With spring having sprung, it's hard to remember that the holiday shopping season ended only a few months ago, and some retailers are just now getting around to reporting financial results that cover that time period. Yoga-apparel specialist lululemon athletica (NASDAQ: LULU) is one such company, with a fiscal year that ends in early February, and investors have been waiting to see whether Lululemon would be able to join the group of other athletic apparel companies that have given their shareholders encouraging news lately.
Coming into Wednesday's fiscal fourth-quarter financial report, Lululemon shareholders were optimistic that the company would continue its impressive rebound from the challenges it's faced over the years. The results from the yoga specialist's report indeed reflected the continued success of Lululemon in restoring its reputation, and the retailer sees good times ahead for the coming fiscal year as well.
Lululemon strikes a pose
Lululemon's fiscal fourth-quarter results finished the year strong. Revenue of $1.17 billion was higher by 26% from the year-ago quarter, crushing the expectations most of those following the stock had for top-line growth rates closer to 20%. Net income soared 82% to $218.5 million, and after accounting for some one-time items, adjusted earnings of $1.85 per share came in well above the consensus forecast for $1.74 per share.
From a fundamental basis, Lululemon continued to show the strong performance it had posted earlier in the year. Comparable sales were up 16% overall, and same-store comps at its retail locations were higher by 6% from the year-earlier period. Meanwhile, Lululemon kept getting more from its e-commerce channel, with direct-to-consumer sales jumping 37% over the same time frame. The numbers would have been even higher without the downward pressure of currency impacts, which cost the retailer about a percentage point of growth on overall comps and comparable-store sales figures.
The margin figures that Lululemon posted showed the yoga retailer's ongoing commitment to cutting costs. Gross margin of 57.3% was higher by a full percentage point from 2017's holiday season, and operating margin picked up 80 basis points to 28.4%. Lower income tax rates also played a role in boosting Lululemon's bottom line.
Lululemon's expansion plans accelerated during the last quarter of the year. The retailer boasted 16 new stores opened during the fourth quarter, and even with two store closures, that brought the total store network for Lululemon to 440 locations with 1.43 million square feet of retail space.
CEO Calvin McDonald celebrated a job well done in 2018. "lululemon has delivered one of its strongest years yet," McDonald said, "a result of broad-based strength across the business." The CEO was especially pleased at meeting several of the goals that the company had initially set for 2020 earlier than anticipated.
What's next for Lululemon?
For 2019, Lululemon sees no reason why the good times won't continue. In particular, the yoga retailer's efforts to bolster its presence in e-commerce appear to be paying off well, meeting Lululemon's customers wherever they want to shop. That's been especially evident in China, where online sales soared 140% during the quarter.
The company is also optimistic in how its success will translate to sales and profit in fiscal 2019. According to Lululemon, fiscal first-quarter revenue should come in around $740 million to $750 million, with low-double-digit percentage gains in comps and earnings of $0.68 to $0.70 per share. For the full year, revenue of $3.70 billion to $3.74 billion is likely, with earnings of $4.48 to $4.55 per share reflecting bottom-line growth expectations of roughly 25%. Those numbers are a lot stronger than what most investors in Lululemon were looking to see.
Shareholders also got a vote of confidence from Lululemon's board of directors, which authorized a $500 million repurchase program. With the intent to finish the buybacks within the next two years, Lululemon showed that it's willing to continue what it's been doing lately, following up on repurchases of about 1.5 million shares at an average price of $121 per share during the fiscal fourth quarter.
The reaction from Lululemon investors was unquestionably positive, and the stock soared 14% in premarket trading Thursday following the Wednesday afternoon announcement. With strong momentum coming into 2019, Lululemon could keep adding to its impressive growth well into the future.
10 stocks we like better than Lululemon AthleticaWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Lululemon Athletica wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of March 1, 2019