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
September 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 September 1, 2016, lululemon athletica inc. (the “Company”) issued a press release announcing its financial results for the second quarter ended July 31, 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 September 1, 2016 to discuss its financial results.
Item 9.01.
Financial Statements and Exhibits.
 (d) Exhibits.
Exhibit No.
  
Description
 
99.1
  
Press release entitled "lululemon athletica inc. Announces Second Quarter Fiscal 2016 Results," issued on September 1, 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: September 1, 2016
/s/ STUART HASELDEN
 
Stuart Haselden
 
Chief Financial Officer





EXHIBIT INDEX
 
Exhibit No.
 
Description
 
99.1
  
Press release entitled "lululemon athletica inc. Announces Second Quarter Fiscal 2016 Results," issued on September 1, 2016.



Exhibit

Exhibit 99.1
lululogo.jpg

LULULEMON ATHLETICA INC. ANNOUNCES SECOND QUARTER FISCAL 2016 RESULTS

Vancouver, British Columbia – September 1, 2016 – lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the second quarter ended July 31, 2016.
For the second quarter ended July 31, 2016:
Net revenue increased by 14% to $514.5 million from $453.0 million in the second quarter of fiscal 2015, or increased by 15% on a constant dollar basis.
Total comparable sales, which includes comparable store sales and direct to consumer, increased by 4%, or by 5% on a constant dollar basis.
Comparable store sales increased by 3%, or by 4% on a constant dollar basis.
Direct to consumer net revenue increased by 6% to $87.4 million, or by 7% on a constant dollar basis. In the second quarter of fiscal 2015 we held an online warehouse sale. Excluding the impact of this online warehouse sale, direct to consumer net revenue would have increased by 16%.
Gross profit increased by 20% to $254.2 million, and as a percentage of net revenue gross profit was 49.4% compared to 46.8% in the second quarter of fiscal 2015.
Income from operations increased by 11% to $74.0 million from $66.6 million in the second quarter of fiscal 2015, and as a percentage of net revenue was 14.4% compared to 14.7% of net revenue in the second quarter of fiscal 2015.
Income tax expense was $20.9 million, which included a net income tax recovery of $1.9 million related to the Company's transfer pricing arrangements and the associated plan to repatriate foreign earnings. In addition, there was a related net interest expense of $0.3 million. The effective tax rate in the second quarter of fiscal 2016 was 28.1% compared to 29.3% in the second quarter of fiscal 2015. Excluding the above tax and related interest adjustments, the effective tax rate was 30.5% in the second quarter of fiscal 2016.
Diluted earnings per share for the second quarter of fiscal 2016 were $0.39 compared to $0.34 in the second quarter of fiscal 2015. Excluding the above tax and related interest adjustments, diluted earnings per share were $0.38 for the second quarter of fiscal 2016.
During the second quarter of fiscal 2016, the Company repurchased 0.2 million shares of the Company's common stock at an average cost of $63.65 per share, completing our approved stock repurchase program.
The Company ended the second quarter of fiscal 2016 with $535.3 million in cash and cash equivalents compared to $541.3 million at the end of the second quarter of fiscal 2015. Inventories at the end of the second quarter of fiscal 2016 decreased by 1% to $277.3 million compared to $280.6 million at the end of the second quarter of fiscal 2015. The Company ended the quarter with 379 stores.
Laurent Potdevin, lululemon's CEO, stated: "The second quarter demonstrated strong results as we delivered sales and EPS at the high-end of our guidance and saw an important inflection in our gross margin and earnings performance."
Mr. Potdevin continued: "Our progress in the second quarter, especially in gross margin and inventory, marks the beginning of our recovery in profitability and sustainable long term growth."
Updated Outlook
For the third quarter of fiscal 2016, we expect net revenue to be in the range of $535 million to $545 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 $0.42 to $0.44 for the quarter. This guidance assumes 137.5 million diluted weighted-average shares outstanding and a 30.5% tax rate.
For the full fiscal 2016, we now expect net revenue to be in the range of $2.325 billion to $2.350 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 $2.11 to $2.19 for the full year, or $2.07 to $2.15 normalized for the tax and related interest adjustments made during the first

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two quarters of fiscal 2016. This guidance assumes 137.5 million diluted weighted-average shares outstanding and a 28.7% tax rate, or 30.5% excluding the above tax and related interest adjustments.
Conference Call Information
A conference call to discuss second quarter results is scheduled for today, September 1, 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, which are not under management's control. 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 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

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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



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lululemon athletica inc.
Condensed Consolidated Statements of Operations
Unaudited; Expressed in thousands, except per share amounts 
 
 
Thirteen Weeks Ended 
 July 31, 2016
 
Thirteen Weeks Ended 
 August 2, 2015
 
Twenty-Six Weeks Ended 
 July 31, 2016
 
Twenty-Six Weeks Ended 
 August 2, 2015
Net revenue
 
$
514,520

 
$
453,010

 
$
1,010,036

 
$
876,554

Costs of goods sold
 
260,359

 
240,985

 
516,744

 
458,652

Gross profit
 
254,161

 
212,025

 
493,292

 
417,902

As a percent of net revenue
 
49.4
%
 
46.8
%
 
48.8
%
 
47.7
%
Selling, general and administrative expenses
 
180,202

 
145,446

 
361,744

 
283,287

As a percent of net revenue
 
35.0
%
 
32.1
%
 
35.8
%
 
32.3
%
Income from operations
 
73,959

 
66,579

 
131,548

 
134,615

As a percent of net revenue
 
14.4
%
 
14.7
%
 
13.0
%
 
15.4
%
Other income (expense), net
 
578

 
842

 
92

 
1,371

Income before income tax expense
 
74,537

 
67,421

 
131,640

 
135,986

Income tax expense
 
20,912

 
19,753

 
32,679

 
40,508

Net income
 
$
53,625

 
$
47,668

 
$
98,961

 
$
95,478

 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
0.39

 
$
0.34

 
$
0.72

 
$
0.67

Diluted earnings per share
 
$
0.39

 
$
0.34

 
$
0.72

 
$
0.67

Basic weighted-average shares outstanding
 
136,987

 
141,372

 
137,071

 
141,656

Diluted weighted-average shares outstanding
 
137,229

 
141,644

 
137,309

 
141,977



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lululemon athletica inc.
Condensed Consolidated Balance Sheets
Unaudited; Expressed in thousands 
 
 
July 31,
2016
 
January 31,
2016
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
535,350

 
$
501,482

Inventories
 
277,279

 
284,009

Prepaid and receivable income taxes
 
98,678

 
91,453

Other current assets
 
51,376

 
40,095

Total current assets
 
962,683

 
917,039

Property and equipment, net
 
395,010

 
349,605

Goodwill and intangible assets, net
 
24,897

 
24,777

Deferred income taxes and other non-current assets
 
32,911

 
22,656

Total assets
 
$
1,415,501

 
$
1,314,077

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
8,295

 
$
10,381

Accrued inventory liabilities
 
19,287

 
25,451

Accrued compensation and related expenses
 
39,495

 
43,524

Income taxes payable
 
33,592

 
37,736

Unredeemed gift card liability
 
46,181

 
57,736

Other accrued liabilities
 
50,588

 
50,676

Total current liabilities
 
197,438

 
225,504

Deferred income tax liability
 
11,198

 
10,759

Other non-current liabilities
 
50,663

 
50,332

Stockholders' equity
 
1,156,202

 
1,027,482

Total liabilities and stockholders' equity
 
$
1,415,501

 
$
1,314,077



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lululemon athletica inc.
Condensed Consolidated Statements of Cash Flows
Unaudited; Expressed in thousands 
 
 
Twenty-Six Weeks Ended 
 July 31, 2016
 
Twenty-Six Weeks Ended 
 August 2, 2015
Cash flows from operating activities
 
 
 
 
Net income
 
$
98,961

 
$
95,478

Items not affecting cash
 
46,604

 
38,163

Changes in operating assets and liabilities
 
(45,577
)
 
(101,480
)
Net cash provided by operating activities
 
99,988

 
32,161

Net cash used in investing activities
 
(71,261
)
 
(65,118
)
Net cash used in financing activities
 
(23,877
)
 
(78,837
)
Effect of exchange rate changes on cash
 
29,018

 
(11,423
)
Increase (decrease) in cash and cash equivalents
 
33,868

 
(123,217
)
Cash and cash equivalents, beginning of period
 
501,482

 
664,479

Cash and cash equivalents, end of period
 
$
535,350

 
$
541,262



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lululemon athletica inc.
Reconciliation of Non-GAAP Financial Measures
Unaudited
The below changes in net revenue, total comparable sales, comparable store sales, and direct to consumer revenue show the change compared to the corresponding period in the prior year.

Constant dollar changes in net revenue
 
 
Thirteen Weeks Ended 
 July 31, 2016
 
Thirteen Weeks Ended 
 August 2, 2015
 
 
(In thousands)
 
(Percentage)
 
(In thousands)
 
(Percentage)
Net revenue increase
 
$
61,510

 
14
%
 
$
62,302

 
16
%
Adjustments due to foreign exchange rate changes
 
5,251

 
1

 
20,293

 
5

Net revenue increase in constant dollars
 
$
66,761

 
15
%
 
$
82,595

 
21
%


Constant dollar changes in total comparable sales
 
 
Thirteen Weeks Ended 
 July 31, 2016
 
Thirteen Weeks Ended 
 August 2, 2015
Increase in total comparable sales1
 
4
%
 
6
%
Adjustments due to foreign exchange rate changes
 
1

 
5

Increase in total comparable sales in constant dollars1
 
5
%
 
11
%
__________
1Total comparable sales includes comparable store sales and direct to consumer sales. Comparable 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.


Constant dollar changes in comparable store sales
 
 
Thirteen Weeks Ended 
 July 31, 2016
 
Thirteen Weeks Ended 
 August 2, 2015
Increase in comparable store sales1
 
3
%
 
1
%
Adjustments due to foreign exchange rate changes
 
1

 
5

Increase in comparable store sales in constant dollars1
 
4
%
 
6
%
__________
1Comparable 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.


Constant dollar changes in direct to consumer net revenue
 
 
Thirteen Weeks Ended 
 July 31, 2016
 
Thirteen Weeks Ended 
 August 2, 2015
Increase in direct to consumer net revenue
 
6
%
 
30
%
Adjustments due to foreign exchange rate changes
 
1

 
5

Increase in direct to consumer net revenue in constant dollars
 
7
%
 
35
%


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Effective tax rate, excluding tax and related interest adjustments
 
 
Thirteen Weeks Ended 
 July 31, 2016
 
Thirteen Weeks Ended 
 August 2, 2015
 
Twenty-Six Weeks Ended 
 July 31, 2016
 
Twenty-Six Weeks Ended 
 August 2, 2015
Effective tax rate
 
28.1
%
 
29.3
%
 
24.8
%
 
29.8
%
Tax and related interest adjustments1
 
2.4

 

 
5.4

 

Effective tax rate, excluding tax and related interest adjustments
 
30.5
%
 
29.3
%
 
30.2
%
 
29.8
%
__________
1These adjustments relate to the Company's transfer pricing arrangements and the associated plan to repatriate 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 September 1, 2016 for an explanation as to the nature of these items.

Diluted earnings per share, excluding tax and related interest adjustments
 
 
Thirteen Weeks Ended 
 July 31, 2016
 
Thirteen Weeks Ended 
 August 2, 2015
 
Twenty-Six Weeks Ended 
 July 31, 2016
 
Twenty-Six Weeks Ended 
 August 2, 2015
Diluted earnings per share
 
$
0.39

 
$
0.34

 
$
0.72

 
$
0.67

Tax and related interest adjustments1
 
(0.01
)
 

 
(0.04
)
 

Diluted earnings per share, excluding tax and related interest adjustments
 
$
0.38

 
$
0.34

 
$
0.68

 
$
0.67

__________
1These adjustments relate to the Company's transfer pricing arrangements and the associated plan to repatriate 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 September 1, 2016 for an explanation as to the nature of these items.


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lululemon athletica inc.
Store Count and Square Footage1 
Twenty-Six Weeks Ended July 31, 2016
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
1st Quarter
 
363

 
11

 
1

 
373

2nd Quarter
 
373

 
6

 

 
379

 
 
 
 
 
 
 
 
 
 
 
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
1st Quarter
 
1,071

 
26

 
2

 
1,095

2nd Quarter
 
1,095

 
22

 

 
1,117

 __________
1Store count and square footage summary includes company-operated stores which are branded lululemon athletica or ivivva athletica. 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.

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