What changed in this filing

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Item 1. Financial Statements

2023-12-07 compared with 2023-08-31 · 91 added, 55 removed, 455 unchanged (24% of the section changed)

56 unchanged sentences

Amounts in thousands, except per share amounts)

Quarter Ended Two Quarters Ended

2023 July 31,

2022 July 30,

2023 July 31,

Quarter Ended Three Quarters Ended

2023 October 30,

2022 October 29,

2023 October 30,

Net revenue $ 2,204,218 $ 1,856,889 $ 6,414,175 $ 5,338,680

2 unchanged sentences

Selling, general and administrative expenses 842,795 684,236 2,407,683 1,954,340

Impairment of assets and restructuring costs 74,501 — 74,501 —

Amortization of intangible assets 1,253 2,189 5,010 6,579

18 unchanged sentences

Amounts in thousands)

Quarter Ended July 30, 2023

Quarter Ended October 29, 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

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

Net income 248,714 248,714

4 unchanged sentences

Repurchase of common stock, including excise tax ( 553 ) ( 4 ) ( 1,002 ) ( 211,620 ) ( 212,626 )

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

Balance as of October 29, 2023 5,116 5,116 $ — 121,122 $ 606 $ 536,390 $ 3,304,683 $ ( 315,830 ) $ 3,525,849

Quarter Ended October 30, 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

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

Net income 255,470 255,470

4 unchanged sentences

Repurchase of common stock ( 55 ) — ( 100 ) ( 16,892 ) ( 16,992 )

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

Balance as of October 30, 2022 5,203 5,203 $ — 122,318 $ 612 $ 455,444 $ 2,874,955 $ ( 291,807 ) $ 3,039,204

Three Quarters Ended October 29, 2023

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, including excise tax ( 1,362 ) ( 7 ) ( 2,470 ) ( 502,166 ) ( 504,643 )

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

Balance as of October 29, 2023 5,116 5,116 $ — 121,122 $ 606 $ 536,390 $ 3,304,683 $ ( 315,830 ) $ 3,525,849

Three Quarters Ended October 30, 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 ( 1,183 ) ( 6 ) ( 2,096 ) ( 372,874 ) ( 374,976 )

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

Balance as of October 30, 2022 5,203 5,203 $ — 122,318 $ 612 $ 455,444 $ 2,874,955 $ ( 291,807 ) $ 3,039,204

See accompanying notes to the unaudited interim consolidated financial statements

2 unchanged sentences

Amounts in thousands)

Two Quarters Ended

2023 July 31,

Three Quarters Ended

2023 October 30,

Cash flows from operating activities

2 unchanged sentences

Depreciation and amortization 276,094 211,629

lululemon Studio obsolescence provision 23,709 —

Impairment of assets and restructuring costs 74,501 —

Gain on disposal of assets — ( 10,180 )

33 unchanged sentences

Note 2 Recent Accounting Pronouncements

Note 3 Impairment of Assets and Restructuring Costs

Note 4 Gain on Disposal of Assets

14 unchanged sentences

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, Switzerland, and Thailand.

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

There were 686 and 655 company-operated stores as of October 29, 2023 and January 29, 2023, respectively.

Basis of presentation

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.

The unaudited interim consolidated financial statements, including the financial position as of October 29, 2023 and the results of operations and cash flows for the periods disclosed, 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 two quarters of 2023 and 2022 ended on July 30, 2023 and July 31, 2022, respectively.

The first three quarters of 2023 and 2022 ended on October 29, 2023 and October 30, 2022, respectively.

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

7 unchanged sentences

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

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.

ASUs adopted by the Company during the first three 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.

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.

The Company adopted this update during the first quarter of 2023 and the related disclosures are included in Note 5.

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.

Impairment of Assets and Restructuring Costs

During the third quarter of 2023, the Company contracted with Peloton Interactive, Inc.

to be the exclusive digital fitness content provider for the lululemon Studio Mirror and decided it would no longer produce its own digital fitness content.

While the Company will continue to provide services and support to existing lululemon Studio subscribers, it also decided that it would cease selling the Mirror hardware and end its digital app-only subscription.

The Company ceased selling the Mirror in December 2023.

During the third quarter of 2023, the Company recognized certain inventory provisions, asset impairments, and restructuring costs related to lululemon Studio.

The following table summarizes the amounts recognized:

(In thousands)

Costs recorded in cost of goods sold:

lululemon Studio obsolescence provision $ 23,709

Costs recorded in operating expenses:

Impairment of assets:

Impairment of intangible assets $ 16,951

Impairment of cloud computing arrangement implementation costs 16,074

Impairment of property and equipment 11,161

Restructuring costs 30,315

Impairment of assets and restructuring costs $ 74,501

Total pre-tax charges $ 98,210

Income tax effects of charges $ ( 26,085 )

Total after-tax charges $ 72,125

lululemon Studio obsolescence provision

As a result of the decision to cease selling the lululemon Studio Mirror, the Company recognized an inventory provision of $ 23.7 million during the third quarter of 2023.

Impairment of assets

As a result of the Company's decisions to no longer produce digital fitness content and to cease the sale of the lululemon Studio Mirror, the Company identified an impairment trigger for the lululemon Studio asset group and conducted an impairment test as of October 29, 2023.

The undiscounted cash flows of the lululemon Studio asset group were less than their carrying value, and therefore the Company calculated the fair value of the asset group, which was also less than its carrying value.

As a result of the impairment test, the Company recognized asset impairments totaling $ 44.2 million during the third quarter of 2023.

The fair value of long-lived assets was based on a discounted cash flow model, and is a Level 3 non-recurring fair value measurement.

The key assumptions used to estimate the fair value were subscriber churn rates and operating costs.

lululemon Studio is included within Other in the Company's segment disclosures.

Restructuring costs

The Company recorded restructuring costs of $ 30.3 million primarily related to contract termination costs, employee severance costs, and professional fees.

The accrued costs are expected to be settled within one year.

Gain on Disposal of Assets

6 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 July 30, 2023, aside from letters of credit of $ 6.4 million, the Company had no other borrowings outstanding under this credit facility.

As of October 29, 2023, aside from letters of credit and guarantee of $ 6.6 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 July 30, 2023, the Company was in compliance with the covenants of the credit facility.

As of October 29, 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 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.

As of October 29, 2023, the Company was in compliance with the covenants and, aside from letters of credit and guarantee of 29.9 million Chinese Yuan ($ 4.1 million), there were no other borrowings or guarantees outstanding under this credit facility.

Supply Chain Financing Program

3 unchanged sentences

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 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 .

As of October 29, 2023 and January 29, 2023, $ 29.0 million and $ 17.6 million, respectively, were 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 $ 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-based compensation expense charged to income for the plans was $ 69.5 million and $ 58.8 million for the first three quarters of 2023 and 2022, respectively.

Total unrecognized compensation cost for all stock-based compensation plans was $ 156.9 million as of October 29, 2023, which is expected to be recognized over a weighted-average period of 2.2 years.

A summary of the balances of the Company's stock-based compensation plans as of October 29, 2023, and changes during the first three quarters then ended, is presented below:

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

5 unchanged sentences

Forfeited/expired 28 332.37 8 350.89 1 368.36 19 348.82

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

Balance as of October 29, 2023 884 $ 273.39 175 $ 349.78 3 $ 368.36 230 $ 355.73

Exercisable as of October 29, 2023 423 $ 203.17

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.

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

The following are weighted averages of the assumptions that were used in calculating the fair value of stock options granted during the first three quarters of 2023:

First Three Quarters

Expected term 3.75 years

7 unchanged sentences

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

During the second quarter of 2023, there were 23.1 thousand shares purchased.

During the third quarter of 2023, there were 25.7 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 $ 9.6 million and $ 6.7 million in the first two quarters of 2023 and 2022, respectively.

The Company's net expense for the defined contribution plans was $ 14.6 million and $ 10.1 million in the first three 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 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:

As of October 29, 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

31 unchanged sentences

changes in forward rates.

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

The Company recorded no ineffectiveness from net investment hedges during the first three 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 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.

During the first three 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.

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

As of October 29, 2023, there were derivative assets of $ 15.9 million and derivative liabilities of $ 11.5 million subject to enforceable netting arrangements.

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

July 30, 2023 January 29, 2023

October 29, 2023 January 29, 2023

Gross Notional Assets Liabilities Gross Notional Assets Liabilities

6 unchanged sentences

Forward currency contracts $ 15,854 $ 11,497 $ 16,707 $ 25,625

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 forward currency contracts designated as net investment hedges outstanding as of October 29, 2023 mature on different dates between November 2023 and March 2024.

The forward currency contracts not designated in a hedging relationship outstanding as of October 29, 2023 mature on different dates between November 2023 and May 2024.

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

Second Quarter First Two Quarters

Third Quarter First Three Quarters

2023 2022 2023 2022

4 unchanged sentences

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

Second Quarter First Two Quarters

Third Quarter First Three Quarters

2023 2022 2023 2022

11 unchanged sentences

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

Second Quarter First Two Quarters

Third Quarter First Three Quarters

2023 2022 2023 2022

9 unchanged sentences

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

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.

For the first three 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.

5 unchanged sentences

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.

The authorized value of shares available to be repurchased under this program excludes the cost of commissions and excise taxes and as of October 29, 2023, the remaining authorized value was $ 243.2 million.

During the first three quarters of 2023, 1.4 million shares were repurchased at a total cost including commissions and excise taxes of $ 504.6 million.

During the first three quarters of 2022, 1.2 million shares were repurchased at a total cost including commissions of $ 375.0 million.

Subsequent to October 29, 2023, and up to December 1, 2023, 0.1 million shares were repurchased at a total cost including commissions and excise taxes of $ 20.4 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.

Second Quarter First Two Quarters

Third Quarter First Three Quarters

2023 2022 2023 2022

10 unchanged sentences

General corporate expense 310,852 234,770 872,024 657,201

lululemon Studio obsolescence provision 23,709 — 23,709 —

Impairment of assets and restructuring costs 74,501 — 74,501 —

Amortization of intangible assets 1,253 2,189 5,010 6,579

16 unchanged sentences

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

Second Quarter First Two Quarters

Third Quarter First Three Quarters

2023 2022 2023 2022

7 unchanged sentences

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

Second Quarter First Two Quarters

Third Quarter First Three Quarters

2023 2022 2023 2022

6 unchanged sentences

The Company is, from time to time, involved in routine legal matters, and audits and inspections by governmental agencies and other third parties which are incidental to the conduct of its business.

This includes legal matters such as initiation and defense of proceedings to protect intellectual property rights, personal injury claims, product liability claims, employment claims, and similar matters.

This includes legal matters such as initiation and defense of proceedings to protect intellectual property rights, employment claims, product liability claims, personal injury claims, and similar matters.

The Company believes the ultimate resolution of any such legal proceedings, audits, and inspections will not have a material adverse effect on its consolidated balance sheets, results of operations or cash flows.

1 unchanged sentence

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