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To our shareholders
In 2023, we celebrated our 25th anniversary and our teams continued to deliver strong
and balanced results. As our product innovations, guest experiences, and market
expansions connected us with our guests and communities, we saw growth across
each of our categories, channels, and regions, and ended the year with $9.6 billion in
net revenue, representing a year-over-year increase of 19%.
We also accelerated our efforts to increase consideration for lululemon through global
brand campaigns and activations. For example, in Los Angeles, we hosted a Dupe Swap
event, where about 50% of the guests who traded in product dupes were new to our
brand. And in China Mainland, our World Mental Health Day activations brought
in over 9,000 participants across six cities.
I am grateful to our teams around the world for driving our performance and our goals to
advance the wellbeing of people and the planet through our Impact Agenda. Community
has been at the core of lululemon since day one, and we believe the deep, genuine
connections across our global collective are a true differentiator for our brand.
Our Growth Pillars
We remain committed to our Power of Three ×2 growth plan, which is grounded in our
goals to double our men’s business, double our digital business, and quadruple our
international business – to ultimately double our revenue from 2021 levels to $12.5 billion
by 2026. In 2023, we advanced our plan with progress across each of our three growth
pillars, and I am proud of all that we achieved as we continued to navigate a dynamic
consumer and macro environment.
Within product innovation, we continued to put product at the center of everything
we do, leveraging the latest research, technologies, and materials to solve for the unmet
needs of our guests. We grew our men’s business by 15%, our women’s business by 17%,
and net revenue from our other categories increased 36%.
We believe one of our competitive advantages is our ability to consistently bring newness
and innovation into our assortment, and that our proprietary fabrics, innovative designs,
and functional technology set us apart. With our focus on feel, functionality, fit, and
versatility, people of all ages and backgrounds can see themselves in lululemon.
Our core and new product launches continued to resonate with guests. We saw strength
in many of our key franchises including Align, Scuba, and ABC, and leveraged the
versatility of our core assortment to expand our offerings within our Play categories
including golf and tennis. We also engineered new sensations within collections such as
Wundermost bodywear for women, expanded our casual offerings for men with Steady
State and Soft Jersey loungewear, and launched updated and enhanced versions of our
Blissfeel and Chargefeel footwear styles.
Looking to 2024, I am excited by our impressive pipeline of product innovation, from our
first-ever men’s footwear collection to innovations created with and inspired by world-
class athletes from Team Canada and our FURTHER women’s ultramarathon.
Within guest experience, our omni-operating model continued to serve our guests both
in-store and online. We saw strength across both channels, with company-operated
store net revenue increasing 21% and e-commerce net revenue increasing 17%, as well
as our single biggest day of traffic and revenue in company history on Black Friday.
We continued to leverage our successful grassroots approach to cultivating
relationships with our guests at the local level. By creating connection points across
both the physical and digital, we engage with guests in ways that go beyond a
transaction, creating an ecosystem of connection that helps build our brand
awareness and drive loyalty.
In-store and online, our Educators supported guests in learning about our products and
innovations. In our communities, our teams created unforgettable experiences at the
local and global level, from store events to larger-scale community activations such as
10K runs. Through our membership program, which has grown to more than 17 million
members in the first year, we gained deeper knowledge on what aspects of our brand
are most meaningful to them. And we announced a multi-year strategic partnership
between lululemon and Peloton, expanding our reach and awareness.
Within market expansion, our business remained strong across our global regions
with 12% growth in the Americas, 67% in China Mainland, and 43% in Rest of World. We
entered new markets in EMEA and APAC, including our first store in Bangkok, Thailand.
In China Mainland, we were proud to celebrate our 10-year anniversary and end the year
approaching $1 billion in revenue. In total, we opened 56 net new company-operated
stores across the globe contributing to 15% square footage growth, ending 2023 with
711 company-operated stores worldwide.
We believe our community-building approach resonates across geographies,
generations, and cultures, and led to gains in brand awareness throughout key growth
markets around the world over the past year – the US increased from 25% to 31%, and
China Mainland increased from 9% to 14%. Relative to peers, our brand awareness
globally represents an opportunity for lululemon. We believe our runway for growth is
substantial, and I am optimistic about the future as we continue to expand our business.
Our Impact
We are committed to advancing our Impact Agenda goals and multi-year strategies for
the wellbeing of people and the planet. This work supports our growth strategy as a
critical business function, as our company continues to grow and serve more guests and
communities around the world.
For our people, we are committed to our goals of supporting physical, mental, and social
wellbeing for all, and creating environments that are equitable, inclusive, and welcoming
for every person within our global collective. We continued to advance our Inclusion,
Diversity, Equity, and Action (IDEA) commitments across our business and invest in the
wellbeing of the people who make our products.
We also released lululemon’s third annual Global Wellbeing Report uncovering the state of
wellbeing around the world, and announced the formation of our Mental Wellbeing Global
Advisory Board to help deepen the impact of wellbeing initiatives across our industry. And,
through our lululemon Centre for Social Impact, we expanded our partnerships with global
and community-led wellbeing organizations to accelerate their work, investing a total of
$44.8 million to date.1
For our planet, we are on a journey to contribute to a climate-stable future through our
products and actions. We believe sustainable innovation will play a critical role, and we
continue to advance our material innovation through strategic industry partnerships, as we
know collaboration is essential to achieving a circular ecosystem and helping to address
global challenges. Looking to the future, we remain focused on driving innovations across
our business that contribute to supporting the health of our planet.
In Closing
On behalf of myself and the entire leadership team, I want to express our sincere gratitude
to the people across lululemon who champion our brand every day and made our strong
results possible.
To our shareholders, thank you for your continued support. As we drive the business
forward, we will remain agile and continue to adapt to all that is around us. My confidence
in our leadership and our people remains high, as we have consistently demonstrated the
strength and resilience of our brand.
We are pleased with our momentum and know that we remain in the early innings of our
growth story. We recognize the significant opportunity in front of us to elevate lululemon
to the next level around the world in 2024 and beyond, and I remain excited and energized
for what lies ahead for our brand.
Calvin McDonald
Chief Executive Officer
1 Included within our Impact Agenda is a goal to invest a total of $75.0 million USD to advance equity in wellbeing by 2025. As of January 28, 2024, we have contributed
$44.8 million to lululemon’s Centre for Social Impact, $32.4 million of which has been contributed directly to social impact organizations. The remaining $12.4 million
primarily consists of contributions toward a donor-advised fund for future grant making.
AR | 2023
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________
Form 10-K
_______________________________________
☑
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 28, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-33608
_______________________________________
lululemon athletica inc.
(Exact name of registrant as specified in its charter)
_______________________________________
Delaware
(State or other jurisdiction of
incorporation or organization)
20-3842867
(I.R.S. Employer
Identification Number)
1818 Cornwall Avenue, Vancouver, British Columbia V6J 1C7
(Address of principal executive offices)
Registrant's telephone number, including area code: (604) 732-6124
Securities registered pursuant to Section 12(b) of the Act:
Trading symbol(s)
LULU
Title of each class
Common Stock, par value $0.005 per share
Name of each exchange on which registered
Nasdaq Global Select Market
_______________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Non-accelerated filer
Emerging growth company
☑
☐
☐
Accelerated filer
Smaller reporting company
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Act). Yes ☐ No ☑
The aggregate market value of the voting stock held by non-affiliates of the registrant on July 28, 2023 was approximately $40,905,000,000. Such aggregate market value was
computed by reference to the closing price of the common stock as reported on the Nasdaq Global Select Market on July 28, 2023. For purposes of determining this amount
only, the registrant has defined affiliates as including the executive officers, directors, and owners of 10% or more of the outstanding voting stock of the registrant on July 28,
2023.
Common Stock: At March 15, 2024 there were 120,892,132 shares of the registrant's common stock, par value $0.005 per share, outstanding.
Exchangeable and Special Voting Shares: At March 15, 2024, there were outstanding 5,115,961 exchangeable shares of Lulu Canadian Holding, Inc., a wholly-owned subsidiary of
the registrant. Exchangeable shares are exchangeable for an equal number of shares of the registrant's common stock.
In addition, at March 15, 2024, the registrant had outstanding 5,115,961 shares of special voting stock, through which the holders of exchangeable shares of Lulu Canadian
Holding, Inc. may exercise their voting rights with respect to the registrant. The special voting stock and the registrant's common stock generally vote together as a single class
on all matters on which the common stock is entitled to vote.
Portions of the Proxy Statement for the 2024 Annual Meeting of Stockholders have been incorporated by reference into Part III of this Annual Report on Form 10-K.
_______________________________________
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
Business
Risk Factors
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Consolidated Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements
Index for Notes to the Consolidated Financial Statements
Controls and Procedures
Other Information
PART I
Item 1.
Item 1A.
Item 1C.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9A.
Item 9B.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
Signatures
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedule
Form 10-K Summary
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PART I
Special Note Regarding Forward-Looking Statements
This report and some documents incorporated herein by reference include estimates, projections, statements relating
to our business plans, objectives, and expected operating results that are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. We use words such as "anticipates," "believes," "estimates," "may," "intends," "expects," and similar
expressions to identify forward-looking statements. Discussions containing forward-looking statements may be found in the
material set forth under "Business", "Management's Discussion and Analysis of Financial Condition and Results of
Operations", and in other sections of the report. All forward-looking statements are inherently uncertain as they are based on
our expectations and assumptions concerning future events. Any or all of our forward-looking statements in this report may
turn out to be inaccurate. We have based these forward-looking statements largely on our current expectations and
projections about future events and financial trends that we believe may affect our financial condition, results of operations,
business strategy, and financial needs. They may be affected by inaccurate assumptions we might make or by known or
unknown risks and uncertainties, including the risks, uncertainties and assumptions described in the section entitled "Item 1A.
Risk Factors" and elsewhere in this report. In light of these risks, uncertainties and assumptions, the forward-looking events
and circumstances discussed in this report may not occur as contemplated, and our actual results could differ materially from
those anticipated or implied by the forward-looking statements. All forward-looking statements in this report are made as of
the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any
forward-looking statement.
This annual report includes website addresses and references to additional materials found on those websites. These
websites and information contained on or accessible through these websites are not incorporated by reference into, and do
not form a part of, this Annual Report or any other report or document we file with the SEC, and any references to any
websites are intended to be inactive textual references only.
ITEM 1. BUSINESS
General
lululemon athletica inc. is principally a designer, distributor, and retailer of technical athletic apparel, footwear, and
accessories. We have a vision to create transformative products and experiences that build meaningful connections, unlocking
greater possibility and wellbeing for all. Since our inception, we have fostered a distinctive corporate culture; we promote a
set of core values in our business which include taking personal responsibility, acting with courage, valuing connection and
inclusion, and choosing to have fun. These core values attract passionate and motivated employees who are driven to achieve
personal and professional goals, and share our purpose "to elevate human potential by helping people feel their best."
In this Annual Report on Form 10-K for the fiscal year ended January 28, 2024, lululemon athletica inc. (together with its
subsidiaries) is referred to as "lululemon," "the Company," "we," "us," or "our." We refer to the fiscal year ended January 28,
2024 as "2023," the fiscal year ended January 29, 2023 as "2022," and the fiscal year ended January 30, 2022 as "2021." Our
next fiscal year ends on February 2, 2025 and is referred to as "2024."
Components of this discussion of our business include:
• Our Products
• Our Markets and Segments
Integrated Marketing
•
Product Design and Development
•
Sourcing and Manufacturing
•
Distribution Facilities
•
Competition
•
Seasonality
•
Human Capital
•
Intellectual Property
•
Securities and Exchange Commission Filings
•
Our Products
We offer a comprehensive line of performance apparel, footwear, and accessories marketed under the lululemon
brand. Our apparel assortment includes items such as pants, shorts, tops, and jackets designed for a healthy lifestyle including
1
athletic activities such as yoga, running, training, and most other activities. We also offer apparel designed for being on the
move and fitness-inspired accessories. We expect to continue to broaden our merchandise offerings through expansion across
these product areas.
Our design and development team continues to source technically advanced fabrics, with new feel and fit, and craft
innovative functional features for our products. Through our vertical retail strategy and direct connection with our customers,
whom we refer to as guests, we are able to collect feedback and incorporate unique performance and fashion needs into our
design process. In this way, we believe we are better positioned to address the needs of our guests, helping us advance our
product lines and differentiate us from our competitors.
During 2023, our women's range represented 64% of net revenue and our men's range represented 23% of net
revenue. Our comprehensive men's line is a key pillar of our strategic growth plans. We believe net revenue from our men's
range is growing as more guests discover the technical rigor and premium quality of our men's products, and are attracted by
our distinctive brand.
We continue to innovate and introduce new products for our guests. This includes introducing new product categories
and expanding our accessories assortment. We believe this is another way in which we can attract new guests and enable
them to experience our products. Net revenue from our other product categories represented 13% of net revenue in 2023.
Our Markets and Segments
We operate in over 25 countries around the world and organize our operations into four regional markets: Americas,
China Mainland, Asia Pacific ("APAC"), and Europe and the Middle East ("EMEA").
We report three segments, Americas, China Mainland, and Rest of World, which is comprised of the APAC and EMEA
regions on a combined basis.
During the fourth quarter of 2023, we revised the financial information which our Chief Executive Officer, who is our
chief operating decision maker ("CODM"), uses to evaluate performance and allocate resources. This resulted in a change in
our identified operating segments. As we have further executed on our omni-channel retail strategy, and continued to expand
our operations in international markets, our performance reviews and resource allocation decisions have evolved to be made
on a regional market basis. Our segment results have been recast to reflect our regional market-based structure. Historically,
our segments were based on selling channel. We continue to monitor our revenue performance by our selling channels which
are further described below.
We operate an omni-channel retail model and aim to efficiently and effectively serve our guests in the ways most
convenient to them. We continue to evolve and integrate our digital and physical channels in order to enrich our interactions
with our guests, and to provide a seamless omni-channel experience. We have invested in technologies which enable our
omni-channel retailing model. Our capabilities differ by market and include:
•
•
Buy online pick-up in store - guests can purchase our products via our website or digital app and then collect that
product from a retail location;
Back-back room - our store educators can access inventory located at our other locations and have product shipped
directly to a guest's address or a store;
2
2023 Net RevenueAmericas 79%China Mainland 10%Rest of World 11%2022 Net RevenueAmericas 84%China Mainland 7%Rest of World 9%2021 Net RevenueAmericas 85%China Mainland 7%Rest of World 8% •
•
Ship from store – we are able to fulfill e-commerce orders by accessing inventory at both our distribution centers and
at our retail locations, expanding the pool of accessible inventory;
Returns processing – e-commerce guests are able to return products either online or in-store; and
• One inventory pool – we are able to view and allocate the product held at our distribution centers to either our
physical retail locations, or make it available to fulfill online demand.
We operate a combination of physical retail locations and e-commerce services via our websites, other region-specific
websites, digital marketplaces, and mobile apps. Our physical retail locations remain a key part of our growth strategy and we
view them as a valuable tool in helping us build our brand and product line as well as enabling our omni-channel capabilities.
We plan to continue to expand square footage and open new company-operated stores to support our growth objectives.
Americas
We have operated in the Americas for over 25 years. We opened our first ever store in Vancouver, Canada in 1998. In
2023, the net revenue we generated in the Americas represented 79% of our total net revenue.
Net revenue
Net revenue growth
2023
2022
(In thousands)
2021
$ 7,631,647
$ 6,817,454
$ 5,299,906
11.9 %
28.6 %
40.3 %
Our operations in the Americas are core to our business and we aim to continue to grow our net revenue in this market
through ongoing product innovation and by building brand awareness. We also plan to continue to invest in our omni-channel
capabilities, to open new retail locations, and to relocate, optimize, and renovate our existing locations as needed.
We generate net revenue in the Americas through our lululemon branded retail locations which include different sizes
of company-operated stores, outlets, pop-ups, other temporary locations, and stores operated by a third-party under a supply
and license agreement in Mexico. We also serve our guests via our e-commerce website www.lululemon.com, our mobile
app, our “Like New” re-commerce program, and through certain wholesale arrangements including certain yoga and fitness
studios, university campus retailers, and other select partners.
China Mainland
We opened our first store in China Mainland in fiscal 2014. In 2023, the net revenue we generated in China Mainland
represented 10% of our total net revenue.
Net revenue
Net revenue growth
2023
2022
(In thousands)
2021
$
963,760
$
576,503
$
434,261
67.2 %
32.8 %
80.3 %
We have experienced significant net revenue growth in China Mainland and believe that as we continue to expand our
operations and build our brand awareness, net revenue will continue to increase in this market. We believe China Mainland
net revenue growth will drive an increase in our overall international net revenue. We plan to continue to invest in China
Mainland and expect that the majority of our company-operated store openings in 2024 will be in this market.
We operate lululemon branded retail locations in China Mainland in a variety of different formats including different
sizes of company-operated stores, outlets, pop-ups, and other temporary locations. We also serve our guests via our WeChat
store and on third party marketplaces such as T-Mall and JD.com.
3
Rest of World
In 2023, the net revenue we generated in APAC and EMEA represented 11% of our total net revenue.
Net revenue
Net revenue growth
2023
2022
(In thousands)
2021
$ 1,023,871
$
716,561
$
522,450
42.9 %
37.2 %
36.3 %
We have experienced significant net revenue growth in APAC and EMEA and intend to continue to invest in these
markets to build brand awareness. Where we identify growth opportunities, we plan to open new retail locations, including in
new markets across the EMEA and APAC regions.
We operate lululemon branded retail locations in these markets in a variety of different formats including different sizes
of company-operated stores, outlets, pop-ups, and stores operated by third-parties under supply and license agreements in
the Middle East and Israel. We also serve our guests via our country specific websites, our mobile app, and through third party
regional marketplaces, such as Zalando, Lazada, and SSG.
Our Selling Channels
We conduct our business through a number of different channels in each market:
Company-operated stores: In addition to serving as a venue to sell our products, our stores give us a direct connection
to our guests, which we view as a valuable tool in helping us build our brand and product lines as well as enabling our omni-
channel capabilities. Our retail stores are located primarily on street locations, in lifestyle centers, and in malls. Our sales per
square foot was $1,609, $1,580, and $1,443 for 2023, 2022, and 2021 respectively.
Number of company-operated stores by market
January 28,
2024
January 29,
2023
United States
Canada
Americas
China Mainland
Australia
South Korea
Hong Kong SAR
Japan
New Zealand
Taiwan
Singapore
Malaysia
Macau SAR
Thailand
APAC
367
71
438
127
33
19
9
8
8
8
7
3
2
1
98
350
69
419
99
32
16
9
7
8
7
8
2
2
—
91
4
Number of company-operated stores by market
January 28,
2024
January 29,
2023
United Kingdom
Germany
France
Ireland
Spain
Netherlands
Sweden
Norway
Switzerland
EMEA
Total company-operated stores
20
9
6
4
3
2
2
1
1
48
711
20
10
4
4
3
1
2
1
1
46
655
E-commerce: We believe e-commerce is convenient for our guests and also allows us to reach and serve guests in
markets beyond where our physical retail locations are based. We believe this channel is effective in building brand
awareness, especially in new markets. We serve our guests via our e-commerce websites, other country and region-specific
websites, digital marketplaces, and mobile apps. E-commerce net revenue includes our buy online pick-up in store, back-back
room, and ship from store omni-channel retailing capabilities.
Other channels: We also use certain other distribution channels, generally with the goal of building brand awareness
and providing broader access to our products. These other channels include:
•
Temporary locations - Our seasonal stores and pop-ups are typically opened for a short period of time enabling us to
serve guests during peak shopping periods in markets where we do not ordinarily have a physical location, or to
expand access in markets where we see high demand at our existing locations.
• Wholesale - We sell to partners that offer convenient access for both core and new guests, including yoga and fitness
studios, university campus retailers, and other select partners.
• Outlets - We utilize outlets to sell slower moving inventory and inventory from prior seasons at discounted prices. As
of January 28, 2024, we operated 47 outlets, the majority of which were in the Americas.
•
•
Like New - Our re-commerce program allows guests to exchange their gently used lululemon products for
merchandise credit. Those products are then verified and quality checked before being resold online at
likenew.lululemon.com. We believe this program is a step towards a circular eco-system and helps reduce our
environmental footprint.
License and supply arrangements - We enter into license and supply arrangements when we believe it will be to our
advantage to partner with third parties with significant experience and proven success in certain target markets.
Under these arrangements we have granted certain third parties the right to operate lululemon branded retail
locations and to sell lululemon products on websites in specific countries.
Number of retail locations operated by third parties by market
January 28,
2024
January 29,
2023
Mexico
United Arab Emirates
Saudi Arabia
Israel
Kuwait
Qatar
Bahrain
Total locations operated by third parties under license and supply arrangements
5
15
8
6
3
3
3
1
39
12
7
3
—
1
3
—
26
Integrated Marketing
We believe that our brand awareness is relatively low, especially outside of the Americas, and also with our male
guests. This represents an opportunity for us and we have a multi-faceted strategy to build brand awareness, affinity, and
guest loyalty. This strategy is designed to leverage owned and paid channels, our ambassador network, brand partners,
events, and content – to drive awareness, consideration, engagement, conversion, and ultimately loyalty and engagement at
the global, regional, and local levels.
Product Design and Development
Our product design and development efforts are led by a team of researchers, scientists, engineers, and designers. Our
team is comprised of athletes and users of our products who embody our design philosophy and dedication to premium
quality. Our design and development team identifies trends based on market intelligence and research, proactively seeks the
input of our guests and our ambassadors, and broadly seeks inspiration consistent with our goals of function, style, and
technical superiority.
As we strive to continue to provide our guests with technically advanced fabrics, our team works closely with our
suppliers to incorporate the latest in technical innovation, bringing particular specifications to our products. We partner with
independent inspection, verification, and testing companies, who conduct a variety of tests on our fabrics, testing
performance characteristics including pilling, shrinkage, abrasion resistance, and colorfastness. We develop proprietary
fabrics and collaborate with leading fabric and trims suppliers to manufacture fabrics and trims that we generally seek to
protect through agreements, trademarks, and as trade-secrets.
Sourcing and Manufacturing
We do not own or operate any manufacturing facilities. We rely on a limited number of suppliers to provide fabrics for,
and to produce, our products. The following statistics are based on cost.
We work with a group of approximately 49 vendors that manufacture our products, five of which produced 55% of our
products in 2023, with the largest manufacturer producing 17%. During 2023, 42% of our products were manufactured in
Vietnam, 16% in Cambodia, 11% in Sri Lanka, 10% in Indonesia, and 8% in Bangladesh, and the remainder in other regions.
We work with a group of approximately 67 suppliers to provide the fabrics for our products. In 2023, 52% of our fabrics
were produced by our top five fabric suppliers, with the largest manufacturer producing 19%. During 2023, 40% of our fabrics
originated from Taiwan, 26% from China Mainland, and 12% from Sri Lanka, and the remainder from other regions.
We also source other raw materials which are used in our products, including items such as content labels, elastics,
buttons, clasps, and drawcords from suppliers located predominantly in APAC and China Mainland.
We have developed long-standing relationships with a number of our vendors and take care to ensure that they share
our commitment to quality and ethics. We do not, however, have any long-term contracts with the majority of our suppliers
or manufacturing sources for the production and supply of our fabrics and garments, and we compete with other companies
for fabrics, raw materials, and production. We require that all of our suppliers and manufacturers adhere to our Vendor Code
of Ethics regarding social and environmental sustainability practices. Our product quality and sustainability teams closely
assess and monitor each supplier's compliance with applicable laws and our Vendor Code of Ethics, including by partnering
with leading inspection and verification firms.
Distribution Facilities
We operate and distribute finished products from our distribution facilities in the United States, Canada, and Australia.
We own our distribution center in Groveport, Ohio, and lease our other distribution facilities. We also utilize third-party
logistics providers in a number of countries in which we operate to warehouse and distribute finished products from their
warehouse locations. We regularly evaluate our distribution infrastructure and consolidate or expand our distribution
capacity as we believe appropriate for our operations and to meet anticipated needs.
Competition
Competition in the athletic apparel industry is based principally on brand image and recognition as well as product
quality, innovation, style, distribution, and price. We believe we successfully compete on the basis of our premium brand
image and our technical product innovation. We also believe our ability to introduce new product innovations, combine
function and fashion, and connect through in-store, online, and community experiences sets us apart from our competition. In
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addition, we believe our vertical retail distribution strategy and community-based marketing differentiates us further,
allowing us to more effectively control our brand image and connect with our guests.
The market for athletic apparel is highly competitive. It includes increasing competition from established companies
that are expanding their production and marketing of performance products, as well as from frequent new entrants to the
market. We are in direct competition with wholesalers and direct sellers of athletic apparel and footwear, such as Nike, Inc.,
adidas AG, PUMA, Under Armour, Inc., and Columbia Sportswear Company. We also compete with retailers who have
expanded to include women's athletic apparel including The Gap, Inc. (including the Athleta brand), Victoria's Secret with its
sport and lounge offering, and Urban Outfitters, Inc.
Seasonality
Our business is affected by the general seasonal trends common to the retail apparel industry. Our annual net revenue
is typically weighted more heavily toward our fourth fiscal quarter, reflecting our historical strength in sales during the holiday
season in the Americas, while our operating expenses are generally more equally distributed throughout the year. As a result,
a substantial portion of our operating profits are typically generated in the fourth quarter of our fiscal year. For example, we
generated approximately 43% of our full year operating profit during the fourth quarter of 2023.
Human Capital
Our Impact Agenda sets out our social and environmental goals and strategy across three pillars - Be Human, Be Well,
and Be Planet. Details can be found in our Impact Report on our website (https://corporate.lululemon.com/our-impact).
Included within our Impact Agenda is a goal to invest a total of $75.0 million to advance equity in well-being by the end
of 2025. As of January 28, 2024, we have invested a total of $44.8 million(1) towards this goal.
The Be Human pillar of our Impact Agenda sets out our focus areas with respect to human capital, including:
•
•
•
Inclusion, Diversity, Equity, and Action (“IDEA”);
Employee empowerment; and
Fair labor practices and the well-being of the people who make our products.
Inclusion, Diversity, Equity and Action
We believe IDEA is fundamental for shaping and building our company, industry, and communities, and for creating a
shared sense of respect and belonging. By continuously striving to be an inclusive, diverse, and equitable organization, we aim
to reflect a variety of perspectives and meet the needs of the global communities we serve. We are proud that as of
January 28, 2024, approximately 50% of our board of directors, 70% of our senior executive leadership team, and 50% of our
vice presidents and above are women, while approximately 75% of our overall workforce are women.(2)
(1) We have contributed $44.8 million to lululemon's Centre for Social Impact, $32.4 million of which has been contributed directly to social impact
organizations. The remaining $12.4 million primarily consists of contributions toward a donor-advised fund for future grant making.
(2) While we track male and female genders, we acknowledge this is not fully encompassing of all gender identities.
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We use an annual voluntary global survey to help us understand the demographics of our employee base and provide
us with access to tangible metrics to help us understand our employees’ sense of inclusion and belonging.(3) In 2023, the
participation rate was approximately 85%. Our overall goal is to reflect the racial diversity(4) of the communities we serve and
in which we operate.
We seek to maintain 100% gender pay equity within our entire global employee population, meaning equal pay for
equal work across genders, by geography. We have achieved full pay equity, including gender and race, in the United States,
which is the only country where we currently collect individually attributable race data.
We offer all employees IDEA education, training, and guided conversations on a variety of topics, including anti-racism,
anti-discrimination, and inclusive leadership behaviors. We have established People Networks, which are employee resource
groups for employees who have marginalized and historically underrepresented identities. We see significant engagement in
IDEA education and training across our global employee base. We aim to foster a culture of inclusion by making IDEA part of
our everyday conversation, and frequently review our policies, programs, and practices to identify ways to be more inclusive
and equitable.
Employee Empowerment
We believe our people are key to the success of our business. As of January 28, 2024 we employed approximately
38,000 people worldwide. We strive to foster a distinctive culture rooted in our core values that attracts and retains
passionate and motivated employees who are driven to achieve personal and professional goals. We believe our people
succeed because we create an environment that fosters growth and is diverse and equitable.
(3) The voluntary demographic survey results presented above relate to all of our employees in the Americas, Europe, Australia, and New Zealand.
(4) "Racial diversity" is used to measure the non-white population.
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Director and Assistant Store Manager and Above Racial Diversity23%27%27%202120222023—%5%10%15%20%25%30%35%Store Employee Racial Diversity37%40%41%202120222023—%5%10%15%20%25%30%35%40%45%2023 Employees by RegionUnited States 52%Canada 24%China Mainland 10%Rest of World 14%2022 Employees by RegionUnited States 54%Canada 26%China Mainland 8%Rest of World 12%2021 Employees by RegionUnited States 57%Canada 26%China Mainland 6%Rest of World 11%
We assess our performance and identify opportunities for improvement through an annual employee engagement
survey. In 2023, the participation rate was approximately 85% and our employee engagement score exceeded the retail
industry average.(5) Our engagement score suggests our people are proud to work for lululemon, they are motivated to
contribute to work that aligns with their purpose, and they recommend lululemon as a great place to work.
We understand that health and wealth programs need to offer choice at all stages of life. Our current offerings support
our goal of becoming the number one place where people come to develop and grow as inclusive leaders, and we regularly
use feedback to inform opportunities to support this goal. These offerings include, among other things:
•
•
•
•
•
•
•
•
Competitive compensation which rewards exceptional performance;
A Fund your Future program for eligible employees which offers partial contribution matches to a pension plan and
employee share purchase plan;
An annual paid VALUES (Volunteer, Awareness, Life, Unity, Empowerment, Support) Day, competitive paid time off,
and sick leave;
An employee discount program, which includes a lifetime discount to celebrate the contribution of our long-tenured
employees to keep them within our collective, even when they have moved on to pursue goals outside of lululemon;
Reimbursement programs which reward physical activity;
A parenthood program which is a gender-neutral benefit that provides all eligible employees up to six months of paid
leave;
An employee assistance program which provides free confidential support to all our employees and their families in a
variety of areas from mental well-being to financial services to advice for new parents; and
Training and development of all of our employees including, but not limited to, mentorship programs, IDEA
internships, leadership development, vision and goals, and coaching.
Fair Labor Practices and the Well-Being of the People who Make our Products
We work with suppliers who we believe share our values and collaborate with us to uphold robust standards, address
systemic challenges, and support the well-being of people who make our products. Our Responsible Supply Chain program is
built on three pillars:
• Monitoring - Assessing and improving working conditions in factories.
•
•
Integration - Integrating responsible purchasing practices across enterprise strategies, processes, and tools.
Collaboration - Working with multi-stakeholder organizations, industry, suppliers, and brands to support systemic
change and impact.
Our Vendor Code of Ethics outlines our commitment to respect human and labor rights, and promote safe and fair
working conditions for people in our supply chain. The code, which is based on international standards, sets the minimum
standards for our supplier partners and is a component of our supplier and manufacturer agreements. Our finished goods and
fabric suppliers are assessed against the Vendor Code of Ethics prior to forming a business relationship, and regularly
thereafter; we work with factories that can uphold our strict requirements.
Our Foreign Migrant Worker Standard sets out our minimum requirements for what we believe are the appropriate and
ethical recruitment, employment, and repatriation of foreign migrant workers.
Intellectual Property
We have trademark rights on many of our products and believe having distinctive marks that are readily identifiable is
an important factor in building our brand image and in distinguishing our products from the products of others. We consider
our lululemon and wave design trademarks to be among our most valuable assets. In addition, we own many other
trademarks for the names of several of our brands, slogans, fabrics and products. We own registered and pending U.S. and
foreign utility and design patents, industrial designs in Canada, and registered community designs in Europe that protect our
product innovations, distinctive apparel, and accessory designs.
(5) Based on an industry benchmark provided by the third party that administers this survey to our employees.
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Securities and Exchange Commission Filings
Our website address is www.lululemon.com. We provide free access to various reports that we file with, or furnish to,
the United States Securities and Exchange Commission, or the SEC, through our website, as soon as reasonably practicable
after they have been filed or furnished. These reports include, but are not limited to, our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports. Our SEC reports can also
be accessed through the SEC's website at www.sec.gov. Also available on our website are printable versions of our Global
Code of Business Conduct and Ethics and charters of the standing committees of our board of directors. Information
contained on or accessible through our websites is not incorporated into, and does not form a part of, this Annual Report or
any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual
references only.
ITEM 1A. RISK FACTORS
In addition to the other information contained in this Form 10-K, the following risk factors should be considered in
evaluating our business. Our business, financial condition, or results of operations could be materially adversely affected as a
result of any of these risks.
Risks related to our business and industry
Our success depends on our ability to maintain the value and reputation of our brand.
The lululemon name is integral to our business as well as to the implementation of our expansion strategies.
Maintaining, promoting, and positioning our brand will depend largely on the success of our marketing and merchandising
efforts and our ability to provide a consistent, high quality product, and guest experience. We rely on social media, as one of
our marketing strategies, to have a positive impact on both our brand value and reputation. Our brand and reputation could
be adversely affected if we fail to achieve these objectives, if our public image was to be tarnished by negative publicity,
which could be amplified by social media, if we fail to deliver innovative and high quality products acceptable to our guests, or
if we face or mishandle a product recall. Our reputation could also be impacted by adverse publicity, whether or not valid,
regarding allegations that we, or persons associated with us or formerly associated with us, have violated applicable laws or
regulations, including but not limited to those related to safety, employment, discrimination, harassment, whistle-blowing,
privacy, corporate citizenship, improper business practices, or cybersecurity. Certain activities on the part of stakeholders,
including nongovernmental organizations and governmental institutions, could cause reputational damage, distract senior
management, and disrupt our business. Additionally, while we devote considerable effort and resources to protecting our
intellectual property, if these efforts are not successful the value of our brand may be harmed. Any harm to our brand and
reputation could have a material adverse effect on our financial condition.
Changes in consumer shopping preferences, and shifts in distribution channels could materially impact our results of
operations.
We operate an omni-channel retail model and aim to efficiently and effectively serve our guests in the ways most
convenient to them. We operate a combination of physical retail locations and e-commerce services via our websites, other
region-specific websites, digital marketplaces, and mobile apps. Our physical retail locations remain a key part of our growth
strategy and we view them as a valuable tool in helping us build our brand and product line as well as enabling our omni-
channel capabilities. We plan to continue to expand square footage and open new company-operated stores to support our
growth objectives. The diversion of sales from our company-operated stores could adversely impact our return on investment
and could lead to impairment charges and store closures, including lease exit costs. We could have difficulty in recreating the
in-store experience through direct channels. Our failure to successfully integrate our digital and physical channels and
respond to these risks might adversely impact our business and results of operations, as well as damage our reputation and
brand.
If any of our products have manufacturing or design defects or are otherwise unacceptable to us or our guests, our business
could be harmed.
We have occasionally received, and may in the future receive, shipments of products that fail to comply with our
technical specifications or that fail to conform to our quality control standards. We have also received, and may in the future
receive, products that are otherwise unacceptable to us or our guests. Under these circumstances, unless we are able to
obtain replacement products in a timely manner, we risk the loss of net revenue resulting from the inability to sell those
products and related increased administrative and shipping costs. Additionally, if the unacceptability of our products is not
discovered until after such products are sold, our guests could lose confidence in our products or we could face a product
recall and our results of operations could suffer and our business, reputation, and brand could be harmed.
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Our lululemon Studio subsidiary offers complex hardware and software products and services that can be affected by
design and manufacturing defects. Sophisticated operating system software and applications, such as those offered by
lululemon Studio, often have issues that can unexpectedly interfere with the intended operation of hardware or software
products. Defects may also exist in components and products that we source from third parties. Any defects could make our
products and services unsafe and create a risk of environmental or property damage or personal injury and we may become
subject to the hazards and uncertainties of product liability claims and related litigation. The occurrence of real or perceived
defects in any of our products, now or in the future, could result in additional negative publicity, regulatory investigations, or
lawsuits filed against us, particularly if guests or others who use or purchase our lululemon Studio products are injured. Even
if injuries are not the result of any defects, if they are perceived to be, we may incur expenses to defend or settle any claims
and our brand and reputation may be harmed.
We operate in a highly competitive market and our competitors may compete more effectively than we can, resulting in a
loss of our market share and a decrease in our net revenue and profitability.
The market for technical athletic apparel is highly competitive. Competition may result in pricing pressures, reduced
profit margins or lost market share, or a failure to grow or maintain our market share, any of which could substantially harm
our business and results of operations. We compete directly against wholesalers and direct retailers of athletic apparel,
including large, diversified apparel companies with substantial market share, and established companies expanding their
production and marketing of technical athletic apparel, as well as against retailers specifically focused on women's athletic
apparel. We also face competition from wholesalers and direct retailers of traditional commodity athletic apparel, such as
cotton T-shirts and sweatshirts. Many of our competitors are large apparel and sporting goods companies with strong
worldwide brand recognition. Because of the fragmented nature of the industry, we also compete with other apparel sellers,
including those specializing in yoga apparel and other activewear. Many of our competitors have significant competitive
advantages, including longer operating histories, larger and broader customer bases, more established relationships with a
broader set of suppliers, greater brand recognition and greater financial, research and development, store development,
marketing, distribution, and other resources than we do. Our competitors may be able to achieve and maintain brand
awareness and market share more quickly and effectively than we can.
We may fail to acknowledge or react appropriately to the entry or growth of a viable competitor or disruptive force, and
could struggle to continue to innovate, differentiate, and sustain the growth of our brand. The increasing dominance and
presence of our brand may also drive guests towards alternative emerging competitors.
In addition, because we hold limited patents and exclusive intellectual property rights in the technology, fabrics or
processes underlying our products, our current and future competitors are able to manufacture and sell products with
performance characteristics, fabrication techniques, and styling similar to our products.
Our sales and profitability may decline as a result of increasing costs and decreasing selling prices.
Our business is subject to significant pressure on costs and pricing caused by many factors, including intense
competition, constrained sourcing capacity and related inflationary pressure, the availability of qualified labor and wage
inflation, pressure from consumers to reduce the prices we charge for our products, and changes in consumer demand. These
and other factors have, and may in the future, cause us to experience increased costs, reduce our prices to consumers or
experience reduced sales in response to increased prices, any of which could cause our operating margin to decline if we are
unable to offset these factors with reductions in operating costs and could have a material adverse effect on our financial
condition, operating results, and cash flows.
If we are unable to anticipate consumer preferences and successfully develop and introduce new, innovative, and
differentiated products, we may not be able to maintain or increase our sales and profitability.
Our success depends on our ability to identify and originate product trends as well as to anticipate and react to
changing consumer demands in a timely manner. All of our products are subject to changing consumer preferences that
cannot be predicted with certainty. If we are unable to introduce new products or novel technologies in a timely manner or
our new products or technologies are not accepted by our guests, our competitors may introduce similar products in a more
timely fashion, which could hurt our goal to be viewed as a leader in technical athletic apparel innovation. Our new products
may not receive consumer acceptance as consumer preferences could shift rapidly to different types of athletic apparel or
away from these types of products altogether, and our future success depends in part on our ability to anticipate and respond
to these changes. Our failure to anticipate and respond in a timely manner to changing consumer preferences could lead to,
among other things, lower sales and excess inventory levels. We may not have relevant data to effectively understand and
react to consumer preferences and expectations. Even if we are successful in anticipating consumer preferences, our ability to
adequately react to and address those preferences will in part depend upon our continued ability to develop and introduce
innovative, high-quality products. Our failure to effectively introduce new products that are accepted by consumers could
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result in a decrease in net revenue and excess inventory levels, which could have a material adverse effect on our financial
condition.
Our results of operations could be materially harmed if we are unable to accurately forecast guest demand for our
products.
To ensure adequate inventory supply, we must forecast inventory needs and place orders with our manufacturers
based on our estimates of future demand for particular products. Our ability to accurately forecast demand for our products
could be affected by many factors, including an increase or decrease in guest demand for our products or for products of our
competitors, our failure to accurately forecast guest acceptance of new products, product introductions by competitors,
unanticipated changes in general market conditions (for example, because of global economic concerns such as inflation, an
economic downturn, or delays and disruptions resulting from local and international shipping delays and labor shortages), and
weakening of economic conditions or consumer confidence in future economic conditions (for example, because of
inflationary pressures, or because of sanctions, restrictions, and other responses related to geopolitical events). If we fail to
accurately forecast guest demand, we may experience excess inventory levels or a shortage of products available for sale in
our stores or for delivery to guests.
Inventory levels in excess of guest demand may result in inventory write-downs or write-offs and the sale of excess
inventory at discounted prices, which would cause our gross margin to suffer and could impair the strength and exclusivity of
our brand. Conversely, if we underestimate guest demand for our products, our manufacturers may not be able to deliver
products to meet our requirements, and this could result in damage to our reputation and guest relationships.
Our limited operating experience and limited brand recognition in new international markets and new product categories
may limit our expansion and cause our business and growth to suffer.
Our future growth depends in part on our expansion efforts outside of the Americas. We have limited experience with
regulatory environments and market practices internationally, and we may not be able to penetrate or successfully operate in
any new market. In connection with our expansion efforts we may encounter obstacles we did not face in the Americas,
including cultural and linguistic differences, differences in regulatory environments, labor practices and market practices,
difficulties in keeping abreast of market, business and technical developments, and international guests' tastes and
preferences. We may also encounter difficulty expanding into new international markets because of limited brand recognition
leading to delayed acceptance of our technical athletic apparel by guests in these new international markets. Our failure to
develop our business in new international markets or disappointing growth outside of existing markets could harm our
business and results of operations.
In addition, our continued growth depends in part on our ability to expand our product categories and introduce new
product lines. We may not be able to successfully manage integration of new product categories or the new product lines
with our existing products. Selling new product categories and lines will require our management to test and develop
different strategies in order to be successful. We may be unsuccessful in entering new product categories and developing or
launching new product lines, which requires management of new suppliers, potential new customers, and new business
models. Our management may not have the experience of selling in these new product categories and we may not be able to
grow our business as planned. For example, in July 2020, we acquired MIRROR, an in-home fitness company with an
interactive workout platform that features live and on-demand classes. If we are unable to effectively and successfully further
develop these and future new product categories and lines, we may not be able to increase or maintain our sales and our
operating margins may be adversely affected. This may also divert the attention of management and cause additional
expenses.
We may, from time to time, evaluate and pursue other strategic investments or acquisitions. These involve various
inherent risks and the benefits sought may not be realized.
If we continue to grow at a rapid pace, we may not be able to effectively manage our growth and the increased complexity
of our business and as a result our brand image and financial performance may suffer.
If our operations continue to grow at a rapid pace, we may experience difficulties in obtaining sufficient raw materials
and manufacturing capacity to produce our products, as well as delays in production and shipments, as our products are
subject to risks associated with overseas sourcing and manufacturing. We could be required to continue to expand our sales
and marketing, product development and distribution functions, to upgrade our management information systems and other
processes and technology, and to obtain more space for our expanding workforce. This expansion could increase the strain on
our resources, and we could experience operating difficulties, including difficulties in hiring, training, and managing an
increasing number of employees. These difficulties could result in the erosion of our brand image which could have a material
adverse effect on our financial condition.
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We are subject to risks associated with leasing retail and distribution space subject to long-term and non-cancelable leases.
We lease the majority of our stores under operating leases and our inability to secure appropriate real estate or lease
terms could impact our ability to grow. Our leases generally have initial terms of between two and 15 years, and generally can
be extended in increments between two and five years, if at all. We generally cannot cancel these leases at our option. If an
existing or new store is not profitable, and we decide to close it, as we have done in the past and may do in the future, we
may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying
the base rent for the balance of the lease term. Similarly, we may be committed to perform our obligations under the
applicable leases even if current locations of our stores become unattractive as demographic patterns change. In addition, as
each of our leases expire, we may fail to negotiate renewals, either on commercially acceptable terms or at all, which could
require us to close stores in desirable locations.
We also lease the majority of our distribution centers and our inability to secure appropriate real estate or lease terms
could impact our ability to deliver our products to the market.
Our future success is substantially dependent on the service of our senior management and our ability to maintain our
culture and to attract, manage, and retain highly qualified individuals.
The performance of our senior management team and other key employees may not meet our needs and expectations.
Also, the loss of services of any of these key employees, or any negative public perception with respect to these individuals,
may be disruptive to, or cause uncertainty in, our business and could have a negative impact on our ability to manage and
grow our business effectively. Such disruption could have a material adverse impact on our financial performance, financial
condition, and the market price of our stock.
If we are unable to successfully maintain and evolve our unique culture, offer competitive compensation and benefits,
and a desirable work model, we may be unable to attract and retain highly qualified individuals to support our business and
continued growth. Our work model may not meet the needs and expectations of our employees and may not be perceived as
favorable compared to other companies. Unionization efforts or other employee organizing activities could lead to higher
people costs or reduce our flexibility to manage our employees which may negatively disrupt our operations. We also face
risks related to employee engagement and productivity which could result in increased headcount and lead to increased labor
costs.
Our business is affected by seasonality, which could result in fluctuations in our operating results.
Our business is affected by the general seasonal trends common to the retail apparel industry. Our annual net revenue
is typically weighted more heavily toward our fourth fiscal quarter, reflecting our historical strength in sales during the holiday
season, while our operating expenses are more equally distributed throughout the year. This seasonality, along with other
factors that are beyond our control, including weather conditions and the effects of climate change, could adversely affect our
business and cause our results of operations to fluctuate.
Risks related to our supply chain
Disruptions of our supply chain could have a material adverse effect on our operating and financial results.
Disruption of our supply chain capabilities due to trade restrictions, political instability, severe weather, natural
disasters, public health crises, war, terrorism, product recalls, labor supply shortages or stoppages, the financial or operational
instability of key suppliers and carriers, changes in diplomatic or trade relationships (including any sanctions, restrictions, and
other responses such as those related to current geopolitical events), or other reasons could impair our ability to distribute
our products. To the extent we are unable to mitigate the likelihood or potential impact of such events, there could be a
material adverse effect on our operating and financial results.
We rely on international suppliers and any significant disruption to our supply chain could impair our ability to procure or
distribute our products.
We do not manufacture our products or raw materials and rely on suppliers and manufacturers located predominantly
in APAC and China Mainland. We also source other materials used in our products, including items such as content labels,
elastics, buttons, clasps, and drawcords, from suppliers located primarily in this region. Based on cost, during 2023:
•
Approximately 42% of our products were manufactured in Vietnam, 16% in Cambodia, 11% in Sri Lanka, 10% in
Indonesia, and 8% in Bangladesh, and the remainder in other regions.
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•
Approximately 40% of the fabric used in our products originated from Taiwan, 26% from China Mainland, 12% from
Sri Lanka, and the remainder from other regions.
The entire apparel industry, including our company, could face supply chain challenges as a result of the impacts of
global public health crises, political instability, inflationary pressures, macroeconomic conditions, and other factors, including
reduced freight availability and increased costs, port disruption, manufacturing facility closures, and related labor shortages
and other supply chain disruptions.
Our supply chain capabilities may be disrupted due to these or other factors, such as severe weather, natural disasters,
war or other military conflicts, terrorism, labor supply shortages or stoppages, the financial or operational instability of key
suppliers or the countries in which they operate, or changes in diplomatic or trade relationships (including any sanctions,
restrictions, and other responses to geopolitical events). Any significant disruption in our supply chain capabilities could
impair our ability to procure or distribute our products, which would adversely affect our business and results of operations.
A relatively small number of vendors supply and manufacture a significant portion of our products, and losing one or more
of these vendors could adversely affect our business and results of operations.
Many of the specialty fabrics used in our products are technically advanced textile products developed and
manufactured by third parties and may be available, in the short-term, from only one or a limited number of sources. We
have no long-term contracts with any of our suppliers or manufacturers for the production and supply of our raw materials
and products, and we compete with other companies for fabrics, other raw materials, and production. During 2023, we
worked with approximately 49 vendors to manufacture our products and 67 suppliers to provide the fabric for our products.
Based on cost, during 2023:
•
•
Approximately 55% of our products were manufactured by our top five vendors, the largest of which produced
approximately 17% of our products; and
Approximately 52% of our fabrics were produced by our top five fabric suppliers, the largest of which produced
approximately 19% of fabric used.
We have experienced, and may in the future experience, a significant disruption in the supply of fabrics or raw materials
and may be unable to locate alternative suppliers of comparable quality at an acceptable price, or at all. In addition, if we
experience significant increased demand, or if we need to replace an existing supplier or manufacturer, we may be unable to
locate additional supplies of fabrics or raw materials or additional manufacturing capacity on terms that are acceptable to us,
or at all, or we may be unable to locate any supplier or manufacturer with sufficient capacity to meet our requirements or fill
our orders in a timely manner. Identifying a suitable supplier is an involved process that requires us to become satisfied with
its quality control, responsiveness and service, financial stability, and labor and other ethical practices. Even if we are able to
expand existing or find new manufacturing or fabric sources, we may encounter delays in production and added costs as a
result of the time it takes to train our suppliers and manufacturers in our methods, products, and quality control standards.
Our supply of fabric or manufacture of our products could be disrupted or delayed by economic or political or global
health conditions, and the related government and private sector responsive actions such as closures, restrictions on product
shipments, and travel restrictions. Delays related to supplier changes could also arise due to an increase in shipping times if
new suppliers are located farther away from our markets or from other participants in our supply chain. In addition, freight
capacity issues continue to persist worldwide as there is much greater demand for shipping and reduced capacity and
equipment. Any delays, interruption, or increased costs in the supply of fabric or manufacture of our products could have an
adverse effect on our ability to meet guest demand for our products and result in lower net revenue and income from
operations both in the short and long term.
Our business could be harmed if our suppliers and manufacturers do not comply with our Vendor Code of Ethics or
applicable laws.
While we require our suppliers and manufacturers to comply with our Vendor Code of Ethics, which includes labor,
health and safety, and environment standards, we do not control their operations. If suppliers or contractors do not comply
with these standards or applicable laws or there is negative publicity regarding the production methods of any of our
suppliers or manufacturers, even if unfounded or not specific to our supply chain, our reputation and sales could be adversely
affected, we could be subject to legal liability, or could cause us to contract with alternative suppliers or manufacturing
sources.
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The fluctuating cost of raw materials could increase our cost of goods sold.
The fabrics used to make our products include synthetic fabrics whose raw materials include petroleum-based products.
Our products also include silver and natural fibers, including cotton. Our costs for raw materials are affected by, among other
things, weather, consumer demand, speculation on the commodities market, the relative valuations and fluctuations of the
currencies of producer versus consumer countries, and other factors that are generally unpredictable and beyond our control.
Any and all of these factors may be exacerbated by global climate change. In addition, political instability, trade relations,
sanctions, inflationary pressure, or other geopolitical or economic conditions could cause raw material costs to increase and
have an adverse effect on our future margins. Increases in the cost of raw materials, including petroleum or the prices we pay
for silver and our cotton yarn and cotton-based textiles, could have a material adverse effect on our cost of goods sold, results
of operations, financial condition, and cash flows.
If we encounter problems with our distribution system, our ability to deliver our products to the market and to meet guest
expectations could be harmed.
We rely on our distribution facilities for substantially all of our product distribution. Our distribution facilities include
computer controlled and automated equipment, which means their operations may be subject to a number of risks related to
security or computer viruses, the proper operation of software and hardware, electronic or power interruptions, or other
system failures. In addition, our operations could also be interrupted by labor difficulties, pandemics, the impacts of climate
change, extreme or severe weather conditions or by floods, fires, or other natural disasters near our distribution centers. If we
encounter problems with our distribution system, our ability to meet guest expectations, manage inventory, complete sales,
and achieve objectives for operating efficiencies could be harmed.
Increasing labor costs and other factors associated with the production of our products in South Asia and South East Asia
could increase the costs to produce our products.
A significant portion of our products are produced in South Asia and South East Asia and increases in the costs of labor
and other costs of doing business in the countries in this area could significantly increase our costs to produce our products
and could have a negative impact on our operations and earnings. Factors that could negatively affect our business include
labor shortages and increases in labor costs, labor disputes, pandemics, the impacts of climate change, difficulties and
additional costs in transporting products manufactured from these countries to our distribution centers and significant
revaluation of the currencies used in these countries, which may result in an increase in the cost of producing products. Also,
the imposition of trade sanctions or other regulations against products imported by us from, or the loss of "normal trade
relations" status with any country in which our products are manufactured, could significantly increase our cost of products
and harm our business.
Risks related to information security and technology
We may be unable to safeguard against security breaches which could damage our customer relationships and result in
significant legal and financial exposure.
As part of our normal operations, we receive confidential, proprietary, and personally identifiable information, including
credit card information, and information about our customers, our employees, job applicants, and other third parties. Our
business employs systems and websites that allow for the storage and transmission of this information. However, despite our
safeguards and security processes and protections, security breaches could expose us to a risk of theft or misuse of this
information, and could result in litigation and potential liability.
The retail industry, in particular, has been the target of many recent cyber-attacks. We may not have the resources or
technical sophistication to be able to anticipate or prevent rapidly evolving types of cyber-attacks. Attacks may be targeted at
us, our vendors or customers, or others who have entrusted us with information. In addition, despite taking measures to
safeguard our information security and privacy environment from security breaches, our customers and our business could
still be exposed to risk. Actual or anticipated attacks may cause us to incur increasing costs including costs to deploy additional
personnel and protection technologies, train employees and engage third party experts and consultants. Advances in
computer capabilities, new technological discoveries or other developments may result in the technology used by us to
protect transaction or other data being breached or compromised. Measures we implement to protect against cyber-attacks
may also have the potential to impact our customers' shopping experience or decrease activity on our websites by making
them more difficult to use.
Data and security breaches can also occur as a result of non-technical issues including intentional or inadvertent breach
by employees or persons with whom we have commercial relationships that result in the unauthorized release of personal or
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confidential information. Any compromise or breach of our security could result in a violation of applicable privacy and other
laws, significant legal and financial exposure, and damage to our brand and reputation or other harm to our business.
In addition, the increased use of employee-owned devices for communications as well as work-from-home
arrangements present additional operational risks to our technology systems, including increased risks of cyber-attacks.
Further, like other companies in the retail industry, we have in the past experienced, and we expect to continue to
experience, cyber-attacks, including phishing, and other attempts to breach, or gain unauthorized access to, our systems. To
date, these attacks have not had a material impact on our operations, but they may have a material impact in the future.
Privacy and data protection laws increase our compliance burden.
We are subject to a variety of privacy and data protection laws and regulations that change frequently and have
requirements that vary from jurisdiction to jurisdiction. For example, we are subject to significant compliance obligations
under privacy laws such as the General Data Privacy Regulation ("GDPR") in the European Union, the Personal Information
Protection and Electronic Documents Act (“PIPEDA”) in Canada, the California Consumer Privacy Act ("CCPA") modified by the
California Privacy Rights Act (“CPRA”), and the Personal Information Protection Law (“PIPL”) in the People's Republic of China
("PRC")(6). Some privacy laws prohibit the transfer of personal information to certain other jurisdictions. We are subject to
privacy and data protection audits or investigations by various government agencies. Our failure to comply with these laws
subjects us to potential regulatory enforcement activity, fines, private litigation including class actions, and other costs. Our
efforts to comply with privacy laws may complicate our operations and add to our compliance costs. A significant privacy
breach or failure or perceived failure by us or our third-party service providers to comply with privacy or data protection laws,
regulations, policies or regulatory guidance might have a materially adverse impact on our reputation, business operations
and our financial condition or results of operations.
Disruption of our technology systems or unexpected network interruption could disrupt our business.
We are increasingly dependent on technology systems and third-parties to operate our e-commerce websites, process
transactions, respond to guest inquiries, manage inventory, purchase, sell and ship goods on a timely basis, and maintain cost-
efficient operations. The failure of our technology systems to operate properly or effectively, problems with transitioning to
upgraded or replacement systems, or difficulty in integrating new systems, could adversely affect our business. In addition,
we have e-commerce websites in the United States, Canada, and internationally. Our technology systems, websites, and
operations of third parties on whom we rely, may encounter damage or disruption or slowdown caused by a failure to
successfully upgrade systems, system failures, viruses, computer "hackers", natural disasters, or other causes. These could
cause information, including data related to guest orders, to be lost or delayed which could, especially if the disruption or
slowdown occurred during the holiday season, result in delays in the delivery of products to our stores and guests or lost
sales, which could reduce demand for our products and cause our sales to decline. The concentration of our primary offices,
several of our distribution centers, and a number of our stores along the west coast of North America could amplify the
impact of a natural disaster occurring in that area to our business, including to our technology systems. In addition, if changes
in technology cause our information systems to become obsolete, or if our information systems are inadequate to handle our
growth, we could lose guests. We have limited back-up systems and redundancies, and our technology systems and websites
have experienced system failures and electrical outages in the past which have disrupted our operations. Any significant
disruption in our technology systems or websites could harm our reputation and credibility, and could have a material adverse
effect on our business, financial condition, and results of operations.
Our technology-based systems that give our customers the ability to shop with us online may not function effectively.
Many of our customers shop with us through our e-commerce websites and mobile apps. Increasingly, customers are
using tablets and smart phones to shop online with us and with our competitors and to do comparison shopping. We are
increasingly using social media and proprietary mobile apps to interact with our customers and as a means to enhance their
shopping experience. Any failure on our part to provide attractive, effective, reliable, user-friendly e-commerce platforms that
offer a wide assortment of merchandise with rapid delivery options and that continually meet the changing expectations of
online shoppers could place us at a competitive disadvantage, result in the loss of e-commerce and other sales, harm our
(6) PRC includes China Mainland, Hong Kong SAR, Taiwan, and Macau SAR.
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reputation with customers, have a material adverse impact on the growth of our e-commerce business globally and could
have a material adverse impact on our business and results of operations.
Risks related to environmental, social, and governance issues
Climate change, and related legislative and regulatory responses to climate change, may adversely impact our business.
There is increasing concern that a gradual rise in global average temperatures due to increased concentration of carbon
dioxide and other greenhouse gases in the atmosphere will cause significant changes in weather patterns around the globe,
an increase in the frequency, severity, and duration of extreme weather conditions and natural disasters, and water scarcity
and poor water quality. These events could adversely impact the cultivation of cotton, which is a key resource in the
production of our products, disrupt the operation of our supply chain and the productivity of our contract manufacturers,
increase our production costs, impose capacity restraints and impact the types of apparel products that consumers purchase.
These events could also compound adverse economic conditions and impact consumer confidence and discretionary
spending. As a result, the effects of climate change could have a long-term adverse impact on our business and results of
operations. In many countries, governmental bodies are enacting new or additional legislation and regulations to reduce or
mitigate the potential impacts of climate change. If we, our suppliers, or our contract manufacturers are required to comply
with these laws and regulations, or if we choose to take voluntary steps to reduce or mitigate our impact on climate change,
we may experience increased costs for energy, production, transportation, and raw materials, increased capital expenditures,
or increased insurance premiums and deductibles, which could adversely impact our operations. Inconsistency of legislation
and regulations among jurisdictions may also affect the costs of compliance with such laws and regulations. Any assessment
of the potential impact of future climate change legislation, regulations or industry standards, as well as any international
treaties and accords, is uncertain given the wide scope of potential regulatory change in the countries in which we operate.
Increased scrutiny from investors and others regarding our environmental, social, governance, or sustainability,
responsibilities could result in additional costs or risks and adversely impact our reputation, employee retention, and
willingness of customers and suppliers to do business with us.
Investor and political advocacy groups, certain institutional investors, investment funds, other market participants,
stockholders, and customers have focused increasingly on the environmental, social and governance ("ESG") practices of
companies, including those associated with climate change and social responsibility. These parties have placed increased
importance on the implications of the social cost of their investments. If our ESG practices do not meet customer, investor,
employee, or other stakeholder expectations or do not align with their opinions or values, our brand, reputation, employee
retention, and business may be negatively impacted. Any sustainability report that we publish or other ESG disclosures we
make may include our policies and practices on a variety of social and ethical matters, including corporate governance,
environmental compliance, employee health and safety practices, human capital management, product quality, supply chain
management, and workforce inclusion and diversity. It is possible that stakeholders may not be satisfied with our ESG policies
or practices, including if we overstate the impact of our ESG practices, and this could reduce demand for our products and
lead to regulatory enforcement that could restrict our ability to market and sell our products. We could also incur additional
costs and require additional resources to monitor, report, and comply with various ESG practices. Also, our failure, or
perceived failure, to meet the standards included in any sustainability disclosure could negatively impact our reputation,
employee retention, and the willingness of our customers and suppliers to do business with us.
Risks related to global economic, political, and regulatory conditions
An economic recession, depression, downturn, periods of inflation, or economic uncertainty in our key markets may
adversely affect consumer discretionary spending and demand for our products.
Many of our products may be considered discretionary items for consumers. Some of the factors that may influence
consumer spending on discretionary items include general economic conditions, high levels of unemployment, pandemics,
higher consumer debt levels, reductions in net worth based on market declines and uncertainty, home foreclosures and
reductions in home values, fluctuating interest and foreign currency exchange rates and credit availability, government
austerity measures, fluctuating fuel and other energy costs, fluctuating commodity prices, inflationary pressure, tax rates and
general uncertainty regarding the overall future economic environment. Global economic conditions are uncertain and
volatile, due in part to the potential impacts of increasing inflation, the potential impacts of geopolitical uncertainties, and any
potential sanctions, restrictions or responses to those conditions. For example, the PRC market presents a number of risks,
including changes in laws and regulations, currency fluctuations, increased competition, and changes in economic conditions,
including the risk of an economic downturn or recession, trade embargoes, restrictions or other barriers, as well as other
conditions that may adversely impact consumer spending, any of which could cause us to fail to achieve anticipated growth.
As global economic conditions continue to be volatile or economic uncertainty remains, trends in consumer discretionary
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spending also remain unpredictable and subject to reductions due to credit constraints and uncertainties about the future.
Unfavorable economic conditions may lead consumers to delay or reduce purchases of our products. Consumer demand for
our products may not reach our targets, or may decline, when there is an economic downturn or economic uncertainty in our
key markets. Our sensitivity to economic cycles and any related fluctuation in consumer demand may have a material adverse
effect on our financial condition.
Our financial condition could be adversely affected by global or regional health events such as the COVID-19 pandemic and
related government, private sector, and individual consumer responsive actions.
The COVID-19 pandemic negatively impacted the global economy, disrupted consumer spending and global supply
chains, and created significant volatility and disruption of financial markets. The COVID-19 pandemic and related government,
private sector, and individual consumer responsive actions negatively impacted our business operations, store traffic,
employee availability, supply chain, financial condition, liquidity, and cash flows.
The occurrence or resurgence of global or regional health events such as the COVID-19 pandemic, and the related
governmental, private sector and individual consumer responses, could contribute to a recession, depression, or global
economic downturn, reduce store traffic and consumer spending, result in temporary or permanent closures of retail
locations, offices, and factories, and could negatively impact the flow of goods. Such events could cause health officials to
impose restrictions and recommend precautions to mitigate the health crisis such as the temporary closure of our stores,
limitations on the number of guests allowed in our stores at any single time, minimum physical distancing requirements, and
limited operating hours. A health event such as the COVID-19 pandemic could also negatively impact our employees, guests,
and brand by reducing consumer willingness to visit stores, malls, and lifestyle centers, and employee willingness to staff our
stores. A global or regional health event may also cause long-term changes to consumer shopping behavior, preferences and
demand for our products that may have a material adverse effect on our business.
A global or regional health event such as the COVID-19 pandemic could significantly and adversely impact our supply
chain if the factories that manufacture our products, the distribution centers where we manage our inventory, or the
operations of our logistics and other service providers are disrupted, temporarily closed, or experience worker shortages.
Global economic and political conditions could adversely impact our results of operations.
Uncertain or challenging global economic and political conditions could impact our performance, including our ability to
successfully expand internationally. Global economic conditions could impact levels of consumer spending in the markets in
which we operate, which could impact our sales and profitability. Political unrest, such as the turmoil related to current
geopolitical events and the related sanctions, restrictions, or other responses, could negatively impact our guests and
employees, reduce consumer spending, and adversely impact our business and results of operations.
We may be unable to source and sell our merchandise profitably or at all if new trade restrictions are imposed or existing
restrictions become more burdensome.
The United States and the countries in which our products are produced or sold have imposed and may impose
additional quotas, duties, tariffs, or other restrictions or regulations, or may adversely adjust prevailing quota, duty, or tariff
levels. The results of any audits or related disputes regarding these restrictions or regulations could have an adverse effect on
our financial statements for the period or periods for which the applicable final determinations are made. Countries impose,
modify, and remove tariffs and other trade restrictions in response to a diverse array of factors, including global and national
economic and political conditions, which make it impossible for us to predict future developments regarding tariffs and other
trade restrictions. Trade restrictions, including tariffs, quotas, embargoes, safeguards, and customs restrictions, could increase
the cost or reduce the supply of products available to us, could increase shipping times, or may require us to modify our
supply chain organization or other current business practices, any of which could harm our business, financial condition, and
results of operations.
We are dependent on international trade agreements and regulations. The countries in which we produce and sell our
products could impose or increase tariffs, duties, or other similar charges that could negatively affect our results of
operations, financial position, or cash flows.
Adverse changes in, or withdrawal from, trade agreements or political relationships between the United States and the
PRC, Canada, or other countries where we sell or source our products, could negatively impact our results of operations or
cash flows. General geopolitical instability and the responses to it, such as the possibility of sanctions, trade restrictions, and
changes in tariffs, including sanctions against the PRC, tariffs imposed by the United States and the PRC, and the possibility of
additional tariffs or other trade restrictions, could adversely impact our business. It is possible that further tariffs may be
introduced, or increased. Such changes could adversely impact our business and could increase the costs of sourcing our
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products from the PRC as well as other countries, or could require us to source our products from different countries. The
Uyghur Forced Labor Prevention Act and other similar legislation may lead to greater supply chain compliance costs and
delays to us and to our vendors.
Changes in tax laws or unanticipated tax liabilities could adversely affect our effective income tax rate and profitability.
We are subject to the income tax laws of the United States, Canada, and several other international jurisdictions. Our
effective income tax rates could be unfavorably impacted by a number of factors, including changes in the mix of earnings
amongst countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in
tax laws, new tax interpretations and guidance, the outcome of income tax audits in various jurisdictions around the world,
and any repatriation of unremitted earnings for which we have not previously accrued applicable U.S. income taxes and
international withholding taxes.
Repatriations from our Canadian subsidiaries are not subject to Canadian withholding taxes if such distributions are
made as a return of capital. The extent to which the accumulated earnings of our Canadian subsidiaries can be repatriated as
a return of capital is dependent on, among other things, the amount of paid-up-capital in our Canadian subsidiaries and
transactions undertaken by our exchangeable shareholders.
Prior to 2022, we had not accrued for Canadian withholding taxes because the accumulated earnings of, or 'net
investment' in, our Canadian subsidiaries was either indefinitely reinvested or could be repatriated as a return of capital
without the payment of withholding taxes.
Since 2022, the net investment in our Canadian subsidiaries, which was not indefinitely reinvested, exceeded the paid-
up capital and therefore we recognized Canadian withholding taxes on the portion of our net investment which we are unable
to repatriate free of withholding tax.
In 2024, assuming there are no exchange transactions by our exchangeable shareholders, we will continue to recognize
Canadian withholding taxes on the accumulated earnings of our Canadian subsidiaries which are not indefinitely reinvested.
We engage in a number of intercompany transactions across multiple tax jurisdictions. Although we believe that these
transactions reflect the accurate economic allocation of profit and that proper transfer pricing documentation is in place, the
profit allocation and transfer pricing terms and conditions may be scrutinized by local tax authorities during an audit and any
resulting changes may impact our mix of earnings in countries with differing statutory tax rates. At the end of 2020, our
Advance Pricing Arrangement ("APA") with the Internal Revenue Service and the Canada Revenue Agency expired. This APA
stipulated the allocation of certain profits between the U.S. and Canada. We are currently in the process of negotiating the
renewal of this arrangement and the final agreed upon terms and conditions thereof could impact our effective tax rate.
Current economic and political conditions make tax rules in any jurisdiction, including the United States and Canada,
subject to significant change. Changes in applicable U.S., Canadian, or other international tax laws and regulations, or their
interpretation and application, including the possibility of retroactive effect, could affect our income tax expense and
profitability, as they did in fiscal 2017 and fiscal 2018 upon passage of the U.S. Tax Cuts and Jobs Act, and in 2020 with the
passage of the Coronavirus Aid, Relief, and Economic Security Act. Certain provisions of the Inflation Reduction Act passed in
2022, including a 15% corporate alternative minimum tax, as well as the similar 15% global minimum tax under the
Organization for Economic Cooperation and Development's Pillar Two Global Anti-Base Erosion Rules, may impact our income
tax expense, profitability, and capital allocation decisions.
Our failure to comply with trade and other regulations could lead to investigations or actions by government regulators
and negative publicity.
The labeling, distribution, importation, marketing, and sale of our products, as well as components of our products,
including chemicals, are subject to extensive regulation by various regulatory bodies. These include federal agencies such as
the Federal Trade Commission, Consumer Product Safety Commission and state attorneys general in the United States, the
Competition Bureau and Health Canada in Canada, the State Administration for Market Regulation of the PRC, General
Administration of Customs of the PRC, as well as other federal, state, provincial, local, and international regulatory authorities
in the countries in which our products are distributed or sold. If we fail to comply with any of these regulations, we could
become subject to enforcement actions or the imposition of significant penalties or claims, which could harm our results of
operations or our ability to conduct our business. In addition, any audits and inspections by governmental agencies related to
these matters could result in significant settlement amounts, damages, fines, or other penalties, divert financial and
management resources, and result in significant legal fees. An unfavorable outcome of any particular proceeding could have
an adverse impact on our business, financial condition, and results of operations. In addition, the adoption of new regulations
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or changes in the interpretation of existing regulations may result in significant compliance costs or discontinuation of product
sales and could impair the marketing of our products, resulting in significant loss of net revenue.
Our international operations are also subject to compliance with the U.S. Foreign Corrupt Practices Act ("FCPA") and
other anti-bribery laws applicable to our operations. In many countries, particularly in those with developing economies, it
may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the
FCPA or other U.S. and international laws and regulations applicable to us. As we expand our operations across multiple
jurisdictions, we could be subject to conflicting laws, or differing consumer sentiment on application of laws, that could lead
to non-compliance which could have an adverse effect on our operations. Although we have implemented procedures
designed to ensure compliance with the FCPA and similar laws, some of our employees, agents, or other partners, as well as
those companies to which we outsource certain of our business operations, could take actions in violation of our policies. Any
such violation could have a material and adverse effect on our business.
As we expand internationally, we are subject to complex employee regulations, and if we fail to comply with these
regulations, we could be subject to enforcement actions or negative employee relations which could harm our results of
operations.
Because a significant portion of our net revenue and expenses are generated in countries other than the United States,
fluctuations in foreign currency exchange rates have affected our results of operations and may continue to do so in the
future.
The functional currency of our international subsidiaries is generally the applicable local currency. Our consolidated
financial statements are presented in U.S. dollars. Therefore, the net revenue, expenses, assets, and liabilities of our
international subsidiaries are translated from their functional currencies into U.S. dollars. Fluctuations in the value of the U.S.
dollar affect the reported amounts of net revenue, expenses, assets, and liabilities. Foreign currency exchange differences
which arise on translation of our international subsidiaries' balance sheets into U.S. dollars are recorded as other
comprehensive income (loss), net of tax in accumulated other comprehensive income or loss within stockholders' equity.
We also have exposure to changes in foreign currency exchange rates associated with transactions which are
undertaken by our subsidiaries in currencies other than their functional currency. Such transactions include intercompany
transactions and inventory purchases denominated in currencies other than the functional currency of the purchasing entity.
As a result, we have been impacted by changes in foreign currency exchange rates and may be impacted for the foreseeable
future. The potential impact of currency fluctuation increases as our international expansion increases.
Although we use financial instruments to hedge certain foreign currency risks, these measures may not succeed in fully
offsetting the negative impact of foreign currency rate movements.
We are exposed to credit-related losses in the event of nonperformance by the counterparties to forward currency
contracts used in our hedging strategies.
Risks related to intellectual property
Our fabrics and manufacturing technology generally are not patented and can be imitated by our competitors. If our
competitors sell products similar to ours at lower prices, our net revenue and profitability could suffer.
The intellectual property rights in the technology, fabrics, and processes used to manufacture our products generally
are owned or controlled by our suppliers and are generally not unique to us. Our ability to obtain intellectual property
protection for our products is therefore limited. We hold limited patents and exclusive intellectual property rights in the
technology, fabrics or processes underlying our products. As a result, our current and future competitors are able to
manufacture and sell products with performance characteristics, fabrics and styling similar to our products. Because many of
our competitors have significantly greater financial, distribution, marketing, and other resources than we do, they may be
able to manufacture and sell products based on our fabrics and manufacturing technology at lower prices than we can. If our
competitors sell products similar to ours at lower prices, our net revenue and profitability could suffer.
Our failure or inability to protect our intellectual property rights could diminish the value of our brand and weaken our
competitive position.
We currently rely on a combination of patent, copyright, trademark, trade dress, trade secret, and unfair competition
laws, as well as confidentiality procedures and licensing arrangements, to establish and protect our intellectual property
rights. The steps we take to protect our intellectual property rights may not be adequate to prevent infringement of these
rights by others, including imitation of our products and misappropriation of our brand. In addition, any of our intellectual
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property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable,
or our intellectual property protection may be unavailable or limited in some international countries where laws or law
enforcement practices may not protect our intellectual property rights as fully as in the United States or Canada, and it may
be more difficult for us to successfully challenge the use of our intellectual property rights by other parties in these countries.
If we fail to protect and maintain our intellectual property rights, the value of our brand could be diminished, and our
competitive position may suffer.
Our trademarks, patents, and other proprietary rights could potentially conflict with the rights of others and we may be
prevented from selling some of our products.
Our success depends in large part on our brand image. We believe that our trademarks, patents, and other proprietary
rights have significant value and are important to identifying and differentiating our products from those of our competitors
and creating and sustaining demand for our products. We have applied for and obtained some United States, Canada, and
international trademark registrations and patents, and will continue to evaluate additional trademarks and patents as
appropriate. However, some or all of these pending trademark or patent applications may not be approved by the applicable
governmental authorities. Moreover, even if the applications are approved, third parties may seek to oppose or otherwise
challenge these applications or registrations. Additionally, we may face obstacles as we expand our product line and the
geographic scope of our sales and marketing. Third parties may assert intellectual property claims against us, particularly as
we expand our business and the number of products we offer. Our defense of any claim, regardless of its merit, could be
expensive and time consuming and could divert management resources. Successful infringement claims against us could
result in significant monetary liability or prevent us from selling some of our products. In addition, resolution of claims may
require us to redesign our products, license rights from third parties, or cease using those rights altogether. Any of these
events could harm our business and cause our results of operations, liquidity, and financial condition to suffer.
We have been, and in the future may be, sued by third parties for alleged infringement of their proprietary rights.
There is considerable patent and other intellectual property development activity in our market, and litigation, based on
allegations of infringement or other violations of intellectual property, is frequent in the fitness and technology industries.
Furthermore, it is common for individuals and groups to purchase patents and other intellectual property assets for the
purpose of making claims of infringement to extract settlements from companies like ours. Our use of third-party content,
including music content, software, and other intellectual property rights may be subject to claims of infringement or
misappropriation. We cannot guarantee that our internally developed or acquired technologies and content do not or will not
infringe the intellectual property rights of others. From time to time, our competitors or other third parties may claim that we
are infringing upon or misappropriating their intellectual property rights, and we may be found to be infringing upon such
rights. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could
require that we pay substantial damages or ongoing royalty payments, prevent us from offering our platform or services or
using certain technologies, force us to implement expensive work-arounds, or impose other unfavorable terms. We expect
that the occurrence of infringement claims is likely to grow as the market for fitness products and services grows and as we
introduce new and updated products and offerings. Accordingly, our exposure to damages resulting from infringement claims
could increase and this could further exhaust our financial and management resources. Any of the foregoing could prevent us
from competing effectively and could have an adverse effect on our business, financial condition, and operating results.
Risks related to legal and governance matters
We are subject to periodic claims and litigation that could result in unexpected expenses and could ultimately be resolved
against us.
From time to time, we are involved in litigation and other proceedings, including matters related to product liability
claims, stockholder class action and derivative claims, commercial disputes and intellectual property, as well as trade,
regulatory, employment, and other claims related to our business. Any of these proceedings could result in significant
settlement amounts, damages, fines, or other penalties, divert financial and management resources, and result in significant
legal fees. An unfavorable outcome of any particular proceeding could exceed the limits of our insurance policies or the
carriers may decline to fund such final settlements and/or judgments and could have an adverse impact on our business,
financial condition, and results of operations. In addition, any proceeding could negatively impact our reputation among our
guests and our brand image.
Our business could be negatively affected as a result of actions of activist stockholders or others.
We may be subject to actions or proposals from stockholders or others that may not align with our business strategies
or the interests of our other stockholders. Responding to such actions can be costly and time-consuming, disrupt our business
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and operations, and divert the attention of our board of directors, management, and employees from the pursuit of our
business strategies. Such activities could interfere with our ability to execute our strategic plan. Activist stockholders or others
may create perceived uncertainties as to the future direction of our business or strategy which may be exploited by our
competitors and may make it more difficult to attract and retain qualified personnel and potential guests, and may affect our
relationships with current guests, vendors, investors, and other third parties. In addition, a proxy contest for the election of
directors at our annual meeting would require us to incur significant legal fees and proxy solicitation expenses and require
significant time and attention by management and our board of directors. The perceived uncertainties as to our future
direction also could affect the market price and volatility of our securities.
Anti-takeover provisions of Delaware law and our certificate of incorporation and bylaws could delay and discourage
takeover attempts that stockholders may consider to be favorable.
Certain provisions of our certificate of incorporation and bylaws and applicable provisions of the Delaware General
Corporation Law may make it more difficult or impossible for a third-party to acquire control of us or effect a change in our
board of directors and management. These provisions include:
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•
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the classification of our board of directors into three classes, with one class elected each year;
prohibiting cumulative voting in the election of directors;
the ability of our board of directors to issue preferred stock without stockholder approval;
the ability to remove a director only for cause and only with the vote of the holders of at least 66 2/3% of our voting
stock;
a special meeting of stockholders may only be called by our chairman or Chief Executive Officer, or upon a
resolution adopted by an affirmative vote of a majority of the board of directors, and not by our stockholders;
prohibiting stockholder action by written consent; and
our stockholders must comply with advance notice procedures in order to nominate candidates for election to our
board of directors or to place stockholder proposals on the agenda for consideration at any meeting of our
stockholders.
In addition, we are governed by Section 203 of the Delaware General Corporation Law which, subject to some specified
exceptions, prohibits "business combinations" between a Delaware corporation and an "interested stockholder," which is
generally defined as a stockholder who becomes a beneficial owner of 15% or more of a Delaware corporation's voting stock,
for a three-year period following the date that the stockholder became an interested stockholder. Section 203 could have the
effect of delaying, deferring, or preventing a change in control that our stockholders might consider to be in their best
interests.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
Our business operations and relationships with customers and suppliers are heavily reliant on technology. We operate a
cybersecurity program designed to assess our security risks and threats, to manage those risks and protect our technology
systems and data, and to detect and respond to cybersecurity incidents.
We manage strategic risks, including cybersecurity risk, through our Enterprise Risk Management program which has
direct involvement from the board of directors, the audit committee, and senior management. Through this process, we have
identified cybersecurity as a risk management priority.
Governance
Our board of directors provides oversight of cybersecurity risks and has delegated primary responsibility to the audit
committee, which is responsible for overseeing our enterprise risk assessments and management policies, procedures, and
practices (including regarding those risks related to information security, cybersecurity, and data protection).
The audit committee maintains a cybersecurity sub-committee that is comprised of our Chief Information Officer
("CIO"), our Chief Information Security Officer ("CISO"), and representatives from the audit committee and board of directors
that have knowledge and experience in cybersecurity matters. The cybersecurity sub-committee reviews our cybersecurity
22
risk assessments and the steps being taken to monitor, control, and report on those risks as well as discusses regulatory and
market developments. They also review our process for identifying and responding to cybersecurity incidents in a timely
manner, and details of cybersecurity attacks or incidents which have occurred.
Management generally meets with, and provides reports to, the cybersecurity sub-committee on a quarterly basis. Our
CIO and CISO also meet with and provide reports to the audit committee at least quarterly. The board of directors receives
periodic reports regarding the activities of the cybersecurity sub-committee. These reports and meetings are designed to
inform the board of directors and committees about the current state of our information security program including
cybersecurity risks, the nature, timing, and extent of cybersecurity incidents, if any, and the resolution of such matters.
Cybersecurity Program and Incident Response
Our CISO is responsible for our cybersecurity program, including risk assessments, information security activities, and
controls. The CISO is responsible for establishing and maintaining corporate information security policies and overseeing our
risk management activities, which prioritize vulnerability management, risk reduction, and prevention. Our CISO also leads our
Cyber Defense and Incident Response (“CDIR”) team which identifies, assesses, escalates, and remediates cybersecurity
incidents. Our current CISO has over 25 years of experience in information security across different industries in the US,
Europe, and South and Central America. Our current CISO is a member of the Information Systems Audit and Control
Association and brings extensive experience and knowledge of cybersecurity risk management.
The CDIR team identifies, tracks, reviews, assesses, and takes actions over key cybersecurity risks including but not
limited to: (i) third parties/vendors, (ii) cloud security, (iii) malicious code, (iv) our digital e-commerce channels and systems,
and (v) our store technology. The CDIR team also undertakes enterprise architecture reviews, considers cyber defense and
incident response findings, performs vulnerability scans, and assesses threats and performs landscape intelligence analysis.
As part of our cybersecurity program, we conduct cybersecurity awareness training including phishing simulations and
supplemental campaigns as well as mandatory e-learning for all our employees. Our employees have multiple mechanisms for
reporting cybersecurity and data privacy concerns. We work with third-party cybersecurity advisors to undertake assessments
of our critical systems and to remediate any high-risk vulnerabilities identified. We also engage third parties to perform
penetration testing on our key systems to identify potential weaknesses.
As part of our cyber incident response plan, we utilize an established framework to assess the severity of cybersecurity
incidents. Under the plan, incidents are escalated to relevant senior management, and the board of directors, as appropriate,
based on their severity. Our disclosure committee assesses the materiality of severe incidents including both quantitative and
qualitative factors.
Third Parties
We utilize third-party service providers as a normal part of our business operations. To address cybersecurity risks
arising from our relationships with third-party service providers, we employ a vendor risk program. We monitor risks relating
to potential compromises of sensitive information at our third-party service providers and re-evaluate the risks associated
with our partners periodically. Prior to exchanging our data with third-party service providers, they are required to go through
a vendor risk assessment. We also conduct third-party security reviews and evaluate their network, processes, and systems. In
addition, we obtain annual attestation reports related to data security and privacy from certain third-party service providers
to further support compliance with industry-standard cybersecurity protocols.
Impact of Cybersecurity Risks on Strategy and Results
Based on the information available as of the date of this Annual Report, we have not been materially affected by any
previous cybersecurity incidents. However, we continue to experience cyber-attacks, including phishing, and other attempts
to break or gain unauthorized access to our systems that could materially affect us in the future. For further information, see
“Risks related to information security and technology” included in Item 1A. Risk Factors of this Annual Report.
23
ITEM 2. PROPERTIES
Our principal executive and administrative offices are located at 1818 Cornwall Avenue, Vancouver, British Columbia,
Canada, V6J 1C7.
The general location, use and approximate size of our principal owned properties as of January 28, 2024, are set forth
below:
Location
Use
Groveport, OH, United States
Distribution Center
Vancouver, BC, Canada
Executive and Administrative Offices
Approximate Square
Feet
310,000
140,000
We lease non-retail properties in a number of locations globally. The general location, use, approximate size and lease
renewal date of our principal non-retail leased properties as of January 28, 2024, are set forth below:
Use
Approximate Square
Feet
Lease Renewal Date
Location
Delta, BC, Canada
Milton, ON, Canada
Mississauga, ON, Canada
Ravenhall, VIC, Australia
Delta, BC, Canada
Distribution Center
Distribution Center
Distribution Center
Distribution Center
Distribution Center
Sumner, WA, United States
Distribution Center
Vancouver, BC, Canada
Executive and Administrative Offices
375,000 December 2037
255,000 May 2031
250,000 September 2033
250,000 September 2033
155,000
January 2031
150,000
July 2025
120,000 October 2032
During 2021, we entered into a new lease for a U.S. distribution center in Ontario, California of approximately 1,255,000
square feet which expires in 2039. We expect this distribution center to be operational in early fiscal 2024.
During 2022, we entered into a new lease for a Canadian distribution center in Brampton, Ontario of approximately
980,000 square feet which expires in 2041. We expect this distribution center to be operational in fiscal 2026.
ITEM 3. LEGAL PROCEEDINGS
Please see the legal proceedings described in Note 21. Commitments and Contingencies included in Item 8 of Part II of
this report.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
24
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Market Information and Dividends
Our common stock is quoted on the Nasdaq Global Select Market under the symbol "LULU."
As of March 15, 2024, there were approximately 1,300 holders of record of our common stock. This does not include
persons whose stock is in nominee or "street name" accounts through brokers.
We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Any future
determination as to the payment of cash dividends will be at the discretion of our board of directors and will depend on our
financial condition, operating results, current and anticipated cash needs, plans for expansion, and other factors that our
board of directors considers to be relevant. In addition, financial and other covenants in any instruments or agreements that
we enter into in the future may restrict our ability to pay cash dividends on our common stock.
Stock Performance Graph
The graph set forth below compares the cumulative total stockholder return on our common stock between February 3,
2019 (the date of our fiscal year end five years ago) and January 28, 2024, with the cumulative total return of (i) the S&P 500
Index and (ii) S&P 500 Apparel, Accessories & Luxury Goods Index, over the same period. This graph assumes the investment
of $100 on February 3, 2019 at the closing sale price of our common stock, the S&P 500 Index and the S&P Apparel,
Accessories & Luxury Goods Index and assumes the reinvestment of dividends, if any.
The comparisons shown in the graph below are based on historical data. We caution that the stock price performance
shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of
our common stock. Information used in the graph was obtained from Bloomberg, a source believed to be reliable, but we are
not responsible for any errors or omissions in such information.
lululemon athletica inc.
S&P 500 Index
03-Feb-19
02-Feb-20
31-Jan-21
30-Jan-22
29-Jan-23
28-Jan-24
$ 100.00 $ 163.83 $ 224.94 $ 216.20 $ 212.74 $ 327.15
$ 100.00 $ 119.18 $ 137.23 $ 163.75 $ 150.40 $ 180.71
S&P 500 Apparel, Accessories & Luxury Goods Index
$ 100.00 $
90.30 $
86.51 $
83.79 $
59.05 $
47.77
25
Comparison of Cumulative Total Stockholder Returnlululemon athletica inc.S&P 500 IndexS&P 500 Apparel, Accessories& Luxury Goods Index03-Feb-1902-Feb-2031-Jan-2130-Jan-2229-Jan-2328-Jan-24$0.00$100.00$200.00$300.00$400.00 Issuer Purchase of Equity Securities
The following table provides information regarding our purchases of shares of our common stock during the fourth
quarter of 2023 related to our stock repurchase programs:
Period(1)
October 30, 2023 - November 26, 2023
November 27, 2023 - December 31, 2023
January 1, 2024 - January 28, 2024
Total
Total Number of
Shares
Purchased(2)
Average
Price Paid per
Share
50,619 $
10,040
59,180
119,839
400.10
507.57
483.73
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs(2)
Maximum Dollar
Value of Shares
that May Yet Be
Purchased Under
the Plans or
Programs(2)
50,619 $
222,941,393
10,040
59,180
119,839
1,217,845,403
1,189,218,138
__________
(1)
(2)
Monthly information is presented by reference to our fiscal periods during our fourth quarter of 2023.
On March 23, 2022 and November 29, 2023, our board of directors approved stock repurchase programs, each for up to $1.0 billion of our common
shares on the open market or in privately negotiated transactions. The repurchase plans have no time limit and do not require the repurchase of a
minimum number of shares. Common shares repurchased on the open market are at prevailing market prices, including under plans complying with
the provisions of Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934. The timing and actual number of common shares to be
repurchased will depend upon market conditions, eligibility to trade, and other factors. The authorized value of shares available to be repurchased
under these programs excludes the cost of commissions and excise taxes.
The following table summarizes purchases of shares of our common stock during the fourth quarter of 2023 related to
our Employee Share Purchase Plan (ESPP):
Period(1)
October 30, 2023 - November 26, 2023
November 27, 2023 - December 31, 2023
January 1, 2024 - January 28, 2024
Total
Total Number of
Shares
Purchased(2)
Average
Price Paid per
Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs(2)
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs(2)
7,367 $
7,331
5,954
20,652
418.18
491.70
482.84
7,367
7,331
5,954
20,652
4,415,983
4,408,652
4,402,698
___________
(1)
(2)
Monthly information is presented by reference to our fiscal periods during our fourth quarter of 2023.
The ESPP was approved by our board of directors and stockholders in September 2007. All shares purchased under the ESPP are purchased on the
Nasdaq Global Select Market (or such other stock exchange as we may designate). Unless our board terminates the ESPP earlier, it will continue until
all shares authorized for purchase have been purchased. The maximum number of shares authorized to be purchased under the ESPP was 6,000,000.
Excluded from this disclosure are shares repurchased to settle statutory employee tax withholding related to the
vesting of stock-based compensation awards.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Not applicable.
26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results of operations is provided as a supplement to,
and should be read in conjunction with, our consolidated financial statements and the related notes included elsewhere in
this Annual Report on Form 10-K. Components of management's discussion and analysis of financial condition and results of
operations include:
• Overview
•
•
•
•
•
•
•
•
•
•
Financial Highlights and Market Conditions and Trends
Results of Operations
Comparison of 2023 to 2022
Comparison of 2022 to 2021
Comparable Sales and Sales Per Square Foot
Non-GAAP Financial Measures
Liquidity and Capital Resources
Liquidity Outlook
Contractual Obligations and Commitments
Critical Accounting Policies and Estimates
Our fiscal year ends on the Sunday closest to January 31 of the following year, typically resulting in a 52-week year, but
occasionally giving rise to an additional week, resulting in a 53-week year. Fiscal 2023, 2022, and 2021 were each 52-week
years. Fiscal 2024 will be a 53-week year.
This discussion and analysis contains forward-looking statements based on current expectations that involve risks,
uncertainties and assumptions, such as our plans, objectives, expectations, and intentions included in the "Special Note
Regarding Forward-Looking Statements." Our actual results and the timing of events may differ materially from those
anticipated in these forward-looking statements as a result of various factors, including those described in the "Item 1A. Risk
Factors" section and elsewhere in this Annual Report on Form 10-K.
We use comparable sales as a metric to evaluate the performance of our business. Refer to the Comparable Sales and
Sales Per Square Foot section of this management's discussion and analysis of financial condition and results of operations for
further information.
We provide constant dollar changes and adjusted financial results, which are non-GAAP financial measures, as
supplemental information that enable evaluation of the underlying trend in our operating performance, and enable a
comparison to our historical financial information. Refer to the Non-GAAP Financial Measures section of this management's
discussion and analysis of financial condition and results of operations for reconciliations between the adjusted non-GAAP
financial measures and the most directly comparable measures calculated in accordance with GAAP.
We disclose material non-public information through one or more of the following channels: our investor relations
website (http://corporate.lululemon.com/investors), the social media channels identified on our investor relations website,
press releases, SEC filings, public conference calls, and webcasts. Information contained on or accessible through our websites
is not incorporated into, and does not form a part of, this Annual Report or any other report or document we file with the SEC,
and any references to our websites are intended to be inactive textual references only.
During the fourth quarter of 2023, we revised the financial information which is regularly reviewed and used by our
CODM to evaluate performance and allocate resources. Historically, our segments were based on selling channel. As we have
further executed on our omni-channel retail strategy, and with the continued expansion of our international operations, our
resource allocation decisions have evolved to focus on regional markets. We organize our operations into four regional
markets: Americas, China Mainland, APAC, and EMEA. We report three segments, Americas, China Mainland, and Rest of
World, which is comprised of the APAC and EMEA regions on a combined basis. Our prior year segment results have been
recast to reflect our new segment reporting structure.
Overview
In 2023, lululemon celebrated its 25th anniversary and delivered another strong year of financial results. We continued
to execute against our Power of Three ×2 growth plan, growing net revenue 19% and diluted earnings per share 83%, or 27%
on an adjusted basis, as our teams were able to successfully navigate an uncertain macroeconomic environment.
Our growth continued across regions, merchandise categories, and channels. We delivered strong net revenue growth
across our regions including 12% in the Americas, 67% in China Mainland, and 43% in Rest of World. Net revenue from our
women's product range increased 17%, men's increased 15%, and net revenue from our other categories increased 36%. We
27
opened 56 net new company-operated stores, contributing to a 15% increase in square footage, while total company-
operated store net revenue increased 21% and e-commerce net revenue increased 17%.
We believe this broad-based growth was underpinned by our ability to bring new innovations into our product
assortment, while also increasing our brand awareness and bringing new guests into our brand.
Product Innovation
By innovating through our Science of Feel approach, we continue to seek to solve the unmet needs of our guests. While
continuing to see strength from our key collections including Align, Scuba, Define, and Softstreme for women and our ABC
collection for men, we launched new innovations as well. For women, we launched Wundermost, our new bodywear
collection, we expanded our dual gender golf and tennis assortments. On the men’s side, we launched Steady State and Soft
Jersey, to expand our lounge offering, while also enhancing our Pace Breaker short. In accessories, we continued to see
strength across our bag assortment, and in footwear we updated our Blissfeel and Chargefeel styles, and in early 2024, we
launched our first footwear styles for men. We also announced a new textile-to-textile recycling partnership with the goal of
enabling circularity in our supply chain by transforming apparel waste into high quality nylon and polyester.
Brand Awareness
We believe that increasing our brand awareness and introducing new guests to the lululemon brand remains one of our
largest opportunities, both in the Americas and to an even greater degree in our international markets.
In order to grow brand awareness we combine our community-based, grass roots model of guest engagement, with
larger scale brand activations and global brand campaigns. With connection points across both our physical and digital
channels, we aim to bring new guests into our brand, engage with them in ways that are more than just transactional and
create deeper connections.
In 2023, we executed several strategies designed to connect with guests, bring new guests into our brand, and grow
awareness. Highlights include: hosting our Dupe Swap event in Los Angeles; testing our first men's focused TV campaign
featuring our ABC pants; taking over the West Bund in Shanghai for one week to host wellness-centric events and experiences
intended to bring awareness to World Mental Health Day; and continuing to grow our Essentials membership program.
In addition, in September 2023 we announced our new partnership with Peloton. Peloton is now the exclusive provider
of content for our lululemon Studio members, we have become their primary apparel provider. We plan to jointly engage our
global communities through special programming, experiences, and events.
Financial Highlights
The summary below compares 2023 to 2022 and provides both GAAP and non-GAAP financial measures. The adjusted
financial measures for 2023 exclude $72.1 million of post-tax asset impairment and other charges recognized in relation to
lululemon Studio. The adjusted financial measures for 2022 exclude $442.7 million of post-tax goodwill impairment and other
charges recognized in relation to lululemon Studio and the post-tax net gain on the sale of an administrative building of $8.5
million.
•
•
•
•
•
Net revenue increased 19% to $9.6 billion. On a constant dollar basis, net revenue increased 20%.
Comparable sales increased 13%, or 14% on a constant dollar basis.
–
–
–
Americas comparable sales increased 8%, or 9% on a constant dollar basis.
China Mainland comparable sales increased 39%, or 46% on a constant dollar basis.
Rest of World comparable sales increased 32%, or 33% on a constant dollar basis.
Gross profit increased 25% to $5.6 billion. Adjusted gross profit increased 24% to $5.6 billion.
Gross margin increased 290 basis points to 58.3%. Adjusted gross margin increased 240 basis points to 58.6%.
Income from operations increased 61% to $2.1 billion. Adjusted income from operations increased 25% to $2.2
billion.
• Operating margin increased 580 basis points to 22.2% from 16.4% in 2022. Adjusted operating margin increased 110
basis points to 23.2% from 22.1% in 2022.
28
•
•
Income tax expense increased 31% to $625.5 million. Our effective tax rate for 2023 was 28.8% compared to 35.9%
for 2022. The adjusted effective tax rate was 28.7% and 28.1% for 2023 and 2022, respectively.
Diluted earnings per share were $12.20 for 2023 compared to $6.68 in 2022. Adjusted diluted earnings per share
were $12.77 for 2023 compared to $10.07 in 2022.
Market Conditions and Trends
Macroeconomic conditions, supply chain disruption, and the COVID-19 pandemic have impacted our business and
operating costs. Certain trends are expected to continue throughout 2024, with the impact varying by market.
Macroeconomic Conditions
Macroeconomic conditions, including foreign currency fluctuations, have impacted our financial results. Foreign
currency fluctuations reduced the growth of our net revenue by $89.8 million when comparing 2023 to 2022, primarily due to
the overall appreciation of the US dollar. We expect future exchange rate volatility to impact our results. We have also
experienced increased wage rates which increased our employee costs when comparing 2023 to 2022.
Consumer purchasing behaviors and their propensity to spend in our sector have been impacted by uncertain economic
conditions including inflation, higher interest rates, and other factors. While we experienced traffic and net revenue growth in
2023 in all markets, over the course of 2023 we saw moderation in the year over year traffic and net revenue growth in the
Americas. We continue to monitor macroeconomic conditions and the trends in consumer demand for our products.
Supply Chain Disruption
In 2021 and 2022 we experienced supply chain disruption, including delays in inbound delivery of our products as well
as in manufacturing. This supply chain disruption caused us to use higher cost modes of transport, including increasing our use
of air freight. We saw an improvement in the supply chain disruption during the second half of 2022 and during 2023,
including reductions in freight costs and reductions in our levels of air freight usage.
COVID-19 Pandemic
Most of our retail locations were open throughout 2023, 2022, and 2021, with certain locations temporarily closed due
to COVID-19 resurgences during the first quarter of 2022 and at various times in 2021. The effect of COVID-19, including store
closures, impacted our revenue and operating margins in 2021 and the first quarter of 2022 in China Mainland.
Results of Operations
The following table summarizes key components of our results of operations for the periods indicated:
2023
2022
2021
2023
2022
2021
(In thousands)
(Percentage of net revenue)
$
9,619,278 $
8,110,518 $
6,256,617
100.0 %
100.0 %
100.0 %
Net revenue
Cost of goods sold
Gross profit
Selling, general and administrative
expenses
Impairment of goodwill and other
assets, restructuring costs
Amortization of intangible assets
Acquisition-related expenses
Gain on disposal of assets
Income from operations
4,009,873
5,609,405
3,618,178
4,492,340
2,648,052
3,608,565
3,397,218
2,757,447
2,225,034
74,501
5,010
—
—
407,913
8,752
—
(10,180)
—
8,782
41,394
—
2,132,676
1,328,408
1,333,355
Other income (expense), net
43,059
4,163
514
Income before income tax expense
2,175,735
1,332,571
1,333,869
625,545
477,771
358,547
Income tax expense
Net income
41.7
58.3
35.3
0.8
0.1
—
—
22.2
0.4
22.6
6.5
44.6
55.4
34.0
5.0
0.1
—
(0.1)
16.4
0.1
16.4
5.9
42.3
57.7
35.6
—
0.1
0.7
—
21.3
—
21.3
5.7
$
1,550,190 $
854,800 $
975,322
16.1 %
10.5 %
15.6 %
29
Comparison of 2023 to 2022
Net Revenue
Net revenue increased $1.5 billion, or 19%, to $9.6 billion in 2023 from $8.1 billion in 2022. On a constant dollar basis,
net revenue increased 20%. Comparable sales increased 13%, or 14% on a constant dollar basis. The increase in net revenue
was primarily due to increased Americas net revenue. China Mainland and Rest of World net revenue also increased.
Net revenue for 2023 and 2022 is summarized below, and reflects our updated segments, including comparatives.
2023
2022
2023
2022
Year over year change
(In thousands)
(Percentage of net revenue)
(In thousands)
(Percentage)
Americas
$
7,631,647 $
6,817,454
China Mainland
Rest of World
963,760
1,023,871
576,503
716,561
79.3 %
10.0
10.6
84.1 % $
814,193
7.1
8.8
387,257
307,310
Net revenue
$
9,619,278 $
8,110,518
100.0 %
100.0 % $
1,508,760
11.9 %
67.2
42.9
18.6 %
(Constant dollar
change)
12.0 %
75.0
44.0
20.0 %
Americas. The increase in Americas net revenue was primarily due to an increase in comparable sales, which increased
8%, or 9% on a constant dollar basis. The increase in comparable sales was primarily a result of increased traffic, partially
offset by a lower dollar value per transaction and a decrease in conversion rates. The increase in Americas net revenue was
also driven by a $327.6 million increase in non-comparable sales, primarily from our company-operated stores that were
opened or significantly expanded since 2022 as well as increased outlet, wholesale, and license and supply arrangement net
revenue, partially offset by fewer temporary locations and lower lululemon Studio net revenue.
China Mainland. The increase in China Mainland net revenue was primarily due to an increase in comparable sales,
which increased 39%, or 46% on a constant dollar basis. The increase in comparable sales was primarily a result of increased
traffic, partially offset by a decrease in conversion rates and a lower dollar value per transaction. The increase in China
Mainland net revenue was also driven by a $180.6 million increase in non-comparable sales, primarily from our company-
operated stores that were opened or significantly expanded since 2022 as well as increased net revenue from outlets.
Rest of World. The increase in Rest of World net revenue was primarily due to an increase in comparable sales, which
increased 32%, or 33% on a constant dollar basis. The increase in comparable sales was primarily a result of increased traffic,
partially offset by a decrease in conversion rates. The increase in Rest of World net revenue was also driven by a $118.9
million increase in non-comparable sales, primarily from our company-operated stores that were opened or significantly
expanded since 2022 as well as increased license and supply arrangements and outlets net revenue.
Gross Profit
Gross profit
Gross margin
2023
2022
Year over year change
(In thousands)
(In thousands)
(Percentage)
$ 5,609,405
$ 4,492,340
$
1,117,065
24.9 %
58.3 %
55.4 %
290 basis points
During 2022, we decided to shift our lululemon Studio strategy to focus on providing digital app-based services. While
we continued to sell at-home hardware in 2023, we reached the decision to cease selling the lululemon Studio Mirror during
the third quarter of 2023. These strategy shifts resulted in the recognition of an inventory obsolescence provision of $62.9
million in 2022 and a further provision of $23.7 million in 2023. These provisions reduced gross margin by 80 basis points and
30 basis points in 2022 and 2023 respectively. Please refer to Note 8. Impairment of Goodwill and Other Assets, Restructuring
Costs included in Item 8 of Part II of this report.
30
Gross margin increased 290 basis points, or excluding the impact of the lululemon Studio obsolescence provisions
detailed above, increased 240 basis points. This 240 basis point net increase was primarily a result of:
•
•
•
a net increase in product margin of 290 basis points, primarily due to lower freight costs from rate reductions and
reduced air freight, as well as lower duty costs, modestly offset by higher inventory provisions and shrink in the
current year;
an unfavorable impact of foreign currency exchange rates of 20 basis points; and
deleverage on occupancy costs of 20 basis points and an increase in costs related to our distribution centers as a
percentage of net revenue of 10 basis points.
Selling, General and Administrative Expenses
Selling, general and administrative expenses
$ 3,397,218
$ 2,757,447
$
639,771
23.2 %
Selling, general and administrative expenses as a percentage of net
revenue
35.3 %
34.0 %
130 basis points
2023
2022
Year over year change
(In thousands)
(In thousands)
(Percentage)
The increase in selling, general and administrative expenses was primarily due to:
•
an increase in head office costs of $327.7 million, comprised of:
– an increase in employee costs of $108.8 million primarily due to increased salaries and wages expense as
well as increased stock-based compensation and incentive compensation, primarily as a result of headcount
growth and increased wage rates;
– an increase in brand and community costs of $95.4 million primarily due to increased marketing expenses;
– an increase in depreciation of $46.0 million;
– an increase in other head office costs of $40.4 million, primarily due to increased professional fees; and
– an increase in technology costs, including cloud computing amortization, of $37.1 million.
•
an increase in costs related to our operating channels of $319.1 million, comprised of:
– an increase in employee costs of $145.1 million primarily due to increased salaries and wages expense,
incentive compensation, and benefit costs for retail employees, primarily from the growth in our business
and increased wage rates;
– an increase in other operating costs of $67.7 million primarily due to increased depreciation costs,
technology costs, and repairs and maintenance costs;
– an increase in variable costs of $66.8 million primarily due to increased credit card fees, distribution costs,
and packaging costs, primarily as a result of increased net revenue; and
– an increase in brand and community costs of $39.5 million primarily due to increased digital marketing
expenses.
The increase in selling, general and administrative expenses was partially offset by a decrease in net foreign currency
exchange and derivative revaluation losses of $7.0 million.
31
Impairment of Goodwill and Other Assets, Restructuring Costs
2023
2022
Year over year change
(In thousands)
(In thousands)
(Percentage)
Impairment of goodwill and other assets, restructuring costs
$
74,501 $
407,913 $
(333,412)
(81.7) %
During 2023, we recognized certain asset impairments and restructuring costs, and during 2022, we recognized
impairment of goodwill and other assets, each in relation to lululemon Studio. Please refer to Note 8. Impairment of Goodwill
and Other Assets, Restructuring Costs included in Item 8 of Part II of this report for further information.
Amortization of Intangible Assets
Amortization of intangible assets
$
5,010 $
8,752 $
(3,742)
(42.8) %
The amortization of intangible assets was primarily the result of the amortization of intangible assets recognized upon
the acquisition of MIRROR, which we rebranded as lululemon Studio.
2023
2022
Year over year change
(In thousands)
(In thousands)
(Percentage)
Gain on Disposal of Assets
Gain on disposal of assets
$
— $
(10,180) $
10,180
(100.0) %
During the second quarter of 2022, we completed the sale of an administrative office building, which resulted in a pre-
2023
2022
Year over year change
(In thousands)
(In thousands)
(Percentage)
tax gain of $10.2 million.
Income from Operations
On a segment basis, we determine income from operations without taking into account our general corporate expenses
and certain other expenses. Segmented income from operations is summarized below. Our prior year segment results have
been recast to reflect our new segment reporting structure.
2023
2022
2023
2022
Year over year change
(In thousands)
(Percentage of net revenue of
respective operating segment)
(In thousands)
(Percentage)
$ 2,937,184
$ 2,503,740
38.5 %
36.7 % $
433,444
Segmented income from operations:
Americas
China Mainland
Rest of World
General corporate expenses
lululemon Studio obsolescence provision
Impairment of goodwill and other assets,
restructuring costs
Amortization of intangible assets
Gain on disposal of assets
Income from operations
Operating margin
337,316
201,832
196,865
103,204
$ 3,476,332
$ 2,803,809
1,240,436
1,005,988
23,709
62,928
74,501
5,010
407,913
8,752
—
(10,180)
$ 2,132,676
$ 1,328,408
22.2 %
16.4 %
35.0
19.7
34.1
14.4
140,451
98,628
$
672,523
234,448
(39,219)
(333,412)
(3,742)
10,180
17.3 %
71.3
95.6
24.0 %
23.3
(62.3)
(81.7)
(42.8)
(100.0)
$
804,268
60.5 %
580 basis points
Americas. The increase in Americas income from operations was primarily the result of increased gross profit of $691.7
million, driven by increased net revenue and higher gross margin. The increase in gross margin was primarily due to higher
product margin, partially offset by deleverage on distribution center costs. The increase in gross profit was partially offset by
an increase in selling, general and administrative expenses, primarily due to higher employee costs, increased digital
marketing expenses, increased credit card fees, packaging costs, and distribution costs driven by higher net revenue, and
32
increased depreciation, and technology costs. Income from operations as a percentage of Americas net revenue increased
due to higher gross margin, partially offset by deleverage on selling, general and administrative expenses.
China Mainland. The increase in China Mainland income from operations was primarily the result of increased gross
profit of $228.1 million, driven by increased net revenue. Gross margin was consistent year over year, primarily due to
leverage on occupancy and other costs, partially offset by unfavorable foreign currency exchange rates and lower product
margin. The increase in gross profit was partially offset by an increase in selling, general and administrative expenses primarily
due to higher employee costs, as well as increased digital marketing expenses, increased packaging costs, distribution costs,
and credit card fees driven by higher net revenue, and increased technology costs. Income from operations as a percentage of
China Mainland net revenue increased due to leverage on selling, general and administrative expenses.
Rest of World. The increase in Rest of World income from operations was primarily the result of increased gross profit of
$190.2 million, driven by increased net revenue and higher gross margin. The increase in gross margin was primarily due to
higher product margin as well as leverage on occupancy and other costs, partially offset by unfavorable foreign currency
exchange rates. The increase in gross profit was partially offset by an increase in selling, general and administrative expenses
primarily due to higher employee costs, as well as increased digital marketing expenses, increased distribution costs, credit
card fees, and packaging costs driven by higher net revenue, and increased technology costs. Income from operations as a
percentage of Rest of World net revenue increased due to higher gross margin and leverage on selling, general and
administrative expenses.
General Corporate Expenses. The increase in general corporate expenses was primarily due to increased employee
costs, as well as increased brand and community costs, depreciation, technology costs, professional fees, and product team
costs. The increase in general corporate expenses was partially offset by a decrease in net foreign currency exchange and
derivative losses of $7.0 million.
Other Income (Expense), Net
Other income (expense), net
$
43,059 $
4,163 $
38,896
934.3 %
The increase in other income, net was primarily due to an increase in interest income as a result of higher cash balances
2023
2022
Year over year change
(In thousands)
(In thousands)
(Percentage)
and higher interest rates.
Income Tax Expense
Income tax expense
Effective tax rate
2023
2022
Year over year change
(In thousands)
(In thousands)
(Percentage)
$
625,545
$
477,771
$
147,774
30.9 %
28.8 %
35.9 %
(710) basis points
The decrease in the effective tax rate was primarily due the income tax impact of certain non-deductible impairment
and other charges recognized in 2022 and 2023 related to lululemon Studio, partially offset by a lower tax rate on the gain on
the sale of an administrative building in 2022. These items increased the effective tax rate by 780 basis points and 10 basis
points in 2022 and 2023, respectively.
Excluding the income tax effects of the impairment and other charges recognized in 2022 and 2023 in relation to
lululemon Studio, and excluding the tax effect of the gain on the sale of the administrative building in 2022, the adjusted
effective tax rate increased to 28.7% in 2023 from 28.1% in 2022.
The increase in the adjusted effective tax rate was primarily due to withholding taxes on unremitted earnings which are
not considered to be permanently reinvested, partially offset by adjustments upon the filing of certain income tax returns,
and a decrease in U.S. state taxes.
Net Income
Net income
2023
2022
Year over year change
(In thousands)
(In thousands)
(Percentage)
$
1,550,190 $
854,800 $
695,390
81.4 %
33
The increase in net income in 2023 was primarily due to an increase in gross profit of $1.1 billion, an increase in other
income (expense), net of $38.9 million, and impairment and restructuring charges recognized in 2023 of $74.5 million
compared to impairment charges of $407.9 million recognized in 2022, partially offset by an increase in selling, general and
administrative expenses of $639.8 million, an increase in income tax expense of $147.8 million, and a gain on disposal of
assets of $10.2 million in the prior year.
Excluding certain inventory provisions, goodwill and other asset impairments, and restructuring costs recognized in
relation to lululemon Studio in 2023 and 2022 and the gain on sale of an administrative building in 2022, and their tax effects,
adjusted net income increased $333.4 million or 26%.
Comparison of 2022 to 2021
Net Revenue
Net revenue increased $1.9 billion, or 30%, to $8.1 billion in 2022 from $6.3 billion in 2021. On a constant dollar basis,
net revenue increased 32%. Comparable sales increased 25%, or 28% on a constant dollar basis. The increase in net revenue
was primarily due to increased Americas net revenue. China Mainland and Rest of World net revenue also increased.
Net revenue for 2022 and 2021 is summarized below, and reflects our updated segments, including comparatives.
2022
2021
2022
2021
Year over year change
(In thousands)
(Percentage of net revenue)
(In thousands)
(Percentage)
Americas
$
6,817,454 $
5,299,906
84.1 %
84.7 % $
1,517,548
China Mainland
Rest of World
576,503
716,561
434,261
522,450
7.1
8.8
6.9
8.4
142,242
194,111
Net revenue
$
8,110,518 $
6,256,617
100.0 %
100.0 % $
1,853,901
28.6 %
32.8
37.2
29.6 %
(Constant dollar
change)
30.0 %
40.0
49.0
32.0 %
Americas. The increase in Americas net revenue was primarily due to an increase in comparable sales, which increased
28%, or 29% on a constant dollar basis. The increase in comparable sales was primarily a result of increased traffic, partially
offset by a decrease in conversion rates. Americas net revenue also increased due to a $296.9 million increase in non-
comparable sales, primarily from our company-operated stores that were opened or significantly expanded since 2021 as well
as increased outlet, wholesale, and re-commerce net revenue, partially offset by lower license and supply arrangement and
lululemon Studio net revenue.
China Mainland. The increase in China Mainland net revenue was primarily due to an increase in comparable sales,
which increased 17%, or 23% on a constant dollar basis. The increase in comparable sales was primarily a result of increased
traffic, partially offset by a decrease in conversion rates. The increase in China Mainland net revenue was also driven by a
$77.5 million increase in non-comparable sales, primarily from our company-operated stores that were opened or
significantly expanded since 2021.
Rest of World. The increase in Rest of World net revenue was primarily due to a $151.5 million increase in non-
comparable sales, primarily from our company-operated stores that were opened or significantly expanded since 2021 as well
as increased license and supply arrangements, outlets, and wholesale net revenue. The increase in Rest of World net revenue
was also driven by an increase in comparable sales, which increased 10%, or 19% on a constant dollar basis. The increase in
comparable sales was primarily a result of increased traffic, partially offset by a decrease in conversion rates.
Gross Profit
Gross profit
Gross margin
2022
2021
Year over year change
(In thousands)
(In thousands)
(Percentage)
$ 4,492,340
$ 3,608,565
$
883,775
24.5 %
55.4 %
57.7 %
(230) basis points
34
During 2022, we updated our lululemon Studio strategy to focus on digital app-based services, which meant we no
longer expected to be able to sell all of the in-home hardware inventory above cost. We recognized a provision of $62.9
million against hardware inventory during 2022. This reduced 2022 gross margin by 80 basis points. Please refer to Note 8.
Impairment of Goodwill and Other Assets, Restructuring Costs included in Item 8 of Part II of this report.
The remaining 150 basis point decrease in gross margin was primarily the result of:
•
•
•
a decrease in product margin of 100 basis points primarily due to higher markdowns, sales mix, and increased
damages and shrink, partially offset by lower air freight costs;
an increase in costs related to our product departments and distribution centers as a percentage of net revenue of
60 basis points; and
an unfavorable impact of foreign currency exchange rates of 40 basis points.
The decrease in gross margin was partially offset by leverage on occupancy and depreciation costs of 50 basis points,
driven primarily by the increase in net revenue.
Selling, General and Administrative Expenses
Selling, general and administrative expenses
$ 2,757,447
$ 2,225,034
$
532,413
23.9 %
Selling, general and administrative expenses as a percentage of net
revenue
34.0 %
35.6 %
(160) basis points
2022
2021
Year over year change
(In thousands)
(In thousands)
(Percentage)
The increase in selling, general and administrative expenses was primarily due to:
•
an increase in head office costs of $283.7 million, comprised of:
– an increase in costs of $142.2 million primarily due to increased depreciation of $43.5 million and increased
technology costs, including cloud computing amortization, of $35.7 million, as well as increased brand and
community costs and professional fees; and
– an increase in employee costs of $141.5 million primarily due to an increase in salaries and wages expense
of $76.5 million and incentive compensation of $34.8 million, as well as increased stock-based
compensation expense and travel costs, primarily as a result of headcount growth and increased wage rates.
•
an increase in costs related to our operating channels of $249.5 million, comprised of:
– an increase in variable costs of $127.6 million primarily due to an increase in distribution costs and credit
card fees, primarily as a result of increased net revenue;
– an increase in employee costs of $104.2 million primarily due to an increase in salaries and wages expense
and incentive compensation in our company-operated store and e-commerce channels, primarily due to
growth in our business and increased wage rates;
– an increase in other costs of $15.3 million primarily due to an increase in repairs and maintenance costs,
depreciation, and technology costs, partially offset by a decrease in professional fees; and
– an increase in brand and community costs of $2.4 million primarily due to an increase in digital marketing
expenses related to our e-commerce channel, partially offset by a decrease in marketing expenses related to
lululemon Studio.
The increase in selling, general and administrative expenses was partially offset by a decrease in net foreign exchange
and derivative revaluation losses of $0.8 million.
35
Impairment of Goodwill and Other Assets, Restructuring Costs
Impairment of goodwill and other assets, restructuring costs
$
407,913 $
— $
407,913
n/a
During 2022, we recognized an impairment of goodwill and other long-lived assets in relation to our lululemon Studio
business unit. Please refer to Note 8. Impairment of Goodwill and Other Assets, Restructuring Costs included in Item 8 of Part
II of this report.
2022
2021
Year over year change
(In thousands)
(In thousands)
(Percentage)
Amortization of Intangible Assets
Amortization of intangible assets
$
8,752 $
8,782 $
(30)
(0.3) %
The amortization of intangible assets was primarily the result of the amortization of intangible assets recognized upon
the acquisition of MIRROR, which we rebranded as lululemon Studio.
2022
2021
Year over year change
(In thousands)
(In thousands)
(Percentage)
Acquisition-Related Expenses
Acquisition-related expenses
$
— $
41,394 $
(41,394)
(100.0) %
In connection with our acquisition of MIRROR, we recognized acquisition-related compensation expenses of $38.4
million and transaction and integration related costs of $3.0 million in 2021. There were no acquisition-related expenses in
2022. Please refer to Note 9. Acquisition-Related Expenses included in Item 8 of Part II of this report for further information.
2022
2021
Year over year change
(In thousands)
(In thousands)
(Percentage)
Gain on Disposal of Assets
Gain on disposal of assets
$
(10,180) $
— $
(10,180)
n/a
During the second quarter of 2022, we completed the sale of an administrative office building, which resulted in a pre-
tax gain of $10.2 million.
2022
2021
Year over year change
(In thousands)
(In thousands)
(Percentage)
36
Income from Operations
On a segment basis, we determine income from operations without taking into account our general corporate expenses
and certain other expenses. Segmented income from operations is summarized below. Our prior segment results have been
recast to reflect our new segment reporting structure.
2022
2021
2022
2021
Year over year change
(In thousands)
(Percentage of net revenue of
respective operating segment)
(In thousands)
(Percentage)
$ 2,503,740
$ 1,867,016
36.7 %
35.2 % $
636,724
Segmented income from operations:
Americas
China Mainland
Rest of World
General corporate expenses
lululemon Studio obsolescence provision
Impairment of goodwill and other assets,
restructuring costs
Amortization of intangible assets
Acquisition-related expenses
Gain on disposal of assets
Income from operations
Operating margin
196,865
103,204
167,318
67,674
$ 2,803,809
$ 2,102,008
1,005,988
718,477
62,928
407,913
8,752
—
(10,180)
—
—
8,782
41,394
—
$ 1,328,408
$ 1,333,355
16.4 %
21.3 %
34.1
14.4
38.5
13.0
29,547
35,530
$
701,801
287,511
62,928
407,913
(30)
(41,394)
(10,180)
$
(4,947)
34.1 %
17.7
52.5
33.4 %
40.0
n/a
n/a
(0.3)
(100.0)
n/a
(0.4) %
(490) basis points
Americas. The increase in Americas income from operations was primarily the result of increased gross profit of $855.2
million, driven by increased net revenue, partially offset by lower gross margin. The decrease in gross margin was primarily
due to lower product margin, partially offset by leverage on occupancy and other costs. The increase in gross profit was
partially offset by an increase in selling, general and administrative expenses, primarily due to higher employee costs, as well
as increased distribution costs and credit card fees driven by higher net revenue, and increased technology costs. Income
from operations as a percentage of Americas net revenue increased due to leverage on selling, general and administrative
expenses.
China Mainland. The increase in China Mainland income from operations was primarily the result of increased gross
profit of $70.4 million, driven by increased net revenue, partially offset by lower gross margin. The decrease in gross margin
was primarily due to unfavorable foreign currency exchange rates as well as deleverage on distribution center and other costs.
The increase in gross profit was partially offset by an increase in selling, general and administrative expenses primarily due to
higher employee costs, as well as increased digital marketing expenses, increased packaging and distribution costs driven by
higher net revenue, and increased technology costs. Income from operations as a percentage of China Mainland net revenue
decreased primarily due to lower gross margin.
Rest of World. The increase in Rest of World income from operations was primarily the result of increased gross profit of
$80.9 million, driven by increased net revenue, partially offset by lower gross margin. The decrease in gross margin was
primarily due to unfavorable foreign currency exchange rates as well as lower product margin, partially offset by leverage on
occupancy and other costs. The increase in gross profit was partially offset by an increase in selling, general and
administrative expenses primarily due to higher employee costs, as well as increased distribution costs, credit card fees, and
packaging costs driven by higher net revenue, and increased digital marketing expenses. Income from operations as a
percentage of Rest of World net revenue increased due to leverage on selling, general and administrative expenses.
General Corporate Expenses. The increase in general corporate expenses was primarily due to higher employee costs, as
well as increased depreciation, brand and community costs, technology costs, professional fees, and product team costs. The
increase in general corporate expenses was partially offset by a decrease in net foreign exchange and derivative losses of $0.8
million.
37
Other Income (Expense), Net
Other income (expense), net
$
4,163 $
514 $
3,649
709.9 %
The increase in other income, net was primarily due to an increase in interest income from higher interest rates,
2022
2021
Year over year change
(In thousands)
(In thousands)
(Percentage)
partially offset by an increase in other expenses.
Income Tax Expense
Income tax expense
Effective tax rate
2022
2021
Year over year change
(In thousands)
(In thousands)
(Percentage)
$
477,771
$
358,547
$
119,224
33.3 %
35.9 %
26.9 %
900 basis points
The increase in the effective tax rate was primarily due to certain non-deductible expenses related to the impairment of
goodwill and other assets recognized in relation to our lululemon Studio business unit (formerly MIRROR) partially offset by
the gain on sale of an administrative building in 2022 which increased the effective tax rate by 780 basis points. Certain non-
deductible expenses related to the MIRROR acquisition increased the effective tax rate by 70 basis points in 2021. The
increase in the effective tax rate was also due to the accrual of U.S. state tax and Canadian withholding taxes on unremitted
earnings which are not considered to be permanently reinvested, adjustments upon filing of certain income tax returns, and a
decrease in deductions for stock-based compensation, partially offset by a decrease in non-deductible expenses in
international jurisdictions.
Excluding the impairment of goodwill and other assets recognized in relation to our lululemon Studio business unit
(formerly MIRROR) and the gain on sale of an administrative building in 2022, and the MIRROR acquisition-related expenses in
2021, and their tax effects, our adjusted effective tax rates were 28.1% and 26.2% for 2022 and 2021, respectively.
Net Income
Net income
2022
2021
Year over year change
(In thousands)
(In thousands)
(Percentage)
$
854,800 $
975,322 $
(120,522)
(12.4) %
The decrease in net income in 2022 was primarily due to an increase in selling, general and administrative expenses of
$532.4 million, an impairment charge recognized in 2022 of $407.9 million, an increase in income tax expense of $119.2
million, partially offset by an increase in gross profit of $883.8 million, a decrease in acquisition-related expenses of $41.4
million, a gain on disposal of assets of $10.2 million, and an increase in other income (expense), net of $3.6 million. Excluding
the impairment of goodwill and other assets recognized in relation to our lululemon Studio business unit (formerly MIRROR)
and the gain on sale of an administrative building in 2022, and the MIRROR acquisition-related expenses in 2021, and their tax
effects, adjusted net income increased $273.7 million or 27.0%.
Comparable Sales and Sales Per Square Foot
Comparable Sales
We use comparable sales to evaluate the performance of our company-operated store and e-commerce businesses
from an omni-channel perspective. It allows us to monitor the performance of our business without the impact of recently
opened or expanded stores. We believe investors would similarly find these metrics useful in assessing the performance of
our business.
Comparable sales includes comparable company-operated store and all e-commerce net revenue. E-commerce net
revenue includes our buy online pick-up in store, back-back room, and ship from store omni-channel retailing capabilities in
addition to our websites, other region-specific websites, digital marketplaces, and mobile apps. Comparable company-
operated stores have been open, or open after being significantly expanded, for at least 12 full fiscal months. Net revenue
from a company-operated store is included in comparable sales beginning with the first fiscal month for which the store has a
full fiscal month of sales in the prior year. Comparable sales excludes sales from new stores that have not been open for at
least 12 full fiscal months, from stores which have not been in their significantly expanded space for at least 12 full fiscal
months, from stores which have been temporarily relocated for renovations or temporarily closed, and sales from company-
38
operated stores that have closed. Comparable sales also excludes sales from our selling channels other than company-
operated stores and e-commerce. The comparable sales measures we report may not be equivalent to similarly titled
measures reported by other companies.
In fiscal years with 53 weeks, the 53rd week of net revenue is excluded from the calculation of comparable sales. In the
year following a 53-week year, the prior year period is shifted by one week to compare similar calendar weeks.
Non-comparable sales includes all net revenue other than comparable sales.
Sales Per Square Foot
We use sales per square foot to assess the performance of our company-operated stores relative to their square
footage. We believe that sales per square foot is useful in evaluating the performance of our company-operated stores. Sales
per square foot is calculated using total net revenue from all company-operated stores divided by the average ending square
footage of the stores for each period during the year. In fiscal years with 53 weeks, the 53rd week of net revenue is excluded
from the calculation of sales per square foot. The square footage of our company-operated stores includes all retail related
space, including selling space as well as storage and back-office areas. The sales per square foot metric we report may not be
equivalent to similarly titled metrics reported by other companies.
Non-GAAP Financial Measures
Constant dollar changes and adjusted financial results are non-GAAP financial measures.
A constant dollar basis assumes the average foreign currency exchange rates for the period remained constant with the
average foreign currency exchange rates for the same period of the prior year. We provide constant dollar changes in our
results to help investors understand the underlying growth rate of net revenue excluding the impact of changes in foreign
currency exchange rates.
Adjusted gross profit, gross margin, income from operations, operating margin, income tax expense, effective tax rates,
net income, and diluted earnings per share exclude certain inventory provisions, goodwill and other asset impairments, and
restructuring costs recognized in relation to lululemon Studio, the gain on disposal of assets for the sale of an administrative
office building, the MIRROR acquisition-related expenses, and the related income tax effects of these items.
We believe these adjusted financial measures are useful to investors as they provide supplemental information that
enable evaluation of the underlying trend in our operating performance, and enable a comparison to our historical financial
information. Further, due to the finite and discrete nature of these items, we do not consider them to be normal operating
expenses that are necessary to run our business, or impairments or disposal gains that are expected to arise in the normal
course of our operations. Management uses these adjusted financial measures and constant currency metrics internally when
reviewing and assessing financial performance.
The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or with
greater prominence to, the financial information prepared and presented in accordance with GAAP. A reconciliation of the
non-GAAP financial measures follows, which includes more detail on the GAAP financial measure that is most directly
comparable to each non-GAAP financial measure, and the related reconciliations between these financial measures. Our non-
GAAP financial measures may be calculated differently from, and therefore may not be directly comparable to, similarly titled
measures reported by other companies.
39
Constant Dollar Changes
The below changes in net revenue and comparable sales show the change compared to the corresponding period in the
prior year.
2023 Compared to 2022
2022 Compared to 2021
Foreign
exchange
changes
Change in
constant
dollars
Change
Foreign
exchange
changes
Change in
constant
dollars
Change
12 %
67
43
19 %
8 %
39
32
13 %
— %
8
1
1 %
1 %
7
1
1 %
12 %
75
44
20 %
9 %
46
33
14 %
29 %
33
37
30 %
28 %
17
10
25 %
1 %
7
12
2 %
1 %
6
9
3 %
30 %
40
49
32 %
29 %
23
19
28 %
Net Revenue
Americas
China Mainland
Rest of World
Total net revenue
Comparable sales(1)
Americas
China Mainland
Rest of World
Total comparable sales
__________
(1)
Comparable sales includes comparable company-operated store and e-commerce net revenue.
Adjusted Financial Measures
The following tables reconcile the most directly comparable measures calculated in accordance with GAAP with the
adjusted financial measures. The 2023 and 2022 adjustments relate to certain inventory provisions, goodwill and other asset
impairments, and restructuring costs recognized in relation to lululemon Studio, and their related tax effects. The 2022
adjustments also relate to the gain on sale of an administrative office building, and their related tax effects. The 2021
adjustments relate to MIRROR acquisition-related expenses, and their related tax effects. Please refer to Note 5. Property and
Equipment, Note 8. Impairment of Goodwill and Other Assets, Restructuring Costs, and Note 9. Acquisition-Related Expenses
included in Item 8 of Part II of this report for further information on the nature of these amounts.
2023
Gross
Profit
Gross
Margin
Income
from
Operations
Operating
Margin
Income Tax
Expense
Effective
Tax Rate
Net
Income
Diluted
Earnings
Per Share
(In thousands, except per share amounts)
GAAP results
$ 5,609,405
58.3 % $ 2,132,676
22.2 % $ 625,545
28.8 % $ 1,550,190 $
12.20
lululemon Studio charges:
lululemon Studio
obsolescence provision
Impairment of assets
Restructuring costs
Tax effect of the above
Adjusted results (non-
GAAP)
23,709
0.3
23,709
44,186
30,315
23,709
0.3
98,210
0.2
0.5
0.3
1.0
23,709
44,186
30,315
(26,085)
72,125
0.19
0.35
0.24
(0.21)
0.57
26,085
26,085
(0.1)
(0.1)
$ 5,633,114
58.6 % $ 2,230,886
23.2 % $ 651,630
28.7 % $ 1,622,315 $
12.77
40
2022
Gross
Profit
Gross
Margin
Income
from
Operations
Operating
Margin
Income Tax
Expense
Effective
Tax Rate
Net
Income
Diluted
Earnings
Per Share
(In thousands, except per share amounts)
GAAP results
$ 4,492,340
55.4 % $ 1,328,408
16.4 % $ 477,771
35.9 % $ 854,800 $
6.68
lululemon Studio charges:
lululemon Studio
obsolescence provision
Impairment of goodwill
and other assets
Tax effect of the above
Gain on disposal of assets
Tax effect of the above
Adjusted results (non-
GAAP)
62,928
0.8
62,928
62,928
0.8
407,913
470,841
(10,180)
0.8
5.0
5.8
(0.1)
62,928
0.49
407,913
(28,171)
442,670
(10,180)
1,661
3.19
(0.22)
3.46
(0.08)
0.01
28,171
28,171
(7.8)
(7.8)
(1,661)
—
$ 4,555,268
56.2 % $ 1,789,069
22.1 % $ 504,281
28.1 % $ 1,288,951 $
10.07
2021
Income
from
Operations
Operating
Margin
Income Tax
Expense
Effective
Tax Rate
Net
Income
(In thousands, except per share amounts)
Diluted
Earnings
Per Share
$ 1,333,355
21.3 % $ 358,547
26.9 % $ 975,322 $
2,989
38,405
—
0.7
1,417
(0.7)
2,989
38,405
(1,417)
$ 1,374,749
22.0 % $ 359,964
26.2 % $ 1,015,299 $
7.49
0.02
0.29
(0.01)
7.79
GAAP results
Transaction and integration costs
Acquisition-related compensation
Tax effect of the above
Adjusted results (non-GAAP)
Liquidity and Capital Resources
Our primary sources of liquidity are our current balances of cash and cash equivalents, cash flows from operations, and
capacity under our committed revolving credit facility, including to fund short-term working capital requirements. Our primary
cash needs are capital expenditures for opening new stores and remodeling or relocating existing stores, investing in our
distribution centers, investing in technology and making system enhancements, funding working capital requirements, and
making other strategic capital investments. We may also use cash to repurchase shares of our common stock. Cash and cash
equivalents in excess of our needs are held in interest bearing accounts with financial institutions, as well as in money market
funds and term deposits.
The following table summarizes our net cash flows provided by and used in operating, investing, and financing activities
for the periods indicated:
Total cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of foreign currency exchange rate changes on cash and cash equivalents
2023
2022
(In thousands)
Year over year
change
$
2,296,164 $
966,463 $
1,329,701
(654,132)
(548,828)
(4,100)
(569,937)
(467,487)
(34,043)
(84,195)
(81,341)
29,943
Increase (decrease) in cash and cash equivalents
$
1,089,104 $
(105,004) $
1,194,108
41
Operating Activities
The increase in cash provided by operating activities was primarily as a result of:
•
an increase in cash flows from changes in operating assets and liabilities of $859.1 million, primarily driven by
changes in inventories, accounts payable, and prepaid expenses and other current assets, partially offset by changes
in income taxes and accrued liabilities; and
•
increased net income of $695.4 million.
The increase in cash provided by operating activities was partially offset by changes in adjusting items of $224.8 million,
primarily driven by goodwill and other asset impairments and restructuring costs recognized in relation to lululemon Studio,
as well as increased depreciation and higher cash inflows related to derivatives.
Investing Activities
The increase in cash used in investing activities was primarily due to the settlement of net investment hedges and
increased capital expenditures. The increase in capital expenditures was primarily due to investment in our distribution
centers as well as other technology infrastructure and system initiatives, partially offset by a decrease in company-operated
store and corporate capital expenditures.
Financing Activities
The increase in cash used in financing activities was primarily the result of an increase in our stock repurchases. During
2023, 1.5 million shares were repurchased at a total cost including commissions and excise taxes of $558.7 million. During
2022, 1.4 million shares were repurchased at a total cost including commissions and excise taxes of $444.0 million. The
common stock was repurchased in the open market at prevailing market prices, including under plans complying with the
provisions of Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934, with the timing and actual number of
shares repurchased depending upon market conditions, eligibility to trade, and other factors.
Liquidity Outlook
We believe our cash and cash equivalent balances, cash generated from operations, and borrowings available to us
under our committed revolving credit facility will be adequate to meet our liquidity needs and capital expenditure
requirements for at least the next 12 months. Our cash from operations may be negatively impacted by a decrease in demand
for our products as well as the other factors described in "Item 1A. Risk Factors". In addition, we may make discretionary
capital improvements with respect to our stores, distribution facilities, headquarters, or systems, or we may repurchase
shares under an approved stock repurchase program, which we would expect to fund through the use of cash, issuance of
debt or equity securities or other external financing sources to the extent we were unable to fund such expenditures out of
our cash and cash equivalents and cash generated from operations.
The following table includes certain measures of our liquidity:
Cash and cash equivalents
Working capital excluding cash and cash equivalents(1)
Capacity under committed revolving credit facility
January 28,
2024
(In thousands)
$
2,243,971
185,345
393,661
__________
(1)
Working capital is calculated as current assets of $4.1 billion less current liabilities of $1.6 billion.
Capital expenditures are expected to range between $690.0 million and $710.0 million in 2024.
Our current commitments with respect to inventory purchases are included within our purchase obligations outlined
below. The timing and cost of our inventory purchases will vary depending on a variety of factors such as revenue growth,
assortment and purchasing decisions, product costs including freight and duty, and the availability of production capacity and
speed. Our inventory balance as of January 28, 2024 was $1.3 billion, a decrease of 9% from January 29, 2023. We expect our
inventories to decrease during the first half of 2024 compared to the first half of 2023, and then increase in the second half of
2024 compared to the second half of 2023.
42
Our existing Americas credit facility provides for $400.0 million in commitments under an unsecured five-year revolving
credit facility. The credit facility has a maturity date of December 14, 2026, subject to extension under certain circumstances.
As of January 28, 2024, aside from letters of credit of $6.3 million, we had no other borrowings outstanding under this credit
facility. Further information regarding our credit facilities and associated covenants is outlined in Note 12. Revolving Credit
Facilities included in Item 8 of Part II of this report.
Contractual Obligations and Commitments
Leases. We lease certain store and other retail locations, distribution centers, offices, and equipment under non-
cancellable operating leases. Our leases generally have initial terms of between two and 15 years, and generally can be
extended in increments between two and five years, if at all. The following table details our future minimum lease payments.
Minimum lease commitments exclude variable lease expenses including contingent rent payments, common area
maintenance, property taxes, and landlord's insurance.
Purchase obligations. The amounts listed for purchase obligations in the table below represent agreements (including
open purchase orders) to purchase products and for other expenditures in the ordinary course of business that are
enforceable and legally binding and that specify all significant terms. In some cases, values are subject to change, such as for
product purchases throughout the production process. The reported amounts exclude liabilities included in our consolidated
balance sheets as of January 28, 2024.
One-time transition tax payable. The U.S. tax reforms enacted in December 2017 imposed a mandatory transition tax on
accumulated foreign subsidiary earnings which have not previously been subject to U.S. income tax. The one-time transition
tax is payable over eight years beginning in fiscal 2018. The one-time transition tax payable is net of foreign tax credits, and
the table below outlines the expected payments due by fiscal year.
The following table summarizes our contractual arrangements due by fiscal year as of January 28, 2024, and the timing
and effect that such commitments are expected to have on our liquidity and cash flows in future periods:
Total
2024
2025
2026
2027
2028
Thereafter
(In thousands)
Operating leases (minimum rent)
$ 1,645,318 $ 300,379 $ 287,224 $ 232,510 $ 214,519 $ 158,252 $ 452,434
Purchase obligations
One-time transition tax payable
688,934
656,376
28,555
12,691
5,566
15,864
10,506
2,899
13,587
—
—
—
—
—
As of January 28, 2024, our operating lease commitments for distribution center operating leases which have been
committed to, but not yet commenced, was $299.6 million, which is not reflected in the table above.
We enter into standby letters of credit to secure certain of our obligations, including leases, taxes, and duties. As of
January 28, 2024, letters of credit and letters of guarantee totaling $10.2 million had been issued, including $6.3 million under
our committed revolving credit facility.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions. Predicting future events is inherently an imprecise activity and, as such,
requires the use of significant judgment. Actual results may vary from our estimates in amounts that may be material to the
financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on
assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that
reasonably could have been used or changes in the accounting estimates that are reasonably likely to occur periodically, could
materially impact our consolidated financial statements.
Our critical accounting policies, estimates, and judgements are as follows, and see Note 2. Summary of Significant
Accounting Policies included in Item 8 of Part II for additional information:
Inventory provision
Inventory is valued at the lower of cost and net realizable value. We periodically review our inventories and make a
provision for obsolescence and goods that have quality issues or that are damaged. We record a provision at an amount that
is equal to the difference between the inventory cost and its net realizable value. As of January 28, 2024 the net carrying value
of our inventories was $1.3 billion, which included provisions for obsolete and damaged inventory of $139.7 million. The
43
provision is determined based upon assumptions about product quality, damages, future demand, selling prices, and market
conditions, and includes a provision of $63.0 million against lululemon Studio Mirror inventory.
Deferred taxes on undistributed net investment of foreign subsidiaries.
We have not recognized U.S. state income taxes and foreign withholding taxes on the net investment in our subsidiaries
which we have determined to be indefinitely reinvested. This determination is based on the cash flow projections and
operational and fiscal objectives of each of our foreign subsidiaries. Such estimates are inherently imprecise since many
assumptions utilized in the projections are subject to revision in the future.
For the portion of our net investment in our Canadian subsidiaries that is not indefinitely reinvested, we have recorded
a deferred tax liability for the taxes which would be due upon repatriation. For distributions made by our Canadian
subsidiaries, the amount of tax payable is partially dependent on how the repatriation transactions are made. The deferred
tax liability has been recorded on the basis that we would choose to make the repatriation transactions in the most tax
efficient manner. Specifically, to the extent that the Canadian subsidiaries have sufficient paid-up-capital, any such
distributions would be made as a return of capital, rather than as a dividend, and therefore would not be subject to Canadian
withholding tax.
As of January 28, 2024, the net investment in our Canadian subsidiaries was $2.5 billion, of which $1.6 billion was
determined to be indefinitely reinvested. The paid-up-capital balance of the Canadian subsidiaries was approximately $140.0
million.
We have recognized a deferred tax liability of $41.2 million as of January 28, 2024 which represents the Canadian
withholding taxes payable on the portion of our Canadian earnings that are not indefinitely reinvested and cannot be
repatriated as a return of capital, and U.S. state income taxes payable upon repatriation of the amounts which are not
indefinitely reinvested.
In future periods, if the net investment in our Canadian subsidiaries continues to grow, whether due to the
accumulation of profits by these subsidiaries or due to a change in the amount that is indefinitely reinvested, we will record
additional deferred tax liabilities, including both Canadian withholding taxes for the amount in excess of the paid-up capital
balance and U.S. state income taxes.
Contingencies
We are involved in legal proceedings regarding contractual and employment relationships and a variety of other
matters. We record contingent liabilities when a loss is assessed to be probable and its amount is reasonably estimable. If it is
reasonably possible that a material loss could occur through ongoing litigation, we provide disclosure in the footnotes to our
financial statements. Assessing probability of loss and estimating the amount of probable losses requires analysis of multiple
factors, including in some cases judgments about the potential actions of third-party claimants and courts. Should we
experience adverse court judgments or should negotiated outcomes differ to our expectations with respect to such ongoing
litigation it could have a material adverse effect on our results of operations, financial position, and cash flows.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Exchange Risk
Translation Risk. The functional currency of our international subsidiaries is generally the applicable local currency. Our
consolidated financial statements are presented in U.S. dollars. Therefore, the net revenue, expenses, assets, and liabilities of
our international subsidiaries are translated from their functional currencies into U.S. dollars. Fluctuations in the value of the
U.S. dollar affect the reported amounts of net revenue, expenses, assets, and liabilities. As a result of the fluctuation in
exchange rates compared to the U.S. dollar our revenue was $89.8 million lower in 2023 in comparison to 2022.
Foreign currency exchange differences which arise on translation of our international subsidiaries' balance sheets into
U.S. dollars are recorded as other comprehensive income (loss), net of tax in accumulated other comprehensive income (loss)
within stockholders' equity. A significant portion of our net assets are held by our Canadian dollar subsidiary. We enter into
forward currency contracts in order to hedge a portion of the foreign currency exposure associated with the translation of our
net investment in our Canadian subsidiary. The impact to other comprehensive loss of translation of our Canadian subsidiaries
was an increase in the loss of $9.0 million, inclusive of net investment hedge gains.
Transaction Risk. We also have exposure to changes in foreign currency exchange rates associated with transactions
which are undertaken by our subsidiaries in currencies other than their functional currency. Such transactions include
intercompany transactions and inventory purchases denominated in currencies other than the functional currency of the
44
purchasing entity. We also hold cash and cash equivalents and other monetary assets in currencies that are different to the
functional currency of our subsidiaries. As of January 28, 2024, we had certain forward currency contracts outstanding in
order to economically hedge the foreign currency revaluation gains and losses recognized by our foreign subsidiaries,
including our Canadian and Chinese subsidiaries, on their monetary assets and liabilities denominated in currencies other than
their functional currency.
We perform a sensitivity analysis to determine the market risk exposure associated with the fair values of our forward
currency contracts. The net fair value of outstanding derivatives as of January 28, 2024 was a liability of $2.2 million. As of
January 28, 2024, a 10% depreciation in the U.S. dollar against the hedged currencies would have resulted in the net fair value
of outstanding derivatives depreciating by $29.8 million. The hypothetical change in the fair value of the forward currency
contracts would have been substantially offset by a corresponding but directionally opposite change in the underlying hedged
items.
In the future, in an effort to reduce foreign currency exchange risks, we may enter into further derivative financial
instruments including hedging additional currency pairs. We do not, and do not intend to, engage in the practice of trading
derivative securities for profit.
Please refer to Note 17. Derivative Financial Instruments included in Item 8 of Part II of this report for further details on
the nature of our financial instruments.
Interest Rate Risk
Our committed revolving credit facility provides us with available borrowings in an amount up to $400.0 million.
Because our revolving credit facilities bear interest at a variable rate, we will be exposed to market risks relating to changes in
interest rates, if we have a meaningful outstanding balance. As of January 28, 2024, aside from letters of credit of $6.3 million,
there were no borrowings outstanding under these credit facilities. We currently do not engage in any interest rate hedging
activity and currently have no intention to do so. However, in the future, if we have a meaningful outstanding balance under
our revolving facility, in an effort to mitigate losses associated with these risks, we may at times enter into derivative financial
instruments, although we have not historically done so. These may take the form of forward contracts, option contracts, or
interest rate swaps. We do not, and do not intend to, engage in the practice of trading derivative securities for profit.
Our cash and cash equivalent balances are held in the form of cash on hand, bank balances, and short-term deposits
with original maturities of three months or less, and in money market funds. As of January 28, 2024, we held cash and cash
equivalents of $2.2 billion. Interest generated on cash balances is subject to variability as interest rates increase or decrease.
Credit Risk. We have cash on deposit with various large, reputable financial institutions and have invested in AAA-rated
money market funds. The amount of cash and cash equivalents held with certain financial institutions exceeds government-
insured limits. We are also exposed to credit-related losses in the event of nonperformance by the financial institutions that
are counterparties to our forward currency contracts. The credit risk amount is our unrealized gains on our derivative
instruments, based on foreign currency rates at the time of nonperformance. We have not experienced any losses related to
these items, and we believe credit risk to be minimal. We seek to minimize our credit risk by entering into transactions with
investment grade credit worthy and reputable financial institutions and by monitoring the credit standing of the financial
institutions with whom we transact. We seek to limit the amount of exposure with any one counterparty.
Inflation
Inflationary factors such as increases in the cost of our product, as well as overhead costs and capital expenditures may
adversely affect our operating results. During 2022 and 2023, our operating margin was impacted by increased wage rates.
During 2022, our gross margin was impacted by higher air freight costs as a result of global supply chain disruption.
Sustained increases in transportation costs, wages, and raw material costs, or other inflationary pressures in the future
may have an adverse effect on our ability to maintain current levels of operating margin if the selling prices of our products do
not increase with these increased costs, or we cannot identify cost efficiencies.
45
ITEM 8. FINANCIAL STATEMENTS
lululemon athletica inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID 271)
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Index for Notes to the Consolidated Financial Statements
47
49
50
51
53
54
46
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of lululemon athletica inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of lululemon athletica inc. and its subsidiaries
(together, the Company) as of January 28, 2024 and January 29, 2023, and the related consolidated statements of operations
and comprehensive income, of stockholders' equity and of cash flows for each of the 52-week years ended January 28, 2024,
January 29, 2023, and January 30, 2022, including the related notes (collectively referred to as the consolidated financial
statements). We also have audited the Company’s internal control over financial reporting as of January 28, 2024, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of January 28, 2024 and January 29, 2023, and the results of its operations and its cash
flows for each of the 52-week years ended January 28, 2024, January 29, 2023, and January 30, 2022 in conformity with
accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of January 28, 2024, based on criteria established in
Internal Control – Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in Management's Annual Report on Internal Control over Financial Reporting appearing under Item 9A of
the Company’s 2023 Annual Report on Form 10-K. Our responsibility is to express opinions on the Company’s consolidated
financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained
in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our
audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
47
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to
accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Inventory Provision
As described in Notes 2 and 3 to the consolidated financial statements, inventories are valued at the lower of cost and
net realizable value, and management records a provision as necessary to appropriately value inventories that are obsolete,
have quality issues, or are damaged. Provision expense is recorded in cost of goods sold. As of January 28, 2024, the
Company’s consolidated net inventories balance was $1,323.6 million inclusive of the inventory provision of $141.5 million.
The amount of the inventory provision is equal to the difference between the cost of the inventory and its estimated net
realizable value based on assumptions about product quality, damages, future demand, selling prices, and market conditions.
The principal considerations for our determination that performing procedures relating to the inventory provision is a
critical audit matter are the significant judgment by management in determining the estimated net realizable value of
inventories that are obsolete, have quality issues, or are damaged, which in turn led to a high degree of auditor judgment,
subjectivity, and effort in performing procedures and evaluating audit evidence relating to the inventory provision.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to the review of the inventory provision including the assumptions used. These procedures also included, among
others, (i) observing the physical condition of inventories during inventory counts; (ii) evaluating the appropriateness of
management’s process for developing the estimates of net realizable value; (iii) testing the reliability of reports used by
management by agreeing to underlying records; (iv) testing the reasonableness of the assumptions about quality, damages,
future demand, selling prices and market conditions by considering historical trends and consistency with evidence obtained
in other areas of the audit; and (v) corroborating the assumptions with individuals within the product team.
/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, Canada
March 21, 2024
We have served as the Company's auditor since 2006.
48
lululemon athletica inc.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share amounts)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable, net
Inventories
Prepaid and receivable income taxes
Prepaid expenses and other current assets
Property and equipment, net
Right-of-use lease assets
Goodwill
Intangible assets, net
Deferred income tax assets
Other non-current assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
Accrued liabilities and other
Accrued compensation and related expenses
Current lease liabilities
Current income taxes payable
Unredeemed gift card liability
Other current liabilities
Non-current lease liabilities
Non-current income taxes payable
Deferred income tax liabilities
Other non-current liabilities
Commitments and contingencies
Stockholders' equity
January 28,
2024
January 29,
2023
$
2,243,971 $
1,154,867
124,769
1,323,602
183,733
184,502
4,060,577
1,545,811
1,265,610
24,083
—
9,176
186,684
132,906
1,447,367
185,641
238,672
3,159,453
1,269,614
969,419
24,144
21,961
6,402
156,045
$
7,091,941 $
5,607,038
$
348,441 $
348,555
326,110
249,270
12,098
306,479
40,308
1,631,261
1,154,012
15,864
29,522
29,201
172,732
399,223
248,167
207,972
174,221
251,478
38,405
1,492,198
862,362
28,555
55,084
20,040
2,859,860
2,458,239
Undesignated preferred stock, $0.01 par value: 5,000 shares authorized; none issued and outstanding
Exchangeable stock, no par value: 60,000 shares authorized; 5,116 and 5,116 issued and outstanding
Special voting stock, $0.000005 par value: 60,000 shares authorized; 5,116 and 5,116 issued and
outstanding
Common stock, $0.005 par value: 400,000 shares authorized; 121,106 and 122,205 issued and outstanding
—
—
—
606
—
—
—
611
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
575,369
3,920,362
(264,256)
4,232,081
474,645
2,926,127
(252,584)
3,148,799
$
7,091,941 $
5,607,038
See accompanying notes to the consolidated financial statements
49
lululemon athletica inc.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands, except per share amounts)
Net revenue
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Impairment of goodwill and other assets, restructuring costs
Amortization of intangible assets
Acquisition-related expenses
Gain on disposal of assets
Income from operations
Other income (expense), net
Income before income tax expense
Income tax expense
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment
Net investment hedge gains (losses)
Other comprehensive income (loss), net of tax
Comprehensive income
Basic earnings per share
Diluted earnings per share
Basic weighted-average number of shares outstanding
Diluted weighted-average number of shares outstanding
January 28,
2024
Fiscal Year Ended
January 29,
2023
January 30,
2022
$
9,619,278 $
8,110,518 $
6,256,617
4,009,873
5,609,405
3,397,218
74,501
5,010
—
—
3,618,178
4,492,340
2,757,447
407,913
8,752
—
(10,180)
2,648,052
3,608,565
2,225,034
—
8,782
41,394
—
2,132,676
1,328,408
1,333,355
43,059
4,163
514
2,175,735
1,332,571
1,333,869
625,545
477,771
358,547
$
1,550,190 $
854,800 $
975,322
$
(23,077) $
(65,571) $
(28,494)
11,405
(11,672)
8,904
(56,667)
9,732
(18,762)
$
1,538,518 $
798,133 $
956,560
$
$
12.23 $
12.20 $
6.70 $
6.68 $
126,726
127,060
127,666
128,017
7.52
7.49
129,768
130,295
See accompanying notes to the consolidated financial statements
50
lululemon athletica inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in thousands)
Exchangeable
Stock
Special Voting Stock
Common Stock
Shares
Shares
Par
Value
Shares
Par
Value
Additional
Paid-in Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
5,203
5,203 $
—
125,150 $
626 $
388,667 $ 2,346,428 $
(177,155) $
2,558,566
975,322
975,322
(18,762)
(18,762)
69,137
502
2
18,192
(153)
(1)
(49,808)
(2,202)
(11)
(3,681)
(808,910)
69,137
18,194
(49,809)
(812,602)
5,203
5,203 $
—
123,297 $
616 $
422,507 $ 2,512,840 $
(195,917) $
2,740,046
854,800
854,800
(56,667)
(56,667)
(87)
(87)
—
87
—
—
78,075
322
2
11,702
—
78,075
11,704
(105)
—
(35,158)
(35,158)
(1,396)
(7)
(2,481)
(441,513)
(444,001)
5,116
5,116 $
—
122,205 $
611 $
474,645 $ 2,926,127 $
(252,584) $
3,148,799
Balance as of January 31,
2021
Net income
Other comprehensive
income (loss), net of tax
Stock-based
compensation expense
Common stock issued
upon settlement of
stock-based
compensation
Shares withheld related
to net share settlement
of stock-based
compensation
Repurchase of common
stock
Balance as of January 30,
2022
Net income
Other comprehensive
income (loss), net of tax
Common stock issued
upon exchange of
exchangeable shares
Stock-based
compensation expense
Common stock issued
upon settlement of
stock-based
compensation
Shares withheld related
to net share settlement
of stock-based
compensation
Repurchase of common
stock, including excise
tax
Balance as of January 29,
2023
51
Net income
Other comprehensive
income (loss), net of tax
Stock-based
compensation expense
Common stock issued
upon settlement of
stock-based
compensation
Shares withheld related
to net share settlement
of stock-based
compensation
Repurchase of common
stock, including excise
tax
Balance as of January 28,
2024
Exchangeable
Stock
Special Voting Stock
Common Stock
Shares
Shares
Par
Value
Shares
Par
Value
Additional
Paid-in Capital
Retained
Earnings
1,550,190
93,560
479
2
42,428
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
1,550,190
(11,672)
(11,672)
93,560
42,430
(96)
—
(32,574)
(32,574)
(1,482)
(7)
(2,690)
(555,955)
(558,652)
5,116
5,116 $
—
121,106 $
606 $
575,369 $ 3,920,362 $
(264,256) $
4,232,081
See accompanying notes to the consolidated financial statements
52
lululemon athletica inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
lululemon Studio obsolescence provision
Impairment of goodwill and other assets, restructuring costs
Gain on disposal of assets
Stock-based compensation expense
Derecognition of unredeemed gift card liability
Settlement of derivatives not designated in a hedging relationship
Deferred income taxes
Changes in operating assets and liabilities:
Inventories
Prepaid and receivable income taxes
Prepaid expenses and other current assets
Other non-current assets
Accounts payable
Accrued liabilities and other
Accrued compensation and related expenses
Current and non-current income taxes payable
Unredeemed gift card liability
Right-of-use lease assets and current and non-current lease liabilities
Other current and non-current liabilities
Net cash provided by operating activities
Cash flows from investing activities
Purchase of property and equipment
Settlement of net investment hedges
Other investing activities
Net cash used in investing activities
Cash flows from financing activities
Proceeds from settlement of stock-based compensation
Shares withheld related to net share settlement of stock-based compensation
Repurchase of common stock
Other financing activities
Net cash used in financing activities
Effect of foreign currency exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Fiscal Year Ended
January 28,
2024
January 29,
2023
January 30,
2022
$
1,550,190 $
854,800 $
975,322
379,384
23,709
74,501
—
93,560
(28,547)
32,527
(28,383)
66,584
1,908
47,167
(53,280)
177,367
(71,734)
70,327
(173,196)
84,315
37,535
12,230
291,791
62,928
407,913
(10,180)
78,075
(23,337)
(38,649)
3,042
224,206
—
—
—
69,137
(18,699)
15,191
(5,180)
(573,438)
(323,609)
(66,714)
(113,820)
(36,518)
(107,280)
65,364
47,254
35,986
68,266
23,905
(2,925)
20,108
(82,404)
(17,556)
117,655
103,878
75,273
120,778
71,441
13,494
30,073
2,296,164
966,463
1,389,108
(651,865)
(638,657)
(394,502)
(1,609)
(658)
47,804
20,916
(23,389)
(10,000)
(654,132)
(569,937)
(427,891)
42,430
(32,574)
11,704
(35,158)
18,194
(49,809)
(558,652)
(444,001)
(812,602)
(32)
(32)
(770)
(548,828)
(467,487)
(844,987)
(4,100)
1,089,104
(34,043)
(105,004)
(6,876)
109,354
$
$
1,154,867 $
1,259,871 $
1,150,517
2,243,971 $
1,154,867 $
1,259,871
See accompanying notes to the consolidated financial statements
53
lululemon athletica inc.
INDEX FOR NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1
Note 2
Note 3
Note 4
Note 5
Note 6
Note 7
Note 8
Note 9
Note 10
Note 11
Note 12
Note 13
Note 14
Note 15
Note 16
Note 17
Note 18
Note 19
Note 20
Note 21
Note 22
Note 23
Note 24
Nature of Operations and Basis of Presentation
Summary of Significant Accounting Policies
Inventories
Prepaid Expenses and Other Current Assets
Property and Equipment
Goodwill
Intangible Assets
Impairment of Goodwill and Other Assets, Restructuring Costs
Acquisition-Related Expenses
Other Non-Current Assets
Accrued Liabilities and Other
Revolving Credit Facilities
Supply Chain Financing Program
Stockholders' Equity
Stock-Based Compensation and Benefit Plans
Fair Value Measurement
Derivative Financial Instruments
Leases
Income Taxes
Earnings Per Share
Commitments and Contingencies
Supplemental Cash Flow Information
Segmented Information
Disaggregated Net Revenue
55
55
62
62
63
63
64
64
66
66
66
66
67
68
68
71
71
73
74
76
76
77
78
79
54
lululemon athletica inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Operations and Basis of Presentation
Nature of operations
lululemon athletica inc., a Delaware corporation, ("lululemon" and, together with its subsidiaries unless the context
otherwise requires, the "Company") is engaged in the design, distribution, and retail of performance apparel, footwear, and
accessories. The Company organizes its operations into four regional markets: Americas, China Mainland, Asia Pacific
("APAC"), and Europe and the Middle East ("EMEA"). It conducts its business through a number of different channels in each
market, including company-operated stores, e-commerce, temporary locations, wholesale, outlets, a re-commerce program,
and license and supply arrangements. There were 711, 655, and 574 company-operated stores in operation as of January 28,
2024, January 29, 2023, and January 30, 2022, respectively.
Basis of presentation
The consolidated financial statements have been presented in U.S. dollars and are prepared in accordance with United
States generally accepted accounting principles ("GAAP").
The Company's fiscal year ends on the Sunday closest to January 31 of the following year, typically resulting in a 52-
week year, but occasionally giving rise to an additional week, resulting in a 53-week year. Fiscal 2023, fiscal 2022, and fiscal
2021 were each 52-week years. Fiscal 2023, 2022, and 2021 ended on January 28, 2024, January 29, 2023, and January 30,
2022, respectively, and are referred to as "2023," "2022," and "2021," respectively.
The Company's business is affected by the pattern of seasonality common to most retail apparel businesses.
Historically, the Company has recognized a significant portion of its operating profit in the fourth fiscal quarter of each year as
a result of increased net revenue during the holiday season.
Note 2. Summary of Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the accounts of lululemon athletica inc. and its wholly-owned
subsidiaries. All intercompany balances and transactions have been eliminated.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, bank balances, money market funds, and short-term deposits with
original maturities of three months or less. The Company has not experienced any losses related to these balances, and
management believes the Company's credit risk to be minimal.
Accounts receivable
Accounts receivable primarily arise out of third party gift card sales, sales to wholesale accounts, online marketplaces,
duty receivables, and license and supply arrangements. The allowance for doubtful accounts represents management's best
estimate of probable credit losses in accounts receivable. Receivables are written off against the allowance when
management believes that the amount receivable will not be recovered. As of January 28, 2024 and January 29, 2023, the
Company had an insignificant allowance for doubtful accounts.
Inventories
Inventories, consisting of finished goods, inventories in transit, and raw materials, are stated at the lower of cost and
net realizable value. Cost is determined using weighted-average costs, and includes all costs incurred to deliver inventory to
the Company's distribution centers including freight, non-refundable taxes, duty, and other landing costs.
The Company periodically reviews its inventories and makes a provision as necessary to appropriately value goods that
are obsolete, have quality issues, or are damaged. The amount of the provision is equal to the difference between the cost of
the inventory and its net realizable value based upon assumptions about product quality, damages, future demand, selling
prices, and market conditions. If changes in market conditions result in reductions in the estimated net realizable value of its
inventory below its previous estimate, the Company would increase its provision in the period in which it made such a
determination.
55
In addition, the Company provides for inventory shrinkage based on historical trends from actual physical inventory
counts. Inventory shrinkage estimates are made to reduce the inventory value for lost or stolen items. The Company performs
physical inventory counts and cycle counts throughout the year and adjusts the shrink provision accordingly.
Business combinations
The purchase price of an acquisition is measured as the aggregate of the fair value of the consideration transferred
including the acquisition-date fair value of the Company's previously held equity interests. The purchase price is allocated to
the fair values of the tangible and intangible assets acquired and liabilities assumed, with any excess recorded as goodwill.
These fair value determinations require judgment and may involve the use of significant estimates and assumptions. The
purchase price allocation may be provisional during a measurement period of up to one year to provide reasonable time to
obtain the information necessary to identify and measure the assets acquired and liabilities assumed. Any such measurement
period adjustments are recognized in the period in which the adjustment amount is determined. Transaction costs associated
with the acquisition are expensed as incurred.
Goodwill
Goodwill represents the excess of the aggregate of the consideration transferred, the fair value of any non-controlling
interest in the acquiree, and the acquisition-date fair value of the Company's previously held equity interest over the net
assets acquired and liabilities assumed. Goodwill is allocated to the reporting unit which is expected to receive the benefit
from the synergies of the combination.
Goodwill is tested annually for impairment or more frequently when an event or circumstance indicates that goodwill
might be impaired. Generally, the Company first performs a qualitative assessment to determine whether it is more likely
than not that the fair value of a reporting unit is less than its carrying value. If factors indicate that this is the case, the
Company then estimates the fair value of the related reporting unit. If the fair value is less than the carrying value, the
goodwill of the reporting unit is determined to be impaired and the Company will record an impairment equal to the excess of
the carrying value over its fair value.
Intangible assets
Acquired finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives, and are
reviewed for impairment when events or circumstances indicate that the asset group to which the intangible assets belong
might be impaired. The Company revises the estimated remaining useful life of these assets when events or changes in
circumstances warrant a revision. If the Company revises the useful life, the unamortized balance is amortized over the
remaining useful life on a prospective basis.
Property and equipment
Property and equipment are recorded at cost less accumulated depreciation. Direct internal and external costs related
to software used for internal purposes which are incurred during the application development stage or for upgrades that add
functionality are capitalized. All other costs related to internal use software are expensed as incurred. Property and
equipment carrying values are reviewed for impairment when events or circumstances indicate that the asset group to which
the property and equipment belong might be impaired.
Depreciation commences when an asset is ready for its intended use. Buildings are depreciated on a straight-line basis
over the expected useful life of the asset, which is individually assessed, and estimated to be up to 40 years. Leasehold
improvements are depreciated on a straight-line basis over the lesser of the expected lease term and the estimated useful life
of the improvement, to a maximum of 10 years for stores and 15 years for corporate offices and distribution centers. All other
property and equipment are depreciated using the declining balance method as follows:
Furniture and fixtures
Computer hardware and software
Equipment and vehicles
20%
20% - 50%
20% - 30%
56
Cloud Computing Arrangements
The Company incurs costs to implement cloud computing arrangements hosted by third party vendors. Costs incurred
to implement cloud computing service arrangements are capitalized when incurred during the application development
phase, and recognized as other non-current assets. Implementation costs are subsequently amortized over the expected term
of the related cloud service. The carrying value of cloud computing implementation costs are tested for impairment when an
event or circumstance indicates that the asset might be impaired. Changes in cloud computing arrangement implementation
costs are classified within operating activities in the consolidated statements of cash flows.
Impairment of long-lived assets
Long-lived assets, held for use are evaluated for impairment when the occurrence of events or a change in
circumstances indicates that the carrying value of the assets may not be recoverable as measured by comparing their carrying
value to the estimated undiscounted future cash flows generated by their use and eventual disposition. Impaired assets are
recorded at fair value, determined principally by discounting the future cash flows expected from their use and eventual
disposition. Reductions in asset values resulting from impairment valuations are recognized in income in the period that the
impairment is determined.
Leased property and equipment
At lease commencement, which is generally when the Company takes possession of the asset, the Company records a
lease liability and corresponding right-of-use asset. Lease liabilities represent the present value of minimum lease payments
over the expected lease term, which includes options to extend or terminate the lease when it is reasonably certain those
options will be exercised. The present value of the lease liability is determined using the Company's incremental collateralized
borrowing rate at the lease commencement.
Minimum lease payments include base rent, fixed escalation of rental payments, and rental payments that are adjusted
periodically depending on a rate or index. In determining minimum lease payments, the Company does not separate non-
lease components for real estate leases. Non-lease components are generally services that the lessor performs for the
Company associated with the leased asset, such as common area maintenance.
Right-of-use assets represent the right to control the use of the leased asset during the lease and are initially recognized
in an amount equal to the lease liability. In addition, prepaid rent, initial direct costs, and adjustments for lease incentives are
components of the right-of-use asset. Over the lease term the lease expense is amortized on a straight-line basis beginning on
the lease commencement date. Right-of-use assets are assessed for impairment as part of the impairment of long-lived
assets, which is performed whenever events or changes in circumstances indicate that the carrying amount of an asset or
asset group may not be recoverable.
Variable lease payments, including contingent rental payments based on sales volume, are recognized when the
achievement of the specific target is probable. A right-of-use asset and lease liability are not recognized for leases with an
initial term of 12 months or less, and the lease expense is recognized on a straight-line basis over the lease term.
The Company recognizes a liability for the fair value of asset retirement obligations ("AROs") when such obligations are
incurred. The Company's AROs are primarily associated with leasehold improvements which, at the end of a lease, the
Company is contractually obligated to remove in order to comply with the lease agreement. At the inception of a lease with
such conditions, the Company records an ARO liability and a corresponding capital asset in an amount equal to the estimated
fair value of the obligation. The liability is estimated based on a number of assumptions requiring management's judgment,
including store closing costs, cost inflation rates and discount rates, and is accreted to its projected future value over time.
The capitalized asset is depreciated using the convention for depreciation of leasehold improvement assets. Upon satisfaction
of the ARO conditions, any difference between the recorded ARO liability and the actual retirement costs incurred is
recognized as an operating gain or loss in the consolidated statements of operations.
The Company recognizes a liability for a cost associated with a lease exit or disposal activity when such obligation is
incurred. A lease exit or disposal liability is measured initially at its fair value in the period in which the liability is incurred. The
Company estimates fair value at the cease-use date of its operating leases as the remaining lease rentals, reduced by
estimated sublease rentals that could be reasonably obtained for the property, even where the Company does not intend to
enter into a sublease. Estimating the cost of certain lease exit costs involves subjective assumptions, including the time it
would take to sublease the leased location and the related potential sublease income. The estimated accruals for these costs
could be significantly affected if future experience differs from the assumptions used in the initial estimate.
57
Revenue recognition
Net revenue is comprised of company-operated store net revenue, e-commerce net revenue through websites and
mobile apps, including mobile apps on in-store devices that allow demand to be fulfilled via the Company's distribution
centers, and other net revenue, which includes revenue from outlets, sales to wholesale accounts, license and supply
arrangement net revenue, which consists of royalties as well as sales of the Company's products to licensees, re-commerce
revenue, revenue from temporary locations, and lululemon Studio revenue. All revenue is reported net of markdowns,
discounts, sales taxes collected from customers on behalf of taxing authorities, and returns. lululemon Studio generates gross
revenue from digital content subscriptions.
Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods or
services to the Company's customers. Control transfers once a customer has the ability to direct the use of, and obtain
substantially all of the benefits from, the product. This includes the transfer of legal title, physical possession, the risks and
rewards of ownership, and customer acceptance. Revenue from company-operated stores and other retail locations is
recognized at the point of sale. E-commerce revenue, sales to wholesale accounts and in-home fitness hardware sales are
recognized upon receipt by the customer. In certain arrangements the Company receives payment before the customer
receives the promised good. These payments are initially recorded as deferred revenue, and recognized as revenue in the
period when control is transferred to the customer.
Revenue is presented net of an allowance for estimated returns. The Company's liability for sales return refunds is
recognized within accrued liabilities and other, and an asset for the value of inventory which is expected to be returned is
recognized within other prepaid expenses and other current assets on the consolidated balance sheets. As of January 28, 2024
and January 29, 2023, the sales return allowance was $61.6 million and $55.5 million, respectively.
Shipping fees billed to customers are recorded as revenue, and shipping costs are recognized within selling, general and
administrative expenses in the same period the related revenue is recognized.
Proceeds from the sale of gift cards are initially deferred and recognized within unredeemed gift card liability on the
consolidated balance sheets, and are recognized as revenue when tendered for payment. While the Company will continue to
honor all gift cards presented for payment, to the extent management determines there is no requirement to remit unused
card balances to government agencies under unclaimed property laws, the portion of card balances not expected to be
redeemed are recognized in net revenue in proportion to the gift cards which have been redeemed, under the redemption
recognition method. For 2023, 2022, and 2021, net revenue recognized on unredeemed gift card balances was $28.5 million,
$23.3 million, and $18.7 million, respectively.
Cost of goods sold
Cost of goods sold includes:
•
•
•
•
•
•
•
•
the cost of purchased merchandise, which includes acquisition and production costs including raw material and
labor, as applicable;
the cost incurred to deliver inventory to the Company's distribution centers including freight, non-refundable taxes,
duty, and other landing costs;
the cost of the Company's distribution centers, such as labor, rent, utilities, and depreciation;
the cost of the Company's production, design, research and development, distribution, and merchandising
departments including salaries, stock-based compensation and benefits, and other expenses;
occupancy costs such as minimum rent, contingent rent where applicable, property taxes, utilities, and depreciation
expense for the Company's company-operated store locations;
hemming costs;
shrink and inventory provision expense; and
the cost of digital content subscription services
58
Selling, general and administrative expenses
Selling, general and administrative expenses consist of all operating costs not otherwise included in cost of goods sold,
intangible asset amortization, or acquisition-related expenses. The Company's selling, general and administrative expenses
include the costs of corporate and retail employee wages and benefits, costs to transport the Company's products from the
distribution facilities to the Company's retail locations and e-commerce guests, professional fees, marketing, technology,
human resources, accounting, legal, corporate facility and occupancy costs, and depreciation and amortization expense other
than in cost of goods sold.
For 2023, 2022, and 2021, the Company incurred costs to transport its products from its distribution facilities to its retail
locations and e-commerce guests of $374.2 million, $353.7 million, and $270.8 million, respectively.
Advertising and Marketing Costs
Advertising costs, including the costs to produce advertising, are expensed as incurred. Advertising expenses were
$429.7 million, $328.6 million, and $297.5 million for 2023, 2022, and 2021, respectively, and are included within selling,
general and administrative expenses.
Store pre-opening costs
Operating costs incurred prior to the opening of new stores are expensed as incurred as selling, general and
administrative expenses.
Income taxes
The Company follows the liability method with respect to accounting for income taxes. Deferred income tax assets and
liabilities are determined based on the temporary differences between the carrying amounts and the tax basis of assets and
liabilities, and for tax losses, tax credit carryforwards, and other tax attributes. Deferred income tax assets and liabilities are
measured using enacted tax rates, for the appropriate tax jurisdiction, that are expected to be in effect when these
differences are anticipated to reverse.
The Company has not recognized U.S. state income taxes and foreign withholding taxes on undistributed earnings of
foreign subsidiaries which the Company has determined to be indefinitely reinvested.
Deferred income tax assets are reduced by a valuation allowance, if based on the weight of available evidence, it is
more likely than not that some portion or all of the deferred tax assets will not be realized. The evaluation as to the likelihood
of realizing the benefit of a deferred income tax asset is based on the timing of scheduled reversals of deferred tax liabilities,
taxable income forecasts, and tax-planning strategies. The recognition of a deferred income tax asset is based upon several
assumptions and forecasts, including current and anticipated taxable income, the utilization of previously unrealized non-
operating loss carryforwards, and regulatory reviews of tax filings.
The Company evaluates its tax filing positions and recognizes the largest amount of tax benefit that is considered more
likely than not to be sustained upon examination by the relevant taxing authorities based on the technical merits of the
position. This determination requires the use of significant judgment. Income tax expense is adjusted in the period in which an
uncertain tax position is effectively settled, the statute of limitations expires, facts or circumstances change, tax laws change,
or new information becomes available. The Company's policy is to recognize interest expense and penalties related to income
tax matters as part of income tax expense. Accrued interest and penalties are included within the related tax liability on the
Company's consolidated balance sheets.
The Company treats the global intangible low-taxed income ("GILTI") tax as a current period expense.
Fair value of financial instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Fair value measurements are made using a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value:
•
•
•
Level 1 - defined as observable inputs such as quoted prices in active markets;
Level 2 - defined as inputs other than quoted prices in active markets that are either directly or indirectly
observable; and
Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to
develop its own assumptions.
The fair value measurement is categorized in its entirety by reference to its lowest level of significant input.
59
The Company records cash, accounts receivable, accounts payable, and accrued liabilities at cost. The carrying values of
these instruments approximate their fair value due to their short-term maturities.
The Company holds certain assets and liabilities that are required to be measured at fair value on a recurring basis, and
performs certain valuations on a non-recurring basis, which are outlined in Note 16. Fair Value Measurement.
Foreign currency
The functional currency for each entity included in these consolidated financial statements that is domiciled outside of
the United States is generally the applicable local currency. Assets and liabilities of each foreign entity are translated into
U.S. dollars at the exchange rate in effect on the balance sheet date. Net revenue and expenses are translated at the average
rate in effect during the period. Unrealized translation gains and losses are recorded as a foreign currency translation
adjustment, which is included in other comprehensive income (loss), net of tax, which is a component of accumulated other
comprehensive income or loss included in stockholders' equity.
Foreign currency transactions denominated in a currency other than an entity's functional currency are remeasured into
the functional currency with any resulting gains and losses recognized in selling, general and administrative expenses, except
for gains and losses arising on intercompany foreign currency transactions that are of a long-term investment nature, which
are recorded as a net investment hedge gains (losses) in other comprehensive income (loss), net of tax.
Derivative financial instruments
The Company uses derivative financial instruments to manage its exposure to certain foreign currency exchange rate
risks.
Net investment hedges. The Company enters into certain forward currency contracts that are designated as net
investment hedges. The effective portions of the hedges are reported in accumulated other comprehensive income or loss,
net of tax, and will subsequently be reclassified to net earnings in the period in which the hedged investment is either sold or
substantially liquidated. Hedge effectiveness is measured using a method based on changes in forward exchange rates. The
Company classifies the cash flows at settlement of its net investment hedges within investing activities in the consolidated
statements of cash flows.
Derivatives not designated as hedging instruments. The Company also enters into certain forward currency contracts
that are not designated as net investment hedges. They are designed to economically hedge the foreign exchange revaluation
gains and losses of certain monetary assets and liabilities. The Company has not applied hedge accounting to these
instruments and the change in fair value of these derivatives is recorded within selling, general and administrative expenses.
The Company classifies the cash flows at settlement of its forward currency contracts which are not designated in hedging
relationships within operating activities in the consolidated statements of cash flows.
The Company presents its derivative assets and derivative liabilities at their gross fair values within prepaid expenses
and other current assets and other current liabilities on the consolidated balance sheets. However, the Company's Master
International Swap Dealers Association, Inc., Agreements and other similar arrangements allow net settlements under certain
conditions.
The Company does not enter into derivative contracts for speculative or trading purposes. Additional information on the
Company's derivative financial instruments is included in Note 16. Fair Value Measurement and Note 17. Derivative Financial
Instruments.
Concentration of credit risk
Accounts receivable primarily arise out of third party gift card sales, sales to wholesale accounts, online marketplaces,
duty receivables, and license and supply arrangements. The Company generally does not require collateral to support the
accounts receivable; however, in certain circumstances, the Company may require parties to provide payment for goods prior
to delivery of the goods or to provide letters of credit. The accounts receivable are net of an allowance for doubtful accounts,
which is established based on management's assessment of the credit risk of the underlying accounts.
Cash and cash equivalents are held with high quality financial institutions. The amount of cash and cash equivalents
held with certain financial institutions exceeds government-insured limits. The Company is also exposed to credit-related
losses in the event of nonperformance by the counterparties to the forward currency contracts. The credit risk amount is the
Company's unrealized gains on its derivative instruments, based on foreign currency rates at the time of nonperformance. The
Company has not experienced any losses related to these items, and it believes credit risk to be minimal. The Company seeks
to minimize its credit risk by entering into transactions with investment grade credit worthy and reputable financial
institutions and by monitoring the credit standing of the financial institutions with whom it transacts. It seeks to limit the
amount of exposure with any one counterparty.
60
The Company's derivative contracts contain certain credit risk-related contingent features. Under certain circumstances,
including an event of default, bankruptcy, termination, and cross default under the Company's Americas revolving credit
facility, the Company may be required to make immediate payment for outstanding liabilities under its derivative contracts.
Stock-based compensation
The Company accounts for stock-based compensation using the fair value method. The fair value of awards granted is
estimated at the date of grant. Awards settled in cash or common stock at the election of the employee are remeasured to
fair value at the end of each reporting period until settlement. The employee compensation expense is recognized on a
straight-line basis over the requisite service period with the offsetting credit to additional paid-in capital for awards that are
settled in common shares, and with the offsetting credit to accrued compensation and related expenses for awards that are
settled in cash or common stock at the election of the employee.
For awards with service and/or performance conditions, the amount of compensation expense recognized is based on
the number of awards expected to vest, reflecting estimated expected forfeitures, and is adjusted to reflect those awards that
do ultimately vest. The forfeiture rate is based on management's best estimate of expected forfeitures, taking into
consideration historical trends and expected future behavior. For awards with performance conditions, the Company
recognizes the compensation expense if and when the Company concludes that it is probable that the performance condition
will be achieved. The Company reassesses the probability of achieving the performance condition at each reporting date.
The grant date fair value of each stock option granted is estimated on the grant date using the Black-Scholes model. The
grant date fair value of restricted shares, performance-based restricted stock units, and restricted stock units is based on the
closing price of the Company's common stock on the grant date. Restricted stock units that were settled in cash or common
stock at the election of the employee were remeasured to fair value at the end of each reporting period until settlement. This
fair value was based on the closing price of the Company's common stock on the last business day before each period end.
Earnings per share
Earnings per share is calculated using the weighted-average number of common and exchangeable shares outstanding
during the period. Exchangeable shares are the economic equivalent of common shares in all material respects. All classes of
stock have in effect the same economic rights and share equally in undistributed net income. Diluted earnings per share is
calculated by dividing net income available to stockholders for the period by the diluted weighted-average number of shares
outstanding during the period. Diluted earnings per share reflects the potential dilution from common shares issuable through
stock options, performance-based restricted stock units that have satisfied their performance factor, restricted shares, and
restricted stock units using the treasury stock method.
Contingencies
In the ordinary course of business, the Company is involved in legal proceedings regarding contractual and employment
relationships and a variety of other matters. The Company records contingent liabilities resulting from claims against it, when
a loss is assessed to be probable and the amount of the loss is reasonably estimable.
Use of estimates
The preparation of financial statements in conformity with GAAP in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the financial statements as well as the reported amounts of net revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Recently adopted accounting pronouncements
The Company considers the applicability and impact of all Accounting Standard Updates ("ASUs"). ASUs adopted during
2023 not listed below were assessed, and determined to be either not applicable or are expected to have minimal impact on
its consolidated financial position or results of operations.
In September 2022, the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure
of Supplier Finance Program Obligations, to require annual and interim disclosures about the key terms of supplier finance
programs used in connection with the purchase of goods and services along with information about the obligations under
these programs, including the amount outstanding at the end of each reporting period and a roll-forward of those obligations.
The Company adopted this update during the first quarter of 2023 and the related disclosures are included in Note 13. Supply
Chain Financing Program.
61
Recently issued accounting pronouncements
ASUs recently issued not listed below were assessed and determined to be either not applicable or are expected to have
minimal impact on the Company's consolidated financial position or results of operations.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures. Entities will be required to provide disclosures of significant segmented expenses and other categories used by
the Chief Operating Decision Maker ("CODM") in order to enhance disclosure at the segment level. This amendment is
effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024, and
is applied retrospectively for periods presented in the financial statements. The Company is currently evaluating the impact
that this new guidance may have on its financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures.
This disclosure requires expanded disclosure within the rate reconciliation as well as disaggregation of annual taxes paid. This
amendment is effective for annual periods beginning after December 15, 2023, and is applied prospectively. The Company is
currently evaluating the impact that this new guidance may have on its financial statement disclosures.
Note 3. Inventories
Inventories, at cost
Provision to reduce inventories to net realizable value:
lululemon Studio Mirror provision
Obsolescence provision
Damages provision
Shrink provision
Inventories
January 28,
2024
January 29,
2023
(In thousands)
$
1,465,076 $
1,571,981
(62,956)
(42,903)
(33,836)
(1,779)
(65,328)
(18,903)
(38,996)
(1,387)
(141,474)
(124,614)
$
1,323,602 $
1,447,367
Please refer to Note 8. Impairment of Goodwill and Other Assets, Restructuring Costs for further details on the
lululemon Studio obsolescence provision.
Note 4. Prepaid Expenses and Other Current Assets
Prepaid expenses
Forward currency contract assets
Other current assets
Prepaid expenses and other current assets
January 28,
2024
January 29,
2023
(In thousands)
137,203
647
46,652
142,003
16,707
79,962
$
184,502 $
238,672
62
Note 5. Property and Equipment
Land
Buildings
Leasehold improvements
Furniture and fixtures
Computer hardware
Computer software
Equipment and vehicles
Work in progress
Property and equipment, gross
Accumulated depreciation
Property and equipment, net
January 28,
2024
January 29,
2023
(In thousands)
$
79,498 $
29,032
1,006,926
156,656
176,597
1,032,567
34,017
247,943
80,692
28,850
818,071
144,572
166,768
742,295
30,766
244,898
2,763,236
2,256,912
(1,217,425)
(987,298)
$
1,545,811 $
1,269,614
Depreciation expense related to property and equipment was $374.0 million, $282.7 million, and $215.3 million for
2023, 2022, and 2021, respectively.
Gain on Disposal of Assets
During the second quarter of 2022, the Company completed the sale of an administrative office building, which resulted
in a pre-tax gain of $10.2 million. The income tax effect of the gain on disposal of assets was an expense of $1.7 million.
Note 6. Goodwill
The changes in the carrying amounts of goodwill were as follows:
Balance as of January 30, 2022
Impairment of goodwill
Effect of foreign currency translation
Balance as of January 29, 2023
Effect of foreign currency translation
Balance as of January 28, 2024
Goodwill
(In thousands)
$
386,880
(362,492)
(244)
24,144
(61)
24,083
$
$
The Company recognized an impairment charge of $362.5 million related to the lululemon Studio reporting unit as of
January 29, 2023 on the goodwill that arose from the acquisition of MIRROR. Please refer to Note 8. Impairment of Goodwill
and Other Assets, Restructuring Costs for further information.
63
Note 7. Intangible Assets
A summary of the balances of the Company's intangible assets as of January 28, 2024, January 29, 2023, is presented
below:
MIRROR brand
Customer relationships
Technology
Content
Other
Intangible assets
MIRROR brand
Customer relationships
Technology
Content
Other
Intangible assets
January 28, 2024
Gross Carrying
Amount
Accumulated
Amortization
Accumulated
Impairment
Net Carrying
Amount
$
26,500 $
(4,089) $
(22,411) $
(In thousands)
28,000
25,500
5,000
270
(7,492)
(12,632)
(3,250)
(270)
(20,508)
(12,868)
(1,750)
—
$
85,270 $
(27,733) $
(57,537) $
—
—
—
—
—
—
January 29, 2023
Gross Carrying
Amount
Accumulated
Amortization
Impairment
Net Carrying
Amount
Remaining
Useful Life
(Years)
$
26,500 $
(3,423) $
(20,077) $
(In thousands, except in years)
28,000
25,500
5,000
270
(7,492)
(8,956)
(2,583)
(270)
(20,508)
—
—
—
3,000
—
16,544
2,417
—
$
85,270 $
(22,724) $
(40,585) $
21,961
3.0
n/a
3.0
2.4
n/a
2.9
Amortization of intangible assets was $5.0 million, $8.8 million, and $8.8 million in 2023, 2022, and 2021, respectively.
During 2022 and 2023, the Company recognized intangible asset impairment charges of $40.6 million and $17.0 million,
respectively. These impairment charges related to the intangible assets that were recognized on the acquisition of MIRROR.
Please refer to Note 8. Impairment of Goodwill and Other Assets, Restructuring Costs for further information.
Note 8. Impairment of Goodwill and Other Assets, Restructuring Costs
During 2022, the Company decided to shift its lululemon Studio strategy to focus on providing digital app-based
services. The Company continued to sell the lululemon Studio Mirror hardware in 2023, and reached the decision to cease
selling it during the third quarter of 2023. It also contracted with Peloton Interactive, Inc. to be the exclusive digital fitness
content provider to existing lululemon Studio subscribers, and stopped producing its own digital fitness content. The
Company ceased selling the lululemon Studio Mirror and new digital content subscriptions in December 2023.
64
These strategy shifts resulted in impairment testing and the recognition of goodwill impairment, inventory provisions,
asset impairments, and restructuring costs related to the lululemon Studio reporting unit. The following table summarizes the
amounts recognized:
Costs recorded in cost of goods sold:
lululemon Studio obsolescence provision
Costs recorded in operating expenses:
Impairment of assets:
Impairment of goodwill
Impairment of intangible assets
Impairment of cloud computing arrangement implementation costs
Impairment of property and equipment
Restructuring costs
Impairment of goodwill and other assets, restructuring costs
Total pre-tax charges
Income tax effects of charges
Total after-tax charges
lululemon Studio obsolescence provision
2023
2022
(In thousands)
$
23,709 $
62,928
$
— $
362,492
16,951
16,074
11,161
40,585
—
4,836
44,186 $
407,913
30,315
—
74,501 $
407,913
98,210 $
470,841
(26,085) $
(28,171)
72,125 $
442,670
$
$
$
$
$
During 2022, the change in strategy related to lululemon Studio to focus on digital app-based services meant the
Company no longer expected to be able to sell all of the lululemon Studio hardware inventory above cost and it recognized an
obsolescence provision of $62.9 million. The net realizable value was determined based on hardware sales forecasts and
assumptions regarding liquidation value.
As a result of the decision to cease selling the lululemon Studio Mirror in the third quarter of 2023, the Company
recognized a further inventory obsolescence provision of $23.7 million during 2023. The net realizable value of the lululemon
Studio inventory was based on assumptions regarding liquidation value.
Impairment of goodwill and other assets
As a result of the strategy shift during 2022, it was concluded that the Company should conduct an impairment test for
the goodwill, intangible assets, and property and equipment related to lululemon Studio as of January 29, 2023. The Company
used a discounted cash flow model to estimate the fair value of the lululemon Studio reporting unit based on the updated
strategic plans, supplemented by market comparable analysis, which indicated the fair value of lululemon Studio was lower
than its carrying value, and led to a recognition of an impairment of goodwill of $362.5 million. The key assumptions used to
estimate the fair value of the lululemon Studio reporting unit were the revenue growth rates, operating profit margins, and
the discount rate. The fair value of the lululemon Studio reporting unit was a Level 3 fair value measurement.
As of January 29, 2023, the undiscounted cash flows of the lululemon Studio asset group to which the intangible assets
belonged were less than their carrying value, and therefore the Company calculated the fair value of the asset group, which
was also less than its carrying value. This resulted in impairment of intangible assets of $40.6 million relating to the MIRROR
brand, which was associated with in-home hardware, and to the customer relationship intangible assets that were recognized
as part of the acquisition.
During 2023, as a result of the Company's decision to no longer produce digital fitness content and to cease the sale of
the lululemon Studio Mirror, the Company performed impairment testing for the lululemon Studio asset group as of October
29, 2023. The undiscounted cash flows of the lululemon Studio asset group were less than their carrying value, and therefore
the Company calculated the fair value of the asset group, which was also less than its carrying value.
65
As a result of the impairment test, the Company recognized asset impairments totaling $44.2 million during 2023. The
fair value of long-lived assets was based on a discounted cash flow model, and is a Level 3 non-recurring fair value
measurement. The key assumptions used to estimate the fair value were subscriber churn rates and operating costs.
Restructuring costs
During 2023, the Company recognized restructuring costs of $30.3 million for lululemon Studio primarily related to
contract termination costs, employee severance costs, and professional fees.
Note 9. Acquisition-Related Expenses
In connection with the acquisition of MIRROR in fiscal 2020, the Company recognized certain expenses which were
included within acquisition-related expenses in the consolidated statements of operations. These amounts included
acquisition-related compensation, transaction and integration costs, and a gain on the Company's existing investment in
MIRROR. During 2021, $41.4 million was recognized. There were no acquisition-related expenses recognized in 2023 or 2022.
Note 10. Other Non-Current Assets
Cloud computing arrangement implementation costs
Security deposits
Other
Other non-current assets
January 28,
2024
January 29,
2023
(In thousands)
$
133,597 $
114,700
31,825
21,262
28,447
12,898
$
186,684 $
156,045
As of January 28, 2024 and January 29, 2023, cloud computing arrangement implementation costs consisted of deferred
costs of $289.3 million and $212.4 million, respectively, and associated accumulated amortization of $155.7 million and $97.7
million, respectively.
Note 11. Accrued Liabilities and Other
Accrued operating expenses
Sales return allowances
Accrued freight
Accrued capital expenditures
Accrued duty
Accrued rent
Accrued inventory liabilities
Sales tax collected
Forward currency contract liabilities
Other
Accrued liabilities and other
Note 12. Revolving Credit Facilities
Americas revolving credit facility
January 28,
2024
January 29,
2023
(In thousands)
$
147,215 $
169,429
61,634
41,241
31,936
25,817
12,522
4,783
3,088
2,872
17,447
55,528
57,692
19,365
21,046
12,223
4,345
20,183
25,625
13,787
$
348,555 $
399,223
On December 14, 2021, the Company entered into an amended and restated credit agreement extending its existing
credit facility, which provides for $400.0 million in commitments under an unsecured five-year revolving credit facility. The
credit facility has a maturity date of December 14, 2026, subject to extension under certain circumstances. Borrowings under
the credit facility may be prepaid and commitments may be reduced or terminated without premium or penalty (other than
customary breakage costs).
66
As of January 28, 2024, aside from letters of credit of $6.3 million, the Company had no other borrowings outstanding
under this credit facility.
Borrowings made under the credit facility bear interest at a rate per annum equal to, at the Company's option, either
(a) a rate based on the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York ("SOFR"),
or (b) an alternate base rate, plus, in each case, an applicable margin. The applicable margin is determined by reference to a
pricing grid, based on the ratio of indebtedness to earnings before interest, tax, depreciation, amortization, and rent
("EBITDAR") and ranges between 1.000%-1.375% for SOFR loans and 0.000%-0.375% for alternate base rate or Canadian
prime rate loans. Additionally, a commitment fee of between 0.100%-0.200%, also determined by reference to the pricing
grid, is payable on the average daily unused amounts under the credit facility.
The applicable interest rates and commitment fees are subject to adjustment based on certain sustainability key
performance indicators ("KPIs"). The two KPIs are based on greenhouse gas emissions intensity reduction and gender pay
equity, and the Company's performance against certain targets measured on an annual basis could result in positive or
negative sustainability rate adjustments of 2.50 basis points to its drawn pricing and positive or negative sustainability fee
adjustments of 0.50 basis points to its undrawn pricing.
The credit agreement contains negative covenants that, among other things and subject to certain exceptions, limit the
ability of the Company's subsidiaries to incur indebtedness, incur liens, undergo fundamental changes, make dispositions of all
or substantially all of their assets, alter their businesses and enter into agreements limiting subsidiary dividends and
distributions.
The Company's financial covenants include maintaining an operating lease adjusted leverage ratio of not greater than
3.25:1.00 and the ratio of consolidated EBITDAR to consolidated interest charges (plus rent) of not less than 2.00:1.00. The
credit agreement also contains certain customary representations, warranties, affirmative covenants, and events of default
(including, among others, an event of default upon the occurrence of a change of control). If an event of default occurs, the
credit agreement may be terminated, and the maturity of any outstanding amounts may be accelerated. As of January 28,
2024, the Company was in compliance with the covenants of the credit facility.
China Mainland revolving credit facility
In December 2019, the Company entered into an uncommitted and unsecured 130.0 million Chinese Yuan ($18.1
million) revolving credit facility with terms that are reviewed on an annual basis. The credit facility was increased to
230.0 million Chinese Yuan ($32.0 million) during 2020 and increased to 240.0 million Chinese Yuan ($33.4 million) during
2023. It is comprised of a revolving loan of up to 200.0 million Chinese Yuan ($27.9 million) and a financial guarantee facility of
up to 40.0 million Chinese Yuan ($5.6 million), or its equivalent in another currency. Loans are available for a period not to
exceed 12 months, at an interest rate equal to the loan prime rate plus a spread of 0.5175%. The Company is required to
follow certain covenants. As of January 28, 2024, the Company was in compliance with the covenants and, aside from letters
of credit of 32.5 million Chinese Yuan ($4.5 million), there were no other borrowings or guarantees outstanding under this
credit facility.
Note 13. Supply Chain Financing Program
The Company facilitates a voluntary supply chain financing ("SCF") program that allows its suppliers to elect to sell the
receivables owed to them by the Company to a third party financial institution. Participating suppliers negotiate arrangements
directly with the financial institution. If a supplier chooses to participate in the SCF program it may request an invoice be paid
earlier than it would by the Company, and the financial institution at its sole and absolute discretion, may elect to make an
early payment to the supplier at a discount. The Company's obligations to its suppliers, including amounts due and scheduled
payment terms, are not impacted by a supplier's participation in the arrangement and the Company provides no guarantees
to any third parties under the SCF program.
67
A roll-forward of the amounts outstanding under the SCF program, which are presented within accounts payable, is
presented below:
Supply chain financing program balance, beginning of year
Amounts added during the year
Amounts settled during the year
Supply chain financing program balance, end of year
Note 14. Stockholders' Equity
Special voting stock and exchangeable shares
2023
(In thousands)
$
$
$
$
17,578
533,640
(509,079)
42,139
The holders of the special voting stock are entitled to one vote for each share held. The special voting shares are not
entitled to receive dividends or distributions or receive any consideration in the event of a liquidation, dissolution, or wind-up.
To the extent that exchangeable shares as described below are exchanged for common stock, a corresponding number of
special voting shares will be cancelled without consideration.
The holders of the exchangeable shares have dividend and liquidation rights equivalent to those of holders of the
common shares of the Company. The exchangeable shares can be converted on a one for one basis by the holder at any time
into common shares of the Company plus a cash payment for any accrued and unpaid dividends. Holders of exchangeable
shares are entitled to the same or economically equivalent dividend as declared on the common stock of the Company. The
exchangeable shares are non-voting. The Company has the right to convert the exchangeable shares into common shares of
the Company at any time after the earliest of July 26, 2047, the date on which fewer than 4.2 million exchangeable shares are
outstanding, or in the event of certain events such as a change in control.
Note 15. Stock-Based Compensation and Benefit Plans
Stock-based compensation plans
The Company's eligible employees participate in various stock-based compensation plans, provided directly by the
Company.
In June 2023, the Company's stockholders approved the adoption of the lululemon athletica inc. 2023 Equity Incentive
Plan. The 2023 Equity Incentive Plan provides for awards in the form of stock options, stock appreciation rights, restricted
stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance-based restricted
stock units, cash-based awards, other stock-based awards, and deferred compensation awards to employees (including
officers and directors who are also employees), consultants, and directors of the Company.
The awards granted under the 2014 Equity Incentive Plan remain outstanding and continue to vest under their original
conditions. No further awards will be granted under the 2014 Equity Incentive Plan.
The Company has granted stock options, performance-based restricted stock units, restricted stock units, and restricted
shares. Stock options granted to date generally have a four-year vesting period and vest at a rate of 25% each year on the
anniversary date of the grant. Stock options generally expire on the earlier of seven years from the date of grant, or a
specified period of time following termination. Performance-based restricted stock units issued generally vest three years
from the grant date and restricted shares generally vest one year from the grant date. Restricted stock units granted generally
have a three-year vesting period and vest at a certain percentage each year on the anniversary date of the grant.
The Company issues previously unissued shares upon the exercise of Company options, vesting of performance-based
restricted stock units or restricted stock units that are settled in common stock, and granting of restricted shares.
Stock-based compensation expense charged to income for the plans was $92.7 million, $77.2 million, and $66.4 million
for 2023, 2022, and 2021, respectively.
Total unrecognized compensation cost for all stock-based compensation plans was $135.9 million as of January 28,
2024, which is expected to be recognized over a weighted-average period of 2.0 years, and was $118.0 million as of
January 29, 2023 over a weighted-average period of 2.1 years.
68
A summary of the balances of the Company's stock-based compensation plans as of January 28, 2024, January 29, 2023,
and January 30, 2022, and changes during the fiscal years then ended is presented below:
Stock Options
Performance-Based
Restricted Stock Units
Restricted Shares
Restricted Stock Units
Restricted Stock Units
(Liability Accounting)
Weighted
-Average
Exercise
Price
Number
Number
Weighted
-Average
Grant
Date Fair
Value
Number
Weighted
-Average
Grant
Date Fair
Value
Number
Weighted
-Average
Grant
Date Fair
Value
(In thousands, except per share amounts)
Weighted
-Average
Fair Value
Number
Balance as of January
31, 2021
804 $ 139.27
199 $ 149.20
4 $ 299.09
275 $ 166.50
15 $ 328.68
Granted
194
310.29
139
185.37
Exercised/vested
174
104.85
165
100.89
326.70
299.09
129
331.42
—
—
144
139.33
15
397.83
35
199.76
6
216.62
—
22
235.23
—
4
4
—
Forfeited/expired
Balance as of January
30, 2022
Exercised/vested
Forfeited/expired
Balance as of January
29, 2023
Forfeited/expired
Balance as of January
28, 2024
789 $ 186.10
167 $ 225.27
4 $ 326.70
238 $ 265.90
— $
Granted
192
371.04
117
274.90
93
22
127.68
286.56
114
170.04
4
307.76
5
4
—
308.66
326.70
120
364.51
111
241.02
—
26
334.39
—
—
—
866 $ 230.78
166 $ 295.93
5 $ 308.66
221 $ 323.89
— $
Granted
213
360.00
121
296.27
Exercised/vested
264
160.45
104
201.56
4
5
370.59
308.66
132
364.63
106
294.65
32
332.26
8
351.14
—
368.36
24
350.38
—
—
—
783 $ 285.69
175 $ 349.84
4 $ 370.85
223 $ 359.12
— $
—
—
—
—
—
—
—
—
—
—
A total of 4.0 million shares of the Company's common stock have been authorized for future issuance under the
Company's 2023 Equity Incentive Plan.
The Company's performance-based restricted stock units are awarded to eligible employees and entitle the grantee to
receive a maximum of two shares of common stock per performance-based restricted stock unit if the Company achieves
specified performance goals and the grantee remains employed during the vesting period. The fair value of performance-
based restricted stock units is based on the closing price of the Company's common stock on the grant date. Expense for
performance-based restricted stock units is recognized when it is probable that the performance goal will be achieved.
The grant date fair value of the restricted shares and restricted stock units is based on the closing price of the
Company's common stock on the grant date. Restricted stock units that were settled in cash or common stock at the election
of the employee were remeasured to fair value at the end of each reporting period until settlement. This fair value was based
on the closing price of the Company's common stock on the last business day before each period end.
The grant date fair value of each stock option granted is estimated on the date of grant using the Black-Scholes model.
The closing price of the Company's common stock on the grant date is used in the model. The assumptions used to calculate
the fair value of the options granted are evaluated and revised, as necessary, to reflect market conditions and the Company's
historical experience. The expected term of the options is based upon the historical experience of similar awards, giving
consideration to expectations of future employee exercise behavior. Expected volatility is based upon the historical volatility
of the Company's common stock for the period corresponding with the expected term of the options. The risk-free interest
rate is based on the U.S. Treasury yield curve for the period corresponding with the expected term of the options. The
following are weighted averages of the assumptions that were used in calculating the fair value of stock options granted
in 2023, 2022, and 2021:
Expected term
Expected volatility
Risk-free interest rate
Dividend yield
2023
2022
2021
3.75 years
3.75 years
3.75 years
42.35 %
3.49 %
— %
40.00 %
2.51 %
— %
39.32 %
0.50 %
— %
69
The following table summarizes information about stock options outstanding and exercisable as of January 28, 2024:
Range of Exercise Prices
Number of
Options
Outstanding
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Life (Years)
Exercisable
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Life (Years)
Number of
Options
(In thousands, except per share amounts and years)
$2.78-$174.52
$188.84-$296.36
$306.71-$356.93
$358.09-$358.09
$368.36-$502.74
151 $
121
157
192
162
783 $
146.29
189.43
309.16
358.09
378.96
285.69
1.8
3.1
4.3
6.1
5.2
4.3
151 $
79
63
1
33
327 $
146.29
189.43
309.07
358.09
378.71
212.01
1.8
3.1
4.2
6.2
5.0
2.9
Intrinsic value
$
150,645
$
86,874
As of January 28, 2024, the unrecognized compensation cost related to these options was $35.8 million, which is
expected to be recognized over a weighted-average period of 2.6 years. The weighted-average grant date fair value of options
granted during 2023, 2022, and 2021 was $130.75, $124.17, and $94.09, respectively.
The following table summarizes the intrinsic value of options exercised and awards that vested during 2023, 2022, and
2021:
Stock options
Performance-based restricted stock units
Restricted shares
Restricted stock units
Restricted stock units (liability accounting)
Employee share purchase plan
2023
2022
2021
(In thousands)
$
69,316 $
19,906 $
33,198
1,661
38,016
—
37,672
1,152
37,275
—
46,761
52,495
1,364
47,042
5,938
$
142,191 $
96,005 $
153,600
The Company's board of directors and stockholders approved the Company's Employee Share Purchase Plan ("ESPP") in
September 2007. Contributions are made by eligible employees, subject to certain limits defined in the ESPP, and the
Company matches one-third of the contribution. The maximum number of shares authorized to be purchased under the ESPP
is 6.0 million shares. All shares purchased under the ESPP are purchased in the open market. During each of 2023, 2022, and
2021, there were 0.1 million shares purchased. As of January 28, 2024, 4.4 million shares remain authorized to be purchased
under the ESPP.
Defined contribution pension plans
The Company offers defined contribution pension plans to its eligible employees. Participating employees may elect to
defer and contribute a portion of their eligible compensation to a plan up to limits stated in the plan documents, not to
exceed the dollar amounts set by applicable laws. The Company matches 50% to 75% of the contribution depending on the
participant's length of service, and the contribution is subject to a two-year vesting period. The Company's net expense for
the defined contribution plans was $19.8 million, $14.0 million, and $11.8 million during 2023, 2022, and 2021, respectively.
70
Note 16. Fair Value Measurement
Assets and liabilities measured at fair value on a recurring basis
As of January 28, 2024 and January 29, 2023, the Company held certain assets and liabilities that are required to be
measured at fair value on a recurring basis:
January 28,
2024
Level 1
Level 2
Level 3
Balance Sheet Classification
(In thousands)
Money market funds
$
1,102,119 $
1,102,119 $
—
—
—
— $
8
647
2,872
— Cash and cash equivalents
— Cash and cash equivalents
Prepaid expenses and other
current assets
—
— Other current liabilities
Term deposits
Forward currency contract assets
Forward currency contract
liabilities
8
647
2,872
January 29,
2023
Level 1
Level 2
Level 3
Balance Sheet Classification
(In thousands)
Money market funds
$
568,000 $
568,000 $
Term deposits
Forward currency contract assets
Forward currency contract
liabilities
8
16,707
25,625
—
—
—
— $
8
16,707
25,625
— Cash and cash equivalents
— Cash and cash equivalents
Prepaid expenses and other
current assets
—
— Other current liabilities
The Company has short-term, highly liquid investments classified as cash equivalents, which are invested in money
market funds and short-term deposits with original maturities of three months or less. The Company records cash equivalents
at their original purchase prices plus interest that has accrued at the stated rate.
The fair values of the forward currency contract assets and liabilities are determined using observable Level 2 inputs,
including foreign currency spot exchange rates, forward pricing curves, and interest rates. The fair values consider the credit
risk of the Company and its counterparties. The Company's Master International Swap Dealers Association, Inc., Agreements
and other similar arrangements allow net settlements under certain conditions. However, the Company records all derivatives
on its consolidated balance sheets at fair value and does not offset derivative assets and liabilities.
Assets and liabilities measured at fair value on a non-recurring basis
The Company has also recorded lease termination liabilities at fair value on a non-recurring basis, determined using
Level 3 inputs based on remaining lease rentals and reduced by estimated sublease income.
During 2023 and 2022, the Company recorded impairment charges for goodwill, intangible assets, cloud computing
arrangement implementation costs, and property and equipment, as disclosed in Note 8. Impairment of Goodwill and Other
Assets, Restructuring Costs. That note includes details on the discounted cash flow model used to estimate fair value, which is
a Level 3 valuation technique.
Note 17. Derivative Financial Instruments
The Company currently hedges against changes in the Canadian dollar and Chinese Yuan to the U.S. dollar exchange
rate and changes in the Euro and Australian dollar to the Canadian dollar exchange rate using forward currency contracts.
Net investment hedges
The Company is exposed to foreign currency exchange gains and losses which arise on translation of its international
subsidiaries' balance sheets into U.S. dollars. These gains and losses are recorded as other comprehensive income (loss), net
of tax in accumulated other comprehensive income or loss within stockholders' equity.
The Company holds a significant portion of its assets in Canada and enters into forward currency contracts designed to
hedge a portion of the foreign currency exposure that arises on translation of a Canadian subsidiary into U.S. dollars. These
71
forward currency contracts are designated as net investment hedges. The Company assesses hedge effectiveness based on
changes in forward rates. The Company recorded no ineffectiveness from net investment hedges during 2023.
Derivatives not designated as hedging instruments
During 2023, the Company entered into certain forward currency contracts designed to economically hedge the foreign
currency exchange revaluation gains and losses that are recognized by its Canadian and Chinese subsidiaries on specific
monetary assets and liabilities denominated in currencies other than the functional currency of the entity. The Company has
not applied hedge accounting to these instruments and the change in fair value of these derivatives is recorded within selling,
general and administrative expenses.
Quantitative disclosures about derivative financial instruments
The notional amounts and fair values of forward currency contracts were as follows:
January 28, 2024
January 29, 2023
Gross
Notional
Assets
Liabilities
Gross
Notional
Assets
Liabilities
(In thousands)
Derivatives designated as net
investment hedges:
Forward currency contracts
Derivatives not designated in a
hedging relationship:
Forward currency contracts
Net derivatives recognized on
consolidated balance sheets:
Forward currency contracts
$
1,242,000 $
— $
258 $
1,070,000 $
— $
17,211
1,543,351
647
2,614
1,605,284
16,707
8,414
$
647 $
2,872
$
16,707 $
25,625
As of January 28, 2024, there were derivative assets of $0.6 million and derivative liabilities of $2.9 million subject to
enforceable netting arrangements.
The forward currency contracts designated as net investment hedges outstanding as of January 28, 2024 mature on
different dates between February 2024 and September 2024.
The forward currency contracts not designated in a hedging relationship outstanding as of January 28, 2024 mature on
different dates between February 2024 and October 2024.
The pre-tax gains and losses on foreign currency exchange forward contracts recorded in accumulated other
comprehensive income or loss were as follows:
2023
2022
2021
(In thousands)
Gains (losses) recognized in net investment hedge gains (losses):
Derivatives designated as net investment hedges
$
15,344 $
12,125 $
13,177
No gains or losses have been reclassified from accumulated other comprehensive income or loss into net income for
derivative financial instruments in a net investment hedging relationship, as the Company has not sold or liquidated (or
substantially liquidated) its hedged subsidiary.
The pre-tax net foreign currency exchange and derivative gains and losses recorded in the consolidated statement of
operations were as follows:
Gains (losses) recognized in selling, general and administrative expenses:
Foreign exchange gains (losses)
Derivatives not designated in a hedging relationship
Net foreign exchange and derivative losses
2023
2022
2021
(In thousands)
$
$
(23,232) $
4,410 $
11,511
22,765
(11,945)
(19,874)
(467) $
(7,535) $
(8,363)
72
Note 18. Leases
The Company has obligations under operating leases for its store and other retail locations, distribution centers, offices,
and equipment. As of January 28, 2024, the initial lease terms of the various leases generally range from two to 15 years. The
majority of the Company's leases include renewal options at the sole discretion of the Company. The lease term includes
options to extend or terminate the lease when it is reasonably certain those options will be exercised.
The following table details the Company's net lease expense. Certain of the Company's leases include rent escalation
clauses, rent holidays, and leasehold rental incentives. The majority of the Company's leases for store premises also include
contingent rental payments based on sales volume. The variable lease expenses disclosed below include contingent rent
payments and other non-fixed lease related costs, including common area maintenance, property taxes, and landlord's
insurance.
Net lease expense:
Operating lease expense
Short-term lease expense
Variable lease expense
2023
2022
2021
(In thousands)
$
282,888 $
245,767 $
215,549
15,289
152,791
16,790
114,441
12,366
90,852
$
450,968 $
376,998 $
318,767
The following table presents future minimum lease payments by fiscal year and the impact of discounting.
2024
2025
2026
2027
2028
Thereafter
Future minimum lease payments
Impact of discounting
Present value of lease liabilities
Balance sheet classification:
Current lease liabilities
Non-current lease liabilities
January 28,
2024
(In thousands)
$
300,379
287,224
232,510
214,519
158,252
452,434
$
1,645,318
(242,036)
$
1,403,282
$
249,270
1,154,012
$
1,403,282
As of January 28, 2024, the Company's minimum lease commitment for distribution center operating leases which have
been committed to, but not yet commenced, was $299.6 million, which is not reflected in the table above.
The weighted-average remaining lease terms and weighted-average discount rates were as follows:
Weighted-average remaining lease term
Weighted-average discount rate
January 28,
2024
January 29,
2023
6.95 years
5.64 years
4.0 %
3.1 %
73
Note 19. Income Taxes
The Company's domestic and foreign income before income tax expense and current and deferred income taxes from
federal, state, and foreign sources are as follows:
Income (loss) before income tax expense
Domestic
Foreign
Current income tax expense
Federal
State
Foreign
Deferred income tax expense (recovery)
Federal
State
Foreign
Income tax expense
2023
2022
2021
(In thousands)
$
458,041 $
(98,764) $
204,350
1,717,694
1,431,335
1,129,519
$
2,175,735 $
1,332,571 $
1,333,869
$
140,726 $
34,752 $
42,476
469,090
33,369
400,250
25,701
17,608
322,105
$
$
$
$
652,292 $
468,371 $
365,414
(14,741) $
8,932 $
(3,097)
(8,909)
2,363
(1,895)
(26,747) $
9,400 $
5,858
1,045
(13,770)
(6,867)
625,545 $
477,771 $
358,547
The Company's income tax expense for 2023, 2022, and 2021 include certain discrete tax amounts, as follows:
2023
2022
2021
(In thousands)
Impairment of goodwill and other assets, restructuring costs
$
(26,085) $
(28,171) $
Gain on disposal of assets
Acquisition-related expenses
—
—
1,661
—
Total discrete income tax expense (recovery)
$
(26,085) $
(26,510) $
—
—
(1,417)
(1,417)
Please refer to Note 5. Property and Equipment, Note 8. Impairment of Goodwill and Other Assets, Restructuring Costs,
and Note 9. Acquisition-Related Expenses for further information.
As of January 28, 2024, the Company's net investment in its Canadian subsidiaries was $2.5 billion, of which $1.6 billion
was determined to be indefinitely reinvested. A deferred income tax liability of $41.2 million has been recognized in relation
to the portion of the Company's net investment in its Canadian subsidiaries that is not indefinitely reinvested, representing
the Canadian withholding taxes and U.S. state income taxes which would be due upon repatriation. This deferred tax liability
has been recorded on the basis that the Company would choose to make the repatriation transactions in the most tax
efficient manner. Specifically, to the extent that the Canadian subsidiaries have paid-up-capital, any such distributions would
be structured as a return of capital, and therefore not subject to Canadian withholding tax. The unrecognized deferred tax
liability on the indefinitely reinvested amount is approximately $89.7 million. No deferred income tax liabilities have been
recognized on any of the undistributed earnings of the Company's other foreign subsidiaries as these earnings are
permanently reinvested outside of the United States. Excluding its Canadian subsidiaries, cumulative undistributed earnings of
the Company's foreign subsidiaries as of January 28, 2024 were $466.5 million.
As of January 28, 2024, the Company had cash and cash equivalents of $822.5 million outside of the United States.
74
A summary reconciliation of the effective tax rate is as follows:
Federal income tax at statutory rate
Foreign tax rate differentials
U.S. state taxes
Non-deductible compensation expense
Excess tax benefits from stock-based compensation
Tax on unremitted foreign earnings
Impairment of goodwill and other assets, gain on disposal of assets
Permanent and other
Effective tax rate
2023
2022
2021
(Percentage)
21.0 %
21.0 %
21.0 %
4.1
1.0
0.6
(0.4)
2.6
—
(0.1)
28.8 %
6.8
(0.4)
0.7
(0.5)
1.4
7.8
(0.9)
35.9 %
5.0
0.8
0.7
(0.9)
—
—
0.3
26.9 %
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and
deferred income tax liabilities as of January 28, 2024 and January 29, 2023 are presented below:
Deferred income tax assets:
Net operating loss carryforwards
Inventories
Accrued bonuses
Unredeemed gift card liability
Non-current lease liabilities
Research and experimental expenditures
Stock-based compensation
Other
Deferred income tax assets
Valuation allowance
Deferred income tax assets, net of valuation allowance
Deferred income tax liabilities:
Property and equipment, net
Intangible assets, net
Right-of-use lease assets
Other
Deferred income tax liabilities
Net deferred income tax liabilities
Balance sheet classification:
Deferred income tax assets
Deferred income tax liabilities
Net deferred income tax liabilities
January 28,
2024
January 29,
2023
(In thousands)
$
2,385 $
43,157
19,075
15,580
2,312
43,471
13,647
12,877
286,528
216,495
48,922
20,057
16,802
452,506
(2,334)
—
16,093
9,645
314,540
(743)
450,172 $
313,797
(162,312) $
(142,516)
—
(5,224)
(265,157)
(192,221)
(43,049)
(22,518)
(470,518)
(362,479)
$
$
$
(20,346) $
(48,682)
$
$
9,176 $
6,402
(29,522)
(20,346) $
(55,084)
(48,682)
As of January 28, 2024, the Company had net operating loss carryforwards of $20.0 million. The majority of the net
operating loss carryforwards expire, if unused, between fiscal 2030 and fiscal 2040.
There was a $1.6 million net increase in the valuation allowance in 2023, compared to a $2.1 million net decrease in
2022, and a $3.7 million net decrease in 2021.
The Company files income tax returns in the U.S., Canada, and various foreign and state jurisdictions. The 2017 to 2022
tax years remain subject to examination by the U.S. federal and state tax authorities. The 2013 tax year is still open for certain
state tax authorities. The 2017 to 2022 tax years remain subject to examination by Canadian tax authorities. The 2016 to 2022
75
tax years remain subject to examination by tax authorities in certain foreign jurisdictions. The Company does not have any
significant unrecognized tax benefits arising from uncertain tax positions taken, or expected to be taken, in the Company's tax
returns.
Note 20. Earnings Per Share
The details of the computation of basic and diluted earnings per share are as follows:
Net income
Basic weighted-average number of shares outstanding
Assumed conversion of dilutive stock options and awards
Diluted weighted-average number of shares outstanding
Basic earnings per share
Diluted earnings per share
2023
2022
2021
(In thousands, except per share amounts)
$
1,550,190 $
854,800 $
975,322
126,726
127,666
129,768
334
351
527
127,060
128,017
130,295
$
$
12.23 $
12.20 $
6.70 $
6.68 $
7.52
7.49
The Company's calculation of weighted-average shares includes the common stock of the Company as well as the
exchangeable shares. Exchangeable shares are the economic equivalent of common shares in all material respects. All classes
of stock have in effect the same economic rights and share equally in undistributed net income. For 2023, 2022, and 2021,
62.7 thousand, 43.5 thousand, and 36.0 thousand stock options and awards, respectively, were anti-dilutive to earnings per
share and therefore have been excluded from the computation of diluted earnings per share.
On January 31, 2019, the Company's board of directors approved a stock repurchase program for up to $500.0 million of
the Company's common shares. On December 1, 2020, it approved an increase in the remaining authorization from
$263.6 million to $500.0 million, and on October 1, 2021, it approved an increase in the remaining authorization from
$141.2 million to $641.2 million. During the first quarter of 2022, the Company completed the remaining stock repurchases
under this program.
On March 23, 2022 and November 29, 2023, the Company's board of directors approved stock repurchase programs,
each for up to $1.0 billion of the Company's common shares on the open market or in privately negotiated transactions. The
repurchase plans have no time limit and do not require the repurchase of a minimum number of shares. Common shares
repurchased on the open market are at prevailing market prices, including under plans complying with the provisions of
Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934. The timing and actual number of common shares to be
repurchased will depend upon market conditions, eligibility to trade, and other factors, in accordance with Securities and
Exchange Commission requirements. The authorized value of shares available to be repurchased under these programs
excludes the cost of commissions and excise taxes and as of January 28, 2024, the remaining authorized value was $1.2 billion.
During 2023, 2022, and 2021, 1.5 million, 1.4 million, and 2.2 million shares, respectively, were repurchased under the
programs at a total cost including commissions and excise taxes of $558.7 million, $444.0 million, and $812.6 million,
respectively.
Subsequent to January 28, 2024, and up to March 15, 2024, 0.2 million shares were repurchased at a total cost including
commissions and excise taxes of $99.2 million.
Note 21. Commitments and Contingencies
Commitments
Leases. The Company has obligations under operating leases for its store and other retail locations, distribution centers,
offices, and equipment. Please refer to Note 18. Leases for further details regarding lease commitments and the timing of
future minimum lease payments.
76
License and supply arrangements. The Company has entered into license and supply arrangements with partners in the
Middle East and Mexico which grant them the right to operate lululemon branded retail locations and sell lululemon products
on websites in specific countries. Under these arrangements, the Company supplies the partners with lululemon products,
training, and other support. As of January 28, 2024, there were 39 licensed locations, including 15 in Mexico, eight in the
United Arab Emirates, six in Saudi Arabia, three in Qatar, three in Kuwait, three in Israel, and one in Bahrain.
One-time transition tax payable. The U.S. tax reforms enacted in December 2017 imposed a mandatory transition tax on
accumulated foreign subsidiary earnings which have not previously been subject to U.S. income tax at a rate of 15.5% on cash
and cash equivalents and 8% on the remaining earnings, net of foreign tax credits. The one-time transition tax is payable over
eight years beginning in fiscal 2018. The table below outlines the remaining expected payments due by fiscal year.
One-time transition tax payable
$
28,555 $
12,691 $
15,864 $
— $
— $
— $
—
Total
2024
2025
2026
2027
2028
Thereafter
Payments Due by Fiscal Year
(In thousands)
Contingencies
Legal proceedings. The Company is, from time to time, involved in routine legal matters, and audits and inspections by
governmental agencies and other third parties which are incidental to the conduct of its business. This includes legal matters
such as initiation and defense of proceedings to protect intellectual property rights, employment claims, product liability
claims, personal injury claims, and similar matters. The Company believes the ultimate resolution of any such legal
proceedings, audits, and inspections will not have a material adverse effect on its consolidated balance sheets, results of
operations or cash flows. The Company has recognized immaterial provisions related to the expected outcome of legal
proceedings.
Note 22. Supplemental Cash Flow Information
Cash paid for income taxes
Cash paid for amounts included in the measurement of lease liabilities
Leased assets obtained in exchange for new operating lease liabilities
Interest paid
2023
2022
2021
(In thousands)
$
824,213 $
502,136 $
245,213
288,934
586,926
234
242,758
450,787
116
215,157
287,008
12
77
Note 23. Segmented Information
The Company's segments are based on the financial information the CODM, who is the Chief Executive Officer, uses to
evaluate performance and allocate resources.
During the fourth quarter of 2023, the financial information the CODM regularly uses to evaluate performance and
allocate resources was revised. As the Company has further executed on its omni-channel retail strategy, and with the
continued expansion of its international operations, the CODM has shifted resource allocation decisions to be focused by
regional market, rather than by selling channel. This resulted in a change in the Company's operating segments.
As of January 28, 2024, the Company reports three segments, Americas, China Mainland, and Rest of World, which is
APAC and EMEA on a combined basis. The Company does not report capital expenditures and assets by segment as that
information is not reviewed by the CODM.
Previously, the Company's segments were comprised of company-operated stores, direct to consumer (or "e-
commerce"), and other. The Company has restated the prior period information to reflect its new segments.
Net revenue:
Americas
China Mainland
Rest of World
Segmented income from operations:
Americas
China Mainland
Rest of World
General corporate expenses
lululemon Studio obsolescence provision
Impairment of goodwill and other assets, restructuring costs
Amortization of intangible assets
Acquisition-related expenses
Gain on disposal of assets
Income from operations
Other income (expense), net
Income before income tax expense
Depreciation and amortization:
Americas
China Mainland
Rest of World
Corporate
2023
2022
2021
(In thousands)
$
7,631,647 $
6,817,454 $
5,299,906
963,760
1,023,871
576,503
716,561
434,261
522,450
$
9,619,278 $
8,110,518 $
6,256,617
$
2,937,184 $
2,503,740 $
1,867,016
337,316
201,832
3,476,332
1,240,436
23,709
74,501
5,010
—
—
196,865
103,204
2,803,809
1,005,988
62,928
407,913
8,752
—
(10,180)
167,318
67,674
2,102,008
718,477
—
—
8,782
41,394
—
2,132,676
1,328,408
1,333,355
43,059
4,163
514
$
2,175,735 $
1,332,571 $
1,333,869
$
170,417 $
137,260 $
121,278
25,746
23,644
159,577
17,842
19,346
117,343
12,208
16,829
73,891
$
379,384 $
291,791 $
224,206
78
Long-lived assets, including property and equipment, net and right-of-use lease assets, by geographic area as of
January 28, 2024 and January 29, 2023 were as follows:
United States
Canada
People's Republic of China
Other geographic areas
Note 24. Disaggregated Net Revenue
January 28,
2024
January 29,
2023
(In thousands)
$
1,597,318 $
1,175,317
671,622
284,575
257,906
601,756
233,590
228,370
$
2,811,421 $
2,239,033
In addition to the disaggregation of net revenue by reportable segment in Note 23. Segmented Information, the
following table disaggregates the Company's net revenue by geographic area.
United States
Canada
China Mainland
Hong Kong SAR, Taiwan, and Macau SAR
People's Republic of China
Other geographic areas
2023
2022
2021
(In thousands)
$
6,346,392 $
5,654,343 $
4,345,687
1,285,255
1,163,111
954,219
963,760
170,533
1,134,293
576,503
105,130
681,633
434,261
86,111
520,372
853,338
611,431
436,339
$
9,619,278 $
8,110,518 $
6,256,617
The following table disaggregates the Company's net revenue by category. Other categories is primarily composed of
accessories, lululemon Studio, and footwear.
Women's product
Men's product
Other categories
The following table disaggregates the Company's net revenue by channel.
Company-operated stores
E-commerce
Other channels
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
2023
2022
2021
(In thousands)
$
6,147,372 $
5,259,803 $
4,171,762
2,252,753
1,219,153
1,956,602
1,535,850
894,113
549,005
$
9,619,278 $
8,110,518 $
6,256,617
2023
2022
2021
(In thousands)
$
4,410,956 $
3,648,127 $
2,821,497
4,311,110
3,699,791
2,777,944
897,212
762,600
657,176
$
9,619,278 $
8,110,518 $
6,256,617
Under the supervision and with the participation of our management, including our principal executive officer and
principal financial and accounting officer, we conducted an evaluation of the effectiveness of the design and operation of our
79
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended, or the Exchange Act, as of the end of the period covered by this report, or the Evaluation Date. Based upon the
evaluation, our principal executive officer and principal financial and accounting officer concluded that our disclosure controls
and procedures were effective as of the Evaluation Date. Disclosure controls and procedures are controls and procedures
designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, such as
this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include controls and procedures designed to reasonably ensure that such information is
accumulated and communicated to our management, including our principal executive officer and principal financial and
accounting officer, as appropriate to allow timely decisions regarding required disclosure.
Inherent Limitations over Internal Controls
Our internal control over financial reporting is designed to provide reasonable assurances regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our
assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being
made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a
material effect on the financial statements. Management, including our principal executive officer and principal financial and
accounting officer, does not expect that our internal controls will prevent or detect all errors and all fraud. A control system,
no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system must reflect the fact that there are resource limitations on all
control systems; no evaluation of internal controls can provide absolute assurance that all control issues and instances of
fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk
that those internal controls may become inadequate because of changes in business conditions, or that the degree of
compliance with the policies and procedures may deteriorate.
Management's Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as
defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Management conducted an evaluation of
the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control—Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. Based on this
evaluation, management concluded that we maintained effective internal control over financial reporting as of January 28,
2024.
The effectiveness of our internal control over financial reporting as of January 28, 2024 has been audited by
PricewaterhouseCoopers LLP, our independent registered public accounting firm, as stated in their report, which appears in
Item 8 of Part II of this Form 10-K.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fourth quarter of 2023 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Trading Arrangements
During the fourth quarter of 2023, no director or officer of lululemon (as defined in Rule 16a-1(f) under the Exchange
Act) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (in each case, as
defined in Item 408(a) of Regulation S-K).
Appointment of Director
On March 15, 2024, the board of directors of lululemon appointed Teri L. List as a member of the board of directors.
Ms. List served as executive vice president and chief financial officer of Gap Inc, a global clothing retailer, from January 2017
80
until her retirement in June 2020. Prior to joining the Gap, she served as chief financial officer at DICK’s Sporting Goods and
Kraft Food Group. Prior to those roles, Ms. List spent nearly 20 years with Procter & Gamble culminating in the role of SVP and
Treasurer. She began her career in public accounting at Deloitte LLP, an auditing, consulting, tax and advisory services firm.
She currently serves on the Boards of Visa, Microsoft and Danaher Corporation. Ms. List received her Bachelor’s degree in
accounting from Northern Michigan University and is a certified public accountant.
The board of directors increased the size of the board from ten to eleven members and appointed Ms. List as a Class I
director to fill the newly created vacancy. Although Ms. List will serve as a member of the class of directors whose terms
expire at the 2026 annual meeting of stockholders, our stockholders will have the opportunity to vote on her nomination as a
continuing Class I director at the next annual meeting of stockholders.
Ms. List will serve on the Audit Committee and will receive compensation for her service as a director consistent with
that of our other non-employee directors. A description of our standard compensation arrangements for non-employee
directors is included as an exhibit to this annual report on Form 10-K. We expect Ms. List to enter into our standard form
indemnification agreement for non-employee directors, the form of which is filed with the SEC as Exhibit 10.16 to our
registration statement on Form S-1, dated July 9, 2007.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
81
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item concerning our directors, director nominees and Section 16 beneficial ownership
reporting compliance is incorporated by reference to our definitive Proxy Statement for our 2024 Annual Meeting of
Stockholders under the captions "Election of Directors," "Executive Officers," and "Corporate Governance," and, to the extent
necessary, under the caption "Delinquent Section 16(a) Reports."
We have adopted a written code of business conduct and ethics, which applies to all of our directors, officers, and
employees, including our principal executive officer and our principal financial and accounting officer. Our Global Code of
Business Conduct and Ethics is available on our website, www.lululemon.com, and can be obtained by writing to Investor
Relations, lululemon athletica inc., 1818 Cornwall Avenue, Vancouver, British Columbia, Canada V6J 1C7 or by sending an
email to investors@lululemon.com. Information contained on or accessible through our websites is not incorporated into, and
does not form a part of, this Annual Report or any other report or document we file with the SEC, and any references to our
websites are intended to be inactive textual references only. Any amendments, other than technical, administrative, or other
non-substantive amendments, to our Global Code of Business Conduct and Ethics or waivers from the provisions of the Global
Code of Business Conduct and Ethics for our principal executive officer and our principal financial and accounting officer will
be promptly disclosed on our website following the effective date of such amendment or waiver.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to our 2024 Proxy Statement under the captions
"Executive Compensation" and "Executive Compensation Tables."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The information required by this item is incorporated by reference to our 2024 Proxy Statement under the caption
"Principal Shareholders and Share Ownership by Management."
Equity Compensation Plan Information (as of January 28, 2024)
Number of
Securities to be Issued
Upon Exercise of
Outstanding Options,
Warrants and Rights(1)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights(2)
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column
(A))(3)
Plan Category
(A)
(B)
(C)
Equity compensation plans approved by stockholders
Equity compensation plans not approved by stockholders
Total
1,181,031 $
—
1,181,031 $
285.69
—
285.69
8,428,503
—
8,428,503
__________
(1)
(2)
(3)
This amount represents the following: (a) 783,036 shares subject to outstanding options, (b) 175,365 shares subject to outstanding performance-based
restricted stock units, and (c) 222,630 shares subject to outstanding restricted stock units. The options, performance-based restricted stock units, and
restricted stock units are all under our 2023 Equity Incentive Plan. Restricted shares outstanding under our 2023 Equity Incentive Plan have already
been reflected in our total outstanding common stock balance.
The weighted-average exercise price is calculated solely on the exercise prices of the outstanding options and does not reflect the shares that will be
issued upon the vesting of outstanding awards of performance-based restricted stock units and restricted stock units, which have no exercise price.
This includes (a) 4,025,805 shares of our common stock available for future issuance under our 2023 Equity Incentive Plan and (b) 4,402,698 shares of
our common stock available for future issuance under our Employee Share Purchase Plan. The number of shares remaining available for future
issuance under our 2023 Equity Incentive Plan is reduced by 1.7 shares for each award other than stock options granted and by one share for each
stock option award granted. Outstanding awards that expire or are canceled without having been exercised or settled in full are available for issuance
again under our 2023 Equity Incentive Plan but shares that are withheld in satisfaction of tax withholding obligations for full value awards are not again
available for issuance. No further awards may be issued under the predecessor plan, our 2014 Equity Incentive Plan.
82
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference to our 2024 Proxy Statement under the captions
"Certain Relationships and Related Party Transactions" and "Corporate Governance."
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference to our 2024 Proxy Statement under the caption
"Fees for Professional Services."
83
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) Documents filed as part of this report:
PART IV
1. Financial Statements. The financial statements as set forth under Item 8 of this Annual Report on Form 10-K are
incorporated herein.
2. Financial Statement Schedule. Separate financial statement schedules have been omitted either because they are not
applicable or because the required information is included in the consolidated financial statements or notes described in Item
15(a)(1) above.
84
3. Exhibits
Exhibit Index
Exhibit
No.
3.1
3.2
4.1
4.2
Exhibit Title
Restated Certificate of Incorporation of lululemon athletica
inc.
Bylaws of lululemon athletica inc.
Form of Specimen Stock Certificate of lululemon athletica inc.
Description of Securities Registered Under Section 12 of the
Securities Exchange Act of 1934
10.1*
lululemon athletica inc. 2023 Equity Incentive Plan
10.2*
Form of Non-Qualified Stock Option Agreement
10.3*
10.4*
Form of Notice of Grant of Performance Shares and
Performance Shares Agreement
Form of Notice of Grant of Restricted Stock Units and
Restricted Stock Units Agreement
10.5*
Form of Restricted Stock Award Agreement
10.6*
10.7
10.8
10.9
10.10
Amended and Restated LIPO Investments (USA), Inc. Option
Plan and form of Award Agreement
Exchange Trust Agreement dated July 26, 2007 between
lululemon athletica inc., Lulu Canadian Holding, Inc. and
Computershare Trust Company of Canada
Exchangeable Share Support Agreement dated July 26, 2007
between lululemon athletica inc., Lululemon Callco ULC and
Lulu Canadian Holding, Inc.
Amended and Restated Declaration of Trust for Forfeitable
Exchangeable Shares dated July 26, 2007, by and among the
parties named therein
Amended and Restated Arrangement Agreement dated as of
June 18, 2007, by and among the parties named therein
(including Plan of Arrangement and Exchangeable Share
Provisions)
Incorporated by Reference
Filed
Herewith
Form Exhibit No.
File No.
Filing Date
X
X
10-K
S-3
10-K
8-K
8-K
8-K
8-K
S-1
3.5
4.1
4.2
10.2
10.3
001-33608
3/28/2023
333-185899
1/7/2013
001-33608
3/26/2020
001-33608
6/13/2023
001-33608
6/13/2023
10.4
001-33608
6/13/2023
10.5
001-33608
6/13/2023
10.3
333-142477
5/1/2007
10-Q
10.5
001-33608
9/10/2007
10-Q
10.6
001-33608
9/10/2007
10-Q
10.7
001-33608
9/10/2007
S-1/A
10.14
333-142477
7/9/2007
10.11
Form of Indemnification Agreement between lululemon
athletica inc. and its directors and certain officers
S-1/A
10.16
333-142477
7/9/2007
10.12* Outside Director Compensation Plan
X
10.13*
Executive Bonus Plan
10.14*
lululemon athletica inc. Employee Share Purchase Plan
10.15*
10.16*
10.17*
Executive Employment Agreement, effective as of December
5, 2016, between lululemon athletica canada inc. and Celeste
Burgoyne
Amendment to Executive Employment Agreement, effective
October 27, 2020, between lululemon athletica canada inc.
and Celeste Burgoyne
Executive Employment Agreement, effective as of August 20,
2018, between lululemon athletica canada inc. and Calvin
McDonald
10.18*
Executive Employment Agreement, effective as of November
23, 2020, between lululemon athletica inc. and Meghan Frank
85
8-K
10-Q
10-K
10.1
10.3
001-33608
3/29/2022
001-33608
11/29/2007
10.23
001-33608
3/29/2017
10-Q
10.1
001-33608
12/10/2020
8-K
10.1
001-33608
7/24/2018
10-Q
10.2
001-33608
12/10/2020
Incorporated by Reference
Filed
Herewith
Form Exhibit No.
10-Q
10.1
File No.
001-33608
Filing Date
12/06/2018
10-Q
10.1
001-33608
12/09/2021
10-K
10.22
001-33608
3/30/2021
8-K
10.1
001-33608
12/17/2021
Exhibit Title
Executive Employment Agreement, effective as of September
20, 2018, between lululemon athletica inc. and Michelle Choe
Executive Employment Agreement, effective September 20,
2021, between lululemon athletica inc. and Nicole Neuburger
Executive Employment Agreement, effective as of January 4,
2021, between lululemon athletica UK ltd. and Andre
Maestrini
Credit Agreement, dated December 14, 2021, among
lululemon athletica inc., lululemon athletica canada inc., Lulu
Canadian Holding, Inc. and lululemon usa inc., as borrowers,
Bank of America, N.A., as administrative agent, swing line
lender and letter of credit issuer, HSBC Bank Canada, as
syndication agent and letter of credit issuer, BOFA Securities,
Inc., as sustainability coordinator, and the other lenders party
thereto.
Significant subsidiaries of lululemon athletica inc.
10-K
21.1
001-33608
3/28/2023
Consent of PricewaterhouseCoopers LLP
Certification of principal executive officer pursuant to
Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of principal financial and accounting officer
pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
32.1**
Certification of principal executive officer and principal
financial and accounting officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Policy for Recovery of Erroneously Awarded Incentive-Based
Compensation
The following financial statements from the Company's 10-K
for the fiscal year ended January 28, 2024, formatted in iXBRL:
(i) Consolidated Balance Sheets, (ii) Consolidated Statements
of Operations and Comprehensive Income, (iii) Consolidated
Statements of Stockholders' Equity, (iv) Consolidated
Statements of Cash Flows (v) Notes to the Consolidated
Financial Statements
Cover Page Interactive Data File (formatted in iXBRL and
contained in Exhibit 101)
X
X
X
X
X
X
8-K
10.1
001-33608
6/13/2023
Denotes a compensatory plan, contract or arrangement, in which our directors or executive officers may participate.
Furnished herewith.
Exhibit
No.
10.19*
10.20*
10.21*
10.22
21.1
23.1
31.1
31.2
97
101
104
*
**
ITEM 16. FORM 10-K SUMMARY
None.
86
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
LULULEMON ATHLETICA INC.
By:
/s/ CALVIN MCDONALD
Calvin McDonald
Chief Executive Officer
(principal executive officer)
Date:
March 21, 2024
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints
Calvin McDonald and Meghan Frank and each of them, with full power of substitution and resubstitution and full power to act
without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to
execute in the name and on behalf of each person, individually and in each capacity stated below, and to file, any and all
documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming
all that said attorneys-in-fact and agents or any of them or their and his or her substitute or substitutes, may lawfully do or
cause to be done by virtue thereof.
87
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ CALVIN MCDONALD
Chief Executive Officer and Director
March 21, 2024
Calvin McDonald
(principal executive officer)
/s/ MEGHAN FRANK
Chief Financial Officer
March 21, 2024
Meghan Frank
(principal financial and accounting officer)
/s/ MARTHA A.M. MORFITT
Director, Board Chair
March 21, 2024
Martha A.M. Morfitt
/s/ MICHAEL CASEY
Director
Michael Casey
/s/ SHANE GRANT
Director
Shane Grant
/s/ KATHRYN HENRY
Director
Kathryn Henry
/s/ TERI LIST
Teri List
Director
/s/ ALISON LOEHNIS
Director
Alison Loehnis
/s/ ISABEL MAHE
Director
Isabel Mahe
/s/ JON MCNEILL
Director
Jon McNeill
/s/ DAVID M. MUSSAFER
Director
David M. Mussafer
/s/ EMILY WHITE
Director
Emily White
March 21, 2024
March 21, 2024
March 21, 2024
March 21, 2024
March 21, 2024
March 21, 2024
March 21, 2024
March 21, 2024
March 21, 2024
88
Board of Directors and Executive Officers
Board of Directors
Martha (Marti) Morfitt
David Mussafer
Calvin McDonald
Michael Casey
Shane Grant
Kathryn Henry
Teri List
Alison Loehnis
Isabel Mahe
Jon McNeill
Emily White
Executive Officers
Calvin McDonald
Meghan Frank
Celeste Burgoyne
Michelle (Sun) Choe
André Maestrini
Board Chair
River Rock Partners Inc., Principal
Lead Director of the Board
Advent International, L.P., Chairman and Managing Partner
Chief Executive Officer
Starbucks Corporation, Retired Executive Vice President,
Chief Financial Officer and Chief Administrative Officer
Danone, Group Deputy CEO, CEO Americas and EVP Dairy, Plant Based and Global Sales
LightBrite, Co-Founder and Advisor
Gap, Inc. Retired Executive Vice President and Chief Financial Officer
Yoox Net-a-Porter, Ad-Interim CEO and President of Luxury and Fashion
Apple Inc., Vice President and Managing Director of Greater China
DVx Ventures, Chief Executive Officer
Anthos Capital, President
Chief Executive Officer
Chief Financial Officer
President, Americas and Global Guest Innovation
Chief Product Officer
Executive Vice President, International
Nicole (Nikki) Neuburger
Chief Brand Officer
Annual Meeting
Investor inquiries should be directed to:
The annual meeting will be held on Thursday, June 6,
2024 at 8:00 am, Pacific Time, via live webcast at www.
virtualshareholdermeeting.com/LULU2024.
Investor Information
Shareholders are advised to review financial information and other
disclosures about lululemon contained in its 2023 Annual Report
on Form 10-K, Quarterly Reports on Form 10-Q, Proxy Statement
and other SEC filings, as well as press releases and earnings
announcements by accessing the Company’s website at http://
corporate.lululemon.com/Investors or at www.sec.gov.
By email:
By mail:
investors@lululemon.com
lululemon athletica Investor Relations
1818 Cornwall Avenue, Vancouver, British Columbia
Canada V6J 1C7
Independent Auditors
PricewaterhouseCoopers LLP
Transfer Agent
Computershare Trust Company, N.A.
This letter contains forward-looking statements based on current expectations that involve risks, uncertainties and assumptions, such as our plans, objectives, expectations, and intentions.
Our actual results and the timing of events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those stated in the “Item 1A.
Risk Factors” section and elsewhere in our Annual Report on Form 10-K.
AR | 2023
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