Lululemon Athletica Inc LULU
Q2 2012 Earnings Call Transcript

Transcript Call Date 09/07/2012

So, for the third quarter of 2012 we anticipate revenue in the range of 300 million to 305 million, this is based on comparable store sales percentage increase in the low to mid-teens on a constant dollar basis. We plan to open eight lululemon stores in the U.S., three in Australia and one ivivva store.

We expect gross margin to be slightly below 55% through Q3, which represents some deleverage against Q3 2011, due to lower product margins primarily for the same reasons discussed earlier with respect to Q2.

In terms of SG&A, we expect to deleverage slightly as a percentage of revenue over the third quarter of 2011. Similar to the investments we made in Q2 we will continue to incur costs, to support the rapid growth of our e-commerce business, including cost associated with our new international sites, our IT network and infrastructure and a design and deployment of new operating systems.

Assuming the tax rate of 29.5% in $145.8 million diluted weighted average shares outstanding, we expect our Q3 2012 earnings per share to be approximately $0.34 to $0.36. For the full fiscal year 2012, we anticipate we will open a total of 35 corporate owned stores, plus two outlets. We expect net revenue to be in the range of $1.345 billion, to $1.36 billion, representing revenue growth of approximately 36% over 2011.

We expect or we continue to expect gross margin for the year, right around our stated long-term target of 55%. We expect slight leverage on SG&A for the full year, deleveraging in Q3 and then leveraging in Q4 due to the much higher volumes. As a result, we expect operating margin to deleverage slightly from the peak levels seen in 2011.

We expect capital expenditures to be between $85 million and $90 million for fiscal 2012, reflecting new store build-outs, renovations on our existing stores, real estate, IT and other head office capital. We project 2012 fiscal year earnings per share to be approximately $1.76 to $1.81. This is based on 145.8 million diluted weighted average shares outstanding and it assumes an effective tax rate of 28.9%. For greater clarity, the impact of the reduction in our effective tax rate added $0.19 to our projected earnings for 2012, and so without this benefit our guidance would have been $1.57 to $1.62, up from our previous guidance of $1.55 to $1.60 per share.

With that, I'll turn it back to Christine.

Christine Day - CEO: Thank you, John. As always, we have deep appreciation to our educators and people in our stores, our guests and the team here at the support center; that make all of this possible. We feel very fortunate to be in a position to reinvest our leverage into future growth opportunities, creating great value for our shareholders.

With that, we'll open it up for questions.

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