Nowadays, people want to be more comfortable and for this reason they have started wearing athletic clothes instead of other apparel for their daily life. People are wearing yoga pants on the sidewalk, to the grocery store and many other places where they previously hesitated to wear the same. For this reason, the activewear market is booming rather than the general apparel market. Lululemon Athletica Inc. (LULU, Financial) is playing well in this activewear market.
Founded in Vancouver, British Columbia in 1998, Lululemon is a designer and retailer of technical athletic apparel. The company offers a line of apparel and accessories for women, men and female youth. Lululemon leads through its design of innovative, functional athletic apparel. Its line of apparel and accessories includes fitness pants, shorts, tops and jackets designed for yoga, running, general fitness, and most other sweaty pursuits. It also provides dance apparel for female youth. By producing products that help keep people active and stress free, Lululemon believes that the world will be a better place. The company's yoga apparel is marketed under the Lululemon athletica and Ivivva athletica brand names. This athletic apparel giant’s branded apparels are sold through 254 stores that are located in the United States, Canada, Australia and New Zealand.
Impressive figures posted
On March 26, 2015, this yoga-inspired athletic apparel company announced financial results for the fourth quarter and fiscal year ended February 1, 2015. Net revenue for the quarter increased 16% to $602.5 million from $521.0 million in the fourth quarter of fiscal 2013. Lululemon’s total comparable sales including comparable store sales (increased by 5% on a constant dollar basis) and direct to consumer (increased 17% to $114.5 million) increased by 8% for the fourth quarter on a constant dollar basis. Direct to consumer net revenue constituted 19% of the total revenue, compared with an 18.8% rise in the prior-year quarter.
Gross profit for the quarter increased by 11% to $310.0 million, and as a percentage of net revenue, gross profit was 51.5% for the quarter compared to 53.5% in the fourth quarter of fiscal 2013. The company’s income from operations for the quarter increased by 2% to $157.2 million, and as a percentage of net revenue was 26.1% compared to 29.6% of net revenue in the fourth quarter of fiscal 2013. Diluted earnings per share for the quarter were $0.78 on net income of $110.9 million, compared to diluted earnings per share of $0.75 on net income of $109.7 million in the fourth quarter of fiscal 2013.
Selling, general & administrative expenses increased to 152.85 million, which has been compensated by increased gross profit. Higher wages, R&D, the introduction of the mobile app, website improvement, and new store expansions are the main reason behind high selling, general & administrative expenses. Lululemon ended the quarter with 302 stores, including 13 newly opened corporate-owned stores.
For the fiscal year 2014, net revenue increased 13% to $1.8 billion from $1.6 billion in fiscal 2013, and total comparable sales increased by 3%. Gross profit for fiscal 2014 increased by 9% to $914.2 million, from $840.1 million in fiscal 2013. Lululemon repurchased 3.7 million shares of its common stock at an average cost of $40.31 per share. Cash and cash equivalents and inventory for the fiscal year were $664.5 million and $208.1 million respectively.
Positive outlook
For the full fiscal 2015, Lululemon expects net revenue to be in the range of $1.970 billion to $2.020 billion based on a total comparable sales increase in the mid-single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $1.85 to $1.90 for the full year.
The company expects to open 60 corporate-owned stores which includes up to eight new stores in Asia and Europe and also 20 Ivivva stores. For the full fiscal 2015, it will invest primarily on its growth strategies, including guest experience, product innovation, brand and international expansion.
Why Lululemon?
As per Wall Street Journal, by 2020 the U.S. athletic apparel market will increase by nearly 50% and the maximum credit goes to Lululemon because of people’s affinity to its yoga pants. Lululemon best known for its yoga pants for women is now manufacturing apparels for men also. It has introduced ABC (anti-ball crushing) pants keeping in mind the extra comfort for men, and the response was also great. To improve the distribution of its products, the company has opened a new distribution centre in Columbus. Lululemon’s key success factors (brand & community, product, and guest experience) are fuelled by innovation.
On a concluding note
Overall Lululemon is a rock-solid company. Its vertically integrated business model (strong business model, omni channel guest centric approach, decentralized leadership) and other strengths such as its revenue growth, increase in net income and expanding profit margins, and solid financial position will attract more and more customers as well as investors in the near future.
(Source: Company's Website)
