What changed in this filing

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Item 1. Business

2022-03-29 compared with 2021-03-30 · 63 added, 64 removed, 147 unchanged (46% of the section changed)

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we promote a set of core values in our business which include taking personal responsibility, nurturing entrepreneurial spirit, acting with honesty and 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 the world by unleashing the full potential within every one of us."

These core values attract passionate and motivated employees who are driven to achieve personal and professional goals, and share our purpose "to elevate the world by realizing the full potential within every one of us."

In this Annual Report on Form 10-K for the fiscal year ended January 30, 2022, 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 31, 2021 as "2020" and the fiscal year ended February 2, 2020 as "2019."

(together with its subsidiaries) is referred to as "lululemon," "the Company," "we," "us," or "our." We refer to the fiscal year ended January 30, 2022 as "2021" and the fiscal year ended January 31, 2021 as "2020."

Components of this discussion of our business include:

• Our Pro ducts

• Our Products

• Our Segments

• Community-Based Marketing

• P roduct Design and Development

• Product Design and Development

• Sourcing and Manufacturing

• Distri bution Facilities

• Distribution Facilities

• Competition

• Seasona lity

• Seasonality

• Human Capital

• Intellec tual Property

• Intellectual Property

• Securities and Exchange Commission Filings

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We offer a comprehensive line of apparel and accessories.

Our apparel assortment includes items such as pants, shorts, tops, and jackets designed for a healthy lifestyle including athletic activities such as yoga, running, training, and most other sweaty pursuits.

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also offer a range of products designed for being On the Move and fitness-related accessories.

Our apparel assortment includes items such as pants, shorts, tops, and jackets

designed for a healthy lifestyle including athletic activities such as yoga, running, training, and most other sweaty pursuits.

We also offer a range of products designed for being On the Move, fitness-related accessories, and footwear.

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, who we refer to as guests, we are able to collect feedback and incorporate unique performance and fashion needs into our design process.

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 the competition.

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Although our largest customer group is made up of guests who shop our women's range, representing 67% of our 2021 net revenue, we also design a comprehensive men's line and have a targeted strategy in place.

Our business is growing as more guests discover the technical rigor and premium quality of our men's products, and are attracted by our distinctive brand.

Revenue from 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.

North America is our largest market by geographical split, representing 85% of our 2021 net revenue.

We are expanding internationally across Europe, the People's Republic of China ("PRC"), and the rest of Asia Pacific.

We are expanding internationally across the People's Republic of China ("PRC"), the rest of Asia Pacific, and Europe.

We are expanding in these regions via a decentralized model, allowing for local community insight and consumer preference to inform our strategic expansion.

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company-operated stores and direct to consumer.

We also conduct business through MIRROR, operate outlets and temporary locations, serve certain wholesale accounts, have license and supply arrangements, and hold warehouse sales from time to time.

We also operate outlets and temporary locations, conduct business through MIRROR, serve certain wholesale accounts, have license and supply arrangements, and hold warehouse sales from time to time.

The financial results of these operations are disclosed in Other.

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Company-Operated Stores

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Our retail stores are located primarily on street locations, in lifestyle centers, and in malls.

Number of company-operated stores by country January 31, 2021 February 02, 2020

Number of company-operated stores by country January 30, 2022 January 31, 2021

United States 324 315

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United Kingdom 17 16

New Zealand 7 7

South Korea 12 7

New Zealand 7 7

Singapore 6 4

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Total company-operated stores 574 521

(1) PRC included seven stores in Hong Kong, Special Administrative Region, two stores in Macao, Special Administration Region, and two stores in Taiwan, as of January 31, 2021.

As of February 2, 2020, there were six stores in Hong Kong, Special Administrative Region, two stores in Macao, Special Administration Region, and one store in Taiwan.

(1) PRC included nine stores in Hong Kong Special Administrative Region, five stores in Taiwan, and two stores in Macao Special Administration Region, as of January 30, 2022.

As of January 31, 2021, there were seven stores in Hong Kong Special Administrative Region, two stores in Macao Special Administration Region, and two stores in Taiwan.

We opened 53 net new company-operated stores in 2021, including 43 net new stores outside of North America.

We perform ongoing evaluations of our portfolio of company-operated store locations.

During 2020, we closed 10 of our lululemon branded company-operated stores.

During 2021, we closed three of our lululemon branded company-operated stores.

As we continue our evaluations we may, in the future, close or relocate additional company-operated stores.

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We believe that our innovative retail concept and guest experience contribute to the success of our stores.

We typically use sales per square foot to assess the performance of our company-operated stores.

As a significant number of our stores were temporarily closed due to COVID-19 during the first two quarters of 2020, we do not believe sales per square foot is currently useful to investors in understanding performance, therefore we have not included this metric.

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.

Our sales per square foot for 2021 was $1,443.

As a significant number of our stores were temporarily closed due to COVID-19 during the first two quarters of 2020, we do not believe sales per square foot for 2020 is useful to investors in understanding performance, therefore we have not included this metric.

Sales per square foot is calculated using total net revenue from all company-operated stores divided by the average square footage of the stores 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, storage areas, and administrative space used by the store employees.

It excludes any space used for non-retail related activities.

The sales per square foot metric we report may not be equivalent to similarly titled metrics reported by other companies.

Direct to Consumer

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We believe this channel is effective in building brand awareness, especially in new markets.

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We serve our guests via our e-commerce website www.lululemon.com, other country and region-specific websites, and mobile apps, including mobile apps on in-store devices that allow demand to be fulfilled via our distribution centers or other retail locations.

We continue to evolve and integrate our digital and physical channels in order to enrich our interactions with our guests, and to provide an enhanced omni-channel experience.

Our other operations include:

• MIRROR - we offer in-home fitness through an interactive workout platform that allows our guests to subscribe for live and on-demand classes

Our other operations primarily include:

• Outlets and warehouse sales - We utilize outlets as well as physical warehouse sales, which are held from time to time, to sell slow moving inventory and inventory from prior seasons at discounted prices.

As of January 30, 2022, we operated 37 outlets, with the majority in North America.

• Temporary locations - Our temporary locations, including seasonal stores, are typically opened for a short period of time.

• Temporary locations - Our temporary locations, including pop ups, are typically opened for a short period of time.

We believe these retail locations enable us to serve guests during peak shopping periods in markets where we do not ordinarily have a physical location, or enable us to better serve our guest in markets where we see high demand at our existing locations.

• MIRROR - We offer in-home fitness through an interactive workout platform that allows our guests to subscribe for live and on-demand classes.

• Wholesale - Our wholesale accounts include premium yoga studios, health clubs, and fitness centers.

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The initial term of the agreement for Mexico expires in November 2026.

As of January 31, 2021, there were four licensed retail locations in Mexico, three in the United Arab Emirates, and one in Qatar, which are not included in the above company-operated stores table.

As of January 30, 2022, there were 14 licensed locations, including six in Mexico, six in the United Arab Emirates, one in Kuwait, and one in Qatar, which are not included in the above company-operated stores table.

Community-Based Marketing

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We pursue a multi-faceted strategy which leverages our local teams and ambassadors, digital marketing and social media, in-store community boards, and a variety of grassroots initiatives.

We also plan to complement and amplify our community-based initiatives with global brand-building activity.

We complement and amplify our community-based initiatives with global brand-building activity.

Product Design and Development

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We develop proprietary fabrics and collaborate with leading fabric and trims suppliers to manufacture fabrics and trims that we ultimately protect through agreements, trademarks, and trade-secrets.

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Sourcing and Manufacturing

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We work with a group of approximately 41 vendors that manufacture our products, five of which produced 57% of our products in 2021, with the largest manufacturer producing 15%.

During 2020, 33% of our products were manufactured in Vietnam, 20% in Cambodia, 12% in Sri Lanka, and 9% in the PRC, including 2% in Taiwan.

During 2021, 40% of our products were manufactured in Vietnam, 17% in Cambodia, 11% in Sri Lanka, 7% in the PRC, including 2% in Taiwan, and the remainder in other regions.

We work with a group of approximately 65 suppliers to provide the fabrics for our products.

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As a result, a substantial portion of our operating profits are generated in the fourth quarter of our fiscal year.

For example, we generated approximately 56% and 47% of our full year operating profit during the fourth quarters of 2020 and 2019, respectively.

Due to a significant number of our company-operated stores being temporarily closed due to COVID-19 during the first two quarters of 2020, we earned a higher proportion of our operating profit during the last two quarters of 2020 compared to prior years.

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For example, we generated approximately 44% and

56% of our full year operating profit during the fourth quarters of 2021 and 2020, respectively.

Human Capital

Our Impact Agenda sets out our social and environmental commitments and strategy — across three interconnected pillars, Be Human, Be Well, and Be Planet.

The Be Human pillar of our Impact Agenda sets out our focus areas with respect to our employees and broader community:

Our Impact Agenda sets out our social and environmental goals, commitments, and strategy across three pillars - Be Well, Be Planet, and Be Human.

Details of our Impact Agenda and corresponding Impact Report can be found on our website (https://corporate.lululemon.com/our-impact).

The Be Human pillar of our Impact Agenda sets out our focus areas with respect to our human capital, including our employees and broader community:

• advancing a culture of Inclusion, Diversity, Equity, and Action (“IDEA”);

• supporting our employees through whole-person opportunities;

• empowering our employees through whole-person opportunities;

• supporting the well-being of the people who make our products in our supply chain.

In 2020, as a response to the COVID-19 pandemic, we also implemented a range of measures to provide financial support to our employees and community and to ensure the safety for our people and guests.

Advancing a culture of Inclusion, Diversity, Equity and Action

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The diversity of our teams and working in an inclusive culture enables increased employee engagement, better decision making, greater adaptability, creativity, and a deeper understanding of the communities we serve.

We are proud that as of January 31, 2021, approximately 55% of our board of directors, 65% of our senior executive leadership team, and 50% of all vice presidents and above are women, while approximately 75% of our overall workforce are women.

We are proud that as of January 30, 2022, approximately 55% of our board of directors, 65% 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.

We maintain 100% gender pay equity within our entire global employee population, meaning equal pay for equal work across genders.

We have achieved pay equity across all areas of diversity in the United States and are seeking, to the extent permitted under local law and regulation, to collect the data necessary to confirm complete pay equity globally.

We are investing $5 million to fund to our global IDEA activities.

We expect to invest at least $5 million annually to fund our global IDEA activities.

These funds can further support the career progress of our diverse talent and increase access to internal opportunities and professional development.

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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.

Supporting our employees through whole-person opportunities

Inclusive in our Impact Agenda is a goal to invest a total of $75.0 million to advance equity in well-being by 2025.

(1) While we track male and female genders, we acknowledge this is not fully encompassing of all gender identities.

Empowering our employees through whole-person opportunities

We believe that each of our approximately 29,000 people are key to the success of our business.

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We assess our performance and identify opportunities for improvement through an annual employee engagement survey.

In 2020, the participation rate was in excess of 90% and our employee engagement score was in the top 10% of retailers.

(2) Our engagement score tells us whether our employees believe lululemon is a great place to work, whether they believe they are able to use their strengths at work, if they are motivated, and whether they would recommend lululemon as a great place to work.

(1) While we track male and female genders, we acknowledge this is not fully encompassing of all gender identities.

(2) Based on an industry benchmark provided by the third party that administers this survey to our employees.

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In 2021, the participation rate was approximately 85% and our employee engagement score exceeded the retail industry average.

(2) 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 to support whole-person opportunities include, among other things:

Our current offerings support our goal of becoming the number one place where people come to develop and grow as inclusive leaders.

These offerings include, among other things:

• Competitive compensation which rewards exceptional performance;

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• A Fund your Future program for eligible employees which offers partial contribution matches to a pension plan and employee share purchase plan.

Supporting the wellbeing of the people who make our products in our supply chain

We partner with our suppliers to work towards creating safe, healthy, and equitable environments that support the wellbeing of all the people who make our products.

Our Vendor Code of Ethics is the foundation of our supplier partnerships.

It adheres to international standards for working conditions, workers’ rights, and environmental protection, and its implementation focuses on prevention, monitoring, and improvement.

Beyond labor compliance, we are committed to supporting worker wellbeing, building on years of partnerships with our suppliers around workplace practices and community support initiatives.

We recently developed and implemented our Foreign Migrant Worker Standard, which outlines our expectations with respect to foreign migrant workers.

This program, which has been successfully executed in Taiwan, has benefited approximately 2,700 migrant workers by virtually eliminating worker-paid fees.

Based on lessons learned from this program, we are now expanding beyond Taiwan so that we can further support foreign migrant workers globally.

As part of the competitive compensation we offer, we raised the minimum base pay for the majority of our store and Guest Education Center employees in North America during 2021.

Supporting the well-being of the people who make our products in our supply chain

We work with suppliers who share our values and collaborate as partners to uphold robust standards, address systemic challenges, and improve the well-being of people who make our products.

Our Vendor Code of Ethics outlines our commitment to respect human and labor rights, and to promote safe and fair working conditions for people in our supply chain.

The code is based on international standards for workers' rights with regard to their employment, wages and working hours, occupational health and safety, access to confidential grievance mechanisms without retaliation, and environmental protection.

Our finished goods and mill 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.

(2) Based on an industry benchmark provided by the third party that administers this survey to our employees.

We have developed and implemented our Foreign Migrant Worker Standard, which outlines our expectations with respect to foreign migrant workers.

This program was successfully executed in Taiwan in 2020 and based on lessons learned from this program, we are now expanding beyond Taiwan so that we can further support foreign migrant workers globally.

Our COVID-19 response

We closely monitor the changing landscape of COVID-19 so that we can make appropriate decisions to support and keep our people safe.

We acted swiftly during the year in response to the crisis by temporarily closing our stores, committing to pay protection for employees, launching our We Stand Together Fund, and launching our Ambassador Relief Fund.

When our stores temporarily closed, we guaranteed pay to our North American employees through the entire closure period.

As stores re-opened, we kept a pay guarantee in place, should a store need to close again for any reason, including if weather-related or related to civil unrest.

We now have a minimum pay guarantee policy by role.

Over the last two years, we have responded to the pandemic with a variety of measures from temporarily closing our stores to committing to pay protection for employees during the COVID-19 related closures.

During 2020 we launched a hardship fund for employees, the We Stand Together Fund, and launched an Ambassador Relief Fund, and these continued in 2021.

We created a wide range of resiliency and connection sessions and tools to support our people during the pandemic and we made these resources available to our guests and the broader community.

Our We Stand Together Fund was established to support employees facing significant financial hardship with relief grants for basic and critical needs.

To establish this fund, for three months the senior leadership team contributed 20% of their salary and our board of directors contributed 100% of their cash retainer, and employees donated as well.

We plan to fund this program on an ongoing basis to aid affected employees.

Separately, we contributed $4.5 million to our Ambassador Relief Fund to assist ambassador-run fitness studios with basic operating costs.

As we continue to navigate the COVID-19 pandemic, we continue to prioritize the safety of our people and our guests.

We are closely monitoring the situation in every market and community which we serve.

We are closely monitoring the situation in the markets and communities that we serve.

We will temporarily close stores and restrict operations as necessary, based upon information from government and health officials.

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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.

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Securities and Exchange Commission Filings

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business