lululemon athletica inc. Announces Fourth Quarter and Full Year Fiscal 2010 Results

Q4 Net Revenue Increases 53% to $245.4 million

Q4 Diluted EPS of $0.76 including tax adjustment

Fiscal 2010 Diluted EPS increases 106% to $1.69

VANCOUVER, British Columbia–(BUSINESS WIRE)– lululemon athletica inc. (NASDAQ:LULU) (TSX:LLL) today announced financial results for the fourth quarter and fiscal year ended January 30, 2011.

lululemon Cheer Station - New York Marathon lululemon educators cheer on thousands of New York Marat ...

lululemon Cheer Station – New York Marathon lululemon educators cheer on thousands of New York Marathon runners at the lululemon cheer station just past the 21 mile marker in Harlem. (Photo: Business Wire)

For the fourth quarter ended January 30, 2011:

  • Net revenue for the quarter increased 53% to $245.4 million from $160.6 million in the fourth quarter of fiscal 2009.
  • Comparable stores sales for the fourth quarter increased by 28% on a constant dollar basis.
  • Direct to consumer revenue increased 152% to $24.6 million, or 10% of total Company sales, in the fourth quarter of fiscal 2010, from 6% of total revenue in the same period last year.
  • Gross profit for the quarter increased by 66% to $143.5 million, and as a percentage of net revenue gross profit increased to 58.5% for the quarter from 53.9% in the fourth quarter of fiscal 2009.
  • Income from operations for the quarter increased by 72% to $71.3 million, and as a percentage of net revenue was 29.1% compared to 25.8% of net revenue in the fourth quarter of fiscal 2009.
  • The tax rate for the quarter was 23.5% compared to 31.4% a year ago, after an adjustment of $8.9 millionreversing deferred tax liabilities recorded in Q1 through Q3 of fiscal 2010. This adjustment resulted from a revision to managements plans for repatriation of unremitted earnings of the Canadian operating subsidiary. Normalized for this adjustment, the tax rate for the quarter was 35.9%.
  • Diluted earnings per share for the quarter were $0.76 on net income of $54.8 million, compared to diluted earnings per share of $0.40 on net income of $28.5 million in the fourth quarter of fiscal 2009. Normalized for the tax adjustment, diluted earnings per share for the quarter were $0.64.

For the fiscal year ended January 30, 2011:

  • Net revenue for the fiscal year increased 57% to $711.7 million from $452.9 million in fiscal 2009.
  • Comparable stores sales for fiscal 2010 increased by 30% on a constant dollar basis, resulting in a record $1,726 sales per square foot as atJanuary 30, 2011.
  • Direct to consumer revenue increased 214% to $57.3 million, or 8% of total Company sales, in fiscal 2010, from 4% of total revenue in fiscal 2009.
  • Gross profit for the fiscal year increased by 77% to $394.9 million from $223.1 million in fiscal 2009. As a percentage of net revenue, gross profit increased to 55.5% for fiscal 2010 from 49.3% in fiscal 2009.
  • Income from operations increased by 108% to $180.4 million, and as a percentage of net revenue was 25.3% compared to 19.1% of net revenue in fiscal 2009.
  • The tax rate for fiscal 2010 was 33.3% compared to 32.8% for fiscal 2009.
  • Diluted earnings per share in fiscal 2010 increased 106% to $1.69 on net income of $121.8 million, compared to diluted earnings per share of$0.82 on net income of $58.3 million in fiscal 2009.

The Company ended fiscal 2010 with $316.3 million in cash and cash equivalents compared to $159.6 million at the end of fiscal 2009. Inventory at the end of fiscal 2010 totaled $57.5 million compared to $44.1 million at the end of fiscal 2009. The Company ended the quarter with 137 stores in North America and Australia.

Christine Day, lululemon’s CEO, stated: “We ended one of the best years in lululemon’s history with strong Q4 results that extended the consistent sales growth and margin expansion that we enjoyed for each quarter of 2010. The exceptionally strong sell through of our Q4 product line leaves us with short term unmet demand in the first quarter due to a low inventory position. However, the strength of our business model and growing guest demand for our product give us the opportunity to accelerate our store and e-commerce channel growth in 2011 and to establish ourselves as the number one women’s athletic wear brand. While we will see some cost pressures in 2011, we are confident in our ability to maintain our business model through disciplined management, operating efficiencies and leverage on higher sales.”

Updated Outlook

For the first quarter of fiscal 2011, we expect net revenue to be in the range of $175 million to $180 million based on a comparable-store sales percentage increase in the low double digits on a constant-dollar basis. Diluted earnings per share are expected to be in the range of $0.36 to $0.38 for the quarter. This assumes 72.4 million diluted weighted-average shares outstanding and a 36% tax rate.

For fiscal 2011, we expect net revenue to be in the range of $885 million to $900 million and diluted earnings per share are expected to be in the range of $1.90 to $2.00 for the full year. This assumes a tax rate of 36% and 72.6 million diluted weighted-average shares outstanding.

Conference Call Information

A conference call to discuss fiscal 2010 results is scheduled for today, March 17, 2011, at 9:00 am Eastern Time. Those interested in participating in the call are invited to dial (877) 303-3203 approximately 10 minutes prior to the start of the call. The conference call will also be webcast live atwww.lululemon.com. The webcast will be accessible on our website for approximately 30 days after the call.

About lululemon athletica inc.

lululemon athletica (NASDAQ:LULU; TSX:LLL) is a yoga-inspired athletic apparel company that creates components for people to live longer, healthier and more fun lives. By producing products that help keep people active and stress free, lululemon believes that the world will be a better place. 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 Measure

Constant-dollar net revenue changes, which exclude the impact of changes in foreign exchange rates, is not a United States Generally Accepted Accounting Principle (“GAAP”) performance measure. We provide constant-dollar net revenue changes because we use the measure to understand the underlying growth rate of revenue excluding the impact on a quarter-by-quarter basis of changes in foreign exchange rates, which are not under management’s direct control. We believe that disclosing net revenue changes on a constant-dollar basis is useful to investors because it enables them to better understand the level of growth of our business.

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, our prospects and strategies for future growth, the development and introduction of new products, and the implementation of our marketing and branding strategies. 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: the possibility that we may not be able to manage operations at our current size or manage growth effectively; risks that consumer spending may continue to decline and that U.S. and global macroeconomic conditions may worsen; risks that the cost of raw materials could increase our cost of goods sold and that we will not be successful in our efforts to protect our business from the volatility of the market price for cotton and other raw materials; risks that increasing labor costs and other factors associated with the manufacture of our products in China could increase our costs to produce our products; risks that we may not be able to obtain quality products on a timely basis or in sufficient quantity from our third-party suppliers to meet the demand for our products; the possibility that levels of comparable-store sales or average sales per square foot will decline; the possibility that we may not be able to successfully expand in the United States and other new markets; increased competition causing us to reduce the prices of our products or to increase significantly our marketing efforts in order to avoid losing market share; the possibility that we may not be able to continually innovate and provide our consumers with improved products; the possibility that our suppliers or manufacturers may not produce or deliver our products in a timely or cost-effective manner; and other risk factors detailed in our Annual Report on Form 10-K for the fiscal year ended January 30, 2011 filed with the Securities and Exchange Commission and available at www.sec.gov. 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 the company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

lululemon athletica inc.
Condensed Consolidated Statements of Operations
Expressed in thousands, except per share amounts

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