What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-03-21 compared with 2023-03-28 · 204 added, 218 removed, 879 unchanged (32% of the section changed)

37 unchanged sentences

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Inventory Provision

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and (v) corroborating the assumptions with individuals within the product team.

Goodwill Impairment Assessment – lululemon Studio (formerly known as MIRROR) Reporting Unit

As described in Notes 6 and 8 to the consolidated financial statements, the Company recorded a goodwill impairment in the amount of $362.5 million during the year ended January 29, 2023.

Goodwill is tested annually for impairment on the first day of the fourth quarter, or more frequently when an event or circumstance indicates that goodwill might be impaired.

Management determined that there were indicators of impairment and therefore conducted an impairment test as of January 29, 2023.

The fair value of the lululemon Studio reporting unit was estimated by management by using a discounted cash flow model, which resulted in the recognition of a goodwill impairment charge of $362.5 million.

The key assumptions used in the discounted cash flow model were the revenue growth rates, operating profit margins, and the discount rate.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the lululemon Studio reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value of the reporting unit;

(ii) the high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s discounted cash flow model including the key assumptions related to the revenue growth rates, operating profit margins, and the discount rate;

and (iii) the audit effort, which involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management's goodwill impairment assessment, including controls over the fair value estimate of the lululemon Studio reporting unit.

These procedures also included, among others, (i) testing management's process for developing the fair value estimate;

(ii) testing the completeness and accuracy of the underlying data used in the model;

and (iii) evaluating the reasonableness of the key assumptions used by management related to the revenue growth rates, operating profit margins, and the discount rate.

Evaluating the reasonableness of the revenue growth rates and operating profit margins involved

considering (i) the current and past performance of the reporting unit;

(ii) the performance of peer companies;

(iii) the consistency with economic and industry forecasts;

and (iv) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the Company’s discounted cash flow model and the reasonableness of the discount rate assumption.

/s/ PricewaterhouseCoopers LLP

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Selling, general and administrative expenses 3,397,218 2,757,447 2,225,034

Impairment of goodwill and other assets, restructuring costs 74,501 407,913 —

Amortization of intangible assets 5,010 8,752 8,782

Impairment of goodwill and other assets 407,913 — —

Acquisition-related expenses — — 41,394

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Shares Shares Par Value Shares Par Value

Balance as of February 2, 2020 6,227 6,227 $ — 124,122 $ 621 $ 355,541 $ 1,820,637 $ ( 224,581 ) $ 1,952,218

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 975,322 975,322

Other comprehensive income (loss), net of tax ( 18,762 ) ( 18,762 )

Common stock issued upon exchange of exchangeable shares ( 1,024 ) ( 1,024 ) — 1,024 5 ( 5 ) —

Stock-based compensation expense 69,137 69,137

5 unchanged sentences

Other comprehensive income (loss), net of tax ( 56,667 ) ( 56,667 )

Common stock issued upon exchange of exchangeable shares ( 87 ) ( 87 ) — 87 — — —

Stock-based compensation expense 78,075 78,075

1 unchanged sentence

Shares withheld related to net share settlement of stock-based compensation ( 105 ) — ( 35,158 ) ( 35,158 )

Repurchase of common stock ( 2,202 ) ( 11 ) ( 3,681 ) ( 808,910 ) ( 812,602 )

Repurchase of common stock, including excise tax ( 1,396 ) ( 7 ) ( 2,481 ) ( 441,513 ) ( 444,001 )

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

3 unchanged sentences

Other comprehensive income (loss), net of tax ( 11,672 ) ( 11,672 )

Common stock issued upon exchange of exchangeable shares ( 87 ) ( 87 ) — 87 — — —

Stock-based compensation expense 93,560 93,560

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Depreciation and amortization 379,384 291,791 224,206

Impairment of goodwill and other assets 407,913 — —

lululemon Studio obsolescence provision 23,709 62,928 —

Impairment of goodwill and other assets, restructuring costs 74,501 407,913 —

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

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Settlement of net investment hedges ( 1,609 ) 47,804 ( 23,389 )

Acquisition, net of cash acquired — — ( 452,581 )

Other investing activities ( 658 ) 20,916 ( 10,000 )

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Note 7 Intangible Assets

Note 8 Impairment of Goodwill and Other Assets

Note 8 Impairment of Goodwill and Other Assets, Restructuring Costs

Note 9 Acquisition-Related Expenses

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Note 12 Revolving Credit Facilities

Note 13 Supply Chain Financing Program

Note 14 Stockholders' Equity

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Note 23 Segmented Information

Note 23 Net Revenue by Category and Geography

Note 24 Disaggregated Net Revenue

lululemon athletica inc.

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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 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.

The Company organizes its operations into four regional markets:

Americas, China Mainland, Asia Pacific ("APAC"), and Europe and the Middle East ("EMEA").

It conducts its business through a number of different channels in each market, including company-operated stores, e-commerce, temporary locations, wholesale, outlets, a re-commerce program, and license and supply arrangements.

There were 711 , 655 , and 574 company-operated stores in operation as of January 28, 2024, January 29, 2023, and January 30, 2022, respectively.

The Company also engages in the design and retail of in-home connected fitness equipment and associated content subscriptions through lululemon Studio, which was rebranded from the Company's former MIRROR brand during fiscal 2022.

COVID-19 Pandemic

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.

The Company temporarily closed almost all of its retail locations for a significant portion of the first half of fiscal 2020.

While most of the Company's retail locations have been open since then, certain locations were temporarily closed based on government and health authority guidance, including certain closures during 2022 in the PRC.

In response to the COVID-19 pandemic, various government programs were announced which provide financial relief for affected businesses.

The most significant relief measures which the Company qualified for are the Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") in the United States, and the Canada Emergency Wage Subsidy ("CEWS") under the COVID-19 Economic Response Plan in Canada.

During fiscal 2020 the Company recognized payroll subsidies totaling $ 37.1 million under these wage subsidy programs and similar plans in other jurisdictions.

The Company utilized the grant accounting model and these subsidies were recorded as a reduction in the associated wage costs which the Company incurred, and were recognized in selling, general and administrative expenses.

These subsidies partially offset the wages paid to employees while its retail locations were temporarily closed due to COVID-19.

The Company did not recognize any payroll subsidies in fiscal 2022 and fiscal 2021.

The COVID-19 pandemic materially impacted the Company's operations.

The extent to which COVID-19 continues to impact the Company's operations, and in turn, its operating results and financial position will depend on future developments, which are highly uncertain and cannot be predicted.

Basis of presentation

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Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, bank balances, and short-term deposits with original maturities of three months or less.

Cash and cash equivalents consist of cash on hand, bank balances, money market funds, and short-term deposits with original maturities of three months or less.

The Company has not experienced any losses related to these balances, and management believes the Company's credit risk to be minimal.

Accounts receivable

Accounts receivable primarily arise out of duty receivables, sales to wholesale accounts, and license and supply arrangements.

Accounts receivable primarily arise out of third party gift card sales, sales to wholesale accounts, online marketplaces, duty receivables, and license and supply arrangements.

The allowance for doubtful accounts represents management's best estimate of probable credit losses in accounts receivable.

Receivables are written off against the allowance when management believes that the amount receivable will not be recovered.

As of January 29, 2023, January 30, 2022, and January 31, 2021, the Company recorded an insignificant allowance for doubtful accounts.

As of January 28, 2024 and January 29, 2023, the Company had an insignificant allowance for doubtful accounts.

Inventories, consisting of finished goods, inventories in transit, and raw materials, are stated at the lower of cost and net realizable value.

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The amount of the provision is equal to the difference between the cost of the inventory and its net realizable value based upon assumptions about product quality, damages, future demand, selling prices, and market conditions.

If changes in market conditions result in reductions in the estimated net realizable value of its inventory below its previous estimate, the Company would increase its reserve in the period in which it made such a determination.

If changes in market conditions result in reductions in the estimated net realizable value of its inventory below its previous estimate, the Company would increase its provision in the period in which it made such a determination.

In addition, the Company provides for inventory shrinkage based on historical trends from actual physical inventory counts.

Inventory shrinkage estimates are made to reduce the inventory value for lost or stolen items.

The Company performs physical inventory counts and cycle counts throughout the year and adjusts the shrink reserve accordingly.

The Company performs physical inventory counts and cycle counts throughout the year and adjusts the shrink provision accordingly.

Business combinations

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Impairment of long-lived assets

Long-lived assets, including intangible assets with finite lives, held for use are evaluated for impairment when the occurrence of events or a change in circumstances indicates that the carrying value of the assets may not be recoverable as measured by comparing their carrying value to the estimated undiscounted future cash flows generated by their use and eventual disposition.

Long-lived assets, held for use are evaluated for impairment when the occurrence of events or a change in circumstances indicates that the carrying value of the assets may not be recoverable as measured by comparing their carrying value to the estimated undiscounted future cash flows generated by their use and eventual disposition.

Impaired assets are recorded at fair value, determined principally by discounting the future cash flows expected from their use and eventual disposition.

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Over the lease term the lease expense is amortized on a straight-line basis beginning on the lease commencement date.

Right-of-use assets are assessed for impairment as part of the impairment of long-lived

assets, which is performed whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.

Right-of-use assets are assessed for impairment as part of the impairment of long-lived assets, which is performed whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.

Variable lease payments, including contingent rental payments based on sales volume, are recognized when the achievement of the specific target is probable.

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Revenue recognition

Net revenue is comprised of company-operated store net revenue, direct to consumer net revenue through websites and mobile apps, including mobile apps on in-store devices that allow demand to be fulfilled via the Company's distribution centers, and other net revenue, which includes revenue from outlets, sales to wholesale accounts, license and supply arrangement net revenue, which consists of royalties as well as sales of the Company's products to licensees, recommerce revenue, revenue from temporary locations, and lululemon Studio revenue.

Net revenue is comprised of company-operated store net revenue, e-commerce net revenue through websites and mobile apps, including mobile apps on in-store devices that allow demand to be fulfilled via the Company's distribution centers, and other net revenue, which includes revenue from outlets, sales to wholesale accounts, license and supply arrangement net revenue, which consists of royalties as well as sales of the Company's products to licensees, re-commerce revenue, revenue from temporary locations, and lululemon Studio revenue.

All revenue is reported net of markdowns, discounts, sales taxes collected from customers on behalf of taxing authorities, and returns.

lululemon Studio generates net revenue from the sale of in-home fitness equipment and associated content subscriptions.

Certain in-home fitness contracts contain multiple performance obligations, including hardware and a subscription service commitment.

For customer contracts that contain multiple performance obligations the Company accounts for individual performance obligations if they are distinct.

The transaction price, net of discounts, is allocated to each performance obligation based on its standalone selling price.

lululemon Studio generates gross revenue from digital content subscriptions.

Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods or services to the Company's customers.

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Revenue from company-operated stores and other retail locations is recognized at the point of sale.

Direct to consumer revenue, sales to wholesale accounts and in-home fitness hardware sales are recognized upon receipt by the customer.

E-commerce revenue, sales to wholesale accounts and in-home fitness hardware sales are recognized upon receipt by the customer.

In certain arrangements the Company receives payment before the customer receives the promised good.

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Proceeds from the sale of gift cards are initially deferred and recognized within unredeemed gift card liability on the consolidated balance sheets, and are recognized as revenue when tendered for payment.

While the Company will continue to honor all gift cards presented for payment, to the extent management determines there is no requirement to remit unused card balances to government agencies under unclaimed property laws, the portion of card balances not expected to be redeemed are recognized in net revenue in proportion to the gift cards which have been redeemed, under the redemption

recognition method.

For 2023, 2022, and 2021, net revenue recognized on unredeemed gift card balances was $ 28.5 million, $ 23.3 million, and $ 18.7 million, respectively.

8 unchanged sentences

• shrink and inventory provision expense;

• the cost of digital content subscription services, including the costs of content creation, studio overhead, and related production departments.

• the cost of digital content subscription services

Selling, general and administrative expenses

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The evaluation as to the likelihood of realizing the benefit of a deferred income tax asset is based on the timing of scheduled reversals of deferred tax liabilities, taxable income forecasts, and tax-planning strategies.

The recognition of a deferred income tax asset is based upon several

assumptions and forecasts, including current and anticipated taxable income, the utilization of previously unrealized non-operating loss carryforwards, and regulatory reviews of tax filings.

The recognition of a deferred income tax asset is based upon several assumptions and forecasts, including current and anticipated taxable income, the utilization of previously unrealized non-operating loss carryforwards, and regulatory reviews of tax filings.

The Company evaluates its tax filing positions and recognizes the largest amount of tax benefit that is considered more likely than not to be sustained upon examination by the relevant taxing authorities based on the technical merits of the position.

1 unchanged sentence

Income tax expense is adjusted in the period in which an uncertain tax position is effectively settled, the statute of limitations expires, facts or circumstances change, tax laws change, or new information becomes available.

The Company's policy is to recognize interest expense and penalties related to income tax matters as part of other income (expense), net.

The Company's policy is to recognize interest expense and penalties related to income tax matters as part of income tax expense.

Accrued interest and penalties are included within the related tax liability on the Company's consolidated balance sheets.

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The carrying values of these instruments approximate their fair value due to their short-term maturities.

Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.

The Company holds certain assets and liabilities that are required to be measured at fair value on a recurring basis, and performs certain valuations on a non-recurring basis, which are outlined in Note 16.

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Concentration of credit risk

Accounts receivable are primarily from inventory duty receivables, wholesale accounts, and from license and supply arrangements.

Accounts receivable primarily arise out of third party gift card sales, sales to wholesale accounts, online marketplaces, duty receivables, and license and supply arrangements.

The Company generally does not require collateral to support the accounts receivable;

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

Under certain circumstances, including an event of default, bankruptcy, termination, and cross default under the Company's North American revolving credit facility, the Company may be required to make immediate payment for outstanding liabilities under its derivative contracts.

Under certain circumstances, including an event of default, bankruptcy, termination, and cross default under the Company's Americas revolving credit facility, the Company may be required to make immediate payment for outstanding liabilities under its derivative contracts.

Stock-based compensation

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The Company reassesses the probability of achieving the performance condition at each reporting date.

The grant date fair value of each stock option granted is estimated on the grant date using the Black-Scholes model, and the grant date fair value of restricted shares, performance-based restricted stock units, and restricted stock units is based on

the closing price of the Company's common stock on the grant date.

Restricted stock units that are settled in cash or common stock at the election of the employee are remeasured to fair value at the end of each reporting period until settlement.

This fair value is based on the closing price of the Company's common stock on the last business day before each period end.

The grant date fair value of each stock option granted is estimated on the grant date using the Black-Scholes model.

The grant date fair value of restricted shares, performance-based restricted stock units, and restricted stock units is based on the closing price of the Company's common stock on the grant date.

Restricted stock units that were settled in cash or common stock at the election of the employee were remeasured to fair value at the end of each reporting period until settlement.

This fair value was based on the closing price of the Company's common stock on the last business day before each period end.

Earnings per share

Earnings per share is calculated using the weighted-average number of common and exchangeable shares outstanding during the period.

Exchangeable shares are the equivalent of common shares in all material respects.

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

Exchangeable shares are the economic equivalent of common shares in all material respects.

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

Diluted earnings per share is calculated by dividing net income available to stockholders for the period by the diluted weighted-average number of shares outstanding during the period.

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In the ordinary course of business, the Company is involved in legal proceedings regarding contractual and employment relationships and a variety of other matters.

The Company records contingent liabilities resulting from claims against us, when a loss is assessed to be probable and the amount of the loss is reasonably estimable.

The Company records contingent liabilities resulting from claims against it, when a loss is assessed to be probable and the amount of the loss is reasonably estimable.

Use of estimates

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ASUs adopted during 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 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.

The Company adopted this update prospectively during the first quarter of 2022 and it did not have a material impact on the Company's consolidated financial statements.

In September 2022, the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations, 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 roll-forward of those obligations.

The Company adopted this update during the first quarter of 2023 and the related disclosures are included in Note 13.

Supply Chain Financing Program .

Recently issued accounting pronouncements

ASUs recently issued 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 guidance is effective for fiscal years beginning after December 15, 2022, including interim periods in those fiscal years, with early adoption permitted.

The Company is currently evaluating the impact that this new guidance may have on its consolidated financial statements.

ASUs recently issued not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company's consolidated financial position or results of operations.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

Entities will be required to provide disclosures of significant segmented expenses and other categories used by the Chief Operating Decision Maker ("CODM") in order to enhance disclosure at the segment level.

This amendment is effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024, and is applied retrospectively for periods presented in the financial statements.

The Company is currently evaluating the impact that this new guidance may have on its financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

This disclosure requires expanded disclosure within the rate reconciliation as well as disaggregation of annual taxes paid.

This amendment is effective for annual periods beginning after December 15, 2023, and is applied prospectively.

The Company is currently evaluating the impact that this new guidance may have on its financial statement disclosures.

January 28, 2024 January 29, 2023

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Provision to reduce inventories to net realizable value:

lululemon Studio Mirror provision ( 62,956 ) ( 65,328 )

Obsolescence provision ( 42,903 ) ( 18,903 )

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Inventories $ 1,323,602 $ 1,447,367

The obsolescence provision as of January 29, 2023 included $ 62.9 million related to lululemon Studio hardware recognized during the fourth quarter of 2022.

Please refer to Note 8.

Impairment of Goodwill and Other Assets for further details.

Impairment of Goodwill and Other Assets, Restructuring Costs for further details on the lululemon Studio obsolescence provision.

Prepaid Expenses and Other Current Assets

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(In thousands)

Prepaid inventories $ 1,082 $ 42,691

Other prepaid expenses 140,921 98,254

Prepaid expenses 137,203 142,003

Forward currency contract assets 647 16,707

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Property and equipment, net $ 1,545,811 $ 1,269,614

There were capitalized computer software costs of $ 67.9 million, $ 35.8 million, and $ 23.5 million in 2022, 2021, and 2020, respectively, associated with internally developed software.

Depreciation expense related to property and equipment was $ 374.0 million, $ 282.7 million, and $ 215.3 million for 2023, 2022, and 2021, respectively.

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Balance as of January 30, 2022

Impairment of goodwill ( 362,492 )

Effect of foreign currency translation ( 244 )

Balance as of January 29, 2023

Impairment of goodwill ( 362,492 )

Effect of foreign currency translation ( 61 )

Balance as of January 28, 2024

The Company recognized an impairment of $ 362.5 million related to the lululemon Studio reporting unit as of January 29, 2023 on the goodwill that arose from the acquisition of MIRROR.

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

The Company recognized an impairment charge of $ 362.5 million related to the lululemon Studio reporting unit as of January 29, 2023 on the goodwill that arose from the acquisition of MIRROR.

Please refer to Note 8.

Impairment of Goodwill and Other Assets for further information.

All of the Company's $ 24.1 million of goodwill as of January 29, 2023 relates to the company-operated stores segment.

Impairment of Goodwill and Other Assets, Restructuring Costs for further information.

Intangible Assets

A summary of the balances of the Company's intangible assets as of January 28, 2024, January 29, 2023, is presented below:

January 29, 2023 January 30, 2022

Gross Carrying Amount Accumulated Amortization Impairment Net Carrying Amount Remaining Useful Life (Years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Remaining Useful Life (Years)

January 28, 2024

Gross Carrying Amount Accumulated Amortization Accumulated Impairment Net Carrying Amount

(In thousands)

MIRROR brand $ 26,500 $ ( 4,089 ) $ ( 22,411 ) $ —

Customer relationships 28,000 ( 7,492 ) ( 20,508 ) —

Technology 25,500 ( 12,632 ) ( 12,868 ) —

Content 5,000 ( 3,250 ) ( 1,750 ) —

Other 270 ( 270 ) — —

Intangible assets $ 85,270 $ ( 27,733 ) $ ( 57,537 ) $ —

January 29, 2023

Gross Carrying Amount Accumulated Amortization Impairment Net Carrying Amount Remaining Useful Life (Years)

(In thousands, except in years)

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Amortization of intangible assets was $ 5.0 million, $ 8.8 million, and $ 8.8 million in 2023, 2022, and 2021, respectively.

As of January 29, 2023, the Company recorded an impairment charge of $ 40.6 million related to the intangible assets in the lululemon Studio reporting unit.

During 2022 and 2023, the Company recognized intangible asset impairment charges of $ 40.6 million and $ 17.0 million, respectively.

These impairment charges related to the intangible assets that were recognized on the acquisition of MIRROR.

Please refer to Note 8.

Impairment of Goodwill and Other Assets for further information.

There were no impairment charges in 2021 and 2020.

The following table presents the future expected amortization expense as of January 29, 2023:

January 29, 2023

(In thousands)

Total estimated future amortization expense $ 21,961

Impairment of Goodwill and Other Assets

Events as of January 29, 2023 indicated the Company should conduct an impairment test for the goodwill, intangible assets, and property and equipment related to lululemon Studio (formerly MIRROR).

Sales of hardware units did not meet the

Company's fourth quarter expectations and the Company revised its short and long term forecasts for lululemon Studio, with an adverse impact on expected cash flows.

As a result, the Company updated its strategy for the lululemon Studio reporting unit.

During the fourth quarter of 2022, the Company recorded impairment of goodwill and other assets related to the lululemon Studio business unit.

Impairment of Goodwill and Other Assets, Restructuring Costs for further information.

Impairment of Goodwill and Other Assets, Restructuring Costs

During 2022, the Company decided to shift its lululemon Studio strategy to focus on providing digital app-based services.

The Company continued to sell the lululemon Studio Mirror hardware in 2023, and reached the decision to cease selling it during the third quarter of 2023.

It also contracted with Peloton Interactive, Inc.

to be the exclusive digital fitness content provider to existing lululemon Studio subscribers, and stopped producing its own digital fitness content.

The Company ceased selling the lululemon Studio Mirror and new digital content subscriptions in December 2023.

These strategy shifts resulted in impairment testing and the recognition of goodwill impairment, inventory provisions, asset impairments, and restructuring costs related to the lululemon Studio reporting unit.

The following table summarizes the amounts recognized:

1 unchanged sentence

Costs recorded in cost of goods sold:

Obsolescence provision $ 62,928

lululemon Studio obsolescence provision $ 23,709 $ 62,928

Costs recorded in operating expenses:

Impairment of assets:

Impairment of goodwill $ — $ 362,492

Impairment of intangible assets 16,951 40,585

Impairment of cloud computing arrangement implementation costs 16,074 —

Impairment of property and equipment 11,161 4,836

Impairment of goodwill and other assets 407,913

$ 44,186 $ 407,913

Restructuring costs 30,315 —

Impairment of goodwill and other assets, restructuring costs $ 74,501 $ 407,913

Total pre-tax charges $ 98,210 $ 470,841

1 unchanged sentence

Total after-tax charges $ 72,125 $ 442,670

To perform the goodwill impairment test on January 29, 2023, the Company used a discounted cash flow model to estimate the fair value of the lululemon Studio reporting unit based on the updated strategic plans, supplemented by market comparable analysis, which indicated the fair value of lululemon Studio was lower than its carrying value, and led to a recognition of an impairment of goodwill of $ 362.5 million.

The key assumptions used to estimate the fair value of the lululemon Studio reporting unit were the revenue growth rates, operating profit margins, and the discount rate.

The fair value of the lululemon Studio reporting unit is a Level 3 fair value measurement.

Intangible assets

Undiscounted cash flows of the lululemon Studio asset group to which the intangible assets belong 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.

This resulted in impairments of $ 40.6 million relating to the MIRROR brand, which is associated with in-home hardware, and to the customer relationship intangible assets that were recognized as part of the acquisition.

The carrying value of individual long-lived assets was not reduced to lower than their fair value.

The fair values of the brand and the customer relationships were based on a relief from royalty method and a discounted cash flow model respectively, and are Level 3 fair value measurements.

The change in strategy related to lululemon Studio to focus on digital app-based services means the Company no longer expects to be able to sell all of the lululemon Studio hardware inventory above cost and it recognized an obsolescence provision of $ 62.9 million as of January 29, 2023.

lululemon Studio obsolescence provision

During 2022, the change in strategy related to lululemon Studio to focus on digital app-based services meant the Company no longer expected to be able to sell all of the lululemon Studio hardware inventory above cost and it recognized an obsolescence provision of $ 62.9 million.

The net realizable value was determined based on hardware sales forecasts and assumptions regarding liquidation value.

If the Company does not achieve its hardware sales forecasts, has to sell the hardware at prices lower than forecast, or is unable to liquidate excess inventory this could result in additional expense in the period in which such a determination is made.

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

The net realizable value of the lululemon Studio inventory was based on assumptions regarding liquidation value.

Impairment of goodwill and other assets

As a result of the strategy shift during 2022, it was concluded that the Company should conduct an impairment test for the goodwill, intangible assets, and property and equipment related to lululemon Studio as of January 29, 2023.

The Company used a discounted cash flow model to estimate the fair value of the lululemon Studio reporting unit based on the updated strategic plans, supplemented by market comparable analysis, which indicated the fair value of lululemon Studio was lower than its carrying value, and led to a recognition of an impairment of goodwill of $ 362.5 million.

The key assumptions used to estimate the fair value of the lululemon Studio reporting unit were the revenue growth rates, operating profit margins, and the discount rate.

The fair value of the lululemon Studio reporting unit was a Level 3 fair value measurement.

As of January 29, 2023, the undiscounted cash flows of the lululemon Studio asset group to which the intangible assets belonged 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.

This resulted in impairment of intangible assets of $ 40.6 million relating to the MIRROR brand, which was associated with in-home hardware, and to the customer relationship intangible assets that were recognized as part of the acquisition.

During 2023, as a result of the Company's decision to no longer produce digital fitness content and to cease the sale of the lululemon Studio Mirror, the Company performed impairment testing for the lululemon Studio asset group 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 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.

Restructuring costs

During 2023, the Company recognized restructuring costs of $ 30.3 million for lululemon Studio primarily related to contract termination costs, employee severance costs, and professional fees.

Acquisition-Related Expenses

In connection with the acquisition of MIRROR, the Company recognized certain expenses which were recognized within acquisition-related expenses in the consolidated statements of operations.

In connection with the acquisition of MIRROR in fiscal 2020, the Company recognized certain expenses which were included within acquisition-related expenses in the consolidated statements of operations.

These amounts included acquisition-related compensation, transaction and integration costs, and a gain on the Company's existing investment in MIRROR.

The amounts recognized were $ 41.4 million and $ 29.8 million in 2021 and 2020, respectively.

There were no acquisition-related expenses recognized in 2022.

During 2021, $ 41.4 million was recognized.

There were no acquisition-related expenses recognized in 2023 or 2022.

Other Non-Current Assets

10 unchanged sentences

Accrued operating expenses $ 147,215 $ 169,429

Accrued freight 57,692 71,390

Sales return allowances 61,634 55,528

Forward currency contract liabilities 25,625 18,985

Accrued duty 21,046 27,182

Sales tax collected 20,183 13,540

Accrued freight 41,241 57,692

Accrued capital expenditures 31,936 19,365

Accrued duty 25,817 21,046

Accrued rent 12,522 12,223

Accrued inventory liabilities 4,783 4,345

Sales tax collected 3,088 20,183

Forward currency contract liabilities 2,872 25,625

Other 17,447 13,787

1 unchanged sentence

Revolving Credit Facilities

North America revolving credit facility

Americas revolving credit facility

On December 14, 2021, the Company entered into an amended and restated credit agreement extending its existing credit facility, which provides for $ 400.0 million in commitments under an unsecured five-year revolving credit facility.

6 unchanged sentences

The applicable interest rates and commitment fees are subject to adjustment based on certain sustainability key performance indicators ("KPIs").

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 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.

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.

5 unchanged sentences

In December 2019, the Company entered into an uncommitted and unsecured 130.0 million Chinese Yuan ($ 18.1 million) revolving credit facility with terms that are reviewed on an annual basis.

The credit facility was increased to 230.0 million Chinese Yuan ($ 33.9 million) during 2020.

The credit facility was increased to 230.0 million Chinese Yuan ($ 32.0 million) during 2020 and increased to 240.0 million Chinese Yuan ($ 33.4 million) during 2023.

It is comprised of a revolving loan of up to 200.0 million Chinese Yuan ($ 27.9 million) and a financial guarantee facility of up to 40.0 million Chinese Yuan ($ 5.6 million), or its equivalent in another currency.

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As of January 28, 2024, the Company was in compliance with the covenants and, aside from letters of credit of 32.5 million Chinese Yuan ($ 4.5 million), there were no other borrowings or guarantees outstanding under this credit facility.

364-Day revolving credit facility

In June 2020, the Company obtained a 364-day $ 300.0 million committed and unsecured revolving credit facility.

In December 2020, the Company elected to terminate 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.

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.

A roll-forward of the amounts outstanding under the SCF program, which are presented within accounts payable , is presented below:

(In thousands)

Supply chain financing program balance, beginning of year $ 17,578

Amounts added during the year $ 533,640

Amounts settled during the year $ ( 509,079 )

Supply chain financing program balance, end of year $ 42,139

Stockholders' Equity

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In June 2023, the Company's stockholders approved the adoption of the lululemon athletica inc.

2014 Equity Incentive Plan ("2014 Plan").

The 2014 Plan provides for awards in the form of stock options, stock appreciation rights, restricted stock purchase rights, restricted share bonuses, restricted stock units, performance shares, performance-based restricted stock units, cash-based awards, other stock-based awards, and deferred compensation awards to employees (including officers and directors who are also employees), consultants, and directors of the Company.

2023 Equity Incentive Plan.

The 2023 Equity Incentive Plan provides for awards in the form of stock options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance-based restricted stock units, cash-based awards, other stock-based awards, and deferred compensation awards to employees (including officers and directors who are also employees), consultants, and directors of the Company.

The awards granted under the 2014 Equity Incentive Plan remain outstanding and continue to vest under their original conditions.

No further awards will be granted under the 2014 Equity Incentive Plan.

The Company has granted stock options, performance-based restricted stock units, restricted stock units, and restricted shares.

11 unchanged sentences

(In thousands, except per share amounts)

Balance as of February 2, 2020 776 $ 113.41 238 $ 103.52 7 $ 175.82 333 $ 108.44 29 $ 239.39

Balance as of January 31, 2021 804 $ 139.27 199 $ 149.20 4 $ 299.09 275 $ 166.50 15 $ 328.68

Granted 194 310.29 139 185.37 4 326.70 129 331.42 — —

15 unchanged sentences

The grant date fair value of the restricted shares and restricted stock units is based on the closing price of the Company's common stock on the grant date.

Restricted stock units that are settled in cash or common stock at the election of the employee are remeasured to fair value at the end of each reporting period until settlement.

This fair value is based on the closing price of the Company's common stock on the last business day before each period end.

Restricted stock units that were settled in cash or common stock at the election of the employee were remeasured to fair value at the end of each reporting period until settlement.

This fair value was based on the closing price of the Company's common stock on the last business day before each period end.

The grant date fair value of each stock option granted is estimated on the date of grant using the Black-Scholes model.

49 unchanged sentences

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

During 2022, there were 0.1 million shares purchased.

During each of 2023, 2022, and 2021, there were 0.1 million shares purchased.

As of January 28, 2024, 4.4 million shares remain authorized to be purchased under the ESPP.

Defined contribution pension plans

18 unchanged sentences

Forward currency contract liabilities 25,625 — 25,625 — Other current liabilities

The Company has short-term, highly liquid investments classified as cash equivalents, which are invested in money market funds and term deposits.

The Company has short-term, highly liquid investments classified as cash equivalents, which are invested in money market funds and short-term deposits with original maturities of three months or less.

The Company records cash equivalents at their original purchase prices plus interest that has accrued at the stated rate.

5 unchanged sentences

The Company has also recorded lease termination liabilities at fair value on a non-recurring basis, determined using Level 3 inputs based on remaining lease rentals and reduced by estimated sublease income.

As of January 29, 2023, the Company recorded impairment charges for goodwill, intangible assets, and property and equipment, as disclosed in Note 8.

Impairment of Goodwill and Other Assets.

During 2023 and 2022, the Company recorded impairment charges for goodwill, intangible assets, cloud computing arrangement implementation costs, and property and equipment, as disclosed in Note 8.

Impairment of Goodwill and Other Assets, Restructuring Costs.

That note includes details on the discounted cash flow model used to estimate fair value, which is a Level 3 valuation technique.

6 unchanged sentences

The Company holds a significant portion of its assets in Canada and enters into forward currency contracts designed to hedge a portion of the foreign currency exposure that arises on translation of a Canadian subsidiary into U.S.

These forward currency contracts are designated as net investment hedges.

forward currency contracts are designated as net investment hedges.

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

15 unchanged sentences

As of January 28, 2024, there were derivative assets of $ 0.6 million and derivative liabilities of $ 2.9 million subject to enforceable netting arrangements.

The forward currency contracts designated as net investment hedges outstanding as of January 29, 2023 mature on different dates between February 2023 and August 2023.

The forward currency contracts not designated in a hedging relationship outstanding as of January 29, 2023 mature on different dates between February 2023 and August 2023.

The forward currency contracts designated as net investment hedges outstanding as of January 28, 2024 mature on different dates between February 2024 and September 2024.

The forward currency contracts not designated in a hedging relationship outstanding as of January 28, 2024 mature on different dates between February 2024 and October 2024.

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

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As of January 28, 2024, the Company's minimum lease commitment for distribution center operating leases which have been committed to, but not yet commenced, was $ 299.6 million, which is not reflected in the table above.

The weighted-average remaining lease term and weighted-average discount rate were as follows:

January 29, 2023

Weighted-average remaining lease term 5.64 years

The weighted-average remaining lease terms and weighted-average discount rates were as follows:

January 28, 2024 January 29, 2023

Weighted-average remaining lease term 6.95 years 5.64 years

Weighted-average discount rate 4.0 % 3.1 %

21 unchanged sentences

(In thousands)

Impairment of goodwill and other assets $ ( 28,171 ) $ — $ —

Impairment of goodwill and other assets, restructuring costs $ ( 26,085 ) $ ( 28,171 ) $ —

Gain on disposal of assets — 1,661 —

Acquisition-related expenses — — ( 1,417 )

Total tax adjustments $ ( 26,510 ) $ ( 1,417 ) $ ( 3,133 )

Total discrete income tax expense (recovery) $ ( 26,085 ) $ ( 26,510 ) $ ( 1,417 )

Please refer to Note 5.

Property and Equipment, Note 8.

Impairment of Goodwill and Other Assets, and Note 9.

Impairment of Goodwill and Other Assets, Restructuring Costs, and Note 9.

Acquisition-Related Expenses for further information.

tax reforms enacted in December 2017 required the Company to pay U.S.

income taxes on accumulated foreign subsidiary earnings not previously subject to U.S.

income tax at a rate of 15.5% on cash and cash equivalents and 8% on the remaining earnings, net of foreign tax credits.

The one-time transition tax is payable over eight years.

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”) into law.

The IRA contains a number of revisions to the Internal Revenue Code, including a 15% corporate minimum income tax for tax years beginning after December 31, 2022.

It also assesses a 1% excise tax on repurchases of corporate stock.

While this is not expected to have a material adverse effect on the Company's results of operations going forward, the Company will continue to evaluate its impact as further information becomes available.

As of January 28, 2024, the Company's net investment in its Canadian subsidiaries was $ 2.5 billion, of which $ 1.6 billion was determined to be indefinitely reinvested.

2 unchanged sentences

This deferred tax liability has been recorded on the basis that the Company would choose to make the repatriation transactions in the most tax efficient manner.

Specifically, to the extent that the Canadian subsidiaries have sufficient paid-up-capital, any such distributions would be structured as a return of capital, and therefore not subject to Canadian withholding tax.

Specifically, to the extent that the Canadian subsidiaries have paid-up-capital, any such distributions would be structured as a return of capital, and therefore not subject to Canadian withholding tax.

The unrecognized deferred tax liability on the indefinitely reinvested amount is approximately $ 89.7 million.

4 unchanged sentences

2023 2022 2021

(Percentages)

Federal income tax at statutory rate 21.0 % 21.0 % 21.0 %

3 unchanged sentences

Excess tax benefits from stock-based compensation ( 0.4 ) ( 0.5 ) ( 0.9 )

Impairment of goodwill and other assets and gain on disposal of assets 7.8 — —

Tax on unremitted foreign earnings 2.6 1.4 —

Impairment of goodwill and other assets, gain on disposal of assets — 7.8 —

Permanent and other ( 0.1 ) ( 0.9 ) 0.3

6 unchanged sentences

Inventories 43,157 43,471

Intangible assets, net 778 873

Non-current lease liabilities 216,495 173,700

Stock-based compensation 16,093 10,739

Accrued bonuses 19,075 13,647

Unredeemed gift card liability 15,580 12,877

Foreign tax credits 1,909 2,003

Non-current lease liabilities 286,528 216,495

Research and experimental expenditures 48,922 —

Stock-based compensation 20,057 16,093

Other 16,802 9,645

15 unchanged sentences

The majority of the net operating loss carryforwards expire, if unused, between fiscal 2030 and fiscal 2040.

There was a $ 2.1 million net decrease in the valuation allowance in 2022, compared to a $ 3.7 million net decrease in 2021, and a $ 0.8 million net increase in 2020.

The Company files income tax returns in the U.S., Canada, and various foreign, state, and provincial jurisdictions.

There was a $ 1.6 million net increase in the valuation allowance in 2023, compared to a $ 2.1 million net decrease in 2022, and a $ 3.7 million net decrease in 2021.

The Company files income tax returns in the U.S., Canada, and various foreign and state jurisdictions.

The 2017 to 2022 tax years remain subject to examination by the U.S.

2 unchanged sentences

The 2017 to 2022 tax years remain subject to examination by Canadian tax authorities.

The 2016 to 2021 tax years remain subject to examination by tax authorities in certain foreign jurisdictions.

The 2016 to 2022

tax years remain subject to examination by tax authorities in certain foreign jurisdictions.

The Company does not have any significant unrecognized tax benefits arising from uncertain tax positions taken, or expected to be taken, in the Company's tax returns.

10 unchanged sentences

The Company's calculation of weighted-average shares includes the common stock of the Company as well as the exchangeable shares.

Exchangeable shares are the equivalent of common shares in all material respects.

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

Exchangeable shares are the economic equivalent of common shares in all material respects.

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

For 2023, 2022, and 2021, 62.7 thousand, 43.5 thousand, and 36.0 thousand 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.

2 unchanged sentences

During the first quarter of 2022, the Company completed the remaining stock repurchases under this program.

On March 23, 2022, the Company's board of directors approved a stock repurchase program for up to $ 1.0 billion of the Company's common shares on the open market or in privately negotiated transactions.

The repurchase plan has no time limit and does not require the repurchase of a minimum number of shares.

On March 23, 2022 and November 29, 2023, the Company's board of directors approved stock repurchase programs, each for up to $ 1.0 billion of the Company's common shares on the open market or in privately negotiated transactions.

The repurchase plans have no time limit and do 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.

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 January 29, 2023, the remaining authorized value was $ 743.8 million.

The authorized value of shares available to be repurchased under these programs excludes the cost of commissions and excise taxes and as of January 28, 2024, the remaining authorized value was $ 1.2 billion.

During 2023, 2022, and 2021, 1.5 million, 1.4 million, and 2.2 million shares, respectively, were repurchased under the programs at a total cost including commissions and excise taxes of $ 558.7 million, $ 444.0 million, and $ 812.6 million, respectively.

5 unchanged sentences

License and supply arrangements .

The Company has entered into 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, Saudi Arabia, and Mexico.

The Company has entered into license and supply arrangements with partners in the Middle East and Mexico which grant them the right to operate lululemon branded retail locations and sell lululemon products on websites in specific countries.

Under these arrangements, the Company supplies the partners with lululemon products, training, and other support.

An extension to the initial term of the agreement for the Middle East was signed in 2020 and it extends the arrangement to December 2024.

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

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.

There was also an e-commerce website operated through the license and supply arrangements.

The following table summarizes the Company's contractual arrangements as of January 29, 2023, and the timing and effect that such commitments are expected to have on its liquidity and cash flows in future periods:

As of January 28, 2024, there were 39 licensed locations, including 15 in Mexico, eight in the United Arab Emirates, six in Saudi Arabia, three in Qatar, three in Kuwait, three in Israel, and one in Bahrain.

One-time transition tax payable .

tax reforms enacted in December 2017 imposed a mandatory transition tax on accumulated foreign subsidiary earnings which have not previously been subject to U.S.

income tax at a rate of 15.5% on cash and cash equivalents and 8% on the remaining earnings, net of foreign tax credits.

The one-time transition tax is payable over eight years beginning in fiscal 2018.

The table below outlines the remaining expected payments due by fiscal year.

Payments Due by Fiscal Year

2 unchanged sentences

One-time transition tax payable $ 28,555 $ 12,691 $ 15,864 $ — $ — $ — $ —

One-time transition tax payable .

tax reforms enacted in December 2017 imposed a mandatory transition tax on accumulated foreign subsidiary earnings which have not previously been subject to U.S.

The one-time transition tax is payable over eight years beginning in fiscal 2018.

The one-time transition tax payable is net of foreign tax credits, and the table above outlines the expected payments due by fiscal year.

Contingencies

Legal proceedings.

In addition to the legal proceedings described below, 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.

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, 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.

The Company has recognized immaterial provisions related to the expected outcome of legal proceedings.

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

(DISH) filed a complaint in the United States District Court for the District of Delaware and, along with DISH DBS Corporation, also with the United States International Trade Commission (ITC) under Section 337 of the Tariff Act of 1930 against the Company and its Curiouser Products subsidiary (MIRROR), along with ICON Health & Fitness, Inc., FreeMotion Fitness, Inc., NordicTrack, Inc., and Peloton Interactive, Inc., alleging infringement of various patents related to fitness devices containing internet-streaming enabled video displays.

In the ITC complaint, DISH seeks an exclusion order barring the importation of MIRROR fitness devices, streaming components and systems containing components that infringe one or more of the asserted patents as well as a cease and desist order preventing the Company from carrying out commercial activities within the United States related to those products.

In the District of Delaware complaint, DISH is seeking an order permanently enjoining the Company from infringing the asserted patents, an award of damages for the infringement of the asserted patents, and an award of damages for lost sales.

In the ITC investigation, an Administrative Law Judge issued an Initial Determination recommending an Exclusion Order and Cease and Desist Order be entered against the Company.

In February 2023, the parties finalized the details of a settlement agreement resolving all litigation between DISH and the Company for an immaterial amount.

Supplemental Cash Flow Information

6 unchanged sentences

Segmented Information

The Company's segments are based on the financial information it uses in managing its business and comprise two reportable segments:

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

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.

The Company's segments are based on the financial information the CODM, who is the Chief Executive Officer, uses to evaluate performance and allocate resources.

During the fourth quarter of 2023, the financial information the CODM regularly uses to evaluate performance and allocate resources was revised.

As the Company has further executed on its omni-channel retail strategy, and with the continued expansion of its international operations, the CODM has shifted resource allocation decisions to be focused by regional market, rather than by selling channel.

This resulted in a change in the Company's operating segments.

As of January 28, 2024, the Company reports three segments, Americas, China Mainland, and Rest of World, which is APAC and EMEA on a combined basis.

The Company does not report capital expenditures and assets by segment as that information is not reviewed by the CODM.

Previously, the Company's segments were comprised of company-operated stores, direct to consumer (or "e-commerce"), and other.

The Company has restated the prior period information to reflect its new segments.

2023 2022 2021

(In thousands)

Company-operated stores $ 3,648,127 $ 2,821,497 $ 1,658,807

Direct to consumer 3,699,791 2,777,944 2,284,068

Other 762,600 657,176 459,004

Americas $ 7,631,647 $ 6,817,454 $ 5,299,906

China Mainland 963,760 576,503 434,261

Rest of World 1,023,871 716,561 522,450

$ 9,619,278 $ 8,110,518 $ 6,256,617

Segmented income from operations:

Company-operated stores $ 991,067 $ 727,735 $ 212,592

Direct to consumer 1,562,538 1,216,496 1,029,102

Other 107,083 77,283 10,502

Americas $ 2,937,184 $ 2,503,740 $ 1,867,016

China Mainland 337,316 196,865 167,318

Rest of World 201,832 103,204 67,674

3,476,332 2,803,809 2,102,008

1 unchanged sentence

lululemon Studio obsolescence provision 23,709 62,928 —

Impairment of goodwill and other assets, restructuring costs 74,501 407,913 —

Amortization of intangible assets 5,010 8,752 8,782

Impairment of goodwill and other assets 407,913 — —

Acquisition-related expenses — — 41,394

3 unchanged sentences

Income before income tax expense $ 2,175,735 $ 1,332,571 $ 1,333,869

Capital expenditures:

Company-operated stores $ 303,697 $ 189,629 $ 134,203

Direct to consumer 57,086 81,679 37,245

Corporate and other 277,874 123,194 57,778

$ 638,657 $ 394,502 $ 229,226

Depreciation and amortization:

Company-operated stores $ 132,715 $ 116,107 $ 100,776

Direct to consumer 36,128 29,877 14,847

Corporate and other 122,948 78,222 69,855

Americas $ 170,417 $ 137,260 $ 121,278

China Mainland 25,746 17,842 12,208

Rest of World 23,644 19,346 16,829

Corporate 159,577 117,343 73,891

$ 379,384 $ 291,791 $ 224,206

Intercompany amounts are excluded from the above table as they are not included in the materials reviewed by the chief operating decision maker.

The amortization of intangible assets in the above table includes $ 8.7 million, $ 8.7 million, and $ 5.2 million related to lululemon Studio for 2022, 2021, and 2020, respectively.

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

Property and equipment, net by geographic area as of January 29, 2023 and January 30, 2022 were as follows:

Long-lived assets, including property and equipment, net and right-of-use lease assets, by geographic area as of January 28, 2024 and January 29, 2023 were as follows:

January 28, 2024 January 29, 2023

2 unchanged sentences

Canada 671,622 601,756

Outside of North America 167,053 117,201

People's Republic of China 284,575 233,590

Other geographic areas 257,906 228,370

$ 2,811,421 $ 2,239,033

Net Revenue by Category and Geography

Disaggregated Net Revenue

In addition to the disaggregation of net revenue by reportable segment in Note 23.

4 unchanged sentences

Canada 1,285,255 1,163,111 954,219

China Mainland 963,760 576,503 434,261

Hong Kong SAR, Taiwan, and Macau SAR

170,533 105,130 86,111

People's Republic of China 1,134,293 681,633 520,372

Rest of world 611,431 436,339 326,449

Other geographic areas 853,338 611,431 436,339

$ 9,619,278 $ 8,110,518 $ 6,256,617

7 unchanged sentences

$ 9,619,278 $ 8,110,518 $ 6,256,617

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

2023 2022 2021

(In thousands)

Company-operated stores $ 4,410,956 $ 3,648,127 $ 2,821,497

E-commerce 4,311,110 3,699,791 2,777,944

Other channels 897,212 762,600 657,176

$ 9,619,278 $ 8,110,518 $ 6,256,617

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 8. Financial Statements and Supplementary Data