Lululemon 2011 Annual Report Download - page 40

Table of Contents
We expect selling, general and administrative expenses to increase throughout fiscal 2011 as we add administrative and sales personnel
and increase our infrastructure to support the growth in our store base and invest in our e-commerce website.
Income from Operations
Income from operations increased $93.8 million, or 108%, to $180.4 million in fiscal 2010 from $86.5 million in fiscal 2009. The increase
of $93.8 million in income from operations for fiscal 2010 was primarily due to a $171.9 million increase in gross profit resulting from sales
growth at existing and additional corporate-owned stores opened during fiscal 2010 and increasing traffic on our e-commerce website, offset by
an increase of $78.0 million in selling, general and administrative expenses, including provision for impairment and lease exit costs.
On a segment basis, we determine income from operations without taking into account our general corporate expenses. We have reviewed
our general corporate expenses and determined some costs previously classified as general corporate are direct segment expenses. Accordingly,
all prior year comparable information has be reclassified to conform to the current year classification.
Income from operations (before general corporate expenses) for fiscal 2010 and fiscal 2009 are expressed in dollar amounts as well as
percentages, presented as a percentage of net revenue of their respective operating segments below.
Corporate-Owned Stores. Net income from our corporate-owned stores segment increased $94.6 million, or 83%, to $208.0 million for
fiscal 2010 from $113.4 million for fiscal 2009 primarily due to an increase of $127.9 million in gross profit, which was offset partially by a
natural increase in selling, general and administrative expenses related to employee costs as well as operating expenses associated with new
stores and net revenue growth at existing stores.
Direct to consumer. Net income from our direct to consumer segment increased $8.6 million, or 160%, to $14.0 million in fiscal 2010
from $5.4 million in fiscal 2009. Prior to the launch of our e-commerce website, our direct to consumer segment consisted only of phone sales.
The addition of our e-commerce website near the beginning of fiscal 2009 has driven the increase in income from operations for our direct to
consumer segment. Income from operations as a percentage of direct to consumer revenue decreased in fiscal 2010 compared to fiscal 2009 due
to the introduction of promotional shipping and increased costs related to our digital strategy associated with this selling channel.
Other. Net income from our other segment increased $6.5 million, or 61%, to $17.1 million in fiscal 2010 from $10.6 million in fiscal
2009. Gross profit related to our other segment increased in fiscal 2010 from fiscal 2009 primarily due to a higher proportion of full margin sales
channels in the current year, such as our showroom sales channel, than in the prior year. There was an increase in selling, general and
administrative expenses as a result of opening and operating an increased number of showrooms in fiscal 2010 compared to fiscal 2009, which
offset a portion of the gross profit increase.
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Fiscal Year Ended January 30, 2011 and
January 31, 2010
2010
2009
2010
2009
(In thousands)
(Percentages)
Corporate
-
owned stores
$
207,992
$
113,428
35.2
28.8
Direct to consumer
14,016
5,394
24.4
29.5
Other
17,059
10,583
26.9
25.7
Income from operations before general corporate expense
$
239,067
$
129,405