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Lululemon (LULU) Q4 Earnings Beat Estimates, Sales Up Y/Y
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lululemon athletica inc. (LULU - Free Report) reported strong fourth-quarter fiscal 2020 results, with the top and the bottom line surpassing the Zacks Consensus Estimate as well as improving year on year.
Management is pleased with fourth-quarter performance, despite significant adversities stemming from COVID-19 led store closures and capacity constraints. The quarterly performance gained from growth across regions as well as increase in total comparable sales. While direct-to-consumer revenues increased during the quarter, comparable store sales continued to remain dismal.
Management continues to remain cautious regarding the impact of the pandemic upon its business. Further, this Zacks Rank #3 (Hold) company provided expectations for the first quarter as well as for fiscal 2021.
We note that shares of the company have gained 72.8% in a year compared with the industry’s 101.5% growth.
Q4 Numbers
lululemon’s adjusted earnings of $2.58 per share in the fiscal fourth quarter beat the Zacks Consensus Estimate of $2.49 and increased 13.2% from earnings of $2.28 in the year-ago quarter.
The Vancouver, Canada-based company’s quarterly revenues rose 24% to $1,729.5 million and surpassed the Zacks Consensus Estimate of $1,660 million. On a constant-dollar basis, revenues increased 22%. The company’s top line primarily benefited from strong total comparable sales (comps) and growth across regions. During the quarter, the company witnessed growth of 21% in North America and 47% in international markets. Moreover, the company gained from broad-based trends across all of major merchandise categories, with high-teens revenue growth in women's, men's and accessories. Moreover, its acquired business — MIRROR — generated $170 million worth sales during the quarter.
Total comps advanced 21% in the reported quarter and were up 20% on a constant-dollar basis. Comps mainly benefited from strength in direct-to-consumer revenues, offset by a decline in comparable store sales (or comps at company-operated stores).
Direct-to-consumer revenues were up 94%, while on a constant-dollar basis, the metric rose 92%. Notably, direct-to-consumer revenues contributed 52% to total sales in the fourth quarter, whereas its contribution was 33% in the year-ago quarter.
The company’s comparable store sales declined 28% (down 29% at constant-dollar basis) year over year. Comparable store productivity was 72%. On a constant-dollar basis, comparable store productivity was 71%. During the quarter, the company had approximately 88% of its stores open, on average.
In the digital channel, the company witnessed a 92% surge in comps. E-commerce sales amounted to $900 million and contributed 52% to total revenues. The company continued to witness notable strength in traffic and conversion.
lululemon athletica inc. Price, Consensus and EPS Surprise
Gross profit advanced 25% to $1,012.7 million in fourth-quarter fiscal 2020. Meanwhile, gross margin expanded 60 basis points (bps) to 58.6% on gains of 190-bps leverage in occupancy, product team costs and depreciation as well as 20 bps of favorable foreign exchange. These were partly offset by 80 bps of deleverage in product margin, stemming from COVID-led higher airfreight costs, increased markdowns and a 70-bps deleverage on DC costs, predominantly related to COVID-19.
SG&A expenses increased 38.2% to $544.8 million. SG&A expenses, as a percentage of sales, deleveraged 330 bps to 31.5%. The elevated SG&A expenses mainly stemmed from higher marketing investment related to MIRROR alongside impacts from store closures, capacity constrains and COVID-19 related costs.
Adjusted operating income rose 12% to $465.7 million. Adjusted operating margin contracted 290 bps to 26.9%.
Store Updates
During the fiscal fourth quarter, the company opened six net new stores, including eight store openings and two closures. During fiscal 2020, the company opened 30 net new company-operated stores, ending the year with 521 stores.
The company currently has 96% of its stores open across the globe.
In fiscal 2021, it expects to open 40-50 net new stores. This includes 30-35 stores in international markets.
Financials
lululemon exited the fiscal fourth quarter with $1.5 billion in total liquidity, which indicates a strong financial position. This included $1,150.5 million of cash and cash equivalents, and $397.6 million available under its revolving credit facility. Further, its stockholders' equity was $2,558.5 million as of Jan 31, 2021. Inventories were up 25% to $647.2 million.
During fiscal 2020, the company generated operating cash flow of $803.3 million.
Capital expenditures are expected to be approximately $335 to $345 million during fiscal 2021.
Outllook
For first-quarter fiscal 2021, the company expects net sales in the range of $1.10-$1.13 billion. Additionally, management expects gross margin to expand 50-100 bps year on year. Adjusted earnings are anticipated in the band of 86-90 cents per share. The Zacks Consensus Estimate for earnings in the first-quarter is currently pegged at 84 cents per share.
For fiscal 2021, the company expects net revenues in the range of $5.55-$5.65 billion. Gross margin is expected to expand in the range of 100-150 bps. Adjusted earnings per share are expected in the range of $6.30 to $6.45. The Zacks Consensus Estimate for earnings in fiscal 2021 is currently pegged at $6.65.
G-III Apparel Group, Ltd. (GIII - Free Report) , also a Zacks Rank #1 stock, has an expected long-term earnings growth rate of 11.6%.
Delta Apparel, Inc. (DLA - Free Report) delivered an earnings surprise of 140.3%, on average, in the trailing four quarters. It presently flaunts a Zacks Rank #1.
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Lululemon (LULU) Q4 Earnings Beat Estimates, Sales Up Y/Y
lululemon athletica inc. (LULU - Free Report) reported strong fourth-quarter fiscal 2020 results, with the top and the bottom line surpassing the Zacks Consensus Estimate as well as improving year on year.
Management is pleased with fourth-quarter performance, despite significant adversities stemming from COVID-19 led store closures and capacity constraints. The quarterly performance gained from growth across regions as well as increase in total comparable sales. While direct-to-consumer revenues increased during the quarter, comparable store sales continued to remain dismal.
Management continues to remain cautious regarding the impact of the pandemic upon its business. Further, this Zacks Rank #3 (Hold) company provided expectations for the first quarter as well as for fiscal 2021.
We note that shares of the company have gained 72.8% in a year compared with the industry’s 101.5% growth.
Q4 Numbers
lululemon’s adjusted earnings of $2.58 per share in the fiscal fourth quarter beat the Zacks Consensus Estimate of $2.49 and increased 13.2% from earnings of $2.28 in the year-ago quarter.
The Vancouver, Canada-based company’s quarterly revenues rose 24% to $1,729.5 million and surpassed the Zacks Consensus Estimate of $1,660 million. On a constant-dollar basis, revenues increased 22%. The company’s top line primarily benefited from strong total comparable sales (comps) and growth across regions. During the quarter, the company witnessed growth of 21% in North America and 47% in international markets. Moreover, the company gained from broad-based trends across all of major merchandise categories, with high-teens revenue growth in women's, men's and accessories. Moreover, its acquired business — MIRROR — generated $170 million worth sales during the quarter.
Total comps advanced 21% in the reported quarter and were up 20% on a constant-dollar basis. Comps mainly benefited from strength in direct-to-consumer revenues, offset by a decline in comparable store sales (or comps at company-operated stores).
Direct-to-consumer revenues were up 94%, while on a constant-dollar basis, the metric rose 92%. Notably, direct-to-consumer revenues contributed 52% to total sales in the fourth quarter, whereas its contribution was 33% in the year-ago quarter.
The company’s comparable store sales declined 28% (down 29% at constant-dollar basis) year over year. Comparable store productivity was 72%. On a constant-dollar basis, comparable store productivity was 71%. During the quarter, the company had approximately 88% of its stores open, on average.
In the digital channel, the company witnessed a 92% surge in comps. E-commerce sales amounted to $900 million and contributed 52% to total revenues. The company continued to witness notable strength in traffic and conversion.
lululemon athletica inc. Price, Consensus and EPS Surprise
lululemon athletica inc. price-consensus-eps-surprise-chart | lululemon athletica inc. Quote
Margins
Gross profit advanced 25% to $1,012.7 million in fourth-quarter fiscal 2020. Meanwhile, gross margin expanded 60 basis points (bps) to 58.6% on gains of 190-bps leverage in occupancy, product team costs and depreciation as well as 20 bps of favorable foreign exchange. These were partly offset by 80 bps of deleverage in product margin, stemming from COVID-led higher airfreight costs, increased markdowns and a 70-bps deleverage on DC costs, predominantly related to COVID-19.
SG&A expenses increased 38.2% to $544.8 million. SG&A expenses, as a percentage of sales, deleveraged 330 bps to 31.5%. The elevated SG&A expenses mainly stemmed from higher marketing investment related to MIRROR alongside impacts from store closures, capacity constrains and COVID-19 related costs.
Adjusted operating income rose 12% to $465.7 million. Adjusted operating margin contracted 290 bps to 26.9%.
Store Updates
During the fiscal fourth quarter, the company opened six net new stores, including eight store openings and two closures. During fiscal 2020, the company opened 30 net new company-operated stores, ending the year with 521 stores.
The company currently has 96% of its stores open across the globe.
In fiscal 2021, it expects to open 40-50 net new stores. This includes 30-35 stores in international markets.
Financials
lululemon exited the fiscal fourth quarter with $1.5 billion in total liquidity, which indicates a strong financial position. This included $1,150.5 million of cash and cash equivalents, and $397.6 million available under its revolving credit facility. Further, its stockholders' equity was $2,558.5 million as of Jan 31, 2021. Inventories were up 25% to $647.2 million.
During fiscal 2020, the company generated operating cash flow of $803.3 million.
Capital expenditures are expected to be approximately $335 to $345 million during fiscal 2021.
Outllook
For first-quarter fiscal 2021, the company expects net sales in the range of $1.10-$1.13 billion. Additionally, management expects gross margin to expand 50-100 bps year on year. Adjusted earnings are anticipated in the band of 86-90 cents per share. The Zacks Consensus Estimate for earnings in the first-quarter is currently pegged at 84 cents per share.
For fiscal 2021, the company expects net revenues in the range of $5.55-$5.65 billion. Gross margin is expected to expand in the range of 100-150 bps. Adjusted earnings per share are expected in the range of $6.30 to $6.45. The Zacks Consensus Estimate for earnings in fiscal 2021 is currently pegged at $6.65.
Looking for Favorable Stocks? Check These
Crocs, Inc. (CROX - Free Report) has an expected long-term earnings growth rate of 15%. The company sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
G-III Apparel Group, Ltd. (GIII - Free Report) , also a Zacks Rank #1 stock, has an expected long-term earnings growth rate of 11.6%.
Delta Apparel, Inc. (DLA - Free Report) delivered an earnings surprise of 140.3%, on average, in the trailing four quarters. It presently flaunts a Zacks Rank #1.
5G Revolution: 3 Stocks to Make Your Move
With super high data speed, it will make current cell phones obsolete and unlock the full potential of big data, cloud computing, and artificial intelligence. In the next few years this industry is predicted to create 22 million jobs and a stunning $12.3 trillion in revenue.
Today you have an historic chance to pursue almost unimaginable gains like Microsoft, Netflix, and Apple in their early phases. Zacks has released a Special Report that reveals our . . .
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