Lululemon Athletica Inc. · NASDAQ:LULU
Lululemon Athletica — ICR Conference 2009
27 slides from Lululemon Athletica's conference presentation, January 2009
Slide 1: lululemon athletica January 2009
lululemon 8) athletica Ja 09
Slide 2: Forward-Looking Statements
Forward-Looking Statements Our presentation includes, and our responses to various questions may include, forward-looking statements about the Company’s revenues, earnings and financial performance and about our future plans and objectives. Any such statements are subject to risks and uncertainties
Slide 3: Company Overview
Company Overview Christine Day, CEO 3
Slide 4: Company History
Company History • Founded in 1998 to address a void in the women’s athletic apparel market • Company initially sourced in Canada and had North America wholesale distribution • First store opened in 1999 • First U.S. store opened in 2003 • Private Equity investment in 2005 • Bob Meers and others hire
Slide 5: Why lululemon athletica?
Why lululemon athletica? • Premium product with strong points of differentiation • Unique culture, values lead • Iconic brand representing health and women • Company-owned, opportunity to capitalize on expertise in small box retail • Engaged founder, strong management team • Talented Board of Direct
Slide 6: Why lululemon athletica?
Why lululemon athletica? • Strong balance sheet – No debt – Healthy Cash Balance • Strong cash flow all four quarters – Not 4th quarter dependant • Strong gross margin with leverage opportunities • Health trends • Early in growth cycle 6
Slide 7: Key Focus Areas to Respond to Macro Environment
Key Focus Areas to Respond to Macro Environment • Build Cash Reserve – Slower short term growth – Newer stores means less renovation capital • Focus on Gross Margin – Production efficiencies/leverage – Systems efficiencies – Inventory control and flow – Distribution/logistics optimization – Limited
Slide 8: Size of the Market – the US active wear market
Size of the Market – the US active wear market Activewear/"Everyday" Core Athletic $70 = 4% AGR $60 – 20 09E C 2004 $50 $15.5 $40 $13.8 $12.7 $13.0 $30 $20 $42.4 $33.6 $27.5 $28.9 $10 $- 2004 2005 2006 2009E Lululemon market share - .0025% Source: NPD Equity Research 8 8
Slide 9: The Keys to Our Success
The Keys to Our Success Technical Product Cool Stores Design, develop and Unique stores that deliver innovative athletic resonate with our guest apparel and their community Our Guest Experience Training & Culture Community Relations Culture of education, Creating authentic personal responsibility an
Slide 10: Our Target Guest
Our Target Guest 32 years old Affluent – earns > $75,000 per year Educated Has a career Goal oriented Works out 4-5 times per week No children Confident Women at the top of her game Pivotal She has everything – iconic – role model Organic shops Lifestyle She wants to take it all on 10 10
Slide 11: Our Educators
Our Educators • Athletic • Cool • Educated • Fun • Live by our manifesto 11 11
Slide 12: Our Product
Our Product • “Function is fashion” • Built to exceed expectations • Inspire health • European couture inspired style with West Coast function and color • Sexy & hot – fit is so good you want more • Understands the guest - outcome is best in the world 12 12
Slide 13: Our Store
Our Store • Kitchen party feel • Quirky • Aspire • Energy sparkles • Taken care of • Connectivity • Builds relationships • Fun • Store fronts with personality that reflect our roots – “unreasonable” 13 13
Slide 14: 2008 Achievements
2008 Achievements • System implementations – MMS, WMS, POS • Executive Team hires and transition • Development of internal talent • Bench for growth in US • On track for 35 new stores • Retaining culture • Poised for strategic growth and execution • Strong response to Macro-economic environment 14 1
Slide 15: 2009 Opportunities & Goals
2009 Opportunities & Goals • Build real estate pipeline for the future • Product expansion • Launch e-Commerce • Focus on execution and productivity of current store base • Get ready for growth in 2010 and beyond 15
Slide 16: The #1 Near-Term Opportunity – US Expansion
The #1 Near-Term Opportunity – US Expansion Potential for over 300 stores in North America alone – 2007 comp store sales sq. ft. of $1,710 – 35 stores for 2008 in North America 112 35 74 77 81 48 36 19 11 5 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008E Existing Stores (1) New Stores (2) Note: In
Slide 17: Product Innovation Opportunities
Product Innovation Opportunities • Expand Running – Grow from seasonal product to year round opportunity • Grow Outwear – Only second season; great revenue and growth potential • Differentiation in a market of markdowns and excess inventory 17
Slide 18: E-Commerce Opportunity
E-Commerce Opportunity • E-Commerce Strategy – Accelerate via outsource – Build ’08 • Internal: web development, merchandizing and call centre • External: platform and fulfillment – On target to accelerate market launch 18
Slide 19: Creating components for people to live longer, healthier and more fun lives
“Creating components for people to live longer, healthier and more fun lives” 19
Slide 20: Financial Overview
Financial Overview John Currie, CFO 20
Slide 21: Net Revenue Growth
Net Revenue Growth ($ in millions) % 0 .4 5 300.0x th= $274.7 ow 0% gr 9. 00 8 $249.6 =8 2 250.0x G R 0 7– CA 20 7 00 200.0x –2 0 4 20 $102.0 $148.9 150.0x 100.0x $84.1 50.0x $40.7 0.0x FY2004 FY2005 FY2006 FY2007 9 Mo. 2007 9 mo. 2008 21
Slide 22: Revenue Drivers
Revenue Drivers 107 Number 95.0x 90.0x 85.0x 81 71 80.0x 75.0x 70.0x 51 65.0x 60.0x 55.0x 37 of 50.0x 45.0x 40.0x 35.0x 30.0x 25.0x 20 20.0x 15.0x 10.0x Stores 5.0x 0.0x FY2004 FY2005 FY2006 FY2007 9 mo. 2007 9 mo. 2008 34% 30% Comp 0.3x 25% 18% 19% Store 0.2x 13% 0.1x 20% 24% 24% Sales(1) 0.0x 10%
Slide 23: Summary Income Statement
Summary Income Statement ($ in millions) FY2004 FY2005 FY2006 FY2007 Net Revenue $40.7 $84.1 $148.9 $274.7 100% Gross Profit 21.3 43.0 76.0 146.3 53.2% Operating Expenses: SG&A 10.8 26.4 52.5 96.2 35.0% Principal Stockholder bonus 12.1 12.8 - Settlement of law suit - - 7.2 - Operating Income $(1.7)
Slide 24: Growth and Profitability Levers
Growth and Profitability Levers: 9 mo. 2008 Net Revenue $249.6 100% •New Stores •Comp. Store Maturation Gross Profit $127.4 51.1% •Leverage on comp. store •New Store Pre-opening occupancy & depreciation •Volume Purchasing •New store initial productivity vs. occupancy & depreciation SG+A $86.9 34.8%
Slide 25: Earnings Guidance
Earnings Guidance FY 2008 Provided September 2008 Provided December 2008 Net Revenue $380 million - $385 million $340 million - $345 million New Stores 35 35 Comp. Store Sales Constant $ - High Single Digits Constant $ - Negative high single digits Tax Rate Low 30% range Low 30% range EPS $0.68 - $0
Slide 26: Strong Balance Sheet
Strong Balance Sheet ($ in millions) As of Nov. 2, 2008 Cash and Cash Equivalents $52.0 Working Capital¹ $8.7 PPE, net $59.9 Total Assets $198.0 Long-Term Debt $0.0 Total Stockholders’ Equity $140.3 (1) Excludes cash and cash equivalents. 26
Slide 27: Namaste
TN Namaste 27