What changed in this filing

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Item 1. Financial Statements

2023-08-31 compared with 2023-06-01 · 94 added, 59 removed, 416 unchanged (27% of the section changed)

6 unchanged sentences

Cash and cash equivalents $ 1,107,530 $ 1,154,867

$ 950,607 $ 1,154,867

Accounts receivable, net 106,221 132,906

40 unchanged sentences

Additional paid-in capital 505,127 474,645

478,496 474,645

Retained earnings 3,267,589 2,926,127

3,118,584 2,926,127

Accumulated other comprehensive loss ( 239,842 ) ( 252,584 )

1 unchanged sentence

$ 5,992,458 $ 5,607,038

$ 5,571,544 $ 5,607,038

See accompanying notes to the unaudited interim consolidated financial statements

2 unchanged sentences

Amounts in thousands, except per share amounts)

Quarter Ended

Quarter Ended Two Quarters Ended

2023 July 31,

2022 July 30,

2023 July 31,

Net revenue $ 2,209,165 $ 1,868,328 $ 4,209,957 $ 3,481,791

3 unchanged sentences

Amortization of intangible assets 1,879 2,195 3,757 4,390

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

Income from operations 479,257 401,208 880,671 661,555

5 unchanged sentences

Foreign currency translation adjustment $ 54,786 $ 8,715 $ 12,036 $ ( 17,133 )

Net investment hedge gains 17,720 5,056

Net investment hedge gains (losses) ( 17,014 ) ( 4,289 ) 706 767

Other comprehensive income (loss), net of tax $ 37,772 $ 4,426 $ 12,742 $ ( 16,366 )

8 unchanged sentences

Amounts in thousands)

Quarter Ended April 30, 2023

Quarter Ended July 30, 2023

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

Shares Shares Par Value Shares Par Value

Balance as of April 30, 2023 5,116 5,116 $ — 122,099 $ 610 $ 478,496 $ 3,118,584 $ ( 277,614 ) $ 3,320,076

Net income 341,603 341,603

Other comprehensive income (loss), net of tax 37,772 37,772

Stock-based compensation expense 24,283 24,283

Common stock issued upon settlement of stock-based compensation 33 — 4,228 4,228

Shares withheld related to net share settlement of stock-based compensation ( 2 ) — ( 942 ) ( 942 )

Repurchase of common stock, including excise tax ( 517 ) ( 2 ) ( 938 ) ( 192,598 ) ( 193,538 )

Balance as of July 30, 2023 5,116 5,116 $ — 121,613 $ 608 $ 505,127 $ 3,267,589 $ ( 239,842 ) $ 3,533,482

Quarter Ended July 31, 2022

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

Shares Shares Par Value Shares Par Value

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

Other comprehensive income (loss), net of tax 4,426 4,426

Stock-based compensation expense 20,817 20,817

Common stock issued upon settlement of stock-based compensation 24 — 1,043 1,043

Shares withheld related to net share settlement of stock-based compensation ( 2 ) — ( 719 ) ( 719 )

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

Two Quarters Ended July 30, 2023

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

Shares Shares Par Value Shares Par Value

Balance as of January 29, 2023 5,116 5,116 $ — 122,205 $ 611 $ 474,645 $ 2,926,127 $ ( 252,584 ) $ 3,148,799

5 unchanged sentences

Repurchase of common stock, including excise tax ( 809 ) ( 3 ) ( 1,468 ) ( 290,546 ) ( 292,017 )

Balance as of April 30, 2023 5,116 5,116 $ — 122,099 $ 610 $ 478,496 $ 3,118,584 $ ( 277,614 ) $ 3,320,076

Quarter Ended May 1, 2022

Balance as of July 30, 2023 5,116 5,116 $ — 121,613 $ 608 $ 505,127 $ 3,267,589 $ ( 239,842 ) $ 3,533,482

Two Quarters Ended July 31, 2022

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

7 unchanged sentences

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

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

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

See accompanying notes to the unaudited interim consolidated financial statements

2 unchanged sentences

Amounts in thousands)

Quarter Ended

Two Quarters Ended

2023 July 31,

Cash flows from operating activities

2 unchanged sentences

Depreciation and amortization 178,125 132,441

Gain on disposal of assets — ( 10,180 )

Stock-based compensation expense 45,584 39,175

16 unchanged sentences

Settlement of net investment hedges ( 549 ) 15,469

Other investing activities ( 658 ) 15,657

Net cash used in investing activities ( 283,660 ) ( 224,944 )

13 unchanged sentences

Note 2 Recent Accounting Pronouncements

Note 3 Gain on Disposal of Assets

Note 4 Revolving Credit Facilities and Supply Chain Financing Program

11 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 to wholesale accounts, license and supply arrangements, recommerce, and sales from temporary locations.

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, France, Ireland, Spain, Malaysia, Sweden, the Netherlands, Norway, and Switzerland.

There were 662 and 655 company-operated stores as of April 30, 2023 and January 29, 2023, respectively.

The Company also offers in-home connected fitness and associated content subscriptions through lululemon Studio.

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 company-operated stores, direct to consumer through e-commerce, outlets, sales to wholesale accounts, license and supply arrangements, recommerce, and sales from temporary locations.

There were 672 and 655 company-operated stores as of July 30, 2023 and January 29, 2023.

Basis of presentation

The unaudited interim consolidated financial statements as of April 30, 2023 and for the quarters ended April 30, 2023 and May 1, 2022 are presented in U.S.

The unaudited interim consolidated financial statements as of July 30, 2023 and for the quarters and two quarters ended July 30, 2023 and July 31, 2022 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 2023 and fiscal 2022 are referred to as "2023," and "2022," respectively.

The first quarter of 2023 and 2022 ended on April 30, 2023 and May 1, 2022, respectively.

The first two quarters of 2023 and 2022 ended on July 30, 2023 and July 31, 2022, 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.

Certain comparative figures have been reclassified to conform to the financial presentation adopted for the current year.

Use of estimates

4 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 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 ASC 405-50, Liabilities - Supplier Finance Programs, 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 rollforward of those obligations.

ASUs adopted by the Company during the first two quarters of 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.

along with information about the obligations under these programs, including the amount outstanding at the end of each reporting period and a rollforward of those obligations.

The Company adopted this update during the first quarter of 2023 and the related disclosures are included in Note 4.

2 unchanged sentences

ASUs recently issued 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.

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.

Revolving Credit Facilities and Supply Chain Financing Program

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 April 30, 2023, aside from letters of credit of $ 6.5 million, the Company had no other borrowings outstanding under this credit facility.

As of July 30, 2023, aside from letters of credit of $ 6.4 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.

7 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 April 30, 2023, the Company was in compliance with the covenants of the credit facility.

As of July 30, 2023, 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 April 30, 2023, the Company was in compliance with the covenants and, aside from letters of credit of 25.1 million Chinese Yuan ($ 3.6 million), there were no other borrowings or guarantees outstanding under this credit facility.

As of July 30, 2023, the Company was in compliance

with the covenants and, aside from letters of credit of 28.1 million Chinese Yuan ($ 3.9 million), there were no other borrowings or guarantees outstanding under this credit facility.

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.

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.

As of April 30, 2023 and January 29, 2023, $ 65.2 million and $ 17.6 million, respectively, was outstanding under the SCF program and presented within accounts payable.

As of July 30, 2023 and January 29, 2023, $ 38.6 million and $ 17.6 million, respectively, was outstanding under the SCF program and presented within accounts payable .

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 $ 21.0 million and $ 18.2 million for the first quarter of 2023 and 2022, respectively.

Total unrecognized compensation cost for all stock-based compensation plans was $ 206.6 million as of April 30, 2023, 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 April 30, 2023, and changes during the first quarter then ended, is presented below:

Stock-based compensation expense charged to income for the plans was $ 45.2 million and $ 38.8 million for the first two quarters of 2023 and 2022, respectively.

Total unrecognized compensation cost for all stock-based compensation plans was $ 184.3 million as of July 30, 2023, which is expected to be recognized over a weighted-average period of 2.4 years.

A summary of the balances of the Company's stock-based compensation plans as of July 30, 2023, 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 15 319.78 5 343.83 — — 9 347.97

Balance as of April 30, 2023 978 $ 264.40 181 $ 349.71 5 $ 308.66 248 $ 354.36

Exercisable as of April 30, 2023 495 $ 194.41

Balance as of July 30, 2023 954 $ 266.24 178 $ 349.85 4 $ 368.36 244 $ 355.81

Exercisable as of July 30, 2023 481 $ 195.84

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 2023:

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 2023:

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 2023, there were 27.7 thousand shares purchased.

During the second quarter of 2023, 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 $ 4.8 million and $ 3.4 million in the first quarter of 2023 and 2022, respectively.

The Company's net expense for the defined contribution plans was $ 9.6 million and $ 6.7 million in the first two quarters of 2023 and 2022, 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 April 30, 2023 and January 29, 2023, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis:

As of July 30, 2023 and January 29, 2023, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis:

2023 Level 1 Level 2 Level 3 Balance Sheet Classification

29 unchanged sentences

These 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 the first quarter of 2023.

The Company assesses hedge effectiveness based on

changes in forward rates.

The Company recorded no ineffectiveness from net investment hedges during the first two quarters of 2023.

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 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.

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 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.

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 April 30, 2023, there were derivative assets of $ 17.4 million and derivative liabilities of $ 10.0 million subject to enforceable netting arrangements.

As of July 30, 2023, there were derivative assets of $ 22.3 million and derivative liabilities of $ 15.9 million subject to enforceable netting arrangements.

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

April 30, 2023 January 29, 2023

July 30, 2023 January 29, 2023

Gross Notional Assets Liabilities Gross Notional Assets Liabilities

6 unchanged sentences

Forward currency contracts $ 22,262 $ 15,854 $ 16,707 $ 25,625

The forward currency contracts designated as net investment hedges outstanding as of April 30, 2023 mature on different dates between May 2023 and August 2023.

The forward currency contracts not designated in a hedging relationship outstanding as of April 30, 2023 mature on different dates between May 2023 and August 2023.

The forward currency contracts designated as net investment hedges outstanding as of July 30, 2023 mature on different dates between August 2023 and December 2023.

The forward currency contracts not designated in a hedging relationship outstanding as of July 30, 2023 mature on different dates between August 2023 and November 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

2023 2022 2023 2022

(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

2023 2022 2023 2022

(In thousands)

5 unchanged sentences

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's forward currency contracts are entered into with investment grade credit worthy and reputable financial institutions that are monitored by the Company for counterparty risk.

The Company's forward currency contracts are generally entered into with what the Company believes are investment grade credit worthy and reputable financial institutions that are monitored by the Company for counterparty risk.

The Company's derivative contracts contain certain credit risk-related contingent features.

2 unchanged sentences

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

First Quarter

Second Quarter First Two Quarters

2023 2022 2023 2022

(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 2023 and 2022, 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 2023 and 2022, 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.

4 unchanged sentences

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 this program excludes the cost of commissions and excise taxes and as of April 30, 2023, the remaining authorized value was $ 645.7 million.

During the first quarter of 2023, 0.3 million shares were repurchased at a total cost including commissions and excise taxes of $ 98.5 million.

During the first quarter of 2022, 0.7 million shares were repurchased at a total cost including commissions of $ 232.6 million.

Subsequent to April 30, 2023, and up to May 26, 2023, 0.2 million shares were repurchased at a total cost including commissions and excise taxes of $ 57.1 million.

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 this program excludes the cost of commissions and excise taxes and as of July 30, 2023, the remaining authorized value was $ 454.0 million.

During the first two quarters of 2023, 0.8 million shares were repurchased at a total cost including commissions and excise taxes of $ 292.0 million.

During the first two quarters of 2022, 1.1 million shares were repurchased at a total cost including commissions of $ 358.0 million.

Subsequent to July 30, 2023, and up to August 25, 2023, 0.2 million shares were repurchased at a total cost including commissions and excise taxes of $ 72.1 million.

Supplementary Financial Information

45 unchanged sentences

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

First Quarter

Second Quarter First Two Quarters

2023 2022 2023 2022

(In thousands)

10 unchanged sentences

Amortization of intangible assets 1,879 2,195 3,757 4,390

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

Income from operations 479,257 401,208 880,671 661,555

14 unchanged sentences

Segmented Information, the following table disaggregates the Company's net revenue by geographic area.

First Quarter

Second Quarter First Two Quarters

2023 2022 2023 2022

(In thousands)

6 unchanged sentences

Other categories is primarily composed of accessories, lululemon Studio, and footwear.

First Quarter

Second Quarter First Two Quarters

2023 2022 2023 2022

(In thousands)

9 unchanged sentences

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