Lululemon (LULU) earnings release review for the 1st quarter of their 2021 fiscal year
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Category: Stock Market and Lululemon (LULU)
Date: 7 June 2021 Stock Price of Lululemon: $329.52 Market Capital Of Lululemon: $42.9 billion We take a look at the 1st quarter earnings for their 2021 fiscal year of Lululemon a sports apparel company. The group reported net revenues of $1.2 billion and net income of $144.9 million for the 1st quarter of their 2021 fiscal year.
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- Calvin McDonald, Chief Executive Officer commented: Our first quarter results reflected strength across all drivers of growth, fueled by the continued expansion in our e-commerce business and a rebound in brick and mortar stores "
About Lululemon
lululemon athletica inc. (NASDAQ:LULU) is a healthy lifestyle inspired athletic apparel company for yoga, running, training, and most other sweaty pursuits, creating transformational products and experiences which enable people to live a life they love. Setting the bar in technical fabrics and functional designs, lululemon works with yogis and athletes in local communities for continuous research and product feedback. A few quick facts about Lululemon
Read more about Lululemon here
- Lululemon is listed on the Nasdaq under share code ticker: LULU
- Lululemon has 506 company operated retail outlets
- Lululemon employs roughly 19 000 people
Read more about Lululemon here
Lululemon store entrance
Overview of Lululemon's 1st quarter 2021 earnings report
For the first quarter of 2021, compared to the first quarter of 2020:
- Net revenue increased 88% to $1.2 billion. On a constant dollar basis, net revenue increased 83%.
- Company-operated stores net revenue increased 106% to $536.6 million.
- Direct to consumer net revenue increased 55% to $545.1 million. On a constant dollar basis, direct to consumer net revenue increased 50%.
- Net revenue increased 82% in North America, and increased 125% internationally.
- Direct to consumer net revenue represented 44.4% of total net revenue compared to 54.0% for the first quarter of 2020.
- Gross profit increased 109% to $700.3 million and gross margin increased 580 basis points to 57.1%.
- Income from operations increased 492% to $193.8 million. Adjusted income from operations increased 479% to $201.5 million.
- Operating margin increased 1,080 basis points to 15.8%. Adjusted operating margin increased 1,110 basis points to 16.4%.
- Income tax expense increased 827% to $49.1 million. The effective tax rate for the first quarter of 2021 was 25.3% compared to 15.6% for the first quarter of 2020. The adjusted effective tax rate was 24.5% for the first quarter of 2021 compared to 14.7% for the first quarter of 2020.
- Diluted earnings per share were $1.11 compared to $0.22 in the first quarter of 2020. Adjusted diluted earnings per share were $1.16 compared to $0.23 in the first quarter of 2020.
- The Company repurchased 0.3 million shares of its own common stock at an average cost of $311.02 per share.
- The Company opened two net new company-operated stores during the quarter, ending with 523 stores
Lululemon's management commentary on their 1st quarter 2021 earnings report
VANCOUVER, British Columbia--(BUSINESS WIRE)--Jun. 3, 2021-- lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the first quarter of fiscal 2021.
Calvin McDonald, Chief Executive Officer, stated: "Our first quarter results reflected strength across all drivers of growth, fueled by the continued expansion in our e-commerce business and a rebound in brick and mortar stores. Our strong performance across categories, channels and geographies demonstrates the momentum and strength of lululemon as we shift into the new normal. All of us on the leadership team are grateful to our teams around the world who enabled these results, and who continue to focus on realizing growth."
Calvin McDonald, Chief Executive Officer, stated: "Our first quarter results reflected strength across all drivers of growth, fueled by the continued expansion in our e-commerce business and a rebound in brick and mortar stores. Our strong performance across categories, channels and geographies demonstrates the momentum and strength of lululemon as we shift into the new normal. All of us on the leadership team are grateful to our teams around the world who enabled these results, and who continue to focus on realizing growth."
Meghan Frank, Chief Financial Officer, stated: "We are very pleased with our Q1 results, which reflect significant growth in the business compared to both 2020 and 2019. Our momentum remains strong as we enter the second quarter, and we are raising our estimates for the year accordingly. The strength of our financial position allows us to continue to deliver against the Power of Three growth strategies, while we leverage both near- and long-term opportunities."
Balance sheet highlights
The Company ended the first quarter of 2021 with $1.2 billion in cash and cash equivalents and the capacity under its committed revolving credit facilities was $397.3 million. Inventories at the end of the first quarter of 2021 increased 17% to $732.9 million compared to $625.8 million at the end of the first quarter of 2020.
2021 Outlook
For the second quarter of 2021, we expect net revenue to be in the range of $1.300 billion to $1.330 billion. Diluted earnings per share are expected to be in the range of $1.05 to $1.10 for the quarter and adjusted diluted earnings per share are expected to be in the range of $1.10 to $1.15.
For 2021, we expect net revenue to be in the range of $5.825 billion to $5.905 billion. Diluted earnings per share are expected to be in the range of $6.52 to $6.65 for the year and adjusted diluted earnings per share are expected to be in the range of $6.73 to $6.86.
Balance sheet highlights
The Company ended the first quarter of 2021 with $1.2 billion in cash and cash equivalents and the capacity under its committed revolving credit facilities was $397.3 million. Inventories at the end of the first quarter of 2021 increased 17% to $732.9 million compared to $625.8 million at the end of the first quarter of 2020.
2021 Outlook
For the second quarter of 2021, we expect net revenue to be in the range of $1.300 billion to $1.330 billion. Diluted earnings per share are expected to be in the range of $1.05 to $1.10 for the quarter and adjusted diluted earnings per share are expected to be in the range of $1.10 to $1.15.
For 2021, we expect net revenue to be in the range of $5.825 billion to $5.905 billion. Diluted earnings per share are expected to be in the range of $6.52 to $6.65 for the year and adjusted diluted earnings per share are expected to be in the range of $6.73 to $6.86.
Lululemon (NASDAQ: LULU) stock price chart
The image below shows the stock price history of Lululemon for the last 5 years, and its been a very very good time for Lululemon stockholders. 5 years ago the stock was trading at $54.10 and its currently trading at $320. That's a whopping 346.10% return over the last 5 years. No stockholder will ever say no to those kind of returns.
The stock of Lululemon is trading at a lost closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of Lululemon stock is very positive at this point in time.
The stock of Lululemon is trading at a lost closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of Lululemon stock is very positive at this point in time.
Lululemon (NASDAQ: LULU) stock price history over the last 5 years
Lululemon (LULU) vs Under Armor (UAA) vs Nike (NKE) over the last 3 years
The image below shows the stock price performance of Lululemon (LULU), Under Armour (UAA) and Nike (NKE) over the last 3 years. Over the last 3 years the three stocks provided the following returns:
- Lululemon (LULU): 346.10%
- Nike (NKE): 143.3%
- Under Armour (UAA): -47.8%
Lululemon (LULU) vs Under Armor (UAA) vs Nike (NKE) over the last 3 years
Lululemon (LULU) latest stock valuation
Based on Lululemon's 1st quarter 2021 earnings report from Lululemon what do we value their stock at? Based on Lululemon's earnings reported our valuation model provides a target price (full value price) of $186.60 a Lululemon stock (up slightly from our 2nd quarter 2020 earnings report valuation of Lululemon).
We therefore believe that the stock of Lululemon is overvalued. We usually recommend that long term fundamental and value investors look to enter a stock at least 10% below our target price which in this case is $186.60. A good entry point into Lululemon would therefore be at $168 or below. Since the stock of Lululemon is trading at well above our target price we rate the stock of Lululemon as avoid.
We expect it to pull back strongly from current levels to levels closer to our target price in coming weeks and months.
We therefore believe that the stock of Lululemon is overvalued. We usually recommend that long term fundamental and value investors look to enter a stock at least 10% below our target price which in this case is $186.60. A good entry point into Lululemon would therefore be at $168 or below. Since the stock of Lululemon is trading at well above our target price we rate the stock of Lululemon as avoid.
We expect it to pull back strongly from current levels to levels closer to our target price in coming weeks and months.
Lululemon store in a mall
Next earnings release of Lululemon
It is expected that Lululemon will release their 1st quarter 2021 earnings report in early September 2021