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lululemon athletica inc. Announces Third Quarter Fiscal 2024 Results

December 5, 2024 4:05 PM

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

Revenue increased 9% to $2.4 billion

Comparable sales increased 4%, or 3% on a constant dollar basis

Diluted EPS of $2.87

VANCOUVER, British Columbia--(BUSINESS WIRE)-- lululemon athletica inc. (NASDAQ: LULU) today announced financial results for the third quarter of fiscal 2024, which ended on October 27, 2024.

Calvin McDonald, Chief Executive Officer, stated: "Our performance in the third quarter shows the enduring strength of lululemon globally, as we saw continued momentum across our international markets and in Canada. Looking to the future, we are pleased with the start to our holiday season, and we remain focused on accelerating our U.S. business and growing our brand awareness around the world. Thank you to our dedicated teams for continuing to deliver for our guests and stakeholders."

The adjusted non-GAAP financial measures below exclude asset impairment and other charges recognized in relation to lululemon Studio during the third quarter of 2023, and the related income tax effects of these items.

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

Meghan Frank, Chief Financial Officer, stated: "Our third quarter results, which exceeded our expectations, demonstrate the ability of our teams to be agile in a dynamic operating environment. With the majority of the fourth quarter still in front of us, we are focused on deepening engagement with our guests and bringing new consumers into the brand. We are committed to delivering on our Power of Three ×2 revenue target of $12.5 billion in 2026 and look forward to all that lies ahead."

Stock Repurchase Program

During the third quarter of 2024, the Company repurchased 1.6 million shares of its common stock for a cost of $408.5 million.

On December 3, 2024, the board of directors approved a $1.0 billion increase to the Company's stock repurchase program. Including this increase, as of December 5, 2024, the Company had approximately $1.8 billion remaining authorized on its stock repurchase program.

Balance Sheet Highlights

The Company ended the third quarter of 2024 with $1.2 billion in cash and cash equivalents and the capacity under its committed revolving credit facility was $393.5 million.

Inventories at the end of the third quarter of 2024 increased 8% to $1.8 billion compared to $1.7 billion at the end of the third quarter of 2023.

2024 Outlook

For the fourth quarter of 2024, the Company expects net revenue to be in the range of $3.475 billion to $3.510 billion, representing growth of 8% to 10%, or 3% to 4% excluding the 53rd week of 2024. Diluted earnings per share are expected to be in the range of $5.56 to $5.64 for the quarter. This assumes a tax rate of approximately 29.5%.

For 2024, the Company now expects net revenue to be in the range of $10.452 billion to $10.487 billion, representing growth of 9%, or 7% excluding the 53rd week of 2024. Diluted earnings per share are now expected to be in the range of $14.08 to $14.16 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.

Conference Call Information

A conference call to discuss third quarter results is scheduled for today, December 5, 2024, at 4:30 p.m. Eastern time. Those interested in participating in the call are invited to dial 1-844-763-8274 or 1-647-484-8814, 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 and adjusted financial results 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.

Adjusted gross profit, gross margin, income from operations, operating margin, income tax expense, effective tax rates, net income, and diluted earnings per share exclude certain inventory provisions, asset impairments, and restructuring costs recognized in relation to lululemon Studio, and the related income tax effects of these items. The Company believes these adjusted financial measures are useful to investors as they provide supplemental information that enable evaluation of the underlying trend in its operating performance, and enable a comparison to its historical financial information. Further, due to the finite and discrete nature of these items, it does not consider them to be normal operating expenses that are necessary to run the business, or impairments or disposal gains that are expected to arise in the normal course of its operations.

Management uses these adjusted financial measures and 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

Third Quarter

First Three Quarters

2024

2023

2024

2023

Net revenue

$

2,396,660

$

2,204,218

$

6,976,629

$

6,414,175

Costs of goods sold

995,054

947,554

2,887,770

2,708,195

Gross profit

1,401,606

1,256,664

4,088,859

3,705,980

As a percentage of net revenue

58.5

%

57.0

%

58.6

%

57.8

%

Selling, general and administrative expenses

909,827

842,795

2,624,212

2,407,683

As a percentage of net revenue

38.0

%

38.2

%

37.6

%

37.5

%

Impairment of assets and restructuring costs

—

74,501

—

74,501

Amortization of intangible assets

1,118

1,253

1,118

5,010

Income from operations

490,661

338,115

1,463,529

1,218,786

As a percentage of net revenue

20.5

%

15.3

%

21.0

%

19.0

%

Other income (expense), net

13,743

9,842

55,020

25,229

Income before income tax expense

504,404

347,957

1,518,549

1,244,015

Income tax expense

152,534

99,243

452,336

363,293

Net income

$

351,870

$

248,714

$

1,066,213

$

880,722

Basic earnings per share

$

2.87

$

1.97

$

8.57

$

6.94

Diluted earnings per share

$

2.87

$

1.96

$

8.55

$

6.92

Basic weighted-average shares outstanding

122,697

126,460

124,471

126,892

Diluted weighted-average shares outstanding

122,803

126,770

124,668

127,218

lululemon athletica inc.

Condensed Consolidated Balance Sheets
Unaudited; Expressed in thousands

October 27,
2024

January 28,
2024

October 29,
2023

ASSETS

Current assets

Cash and cash equivalents

$

1,188,419

$

2,243,971

$

1,091,138

Inventories

1,800,893

1,323,602

1,663,617

Prepaid and receivable income taxes

257,388

183,733

300,258

Other current assets

358,589

309,271

309,886

Total current assets

3,605,289

4,060,577

3,364,899

Property and equipment, net

1,697,759

1,545,811

1,413,918

Right-of-use lease assets

1,360,589

1,265,610

1,048,607

Goodwill and intangible assets, net

178,185

24,083

23,912

Deferred income taxes and other non-current assets

241,847

195,860

170,928

Total assets

$

7,083,669

$

7,091,941

$

6,022,264

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

385,960

$

348,441

$

309,324

Accrued liabilities and other

561,615

348,555

392,949

Accrued compensation and related expenses

190,169

326,110

250,479

Current lease liabilities

290,368

249,270

217,138

Current income taxes payable

96,808

12,098

27,231

Unredeemed gift card liability

238,327

306,479

213,256

Other current liabilities

40,286

40,308

37,737

Total current liabilities

1,803,533

1,631,261

1,448,114

Non-current lease liabilities

1,223,733

1,154,012

950,954

Non-current income taxes payable

—

15,864

15,864

Deferred income tax liability

33,231

29,522

53,833

Other non-current liabilities

37,440

29,201

27,650

Stockholders' equity

3,985,732

4,232,081

3,525,849

Total liabilities and stockholders' equity

$

7,083,669

$

7,091,941

$

6,022,264

lululemon athletica inc.

Condensed Consolidated Statements of Cash Flows
Unaudited; Expressed in thousands

First Three Quarters

2024

2023

Cash flows from operating activities

Net income

$

1,066,213

$

880,722

Adjustments to reconcile net income to net cash provided by operating activities

(194,890

)

31,344

Net cash provided by operating activities

871,323

912,066

Net cash used in investing activities

(575,214

)

(445,325

)

Net cash used in financing activities

(1,328,510

)

(510,583

)

Effect of foreign currency exchange rate changes on cash and cash equivalents

(23,151

)

(19,887

)

Decrease in cash and cash equivalents

(1,055,552

)

(63,729

)

Cash and cash equivalents, beginning of period

2,243,971

1,154,867

Cash and cash equivalents, end of period

$

1,188,419

$

1,091,138

lululemon athletica inc.

Reconciliation of Non-GAAP Financial Measures
Unaudited; Expressed in thousands, except per share amounts

Constant dollar changes

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

Net Revenue

Change

Foreign
exchange

Change in
constant
dollars

United States

—

%

—

%

—

%

Canada

9

—

9

Mexico(1)

n/a

n/a

n/a

Americas

2

—

2

China Mainland

39

(3

)

36

Rest of World

27

(4

)

23

Total international

33

(3

)

30

Total

9

%

(1

)%

8

%

Comparable Sales(2)

Change

Foreign
exchange

Change in
constant
dollars

Americas

(2

)%

—

%

(2

)%

China Mainland

27

(3

)

24

Rest of World

23

(3

)

20

Total international

25

(3

)

22

Total

4

%

(1

)%

3

%

__________

(1)

On September 10, 2024, the Company acquired the lululemon branded retail locations and operations run by a third party in Mexico. Wholesale sales to the third party by lululemon athletica canada inc. prior to the acquisition are disclosed as net revenue recognized within Canada.

(2)

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.

Adjusted financial measures

The following tables reconcile adjusted 2023 financial measures with the most directly comparable measures calculated in accordance with GAAP. The adjustments relate to certain inventory provisions, asset impairments, and restructuring costs recognized in relation to lululemon Studio and their related tax effects. Please refer to Note 4. Impairment of Assets and Restructuring Costs included in Item 1 of Part I of the Company's Report on Form 10-Q to be filed with the SEC on or about December 5, 2024 for further information on the nature of these amounts.

Third Quarter 2023

Gross Profit

Gross
Margin

Income
from
Operations

Operating
Margin

Income Tax
Expense

Effective
Tax Rate

Net Income

Diluted
Earnings
Per Share

GAAP results

$

1,256,664

57.0

%

$

338,115

15.3

%

$

99,243

28.5

%

$

248,714

$

1.96

lululemon Studio charges:

lululemon Studio obsolescence provision

23,709

1.1

23,709

1.1

23,709

0.19

Impairment of assets

44,186

2.0

44,186

0.35

Restructuring costs

30,315

1.4

30,315

0.24

Tax effect of the above

26,085

(0.4

)

(26,085

)

(0.21

)

23,709

1.1

98,210

4.5

26,085

(0.4

)

72,125

0.57

Adjusted results (non-GAAP)

$

1,280,373

58.1

%

$

436,325

19.8

%

$

125,328

28.1

%

$

320,839

$

2.53

First Three Quarters 2023

Gross Profit

Gross
Margin

Income
from
Operations

Operating
Margin

Income Tax
Expense

Effective
Tax Rate

Net Income

Diluted
Earnings
Per Share

GAAP results

$

3,705,980

57.8

%

$

1,218,786

19.0

%

$

363,293

29.2

%

$

880,722

$

6.92

lululemon Studio charges:

lululemon Studio obsolescence provision

23,709

0.3

23,709

0.3

23,709

0.19

Impairment of assets

44,186

0.7

44,186

0.35

Restructuring costs

30,315

0.5

30,315

0.24

Tax effect of the above

26,085

(0.2

)

(26,085

)

(0.21

)

23,709

0.3

98,210

1.5

26,085

(0.2

)

72,125

0.57

Adjusted results (non-GAAP)

$

3,729,689

58.1

%

$

1,316,996

20.5

%

$

389,378

29.0

%

$

952,847

$

7.49

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.

Fourth Quarter 2024

Fiscal 2024

Expected net revenue increase

8% to 10%

9%

Impact of 53rd week

(5)% to (6)%

(2)%

Expected net revenue increase excluding the 53rd week (non-GAAP)

3% to 4%

7%

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

4th Quarter 2023

686

26

1

711

1st Quarter 2024

711

5

5

711

2nd Quarter 2024

711

11

1

721

3rd Quarter 2024

721

28

—

749

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

4th Quarter 2023

2,797

173

3

2,967

1st Quarter 2024

2,967

35

14

2,988

2nd Quarter 2024

2,988

90

3

3,075

3rd Quarter 2024

3,075

156

—

3,231

__________

(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.

Investor Contacts:

lululemon athletica inc.

Howard Tubin

1-604-732-6124

or

ICR, Inc.

Joseph Teklits/Caitlin Churchill

1-203-682-8200



Media Contact:

lululemon athletica inc.

Madi Wallace

1-604-732-6124

Source: lululemon athletica inc.

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