• Lululemon,   the Canadian athletics apparel retailer, reported fourth quarter results for 2021 which saw   profits come in higher than expected but produced revenues which missed Wall   Street expectations.

  • The yoga-wear maker also announced better-than-expected guidance and   a a $1 billion share buyback programme which sent shares higher.

  • Net revenue for Q4 2021 rose 23% y/y to $2.1 billion. Sales   increased 21% in North America and was up 35% internationally. E-commerce   revenue totaled $1.0 billion, making up 49.3% of total revenue.

  • Gross profit for the period jumped 22% y/y to $1.2 billion, with the   gross margin falling 50 basis points to 58.1%. The decrease in the gross   margin was because of higher air freight costs as a result of global supply   chain disruptions, which was partially offset by smaller markdowns. Costs at   distribution centers also weighed on profits.

  • Income from operations increased 29% y/y to $590.6 million with the   operating margin expanding 120 basis points to 27.7%. Diluted EPS in the   fourth quarter were 33% higher y/y to $3.36.

  • Lululemon ended the period with $1.3 billion in cash and cash   equivalents. Capex of $127.5 million was mostly due to the company opening 22   net new company-operated stores, ending the period with 574 stores in total.

  • For the first quarter of fiscal 2022, the company expects net   revenue to be in the range of $1.525 billion to $1.550 billion, representing   growth of between 24% and 26% y/y.

  • Lululemon is high quality business and the group performed well across all products, channels, and regions. The latest set of results highlighted the pricing power of the brand in an inflationary environment where consumers had to practice more discretion with their more-limited purchasing power. We do however prefer Nike in the athletic apparel space, which we hold across portfolios and in the Cratos BCI Worldwide Flexible fund.