lululemon athletica inc. Continues to Gain Momentum with Strong Fourth Quarter and Fiscal Year 2007 Results

lululemon athletica inc. [NASDAQ: LULU; TSX: LLL] today announced financial results for the quarter and fiscal year ended February 3, 2008. For the quarter ended February 3, 2008: Net revenue increased 101% to $105.1 million from $52.2 million for the fourth quarter of fiscal 2006. Net revenue from corporate-owned stores was $92.5 million, an increase of 117% from $42.6 million for the fourth quarter of fiscal 2006, with comparable-store sales increasing 41%, or 24% on a constant Dollar basis. Gross profit as a percentage of net revenue increased 270 basis points to 54.1% of net revenue from 51.4% of net revenue in the fourth quarter of fiscal 2006. Income from operations was $21.7 million, or 20.6% of revenues, compared to $2.2 million, or 4.2% of revenues, in the fourth quarter of fiscal 2006. Diluted earnings per share was $0.21 on net income of $14.6 million, compared to diluted earnings per share of $0.01 on net income of $0.9 million in the fourth quarter of fiscal 2006. Excluding a one-time legal settlement expense, diluted earnings per share for the fourth quarter of fiscal 2006 were $0.05. For the fiscal year ended February 3, 2008: Net revenue increased 84% to $274.7 million from $148.9 million for the same period in fiscal 2006. Net revenue from corporate-owned stores was $243.6 million, an increase of 102% from $120.7 million for the same period in fiscal 2006, with comparable-store sales increasing 34%, or 24% on a constant dollar basis. Gross profit as a percentage of net revenue increased 230 basis points to 53.3% of net revenue from 51.0% of net revenue in the twelve months of fiscal 2006. Income from operations was $50.1 million, or 18.2% of revenues, compared to $16.2 million, or 10.9% of revenues, in the twelve months of fiscal 2006. Diluted earnings per share was $0.45 on net income of $30.8 million, compared to diluted earnings per share of $0.11 on net income of $7.7 million for the same period in fiscal 2006. Excluding a one-time charge for the settlement of a lawsuit, diluted earnings per share for fiscal 2006 was $0.18. Robert Meers, lululemon’s CEO stated: "We are extremely pleased with the accelerated growth of our fourth quarter results. We believe that the strong momentum generated in 2007 puts us in great standing for 2008. The Company will continue to deliver innovative performance apparel, a distinctive store experience, and a community-based marketing approach, focusing on U.S. expansion.” Mr. Meers continued: "While the current overall consumer environment may be challenging, the increasing loyalty of our guests and our unique positioning in the historically resilient active and healthy-lifestyle market, are providing for continued acceptance of our brand.” Discontinuing Operations in Japan The Company also announced today that it will be discontinuing its operations in Japan. lululemon athletica opened its first store in Japan in 2005 and has operated in Japan through a joint venture known as lululemon Japan Inc. with Japanese apparel company, Descente, Ltd., since 2006. lululemon Japan Inc. currently has four stores. Robert Meers, CEO of lululemon athletica commented, "Japan represents less than 1.5% of our revenues but has been taking a disproportionate amount of management time and attention over this past year. After re-evaluating our operating performance in Japan and our priorities, we have concluded our time, attention, and capital resources are best spent focused on our top priorities which are growth in the United States, where we plan to open 35 stores in 2008, and the development of an e-commerce business.” lululemon athletica and Descente are working together to wind down the store operations as soon as possible, with expected completion in Q2 of 2008. Fiscal Year 2008 Guidance The Company has previously stated its long-term growth targets of net revenue growth of approximately 25% and diluted EPS growth in excess of 25%. The Company believes 2008 net revenues and diluted EPS growth will exceed these long-term targets. For fiscal 2008, diluted earnings per share are expected to be in the range of $0.70 to $0.72. This guidance is based on anticipated comparable store sales growth of low teens; or high single digits on a constant dollar basis, and 35 planned new store openings in North America. The Company expects an effective tax rate of approximately 33% for the full year and anticipates diluted weighted average shares outstanding of approximately 71.0 million for 2008. This fiscal 2008 earnings guidance includes a charge of approximately $0.02 per share resulting from the Company’s planned closure of its four stores currently operating in Japan. In a separate news release, lululemon also today announced the appointment of Christine Day, currently Executive Vice President of Retail Operations, to the offices of President and COO and to the role of CEO Designate. Ms. Day will be appointed CEO upon the retirement of Bob Meers on June 30, 2008. Conference Call Information A conference call to discuss fourth quarter results is scheduled for today, April 2, 2008, at 9:00 AM Eastern Time. Investors interested in participating in the call are invited to dial (877) 397-0300 approximately ten minutes prior to the start of the call. The conference call will also be webcast live at www.lululemon.com. About lululemon athletica inc. lululemon athletica (NASDAQ: LULU; TSX: LLL) is a yoga-inspired athletic apparel company that creates components for people to live longer, healthier and more fun lives. By producing products that help keep people active and stress free, lululemon believes that the world will be a better place. Setting the bar in technical fabrics and functional designs, lululemon works with yogis and athletes in local communities for continuous research and product feedback. For more information, http://www.lululemon.com. Forward-Looking Statements: This press release contains "forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risks, uncertainties and assumptions, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, both in North America and internationally, the development and introduction of new products, and the implementation of our marketing and branding strategies. In many cases, you can identify forward-looking statements by terms such as "may,” "will,” "should,” "expects,” "plans,” "anticipates,” "believes,” "intends,” "estimates,” "predicts,” "potential” or the negative of these terms or other comparable terminology. These forward-looking statements are based on management's current expectations but they involve a number of risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in the forward-looking statements as a result of risks and uncertainties, which include, without limitation: the possibility that we may not be able to manage operations at our current size or manage growth effectively; the possibility that we may not be able to identify suitable locations to open new stores or attract customers to our stores; the possibility that we may not be able to successfully expand in the United States or in other markets, or expand into new markets; the possibility that we may not be able to finance our growth and maintain sufficient levels of cash flow; increasing competition, which may cause us to reduce the prices of our products or to increase significantly our marketing efforts to avoid losing market share; the possibility that we may not be able to effectively market and maintain a positive brand image; the possibility that we may not be able to continually innovate and provide our consumers with improved products; and other risk factors detailed in our filings with the Securities and Exchange Commission, including risk factors contained in our final prospectus relating to our initial public offering included in our Registration Statement on Form S-1 (file no. 333-142477) filed with the SEC and other filings we make with the SEC. Our filings with the SEC are available at www.sec.gov http://www.sec.gov. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release and the company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. Exhibit (1) lululemon athletica inc. Condensed Consolidated Statements of Operations Expressed in thousands of dollars except per share amounts         Three Months Ended   Three Months Ended Twelve Months Ended Twelve Months Ended January 31, 2007 February 3, 2008 January 31, 2007 February 3, 2008   Net revenue $ 52,216 $ 105,093 $ 148,885 $ 274,713   Costs of goods sold   25,395     48,273     72,903     128,411   Gross Profit 26,821 56,820 75,982 146,302 As a percent of revenues 51.4 % 54.1 % 51.0 % 53.3 %   Selling, general and administrative expenses 24,656 35,143 59,767 96,177 As a percent of revenues   47.2 %   33.4 %   40.1 %   35.0 % Income from operations 2,165 21,676 16,213 50,125 As a percent of revenues 4.2 % 20.6 % 10.9 % 18.2 %   Interest expense (income), net   (17 )   (258 )   (94 )   (854 )   Income before income tax 2,182 21,935 16,307 50,979   Provision for income taxes 1,349 7,460 8,753 20,471 Non-controlling interest   (54 )   (134 )   (112 )   (334 )   Net income $ 887   $ 14,609   $ 7,666   $ 30,842     Earnings per share: Basic $ 0.01 $ 0.22 $ 0.12 $ 0.46 Diluted $ 0.01 $ 0.21 $ 0.11 $ 0.45   Weighted average outstanding: Basic 65,087,431 67,527,381 65,156,625 66,430,022 Diluted 65,087,431 70,629,927 69,728,162 69,297,878 Exhibit (2) lululemon athletica inc. Condensed Consolidated Balance Sheets Expressed in thousands of dollars       January 31, 2007 February 3, 2008   ASSETS Current assets Cash and cash equivalents $ 16,029 $ 53,339 Inventories 26,628 39,092 Other current assets   5,836   5,475 Total current assets 48,493 97,906   Property and equipment, net 18,176 44,039   Goodwill and intangible assets, net 2,952 8,124   Other assets   2,672   5,023 Total assets $ 72,293 $ 155,092       LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 4,935 $ 5,200 Other current liabilities 17,826 24,902 Income taxes payable   9,178   5,720 Total current liabilities 31,939 35,822   Other non-current liabilities 2,975 7,236   Stockholders’ equity   37,379   112,034 Total liabilities and stockholders’ equity $ 72,293 $ 155,092 Exhibit (3) lululemon athletica inc. Condensed Consolidated Cash Flow Statements Expressed in thousands of dollars         Three Months Ended Three Months Ended Twelve Months Ended Twelve Months Ended January 31, 2007 February 3, 2008 January 31, 2007 February 3, 2008   Cash flow from operating activities   Net income for the year $ 887 $ 14,609 $ 7,666 $ 30,842 Items not affecting cash: Depreciation and amortization 1,666 2,847 4,619 8,341 Deferred income tax (669 ) (195 ) (3,077 ) 1,799 Loss on property & equipment - - 230 - Non-cash compensation 886 1,132 2,830 5,947 Non-controlling interest (54 ) (134 ) (112 ) (334 ) Changes in non-cash working capital items   15,063     9,372     13,293     (8,504 ) 17,779 27,631 25,449 38,091   Cash flows from investing activities   Purchase of property and equipment (3,711 ) (10,937 ) (12,838 ) (29,676 ) Acquisition of franchises   -     -     (512 )   (5,559 ) (3,711 ) (10,937 ) (13,350 ) (35,235 )   Cash flow from financing activities   Cash received on exercise of stock options - 54 - 54 Amounts received from principal stockholder loan - - 222 - Amounts received from joint venture partner - - - 564 Capital stock issued for cash - - 446 38,350 IPO Costs   -     -       -       (6,992 ) - 54 669 31,976   Effect of exchange rate changes on cash (1,522 ) 266 (616 ) 2,478   Increase in cash and cash equivalents 12,546 17,014 12,152 37,310   Cash and cash equivalents, beginning of year   3,483     36,325     3,877     16,029     Cash and cash equivalents, end of year $ 16,029   $ 53,339   $ 16,029   $ 53,339