in the fourth quarter of fiscal 2011.

Fiscal year ended Feb. 3, 2013:
Net revenue for the fiscal year increased 37 percent to $1.4 billion from $1.0 billion in fiscal 2011. Fiscal 2012 consisted of 53 weeks while fiscal 2011 consisted of 52 weeks. Net sales for the year include an additional week; however, comparable stores sales and sales per square foot calculations exclude the 53rd week.

Comparable stores sales for fiscal 2012 increased by 16 percent on a constant dollar basis, resulting in $2,058 annual sales per square foot for comparable stores for fiscal 2012.

Direct to consumer revenue increased 86 percent to $197.3 million, or
14.4 percent of net revenue in fiscal 2012, from 10.6 percent of net revenue in fiscal 2011.

Gross profit for fiscal 2012 increased by 34 percent to $762.8 million, from $569.4 million in fiscal 2011. As a percentage of net revenue, gross profit decreased to 55.7 percent compared to 56.9 percent in fiscal 2011.

Income from operations increased by 31 percent to $376.4 million, from $287.0 million in fiscal 2011. As a percentage of net revenue, income from operations decreased to 27.5 percent compared to 28.7 percent of net revenue in fiscal 2011.

The tax rate for fiscal 2012 was 28.8 percent compared to 36.1 percent for fiscal 2011. The lower effective rate reflects the ongoing impact of revised intercompany pricing agreements.

Diluted earnings per share in fiscal 2012 increased 46 percent to $1.85 on net income of $270.6 million, compared to diluted earnings per share of $1.27 on net income of $184.1 million in fiscal 2011.

The company ended fiscal 2012 with $590.2 million in cash and cash equivalents compared to $409.4 million at the end of fiscal 2011. Inventory at the end of fiscal 2012 was $155.2 million compared to $104.1 million at the end of fiscal 2011. The company ended the quarter with 211 stores in North America and Australia.

“The fundamentals of our business are strong, we delivered excellent results in 2012, and we plan to continue to earn the loyalty of our customers and shareholders every day going forward," said Christine Day, Lululemon’s CEO.

Addressing quality control problems

"As previously announced on March 18th, we pulled a selection of our black Luon pants from our stores. Delivering the top quality our guests expect is a critical factor in our differentiation in the market place. Our proprietary fabric, black Luon, is a very technical and sensitive product to manufacture.

"We have a long history with our manufacturers and as we have in the past, we are working closely with them to resolve the current issues. We have a team on site collaborating with them to identify the root cause. We have recently added strong leadership in Quality Control, our Liason Office and our commercialization and development teams, and expect these people and other investments to solidify our quality consistency and our delivery capabilities.”

Updated outlook
For the first quarter of fiscal 2013, we expect net revenue to be in the range of $333 million to $343 million based on a comparable-store sales percentage increase between 5 percent and 8 percent on a constant-dollar basis. Diluted earnings per share are expected to be in the range of 28 to 30 cents for the quarter.

This outlook reflects our current expectations of the impact from the black Luon issue, including lost revenue in the range of $12 million to $17 million, additional costs expected to be incurred and the write down of affected product on hand and expected to be received during the first half of 2013, resulting in a negative impact on EPS of $0.11 to $0.12. This guidance also assumes 146 million diluted weighted-average shares outstanding and a 30 percent tax rate.

For fiscal 2013, we expect net revenue to be in the range of $1.615 billion to $1.640 billion and diluted earnings per share to be in the range of $1.95 to $1.99 for the full year. This outlook reflects our current expectations of the impact from the black Luon issue, including lost revenue in the range of $57 million to $67 million, additional costs expected to be incurred and the write down of affected product on hand and expected to be received during the first half of 2013, resulting in a negative impact on EPS of $0.25 to $0.27. This guidance also assumes a tax rate of 30 percent and 146.6 million diluted weighted-average shares outstanding.

( Source Lululemon through SportsOneSource )

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