Volatile post-earnings mover: Lululemon Athletica Inc. (NASDAQ:LULU)

Lululemon Athletica Inc. (NASDAQ:LULU) reported earnings for the three months ended April 2016 on June 08, 2016. The company earned $0.3 per share on revenue of $495.52M. Analysts had been modeling earning per share of $0.31 with $487.6M in revenue.

Lululemon Athletica Inc. (NASDAQ:LULU)  announced financial results for the first quarter ended May 1, 2016.

For the first quarter ended May 1, 2016:

  • Net revenue increased by 17% to $495.5 million from $423.5 million in the first quarter of fiscal 2015, or increased by 19% on a constant dollar basis.
  • Total comparable sales, which includes comparable store sales and direct to consumer, increased by 6%, or by 8% on a constant dollar basis.
  • Comparable store sales increased by 3%, or by 5% on a constant dollar basis.
  • Direct to consumer net revenue increased by 17% to $97.6 million, or by 18% on a constant dollar basis.
  • Gross profit increased by 16% to $239.1 million, and as a percentage of net revenue gross profit was 48.3% compared to 48.6% in the first quarter of fiscal 2015.
  • Income from operations decreased by 15% to $57.6 million from $68.0 million in the first quarter of fiscal 2015, and as a percentage of net revenue was 11.6% compared to 16.1% of net revenue in the first quarter of fiscal 2015. Included in selling, general and administrative expenses were net foreign exchange losses of $13.5 million, primarily due to the revaluation of U.S. dollar cash and receivables held in Canada, which were $9.1 million more than the net foreign exchange losses in the first quarter of fiscal 2015.
  • Income tax expense was $11.8 million, which included a net income tax recovery of $5.6 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 $1.2 million. The effective tax rate in the first quarter of fiscal 2016 was 20.6% compared to 30.3% in the first quarter of fiscal 2015. Excluding the above tax and related interest adjustments, the effective tax rate was 29.8% in the first quarter of fiscal 2016.
  • Diluted earnings per share for the first quarter of fiscal 2016 were $0.33 compared to $0.34 in the first quarter of fiscal 2015. Excluding the above tax and related interest adjustments, diluted earnings per share were $0.30 for the first quarter of fiscal 2016.
  • During the first quarter of fiscal 2016, the Company repurchased 0.2 million shares of the Company’s common stock at an average cost of $65.01 per share.

The Company ended the first quarter of fiscal 2016 with $550.0 million in cash and cash equivalents compared to $655.9 million at the end of the first quarter of fiscal 2015. Inventories at the end of the first quarter of fiscal 2016 increased by 21% to $286.2 million compared to $236.5 million at the end of the first quarter of fiscal 2015. The Company ended the quarter with 373 stores.

Laurent Potdevin, lululemon’s CEO, stated: “We are pleased with our first quarter performance, delivering strong sales results and gross margin that exceeded expectations. We finished the quarter with our inventory levels rebalanced and on track to achieve our goals for the year.”

Updated Outlook

For the second quarter of fiscal 2016, we expect net revenue to be in the range of $505 million to $515 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 $0.36 to $0.38 for the quarter. This guidance assumes 137.5 million diluted weighted-average shares outstanding and a 30.2% tax rate.

For the full fiscal 2016, we now expect net revenue to be in the range of $2.305 billion to $2.345 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 $2.08 to $2.18 for the full year, or $2.05 to $2.15 normalized for the tax and related interest adjustments made during the first quarter of fiscal 2016. This guidance assumes 137.5 million diluted weighted-average shares outstanding and a 28.9% tax rate, which includes the above tax and related interest adjustments.

Lululemon Athletica Inc. earnings per share showed an increasing trend of 14.2% for the current fiscal year. The company’s expected EPS growth rate for next fiscal year is 253%.Analysts project EPS growth over the next 5 years at 16.14%. It has EPS annual growth over the past 5 fiscal years of 17.4% when sales grew 23.7. It reported 17% sales growth, and -1.8% EPS decline in the last quarter.

The stock is trading at $71.82, up 66.48% from 52-week low of $43.14. The stock trades down -1.91% from its peak of $73.22 and % below the consensus price target of $71.39. Its volume clocked up at 1.39 million shares which is lower than the average volume of 2.31 million shares. Its market capitalization currently stands at $9.77B.

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