EPS of $5.29 increased by 463.8% from previous year
Gross margin of 59.4%
Net income of 669.47M
""It's early innings in our growth story, with significant opportunities in both domestic and international markets remaining ahead of us."" - Calvin McDonald
In the fourth quarter of 2023, Lululemon Athletica Inc (NASDAQ: LULU) delivered impactful financial results, with total revenue reaching $3.205 billion, reflecting a 16% increase year-over-year. The company exhibited robust demand across all its segments, particularly driven by strong growth in international markets, including an impressive 78% increase in Mainland China. Despite facing a more challenging retail environment in the U.S., management remains optimistic about their strategic initiatives to optimize store performance and enhance brand awareness. Lululemon exceeded EPS expectations with $5.29 per diluted share, marking a significant increase from the previous year's adjusted EPS of $4.40. As the company continues to build on its Power of Three x2 strategy, they expect steady revenue growth between 11-12% in the coming year.
Key Performance Indicators
Revenue
3.21B
QoQ: 45.41% | YoY:15.63%
Gross Profit
1.90B
59.40% margin
QoQ: 51.47% | YoY:24.60%
Operating Income
941.36M
QoQ: 178.41% | YoY:199.39%
Net Income
669.47M
QoQ: 169.17% | YoY:458.77%
EPS
5.30
QoQ: 169.04% | YoY:463.83%
Revenue Trend
Margin Analysis
Key Insights
**Q4 2023 Revenue:** $3.205 billion (up 16% YoY)
**Full Year Revenue 2023:** $9.6 billion (up 19% YoY)
**Americas Revenue Growth:** 9% YoY, while China revenue surges 78% YoY.
**Gross Profit Margin:** 59.4%, up from adjusted 57.4% YoY, supported by improved product margins and lower freight costs.
**Net Income:** $669 million (up 458.77% YoY)
Financial Highlights
### Revenue Performance
- Q4 2023 Revenue: $3.205 billion (up 16% YoY)
- Full Year Revenue 2023: $9.6 billion (up 19% YoY)
- Americas Revenue Growth: 9% YoY, while China revenue surges 78% YoY.
- Gross Profit Margin: 59.4%, up from adjusted 57.4% YoY, supported by improved product margins and lower freight costs.
### Profitability Metrics
- Net Income: $669 million (up 458.77% YoY)
- Operating Income Ratio: 28.5%
- Earnings Per Share (EPS): $5.29, a remarkable increase from $4.40 YoY.
### Balance Sheet Health
- Cash at End of Q4: $2.24 billion with $400 million available in credit facilities.
- Inventory Levels: $1.3 billion, a decrease of 9% YoY.
- Total Assets: $7.09 billion, with total liabilities of $2.86 billion, leading to a solid equity position of $4.23 billion.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
3.21B
15.63%
45.41%
Gross Profit
1.90B
24.60%
51.47%
Operating Income
941.36M
199.39%
178.41%
Net Income
669.47M
458.77%
169.17%
EPS
5.30
463.83%
169.04%
Key Financial Ratios
currentRatio
2.49
grossProfitMargin
59.4%
operatingProfitMargin
29.4%
netProfitMargin
20.9%
returnOnAssets
9.44%
returnOnEquity
15.8%
debtEquityRatio
0.33
operatingCashFlowPerShare
$10.97
freeCashFlowPerShare
$9.33
priceToBookRatio
14.38
priceEarningsRatio
22.72
Net Income vs. Revenue
Expense Breakdown
Management Commentary
### Key Management Insights:
- Calvin McDonald (CEO): "Despite the dynamic retail environment, we see this as an opportunity to continuously invest in our growth trajectory. Our revenue growth has remained balanced across channels and regions, and we are excited to optimize our expansion plans."
- Meghan Frank (CFO): "We are committed to our Power of Three x2 growth plan and expect revenue to be in the range of $10.7 billion to $10.8 billion for 2024, reflecting steady demand metrics. Our stores continue to outperform, contributing significantly to sales."
- Growth Strategy: Emphasis on brand awareness and product innovation remains a core part of Lululemon’s strategy, with recent initiatives like the Essentials membership program attracting over 17 million members in its first year.
"It's early innings in our growth story, with significant opportunities in both domestic and international markets remaining ahead of us."
— Calvin McDonald
"Our ability to innovate and enhance our offerings continuously positions us ahead of competitors in meeting consumer expectations."
— Calvin McDonald
Forward Guidance
For 2024, Lululemon forecasts a revenue increase between 11% to 12%, excluding the effect of a 53rd week, indicating confidence in sustained growth. The company plans to open 35-40 new company-operated stores, with notable expansions in international markets. **Management anticipates soft conditions in the U.S.** but plans to drive traffic through targeted marketing efforts and product enhancements in specific areas such as sizing and color offerings.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
LULU Focus
59.40%
29.40%
15.80%
22.72%
AEO
33.20%
7.72%
0.36%
162.39%
ANF
62.90%
15.30%
15.30%
8.73%
URBN
29.90%
4.99%
2.26%
18.46%
FL
24.60%
2.27%
-13.50%
-1.71%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Lululemon stands out as a robust investment opportunity, capitalizing on both qualitative and quantitative factors. The company has demonstrated exceptional revenue growth, significantly outpacing competitors and industry averages while maintaining strong profitability and a healthy balance sheet. Continued focus on international expansion and product innovation positions Lululemon unfavorably against competitors like AEO and ANF, especially considering its higher gross margins and operational efficiency metrics. However, investors should monitor U.S. market performance, which may face challenges, alongside economic trends affecting consumer spending.
Key Investment Factors
Growth Potential
Lululemon's consistent revenue growth is expected to continue, supported by the expansion of its store footprint and a strong international presence, particularly in China where growth rates exceed domestic performance.
Profitability Risk
Evolving consumer behavior due to economic conditions may impact retail performance, particularly in the highly competitive U.S. athletic apparel sector.
Financial Position
Strong balance sheet with substantial cash reserves, contributing to flexibility in operational investments and strategic growth initiatives.
SWOT Analysis
Strengths
Strong brand recognition and loyalty within the athletic apparel segment
A diversified product portfolio across categories and price points
Substantial international presence with significant growth in regions like China
Weaknesses
High dependency on U.S. markets for revenue growth
Potentially high operating costs due to ongoing investments in marketing and technology
Opportunities
Expansion of digital sales channels and e-commerce capabilities
Increased product innovations in footwear and clothing categories to capture new demographics
Threats
Intense competition from existing and new players in the athletic apparel market
Shifting consumer preferences and economic pressures affecting discretionary spending