Lululemon Athletica, Lecture notes of Statistics

Download Lululemon Athletica and more Lecture notes Statistics in PDF only on Docsity! SWS Stock Pitch - 12/10/19 Crystal Lin, Elaine Smith, Isabella Vasko, and Carolyn Woll Lululemon Athletica Lululemon Overview (NASDAQ: LULU) • Luxury Athletic Apparel Retailer • Founded in 1998 in Vancouver • Calvin McDonald, CEO • 440 stores worldwide • Current share price: $230.881 • $3.58B in revenue • 15,700 employees Sources: Lululemon 10-K, Lululemon, 1As Of 12/9/19 2 smartwomansecurities Income Statement Consolidated statement of operations and comprehensive income data: Net revenue Cost of goods sold. Gross profit... 0.6... eee eee cece Selling, general and administrative expenses . . . Asset impairment and restructuring costs . Income from operations .. . Other income (expense), net . . Income before income tax expense Income tax expense Net income ..........-.6.. 005s see eee eee Other comprehensive income (loss), net of tax: Foreign currency translation adjustment. . ... . . Comprehensive income. ..............0. 00+ Basic earnings per share . . . Diluted earnings per share. Basic weighted-average number of shares outstanding . 2.2... 0... e eee eee eee eee Diluted weighted-average number of shares outstanding .. 0.0.2... cee eee cece Consolidated balance sheet data: Cash and cash equivalents.............6..45 Inventories. . . Total assets . . Total stockholders' equity ................0- Source: Lululemon 10-K Fiscal Year Ended February 3, January 28, January 29, January 31, February 1, 2019 2018 2017 2016 2015 (In thousands, except per share data) $ 2,344,392 $ 2,060,523 $ 1,797,213 1,472,032 1,250,391 1,144,775 1,063,357 883,033 1,816,287 1,398,790 1,199,617 997,166 914,180 1,110,451 904,264 778,465 628,090 538,147 =— 38,525 _— — — 705,836 456,00) 421,152 369,076 376,033 9,414 3,997 1,577 (581) 7,102 715,250 459,998 422,729 368,495 383,135 231,449 201,336 119,348 102,448 144,102 $__ 483,80) $ 258,662 $ 303,381 $ 266,047 $ 239,033 (73,885) 58,577 36,703 (64,796) (105,339) $ 409,916 $ 317,239 $ 340,084 $ 201,251 $ 133,694 Ss $s 2.21 $ 1.90 $ 1.66 $ 1.90 $ 2.21 $ 1.89 $ 1.66 133,413 135,988 137,086 140,365 143,935 133,971 136,198 137,302 140,610 144,298 As of February 3, January 28, ‘January 29, January 31, February 1, 2019 2018 2017 2016 2015 (In thousands) $ 881,320 $ 990,501 $ 734,846 $ 501,482 $ 664,479 404,842 329,562 298,432 284,009 208,116 2,084,711 1,998,483 1,657,541 1,314,077 1,296,213 1,445,975 1,596,960 1,359,973 1,027,482 1,089,568 Income Statement Analysis Source: Lululemon 10-K • Revenue Growth = (3,288,319/2,649,181)-1 =24.1% • Company generating more money from sale of services/products • Operating Income (EBIT) Growth = (705,836/456,001)-1 =54.8% • Whether company’s effectively managing costs & generating revenues • Earnings Per Share (EPS) Growth = (3.63/1.90)-1 = 91.1% • Gross Profit Margin =(1,816,287/3,288,319) =55.2% • For every dollar generated in sales, Lululemon has ~55 cents left over to cover basic operating costs & profit • Operating Profit (EBIT) Margin = (705,836/3,288,319) =21.5% • For every dollar generated in sales, Lululemon has ~22 cents left over to cover non-operating expenses & profit • Net Income Margin = (483,801/3,288,319) =14.7% • For every dollar generated in sales, Lululemon has ~15 cents left over in profit Income statement metrics help us understand how the company is making their money 6 Growth Metrics → Useful to compare with multiple companies within an industry & over time Margin Metrics → How effective firm is in any given year at managing specific costs & line items smartwomansecurities Balance Sheet @ February 3, 2019 ASSETS Current assets Cash and cash equivalents .......... 000. c cece ccc e eee e cece eee ee ee eeeeeneaes $ 881,320 $ Accounts receivable... 2.0... ccc cece ec ce cece eee e eect eee eeeeeeeeeseeeeee 35,786 Inventories 2.0.2... cece cece ee ee eens cee 404,842 Prepaid and receivable income taxes 49,385 Other prepaid expenses and other current assets ........ 00.0.0 c cece cece e eee e eee ees 57,949 1,429,282 Property and equipment, net... 6.0.0... eee eee cece eee e teen eee eens eens 567,237 Goodwill and intangible assets, net... .. 6... ccc cece ccc teen eee een en en eeeees 24,239 Deferred income tax assets wee 26,549 Other non-current assets... 2.0.0... ccc cece cece cece n cence eee e eee e een eneneeeees $ 2,084,711 $ Source: Lululemon 10-K January 28, 2018 990,501 19,173 329,562 48,948 48,098 1,436,282 473,642 24,679 32,491 31,389 1,998,483 EPS Growth 50.0% 70.0% 90.0% 110.0% 130.0% 150.0% 170.0% 190.0% Lululemon Athletica (NASDAQ: LULU) Company Performance S&P 500 S&P 500 Apparel, Accessories & Luxury Goods Sector $0 $1 $2 $3 $4 $5 $6 Jan-18 Jan-19 Jan-20 Jan-21 EPS Forecast EPS Key Statistics Lululemon has consistently outperformed the S&P over the past year Sources: CapIQ, Yahoo Finance, Morningstar Valuation 10 2018 EPS: $1.19 2019 EPS: $3.61 • 10-year average annual shareholder return of 34% compared to industry average of 14% • Company experienced 20% revenue growth in company-operated stores • EPS grew 90% over the past year Source: CapIQ Lululemon Public Comparables 11 Latest Market Cap Enterprise Value Price/Earnings Company Name Ticker Close Price $MM $MM LTM NTM LTM NTM NTM Columbia Sportswear Company COLM $92.50 $6,246 $6,435 2.1x 2.0x 12.6x 12.3x 18.9x Hanesbrands Inc. HBI 15.07 5451 9475 1.4x 1.4x 8.8x 8.7x 8.6x Under Armour, Inc. UAA 18.89 8166 9049 1.7x 1.7x 23.2x 19.5x 44.1x PUMA PUM 75.14 11235 11883 2.1x 1.8x 21.1x 14.7x 33.7x Adidas ADS 311.54 60789 63052 2.5x 2.3x 16.5x 15.1x 26.2x NIKE, Inc. NKE 93.49 145943 149120 3.7x 3.5x 26.2x 26.0x 30.6x 75th Percentile $48,400 $50,260 2.4x 2.2x 22.8x 18.4x 32.9x Mean 39,638 41,502 2.3x 2.1x 18.1x 16.1x 27.0x Median 9,701 10,679 2.1x 1.9x 18.8x 14.9x 28.4x 25th Percentile 6,726 9,156 1.8x 1.7x 13.6x 13.0x 20.7x Lululemon Athletica LULU $225.69 $29,402 $29,477 8.2x 7.16x 32.8x 27.83x 44.93x EV/Revenue EV/EBITDA Margins Company Name Ticker LTM NTM LTM NTM LTM NTM LTM NTM EBITDA Columbia Sportswear Company COLM $3,005 $3,170 $510 $522 13.0% 42.1% 17.0% Hanesbrands Inc. HBI 6984 6846 1082 1085 4.5% 0.5% 15.5% Under Armour, Inc. UAA 5216 5481 395 464 0.8% 22.0% 7.6% PUMA PUM 5784 6475 564 807 17.7% 25.6% 9.7% Adidas ADS 25380 27564 3831 4177 6.0% 26.0% 15.1% NIKE, Inc. NKE 39829 43003 5695 6466 6.9% 4.6% 14.3% 75th Percentile $20,781 $22,384 $3,144 $3,404 11.4% 25.9% 15.4% Mean 14,366 15,423 2,013 2253 8.1% 20.1% 13.2% Median 6,384 6,660 823 946 6.4% 23.8% 14.7% 25th Percentile 5,358 5,729 524 593 4.9% 9.0% 10.9% Lululemon Athletica LULU $3,581 $4,116 $876 $1,059 22.6% 25.6% 25.1% Revenue ($MM) EBITA ($MM) Revenue Growth EBITDA Growth Fair Value Current Price P/E EV/EBITDA EV $143 $231 75th 32.9x 22.8x $22,646 Median 28.4x 18.8x $18,673 Average 27.0x 18.1x $17,978 25th 20.7x 13.6x $13,508 Lululemon 2019E Implied Valuation Investment Opportunities Self-Care Product Line Source: Lululemon.com Professional Clothing Line Athletic Event Sponsorship • Expand upon current offerings • Establish Lululemon as a major player in the self-care industry • Develop new clothing line for the modern workplace • Suits, Blazers, Slacks, and Blouses • Partner with major athletic contests around the world • Marathons, Yoga Retreats, Cycling Races 12