VANCOUVER, British Columbia--(BUSINESS WIRE)-- lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the third quarter ended November 2, 2014.
For the third quarter ended November 2, 2014:
Net revenue for the quarter increased 10% to $419.4 million from $379.9 million in the third quarter of fiscal 2013.
Total comparable sales, which includes comparable store sales and direct to consumer, increased by 3% for the third quarter on a constant dollar basis. Comparable store sales for the third quarter decreased by 3% on a constant dollar basis and direct to consumer revenue increased 27% on a constant dollar basis.
Direct to consumer revenue increased to $77.2 million, or 18.4% of total Company revenues, in the third quarter of fiscal 2014, an increase from 16.3% of total Company revenues in the third quarter of fiscal 2013.
Gross profit for the quarter increased 3% to $211.1 million, and as a percentage of net revenue gross profit decreased to 50.3% for the quarter from 53.9% in the third quarter of fiscal 2013.
Income from operations for the quarter decreased 12% to $81.2 million, and as a percentage of net revenue was 19.4% compared to 24.3% of net revenue in the third quarter of fiscal 2013.
The effective tax rate for the third quarter of fiscal 2014 was 27.1% compared to 29.5% a year ago.
Diluted earnings per share for the quarter were $0.42 on net income of $60.5 million, compared to diluted earnings per share of $0.45 on net income of $66.1 million in the third quarter of fiscal 2013.
During the third quarter of fiscal 2014, the Company repurchased 1.8 million shares of the Company's common stock at an average cost of $40.49 per share.
For the thirty-nine weeks ended November 2, 2014:
Net revenue for the first three quarters of fiscal 2014 increased 12% to $1,194.7 million from $1,070.2 million in the same period of fiscal 2013.
Total comparable sales increased 1% for the first three quarters on a constant dollar basis. Comparable store sales for the first three quarters decreased by 4% on a constant dollar basis and direct to consumer revenue increased 27% on a constant dollar basis.
Direct to consumer revenue increased 25% to $206.7 million, or 17.3% of total company revenues, in the first three quarters of fiscal 2014, an increase from 15.5% of total company revenues in the first three quarters of fiscal 2013.
Gross profit for the first three quarters of fiscal 2014 increased 8% to $604.1 million, and as a percentage of net revenue gross profit was 50.6% for the first three quarters as compared to 52.4% in the same period of fiscal 2013.
Income from operations for the first three quarters of fiscal 2014 decreased 8% to $218.8 million, and as a percentage of net revenue was 18.4% as compared to 22.2% of net revenue in the same period of fiscal 2013.
Tax expense for the first three quarters was $96.0 million, which included a non-recurring adjustment of $31.3 million related to the repatriation of foreign earnings that will be used to fund the share buyback program. The normalized tax rate before the $31.3 million non-recurring tax adjustment would have been 28.9%, compared to 29.7% a year ago. The tax rate for the first three quarters of fiscal 2014, including the non-recurring tax adjustment, was 42.8%.
Excluding the non-recurring tax adjustment, diluted earnings per share were $1.10 in the first three quarters of fiscal 2014. Including the non-recurring tax adjustment, diluted earnings per share for the first three quarters of fiscal 2014 were $0.88, which included a $0.22 per share impact from the non-recurring tax adjustment.
During the first three quarters of fiscal 2014, the Company repurchased 3.3 million shares of the Company's common stock at an average cost of $39.94 per share.
The Company ended the third quarter of fiscal 2014 with $633.6 million in cash and cash equivalents compared to $600.7 million at the end of the third quarter of fiscal 2013. Inventory at the end of the third quarter of fiscal 2014 totaled $229.9 million compared to $209.1 million at the end of the third quarter of fiscal 2013. The Company ended the quarter with 289 stores.
Laurent Potdevin, lululemon's CEO, stated: "I am pleased that our third quarter results demonstrated sequential improvements as the quarter progressed, with all key facets of our business - brand, guest experience, and product - contributing to our momentum." Mr. Potdevin continued: "I am confident that our strong team, coupled with strategic investments into our core business areas, have already made a positive impact and place us on a strong trajectory for further global growth."
Updated Outlook
For the fourth quarter of fiscal 2014, we expect net revenue to be in the range of $570 million to $585 million based on a total comparable sales increase in the low single digits on a constant dollar basis. The sales outlook relative to previous guidance is expected to be impacted by approximately $15 million due to the combined impact of West Coast port delays, a lower Canadian dollar, and delayed store openings. Diluted earnings per share are expected to be in the range of $0.65 to $0.69 for the quarter. This guidance assumes 142.6 million diluted weighted-average shares outstanding and a 30.2% tax rate. The guidance does not reflect potential future repurchases of the Company's shares.
For the full fiscal 2014, we now expect net revenue to be in the range of $1.765 billion to $1.780 billion based on a total comparable sales increase in the low single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $1.53 to $1.57 for the full year, or $1.74 to $1.78 normalized for the non-recurring tax adjustment incurred in the first quarter of fiscal 2014 related to the repatriation of foreign earnings that will be used to fund the share buyback program. This guidance assumes 144.3 million diluted weighted-average shares outstanding and a 37.9% tax rate, which includes the above tax adjustment, or 29.4% before the tax adjustment. The guidance does not reflect potential future repurchases of the Company's shares.