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Author: captainccs Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2079  
Subject: LULU earnings Date: 12/6/2012 12:10 PM
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Does LULU justify a P/E ratio of 45? Sort of. Income before provision for income taxes grew y/y by 36% for the quarter and 31.4% YTD. I'm not using net profit to measure growth rate because a change in the tax structure is giving the bottom line growth rate a one time extra boost. With just 201 stores in North America and Australia lululemon has plenty of room to grow.

lululemon athletica inc. Announces Third Quarter Fiscal 2012 Results
Press Release: lululemon athletica inc. – 2 hours 18 minutes ago

VANCOUVER, British Columbia--(BUSINESS WIRE)--
lululemon athletica inc. (LULU) (LLL.TO) today announced financial results for the third quarter ended October 28, 2012.

For the thirteen weeks ended October 28, 2012:

- Net revenue for the quarter increased 37% to $316.5 million from $230.2 million in the third quarter of fiscal 2011.

- Comparable stores sales for the third quarter increased by 18% on a constant dollar basis.

- Direct to consumer revenue increased 89% to $45.1 million, or 14.3% of total Company revenues, in the third quarter of fiscal 2012, an increase from 10.4% of total Company revenues in the third quarter of fiscal 2011.

- Gross profit for the quarter increased 36% to $175.3 million, and as a percentage of net revenue gross profit decreased to 55.4% for the quarter from 55.8% in the third quarter of fiscal 2011.

- Income from operations for the quarter increased 35% to $80.6 million, and as a percentage of net revenue was 25.5% compared to 25.9% of net revenue in the third quarter of fiscal 2011.

- The tax rate for the quarter was 30.1% compared to 35.5% a year ago. The lower effective rate reflects the ongoing impact of revised intercompany pricing agreements.

- Diluted earnings per share for the quarter were $0.39 on net income of $57.3 million, compared to diluted earnings per share of $0.27 on net income of $38.8 million in the third quarter of fiscal 2011.

For the thirty-nine weeks ended October 28, 2012:

- Net revenue for the first three quarters increased 41% to $884.9 million from $629.3 million in the same period of fiscal 2011.

- Comparable stores sales for the first three quarters increased by 19% on a constant dollar basis.

- Direct to consumer revenue increased 112% to $119.0 million, or 13.4% of total Company revenues, in the first three quarters of fiscal 2012, an increase from 8.9% of total Company revenues in the first three quarters of fiscal 2011.

- Gross profit for the first three quarters increased 36% to $488.3 million, and as a percentage of net revenue gross profit decreased to 55.2% for the first three quarters from 57.3% in the same period of fiscal 2011.

- Income from operations for the first three quarters increased 31% to $223.9 million, and as a percentage of net revenue was 25.3% compared to 27.2% of net revenue in the same period of fiscal 2011.

- The tax rate for the first three quarters was 28.7% compared to 35.8% a year ago. The lower effective rate reflects the ongoing impact of revised intercompany pricing agreements.

- Diluted earnings per share for the first three quarters were $1.11 on net income of $161.2 million, compared to diluted earnings per share of $0.76 on net income of $110.5 million in the same period of fiscal 2011.



lululemon athletica inc.
Condensed Consolidated Statements of Operations
Expressed in thousands, except per share amounts
(unaudited)

13 weeks 13 weeks Growth 39 weeks 39 weeks Growth
Ended Ended % Ended Ended %
Oct 28, Oct 30, Oct 28, Oct 30,
2012 2011 2012 2011


Net revenue 316,537 230,216 37.5 884,869 629,319 40.6
Costs of goods sold 141,237 101,703 38.9 396,550 269,013 47.4
Gross profit 175,300 128,513 36.4 488,319 360,306 35.5
As a percent of net revenue 55.4 55.8 55.2 57.3

SG&A expenses 94,689 68,792 37.6 264,455 189,415 39.6
As a percent of net revenue 0.299 0.299 0.299 0.301
Income from operations 80,611 59,721 35.0 223,864 170,891 31.0
As a percent of net revenue 25.5 25.9 25.3 27.2

Other income (expense), net 1,424 619 130.0 3,500 2,120 65.1
Income before prov. taxes 82,035 60,340 36.0 227,364 173,011 31.4
Provision for income taxes 24,655 21,399 15.2 65.308 61,935 5.4
Net income 57,380 38,941 47.4 162,056 111,076 45.9
Net income non-control int 64 147 -56.5 875 531 64.8
Net income lululemon 57,316 38,794 47.7 161,181 110,545 45.8
Basic earnings per share 0.40 0.27 48.1 1.12 0.77 45.5
Diluted earnings per share 0.39 0.27 44.4 1.11 0.76 46.1
Basic shares outstanding 144,057 143,370 0.5 143,903 143,096 0.6
Diluted shares outstanding 145,748 145,349 0.3 145,750 145,230 0.4


Denny Schlesinger
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Author: captainccs Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1924 of 2079
Subject: Re: LULU earnings Date: 12/6/2012 6:12 PM
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The more I read about lululemon the better I like it. Great businesses have a personality of their own instead of being cooky cutter versions of a generic business. lululemon is not just a retailer, it's a community center. In the ever more secular world there is a yearning for the spiritual which yoga fills. lululemon has identified and made its own an affluent customer base to whom it sells affordable luxuries. If that sounds like an oxymoron, think how much more expensive private jets, yachts and jewelry are.

The CC transcript (link below) gives a lot of detail about their expansion plans which seem remarkably well thought out, a combination of local and international growth. Having been a management consultant with the task of transplanting American technology to a developing country I know the difficulties. The receiving culture will reject the transplant unless the terrain is properly prepared and the technology adapted to the receiving culture.

I was struck by the purchase of real estate and my curiosity was specifically answered in the CC:

Rob Wilson - Tiburon Research Group, Inc.
Okay. One more question real quick since I'm last, why would you guys want to own real estate?

John E. Currie - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer
It's not a core strategy, but when we have a key location that we see ourselves being in long-term and that can be our head officer or it could be a key store, such as the Newbury Street store that we acquired, we evaluate acquiring it versus entering into a lease where, of course, we're at -- exposed to on renewal lease rates going up. So just strategically, it can be a better way of securing real estate on a long-term basis.


In another reply management explained how they first canvas a whole territory, say a city, identifying the locations they would like to occupy and then open stores and showrooms, sometimes on an opportunistic basis as the choice locations become available. There is a depth of planning to the execution.

I discovered in wikipedia that store managers are given a lot of leeway much like Buffett lets the managers of his various businesses run them with hardly any interference:

Ms. Day allows the store managers to make their own decisions regarding their individual store, encouraging them to take responsibility and risks. For example, a store manager has the responsibility of deciding the store’s layout, color coordination, and community involvement. The idea is that store managers have the opportunity to run their store as if it was their own small business, and this autonomy is matched with an entrepreneurial pay structure. As opposed to typical retail outlets, Lululemon is highly decentralized, and this micromanagement leads to innovation and creativity.

http://en.wikipedia.org/wiki/Lululemon_Athletica#Store_manag...

I also like their website which is simple and functional and not burdened by whiz-bang overload of javascript crap. Notice that the logo is conspicuously displayed but not the company name. From the transcript it seems that the stores are also not burdened with signs with the company name. The business is about the community and this is reinforced at every possible opportunity! Note how central the calendar of community events is on the web page:

http://www.lululemon.com/newyork/newyork

LULU is currently my largest position. With just 201 stores they have a lot of room to expand both in the USA and in world wide affluent markets. My best guess is that they have a minimum of ten years of expansion ahead of them. lululemon is cash rich and has high margins. Even after the expansion slows, lululemon is likely to remain a cash cow for years.

Link to the Seeking Alpha CC transcript.

http://seekingalpha.com/article/1049781-lululemon-athletica-...

Denny Schlesinger

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Author: Garranova Three stars, 500 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1925 of 2079
Subject: Re: LULU earnings Date: 12/6/2012 6:23 PM
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Denny,

I'm with you on this one. I really like their products (not just my wife's tight pants, but their men's products are well-made, too). Numbers corroborate everything.

My concern is execution. Can they keep quality up and handle distribution as the store count doubles and triples? We tend to just look at product, but there's a big logistical reality behind it. I'm guessing they are hiring the best and brightest, but this is still a concern for me.

Did you notice that Brody was wearing their shirts in episodes of Homeland?

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Author: captainccs Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1926 of 2079
Subject: Re: LULU earnings Date: 12/6/2012 8:42 PM
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Did you notice that Brody was wearing their shirts in episodes of Homeland?

I don't watch TV. I don't even have a TV set.

Denny Schlesinger

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Author: cautiousone100 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1929 of 2079
Subject: Re: LULU earnings Date: 12/7/2012 11:27 AM
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Bryan Riviere
Vice President/Head of Global Sourcing and Manufacturing, lululemon athletica

Bryan Riviere is the Vice President/Head of Global Sourcing and Manufacturing at lululemon athletic, which includes responsibilities for the Raw Materials, Commercialization and Quality Assurance teams. Bryan joined the company five years ago with a mandate to grow and expand the source base to support an incredibly fast-paced and high-growth business. In that period, lululemon has grown from approximately 45 stores in Canada to more than 150 stores in North America, Australia and most recently New Zealand. Prior to lululemon, Bryan was the Sourcing Director at Nike Inc.

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Author: hiddenflem Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1930 of 2079
Subject: Re: LULU earnings Date: 12/7/2012 1:26 PM
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I didn't even know that they made men's clothes. Brody kind of freaks me out, not sure that him wearing lulu is a good thing for them..

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Author: Garranova Three stars, 500 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1933 of 2079
Subject: Re: LULU earnings Date: 12/7/2012 3:50 PM
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I didn't even know that they made men's clothes.

I recommend them. Good fit and sturdy. We don't go there because it is easy to spend money, but I wear their shorts darn near every day.

Brody kind of freaks me out, not sure that him wearing lulu is a good thing for them..

I think Mike was wearing them as well. He's a much nicer fellow.

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Author: CM001 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1961 of 2079
Subject: Re: LULU earnings Date: 1/7/2013 5:36 PM
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In the ever more secular world there is a yearning for the spiritual which yoga fills.

Hinduism in general and Advaita specifically rejects Yoga (please note yoga has many meanings, I refer here "yoga" as exercise) as a means of attaining spiritual nirvana.

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