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lululemon (LULU) Q4 Earnings Top Estimates, Revenues Rise Y/Y
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Shares of lululemon athletica inc. (LULU - Free Report) gained 2.1% in the after-market trading session on Mar 21, following strong fourth-quarter fiscal 2023 results. Revenues and earnings surpassed the Zacks Consensus Estimate and improved year over year.
The results were driven by innovative product offerings and the strength of the company's business model. It has been on track with the Power of Three X2 growth plan. It outlined its guidance for the fiscal first quarter and fiscal 2024.
lululemon athletica inc. Price, Consensus and EPS Surprise
lululemon’s fiscal fourth-quarter earnings came in at $5.29 per share. In the year-ago period, its adjusted EPS came in at $4.40 per share, while the reported earnings were 94 cents per share. Also, the bottom line beat the Zacks Consensus Estimate of $5.01.
The Vancouver, Canada-based company’s quarterly revenues advanced 15.6% year over year to $3,205.1 million and outpaced the Zacks Consensus Estimate of $3,189 million. Net revenues grew 9% in North America and 54% internationally (up 56% on a constant-dollar basis).
Total comparable sales rose 12% year over year. Comparable store sales climbed 5% year over year, and e-commerce net revenues increased 17% year over year.
Comparable sales in the Americas increased 7% year over year. Internationally, comparable sales increased 43% and 44% on a constant-dollar basis.
This Zacks Rank #3 (Hold) company’s shares have rallied 55.4% in the past year compared with the industry’s growth of 27.2%.
Image Source: Zacks Investment Research
Margins
Adjusted gross profit improved 20% year over year to $1.9 billion. Also, the adjusted gross margin expanded 200 basis points (bps) to 59.4% due to a 210-bps rise in the product margin from lower ocean freight costs and lower air freight use. We had expected the adjusted gross margin to expand 130 bps to 58.7% for the quarter under review.
SG&A expenses of $989.5 million increased 23.2% from the year-ago quarter compared with our estimate of $971 million. This resulted from its ongoing strategic investments in brand building, technology and essential infrastructure, along with higher depreciation and amortization costs from investments made in fiscal 2022 and 2023. SG&A expenses, as a percentage of net revenues, were 30.9%, up 190 bps from the 29% reported in the prior-year quarter. We had expected the metric to expand 160 bps to 30.6% for the quarter.
Adjusted operating income jumped 16% year over year in the fiscal fourth quarter. We note that the adjusted operating margin rose 20 bps year over year to 28.5%.
Store Update
In the fiscal fourth quarter, LULU opened 25 net new stores and completed 15 store optimizations. As of Jan 28, 2024, the company operated 711 stores.
For the first quarter of fiscal 2024, Lululemon plans to open one net new company-operated store. For the full fiscal 2024, the company anticipates opening 35 to 40 net new company-operated stores and completing approximately 40 co-located optimizations, contributing to overall square footage growth in the low double digits. The new store openings in fiscal 2024 will include five to 10 stores in the Americas, with the rest in international markets, primarily in China Mainland.
Financials
lululemon exited the quarter with cash and cash equivalents of $2,244 million, and stockholders’ equity of $4,232.1 million. At the end of the quarter, it had $393.7 million remaining under its committed revolving credit facility. Its inventories decreased 8.6% year over year to $1,323.6 million.
In the quarter under review, lululemon repurchased 120,000 shares, and in fiscal 2023, it bought back shares worth around $550 million. By the end of the fiscal fourth quarter, the company still had about $1.2 billion left for further share buybacks under its current authorization.
Outlook
For the first quarter of fiscal 2024, management anticipates net revenues of $2.175-$2.200 billion, indicating 9-10% year-over-year growth. The company expects gross margin to be nearly flat with the first quarter of fiscal 2023 with markdowns relatively flat with last year.
SG&A, as a percentage of sales, is likely to deleverage by 130-140 bps year over year due to increased investments to grow brand awareness, acquire new guests and higher depreciation resulting from technology investments made in fiscal 2022 and 2023. The operating margin is expected to contract 130-140 bps year over year. EPS in the fiscal first quarter is expected to be $2.35-$2.40 per share, whereas it reported $2.28 a year ago. It estimates an effective tax rate of 29%-29.5% for the fiscal first quarter.
For fiscal 2024, it anticipates net revenues of $10.7-$10.8 billion, suggesting growth of 11-12% or 10-11% (excluding the 53rd week in 2024).
The company projects EPS of $14.00-$14.20, suggesting a jump from $12.77 reported in fiscal 2023.
LULU anticipates an effective tax rate of 30% for fiscal 2024. SG&A, as a percentage of sales, is likely to leverage by 10 bps year over year. It expects the fiscal 2024 operating margin to rise 10 bps from the year-ago reported level.
lululemon expects capital expenditure of $670-$690 million for fiscal 2024.
As part of the Power of Three X2 growth plan, LULU estimates net revenues of $12.5 billion by 2026, implying significant growth from the 2021 reported figure of $6.25 billion.
Stocks to Consider
A few better-ranked stocks in the same space are Deckers Outdoor Corporation (DECK - Free Report) , American Eagle Outfitters Inc. (AEO - Free Report) and Abercrombie & Fitch Co. (ANF - Free Report) .
Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 38.7% and 15.8% from the year-ago period’s reported figures, respectively. DECK has a trailing four-quarter average earnings surprise of 32.1%.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It flaunts a Zacks Rank #1 at present.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings and sales indicates growth of 12.5% and 3.3% from the year-ago period’s reported figures, respectively. AEO has a trailing four-quarter average earnings surprise of 22.7%.
Abercrombie & Fitch is a specialty retailer of premium, high-quality casual apparel. The company currently carries a Zacks Rank #1. ANF has a trailing four-quarter average earnings surprise of 715.6%.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year earnings and sales indicates growth of 19.1% and 5.6% from the year-ago period’s reported figures, respectively.
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lululemon (LULU) Q4 Earnings Top Estimates, Revenues Rise Y/Y
Shares of lululemon athletica inc. (LULU - Free Report) gained 2.1% in the after-market trading session on Mar 21, following strong fourth-quarter fiscal 2023 results. Revenues and earnings surpassed the Zacks Consensus Estimate and improved year over year.
The results were driven by innovative product offerings and the strength of the company's business model. It has been on track with the Power of Three X2 growth plan. It outlined its guidance for the fiscal first quarter and fiscal 2024.
lululemon athletica inc. Price, Consensus and EPS Surprise
lululemon athletica inc. price-consensus-eps-surprise-chart | lululemon athletica inc. Quote
Top & Bottom Lines in Detail
lululemon’s fiscal fourth-quarter earnings came in at $5.29 per share. In the year-ago period, its adjusted EPS came in at $4.40 per share, while the reported earnings were 94 cents per share. Also, the bottom line beat the Zacks Consensus Estimate of $5.01.
The Vancouver, Canada-based company’s quarterly revenues advanced 15.6% year over year to $3,205.1 million and outpaced the Zacks Consensus Estimate of $3,189 million. Net revenues grew 9% in North America and 54% internationally (up 56% on a constant-dollar basis).
Total comparable sales rose 12% year over year. Comparable store sales climbed 5% year over year, and e-commerce net revenues increased 17% year over year.
Comparable sales in the Americas increased 7% year over year. Internationally, comparable sales increased 43% and 44% on a constant-dollar basis.
This Zacks Rank #3 (Hold) company’s shares have rallied 55.4% in the past year compared with the industry’s growth of 27.2%.
Image Source: Zacks Investment Research
Margins
Adjusted gross profit improved 20% year over year to $1.9 billion. Also, the adjusted gross margin expanded 200 basis points (bps) to 59.4% due to a 210-bps rise in the product margin from lower ocean freight costs and lower air freight use. We had expected the adjusted gross margin to expand 130 bps to 58.7% for the quarter under review.
SG&A expenses of $989.5 million increased 23.2% from the year-ago quarter compared with our estimate of $971 million. This resulted from its ongoing strategic investments in brand building, technology and essential infrastructure, along with higher depreciation and amortization costs from investments made in fiscal 2022 and 2023. SG&A expenses, as a percentage of net revenues, were 30.9%, up 190 bps from the 29% reported in the prior-year quarter. We had expected the metric to expand 160 bps to 30.6% for the quarter.
Adjusted operating income jumped 16% year over year in the fiscal fourth quarter. We note that the adjusted operating margin rose 20 bps year over year to 28.5%.
Store Update
In the fiscal fourth quarter, LULU opened 25 net new stores and completed 15 store optimizations. As of Jan 28, 2024, the company operated 711 stores.
For the first quarter of fiscal 2024, Lululemon plans to open one net new company-operated store. For the full fiscal 2024, the company anticipates opening 35 to 40 net new company-operated stores and completing approximately 40 co-located optimizations, contributing to overall square footage growth in the low double digits. The new store openings in fiscal 2024 will include five to 10 stores in the Americas, with the rest in international markets, primarily in China Mainland.
Financials
lululemon exited the quarter with cash and cash equivalents of $2,244 million, and stockholders’ equity of $4,232.1 million. At the end of the quarter, it had $393.7 million remaining under its committed revolving credit facility. Its inventories decreased 8.6% year over year to $1,323.6 million.
In the quarter under review, lululemon repurchased 120,000 shares, and in fiscal 2023, it bought back shares worth around $550 million. By the end of the fiscal fourth quarter, the company still had about $1.2 billion left for further share buybacks under its current authorization.
Outlook
For the first quarter of fiscal 2024, management anticipates net revenues of $2.175-$2.200 billion, indicating 9-10% year-over-year growth. The company expects gross margin to be nearly flat with the first quarter of fiscal 2023 with markdowns relatively flat with last year.
SG&A, as a percentage of sales, is likely to deleverage by 130-140 bps year over year due to increased investments to grow brand awareness, acquire new guests and higher depreciation resulting from technology investments made in fiscal 2022 and 2023. The operating margin is expected to contract 130-140 bps year over year. EPS in the fiscal first quarter is expected to be $2.35-$2.40 per share, whereas it reported $2.28 a year ago. It estimates an effective tax rate of 29%-29.5% for the fiscal first quarter.
For fiscal 2024, it anticipates net revenues of $10.7-$10.8 billion, suggesting growth of 11-12% or 10-11% (excluding the 53rd week in 2024).
The company projects EPS of $14.00-$14.20, suggesting a jump from $12.77 reported in fiscal 2023.
LULU anticipates an effective tax rate of 30% for fiscal 2024. SG&A, as a percentage of sales, is likely to leverage by 10 bps year over year. It expects the fiscal 2024 operating margin to rise 10 bps from the year-ago reported level.
lululemon expects capital expenditure of $670-$690 million for fiscal 2024.
As part of the Power of Three X2 growth plan, LULU estimates net revenues of $12.5 billion by 2026, implying significant growth from the 2021 reported figure of $6.25 billion.
Stocks to Consider
A few better-ranked stocks in the same space are Deckers Outdoor Corporation (DECK - Free Report) , American Eagle Outfitters Inc. (AEO - Free Report) and Abercrombie & Fitch Co. (ANF - Free Report) .
Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 38.7% and 15.8% from the year-ago period’s reported figures, respectively. DECK has a trailing four-quarter average earnings surprise of 32.1%.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It flaunts a Zacks Rank #1 at present.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings and sales indicates growth of 12.5% and 3.3% from the year-ago period’s reported figures, respectively. AEO has a trailing four-quarter average earnings surprise of 22.7%.
Abercrombie & Fitch is a specialty retailer of premium, high-quality casual apparel. The company currently carries a Zacks Rank #1. ANF has a trailing four-quarter average earnings surprise of 715.6%.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year earnings and sales indicates growth of 19.1% and 5.6% from the year-ago period’s reported figures, respectively.