Lululemon Athletica Inc. (LULU), a leading yoga-inspired athletic apparel and accessories retailer, posted better-than-expected fourth-quarter fiscal 2012 results with earnings per share of 75 cents, ahead of the Zacks Consensus Estimate of 74 cents. Quarterly earnings also increased 47.1% from 51 cents earned in the year-ago comparable quarter, primarily driven by robust sales growth along with improved margins.

Quarter in detail

Lululemon’s quarterly revenue of $485.5 million was up 30.7% from $371.5 million in the comparable year-ago quarter and inched past the Zacks Consensus Estimate of $485.0 million. Revenue growth in the quarter mainly rode on a 10% upside in comparable-store sales and a 56% increase in Direct-to-Consumer revenue. Direct-to-Consumer revenue of $78.3 million in the fourth quarter represented about 16.1% of total revenue.

Gross profit during the quarter increased 31% to $274.5 million from the prior-year quarter. Gross margin expanded 20 basis points to 56.5% compared with 56.3% in the fourth quarter of fiscal 2011 primarily due to improved product margin and lower occupancy and depreciation expenses as a percentage of sales.

Selling, general & administrative (SG&A) expenses increased 31.1% to $121.9 million compared with $93.0 million in the same period of fiscal 2011, while as a percentage of sales it remained flat year over year at 25.1%. The dollar increase in SG&A expenses was mainly due to higher compensation and operating costs related to new store openings.

During the quarter, the company’s operating income increased 31.4% to $152.6 million compared with $116.1 million a year ago, primarily driven by strong top-line growth. Consequently, operating margin improved 20 basis points to 31.4%.

We believe that Lululemon’s strong performance in the fourth quarter was attributable to its unparalleled execution, robust community engagement, attractive product and continued strength in direct-to-consumer business.

Balance Sheet

Lululemon, which competes with New York & Co. (NWY), Abercrombie & Fitch Co. (ANF) and Ascena Retail Group Inc. (ASNA), exited fiscal 2012 with cash and cash equivalents of $590.2 million, up 44.2% from fiscal 2011 level. Inventories at the end of the fiscal year summed up to $155.2 million versus $104.1 million in fiscal 2011. Stockholders' equity came in at $887.3 million. In addition, the company is free from any long-term debts.

Lululemon exited fiscal 2012, ended Feb 3, 2013, with cash flow from operating activities of $280.1 million compared with $203.6 million at the end of fiscal 2011.