UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
December 1, 2016
Date of Report (Date of earliest event reported)
 
 
lululemon athletica inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
 
 
Delaware
 
001-33608
 
20-3842867
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
1818 Cornwall Avenue
Vancouver, British Columbia
Canada, V6J 1C7
(Address of principal executive offices, including Zip Code)
Registrant’s telephone number, including area code: (604) 732-6124
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 






Item 2.02.
Results of Operations and Financial Condition.
On December 7, 2016, lululemon athletica inc. (the “Company”) issued a press release announcing its financial results for the third quarter ended October 30, 2016 and certain other information. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. As previously announced, the Company has scheduled a conference call for 4:30 p.m. Eastern time on December 7, 2016 to discuss its financial results.
Item 8.01.
Other Events.
On December 1, 2016 the Company's board of directors approved a stock repurchase program for up to $100 million of its common shares in the open market at prevailing market prices. The timing and actual number of common shares to be repurchased will depend upon market conditions and other factors, in accordance with Securities and Exchange Commission requirements, and the repurchase program is expected to be completed in two years. Shares may be repurchased from time to time on the open market, through block trades or otherwise. Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors.
Item 9.01.
Financial Statements and Exhibits.
 (d) Exhibits.
Exhibit No.
  
Description
 
99.1
  
Press release issued on December 7, 2016.





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
lululemon athletica inc.
 
 
Dated: December 7, 2016
/s/ STUART HASELDEN
 
Stuart Haselden
 
Chief Financial Officer





EXHIBIT INDEX
 
Exhibit No.
  
Description
 
99.1
  
Press release issued on December 7, 2016.



Exhibit

Exhibit 99.1
luluwordmark.jpg

LULULEMON ATHLETICA INC. ANNOUNCES THIRD QUARTER FISCAL 2016 RESULTS;
BOARD OF DIRECTORS AUTHORIZES $100 MILLION STOCK REPURCHASE PROGRAM

Vancouver, British Columbia – December 7, 2016 – lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the third quarter ended October 30, 2016.
For the third quarter ended October 30, 2016:
Net revenue increased by 13% to $544.4 million from $479.7 million in the third quarter of fiscal 2015.
Total comparable sales, which includes comparable store sales and direct to consumer, increased by 7%.
Comparable store sales increased by 4%.
Direct to consumer net revenue increased by 16% to $104.0 million.
Gross profit increased by 24% to $278.4 million, and as a percentage of net revenue gross profit was 51.1% compared to 46.9% in the third quarter of fiscal 2015.
Income from operations increased by 36% to $93.0 million from $68.2 million in the third quarter of fiscal 2015, and as a percentage of net revenue was 17.1% compared to 14.2% of net revenue in the third quarter of fiscal 2015.
Income tax expense increased to $25.3 million from $12.1 million in the third quarter of fiscal 2015, and the effective tax rate was 27.0% compared to 18.6%. Excluding certain tax and related interest adjustments, the effective tax rate was 31.3% compared to 28.8% in the third quarter of fiscal 2015.
Diluted earnings per share for the third quarter of fiscal 2016 were $0.50 compared to $0.38 in the third quarter of fiscal 2015. Excluding certain tax and related interest adjustments, diluted earnings per share were $0.47 for the third quarter of fiscal 2016 compared to $0.35 for the third quarter of fiscal 2015.
The Company ended the third quarter of fiscal 2016 with $480.4 million in cash and cash equivalents compared to $403.4 million at the end of the third quarter of fiscal 2015. Inventories at the end of the third quarter of fiscal 2016 increased by 2% to $364.5 million compared to $357.8 million at the end of the third quarter of fiscal 2015. The Company ended the quarter with 389 stores.
The Company also announced that its board of directors has approved a stock repurchase program for up to $100 million of its common shares in the open market at prevailing market prices. The timing and actual number of common shares to be repurchased will depend upon market conditions and other factors, in accordance with Securities and Exchange Commission requirements. The stock repurchase program is intended to create shareholder value by making opportunistic repurchases during periods of favorable market conditions. Shares may be repurchased from time to time on the open market, through block trades or otherwise. Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors.
Laurent Potdevin, lululemon's CEO, stated: "Our third quarter results demonstrated strong execution across all areas of our business as we delivered continued topline momentum, outperformed in gross margin and inflected meaningfully in EPS. This success is a result of our team's ongoing effort and commitment to delivering on our long term strategies."
Mr. Potdevin continued: "As we entered the fourth quarter, we experienced mixed sales results that have since improved. I am inspired by the team's response and passion towards making this another successful holiday season, and I am confident that we will continue to deliver an unparalleled guest experience across all our channels and regions around the globe."
Updated Outlook
For the fourth quarter of fiscal 2016, we expect net revenue to be in the range of $765 million to $785 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 $0.96 to $1.01 for the quarter. This guidance assumes 137.3 million diluted weighted-average shares outstanding and a 31.2% tax rate.

1



luluwordmark.jpg

For the full fiscal 2016, we now expect net revenue to be in the range of $2.320 billion to $2.340 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 $2.18 to $2.23 for the full year, or $2.11 to $2.16 normalized for the tax and related interest adjustments made during the first three quarters of fiscal 2016. This guidance assumes 137.3 million diluted weighted-average shares outstanding and a 28.2% tax rate, or 30.9% excluding the above tax and related interest adjustments.
Conference Call Information
A conference call to discuss third quarter results is scheduled for today, December 7, 2016, 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: http://investor.lululemon.com/events.cfm. 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 healthy lifestyle inspired athletic apparel company for yoga, running, training, and most other sweaty pursuits, with products that create transformational experiences for people to live happy, healthy, fun lives. Setting the bar in technical fabrics and functional designs, lululemon works with yogis and athletes in local communities for continuous research and product feedback. For more information, visit www.lululemon.com.
Non-GAAP Financial Measures
Constant dollar changes in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue, and the effective tax rate and diluted earnings per share excluding certain tax and related interest adjustments, are not United States generally accepted accounting principle ("GAAP") financial measures.
A constant dollar basis assumes the average foreign exchange rates for the current period remained constant with the average foreign exchange rates for the same period of the prior year. We provide constant dollar changes in net revenue, total comparable sales, comparable store sales, and changes in direct to consumer net revenue because we use these measures to understand the underlying growth rate of net revenue excluding the impact of changes in foreign exchange rates. We believe that disclosing these measures on a constant dollar basis is useful to investors because it enables them to better understand the level of growth of our business.
We disclose the effective tax rate and diluted earnings per share excluding certain tax and related interest adjustments because of their comparability to our historical information, which we believe is useful to investors.
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.
Forward-Looking Statements:
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risks, uncertainties and assumptions, such as statements regarding our future financial condition or results of operations and our prospects and strategies for future growth. 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 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: our ability to maintain the value and reputation of our brand, including any negative publicity regarding our products or the production methods of our suppliers or

2



luluwordmark.jpg

manufacturers; the acceptability of our products to our guests, including receiving products that comply with our technical specifications and quality standards; our highly competitive market and increasing competition; our reliance on and limited control over third-party suppliers to provide fabrics for and to produce our products; an economic downturn or economic uncertainty in our key markets; increasing product costs and decreasing selling prices; our ability to anticipate consumer preferences and successfully develop and introduce new, innovative and updated products; our ability to accurately forecast customer demand for our products; our ability to safeguard against security breaches with respect to our information technology systems; any material disruption of our information systems; our ability to manage our growth and the increased complexity of our business effectively; the fluctuating costs of raw materials; our ability to expand internationally in light of our limited operating experience and limited brand recognition in new international markets; our ability to deliver our products to the market and to meet customer expectations if we have problems with our distribution system; imitation by our competitors; our ability to protect our intellectual property rights; changes in tax laws or unanticipated tax liabilities, capital or financing needs in the United States, or our intentions with respect to the reinvestment of foreign earnings; our ability to cancel store leases if an existing or new store is not profitable; increasing labor costs and other factors associated with the production of our products in South and South East Asia; our ability to successfully open new store locations in a timely manner; our ability to comply with trade and other regulations; the continued service of our senior management; seasonality; fluctuations in foreign currency exchange rates; the operations of many of our suppliers are subject to international and other risks; our ability to source our merchandise profitably or at all; our exposure to various types of litigation; actions of activist stockholders; 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, our 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 we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances, except as may be required by law.
Contacts:
Investor Contact:
Joseph Teklits/Caitlin Morahan
ICR, Inc.
203-682-8200

Media Contact:
Alecia Pulman
ICR, Inc.
203-682-8224



3



luluwordmark.jpg

lululemon athletica inc.
Condensed Consolidated Statements of Operations
Unaudited; Expressed in thousands, except per share amounts 
 
 
Thirteen Weeks Ended 
 October 30, 2016
 
Thirteen Weeks Ended 
 November 1, 2015
 
Thirty-Nine Weeks Ended 
 October 30, 2016
 
Thirty-Nine Weeks Ended 
 November 1, 2015
Net revenue
 
$
544,416

 
$
479,693

 
$
1,554,452

 
$
1,356,247

Costs of goods sold
 
265,990

 
254,896

 
782,734

 
713,548

Gross profit
 
278,426

 
224,797

 
771,718

 
642,699

As a percent of net revenue
 
51.1
%
 
46.9
%
 
49.6
%
 
47.4
%
Selling, general and administrative expenses
 
185,451

 
156,619

 
547,195

 
439,906

As a percent of net revenue
 
34.1
%
 
32.7
%
 
35.2
%
 
32.4
%
Income from operations
 
92,975

 
68,178

 
224,523

 
202,793

As a percent of net revenue
 
17.1
%
 
14.2
%
 
14.4
%
 
15.0
%
Other income (expense), net
 
628

 
(2,890
)
 
720

 
(1,519
)
Income before income tax expense
 
93,603

 
65,288

 
225,243

 
201,274

Income tax expense
 
25,318

 
12,135

 
57,997

 
52,643

Net income
 
$
68,285

 
$
53,153

 
$
167,246

 
$
148,631

 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
0.50

 
$
0.38

 
$
1.22

 
$
1.05

Diluted earnings per share
 
$
0.50

 
$
0.38

 
$
1.22

 
$
1.05

Basic weighted-average shares outstanding
 
137,033

 
140,282

 
137,095

 
141,198

Diluted weighted-average shares outstanding
 
137,237

 
140,457

 
137,321

 
141,470



4



luluwordmark.jpg

lululemon athletica inc.
Condensed Consolidated Balance Sheets
Unaudited; Expressed in thousands 
 
 
October 30,
2016
 
January 31,
2016
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
480,386

 
$
501,482

Inventories
 
364,514

 
284,009

Prepaid and receivable income taxes
 
123,362

 
91,453

Other current assets
 
54,648

 
40,095

Total current assets
 
1,022,910

 
917,039

Property and equipment, net
 
399,658

 
349,605

Goodwill and intangible assets, net
 
24,567

 
24,777

Deferred income taxes and other non-current assets
 
31,805

 
22,656

Total assets
 
$
1,478,940

 
$
1,314,077

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
9,132

 
$
10,381

Accrued inventory liabilities
 
32,146

 
25,451

Accrued compensation and related expenses
 
53,641

 
43,524

Income taxes payable
 
21,953

 
37,736

Unredeemed gift card liability
 
44,173

 
57,736

Other accrued liabilities
 
51,663

 
50,676

Total current liabilities
 
212,708

 
225,504

Deferred income tax liability
 
11,064

 
10,759

Other non-current liabilities
 
50,699

 
50,332

Stockholders' equity
 
1,204,469

 
1,027,482

Total liabilities and stockholders' equity
 
$
1,478,940

 
$
1,314,077



5



luluwordmark.jpg

lululemon athletica inc.
Condensed Consolidated Statements of Cash Flows
Unaudited; Expressed in thousands 
 
 
Thirty-Nine Weeks Ended 
 October 30, 2016
 
Thirty-Nine Weeks Ended 
 November 1, 2015
Cash flows from operating activities
 
 
 
 
Net income
 
$
167,246

 
$
148,631

Items not affecting cash
 
75,252

 
58,471

Changes in operating assets and liabilities
 
(145,167
)
 
(181,162
)
Net cash provided by operating activities
 
97,331

 
25,940

Net cash used in investing activities
 
(106,168
)
 
(108,061
)
Net cash used in financing activities
 
(23,960
)
 
(167,452
)
Effect of exchange rate changes on cash
 
11,701

 
(11,460
)
Decrease in cash and cash equivalents
 
(21,096
)
 
(261,033
)
Cash and cash equivalents, beginning of period
 
501,482

 
664,479

Cash and cash equivalents, end of period
 
$
480,386

 
$
403,446



6



luluwordmark.jpg

lululemon athletica inc.
Reconciliation of Non-GAAP Financial Measures
Unaudited


Constant dollar changes in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue
The below changes in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue show the net change for the third quarter of fiscal 2016 compared to the third quarter of fiscal 2015.
 
 
Change in Net Revenue
 
Change in Total Comparable Sales1,2
 
Change in Comparable Store Sales2
 
Change in Direct to Consumer Net Revenue
Increase
 
13
%
 
7
%
 
4
%
 
16
%
Adjustments due to foreign exchange rate changes
 

 

 

 

Increase in constant dollars
 
13
%
 
7
%
 
4
%
 
16
%
__________
1Total comparable sales includes comparable store sales and direct to consumer sales.
2Comparable store sales reflects net revenue from company-operated stores that have been open for at least 12 months, or open for at least 12 months after being significantly expanded.


Effective tax rate and diluted earnings per share, excluding tax and related interest adjustments
 
 
Thirteen Weeks Ended 
 October 30, 2016
 
Thirteen Weeks Ended 
 November 1, 2015
 
Thirty-Nine Weeks Ended 
 October 30, 2016
 
Thirty-Nine Weeks Ended 
 November 1, 2015
Effective tax rate
 
27.0
%
 
18.6
%
 
25.7
%
 
26.2
%
Tax and related interest adjustments1
 
4.3

 
10.2

 
5.0

 
3.3

Effective tax rate, excluding tax and related interest adjustments
 
31.3
%
 
28.8
%
 
30.7
%
 
29.5
%

 
 
Thirteen Weeks Ended 
 October 30, 2016
 
Thirteen Weeks Ended 
 November 1, 2015
 
Thirty-Nine Weeks Ended 
 October 30, 2016
 
Thirty-Nine Weeks Ended 
 November 1, 2015
Diluted earnings per share
 
$
0.50

 
$
0.38

 
$
1.22

 
$
1.05

Tax and related interest adjustments1
 
(0.03
)
 
(0.03
)
 
(0.07
)
 
(0.03
)
Diluted earnings per share, excluding tax and related interest adjustments
 
$
0.47

 
$
0.35

 
$
1.15

 
$
1.02

__________
1These adjustments relate to the Company's transfer pricing arrangements and the associated repatriation of foreign earnings. Please refer to Note 7 to the unaudited interim consolidated financial statements 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 7, 2016 for an explanation as to the nature of these items.

7



luluwordmark.jpg

Expected annual effective tax rate and diluted earnings per share, excluding tax and related interest adjustments
 
 
Fifty-Two Weeks Ending January 29, 2017
Expected effective tax rate
 
28.2
%
Tax and related interest adjustments1
 
2.7

Expected effective tax rate, excluding tax and related interest adjustments
 
30.9
%

 
 
Fifty-Two Weeks Ending January 29, 2017
Expected diluted earnings per share range
 
$2.18 to $2.23
Tax and related interest adjustments1
 
(0.07)
Diluted earnings per share, excluding tax and related interest adjustments
 
$2.11 to $2.16
__________
1These adjustments relate to the Company's transfer pricing arrangements and the associated repatriation of foreign earnings. Please refer to Note 7 to the unaudited interim consolidated financial statements 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 7, 2016 for an explanation as to the nature of these items.


8



luluwordmark.jpg

lululemon athletica inc.
Store Count and Square Footage1 
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 2015
 
354

 
10

 
1

 
363

1st Quarter 2016
 
363

 
11

 
1

 
373

2nd Quarter 2016
 
373

 
6

 

 
379

3rd Quarter 2016
 
379

 
12

 
2

 
389


 
 
Total Gross Square Feet at the Beginning of the Quarter
 
Gross Square Feet Added During the Quarter2
 
Gross Square Feet Lost During the Quarter2
 
Total Gross Square Feet at the End of the Quarter
4th Quarter 2015
 
1,036

 
38

 
3

 
1,071

1st Quarter 2016
 
1,071

 
26

 
2

 
1,095

2nd Quarter 2016
 
1,095

 
22

 

 
1,117

3rd Quarter 2016
 
1,117

 
32

 
5

 
1,144

 __________
1Store count and square footage summary includes company-operated stores which are branded lululemon or ivivva. Excludes retail locations operated by a third party under a license and supply arrangement.
2Gross 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.

9