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
March 29, 2017
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 March 29, 2017, lululemon athletica inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter and full year ended January 29, 2017 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 March 29, 2017 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 Fourth Quarter and Full Year Fiscal 2016 Results'' issued on March 29, 2017.





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: March 28, 2017
 
 
 
 
 
/s/ STUART HASELDEN
 
 
 
 
 
 
Stuart Haselden
 
 
 
 
 
 
Chief Financial Officer





EXHIBIT INDEX
 
Exhibit No.
 
Description
 
 
99.1
  
Press release entitled ''lululemon athletica inc. Announces Fourth Quarter and Full Year Fiscal 2016 Results'' issued on March 29, 2017.




Exhibit

Exhibit 99.1
luluwordmark.jpg

LULULEMON ATHLETICA INC. ANNOUNCES FOURTH QUARTER
AND FULL YEAR FISCAL 2016 RESULTS

Vancouver, British Columbia - March 29, 2017 - lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the fourth quarter and fiscal year ended January 29, 2017.
For the fourth quarter ended January 29, 2017:
Net revenue increased 12% to $789.9 million from $704.3 million in the fourth quarter of fiscal 2015. On a constant dollar basis, net revenue increased 12%.
Total comparable sales, which includes comparable store sales and direct to consumer, increased 8%, or by 7% on a constant dollar basis.
Comparable store sales increased 6%, or by 6% on a constant dollar basis.
Direct to consumer net revenue increased 12% to $164.3 million, or by 12% on a constant dollar basis.
Gross profit increased 21% to $427.9 million, and as a percentage of net revenue was 54.2% compared to 50.3% in the fourth quarter of fiscal 2015.
Income from operations increased 18% to $196.6 million, and as a percentage of net revenue was 24.9% compared to 23.6% in the fourth quarter of fiscal 2015.
Income tax expense increased to $61.4 million from $49.8 million in the fourth quarter of fiscal 2015, and the effective tax rate was 31.1% compared to 29.8% in the fourth quarter of fiscal 2015. Excluding certain tax and related interest adjustments, the effective tax rate was 30.6% compared to 29.6% in the fourth quarter of fiscal 2015.
Diluted earnings per share were $0.99 compared to $0.85 in the fourth quarter of fiscal 2015. Excluding certain tax and related interest adjustments, diluted earnings per share were $1.00 compared to $0.85 for the fourth quarter of fiscal 2015.
For the fiscal year ended January 29, 2017:
Net revenue increased 14% to $2.3 billion from $2.1 billion in fiscal 2015. On a constant dollar basis, net revenue increased 14%.
Total comparable sales increased 6%, or by 7% on a constant dollar basis.
Comparable store sales increased 4%, or by 5% on a constant dollar basis. Company-operated stores which have been open for at least one year averaged sales of $1,521 per square foot.
Direct to consumer net revenue increased 13% to $453.3 million, or 13% on a constant dollar basis.
Gross profit increased 20% to $1.2 billion, and as a percentage of net revenue was 51.2% compared to 48.4% in fiscal 2015.
Income from operations increased 14% to $421.2 million, and as a percentage of net revenue, was 18.0% compared to 17.9% in fiscal 2015.
Income tax expense increased to $119.3 million from $102.4 million in fiscal 2015, and the effective tax rate was 28.2% compared to 27.8% for fiscal 2015. Excluding certain tax and related interest adjustments, the effective tax rate was 30.7% compared to 29.5% for fiscal 2015.
Diluted earnings per share were $2.21 compared to $1.89 in fiscal 2015. Excluding certain tax and related interest adjustments, diluted earnings per share were $2.14 compared to $1.86 in fiscal 2015.
The Company ended fiscal 2016 with $734.8 million in cash and cash equivalents compared to $501.5 million at the end of fiscal 2015. Inventories at the end of fiscal 2016 increased by 5% to $298.4 million compared to $284.0 million at the end of fiscal 2015. The Company ended the year with 406 stores.

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Laurent Potdevin, CEO, lululemon, commented: "2016 marks a milestone year where our successful execution against long-term strategies returned the company to positive operating income growth for the first time in three years. These results reflect our strong brand and solid foundation now in place to drive our future performance."
Mr. Potdevin added: "Although we’ve had a slow start to 2017, our teams are passionately committed to delivering on our robust plans across product innovation, digital, North America and international as we realize our ambitious vision for the future."
Fiscal 2017 Outlook
For the first quarter of fiscal 2017, we expect net revenue to be in the range of $510 million to $515 million based on a total comparable sales decrease in the low-single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $0.25 to $0.27 for the quarter. This guidance assumes 137.3 million diluted weighted-average shares outstanding and a 31.2% tax rate. The guidance does not reflect potential future repurchases of the Company's shares.
For the full fiscal 2017, we expect net revenue to be in the range of $2.550 billion to $2.600 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 $2.26 to $2.36 for the full year. This guidance assumes 137.5 million diluted weighted-average shares outstanding and a 31.2% tax rate. The guidance does not reflect potential future repurchases of the Company's shares.
Conference Call Information
A conference call to discuss fiscal 2016 results is scheduled for today, March 29, 2017, 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 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

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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 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; 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 manage our growth and the increased complexity of our business effectively; 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 source our merchandise profitably or at all; 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 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 January 29, 2017
 
Thirteen Weeks Ended January 31, 2016
 
Fifty-Two Weeks Ended January 29, 2017
 
Fifty-Two Weeks Ended January 31, 2016
Net revenue
 
$
789,940

 
$
704,276

 
$
2,344,392

 
$
2,060,523

Costs of goods sold
 
362,041

 
349,809

 
1,144,775

 
1,063,357

Gross profit
 
427,899

 
354,467

 
1,199,617

 
997,166

As a percent of net revenue
 
54.2
%
 
50.3
%
 
51.2
%
 
48.4
%
Selling, general and administrative expenses
 
231,270

 
188,184

 
778,465

 
628,090

As a percent of net revenue
 
29.3
%
 
26.7
%
 
33.2
%
 
30.5
%
Income from operations
 
196,629

 
166,283

 
421,152

 
369,076

As a percent of net revenue
 
24.9
%
 
23.6
%
 
18.0
%
 
17.9
%
Other income (expense), net
 
857

 
938

 
1,577

 
(581
)
Income before income tax expense
 
197,486

 
167,221

 
422,729

 
368,495

Income tax expense
 
61,351

 
49,805

 
119,348

 
102,448

Net income
 
$
136,135

 
$
117,416

 
$
303,381

 
$
266,047

 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
0.99

 
$
0.85

 
$
2.21

 
$
1.90

Diluted earnings per share
 
$
0.99

 
$
0.85

 
$
2.21

 
$
1.89

Basic weighted-average shares outstanding
 
137,059

 
138,076

 
137,086

 
140,365

Diluted weighted-average shares outstanding
 
137,245

 
138,240

 
137,302

 
140,610



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lululemon athletica inc.
Condensed Consolidated Balance Sheets
Unaudited; Expressed in thousands
 
 
January 29, 2017
 
January 31, 2016
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
734,846

 
$
501,482

Inventories
 
298,432

 
284,009

Prepaid and receivable income taxes
 
81,190

 
91,453

Other current assets
 
48,269

 
40,095

Total current assets
 
1,162,737

 
917,039

Property and equipment, net
 
423,499

 
349,605

Goodwill and intangible assets, net
 
24,557

 
24,777

Deferred income taxes and other non-current assets
 
46,748

 
22,656

Total assets
 
$
1,657,541

 
$
1,314,077

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
24,846

 
$
10,381

Accrued inventory liabilities
 
8,601

 
25,451

Accrued compensation and related expenses
 
55,238

 
43,524

Income taxes payable
 
30,290

 
37,736

Unredeemed gift card liability
 
70,454

 
57,736

Other accrued liabilities
 
52,020

 
50,676

Total current liabilities
 
241,449

 
225,504

Deferred income tax liability
 
7,262

 
10,759

Other non-current liabilities
 
48,857

 
50,332

Stockholders' equity
 
1,359,973

 
1,027,482

Total liabilities and stockholders' equity
 
$
1,657,541

 
$
1,314,077



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lululemon athletica inc.
Condensed Consolidated Statements of Cash Flows
Unaudited; Expressed in thousands
 
 
Fifty-Two Weeks Ended January 29, 2017
 
Fifty-Two Weeks Ended January 31, 2016
Cash flows from operating activities
 
 
 
 
Net income
 
$
303,381

 
$
266,047

Items not affecting cash
 
81,135

 
92,436

Changes in operating assets and liabilities
 
603

 
(59,743
)
Net cash provided by operating activities
 
385,119

 
298,740

Net cash used in investing activities
 
(149,511
)
 
(143,487
)
Net cash used in financing activities
 
(25,338
)
 
(273,693
)
Effect of exchange rate changes on cash
 
23,094

 
(44,557
)
Increase (decrease) in cash and cash equivalents
 
233,364

 
(162,997
)
Cash and cash equivalents, beginning of year
 
$
501,482

 
$
664,479

Cash and cash equivalents, end of year
 
$
734,846

 
$
501,482



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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 fourth quarter of fiscal 2016 compared to the fourth 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
 
12
 %
 
8
 %
 
6
%
 
12
%
Adjustments due to foreign exchange rate changes
 

 
(1
)
 

 

Increase in constant dollars
 
12
 %
 
7
 %
 
6
%
 
12
%
The below changes in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue show the net change for fiscal 2016 compared to 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
 
14
%
 
6
%
 
4
%
 
13
%
Adjustments due to foreign exchange rate changes
 

 
1

 
1

 

Increase in constant dollars
 
14
%
 
7
%
 
5
%
 
13
%
__________
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.

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Effective tax rate and diluted earnings per share, excluding tax and related interest adjustments
 
 
Thirteen Weeks Ended January 29, 2017
 
Thirteen Weeks Ended January 31, 2016
 
Fifty-Two Weeks Ended January 29, 2017
 
Fifty-Two Weeks Ended January 31, 2016
Effective tax rate
 
31.1
 %
 
29.8
 %
 
28.2
%
 
27.8
%
Tax and related interest adjustments1
 
(0.5
)
 
(0.2
)
 
2.5

 
1.7

Effective tax rate, excluding tax and related interest adjustments
 
30.6
 %
 
29.6
 %
 
30.7
%
 
29.5
%

 
 
Thirteen Weeks Ended January 29, 2017
 
Thirteen Weeks Ended January 31, 2016
 
Fifty-Two Weeks Ended January 29, 2017
 
Fifty-Two Weeks Ended January 31, 2016
Diluted earnings per share
 
$
0.99

 
$
0.85

 
$
2.21

 
$
1.89

Tax and related interest adjustments1
 
0.01

 

 
(0.07
)
 
(0.03
)
Diluted earnings per share, excluding tax and related interest adjustments
 
$
1.00

 
$
0.85

 
$
2.14

 
$
1.86


__________
1These adjustments relate to the Company's transfer pricing arrangements and taxes associated with the repatriation of foreign earnings. Please refer to Note 15 to the audited consolidated financial statements included in Item 8 of Part II of the Company's Report on Form 10-K to be filed with the SEC on or about March 29, 2017 for an explanation as to the nature of these items.

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lululemon athletica inc.
Store Count and Square Footage1 
Fifty-Two Weeks Ended January 29, 2017
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

3rd Quarter

379

 
12

 
2

 
389

4th Quarter
 
389

 
17

 

 
406

 
 
Total Gross Square Feet at the Beginning of the Quarter
 
Gross Square Feet Added During the Quarter2
 
Gross Square Feet Lost During the Quarter3
 
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

3rd Quarter
 
1,117

 
32

 
5

 
1,144

4th Quarter
 
1,144

 
47

 
1

 
1,190

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