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Lululemon Athletica Inc (LULU) Reports Robust Revenue Growth and Expands Stock Repurchase Program

  • Revenue climbed by 19% to $2.2 billion in the third quarter.

  • Adjusted EPS rose to $2.53, outperforming GAAP EPS of $1.96.

  • Gross margin expanded by 220 basis points on an adjusted basis to 58.1%.

  • Lululemon Athletica Inc (NASDAQ:LULU) authorizes an additional $1.0 billion stock repurchase program.

On December 7, 2023, Lululemon Athletica Inc (NASDAQ:LULU) released its 8-K filing, announcing financial results for the third quarter of fiscal 2023. The company reported a significant 19% increase in net revenue to $2.2 billion compared to the same period last year, with a notable 49% international revenue surge. Comparable sales grew by 13%, or 14% on a constant dollar basis, while direct to consumer net revenue saw an 18% increase.

Financial Highlights and Performance

Lululemon Athletica Inc (NASDAQ:LULU) demonstrated strong financial performance with gross profit rising 21% to $1.3 billion, and an adjusted gross profit increase of 23%. The adjusted gross margin improved by 220 basis points to 58.1%. However, income from operations saw a 4% decrease to $338.1 million, but on an adjusted basis, it increased by 24% to $436.3 million. The adjusted operating margin also grew by 80 basis points to 19.8%.

Despite these gains, diluted earnings per share (EPS) decreased slightly to $1.96 from $2.00 in the third quarter of 2022. Adjusted diluted EPS, however, climbed to $2.53. The effective tax rate for the quarter was 28.5%, slightly up from 27.6% the previous year, with an adjusted rate of 28.1%.

Strategic Developments and Outlook

CEO Calvin McDonald expressed confidence in the company's position as it enters the holiday season, citing strong early performance and the brand's global resonance.

This was another strong quarter for lululemon as our innovative product offerings and community activations continued to powerfully resonate with our guests globally,"

McDonald said. The company also announced a partnership with Peloton Interactive, Inc. and will discontinue producing its own content for the lululemon Studio Mirror, recognizing post-tax asset impairment and other charges totaling $72.1 million for the quarter.

Chief Financial Officer Meghan Frank highlighted the company's ability to exceed expectations in a challenging macro environment and emphasized the focus on driving long-term growth.

Our third quarter performance, which exceeded our expectations on the top- and bottom-line, reflects the ongoing strength of our business model and our teams' ability to successfully execute at a high level amid an uncertain macro environment,"

Frank stated.

During the third quarter, Lululemon Athletica Inc (NASDAQ:LULU) repurchased 0.6 million shares at an average price of $380.88 per share, costing $210.8 million. The board of directors has also authorized an additional stock repurchase program of up to $1.0 billion.

Balance Sheet and Cash Flow

The company concluded the third quarter with $1.1 billion in cash and cash equivalents. Inventory levels decreased by 4% to $1.664 billion compared to the previous year. The cash flow statements reveal a net cash provided by operating activities of $912.066 million for the first three quarters of 2023, a significant improvement from the net cash used in the same period of 2022.

Future Expectations

Looking ahead, Lululemon Athletica Inc (NASDAQ:LULU) forecasts fourth-quarter net revenue to be between $3.135 billion and $3.170 billion, with diluted EPS expected to range from $4.85 to $4.93. For the full year of 2023, the company anticipates net revenue to be between $9.549 billion and $9.584 billion, representing an 18% growth, with adjusted diluted EPS expected to be between $12.34 and $12.42.

The company's "Power of Three 2" growth plan aims to double the business from 2021 net revenue of $6.25 billion to $12.5 billion by 2026, focusing on product innovation, guest experience, and market expansion.

Investors and stakeholders are encouraged to review the detailed financial tables and reconciliations of non-GAAP financial measures included in the earnings release to gain a deeper understanding of Lululemon Athletica Inc (NASDAQ:LULU)'s financial position and performance.

Explore the complete 8-K earnings release (here) from Lululemon Athletica Inc for further details.

This article first appeared on GuruFocus.