What changed in this filing

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Item 1. Business

2023-03-28 compared with 2022-03-29 · 78 added, 76 removed, 134 unchanged (53% of the section changed)

lululemon athletica inc.

is principally a designer, distributor, and retailer of healthy lifestyle inspired athletic apparel and accessories.

We have a vision to be the experiential brand that ignites a community of people through sweat, grow, and connect, which we call "living the sweatlife." 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, 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 realizing the full potential within every one of us."

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 29, 2023, 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 30, 2022 as "2021" and the fiscal year ended January 31, 2021 as "2020."

(together with its subsidiaries) is referred to as "lululemon," "the Company," "we," "us," or "our." We refer to 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 January 28, 2024 and is referred to as "2023."

Components of this discussion of our business include:

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• Our Segments

• Community-Based Marketing

• Integrated Marketing

• Product Design and Development

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• Securities and Exchange Commission Filings

Our healthy lifestyle inspired athletic apparel and accessories are marketed under the lululemon brand.

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.

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

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

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.

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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.

During the second quarter of 2020, we acquired Curiouser Products Inc., dba MIRROR.

MIRROR is an in-home fitness company with an interactive workout platform that features live and on-demand classes.

The acquisition of MIRROR bolsters our digital sweatlife offerings and brings immersive and personalized in-home sweat and mindfulness content to new and existing lululemon guests.

To help build our community of guests, and as part of our membership program, we offer in-home connected fitness and associated content subscriptions through lululemon Studio.

Our guests seek a combination of performance, style, and sensation in their athletic apparel, choosing products that allow them to feel great however they exercise.

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Although our largest customer group is made up of guests who shop our women's range, representing 65% of our 2022 net revenue, we also design a comprehensive men's line and have a targeted strategy in place.

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.

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.

North America is our largest market by geographical split, representing 84% of our 2022 net revenue.

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company-operated stores and direct to consumer.

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.

We also operate outlets, serve certain wholesale accounts, have license and supply arrangements, sell repurchased product through our "Like New" recommerce program, have temporary locations, and sell connected hardware and associated subscriptions through lululemon Studio.

The financial results of these operations are disclosed in Other.

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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 30, 2022 January 31, 2021

Number of company-operated stores by country (market) January 29, 2023 January 30, 2022

United States 350 324

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Total company-operated stores 655 574

(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.

(1) PRC included 99 stores in China Mainland, nine stores in Hong Kong Special Administrative Region, seven stores in Taiwan, and two stores in Macao Special Administration Region, as of January 29, 2023.

As of January 30, 2022, there were 70 stores in China Mainland, nine stores in Hong Kong Special Administrative Region, five stores in Taiwan, and two stores in Macao Special Administration Region.

Retail locations operated by third parties under license and supply arrangements are not included in the above table.

As of January 29, 2023, there were 26 licensed locations, including 12 in Mexico, seven in the United Arab Emirates, three in Qatar, three in Saudi Arabia, and one in Kuwait.

We opened 81 net new company-operated stores in 2022, including 49 net new stores outside of North America.

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

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

During 2022, we closed six of our lululemon branded company-operated stores.

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

In fiscal 2022, our new store growth will come primarily from company-operated store openings in Asia and in the United States.

Our real estate strategy over the next several years will not only consist of opening new company-operated stores, but also in overall square footage growth through store expansions and relocations.

In 2023, we believe our new store growth will come primarily from company-operated store openings in the United States and the PRC.

We expect our real estate strategy over the next several years to not only consist of opening new company-operated stores, but also to include overall square footage growth through store expansions and relocations.

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

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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.

Our sales per square foot was $1,580 and $1,443 for 2022 and 2021, respectively.

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.

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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.

It excludes any space used for non-retail related

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

Direct to Consumer

We believe that e-commerce is convenient for our core guest and enhances the image of our brand.

We believe e-commerce is convenient for our core guest and enhances the image of our brand.

Our direct to consumer channel also allows us to reach and serve guests in markets beyond where our physical retail locations are based.

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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.

• Outlets - We utilize outlets to sell slow moving inventory and inventory from prior seasons at discounted prices.

As of January 29, 2023, we operated 39 outlets, with the majority in North America.

• 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.

We believe these premium wholesale locations offer an alternative distribution channel that is convenient for our core guest and enhances the image of our brand.

• Wholesale - We sell to premium wholesale locations that offer an alternative distribution channel that is convenient for our core guest and enhances the image of our brand, including yoga and fitness studios, university campus retailers, and other select partners.

We do not intend wholesale to be a significant contributor to overall sales.

Instead, we use the channel to build brand awareness, including outside of North America.

• License and supply arrangements - We enter into license and supply arrangements from time to time when we believe that it will be to our advantage to partner with companies and individuals with significant experience and proven success in certain target markets.

We have license and supply arrangements with partners in the Middle East and Mexico which grant them the right to operate lululemon branded retail locations in the United Arab Emirates, Kuwait, Qatar, Oman, Bahrain, and Mexico.

We retain the rights to sell lululemon products through our e-commerce websites in these countries.

• License and supply arrangements - We enter into license and supply arrangements from time to time when we believe it will be to our advantage to partner with companies and individuals with significant experience and proven success in certain target markets.

Under these arrangements we supply the partners with lululemon products, training and other support.

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

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

We utilize a community-based approach to build brand awareness and guest loyalty.

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

As of January 29, 2023, there was also an e-commerce website operated through the license and supply arrangements.

• Recommerce - Our recommerce is the sale of repurchased product via our "Like New" program.

This program allows guests to exchange their gently used lululemon products for credit, and then those products are 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 achieving our Impact Agenda goals to reduce our environmental footprint.

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

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

Integrated Marketing

We have a multi-faceted strategy to build brand awareness, affinity and guest loyalty.

This strategy leverages 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 team is comprised of athletes and users of our products who embody our design philosophy and dedication to premium

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.

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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 ultimately protect through agreements, trademarks, and trade-secrets.

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

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We work with a group of approximately 45 vendors that manufacture our products, five of which produced 56% of our products in 2022, with the largest manufacturer producing 15%.

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.

During 2022, 39% of our products were manufactured in Vietnam, 14% in Cambodia, 12% in Sri Lanka, 8% in Bangladesh, and 7% in Indonesia, and the remainder in other regions.

We work with a group of approximately 60 suppliers to provide the fabrics for our products.

In 2022, 56% of our fabrics were produced by our top five fabric suppliers, with the largest manufacturer producing 21%.

During 2021, 48% of our fabrics originated from Taiwan, 19% from Mainland China, 11% from Sri Lanka, and the remainder from other regions.

During 2022, 43% of our fabrics originated from Taiwan, 19% from China Mainland, 16% 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 the Asia Pacific region.

We have developed long-standing relationships with a number of our vendors and take great care to ensure that they share our commitment to quality and ethics.

We do not, however, have any long-term 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 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 manufacturers adhere to our Vendor Code of Ethics regarding social and environmental sustainability practices.

Our product quality and sustainability teams partner with leading inspection and verification firms to closely monitor each supplier's compliance with applicable laws and our vendor code of ethics.

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

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We own our distribution center in Columbus, Ohio, and lease our other distribution facilities.

We also utilize third-party logistics providers to warehouse and distribute finished products from their warehouse locations in the United Sates, the PRC, and the Netherlands.

We also utilize third-party logistics providers to warehouse and distribute finished products from their warehouse locations in the United States, the PRC, and the Netherlands.

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 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 that we successfully compete on the basis of our premium brand image and our technical product innovation.

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.

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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, such as Nike, Inc., adidas AG, Under Armour, Inc, and Columbia Sportswear Company.

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.

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Our annual net revenue is 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.

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 44% and

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

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 44% of our full year operating profit during the fourth quarter of 2021.

Our operating profits in 2022 were not weighted towards our fourth quarter primarily due to the impairment of goodwill and other assets recognized in relation to our lululemon Studio business unit during that quarter.

We generated approximately 24% of our full year operating profit during the fourth quarter of 2022.

Excluding the impairment of goodwill and other assets recognized in relation to lululemon Studio (formerly MIRROR), we generated approximately 44% of our full year operating profit during the fourth quarter of fiscal 2022.

Human Capital

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We are proud that as of January 29, 2023, approximately 55% of our board of directors, 65% of our senior executive leadership team, and 45% 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 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.

We measure the current state of diverse representation and organizational inclusion health through an annual voluntary survey.

(2) In 2022, the participation rate was approximately 70%.

Our overall goal is to reflect the racial diversity (3) of the communities we serve and operate in.

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

(2) The voluntary demographic survey results presented above relate to all of our employees in North America, Europe, Australia, and New Zealand.

(3) "Racial diversity" is used to measure the non-white population.

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.

We follow local laws and regulations and where we are able to collect the data necessary to confirm complete pay equity, we do so.

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 that represent 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.

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.

As of January 29, 2023, we have invested a total of $29.4 million (4) towards this goal.

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.

We believe each of our approximately 34,000 people is key to the success of our business.

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.

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• 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;

(4) We have contributed $29.4 million to lululemon's Centre for Social Impact, $21.2 million of which has been contributed directly to social impact organizations.

The remaining $8.2 million includes $6.0 million toward a Donor-Advised-Fund to be advised for future grantmaking as well as operational costs.

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

• 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;

• Personal resilience tools to employees, ambassadors, and suppliers;

• Reimbursement programs which reward physical activity;

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

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.

• Training and development of all of our employees including, but not limited to, mentorship programs, IDEA internships, leadership development, vision and goals, and coaching.

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

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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.

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.

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 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.

Our Foreign Migrant Worker Standard outlines our expectations with respect to foreign migrant workers.

This program helps to raise standards and build shared approaches that benefit garment workers.

Intellectual Property

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We consider our lululemon and wave design trademarks to be among our most valuable assets.

In addition, we own many other trademarks for names of several of our brands, slogans, fabrics and products.

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.

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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 Code of Business Conduct and Ethics and charters of the standing committees of our board of directors.

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 on our website does not constitute part of this annual report on Form 10-K or any other report we file or furnish with the SEC.

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