Lululemon Athletica inc. (NASDAQ:LULU) announced financial results for the third quarter ended November 1, 2015.

For the third quarter ended November 1, 2015:

  • Net revenue for the quarter increased 14% to $479.7 million from $419.4 million in the third quarter of fiscal 2014.
  • Total comparable sales, which includes comparable store sales and direct to consumer, increased by 9% for the third quarter on a constant dollar basis.
  • Comparable store sales for the third quarter increased by 6% on a constant dollar basis and direct to consumer revenue increased 21% on a constant dollar basis.
  • Direct to consumer net revenue increased 16% to $89.3 million, or 18.6% of total Company revenue, in the third quarter of fiscal 2015, an increase from 18.4% of total Company revenues in the third quarter of fiscal 2014.
  • Gross profit for the quarter increased by 7% to $224.8 million, and as a percentage of net revenue gross profit was 46.9% for the quarter compared to 50.3% in the third quarter of fiscal 2014.
  • Income from operations for the quarter decreased by 16% to $68.2 million, and as a percentage of net revenue was 14.2% compared to 19.4% of net revenue in the third quarter of fiscal 2014.
  • The income tax expense for the third quarter of fiscal 2015 was $12.1 million, which includes an income tax recovery of $7.7 million related to the Company’s transfer pricing arrangements and taxes associated with the repatriation of foreign earnings. In addition, there was a related net interest expense of $3.6 million. The tax rate excluding these adjustments was 28.8% in the third quarter of fiscal 2015 compared to 27.1% in the third quarter of fiscal 2014. The effective tax rate in the third quarter of fiscal 2015 including these tax and related interest adjustments was 18.6%.
  • Diluted earnings per share for the third quarter of fiscal 2015 were $0.38 compared to $0.42 in the third quarter of fiscal 2014. Excluding the above tax and related interest adjustments, diluted earnings per share were $0.35 for the third quarter of fiscal 2015.
  • During the third quarter of fiscal 2015, the Company repurchased 1.6 million shares of the Company’s common stock at an average cost of $55.50 per share.

The Company ended the third quarter of fiscal 2015 with $403.4 million in cash and cash equivalents compared to $633.6 million at the end of the third quarter of fiscal 2014. Inventory at the end of the third quarter of fiscal 2015 totaled $357.8 million compared to $229.9 million at the end of the third quarter of fiscal 2014. The Company ended the quarter with 354 stores.

Laurent Potdevin, lululemon’s CEO, stated: “We had a solid quarter in line with our expectations underscored by the combination of our product, guest and community initiatives along with tremendous guest reception to major store openings around the world. I would like to personally thank all of our educators who create amazing experiences for our guests every day.”

Mr. Potdevin continued: “We’ve implemented critical organizational changes this quarter and now have in place a complete, world-class management team that is aligned with our strategic global priorities focused on design and dedicated to creating long-term value.”

Updated Outlook

For the fourth quarter of fiscal 2015, we expect net revenue to be in the range of $670 million to $685 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 $0.75 to $0.78 for the quarter. This guidance assumes 139.0 million diluted weighted-average shares outstanding and a 29.5% tax rate. The guidance does not reflect potential future repurchases of the Company’s shares.

For the full fiscal 2015, we now expect net revenue to be in the range of $2.025 billion to $2.040 billion based on total comparable sales in the high single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $1.81 to $1.84 for the full year, or$1.78 to $1.81 normalized for the tax and related interest adjustments made during the third quarter of fiscal 2015. This guidance assumes 140.9 million diluted weighted-average shares outstanding and a 27.6% tax rate, which includes the above tax adjustments. The guidance does not reflect potential future repurchases of the Company’s shares. (Original Source)

Shares of Lululemon Athletica are down 11.33% to $46.25 in pre-market trading. LULU has a 1-year high of $70 and a 1-year low of $43.14. The stock’s 50-day moving average is $49.69 and its 200-day moving average is $57.96.

On the ratings front, Lululemon has been the subject of a number of recent research reports. In a report issued on December 7, MKM Partners analyst Roxanne Meyer maintained a Buy rating on LULU, with a price target of $69, which represents a potential upside of 32.3% from where the stock is currently trading. Separately, on December 1, Credit Suisse’s Christian Buss reiterated a Buy rating on the stock and has a price target of $64.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Roxanne Meyer and Christian Buss have a total average return of 10.3% and 3.7% respectively. Meyer has a success rate of 67.6% and is ranked #559 out of 3640 analysts, while Buss has a success rate of 54.3% and is ranked #1102.

Overall, 3 research analysts have rated the stock with a Sell rating, 5 research analysts have assigned a Hold rating and 8 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 $61.00 which is 16.9% above where the stock closed yesterday.

Lululemon Athletica Inc is a designer and retailer of technical athletic apparel operating in North America and Australia. Its yoga-inspired apparel is marketed under the lululemon athletica and ivivva athletica brand names.