lululemon athletica inc. Announces First Quarter Fiscal 2024 Results

Rhea-AI Summary

lululemon athletica (NASDAQ:LULU) announced its Q1 Fiscal 2024 results, showcasing a 10% revenue increase to $2.2 billion and a 7% rise in comparable sales on a constant dollar basis.

International revenue surged by 40% on a constant dollar basis, while U.S. sales remained flat. Gross profit rose 11% to $1.3 billion, though operating margin dipped by 50 basis points to 19.6%.

Diluted EPS climbed to $2.54 from $2.28 in the previous year. The company ended the quarter with $1.9 billion in cash and a 15% reduction in inventories. The board authorized a $1 billion increase in its stock repurchase program, totaling $1.7 billion in repurchase capacity.

For Q2 2024, revenue is forecasted to reach $2.4-$2.42 billion with EPS between $2.92-$2.97. Yearly revenue guidance is set at $10.7-$10.8 billion with a projected EPS of $14.27-$14.47.

Positive

• Revenue increased 10% to $2.2 billion
• International net revenue rose 40% on a constant dollar basis
• Gross profit increased 11% to $1.3 billion
• Diluted EPS increased to $2.54 from $2.28
• Inventories decreased 15% to $1.3 billion
• Board authorized a $1 billion increase in stock repurchase program
• Company ended Q1 2024 with $1.9 billion in cash
• Q2 2024 revenue expected to be $2.4-$2.42 billion
• Full-year revenue guidance set at $10.7-$10.8 billion
• Projected full-year EPS of $14.27-$14.47

Negative

• Americas net revenue increased only 4% on a constant dollar basis
• Comparable sales in the Americas were flat
• Operating margin decreased by 50 basis points to 19.6%
• Effective income tax rate increased to 29.5% from 29.1%

Insights

Financial Analyst

lululemon athletica inc. has shown a solid performance in the first quarter of fiscal 2024. The company's $2.2 billion revenue, marking a 10% increase compared to the same period last year, highlights its strong growth trajectory. The revenue growth is particularly notable in its international markets, which saw a 35% increase, or 40% on a constant dollar basis. This indicates a strong global brand resonance and effective international strategy.

The gross profit increased by 11% to $1.3 billion, with a slight gross margin improvement to 57.7%, suggesting effective cost management and pricing strategies. However, the operating margin decreased by 50 basis points to 19.6%, which might be attributed to increased operating expenses or strategic investments as indicated in the company's statements.

The stock repurchase program authorized an additional $1.0 billion, showing the company's confidence in its financial health and a commitment to returning value to shareholders. This often positively influences the stock price by reducing the number of shares outstanding, thereby increasing earnings per share (EPS).

Market Research Analyst

lululemon's comparable sales growth of 6% (or 7% on a constant dollar basis) is compelling, especially when juxtaposed with the flat performance in the Americas and the impressive 25% international growth. This suggests that while the brand may face saturation or tougher competition in its home market, it continues to gain traction and expand its footprint internationally.

The reduction in inventories by 15% to $1.3 billion is a positive sign, indicating effective inventory management and a potential reduction in excess stock. This can improve cash flow and reduce costs associated with storing and managing unsold products.

The optimistic 2024 outlook with expected net revenue growth of 11% to 12% and EPS range of $14.27 to $14.47 underscores the company's confidence in its strategies and market position. The consistent performance and strategic investments point towards sustainable long-term growth.

CFO Perspective

From a CFO's standpoint, the increase in cash and cash equivalents to $1.9 billion alongside a manageable debt load indicates a solid balance sheet. This financial flexibility allows lululemon to invest in growth opportunities, strategically manage debt, or return capital to shareholders as demonstrated by the substantial stock repurchase program.

The effective income tax rate of 29.5%, albeit slightly higher than the previous year's 29.1%, remains within a reasonable range. This stability in tax rates adds predictability to the financial planning and forecasting processes.

The strategic investments in optimizing the U.S. product assortment and leveraging international growth opportunities show a balanced approach to both defend the core market and aggressively grow in new territories. These steps should help in sustaining growth momentum while managing risks associated with market expansion.

Board of Directors Authorizes $1.0 Billion Increase in Its Stock Repurchase Program

Revenue increased 10% to $2.2 billion

Comparable sales increased 6%, or increased 7% on a constant dollar basis

Diluted EPS of $2.54

VANCOUVER, British Columbia--(BUSINESS WIRE)-- lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the first quarter of fiscal 2024, which ended on April 28, 2024.

Calvin McDonald, Chief Executive Officer, stated: "In the first quarter, we saw strong momentum in our international markets, demonstrating how our brand continues to resonate around the world. Guests responded well to our product innovations across categories, and we are pleased by the progress we are making to optimize our U.S. product assortment. Looking ahead, we continue to have a significant runway for growth and are confident in our team’s ability to powerfully deliver for our guests in 2024 and beyond."

For the first quarter of 2024, compared to the first quarter of 2023:

• Net revenue increased 10% to $2.2 billion, or increased 11% on a constant dollar basis.
  • Americas net revenue increased 3%, or 4% on a constant dollar basis.
  • International net revenue increased 35%, or 40% on a constant dollar basis.
• Comparable sales increased 6%, or 7% on a constant dollar basis.
  • Americas comparable sales were flat compared to the first quarter of 2023.
  • International comparable sales increased 25%, or 29% on a constant dollar basis.
• Gross profit increased 11% to $1.3 billion.
• Gross margin increased 20 basis points to 57.7%.
• Income from operations increased 8% to $432.6 million.
• Operating margin decreased 50 basis points to 19.6%.
• The effective income tax rate for the first quarter of 2024 was 29.5% compared to 29.1% for the first quarter of 2023.
• Diluted earnings per share were $2.54 compared to $2.28 in the first quarter of 2023.
• The Company ended the first quarter of 2024 with 711 company-operated stores.

Meghan Frank, Chief Financial Officer, stated: "We reported first quarter results ahead of our expectations as we operated with agility and continued to make strategic investments in the business. As we look to the rest of the year, we remain focused on leveraging our strengths and differentiated model to advance our Power of Three ×2 strategy and fuel performance. We are energized by the opportunities in front of us and believe we are well-positioned to drive sustainable, long-term growth."

Stock Repurchase Program

During the first quarter of 2024, the Company repurchased 0.8 million shares of its common stock for a cost of $296.9 million.

On May 29, 2024, the board of directors approved a $1.0 billion increase to the Company's stock repurchase program. Including this increase, as of June 5, 2024, the Company had approximately $1.7 billion remaining authorized on its stock repurchase program.

Balance Sheet Highlights

The Company ended the first quarter of 2024 with $1.9 billion in cash and cash equivalents and the capacity under its committed revolving credit facility was $393.8 million.

Inventories at the end of the first quarter of 2024 decreased 15% to $1.3 billion compared to $1.6 billion at the end of the first quarter of 2023.

2024 Outlook

For the second quarter of 2024, the Company expects net revenue to be in the range of $2.400 billion to $2.420 billion, representing growth of 9% to 10%. Diluted earnings per share are expected to be in the range of $2.92 to $2.97 for the quarter. This assumes a tax rate of approximately 30%.

For 2024, the Company continues to expect net revenue to be in the range of $10.700 billion to $10.800 billion, representing growth of 11% to 12%, or 10% to 11% excluding the 53rd week of 2024. It continues to expect operating margin for the year to be approximately 23.3%. Diluted earnings per share are now expected to be in the range of $14.27 to $14.47 for the year. This assumes a tax rate of approximately 30%.

The guidance does not reflect potential future repurchases of the Company's shares.

The guidance and outlook forward-looking statements made in this press release are based on management's expectations as of the date of this press release and do not incorporate future unknown impacts, including macroeconomic trends. The Company undertakes no duty to update or to continue to provide information with respect to any forward-looking statements or risk factors, whether as a result of new information or future events or circumstances or otherwise. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of risks and uncertainties, including those stated below.

Power of Three ×2

The Company's Power of Three ×2 growth plan calls for a doubling of the business from 2021 net revenue of $6.25 billion to $12.5 billion by 2026. The key pillars of the plan are product innovation, guest experience, and market expansion and the growth strategy includes a plan to double men's, double e-commerce, and quadruple international net revenue relative to 2021.

Conference Call Information

A conference call to discuss first quarter results is scheduled for today, June 5, 2024, 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: https://corporate.lululemon.com/investors/news-and-events/events-and-presentations. 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 technical athletic apparel, footwear, and accessories company for yoga, running, training, and most other activities, creating transformational products and experiences that build meaningful connections, unlocking greater possibility and wellbeing for all. Setting the bar in innovation of fabrics and functional designs, lululemon works with yogis and athletes in local communities around the world for continuous research and product feedback. For more information, visit lululemon.com.

Non-GAAP Financial Measures

Constant dollar changes are non-GAAP financial measures. A constant dollar basis assumes the average foreign currency exchange rates for the period remained constant with the average foreign currency exchange rates for the same period of the prior year. The Company provides constant dollar changes in its results to help investors understand the underlying growth rate of net revenue excluding the impact of changes in foreign currency exchange rates. Management uses these constant currency metrics internally when reviewing and assessing financial performance.

The Company's fiscal year ends on the Sunday closest to January 31st of the following year, typically resulting in a 52-week year, but occasionally giving rise to an additional week, resulting in a 53-week year. Fiscal 2023 was a 52-week year while 2024 will be a 53-week year. The expected net revenue increase excluding the 53rd week excludes the expected net revenue for the 53rd week of 2024. This enables an evaluation of the expected year-over-year increase in net revenue based on 52 weeks in each year.

The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or with greater prominence to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the section captioned "Reconciliation of Non-GAAP Financial Measures" included in the accompanying financial tables, which includes more detail on the GAAP financial measure that is most directly comparable to each non-GAAP financial measure, and the related reconciliations between these financial measures. The Company's non-GAAP financial measures may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures reported by other companies.

Forward-Looking Statements:

This press release includes estimates, projections, statements relating to the Company's business plans, objectives, and expected operating results that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In many cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "outlook," "believes," "intends," "estimates," "predicts," "potential" or the negative of these terms or other comparable terminology. These forward-looking statements also include the Company's guidance and outlook statements. These statements are based on management's current expectations but they involve a number of risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in the forward-looking statements as a result of risks and uncertainties, which include, without limitation: the Company's ability to maintain the value and reputation of its brand; changes in consumer shopping preferences and shifts in distribution channels; the acceptability of its products to guests; its highly competitive market and increasing competition; increasing costs and decreasing selling prices; its ability to anticipate consumer preferences and successfully develop and introduce new, innovative and updated products; its ability to accurately forecast guest demand for its products; its ability to expand in light of its limited operating experience and limited brand recognition in new international markets and new product categories; its ability to manage its growth and the increased complexity of its business effectively; its ability to successfully open new store locations in a timely manner; seasonality; disruptions of its supply chain; its reliance on a relatively small number of vendors to supply and manufacture a significant portion of its products; suppliers or manufacturers not complying with its Vendor Code of Ethics or applicable laws; its ability to deliver its products to the market and to meet guest expectations if it has problems with its distribution system; increasing labor costs and other factors associated with the production of its products in South Asia and South East Asia; its ability to safeguard against security breaches with respect to its technology systems; its compliance with privacy and data protection laws; any material disruption of its information systems; its ability to have technology-based systems function effectively and grow its e-commerce business globally; climate change, and related legislative and regulatory responses; increased scrutiny regarding its environmental, social, and governance, or sustainability responsibilities; an economic recession, depression, or downturn or economic uncertainty in its key markets; global or regional health events such as the COVID-19 pandemic and related government, private sector, and individual consumer responsive actions; global economic and political conditions; its ability to source and sell its merchandise profitably or at all if new trade restrictions are imposed or existing trade restrictions become more burdensome; changes in tax laws or unanticipated tax liabilities; its ability to comply with trade and other regulations; fluctuations in foreign currency exchange rates; imitation by its competitors; its ability to protect its intellectual property rights; conflicting trademarks and patents and the prevention of sale of certain products; its exposure to various types of litigation; and other risks and uncertainties set out in filings made from time to time with the United States Securities and Exchange Commission and available at www.sec.gov, including, without limitation, its most recent reports on Form 10-K and Form 10-Q. You are urged to consider these factors carefully in evaluating the forward-looking statements contained herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by these cautionary statements. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances, except as may be required by law.

lululemon athletica inc.

The fiscal year ending February 2, 2025 is referred to as "2024" and the fiscal year ended January 28, 2024 is referred to as "2023".

Condensed Consolidated Statements of Operations Unaudited; Expressed in thousands, except per share amounts
		First Quarter
			2024			2023
Net revenue		$	2,208,891		$	2,000,792
Costs of goods sold			933,823			849,987
Gross profit			1,275,068			1,150,805
As a percentage of net revenue			57.7%			57.5%
Selling, general and administrative expenses			842,426			747,513
As a percentage of net revenue			38.1%			37.4%
Amortization of intangible assets			—			1,878
Income from operations			432,642			401,414
As a percentage of net revenue			19.6%			20.1%
Other income (expense), net			23,283			8,025
Income before income tax expense			455,925			409,439
Income tax expense			134,504			119,034
Net income		$	321,421		$	290,405
Basic earnings per share		$	2.55		$	2.28
Diluted earnings per share		$	2.54		$	2.28
Basic weighted-average shares outstanding			125,989			127,246
Diluted weighted-average shares outstanding			126,336			127,621

lululemon athletica inc. Condensed Consolidated Balance Sheets Unaudited; Expressed in thousands
		April 28, 2024			January 28, 2024			April 30, 2023
ASSETS
Current assets
Cash and cash equivalents		$	1,900,672		$	2,243,971		$	950,607
Inventories			1,345,267			1,323,602			1,580,313
Prepaid and receivable income taxes			192,955			183,733			182,393
Other current assets			329,193			309,271			339,989
Total current assets			3,768,087			4,060,577			3,053,302
Property and equipment, net			1,561,185			1,545,811			1,312,793
Right-of-use lease assets			1,263,749			1,265,610			993,471
Goodwill and intangible assets, net			23,992			24,083			44,123
Deferred income taxes and other non-current assets			211,482			195,860			167,855
Total assets		$	6,828,495		$	7,091,941		$	5,571,544
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable		$	261,605		$	348,441		$	287,464
Accrued liabilities and other			374,446			348,555			342,751
Accrued compensation and related expenses			132,911			326,110			125,053
Current lease liabilities			254,443			249,270			210,506
Current income taxes payable			53,087			12,098			30,213
Unredeemed gift card liability			268,296			306,479			223,970
Other current liabilities			38,783			40,308			36,814
Total current liabilities			1,383,571			1,631,261			1,256,771
Non-current lease liabilities			1,147,631			1,154,012			888,582
Non-current income taxes payable			15,864			15,864			28,555
Deferred income tax liability			29,150			29,522			54,533
Other non-current liabilities			32,471			29,201			23,027
Stockholders' equity			4,219,808			4,232,081			3,320,076
Total liabilities and stockholders' equity		$	6,828,495		$	7,091,941		$	5,571,544

lululemon athletica inc. Condensed Consolidated Statements of Cash Flows Unaudited; Expressed in thousands
		First Quarter
			2024				2023
Cash flows from operating activities
Net income		$	321,421			$	290,405
Adjustments to reconcile net income to net cash provided by operating activities			(193,897	)			(244,902	)
Net cash provided by operating activities			127,524				45,503
Net cash used in investing activities			(131,537	)			(138,219	)
Net cash used in financing activities			(328,628	)			(115,399	)
Effect of foreign currency exchange rate changes on cash and cash equivalents			(10,658	)			3,855
Decrease in cash and cash equivalents			(343,299	)			(204,260	)
Cash and cash equivalents, beginning of period			2,243,971				1,154,867
Cash and cash equivalents, end of period		$	1,900,672			$	950,607

lululemon athletica inc.

Reconciliation of Non-GAAP Financial Measures
Unaudited

Constant dollar changes

The below changes show the change for the first quarter of 2024 compared to the first quarter of 2023.

		Net Revenue
		Increase		Foreign exchange		Increase in constant dollars
United States		2%		—%		2%
Canada		11		1		12
Americas		3		1		4
China Mainland		45		7		52
Rest of World		27		3		30
Total international		35		5		40
Total		10%		1%		11%

		Comparable Sales(1)
		Increase		Foreign exchange		Increase in constant dollars
Americas		—%		—%		—%
China Mainland		26		7		33
Rest of World		23		3		26
Total international		25		4		29
Total		6%		1%		7%

__________
(1)		Comparable sales includes comparable company-operated store and e-commerce net revenue. Comparable company-operated stores have been open for at least 12 full fiscal months, or open for at least 12 full fiscal months after being significantly expanded. Comparable company-operated stores exclude stores which have been temporarily relocated for renovations or have been temporarily closed.

Expected net revenue increase excluding the 53rd week

The Company's fiscal year ends on the Sunday closest to January 31st of the following year, typically resulting in a 52-week year, but occasionally giving rise to an additional week, resulting in a 53-week year. Fiscal 2023 was a 52-week year while 2024 will be a 53-week year.

		Fiscal 2024
Expected net revenue increase		11% to 12%
Impact of 53rd week		(1)%
Expected net revenue increase excluding the 53rd week (non-GAAP)		10% to 11%

lululemon athletica inc. Company-operated Store Count and Square Footage(1) Square footage expressed in thousands
		Number of Stores Open at the Beginning of the Quarter		Number of Stores Opened During the Quarter		Number of Stores Closed During the Quarter		Number of Stores Open at the End of the Quarter
2nd Quarter 2023		662		12		2		672
3rd Quarter 2023		672		15		1		686
4th Quarter 2023		686		26		1		711
1st Quarter 2024		711		5		5		711

		Total Gross Square Feet at the Beginning of the Quarter		Gross Square Feet Added During the Quarter(2)		Gross Square Feet Lost During the Quarter(2)		Total Gross Square Feet at the End of the Quarter
2nd Quarter 2023		2,632		64		5		2,691
3rd Quarter 2023		2,691		109		3		2,797
4th Quarter 2023		2,797		173		3		2,967
1st Quarter 2024		2,967		35		14		2,988

__________
(1)		Company-operated store count and square footage summary excludes retail locations operated by third parties under license and supply arrangements.
(2)		Gross square feet added/lost during the quarter includes net square foot additions for company-operated stores which have been renovated or relocated in the quarter.

 

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Investor Contact:

lululemon athletica inc.

Howard Tubin

1-604-732-6124

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ICR, Inc.

Joseph Teklits/Caitlin Churchill

1-203-682-8200



Media Contact:

lululemon athletica inc.

Erin Hankinson

1-604-732-6124

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lululemon athletica inc.

Madi Wallace

1-604-732-6124

Source: lululemon athletica inc.

FAQ

What was lululemon's Q1 Fiscal 2024 revenue?

lululemon's Q1 Fiscal 2024 revenue increased 10% to $2.2 billion.

How much did lululemon's comparable sales increase in Q1 Fiscal 2024?

lululemon's comparable sales increased by 6%, or 7% on a constant dollar basis in Q1 Fiscal 2024.

What was lululemon's diluted EPS for Q1 Fiscal 2024?

lululemon's diluted EPS for Q1 Fiscal 2024 was $2.54.

How did lululemon's international revenue perform in Q1 Fiscal 2024?

lululemon's international revenue increased by 40% on a constant dollar basis in Q1 Fiscal 2024.

What is lululemon's revenue guidance for Q2 2024?

lululemon expects Q2 2024 revenue to be between $2.4 billion and $2.42 billion.

What is the projected full-year EPS for lululemon in 2024?

lululemon projects a full-year EPS of $14.27 to $14.47 for 2024.

How much did lululemon decrease its inventories by in Q1 Fiscal 2024?

lululemon decreased its inventories by 15% to $1.3 billion in Q1 Fiscal 2024.

What was the increase in lululemon's stock repurchase program?

lululemon's board authorized a $1 billion increase in its stock repurchase program.