Lululemon Athletica inc. (NASDAQ:LULU) announced financial results for the second quarter ended July 31, 2016.
For the second quarter ended July 31, 2016:
- Net revenue increased by 14% to $514.5 million from $453.0 million in the second quarter of fiscal 2015, or increased by 15% on a constant dollar basis.
- Total comparable sales, which includes comparable store sales and direct to consumer, increased by 4%, or by 5% on a constant dollar basis.
- Comparable store sales increased by 3%, or by 4% on a constant dollar basis.
- Direct to consumer net revenue increased by 6% to $87.4 million, or by 7% on a constant dollar basis. In the second quarter of fiscal 2015 we held an online warehouse sale. Excluding the impact of this online warehouse sale, direct to consumer net revenue would have increased by 16%.
- Gross profit increased by 20% to $254.2 million, and as a percentage of net revenue gross profit was 49.4% compared to 46.8% in the second quarter of fiscal 2015.
- Income from operations increased by 11% to $74.0 million from $66.6 million in the second quarter of fiscal 2015, and as a percentage of net revenue was 14.4% compared to 14.7% of net revenue in the second quarter of fiscal 2015.
- Income tax expense was $20.9 million, which included a net income tax recovery of $1.9 million related to the Company’s transfer pricing arrangements and the associated plan to repatriate foreign earnings. In addition, there was a related net interest expense of $0.3 million. The effective tax rate in the second quarter of fiscal 2016 was 28.1% compared to 29.3% in the second quarter of fiscal 2015. Excluding the above tax and related interest adjustments, the effective tax rate was 30.5% in the second quarter of fiscal 2016.
- Diluted earnings per share for the second quarter of fiscal 2016 were $0.39 compared to $0.34 in the second quarter of fiscal 2015. Excluding the above tax and related interest adjustments, diluted earnings per share were $0.38 for the second quarter of fiscal 2016.
- During the second quarter of fiscal 2016, the Company repurchased 0.2 million shares of the Company’s common stock at an average cost of $63.65 per share, completing our approved stock repurchase program.
The Company ended the second quarter of fiscal 2016 with $535.3 million in cash and cash equivalents compared to $541.3 million at the end of the second quarter of fiscal 2015. Inventories at the end of the second quarter of fiscal 2016 decreased by 1% to $277.3 million compared to $280.6 million at the end of the second quarter of fiscal 2015. The Company ended the quarter with 379 stores.
Laurent Potdevin, lululemon’s CEO, stated: “The second quarter demonstrated strong results as we delivered sales and EPS at the high-end of our guidance and saw an important inflection in our gross margin and earnings performance.”
Mr. Potdevin continued: “Our progress in the second quarter, especially in gross margin and inventory, marks the beginning of our recovery in profitability and sustainable long term growth.”
For the third quarter of fiscal 2016, we expect net revenue to be in the range of $535 million to $545 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 $0.42 to $0.44 for the quarter. This guidance assumes 137.5 million diluted weighted-average shares outstanding and a 30.5% tax rate.
For the full fiscal 2016, we now expect net revenue to be in the range of $2.325 billion to $2.350 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 $2.11 to $2.19 for the full year, or $2.07 to $2.15 normalized for the tax and related interest adjustments made during the first two quarters of fiscal 2016. This guidance assumes 137.5 million diluted weighted-average shares outstanding and a 28.7% tax rate, or 30.5% excluding the above tax and related interest adjustments. (Original Source)
Shares of Lululemon are falling nearly 7% to $70.95 in after-hours trading. LULU has a 1-year high of $81.81 and a 1-year low of $43.14. The stock’s 50-day moving average is $78.20 and its 200-day moving average is $68.87.
On the ratings front, Lululemon has been the subject of a number of recent research reports. In a report released yesterday, Barclays analyst Matthew McClintock reiterated a Buy rating on LULU, with a price target of $85, which represents a potential upside of 12.0% from where the stock is currently trading. Separately, on August 30, Canaccord Genuity’s Camilo Lyon reiterated a Hold 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, Matthew McClintock and Camilo Lyon have a total average return of 8.6% and 2.8% respectively. McClintock has a success rate of 63% and is ranked #592 out of 4129 analysts, while Lyon has a success rate of 56% and is ranked #793.
The street is mostly Bullish on LULU stock. Out of 23 analysts who cover the stock, 15 suggest a Buy rating , 5 suggest a Hold and 3 recommend to Sell the stock. The 12-month average price target assigned to the stock is $74.06, which represents a slight downside potential from current levels.
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.