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Understanding Lululemon Athletica’s Top and Bottom Lines in 4Q15 and 2015

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Lululemon Athletica’s price movement

Lululemon Athletica (LULU) has a market cap of $9.4 billion and rose by 10.7% to close at $67.80 per share on March 30, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 12.4%, 8.1%, and 29.2%, respectively, as of that day.

Currently, LULU is trading 9.3% above its 20-day moving average, 11.9% above its 50-day moving average, and 17.7% above its 200-day moving average.

Understanding Lululemon Athletica's Top and Bottom Lines in 4Q15 and 2015

The Vanguard Mid-Cap ETF (VO) invests 0.19% of its holdings in Lululemon Athletica. The ETF tracks the CRSP US Mid-Cap Index, a diversified index of midcap US companies. The YTD price movement of VO was 0.65% as of March 29, 2016.

The market caps of Lululemon Athletica’s competitors are as follows:

  • Nike (NKE)—$105.7 billion
  • Gap (GPS)—$11.8 billion
  • Express (EXPR)—$1.8 billion
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Lululemon Athletica’s performance in 4Q15 and 2015

Lululemon Athletica reported fiscal 4Q15 net revenue of $704.3 million, a rise of 16.9% compared to net revenue of $602.5 million in fiscal 4Q14. The company’s gross profit margin fell by 2.3%, and its operating income rose by 5.8% in fiscal 4Q15 compared to fiscal 4Q14.

The company’s net income and EPS (earnings per share) rose to $117.4 million and $0.85, respectively, in fiscal 4Q15, compared to $110.9 million and $0.78, respectively, in fiscal 4Q14.

Fiscal 2015 results

In fiscal 2015, LULU reported net revenue of ~$2.1 billion, a rise of 14.7% YoY (year-over-year). The company’s net income and EPS rose to $266 million and $1.89, respectively, in fiscal 2015, compared to $239 million and $1.66, respectively, in fiscal 2014.

LULU’s cash and cash equivalents fell by 24.5%, and its inventories rose by 36.5% in fiscal 2015. Its current ratio fell to 4.1x, and its debt-to-equity ratio rose to 0.28x in fiscal 2015, compared to a current ratio and a debt-to-equity ratio of 5.9x and 0.19x, respectively, in fiscal 2014.

The price-to-earnings and price-to-sales ratios of Lululemon Athletica were 37.1x and 4.8x, respectively, as of March 30, 2016.

Projections

The company has made the following projections for fiscal 1Q16:

  • net revenue in the range of $483 million–$488 million based on total comparable sales on a constant dollar basis
  • EPS in the range of $0.28–$0.30

The company has made the following projections for fiscal 2016:

  • net revenue in the range of $2.29 billion–$2.34 billion based on total comparable sales on a constant dollar basis
  • EPS in the range of $2.05–$2.15.
  • an effective tax rate of 30.2%

This guidance does not reflect any future share repurchases in fiscal 1Q16 and 2016.

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