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lululemon athletica Puts Up Sunshine but No Rainbows

http://www.fool.com/investing/general/2012/03/22/lululemon-athletica-puts-up-sunshine-but-no-rainbo.aspx

Evan Niu (TMFNewCow)
March 22, 2012

Here we go again.

My expectations coming into lululemon athletica's (Nasdaq: LULU  ) fourth quarter and full-year fiscal 2011 results were a bit tempered. Not in terms of the actual figures that the yoga guru would put up -- I had little doubt that the company would put up a strong quarter, and it did. No, my reservation was that myopic investors would pessimistically focus on where the company could have done phenomenally instead of optimistically looking at where it actually did phenomenally.

Tale of the tape
This morning, shares opened over 3% lower and quickly jumped to flirt with sweet green turf, only to fall back in the red throughout the day as investors faced indigestion trying to swallow the earnings release.

The market was looking for earnings per share of $0.49 on revenue of $362.4 million, which analysts had been ratcheting up to meet lulu's own guidance bump in January to an expected revenue range of $358 million to $363 million and a bottom-line forecast of $0.47 to $0.49 per share. That meant the yoga retailer was going to have to stretch to beat the Street, along with its own guidance.

The yogi did what yogis do best: it stretched.

Fourth-quarter revenue did a tree pose and stood tall at $371.5 million, a 51.3% increase over last year, which made way for earnings per share of $0.51, meaning both the top and bottom lines registered a healthy beat.

Starting with a "B" and having nine zeros
lululemon has just closed out a milestone year, with fiscal 2011 revenue squeezing by the billion-dollar mark. Over the past year, the company cleared a hair over $1 billion in sales, a 40.6% jump over fiscal 2010. The company's press release was even titled, "Company Achieves Cool Revenue Milestone, Starting With a 'B' and Having Nine Zeros."

All of a sudden, lululemon's premium valuation looks a tad bit more reasonable. Yesterday, it was trading at roughly 11.9 times sales, and today's release brings that metric down to about 10.6 as its market cap sits right around $10.6 billion.

Show me the money
Last year, there was some concern that lulu's comparable-store sales were trending down into the low to mid-teens, which would still beat the $98 Astro Pants off rival retailers such as Urban Outfitters (Nasdaq: URBN  ) , which saw comps fall 4% last year. Gap's (NYSE: GPS  ) comps look eerily familiar, with 4% of red ink last year.

lululemon just put up a 26% jump in comps in the fourth quarter and a 20% increase for the year. On top of that, the company hit another record of $2,004 in annual sales per square foot for comparable stores.

RetailSails released a report of other luxury-brand retailers just last month, with Coach (NYSE: COH  ) carrying $1,824 per square foot and Tiffany's (NYSE: TIF &n