What changed in this filing

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Item 1. Financial Statements

2022-09-01 compared with 2022-06-02 · 104 added, 60 removed, 432 unchanged (28% of the section changed)

60 unchanged sentences

Amounts in thousands, except per share amounts)

Quarter Ended

Quarter Ended Two Quarters Ended

2022 August 1,

2021 July 31,

2022 August 1,

Net revenue $ 1,868,328 $ 1,450,618 $ 3,481,791 $ 2,677,083

4 unchanged sentences

Acquisition-related expenses — 8,143 — 15,807

Gain on disposal of assets ( 10,180 ) — ( 10,180 ) —

Income from operations 401,208 291,031 661,555 484,852

16 unchanged sentences

Amounts in thousands)

Quarter Ended May 1, 2022

Quarter Ended July 31, 2022

Exchangeable Stock Special Voting Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total

Shares Shares Par Value Shares Par Value

Balance as of January 30, 2022 5,203 5,203 $ — 123,297 $ 616 $ 422,507 $ 2,512,840 $ ( 195,917 ) $ 2,740,046

Balance as of May 1, 2022 5,203 5,203 $ — 122,732 $ 614 $ 412,713 $ 2,471,432 $ ( 216,709 ) $ 2,668,050

Net income 289,521 289,521

4 unchanged sentences

Repurchase of common stock ( 420 ) ( 2 ) ( 762 ) ( 124,576 ) ( 125,340 )

Balance as of July 31, 2022 5,203 5,203 $ — 122,334 $ 612 $ 433,092 $ 2,636,377 $ ( 212,283 ) $ 2,857,798

Quarter Ended August 1, 2021

Exchangeable Stock Special Voting Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total

Shares Shares Par Value Shares Par Value

Balance as of May 2, 2021 5,203 5,203 $ — 125,069 $ 625 $ 364,743 $ 2,408,006 $ ( 133,519 ) $ 2,639,855

Quarter Ended May 2, 2021

Net income 208,074 208,074

Other comprehensive income (loss), net of tax ( 23,520 ) ( 23,520 )

Stock-based compensation expense 15,289 15,289

Common stock issued upon settlement of stock-based compensation 88 — 5,218 5,218

Shares withheld related to net share settlement of stock-based compensation ( 8 ) — ( 2,668 ) ( 2,668 )

Repurchase of common stock ( 505 ) ( 2 ) ( 845 ) ( 170,235 ) ( 171,082 )

Balance as of August 1, 2021 5,203 5,203 $ — 124,644 $ 623 $ 381,737 $ 2,445,845 $ ( 157,039 ) $ 2,671,166

Two Quarters Ended July 31, 2022

Exchangeable Stock Special Voting Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total

7 unchanged sentences

Repurchase of common stock ( 1,128 ) ( 6 ) ( 1,996 ) ( 355,982 ) ( 357,984 )

Balance as of May 2, 2021 5,203 5,203 $ — 125,069 $ 625 $ 364,743 $ 2,408,006 $ ( 133,519 ) $ 2,639,855

Balance as of July 31, 2022 5,203 5,203 $ — 122,334 $ 612 $ 433,092 $ 2,636,377 $ ( 212,283 ) $ 2,857,798

Two Quarters Ended August 1, 2021

Exchangeable Stock Special Voting Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total

Shares Shares Par Value Shares Par Value

Balance as of January 31, 2021 5,203 5,203 $ — 125,150 $ 626 $ 388,667 $ 2,346,428 $ ( 177,155 ) $ 2,558,566

Net income 353,030 353,030

Other comprehensive income (loss), net of tax 20,116 20,116

Stock-based compensation expense 30,221 30,221

Common stock issued upon settlement of stock-based compensation 412 2 9,711 9,713

Shares withheld related to net share settlement of stock-based compensation ( 143 ) ( 1 ) ( 45,566 ) ( 45,567 )

Repurchase of common stock ( 775 ) ( 4 ) ( 1,296 ) ( 253,613 ) ( 254,913 )

Balance as of August 1, 2021 5,203 5,203 $ — 124,644 $ 623 $ 381,737 $ 2,445,845 $ ( 157,039 ) $ 2,671,166

See accompanying notes to the unaudited interim consolidated financial statements

2 unchanged sentences

Amounts in thousands)

Quarter Ended

May 1, 2022 May 2, 2021

Two Quarters Ended

2022 August 1,

Cash flows from operating activities

2 unchanged sentences

Depreciation and amortization 132,441 104,123

Gain on disposal of assets ( 10,180 ) —

Stock-based compensation expense 39,175 30,221

16 unchanged sentences

Settlement of net investment hedges 15,469 ( 46,999 )

Other investing activities 15,657 ( 10,000 )

Net cash used in investing activities ( 224,944 ) ( 201,493 )

14 unchanged sentences

Note 3 Acquisition-Related Expenses

Note 4 Gain on Disposal of Assets

Note 5 Revolving Credit Facilities

7 unchanged sentences

Note 13 Legal Proceedings and Other Contingencies

Note 13 Subsequent Event

lululemon athletica inc.

2 unchanged sentences

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 technical athletic apparel, footwear, and accessories, which are sold through a chain of company-operated stores, direct to consumer through e-commerce, outlets, sales from temporary locations, sales to wholesale accounts, and license and supply arrangements.

The Company operates stores in the United States, the People's Republic of China ("PRC"), Canada, Australia, the United Kingdom, South Korea, Germany, New Zealand, Japan, Singapore, Ireland, France, Malaysia, Sweden, the Netherlands, Norway, and Switzerland.

There were 579 and 574 company-operated stores as of May 1, 2022 and January 30, 2022, respectively.

Recommerce is the sale of repurchased product via the Company's "Like New" program.

The Company operates stores in the United States, the People's Republic of China ("PRC"), Canada, Australia, the United Kingdom, South Korea, Germany, New Zealand, Singapore, Japan, Ireland, France, Malaysia, Sweden, the Netherlands, Norway, and Switzerland.

There were 600 and 574 company-operated stores as of July 31, 2022 and January 30, 2022, respectively.

The Company also engages in the design and retail of in-home fitness equipment and associated content subscriptions through its MIRROR brand.

1 unchanged sentence

The outbreak of a novel strain of coronavirus ("COVID-19") caused governments and public health officials to impose restrictions and recommend precautions to mitigate the spread of the virus.

While most of the Company's retail locations were open throughout the first quarter of fiscal 2022 and 2021, certain locations were temporarily closed based on government and health authority guidance.

Certain stores and the Company's third party distribution center in the PRC experienced temporary closures during the first quarter of 2022, and there is uncertainty regarding the ongoing impact of COVID-19 on its operations in the PRC.

The pandemic has impacted its suppliers and its distribution and logistics providers, including in the PRC.

There has been disruption in transportation and port congestion, an increase in freight costs, and the Company has increased its use of air freight.

While most of the Company's retail locations were open throughout the first two quarters of fiscal 2022 and 2021, certain locations were temporarily closed based on government and health authority guidance.

Certain stores and the Company's third party distribution center in the PRC experienced temporary closures during the first quarter of 2022.

Almost all PRC stores reopened in the second quarter of 2022, with certain localized closures dependent on COVID-19 resurgences.

The pandemic has impacted the Company's suppliers and its distribution and logistics providers, including in the PRC.

There has been disruption in transportation, port congestion, and an increase in freight costs, and the Company has increased its use of air freight.

Basis of presentation

The unaudited interim consolidated financial statements as of May 1, 2022 and for the quarters ended May 1, 2022 and May 2, 2021 are presented in U.S.

The unaudited interim consolidated financial statements as of July 31, 2022 and for the quarters and two quarters ended July 31, 2022 and August 1, 2021 are presented in U.S.

dollars and have been prepared by the Company under the rules and regulations of the Securities and Exchange Commission ("SEC").

8 unchanged sentences

Fiscal 2022 and fiscal 2021 are referred to as "2022," and "2021," respectively.

The first quarter of 2022 and 2021 ended on May 1, 2022 and May 2, 2021, respectively.

The first two quarters of 2022 and 2021 ended on July 31, 2022 and August 1, 2021, respectively.

The Company's business is affected by the pattern of seasonality common to most retail apparel businesses.

3 unchanged sentences

The Company considers the applicability and impact of all Accounting Standard Updates ("ASUs").

ASUs adopted by the Company during the first quarter of 2022 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.

ASUs adopted by the Company during the first two quarters of 2022 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 November 2021, the FASB issued ASC 832, Government Assistance to require annual disclosures about the nature of certain government assistance received, the accounting policy used to account for the transactions, the location in the financial statements where such transactions were recorded and significant terms and conditions associated with such transactions.

6 unchanged sentences

The following table summarizes the acquisition-related expenses recognized:

First Quarter

Second Quarter First Two Quarters

2022 2021 2022 2021

(in thousands)

2 unchanged sentences

Acquisition-related compensation — 7,108 — 14,276

$ — $ 8,143 $ — $ 15,807

Income tax effects of acquisition-related expenses $ — $ ( 434 ) $ — $ ( 806 )

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.

The building's carrying value of $ 5.4 million was first classified as held for sale and recognized within other current assets as of May 1, 2022 .

Revolving Credit Facilities

3 unchanged sentences

Borrowings under the credit facility may be prepaid and commitments may be reduced or terminated without premium or penalty (other than customary breakage costs).

As of May 1, 2022, aside from letters of credit of $ 3.1 million, the Company had no other borrowings outstanding under this credit facility.

As of July 31, 2022, aside from letters of credit of $ 5.2 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.

2 unchanged sentences

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.

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.

2 unchanged sentences

If an event of default occurs, the credit agreement may be terminated, and the maturity of any outstanding amounts may be accelerated.

As of May 1, 2022, the Company was in compliance with the covenants of the credit facility.

As of July 31, 2022, the Company was in compliance with the covenants of the credit facility.

China Mainland revolving credit facility

4 unchanged sentences

The Company is required to follow certain covenants.

As of May 1, 2022, the Company was in compliance with the covenants and, aside from letters of credit of 6.1 million Chinese Yuan ($ 0.9 million), there were no other borrowings or guarantees outstanding under this credit facility.

As of July 31, 2022, the Company was in compliance with the covenants and, aside from letters of credit of 8.9 million Chinese Yuan ($ 1.3 million), there were no other borrowings or guarantees outstanding under this credit facility.

Stock-Based Compensation and Benefit Plans

1 unchanged sentence

The Company's eligible employees participate in various stock-based compensation plans, provided directly by the Company.

Stock-based compensation expense charged to income for the plans was $ 18.2 million and $ 16.2 million for the first quarter of 2022 and 2021, respectively.

Total unrecognized compensation cost for all stock-based compensation plans was $ 170.0 million as of May 1, 2022, which is expected to be recognized over a weighted-average period of 2.5 years.

A summary of the balances of the Company's stock-based compensation plans as of May 1, 2022, and changes during the first quarter then ended, is presented below:

Stock-based compensation expense charged to income for the plans was $ 38.8 million and $ 33.6 million for the first two quarters of 2022 and 2021, respectively.

Total unrecognized compensation cost for all stock-based compensation plans was $ 154.4 million as of July 31, 2022, which is expected to be recognized over a weighted-average period of 2.3 years.

A summary of the balances of the Company's stock-based compensation plans as of July 31, 2022, and changes during the first two quarters then ended, is presented below:

Stock Options Performance-Based Restricted Stock Units Restricted Shares Restricted Stock Units

5 unchanged sentences

Forfeited/expired 14 268.26 3 302.77 — — 9 310.80

Balance as of May 1, 2022 920 $ 223.21 165 $ 295.62 4 $ 326.70 238 $ 327.25

Exercisable as of May 1, 2022 415 $ 152.79

Balance as of July 31, 2022 909 $ 226.19 166 $ 295.76 4 $ 307.77 236 $ 328.60

Exercisable as of July 31, 2022 415 $ 153.80

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.

9 unchanged sentences

Treasury yield curve for the period corresponding with the expected term of the options.

following are weighted averages of the assumptions that were used in calculating the fair value of stock options granted during the first quarter of 2022:

First Quarter

The following are weighted averages of the assumptions that were used in calculating the fair value of stock options granted during the first two quarters of 2022:

First Two Quarters

Expected term 3.75 years

7 unchanged sentences

All shares purchased under the ESPP are purchased in the open market.

During the first quarter of 2022, there were 21.6 thousand shares purchased.

During the second quarter of 2022, there were 23.1 thousand shares purchased.

Defined contribution pension plans

2 unchanged sentences

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 $ 3.4 million and $ 2.8 million in the first quarter of 2022 and 2021, respectively.

The Company's net expense for the defined contribution plans was $ 6.7 million and $ 5.8 million in the first two quarters of 2022 and 2021, respectively.

Fair Value Measurement

6 unchanged sentences

The fair value measurement is categorized in its entirety by reference to its lowest level of significant input.

As of May 1, 2022 and January 30, 2022, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis:

May 1, 2022 Level 1 Level 2 Level 3 Balance Sheet Classification

As of July 31, 2022 and January 30, 2022, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis:

2022 Level 1 Level 2 Level 3 Balance Sheet Classification

(In thousands)

3 unchanged sentences

Forward currency contract liabilities 5,015 — 5,015 — Other current liabilities

January 30, 2022 Level 1 Level 2 Level 3 Balance Sheet Classification

2022 Level 1 Level 2 Level 3 Balance Sheet Classification

(In thousands)

23 unchanged sentences

The Company assesses hedge effectiveness based on changes in forward rates.

The Company recorded no ineffectiveness from net investment hedges during the first quarter of 2022.

The Company recorded no ineffectiveness from net investment hedges during the first two quarters of 2022.

The Company classifies the cash flows at settlement of its net investment hedges within investing activities in the consolidated statements of cash flows.

4 unchanged sentences

The resulting foreign currency gains and losses are recorded in selling, general and administrative expenses.

During the first quarter of 2022, 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.

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.

During the first two quarters of 2022, 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.

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.

2 unchanged sentences

However, the Company's Master International Swap Dealers Association, Inc., Agreements and other similar arrangements allow net settlements under certain conditions.

As of May 1, 2022, there were derivative assets of $ 21.7 million and derivative liabilities of $ 15.4 million subject to enforceable netting arrangements.

As of July 31, 2022, there were derivative assets of $ 6.4 million and derivative liabilities of $ 5.0 million subject to enforceable netting arrangements.

The notional amounts and fair values of forward currency contracts were as follows:

May 1, 2022 January 30, 2022

July 31, 2022 January 30, 2022

Gross Notional Assets Liabilities Gross Notional Assets Liabilities

6 unchanged sentences

Forward currency contracts $ 6,397 $ 5,015 $ 19,077 $ 18,985

The forward currency contracts designated as net investment hedges outstanding as of May 1, 2022 mature on different dates between May 2022 and February 2023.

The forward currency contracts not designated in a hedging relationship outstanding as of May 1, 2022 mature on different dates between May 2022 and February 2023.

The forward currency contracts designated as net investment hedges outstanding as of July 31, 2022 mature on different dates between August 2022 and June 2023.

The forward currency contracts not designated in a hedging relationship outstanding as of July 31, 2022 mature on different dates between August 2022 and February 2023.

The pre-tax gains and losses on foreign currency exchange forward contracts recorded in accumulated other comprehensive income or loss were as follows:

First Quarter

Second Quarter First Two Quarters

2022 2021 2022 2021

(In thousands)

3 unchanged sentences

The pre-tax net foreign currency exchange and derivative gains and losses recorded in the consolidated statement of operations were as follows:

First Quarter

Second Quarter First Two Quarters

2022 2021 2022 2021

(In thousands)

10 unchanged sentences

The details of the computation of basic and diluted earnings per share are as follows:

First Quarter

Second Quarter First Two Quarters

2022 2021 2022 2021

(In thousands, except per share amounts)

8 unchanged sentences

All classes of stock have, in effect, the same rights and share equally in undistributed net income.

For the first quarter of 2022 and 2021, 0.1 million and 0.1 million 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.

For the first two quarters of 2022 and 2021, 0.1 million and 0.1 million 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.

3 unchanged sentences

The repurchase plan has no time limit and does 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.

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.

As of May 1, 2022, the remaining authorized value of shares available to be repurchased under this program was $ 954.8 million.

During the first quarter of 2022 and 2021, 0.7 million and 0.3 million shares, respectively, were repurchased under the program at a total cost of $ 232.6 million and $ 83.8 million, respectively.

Subsequent to May 1, 2022, and up to May 27, 2022, 0.3 million shares were repurchased at a total cost of $ 87.9 million.

As of July 31, 2022, the remaining authorized value of shares available to be repurchased under this program was $ 829.5 million.

During the first two quarters of 2022 and 2021, 1.1 million and 0.8 million shares, respectively, were repurchased under the program at a total cost of $ 358.0 million and $ 254.9 million, respectively.

Subsequent to July 31, 2022, and up to August 26, 2022, 31.5 thousand shares were repurchased at a total cost of $ 10.0 million.

Supplementary Financial Information

28 unchanged sentences

$ 146,056 $ 132,102

2022 January 30,

(In thousands)

Accrued liabilities and other:

13 unchanged sentences

(i) company-operated stores and (ii) direct to consumer.

The remainder of its operations which includes outlets, temporary locations, MIRROR, sales to wholesale accounts, and license and supply arrangements are included within Other.

First Quarter

The remainder of its operations which includes outlets, temporary locations, MIRROR, sales to wholesale accounts, license and supply arrangements, and recommerce are included within Other.

Second Quarter First Two Quarters

2022 2021 2022 2021

(In thousands)

11 unchanged sentences

Acquisition-related expenses — 8,143 — 15,807

Gain on disposal of assets ( 10,180 ) — ( 10,180 ) —

Income from operations 401,208 291,031 661,555 484,852

13 unchanged sentences

The following table disaggregates the Company's net revenue by geographic area.

First Quarter

Second Quarter First Two Quarters

2022 2021 2022 2021

(In thousands)

4 unchanged sentences

In addition to the disaggregation of net revenue by reportable segment, the following table disaggregates the Company's net revenue by category.

First Quarter

Other categories is primarily composed of accessories, MIRROR, and footwear.

Second Quarter First Two Quarters

2022 2021 2022 2021

(In thousands)

11 unchanged sentences

The Company obtained summary judgment that the Company did not infringe upon any of the plaintiff's rights and the district court entered judgment in the Company's favor on all claims.

The plaintiff has filed a Notice of Appeal with the United States Court of Appeals for the Ninth Circuit.

The Company intends to defend its win at the appellate level.

The plaintiff filed a Notice of Appeal with the United States Court of Appeals for the Ninth Circuit.

The Ninth Circuit affirmed the district court's decision on all grounds and entered judgment in favor of the Company in August 2022.

In April 2021, DISH Technologies L.L.C., and Sling TV L.L.C.

4 unchanged sentences

The Company intends to vigorously defend this matter.

Subsequent Event

Subsequent to May 1, 2022, the Company completed the sale of an administrative office building.

As of May 1, 2022, the building's carrying value of $ 5.4 million was classified as a held for sale and was recognized within other current assets.

The sale resulted in a pre-tax gain of $ 10.2 million which will be recognized during the second quarter of 2022.

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-Q

Item 1. Financial Statements