Stock Update (NASDAQ:LULU): Lululemon Athletica inc. Reports Third Quarter Fiscal 2016 Results; Shares Jump 14%


Lululemon Athletica inc. (NASDAQ:LULU) announced financial results for the third quarter ended October 30, 2016.

For the third quarter ended October 30, 2016:

  • Net revenue increased by 13% to $544.4 million from $479.7 million in the third quarter of fiscal 2015.
  • Total comparable sales, which includes comparable store sales and direct to consumer, increased by 7%.
  • Comparable store sales increased by 4%.
  • Direct to consumer net revenue increased by 16% to $104.0 million.
  • Gross profit increased by 24% to $278.4 million, and as a percentage of net revenue gross profit was 51.1% compared to 46.9% in the third quarter of fiscal 2015.
  • Income from operations increased by 36% to $93.0 million from $68.2 million in the third quarter of fiscal 2015, and as a percentage of net revenue was 17.1% compared to 14.2% of net revenue in the third quarter of fiscal 2015.
  • Income tax expense increased to $25.3 million from $12.1 million in the third quarter of fiscal 2015, and the effective tax rate was 27.0% compared to 18.6%. Excluding certain tax and related interest adjustments, the effective tax rate was 31.3% compared to 28.8% in the third quarter of fiscal 2015.
  • Diluted earnings per share for the third quarter of fiscal 2016 were $0.50 compared to $0.38 in the third quarter of fiscal 2015. Excluding certain tax and related interest adjustments, diluted earnings per share were $0.47 for the third quarter of fiscal 2016 compared to $0.35 for the third quarter of fiscal 2015.

The Company ended the third quarter of fiscal 2016 with $480.4 million in cash and cash equivalents compared to $403.4 million at the end of the third quarter of fiscal 2015. Inventories at the end of the third quarter of fiscal 2016 increased by 2% to $364.5 million compared to $357.8 million at the end of the third quarter of fiscal 2015. The Company ended the quarter with 389 stores.

The Company also announced that its board of directors has approved a stock repurchase program for up to $100 million of its common shares in the open market at prevailing market prices. The timing and actual number of common shares to be repurchased will depend upon market conditions and other factors, in accordance with Securities and Exchange Commission requirements. 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, lululemon’s CEO, stated: “Our third quarter results demonstrated strong execution across all areas of our business as we delivered continued topline momentum, outperformed in gross margin and inflected meaningfully in EPS. This success is a result of our team’s ongoing effort and commitment to delivering on our long term strategies.”

Mr. Potdevin continued: “As we entered the fourth quarter, we experienced mixed sales results that have since improved. I am inspired by the team’s response and passion towards making this another successful holiday season, and I am confident that we will continue to deliver an unparalleled guest experience across all our channels and regions around the globe.”

Updated Outlook

For the fourth quarter of fiscal 2016, we expect net revenue to be in the range of $765 million to $785 million based on total comparable sales in the mid-single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $0.96 to $1.01 for the quarter. This guidance assumes 137.3 million diluted weighted-average shares outstanding and a 31.2% tax rate.

For the full fiscal 2016, we now expect net revenue to be in the range of $2.320 billion to $2.340 billion based on total comparable sales in the mid-single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $2.18 to $2.23 for the full year, or $2.11 to $2.16 normalized for the tax and related interest adjustments made during the first three quarters of fiscal 2016. This guidance assumes 137.3 million diluted weighted-average shares outstanding and a 28.2% tax rate, or 30.9% excluding the above tax and related interest adjustments. (Original Source)

Shares of Lululemon Athletica are rising nearly 14% to $68.15 in after-hours trading. LULU has a 1-year high of $81.81 and a 1-year low of $44.62. The stock’s 50-day moving average is $57.44 and its 200-day moving average is $70.53.

On the ratings front, LULU stock has been the subject of a number of recent research reports. In a report released yesterday, Deutsche Bank analyst Dave Weiner maintained a Hold rating on LULU, with a price target of $62, which represents a potential upside of 8% from where the stock is currently trading. Separately, on the same day, Wedbush’s Morry Brown maintained a Buy rating on the stock and has a price target of $70.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Dave Weiner and Morry Brown have a yearly average return of 2.0% and 0.7% respectively. Weiner has a success rate of 44% and is ranked #1548 out of 4262 analysts, while Brown has a success rate of 47% and is ranked #2242.

Overall, 3 research analysts have rated the stock with a Sell rating, 4 research analysts have assigned a Hold rating and 7 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $74.50 which is 29.5% above where the stock opened today.

lululemon athletica, inc. designs and retails athletic apparels primarily in North America and Australia. It offers a comprehensive line of apparel and accessories, including fitness pants, shorts, tops and jackets designed for athletic pursuits such as yoga, running and general fitness. The company operates through corporate owned stores and direct to consumer segments. Its yoga-inspired apparel is marketed under the Lululemon Athletica brand name.