lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the third quarter of fiscal 2020.
Calvin McDonald, Chief Executive Officer, stated: “Our third quarter results demonstrate the strength of lululemonacross channels and markets, both in North America and around the world. Our product innovations, investments in the e-commerce business, and strategic acquisition of MIRROR position us well to serve our guests as their needs evolve across both physical and digital experiences.”
For the third quarter of fiscal 2020, compared to the third quarter of fiscal 2019
- Net revenue increased 22% to $1.1 billion. On a constant dollar basis, net revenue increased 21%.
– Net revenue increased 19% in North America, and increased 45% internationally.
- Total comparable sales increased 19%, or increased 18% on a constant dollar basis.
– Direct to consumer net revenue increased 94%, or increased 93% on a constant dollar basis.
– Comparable store productivity was 83%, or 82% on a constant dollar basis, representing a comparable store sales decrease of 17%, or a decrease of 18% on a constant dollar basis.
- Direct to consumer net revenue represented 42.8% of total net revenue compared to 26.9% for the third quarter of fiscal 2019.
- Gross profit increased 24% to $627.4 million and gross margin increased 100 basis points to 56.1%.
- Income from operations increased 17% to $204.9 million. Adjusted income from operations increased 21% to $213.5 million.
- Operating margin decreased 90 basis points to 18.3%. Adjusted operating margin decreased 10 basis points to 19.1%.
- Income tax expense increased 17% to $60.7 million. The effective tax rate for the third quarter of fiscal 2020 was 29.7% compared to 29.1% for the third quarter of fiscal 2019. The adjusted effective tax rate was 28.9% for the third quarter of fiscal 2020.
- Diluted earnings per share were $1.10 compared to $0.96 in the third quarter of fiscal 2019. Adjusted diluted earnings per share were $1.16 for the third quarter of fiscal 2020.
- The Company opened nine net new company-operated stores during the quarter, ending with 515 stores.
The summary above provides both GAAP and adjusted non-GAAP financial measures. The adjusted financial measures exclude certain costs incurred in connection with the acquisition of MIRROR, and the related tax effects.
Meghan Frank, Chief Financial Officer, stated: “Our performance this quarter was driven by strong omni momentum, with notable strength in conversion and increased traffic to our e-commerce sites.” Frank continued, “We have planned the fourth quarter based on multiple performance scenarios and believe we are well positioned for the holiday season.”
Balance sheet highlights
The Company ended the third quarter of fiscal 2020 with $481.6 million in cash and cash equivalents and the capacity under its committed revolving credit facilities was $697.3 million. Inventories at the end of the third quarter of fiscal 2020 increased 23% to $771.0 million compared to $627.1 million at the end of the third quarter of fiscal 2019.
Share repurchase and cancellation of 364-day credit facility
The Company announced that on December 1, 2020, the board of directors approved an increase in its share repurchase authorization from $263.6 million to $500.0 million. The timing, pricing, and actual number of common shares to be repurchased will depend upon prevailing market conditions, applicable legal requirements, and other factors. The repurchase plan has no time limit.
The Company also announced that on December 4, 2020, it had given notice to terminate its 364-day unsecured revolving credit facility. The $300.0 million facility was due to mature on June 28, 2021 and will be terminated without penalty on December 11, 2020. The Company continues to maintain its unsecured five-year revolving credit facility of $400.0 million which matures on June 6, 2023.
COVID-19 Pandemic and fiscal 2020 outlook
As a result of the COVID-19 pandemic, all of the Company’s retail locations in North America, Europe, and certain countries in Asia Pacific were temporarily closed during the first quarter of fiscal 2020. The Company began reopening its retail locations in these markets during the second quarter of fiscal 2020 and almost all locations were open during the third quarter of fiscal 2020. Subsequent to November 1, 2020, while almost all of the Company’s retail locations have remained open, it has experienced some temporary closures and is currently operating with tighter capacity restrictions in certain markets.
Due to the impact that COVID-19 is having across the globe, and the rapid and continuous developments, the Company is not providing detailed financial guidance for fiscal 2020 at this time.
Conference Call Information
A conference call to discuss third quarter results is scheduled for today, December 10, 2020, 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, 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.
