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What changed in Lululemon Athletica's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Lululemon Athletica's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+266 added−309 removedSource: 10-K (2025-03-27) vs 10-K (2024-03-21)

Top changes in Lululemon Athletica's 2025 10-K

266 paragraphs added · 309 removed · 213 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur finished goods and fabric suppliers are assessed against the Vendor Code of Ethics prior to forming a business relationship, and regularly thereafter; we work with factories that can uphold our strict requirements. Our Foreign Migrant Worker Standard sets out our minimum requirements for what we believe are the appropriate and ethical recruitment, employment, and repatriation of foreign migrant workers.
Biggest changeThe code, which is based on international standards, sets the minimum standards for our supplier partners and is a component of our supplier and manufacturer agreements. Our finished goods and fabric suppliers are assessed against the Vendor Code of Ethics prior to forming a business relationship, and regularly thereafter; we work with factories that can uphold our strict requirements.
These offerings include, among other things: • Competitive compensation which rewards exceptional performance; • A Fund your Future program for eligible employees which offers partial contribution matches to a pension plan and employee share purchase plan; • An annual paid VALUES (Volunteer, Awareness, Life, Unity, Empowerment, Support) Day, competitive paid time off, and sick leave; • An employee discount program, which includes a lifetime discount to celebrate the contribution of our long-tenured employees to keep them within our collective, even when they have moved on to pursue goals outside of lululemon; • Reimbursement programs which reward physical activity; • A parenthood program which is a gender-neutral benefit that provides all eligible employees up to six months of paid leave; • An employee assistance program which provides free confidential support to all our employees and their families in a variety of areas from mental well-being to financial services to advice for new parents; and • Training and development of all of our employees including, but not limited to, mentorship programs, IDEA internships, leadership development, vision and goals, and coaching.
These offerings include, among other things: • Competitive compensation which rewards exceptional performance; • A Fund your Future program for eligible employees which offers partial contribution matches to a pension plan and employee share purchase plan; • An annual paid VALUES (Volunteer, Awareness, Life, Unity, Empowerment, Support) Day, competitive paid time off, and sick leave; • An employee discount program, which includes a lifetime discount to celebrate the contribution of our long-tenured employees to keep them within our collective, even when they have moved on to pursue goals outside of lululemon; • Reimbursement programs which reward physical activity; • A parenthood program that provides all eligible employees up to six months of paid leave; • An employee assistance program which provides free confidential support to all our employees and their families in a variety of areas from mental well-being to financial services to advice for new parents; and • Training and development of all of our employees including, but not limited to, mentorship programs, global internships, leadership development, vision and goals, and coaching.
We believe China Mainland net revenue growth will drive an increase in our overall international net revenue. We plan to continue to invest in China Mainland and expect that the majority of our company-operated store openings in 2024 will be in this market.
We believe China Mainland net revenue growth will drive an increase in our overall international net revenue. We plan to continue to invest in China Mainland and expect that the majority of our company-operated store openings in 2025 will be in this market.
We believe this is another way in which we can attract new guests and enable them to experience our products. Net revenue from our other product categories represented 13% of net revenue in 2023.
We believe this is another way in which we can attract new guests and enable them to experience our products. Net revenue from our other product categories represented 13% of net revenue in 2024.
Our capabilities differ by market and include: • Buy online pick-up in store - guests can purchase our products via our website or digital app and then collect that product from a retail location; • Back-back room - our store educators can access inventory located at our other locations and have product shipped directly to a guest's address or a store; 2 Table of Contents • Ship from store – we are able to fulfill e-commerce orders by accessing inventory at both our distribution centers and at our retail locations, expanding the pool of accessible inventory; • Returns processing – e-commerce guests are able to return products either online or in-store; and • One inventory pool – we are able to view and allocate the product held at our distribution centers to either our physical retail locations, or make it available to fulfill online demand.
Our capabilities differ by market and include: • Buy online pick-up in store - guests can purchase our products via our website or digital app and then collect that product from a retail location; • Back-back room - our store educators can access inventory located at our other locations and have product shipped directly to a guest's address or a store; • Ship from store – we are able to fulfill e-commerce orders by accessing inventory at both our distribution centers and at our retail locations, expanding the pool of accessible inventory; • Returns processing – e-commerce guests are able to return products either online or in-store; and • One inventory pool – we are able to view and allocate the product held at our distribution centers to either our physical retail locations, or make it available to fulfill online demand. 2 Table of Contents We operate a combination of physical retail locations and e-commerce services via our websites, other region-specific websites, digital marketplaces, and mobile apps.
In 6 Table of Contents addition, we believe our vertical retail distribution strategy and community-based marketing differentiates us further, allowing us to more effectively control our brand image and connect with our guests. The market for athletic apparel is highly competitive.
In addition, we believe our vertical retail distribution strategy and community-based marketing differentiates us further, allowing us to more effectively control our brand image and connect with our guests. The market for athletic apparel is highly competitive.
(together with its subsidiaries) is referred to as "lululemon," "the Company," "we," "us," or "our." We refer to the fiscal year ended January 28, 2024 as "2023," the fiscal year ended January 29, 2023 as "2022," and the fiscal year ended January 30, 2022 as "2021." Our next fiscal year ends on February 2, 2025 and is referred to as "2024." Components of this discussion of our business include: • Our Products • Our Markets and Segments • Integrated Marketing • Product Design and Development • Sourcing and Manufacturing • Distribution Facilities • Competition • Seasonality • Human Capital • Intellectual Property • Securities and Exchange Commission Filings Our Products We offer a comprehensive line of performance apparel, footwear, and accessories marketed under the lululemon brand.
(together with its subsidiaries) is referred to as "lululemon," "the Company," "we," "us," or "our." We refer to the fiscal year ended February 2, 2025 as "2024," the fiscal year ended January 28, 2024 as "2023." Our next fiscal year ends on February 1, 2026 and is referred to as "2025." Components of this discussion of our business include: • Our Products • Our Markets and Segments • Integrated Marketing • Product Design and Development • Sourcing and Manufacturing • Distribution Facilities • Competition • Seasonality • Human Capital • Intellectual Property • Securities and Exchange Commission Filings Our Products We offer a comprehensive line of technical athletic apparel, footwear, and accessories marketed under the lululemon brand.
These core values attract passionate and motivated employees who are driven to achieve personal and professional goals, and share our purpose "to elevate human potential by helping people feel their best." In this Annual Report on Form 10-K for the fiscal year ended January 28, 2024, lululemon athletica inc.
These core values attract passionate and motivated employees who are driven to achieve personal and professional goals, and share our purpose "to elevate human potential by helping people feel their best." In this Annual Report on Form 10-K for the fiscal year ended February 2, 2025, lululemon athletica inc.
In this way, we believe we are better positioned to address the needs of our guests, helping us advance our product lines and differentiate us from our competitors. During 2023, our women's range represented 64% of net revenue and our men's range represented 23% of net revenue. Our comprehensive men's line is a key pillar of our strategic growth plans.
In this way, we believe we are better positioned to address the needs of our guests, helping us advance our product lines and differentiate us from our competitors. During 2024, our women's range represented 63% of net revenue and our men's range represented 24% of net revenue. Our comprehensive men's line is a key pillar of our strategic growth plans.
Distribution Facilities We operate and distribute finished products from our distribution facilities in the United States, Canada, and Australia. We own our distribution center in Groveport, Ohio, and lease our other distribution facilities. We also utilize third-party logistics providers in a number of countries in which we operate to warehouse and distribute finished products from their warehouse locations.
We own our distribution center in Groveport, Ohio, and lease our other distribution facilities. We also utilize third-party logistics providers in a number of countries in which we operate to warehouse and distribute finished products from their warehouse locations.
We provide free access to various reports that we file with, or furnish to, the United States Securities and Exchange Commission, or the SEC, through our website, as soon as reasonably practicable after they have been filed or furnished.
Securities and Exchange Commission Filings Our website address is www.lululemon.com. We provide free access to various reports that we file with, or furnish to, the United States Securities and Exchange Commission, or the SEC, through our website, as soon as reasonably practicable after they have been filed or furnished.
As of January 28, 2024, we operated 47 outlets, the majority of which were in the Americas. • Like New - Our re-commerce program allows guests to exchange their gently used lululemon products for merchandise credit. Those products are then verified and quality checked before being resold online at likenew.lululemon.com.
As of February 2, 2025, we operated 52 outlets, the majority of which were in the Americas. • Like New - Our re-commerce program allows guests to exchange their gently used lululemon products for merchandise credit. Those products are then verified and quality checked before being resold online at likenew.lululemon.com.
The Be Human pillar of our Impact Agenda sets out our focus areas with respect to human capital, including: • Inclusion, Diversity, Equity, and Action (“IDEA”); • Employee empowerment; and • Fair labor practices and the well-being of the people who make our products.
The Be Human pillar of our Impact Agenda sets out our focus areas with respect to human capital, including inclusion for all, employee empowerment, and fair labor practices and the well-being of the people who make our products.
We strive to foster a distinctive culture rooted in our core values that attracts and retains passionate and motivated employees who are driven to achieve personal and professional goals. We believe our people succeed because we create an environment that fosters growth and is diverse and equitable.
We strive to foster a distinctive culture rooted in our core values that attracts and retains passionate and motivated employees who are driven to achieve personal and professional goals. We believe our people succeed because we create an environment that fosters growth and provides opportunities for all.
Our retail stores are located primarily on street locations, in lifestyle centers, and in malls. Our sales per square foot was $1,609, $1,580, and $1,443 for 2023, 2022, and 2021 respectively.
Our retail stores are located primarily on street locations, in lifestyle centers, and in malls. Our sales per square foot was $1,574 and $1,609 for 2024 and 2023, respectively.
Number of company-operated stores by market January 28, 2024 January 29, 2023 United States 367 350 Canada 71 69 Americas 438 419 China Mainland 127 99 Australia 33 32 South Korea 19 16 Hong Kong SAR 9 9 Japan 8 7 New Zealand 8 8 Taiwan 8 7 Singapore 7 8 Malaysia 3 2 Macau SAR 2 2 Thailand 1 — APAC 98 91 4 Table of Contents Number of company-operated stores by market January 28, 2024 January 29, 2023 United Kingdom 20 20 Germany 9 10 France 6 4 Ireland 4 4 Spain 3 3 Netherlands 2 1 Sweden 2 2 Norway 1 1 Switzerland 1 1 EMEA 48 46 Total company-operated stores 711 655 E-commerce : We believe e-commerce is convenient for our guests and also allows us to reach and serve guests in markets beyond where our physical retail locations are based.
Number of company-operated stores by market February 2, 2025 January 28, 2024 United States 374 367 Canada 71 71 Mexico 17 — Americas 462 438 China Mainland 151 127 Australia 33 33 South Korea 20 19 Hong Kong SAR 10 9 Japan 10 8 New Zealand 8 8 Taiwan 8 8 Singapore 7 7 Malaysia 5 3 Thailand 4 1 Macau SAR 2 2 APAC 107 98 4 Table of Contents Number of company-operated stores by market February 2, 2025 January 28, 2024 United Kingdom 19 20 Germany 9 9 France 6 6 Ireland 4 4 Spain 3 3 Netherlands 2 2 Sweden 2 2 Norway 1 1 Switzerland 1 1 EMEA 47 48 Total company-operated stores 767 711 E-commerce : We believe e-commerce is convenient for our guests and also allows us to reach and serve guests in markets beyond where our physical retail locations are based.
Included within our Impact Agenda is a goal to invest a total of $75.0 million to advance equity in well-being by the end of 2025. As of January 28, 2024, we have invested a total of $44.8 million (1) towards this goal.
Included within our Impact Agenda is a goal to invest a total of $75.0 million to advance equity in well-being by the end of 2025. As of February 2, 2025, we have invested a total of $71.0 million (1) towards this goal.
We also serve our guests via our WeChat store and on third party marketplaces such as T-Mall and JD.com. 3 Table of Contents Rest of World In 2023, the net revenue we generated in APAC and EMEA represented 11% of our total net revenue. 2023 2022 2021 (In thousands) Net revenue $ 1,023,871 $ 716,561 $ 522,450 Net revenue growth 42.9 % 37.2 % 36.3 % We have experienced significant net revenue growth in APAC and EMEA and intend to continue to invest in these markets to build brand awareness.
We also serve our guests via our WeChat store and on third party marketplaces such as T-Mall and JD.com. 3 Table of Contents Rest of World In 2024, the net revenue we generated in APAC and EMEA represented 12% of our total net revenue. 2024 2023 (In thousands) Net revenue $ 1,298,633 $ 1,023,871 Net revenue growth 26.8 % 42.9 % We have experienced significant net revenue growth in APAC and EMEA and intend to continue to invest in these markets to build brand awareness.
We work with a group of approximately 49 vendors that manufacture our products, five of which produced 55% of our products in 2023, with the largest manufacturer producing 17%. During 2023, 42% of our products were manufactured in Vietnam, 16% in Cambodia, 11% in Sri Lanka, 10% in Indonesia, and 8% in Bangladesh, and the remainder in other regions.
We work with a group of approximately 52 vendors that manufacture our products, five of which produced 49% of our products in 2024, with the largest manufacturer producing 15%. During 2024, 40% of our products were manufactured in Vietnam, 17% in Cambodia, 11% in Sri Lanka, 11% in Indonesia, and 7% in Bangladesh, and the remainder in other regions.
This represents an opportunity for us and we have a multi-faceted strategy to build brand awareness, affinity, and guest loyalty. This strategy is designed to leverage owned and paid channels, our ambassador network, brand partners, events, and content – to drive awareness, consideration, engagement, conversion, and ultimately loyalty and engagement at the global, regional, and local levels.
This represents an opportunity for us and we have designed a multi-faceted strategy that leverages what guests know us for; our products, community, and experiences. This strategy is designed to leverage owned and paid channels, our ambassador network, events, and content – to drive awareness, consideration, engagement, conversion, and ultimately loyalty and engagement at the global, regional, and local levels.
These other channels include: • Temporary locations - Our seasonal stores and pop-ups are typically opened for a short period of time enabling us to serve guests during peak shopping periods in markets where we do not ordinarily have a physical location, or to expand access in markets where we see high demand at our existing locations. • Wholesale - We sell to partners that offer convenient access for both core and new guests, including yoga and fitness studios, university campus retailers, and other select partners. • Outlets - We utilize outlets to sell slower moving inventory and inventory from prior seasons at discounted prices.
These other channels include: • Temporary locations - Our seasonal stores and pop-ups are typically opened for a short period of time enabling us to serve guests during peak shopping periods in markets where we do not ordinarily have a physical location, or to expand access in markets where we see high demand at our existing locations. • Wholesale - We sell to partners that offer convenient access for both core and new guests, including university campus retailers and other organizations that we partner with to sell co-branded lululemon products.
We work with a group of approximately 67 suppliers to provide the fabrics for our products. In 2023, 52% of our fabrics were produced by our top five fabric suppliers, with the largest manufacturer producing 19%. During 2023, 40% of our fabrics originated from Taiwan, 26% from China Mainland, and 12% from Sri Lanka, and the remainder from other regions.
We work with a group of approximately 67 suppliers to provide the fabrics for our products. In 2024, 52% of our fabrics were produced by our top five fabric suppliers, with the largest manufacturer producing 18%. During 2024, 35% of our fabrics originated from Taiwan, 28% from China Mainland, and 11% from South Korea, and the remainder from other regions.
In 2023, the net revenue we generated in the Americas represented 79% of our total net revenue. 2023 2022 2021 (In thousands) Net revenue $ 7,631,647 $ 6,817,454 $ 5,299,906 Net revenue growth 11.9 % 28.6 % 40.3 % Our operations in the Americas are core to our business and we aim to continue to grow our net revenue in this market through ongoing product innovation and by building brand awareness.
In 2024, the net revenue we generated in the Americas represented 75% of our total net revenue. 2024 2023 (In thousands) Net revenue $ 7,928,156 $ 7,631,647 Net revenue growth 3.9 % 11.9 % Our operations in the Americas are core to our business and we aim to continue to grow our net revenue in this market through ongoing product innovation and by building brand awareness.
Under these arrangements we have granted certain third parties the right to operate lululemon branded retail locations and to sell lululemon products on websites in specific countries.
Under these arrangements we have granted certain third parties the right to operate lululemon branded retail locations and to sell lululemon products on websites in specific countries. On September 10, 2024, we acquired the lululemon branded retail locations and operations run by a third party in Mexico.
We continue to evolve and integrate our digital and physical channels in order to enrich our interactions with our guests, and to provide a seamless omni-channel experience. We have invested in technologies which enable our omni-channel retailing model.
We operate an omni-channel retail model and aim to efficiently and effectively serve our guests in the ways most convenient to them. We continue to evolve and integrate our digital and physical channels in order to enrich our interactions with our guests, and to provide a seamless omni-channel experience. We have invested in technologies which enable our omni-channel retailing model.
In 2023, the net revenue we generated in China Mainland represented 10% of our total net revenue. 2023 2022 2021 (In thousands) Net revenue $ 963,760 $ 576,503 $ 434,261 Net revenue growth 67.2 % 32.8 % 80.3 % We have experienced significant net revenue growth in China Mainland and believe that as we continue to expand our operations and build our brand awareness, net revenue will continue to increase in this market.
In 2024, the net revenue we generated in China Mainland represented 13% of our total net revenue. 2024 2023 (In thousands) Net revenue $ 1,361,337 $ 963,760 Net revenue growth 41.3 % 67.2 % We have experienced significant net revenue growth in China Mainland and believe that as we continue to expand our operations and build our brand awareness, net revenue will continue to increase in this market.
Number of retail locations operated by third parties by market January 28, 2024 January 29, 2023 Mexico 15 12 United Arab Emirates 8 7 Saudi Arabia 6 3 Israel 3 — Kuwait 3 1 Qatar 3 3 Bahrain 1 — Total locations operated by third parties under license and supply arrangements 39 26 5 Table of Contents Integrated Marketing We believe that our brand awareness is relatively low, especially outside of the Americas, and also with our male guests.
We had previously granted the third party the right to operate retail locations and to sell lululemon products in Mexico. 5 Table of Contents Number of retail locations operated by third parties by market February 2, 2025 January 28, 2024 Mexico — 15 United Arab Emirates 10 8 Saudi Arabia 8 6 Israel 7 3 Kuwait 4 3 Qatar 4 3 Bahrain 1 1 Total locations operated by third parties under license and supply arrangements 34 39 Integrated Marketing We believe that our brand awareness is relatively low, especially outside of the Americas, and also with men.
It includes increasing competition from established companies that are expanding their production and marketing of performance products, as well as from frequent new entrants to the market. We are in direct competition with wholesalers and direct sellers of athletic apparel and footwear, such as Nike, Inc., adidas AG, PUMA, Under Armour, Inc., and Columbia Sportswear Company.
It includes increasing competition from established companies that are expanding their production and marketing of performance products, as well as from frequent new entrants to the market. We are in direct competition with global as well as regional and country-specific wholesalers and direct sellers of athletic apparel and footwear.
We are proud that as of January 28, 2024, approximately 50% of our board of directors, 70% of our senior executive leadership team, and 50% of our vice presidents and above are women, while approximately 75% of our overall workforce are women.
We are proud that as of February 2, 2025, approximately 55% of our board of directors, 60% of our senior executive leadership team, and 45% of our vice presidents and above are women, while approximately 75% of our overall workforce are women.
We operate lululemon branded retail locations in these markets in a variety of different formats including different sizes of company-operated stores, outlets, pop-ups, and stores operated by third-parties under supply and license agreements in the Middle East and Israel.
Where we identify growth opportunities, we plan to open new retail locations, including in new markets across the EMEA and APAC regions. We operate lululemon branded retail locations in these markets in a variety of different formats including different sizes of company-operated stores, outlets, pop-ups, and stores operated by third-parties under license and supply arrangements.
We also serve our guests via our e-commerce website www.lululemon.com, our mobile app, our “Like New” re-commerce program, and through certain wholesale arrangements including certain yoga and fitness studios, university campus retailers, and other select partners. China Mainland We opened our first store in China Mainland in fiscal 2014.
We also serve our guests via our e-commerce website www.lululemon.com, our mobile app, our “Like New” re-commerce program, and through certain wholesale arrangements including university campus retailers and other organizations that we partner with to sell co-branded lululemon products as well as through wholesale arrangements with yoga and fitness studios and other select partners.
Our Responsible Supply Chain program is built on three pillars: • Monitoring - Assessing and improving working conditions in factories. • Integration - Integrating responsible purchasing practices across enterprise strategies, processes, and tools. • Collaboration - Working with multi-stakeholder organizations, industry, suppliers, and brands to support systemic change and impact.
Our Responsible Supply Chain program is built on three pillars: • Monitoring - Assessing and, in collaboration with suppliers, improving working conditions in facilities. • Integration - Integrating responsible purchasing practices across key lululemon strategies, processes, and tools. • Collaboration - Working with multi-stakeholder organizations, industry, suppliers, and brands to support systemic change and impact. 8 Table of Contents Our Vendor Code of Ethics outlines our commitment to respect human and labor rights, and promote safe and fair working conditions for people in our supply chain.
Our annual net revenue is typically weighted more heavily toward our fourth fiscal quarter, reflecting our historical strength in sales during the holiday season in the Americas, while our operating expenses are generally more equally distributed throughout the year. As a result, a substantial portion of our operating profits are typically generated in the fourth quarter of our fiscal year.
Seasonality Our business is affected by the general seasonal trends common to the retail apparel industry. Our annual net revenue is typically weighted more heavily toward our fourth fiscal quarter, reflecting our historical strength in sales during the holiday season in the Americas, while our operating expenses are generally more equally distributed throughout the year.
We plan to continue to expand square footage and open new company-operated stores to support our growth objectives. Americas We have operated in the Americas for over 25 years. We opened our first ever store in Vancouver, Canada in 1998.
Americas We have operated in the Americas for over 25 years. We opened our first ever store in Vancouver, Canada in 1998.
For example, we generated approximately 43% of our full year operating profit during the fourth quarter of 2023. Human Capital Our Impact Agenda sets out our social and environmental goals and strategy across three pillars - Be Human, Be Well, and Be Planet. Details can be found in our Impact Report on our website (https://corporate.lululemon.com/our-impact).
Human Capital Our Impact Agenda sets out our social and environmental goals and strategy across three pillars - Be Human, Be Well, and Be Planet. Details can be found in our Impact Report on our website.
We operate a combination of physical retail locations and e-commerce services via our websites, other region-specific websites, digital marketplaces, and mobile apps. Our physical retail locations remain a key part of our growth strategy and we view them as a valuable tool in helping us build our brand and product line as well as enabling our omni-channel capabilities.
Our physical retail locations remain a key part of our growth strategy and we view them as a valuable tool in helping us build our brand and product line as well as enabling our omni-channel capabilities. We plan to continue to expand square footage and open new company-operated stores to support our growth objectives.
We generate net revenue in the Americas through our lululemon branded retail locations which include different sizes of company-operated stores, outlets, pop-ups, other temporary locations, and stores operated by a third-party under a supply and license agreement in Mexico.
We also plan to continue to invest in our omni-channel capabilities, to open new retail locations, and to relocate, optimize, and renovate our existing locations as needed. We generate net revenue in the Americas through our lululemon branded retail locations which include different sizes of company-operated stores, outlets, pop-ups, and other temporary locations.
(2) (1) We have contributed $44.8 million to lululemon's Centre for Social Impact, $32.4 million of which has been contributed directly to social impact organizations. The remaining $12.4 million primarily consists of contributions toward a donor-advised fund for future grant making.
We see strong engagement in inclusion-focused education and (1) We have contributed $71.0 million to lululemon's Centre for Social Impact, $45.5 million of which has been contributed directly to social impact organizations. The remaining $25.5 million primarily consists of contributions toward a donor-advised fund for future grant making. 7 Table of Contents training across our global employee base.
We aim to foster a culture of inclusion by making IDEA part of our everyday conversation, and frequently review our policies, programs, and practices to identify ways to be more inclusive and equitable. Employee Empowerment We believe our people are key to the success of our business. As of January 28, 2024 we employed approximately 38,000 people worldwide.
We strive to foster a culture where inclusion is part of everyday conversations and regularly review our policies, programs, and practices to try to ensure they support a more inclusive and fair workplace. Employee Empowerment We believe our people are key to the success of our business. As of February 2, 2025, we employed approximately 39,000 people worldwide.
We require that all of our suppliers and manufacturers adhere to our Vendor Code of Ethics regarding social and environmental sustainability practices. Our product quality and sustainability teams closely assess and monitor each supplier's compliance with applicable laws and our Vendor Code of Ethics, including by partnering with leading inspection and verification firms.
Our product quality and sustainability teams closely assess and monitor each supplier's compliance with applicable laws and our Vendor Code of Ethics, including by partnering with leading inspection and verification firms. 6 Table of Contents Distribution Facilities We operate and distribute finished products from our distribution facilities in the United States, Canada, and Australia.
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During the fourth quarter of 2023, we revised the financial information which our Chief Executive Officer, who is our chief operating decision maker ("CODM"), uses to evaluate performance and allocate resources. This resulted in a change in our identified operating segments.
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On September 10, 2024, we acquired the lululemon branded retail locations and operations run by a third party in Mexico. We had previously granted the third party the right to operate retail locations and to sell lululemon products in Mexico. China Mainland We opened our first store in China Mainland in fiscal 2014.
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As we have further executed on our omni-channel retail strategy, and continued to expand our operations in international markets, our performance reviews and resource allocation decisions have evolved to be made on a regional market basis. Our segment results have been recast to reflect our regional market-based structure. Historically, our segments were based on selling channel.
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We also sell to yoga and fitness studios and other select partners. • Outlets - We utilize outlets to sell slower moving inventory and inventory from prior seasons at discounted prices.
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We continue to monitor our revenue performance by our selling channels which are further described below. We operate an omni-channel retail model and aim to efficiently and effectively serve our guests in the ways most convenient to them.
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As a result, a substantial portion of our operating profits are typically generated in the fourth quarter of our fiscal year. For example, we generated approximately 42% of our full year operating profit during the fourth quarter of 2024.
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We also plan to continue to invest in our omni-channel capabilities, to open new retail locations, and to relocate, optimize, and renovate our existing locations as needed.
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Inclusion for All We are committed to fostering an environment where every individual feels valued and included, recognizing that diverse perspectives drive innovation and enrich our workplace.
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Where we identify growth opportunities, we plan to open new retail locations, including in new markets across the EMEA and APAC regions.
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During 2024, we implemented an ongoing feedback approach to gain insights into our workforce composition and gather measurable data on employees' feelings of engagement, inclusion, and belonging. Our primary objective is to cultivate a workforce inspired and informed by the diversity of the communities we serve and where we operate.
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We also compete with retailers who have expanded to include women's athletic apparel including The Gap, Inc. (including the Athleta brand), Victoria's Secret with its sport and lounge offering, and Urban Outfitters, Inc. Seasonality Our business is affected by the general seasonal trends common to the retail apparel industry.
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We strive to maintain equitable pay, by geography, for comparable work across all our global operations. We have achieved full pay equity across various demographics in regions where we analyze this data. We offer all employees education, training, and facilitated discussions on topics such as preventing bias, ensuring equal opportunity, and fostering inclusive leadership behaviors.
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Inclusion, Diversity, Equity and Action We believe IDEA is fundamental for shaping and building our company, industry, and communities, and for creating a shared sense of respect and belonging. By continuously striving to be an inclusive, diverse, and equitable organization, we aim to reflect a variety of perspectives and meet the needs of the global communities we serve.
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Our Foreign Migrant Worker Standard sets out our minimum requirements for what we believe are the appropriate and ethical recruitment, employment, and repatriation of foreign migrant workers.
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(2) While we track male and female genders, we acknowledge this is not fully encompassing of all gender identities. 7 Table of Contents We use an annual voluntary global survey to help us understand the demographics of our employee base and provide us with access to tangible metrics to help us understand our employees’ sense of inclusion and belonging.
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(3) In 2023, the participation rate was approximately 85%. Our overall goal is to reflect the racial diversity (4) of the communities we serve and in which we operate. We seek to maintain 100% gender pay equity within our entire global employee population, meaning equal pay for equal work across genders, by geography.
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We have achieved full pay equity, including gender and race, in the United States, which is the only country where we currently collect individually attributable race data. We offer all employees IDEA education, training, and guided conversations on a variety of topics, including anti-racism, anti-discrimination, and inclusive leadership behaviors.
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We have established People Networks, which are employee resource groups for employees who have marginalized and historically underrepresented identities. We see significant engagement in IDEA education and training across our global employee base.
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(3) The voluntary demographic survey results presented above relate to all of our employees in the Americas, Europe, Australia, and New Zealand. (4) "Racial diversity" is used to measure the non-white population. 8 Table of Contents We assess our performance and identify opportunities for improvement through an annual employee engagement survey.
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In 2023, the participation rate was approximately 85% and our employee engagement score exceeded the retail industry average. (5) Our engagement score suggests our people are proud to work for lululemon, they are motivated to contribute to work that aligns with their purpose, and they recommend lululemon as a great place to work.
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Our Vendor Code of Ethics outlines our commitment to respect human and labor rights, and promote safe and fair working conditions for people in our supply chain. The code, which is based on international standards, sets the minimum standards for our supplier partners and is a component of our supplier and manufacturer agreements.
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(5) Based on an industry benchmark provided by the third party that administers this survey to our employees. 9 Table of Contents Securities and Exchange Commission Filings Our website address is www.lululemon.com.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur supply chain capabilities may be disrupted due to these or other factors, such as severe weather, natural disasters, war or other military conflicts, terrorism, labor supply shortages or stoppages, the financial or operational instability of key suppliers or the countries in which they operate, or changes in diplomatic or trade relationships (including any sanctions, restrictions, and other responses to geopolitical events).
Biggest changeThe entire apparel industry, including our company, could face supply chain challenges as a result of the impacts of global public health crises, political instability, inflationary pressures, macroeconomic conditions, and other factors, including reduced freight availability and increased costs, port disruption, manufacturing facility closures, and related labor shortages and other supply chain disruptions. 14 Table of Contents Our supply chain capabilities may be disrupted due to these or other factors, such as severe weather, natural disasters, war or other military conflicts, terrorism, labor supply shortages or stoppages, the financial or operational instability of key suppliers or the countries in which they operate, or changes in diplomatic or trade relationships (including any sanctions, restrictions, and other responses to geopolitical events).
Investor and political advocacy groups, certain institutional investors, investment funds, other market participants, stockholders, and customers have focused increasingly on the environmental, social and governance ("ESG") practices of companies, including those associated with climate change and social responsibility. These parties have placed increased importance on the implications of the social cost of their investments.
Investor and political advocacy groups, certain institutional investors, investment funds, other market participants, stockholders, and customers have focused increasingly on the environmental, social and governance ("ESG") practices of companies, including those associated with climate change and social responsibility. These parties have placed increased importance on the implications of the social cost of their investments and disclosure of their ESG practices.
Certain provisions of the Inflation Reduction Act passed in 2022, including a 15% corporate alternative minimum tax, as well as the similar 15% global minimum tax under the Organization for Economic Cooperation and Development's Pillar Two Global Anti-Base Erosion Rules, may impact our income tax expense, profitability, and capital allocation decisions.
Certain provisions of the Inflation Reduction Act passed in 2022, including a 15% corporate alternative minimum tax, as well as the similar 15% global minimum tax under the Organization for Economic Cooperation and Development's Pillar Two Global Anti-Base Erosion Rules, may impact our income tax expense, profitability, and capital allocation decisions in the future.
Also, the loss of services of any of these key employees, or any negative public perception with respect to these individuals, may be disruptive to, or cause uncertainty in, our business and could have a negative impact on our ability to manage and grow our business effectively.
Also, the loss of services of any of these key individuals, or any negative public perception with respect to these individuals, may be disruptive to, or cause uncertainty in, our business and could have a negative impact on our ability to manage and grow our business effectively.
For example, we are subject to significant compliance obligations under privacy laws such as the General Data Privacy Regulation ("GDPR") in the European Union, the Personal Information Protection and Electronic Documents Act (“PIPEDA”) in Canada, the California Consumer Privacy Act ("CCPA") modified by the California Privacy Rights Act (“CPRA”), and the Personal Information Protection Law (“PIPL”) in the People's Republic of China ("PRC") (6) .
For example, we are subject to significant compliance obligations under privacy laws such as the General Data Privacy Regulation ("GDPR") in the European Union, the Personal Information Protection and Electronic Documents Act (“PIPEDA”) in Canada, the California Consumer Privacy Act ("CCPA") modified by the California Privacy Rights Act (“CPRA”), and the Personal Information Protection Law (“PIPL”) in the People's Republic of China ("PRC") (2) .
If we are unable to effectively and successfully further develop these and future new product categories and lines, we may not be able to increase or maintain our sales and our operating margins may be adversely affected. This may also divert the attention of management and cause additional expenses.
If we are unable to effectively and successfully further develop current and future new product categories and lines, we may not be able to increase or maintain our sales and our operating margins may be adversely affected. This may also divert the attention of management and cause additional expenses.
In 2024, assuming there are no exchange transactions by our exchangeable shareholders, we will continue to recognize Canadian withholding taxes on the accumulated earnings of our Canadian subsidiaries which are not indefinitely reinvested. We engage in a number of intercompany transactions across multiple tax jurisdictions.
In 2025, assuming there are no exchange transactions by our exchangeable shareholders, we will continue to recognize Canadian withholding taxes on the accumulated earnings of our Canadian subsidiaries which are not indefinitely reinvested. We engage in a number of intercompany transactions across multiple tax jurisdictions.
In addition, any of our intellectual 20 Table of Contents property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable, or our intellectual property protection may be unavailable or limited in some international countries where laws or law enforcement practices may not protect our intellectual property rights as fully as in the United States or Canada, and it may be more difficult for us to successfully challenge the use of our intellectual property rights by other parties in these countries.
In addition, any of our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable, or our intellectual property protection may be unavailable or limited in some international countries where laws or law enforcement practices may not protect our intellectual property rights as fully as in the United States or Canada, and it may be more difficult for us to successfully challenge the use of our intellectual property rights by other parties in these countries.
In addition, we are governed by Section 203 of the Delaware General Corporation Law which, subject to some specified exceptions, prohibits "business combinations" between a Delaware corporation and an "interested stockholder," which is generally defined as a stockholder who becomes a beneficial owner of 15% or more of a Delaware corporation's voting stock, for a three-year period following the date that the stockholder became an interested stockholder.
In addition, we are governed by Section 203 of the Delaware General Corporation Law which, subject to some specified exceptions, prohibits "business combinations" between a Delaware corporation and an "interested stockholder," which is 21 Table of Contents generally defined as a stockholder who becomes a beneficial owner of 15% or more of a Delaware corporation's voting stock, for a three-year period following the date that the stockholder became an interested stockholder.
The performance of our senior management team and other key employees may not meet our needs and expectations.
The performance of our senior management team and other key employees and contractors may not meet our needs and expectations.
In addition, any audits and inspections by governmental agencies related to these matters could result in significant settlement amounts, damages, fines, or other penalties, divert financial and management resources, and result in significant legal fees. An unfavorable outcome of any particular proceeding could have an adverse impact on our business, financial condition, and results of operations.
In addition, any audits and inspections by governmental agencies related to these matters could result in significant settlement amounts, damages, fines, or other 18 Table of Contents penalties, divert financial and management resources, and result in significant legal fees. An unfavorable outcome of any particular proceeding could have an adverse impact on our business, financial condition, and results of operations.
We could also incur additional costs and require additional resources to monitor, report, and comply with various ESG practices. Also, our failure, or perceived failure, to meet the standards included in any sustainability disclosure could negatively impact our reputation, employee retention, and the willingness of our customers and suppliers to do business with us.
We could also incur additional costs and require additional resources to monitor, report, and comply with various ESG practices. Also, our failure, or perceived failure, to meet the goals or targets included in any sustainability disclosure could negatively impact our reputation, employee retention, and the willingness of our customers and suppliers to do business with us.
As global economic conditions continue to be volatile or economic uncertainty remains, trends in consumer discretionary 17 Table of Contents spending also remain unpredictable and subject to reductions due to credit constraints and uncertainties about the future. Unfavorable economic conditions may lead consumers to delay or reduce purchases of our products.
As global economic conditions continue to be volatile or economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable and subject to reductions due to credit constraints and uncertainties about the future. Unfavorable economic conditions may lead consumers to delay or reduce purchases of our products.
Increases in the cost of raw materials, including petroleum or the prices we pay for silver and our cotton yarn and cotton-based textiles, could have a material adverse effect on our cost of goods sold, results of operations, financial condition, and cash flows.
Increases in the cost of raw materials, including petroleum or the prices we pay 15 Table of Contents for silver and our cotton yarn and cotton-based textiles, could have a material adverse effect on our cost of goods sold, results of operations, financial condition, and cash flows.
Data and security breaches can also occur as a result of non-technical issues including intentional or inadvertent breach by employees or persons with whom we have commercial relationships that result in the unauthorized release of personal or 15 Table of Contents confidential information.
Data and security breaches can also occur as a result of non-technical issues including intentional or inadvertent breach by employees or persons with whom we have commercial relationships that result in the unauthorized release of personal or confidential information.
The occurrence of real or perceived defects in any of our products, now or in the future, could result in additional negative publicity, regulatory investigations, or lawsuits filed against us, particularly if guests or others who use or purchase our lululemon Studio products are injured.
The occurrence of real or perceived defects in any of our products, now or in the future, could result in additional negative publicity, regulatory investigations, or lawsuits filed against us, particularly if guests or others who use or purchase our lululemon Studio products 10 Table of Contents are injured.
Our technology systems, websites, and operations of third parties on whom we rely, may encounter damage or disruption or slowdown caused by a failure to successfully upgrade systems, system failures, viruses, computer "hackers", natural disasters, or other causes.
Our technology systems, websites, and operations of third parties on whom we rely, may encounter damage, slowdown, or disruption including complete outages caused by a failure to successfully upgrade systems, system failures, viruses, computer "hackers", natural disasters, or other causes.
Responding to such actions can be costly and time-consuming, disrupt our business 21 Table of Contents and operations, and divert the attention of our board of directors, management, and employees from the pursuit of our business strategies. Such activities could interfere with our ability to execute our strategic plan.
Responding to such actions can be costly and time-consuming, disrupt our business and operations, and divert the attention of our board of directors, management, and employees from the pursuit of our business strategies. Such activities could interfere with our ability to execute our strategic plan.
Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our platform or services or using certain technologies, force us to implement expensive work-arounds, or impose other unfavorable terms.
Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could 20 Table of Contents require that we pay substantial damages or ongoing royalty payments, prevent us from offering our platform or services or using certain technologies, force us to implement expensive work-arounds, or impose other unfavorable terms.
Activist stockholders or others may create perceived uncertainties as to the future direction of our business or strategy which may be exploited by our competitors and may make it more difficult to attract and retain qualified personnel and potential guests, and may affect our relationships with current guests, vendors, investors, and other third parties.
Stockholders, political or consumer activists, or others may create perceived uncertainties as to the future direction of our business or strategy which may be exploited by our competitors and may make it more difficult to attract and retain qualified personnel and potential guests, and may affect our relationships with current guests, vendors, investors, and other third parties.
Global economic and political conditions could adversely impact our results of operations. Uncertain or challenging global economic and political conditions could impact our performance, including our ability to successfully expand internationally. Global economic conditions could impact levels of consumer spending in the markets in which we operate, which could impact our sales and profitability.
Uncertain or challenging global economic and political conditions could impact our performance, including our ability to successfully expand internationally. Global economic conditions could impact levels of consumer spending in the markets in which we operate, which could impact our sales and profitability.
Trade restrictions, including tariffs, quotas, embargoes, safeguards, and customs restrictions, could increase the cost or reduce the supply of products available to us, could increase shipping times, or may require us to modify our supply chain organization or other current business practices, any of which could harm our business, financial condition, and results of operations.
Trade restrictions, including tariffs, changes to de minimis thresholds, quotas, embargoes, safeguards, and customs restrictions, could increase the cost or reduce the supply of products available to us, could increase shipping times, or may require us to modify our supply chain organization or other current business practices, any of which could harm our business, financial condition, and results of operations.
We also face risks related to employee engagement and productivity which could result in increased headcount and lead to increased labor costs. Our business is affected by seasonality, which could result in fluctuations in our operating results. Our business is affected by the general seasonal trends common to the retail apparel industry.
We also face risks related to employee engagement and productivity which could result in increased headcount and lead to increased labor costs. 12 Table of Contents Our business is affected by seasonality, which could result in fluctuations in our operating results. Our business is affected by the general seasonal trends common to the retail apparel industry.
We have no long-term contracts with any of our suppliers or manufacturers for the production and supply of our raw materials and products, and we compete with other companies for fabrics, other raw materials, and production. During 2023, we worked with approximately 49 vendors to manufacture our products and 67 suppliers to provide the fabric for our products.
We have no long-term contracts with any of our suppliers or manufacturers for the production and supply of our raw materials and products, and we compete with other companies for fabrics, other raw materials, and production. During 2024, we worked with approximately 52 vendors to manufacture our products and 67 suppliers to provide the fabric for our products.
Our failure to anticipate and respond in a timely manner to changing consumer preferences could lead to, among other things, lower sales and excess inventory levels. We may not have relevant data to effectively understand and react to consumer preferences and expectations.
Our failure to anticipate and respond in a timely manner to changing consumer preferences could lead to, among other things, lower sales and excess inventory levels. We may not have or successfully leverage the relevant data to effectively understand and react to consumer preferences and expectations.
Foreign Corrupt Practices Act ("FCPA") and other anti-bribery laws applicable to our operations. In many countries, particularly in those with developing economies, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the FCPA or other U.S. and international laws and regulations applicable to us.
In many countries, particularly in those with developing economies, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the FCPA or other U.S. and international laws and regulations applicable to us.
We compete directly against wholesalers and direct retailers of athletic apparel, including large, diversified apparel companies with substantial market share, and established companies expanding their production and marketing of technical athletic apparel, as well as against retailers specifically focused on women's athletic apparel.
We compete directly against global as well as regional and country-specific wholesalers and direct retailers of athletic apparel, including large, diversified apparel companies with substantial market share, and established companies expanding their production and marketing of technical athletic apparel, as well as against smaller retailers and those specifically focused on women's athletic apparel.
Any sustainability report that we publish or other ESG disclosures we make may include our policies and practices on a variety of social and ethical matters, including corporate governance, environmental compliance, employee health and safety practices, human capital management, product quality, supply chain management, and workforce inclusion and diversity.
Any sustainability or impact report that we publish or other ESG disclosures we make may include our policies, practices, goals, and targets on a variety of social and ethical matters, including corporate governance, environmental compliance, employee health and safety practices, 16 Table of Contents human capital management, product quality, supply chain management, and workforce inclusion and composition.
Competition may result in pricing pressures, reduced profit margins or lost market share, or a failure to grow or maintain our market share, any of which could substantially harm our business and results of operations.
The market for our products is highly competitive. Competition may result in pricing pressures, reduced profit margins or lost market share, or a failure to grow or maintain our market share, any of which could substantially harm our business and results of operations.
If suppliers or contractors do not comply with these standards or applicable laws or there is negative publicity regarding the production methods of any of our suppliers or manufacturers, even if unfounded or not specific to our supply chain, our reputation and sales could be adversely affected, we could be subject to legal liability, or could cause us to contract with alternative suppliers or manufacturing sources. 14 Table of Contents The fluctuating cost of raw materials could increase our cost of goods sold.
If suppliers or contractors do not comply with these standards or applicable laws or there is negative publicity regarding the production methods of any of our suppliers or manufacturers, even if unfounded or not specific to our supply chain, our reputation and sales could be adversely affected, we could be subject to legal liability, or could cause us to contract with alternative suppliers or manufacturing sources.
Any failure on our part to provide attractive, effective, reliable, user-friendly e-commerce platforms that offer a wide assortment of merchandise with rapid delivery options and that continually meet the changing expectations of online shoppers could place us at a competitive disadvantage, result in the loss of e-commerce and other sales, harm our (6) PRC includes China Mainland, Hong Kong SAR, Taiwan, and Macau SAR. 16 Table of Contents reputation with customers, have a material adverse impact on the growth of our e-commerce business globally and could have a material adverse impact on our business and results of operations.
Any failure on our part to provide attractive, effective, reliable, user-friendly e-commerce platforms that offer a wide assortment of merchandise with rapid delivery options and that continually meet the changing expectations of online shoppers could place us at a competitive disadvantage, result in the loss of e-commerce and other sales, harm our reputation with customers, have a material adverse impact on the growth of our e-commerce business globally and could have a material adverse impact on our business and results of operations.
Consumer demand for our products may not reach our targets, or may decline, when there is an economic downturn or economic uncertainty in our key markets. Our sensitivity to economic cycles and any related fluctuation in consumer demand may have a material adverse effect on our financial condition.
Consumer demand for our products may not reach our targets, or may decline, when there is an economic downturn or economic uncertainty in our key markets. Our sensitivity to economic cycles and any related fluctuation in consumer demand may have a material adverse effect on our financial condition. Global economic and political conditions could adversely impact our results of operations.
Any defects could make our products and services unsafe and create a risk of environmental or property damage or personal injury and we may become subject to the hazards and uncertainties of product liability claims and related litigation.
Defects may also exist in components and products that we source from third parties. Any defects could make our products and services unsafe and create a risk of environmental or property damage or personal injury and we may become subject to the hazards and uncertainties of product liability claims and related litigation.
If our operations continue to grow at a rapid pace, we may experience difficulties in obtaining sufficient raw materials and manufacturing capacity to produce our products, as well as delays in production and shipments, as our products are subject to risks associated with overseas sourcing and manufacturing.
We may experience difficulties in obtaining sufficient raw materials and manufacturing capacity to produce our products, as well as delays in production and shipments, as our products are subject to risks associated with overseas sourcing and manufacturing.
Disruption of our technology systems or unexpected network interruption could disrupt our business. We are increasingly dependent on technology systems and third-parties to operate our e-commerce websites, process transactions, respond to guest inquiries, manage inventory, purchase, sell and ship goods on a timely basis, and maintain cost-efficient operations.
We are increasingly dependent on networks, technology systems, and third-parties to operate our e-commerce websites, process transactions, respond to guest inquiries, manage inventory, purchase, sell and ship goods on a timely basis, and maintain cost-efficient operations.
Based on cost, during 2023: • Approximately 55% of our products were manufactured by our top five vendors, the largest of which produced approximately 17% of our products; and • Approximately 52% of our fabrics were produced by our top five fabric suppliers, the largest of which produced approximately 19% of fabric used.
Based on cost, during 2024: • Approximately 49% of our products were manufactured by our top five vendors, the largest of which produced approximately 15% of our products; and • Approximately 52% of our fabrics were produced by our top five fabric suppliers, the largest of which produced approximately 18% of fabric used.
The fabrics used to make our products include synthetic fabrics whose raw materials include petroleum-based products. Our products also include silver and natural fibers, including cotton.
The fluctuating cost of raw materials could increase our cost of goods sold. The fabrics used to make our products include synthetic fabrics whose raw materials include petroleum-based products. Our products also include silver and natural fibers, including cotton.
General geopolitical instability and the responses to it, such as the possibility of sanctions, trade restrictions, and changes in tariffs, including sanctions against the PRC, tariffs imposed by the United States and the PRC, and the possibility of additional tariffs or other trade restrictions, could adversely impact our business. It is possible that further tariffs may be introduced, or increased.
General geopolitical instability and the responses to it, such as the possibility of sanctions, trade restrictions, and 17 Table of Contents changes in tariffs, including sanctions against the PRC, tariffs imposed by the United States and the PRC, and the possibility of additional tariffs or other trade restrictions, could adversely impact our business.
It is possible that stakeholders may not be satisfied with our ESG policies or practices, including if we overstate the impact of our ESG practices, and this could reduce demand for our products and lead to regulatory enforcement that could restrict our ability to market and sell our products.
It is possible that stakeholders may not be satisfied with our ESG policies, practices, goals, or targets, including how we describe and report our ESG goals, efforts, and practices, and this could reduce demand for our products or lead to regulatory enforcement that could restrict our ability to market and sell our products.
Any harm to our brand and reputation could have a material adverse effect on our financial condition. Changes in consumer shopping preferences, and shifts in distribution channels could materially impact our results of operations. We operate an omni-channel retail model and aim to efficiently and effectively serve our guests in the ways most convenient to them.
Changes in consumer shopping preferences, and shifts in distribution channels could materially impact our results of operations. We operate an omni-channel retail model and aim to efficiently and effectively serve our guests in the ways most convenient to them.
Even if injuries are not the result of any defects, if they are perceived to be, we may incur expenses to defend or settle any claims and our brand and reputation may be harmed.
Even if injuries are not the result of any defects, if they are perceived to be, we may incur expenses to defend or settle any claims and our brand and reputation may be harmed. Our sales and profitability may decline as a result of increasing costs and decreasing selling prices.
This seasonality, along with other factors that are beyond our control, including weather conditions and the effects of climate change, could adversely affect our business and cause our results of operations to fluctuate. Risks related to our supply chain Disruptions of our supply chain could have a material adverse effect on our operating and financial results.
This seasonality, along with other factors that are beyond our control, including weather conditions and the effects of climate change, could adversely affect our business and cause our results of operations to fluctuate.
The failure of our technology systems to operate properly or effectively, problems with transitioning to upgraded or replacement systems, or difficulty in integrating new systems, could adversely affect our business. In addition, we have e-commerce websites in the United States, Canada, and internationally.
The failure of our technology systems to operate properly or effectively, problems with transitioning to upgraded or replacement systems, or difficulty in integrating new systems, could adversely affect our business.
A global or regional health event such as the COVID-19 pandemic could significantly and adversely impact our supply chain if the factories that manufacture our products, the distribution centers where we manage our inventory, or the operations of our logistics and other service providers are disrupted, temporarily closed, or experience worker shortages.
A global or regional health event may also cause long-term changes to consumer shopping behavior, preferences and demand for our products that may have a material adverse effect on our business. 19 Table of Contents A global or regional health event such as the COVID-19 pandemic could significantly and adversely impact our supply chain if the factories that manufacture our products, the distribution centers where we manage our inventory, or the operations of our logistics and other service providers are disrupted, temporarily closed, or experience worker shortages.
Such changes could adversely impact our business and could increase the costs of sourcing our 18 Table of Contents products from the PRC as well as other countries, or could require us to source our products from different countries.
It is possible that further tariffs may be introduced or increased. Such changes could adversely impact our business and could increase the costs of sourcing our products from the PRC as well as other countries, or could require us to source our products from different countries.
Additionally, if the unacceptability of our products is not discovered until after such products are sold, our guests could lose confidence in our products or we could face a product recall and our results of operations could suffer and our business, reputation, and brand could be harmed. 10 Table of Contents Our lululemon Studio subsidiary offers complex hardware and software products and services that can be affected by design and manufacturing defects.
Additionally, if the unacceptability of our products is not discovered until after such products are sold, our guests could lose confidence in our products or we could face a product recall and our results of operations could suffer and our business, reputation, and brand could be harmed.
In addition, the adoption of new regulations 19 Table of Contents or changes in the interpretation of existing regulations may result in significant compliance costs or discontinuation of product sales and could impair the marketing of our products, resulting in significant loss of net revenue. Our international operations are also subject to compliance with the U.S.
In addition, the adoption of new regulations or changes in the interpretation of existing regulations, or changes in consumer perceptions of the components of our products, may result in significant compliance costs or discontinuation of product sales and could impair the marketing of our products, resulting in significant loss of net revenue.
This expansion could increase the strain on our resources, and we could experience operating difficulties, including difficulties in hiring, training, and managing an increasing number of employees.
This expansion could increase the strain on our resources, and we could experience operating difficulties, including difficulties in hiring, training, and managing an increasing number of employees. These difficulties could result in the erosion of our brand image which could have a material adverse effect on our financial condition.
Based on cost, during 2023: • Approximately 42% of our products were manufactured in Vietnam, 16% in Cambodia, 11% in Sri Lanka, 10% in Indonesia, and 8% in Bangladesh, and the remainder in other regions. 13 Table of Contents • Approximately 40% of the fabric used in our products originated from Taiwan, 26% from China Mainland, 12% from Sri Lanka, and the remainder from other regions.
Based on cost, during 2024: • Approximately 40% of our products were manufactured in Vietnam, 17% in Cambodia, 11% in Sri Lanka, 11% in Indonesia, and 7% in Bangladesh, and the remainder in other regions. • Approximately 35% of the fabric used in our products originated from Taiwan, 28% from China Mainland, 11% from South Korea, and the remainder from other regions.
Our failure to effectively introduce new products that are accepted by consumers could 11 Table of Contents result in a decrease in net revenue and excess inventory levels, which could have a material adverse effect on our financial condition. Our results of operations could be materially harmed if we are unable to accurately forecast guest demand for our products.
Our failure to effectively introduce new products that are accepted by consumers could result in a decrease in net revenue and excess inventory levels, which could have a material adverse effect on our financial condition. If any of our products have manufacturing or design defects or are otherwise unacceptable to us or our guests, our business could be harmed.
Many of our customers shop with us through our e-commerce websites and mobile apps. Increasingly, customers are using tablets and smart phones to shop online with us and with our competitors and to do comparison shopping. We are increasingly using social media and proprietary mobile apps to interact with our customers and as a means to enhance their shopping experience.
We are increasingly using social media and proprietary mobile apps to interact with our customers and as a means to enhance their shopping experience.
Advances in computer capabilities, new technological discoveries or other developments may result in the technology used by us to protect transaction or other data being breached or compromised. Measures we implement to protect against cyber-attacks may also have the potential to impact our customers' shopping experience or decrease activity on our websites by making them more difficult to use.
Measures we implement to protect against cyber-attacks may also have the potential to impact our customers' shopping experience or decrease activity on our websites by making them more difficult to use or requiring website downtime.
Any of the foregoing could prevent us from competing effectively and could have an adverse effect on our business, financial condition, and operating results. Risks related to legal and governance matters We are subject to periodic claims and litigation that could result in unexpected expenses and could ultimately be resolved against us.
Any of the foregoing could prevent us from competing effectively and could have an adverse effect on our business, financial condition, and operating results. Risks related to legal and governance matters Our business could be negatively affected as a result of actions of stockholders, activists, or others.
Our business could be negatively affected as a result of actions of activist stockholders or others. We may be subject to actions or proposals from stockholders or others that may not align with our business strategies or the interests of our other stockholders.
We may be subject to actions or proposals from stockholders, political or consumer activists, or others that may not align with our business strategies or the interests of our other stockholders. Activism could include geopolitical conflict between the PRC and other countries.
Sophisticated operating system software and applications, such as those offered by lululemon Studio, often have issues that can unexpectedly interfere with the intended operation of hardware or software products. Defects may also exist in components and products that we source from third parties.
The complex hardware previously sold by our lululemon Studio subsidiary, as well as the services currently offered, can be affected by design and manufacturing defects. Sophisticated operating system software and applications, such as those offered by lululemon Studio, often have issues that can unexpectedly interfere with the intended operation of hardware or software products.
We may, from time to time, evaluate and pursue other strategic investments or acquisitions. These involve various inherent risks and the benefits sought may not be realized.
We may, from time to time, evaluate and pursue other strategic investments or acquisitions. These involve various inherent risks and the benefits sought may not be realized. 11 Table of Contents We may not be able to effectively manage our growth and the increased complexity of our business and as a result our brand image and financial performance may suffer.
Maintaining, promoting, and positioning our brand will depend largely on the success of our marketing and merchandising efforts and our ability to provide a consistent, high quality product, and guest experience. We rely on social media, as one of our marketing strategies, to have a positive impact on both our brand value and reputation.
We rely on social media, as one of our marketing strategies, to have a positive impact on both our brand value and reputation.
Our work model may not meet the needs and expectations of our employees and may not be perceived as favorable compared to other companies. Unionization efforts or other employee organizing activities could lead to higher people costs or reduce our flexibility to manage our employees which may negatively disrupt our operations.
Our work model may not meet the needs and expectations of our employees and may not be perceived as favorable compared to other companies.
We operate in a highly competitive market and our competitors may compete more effectively than we can, resulting in a loss of our market share and a decrease in our net revenue and profitability. The market for technical athletic apparel is highly competitive.
Any harm to our brand and reputation could have a material adverse effect on our financial condition. 9 Table of Contents We operate in a highly competitive market and our competitors may compete more effectively than we can, resulting in a loss of our market share and a decrease in our net revenue and profitability.
Our failure to successfully integrate our digital and physical channels and respond to these risks might adversely impact our business and results of operations, as well as damage our reputation and brand. If any of our products have manufacturing or design defects or are otherwise unacceptable to us or our guests, our business could be harmed.
Our failure to successfully integrate our digital and physical channels and respond to these risks might adversely impact our business and results of operations, as well as damage our reputation and brand. In addition, our channels have different operating margins and shifts to diversified distribution channels could negatively impact our overall operating margins and results of operations.
We lease the majority of our stores under operating leases and our inability to secure appropriate real estate or lease terms could impact our ability to grow. Our leases generally have initial terms of between two and 15 years, and generally can be extended in increments between two and five years, if at all.
Our leases generally have initial terms of between two and 15 years, and generally can be extended in increments between two and five years, if at all. We generally cannot cancel these leases at our option.
Our management may not have the experience of selling in these new product categories and we may not be able to grow our business as planned. For example, in July 2020, we acquired MIRROR, an in-home fitness company with an interactive workout platform that features live and on-demand classes.
Our management may not have the experience of selling in these new product categories and we may not be able to grow our business as planned. For example, in July 2020, we acquired MIRROR, which was rebranded as lululemon Studio, and in 2023, we discontinued selling its hardware and offering its digital app-only subscription.
Any significant disruption in our technology systems or websites could harm our reputation and credibility, and could have a material adverse effect on our business, financial condition, and results of operations. Our technology-based systems that give our customers the ability to shop with us online may not function effectively.
We have limited back-up systems and redundancies, and our technology systems and websites have experienced system failures and electrical outages in the past which have disrupted our operations. Any significant disruption in our technology systems or websites could harm our reputation and credibility, and could have a material adverse effect on our business, financial condition, and results of operations.
In addition, if changes in technology cause our information systems to become obsolete, or if our information systems are inadequate to handle our growth, we could lose guests. We have limited back-up systems and redundancies, and our technology systems and websites have experienced system failures and electrical outages in the past which have disrupted our operations.
In addition, if changes in technology cause our information systems to become obsolete, we do not effectively leverage artificial intelligence, or if our information systems are inadequate to handle our growth, we could lose guests.
These difficulties could result in the erosion of our brand image which could have a material adverse effect on our financial condition. 12 Table of Contents We are subject to risks associated with leasing retail and distribution space subject to long-term and non-cancelable leases.
We are subject to risks associated with leasing retail and distribution space subject to long-term and non-cancelable leases. We lease the majority of our stores under operating leases and our inability to secure appropriate real estate or lease terms could impact our ability to grow.
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Many of our competitors have significant competitive advantages, including longer operating histories, larger and broader customer bases, more established relationships with a broader set of suppliers, greater brand recognition and greater financial, research and development, store development, marketing, distribution, and other resources than we do.
Added
Maintaining, promoting, and positioning our brand will depend largely on the success of our marketing and merchandising efforts and our ability to provide a consistent, high quality product, and guest experience. As we grow, our brand positioning, products, and marketing efforts may not be considered distinct, culturally relevant, or desirable to guests, employees, and other stakeholders.
Removed
Our sales and profitability may decline as a result of increasing costs and decreasing selling prices.
Added
Unionization efforts or other employee organizing activities could lead to higher people costs or reduce our flexibility to manage our employees which may negatively disrupt our operations. Our results of operations could be materially harmed if we are unable to accurately forecast guest demand for our products.
Removed
If we continue to grow at a rapid pace, we may not be able to effectively manage our growth and the increased complexity of our business and as a result our brand image and financial performance may suffer.
Added
We may be unable to achieve our growth objectives if we do not have the right level of efficiency and scalability in our processes and operations.
Removed
We generally cannot cancel these leases at our option.
Added
Advances in artificial intelligence and other computer capabilities, new technological discoveries or other developments may result in the technology used by us to protect transaction or other data being breached or compromised.
Removed
The entire apparel industry, including our company, could face supply chain challenges as a result of the impacts of global public health crises, political instability, inflationary pressures, macroeconomic conditions, and other factors, including reduced freight availability and increased costs, port disruption, manufacturing facility closures, and related labor shortages and other supply chain disruptions.
Added
(2) PRC includes China Mainland, Hong Kong SAR, Taiwan, and Macau SAR. 13 Table of Contents Disruption of our technology systems or unexpected network interruption could disrupt our business.
Removed
A global or regional health event may also cause long-term changes to consumer shopping behavior, preferences and demand for our products that may have a material adverse effect on our business.
Added
Our technology-based systems that give our customers the ability to shop with us online may not function effectively. Many of our customers shop with us through our e-commerce websites and mobile apps. Increasingly, customers are using tablets and smart phones to shop online with us and with our competitors and to do comparison shopping.
Added
Risks related to our supply chain Disruptions of our supply chain could have a material adverse effect on our operating and financial results.
Added
Our ability to track and respond to regulations may not be sufficient to meet the increased number and complexity of regulations we are subject to globally.
Added
Our international operations are also subject to compliance with the U.S. Foreign Corrupt Practices Act ("FCPA") and other anti-bribery laws applicable to our operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changePrior to exchanging our data with third-party service providers, they are required to go through a vendor risk assessment. We also conduct third-party security reviews and evaluate their network, processes, and systems. In addition, we obtain annual attestation reports related to data security and privacy from certain third-party service providers to further support compliance with industry-standard cybersecurity protocols.
Biggest changeWe monitor risks relating to potential compromises of sensitive information at our third-party service providers and re-evaluate the risks associated with our partners periodically. Prior to exchanging our data with third-party service providers, they are required to go through a vendor risk assessment. We also conduct third-party security reviews and evaluate their network, processes, and systems.
Governance Our board of directors provides oversight of cybersecurity risks and has delegated primary responsibility to the audit committee, which is responsible for overseeing our enterprise risk assessments and management policies, procedures, and practices (including regarding those risks related to information security, cybersecurity, and data protection).
Governance Our board of directors is responsible for the oversight of cybersecurity risks and has delegated primary responsibility to the audit committee, which is responsible for overseeing our enterprise risk assessments and management policies, procedures, and practices (including regarding those risks related to information security, cybersecurity, and data protection).
The cybersecurity sub-committee reviews our cybersecurity 22 Table of Contents risk assessments and the steps being taken to monitor, control, and report on those risks as well as discusses regulatory and market developments. They also review our process for identifying and responding to cybersecurity incidents in a timely manner, and details of cybersecurity attacks or incidents which have occurred.
The cybersecurity sub-committee reviews our cybersecurity risk assessments and the steps being taken to monitor, control, and report on those risks as well as discusses regulatory and market developments. They also review our process for identifying and responding to cybersecurity incidents in a timely manner, and details of cybersecurity attacks or incidents which have occurred.
The audit committee maintains a cybersecurity sub-committee that is comprised of our Chief Information Officer ("CIO"), our Chief Information Security Officer ("CISO"), and representatives from the audit committee and board of directors that have knowledge and experience in cybersecurity matters.
The audit committee maintains a cybersecurity sub-committee that is comprised of our EVP, Chief Information Officer ("CIO"), our SVP, Chief Information Security Officer ("CISO"), and representatives from the audit committee and board of directors that have knowledge and experience in cybersecurity matters.
As part of our cyber incident response plan, we utilize an established framework to assess the severity of cybersecurity incidents. Under the plan, incidents are escalated to relevant senior management, and the board of directors, as appropriate, based on their severity. Our disclosure committee assesses the materiality of severe incidents including both quantitative and qualitative factors.
We also engage third parties to perform penetration testing on our key systems to identify potential weaknesses. As part of our cyber incident response plan, we utilize an established framework to assess the severity of cybersecurity incidents. Under the plan, incidents are escalated to relevant senior management, and the board of directors, as appropriate, based on their severity.
Third Parties We utilize third-party service providers as a normal part of our business operations. To address cybersecurity risks arising from our relationships with third-party service providers, we employ a vendor risk program. We monitor risks relating to potential compromises of sensitive information at our third-party service providers and re-evaluate the risks associated with our partners periodically.
Our disclosure committee assesses the materiality of severe incidents including both quantitative and qualitative factors. 22 Table of Contents Third Parties We utilize third-party service providers as a normal part of our business operations. To address cybersecurity risks arising from our relationships with third-party service providers, we employ a vendor risk program.
Our employees have multiple mechanisms for reporting cybersecurity and data privacy concerns. We work with third-party cybersecurity advisors to undertake assessments of our critical systems and to remediate any high-risk vulnerabilities identified. We also engage third parties to perform penetration testing on our key systems to identify potential weaknesses.
As part of our cybersecurity program, we conduct cybersecurity awareness training including phishing simulations and supplemental campaigns as well as mandatory e-learning for all our employees. Our employees have multiple mechanisms for reporting cybersecurity and data privacy concerns. We work with third-party cybersecurity advisors to undertake assessments of our critical systems and to remediate any high-risk vulnerabilities identified.
Our CISO also leads our Cyber Defense and Incident Response (“CDIR”) team which identifies, assesses, escalates, and remediates cybersecurity incidents. Our current CISO has over 25 years of experience in information security across different industries in the US, Europe, and South and Central America.
Our CISO also leads our Cyber Defense and Incident Response (“CDIR”) team which identifies, assesses, escalates, and remediates cybersecurity incidents. Our CISO has over 30 years of experience in the field of cybersecurity, bringing an extensive understanding of cybersecurity threats, regulatory compliance, and industry best practices.
The CDIR team identifies, tracks, reviews, assesses, and takes actions over key cybersecurity risks including but not limited to: (i) third parties/vendors, (ii) cloud security, (iii) malicious code, (iv) our digital e-commerce channels and systems, and (v) our store technology.
The CDIR team monitors and manages key cybersecurity risks, including threats related to third parties, cloud security, malicious code, e-commerce systems, and store technology. It also conducts security reviews, assesses vulnerabilities, and analyzes threat intelligence to strengthen our cyber defenses and incident response efforts.
For further information, see “Risks related to information security and technology” included in Item 1A. Risk Factors of this Annual Report. 23 Table of Contents
However, like many companies, we continue to face ongoing cyber threats, including phishing and other unauthorized access attempts, which if successful could have a material impact in the future. For more information, see “Risks related to information security and technology” included in Item 1A. Risk Factors of this annual report.
Removed
Our current CISO is a member of the Information Systems Audit and Control Association and brings extensive experience and knowledge of cybersecurity risk management.
Added
In addition, we obtain annual attestation reports related to data security and privacy from certain third-party service providers to further support compliance with industry-standard cybersecurity protocols. Impact of Cybersecurity Risks on Strategy and Results As of the date of this annual report, we are not aware of any cybersecurity incidents that have had a material impact on our business.
Removed
The CDIR team also undertakes enterprise architecture reviews, considers cyber defense and incident response findings, performs vulnerability scans, and assesses threats and performs landscape intelligence analysis. As part of our cybersecurity program, we conduct cybersecurity awareness training including phishing simulations and supplemental campaigns as well as mandatory e-learning for all our employees.
Removed
Impact of Cybersecurity Risks on Strategy and Results Based on the information available as of the date of this Annual Report, we have not been materially affected by any previous cybersecurity incidents. However, we continue to experience cyber-attacks, including phishing, and other attempts to break or gain unauthorized access to our systems that could materially affect us in the future.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe general location, use, approximate size and lease renewal date of our principal non-retail leased properties as of January 28, 2024, are set forth below: Location Use Approximate Square Feet Lease Renewal Date Delta, BC, Canada Distribution Center 375,000 December 2037 Milton, ON, Canada Distribution Center 255,000 May 2031 Mississauga, ON, Canada Distribution Center 250,000 September 2033 Ravenhall, VIC, Australia Distribution Center 250,000 September 2033 Delta, BC, Canada Distribution Center 155,000 January 2031 Sumner, WA, United States Distribution Center 150,000 July 2025 Vancouver, BC, Canada Executive and Administrative Offices 120,000 October 2032 During 2021, we entered into a new lease for a U.S. distribution center in Ontario, California of approximately 1,255,000 square feet which expires in 2039.
Biggest changeThe general location, use, approximate size, and lease renewal date of our principal non-retail leased properties as of February 2, 2025, are set forth below: Location Use Approximate Square Feet Lease Renewal Date Ontario, CA, United States Distribution Center 1,255,000 February 2039 Delta, BC, Canada Distribution Center 375,000 December 2037 Milton, ON, Canada Distribution Center 255,000 May 2031 Mississauga, ON, Canada Distribution Center 250,000 September 2033 Ravenhall, VIC, Australia Distribution Center 250,000 September 2033 Delta, BC, Canada Distribution Center 155,000 January 2031 Sumner, WA, United States Distribution Center 150,000 July 2025 Vancouver, BC, Canada Executive and Administrative Offices 120,000 October 2032 Vancouver, BC, Canada Executive and Administrative Offices 105,000 October 2027 During 2022, we entered into a new lease for a Canadian distribution center in Brampton, Ontario of approximately 980,000 square feet which expires in 2041.
The general location, use and approximate size of our principal owned properties as of January 28, 2024, are set forth below: Location Use Approximate Square Feet Groveport, OH, United States Distribution Center 310,000 Vancouver, BC, Canada Executive and Administrative Offices 140,000 We lease non-retail properties in a number of locations globally.
The general location, use and approximate size of our principal owned properties as of February 2, 2025, are set forth below: Location Use Approximate Square Feet Groveport, OH, United States Distribution Center 605,000 Vancouver, BC, Canada Executive and Administrative Offices 140,000 We lease non-retail properties in a number of locations globally.
LEGAL PROCEEDINGS Please see the legal proceedings described in Note 21. Commitments and Contingencies included in Item 8 of Part II of this report.
We expect this distribution center to be operational in fiscal 2026. From time to time, we sublease unused portions of our distribution center facilities. ITEM 3. LEGAL PROCEEDINGS Please see the legal proceedings described in Note 21. Commitments and Contingencies included in Item 8 of Part II of this report. ITEM 4.
Removed
We expect this distribution center to be operational in early fiscal 2024. During 2022, we entered into a new lease for a Canadian distribution center in Brampton, Ontario of approximately 980,000 square feet which expires in 2041. We expect this distribution center to be operational in fiscal 2026. ITEM 3.
Added
MINE SAFETY DISCLOSURES Not applicable. 23 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeInformation used in the graph was obtained from Bloomberg, a source believed to be reliable, but we are not responsible for any errors or omissions in such information. 03-Feb-19 02-Feb-20 31-Jan-21 30-Jan-22 29-Jan-23 28-Jan-24 lululemon athletica inc. $ 100.00 $ 163.83 $ 224.94 $ 216.20 $ 212.74 $ 327.15 S&P 500 Index $ 100.00 $ 119.18 $ 137.23 $ 163.75 $ 150.40 $ 180.71 S&P 500 Apparel, Accessories & Luxury Goods Index $ 100.00 $ 90.30 $ 86.51 $ 83.79 $ 59.05 $ 47.77 25 Table of Contents Issuer Purchase of Equity Securities The following table provides information regarding our purchases of shares of our common stock during the fourth quarter of 2023 related to our stock repurchase programs: Period (1) Total Number of Shares Purchased (2) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) October 30, 2023 - November 26, 2023 50,619 $ 400.10 50,619 $ 222,941,393 November 27, 2023 - December 31, 2023 10,040 507.57 10,040 1,217,845,403 January 1, 2024 - January 28, 2024 59,180 483.73 59,180 1,189,218,138 Total 119,839 119,839 __________ (1) Monthly information is presented by reference to our fiscal periods during our fourth quarter of 2023.
Biggest changeInformation used in the graph was obtained from Bloomberg, a source believed to be reliable, but we are not responsible for any errors or omissions in such information. 02-Feb-20 31-Jan-21 30-Jan-22 29-Jan-23 28-Jan-24 02-Feb-25 lululemon athletica inc. $ 100.00 $ 137.30 $ 131.96 $ 129.85 $ 199.69 $ 173.02 S&P 500 Index $ 100.00 $ 115.15 $ 137.40 $ 126.20 $ 151.63 $ 187.27 S&P 500 Apparel, Accessories & Luxury Goods Index $ 100.00 $ 95.81 $ 92.79 $ 65.40 $ 52.91 $ 56.14 24 Table of Contents Issuer Purchase of Equity Securities The following table provides information regarding our purchases of shares of our common stock during the fourth quarter of 2024 related to our stock repurchase programs: Period (1) Total Number of Shares Purchased (2) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) October 28, 2024 - November 24, 2024 317,785 $ 313.18 317,785 $ 800,585,948 November 25, 2024 - December 29, 2024 298,348 360.75 298,348 1,692,956,482 December 30, 2024 - February 2, 2025 321,885 388.60 321,885 1,567,870,658 Total 938,018 938,018 __________ (1) Monthly information is presented by reference to our fiscal periods during our fourth quarter of 2024.
This graph assumes the investment of $100 on February 3, 2019 at the closing sale price of our common stock, the S&P 500 Index and the S&P Apparel, Accessories & Luxury Goods Index and assumes the reinvestment of dividends, if any. The comparisons shown in the graph below are based on historical data.
This graph assumes the investment of $100 on February 2, 2020 at the closing sale price of our common stock, the S&P 500 Index and the S&P Apparel, Accessories & Luxury Goods Index and assumes the reinvestment of dividends, if any. The comparisons shown in the graph below are based on historical data.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Dividends Our common stock is quoted on the Nasdaq Global Select Market under the symbol "LULU." As of March 15, 2024, there were approximately 1,300 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Dividends Our common stock is quoted on the Nasdaq Global Select Market under the symbol "LULU." As of March 21, 2025, there were approximately 1,200 holders of record of our common stock.
Stock Performance Graph The graph set forth below compares the cumulative total stockholder return on our common stock between February 3, 2019 (the date of our fiscal year end five years ago) and January 28, 2024, with the cumulative total return of (i) the S&P 500 Index and (ii) S&P 500 Apparel, Accessories & Luxury Goods Index, over the same period.
Stock Performance Graph The graph set forth below compares the cumulative total stockholder return on our common stock between February 2, 2020 (the date of our fiscal year end five years ago) and February 2, 2025, with the cumulative total return of (i) the S&P 500 Index and (ii) S&P 500 Apparel, Accessories & Luxury Goods Index, over the same period.
(2) The ESPP was approved by our board of directors and stockholders in September 2007. All shares purchased under the ESPP are purchased on the Nasdaq Global Select Market (or such other stock exchange as we may designate). Unless our board terminates the ESPP earlier, it will continue until all shares authorized for purchase have been purchased.
(2) All shares purchased under the ESPP are purchased on the Nasdaq Global Select Market (or such other stock exchange as we may designate). Unless our board terminates the ESPP earlier, it will continue until all shares authorized for purchase have been purchased. The maximum number of shares authorized to be purchased under the ESPP is 6,000,000.
The maximum number of shares authorized to be purchased under the ESPP was 6,000,000. Excluded from this disclosure are shares repurchased to settle statutory employee tax withholding related to the vesting of stock-based compensation awards.
Excluded from this disclosure are shares withheld to settle statutory employee tax withholding related to the vesting of stock-based compensation awards.
(2) On March 23, 2022 and November 29, 2023, our board of directors approved stock repurchase programs, each for up to $1.0 billion of our 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.
(2) On November 29, 2023, our board of directors approved a stock repurchase program for up to $1.0 billion of our common shares on the open market or in privately negotiated transactions. On each of May 29, 2024 and December 3, 2024, our board of directors approved $1.0 billion increases to the existing stock repurchase program.
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.
The repurchase plan has no time limit and does not require the repurchase of a minimum number of shares. Common shares repurchased on the open market are at prevailing market prices, including under plans complying with the provisions of Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934.
The following table summarizes purchases of shares of our common stock during the fourth quarter of 2023 related to our Employee Share Purchase Plan (ESPP): Period (1) Total Number of Shares Purchased (2) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2) October 30, 2023 - November 26, 2023 7,367 $ 418.18 7,367 4,415,983 November 27, 2023 - December 31, 2023 7,331 491.70 7,331 4,408,652 January 1, 2024 - January 28, 2024 5,954 482.84 5,954 4,402,698 Total 20,652 20,652 ___________ (1) Monthly information is presented by reference to our fiscal periods during our fourth quarter of 2023.
The following table summarizes purchases of shares of our common stock during the fourth quarter of 2024 related to our Employee Share Purchase Plan (ESPP): Period (1) Total Number of Shares Purchased (2) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2) October 28, 2024 - November 24, 2024 11,094 $ 318.94 11,094 4,289,892 November 25, 2024 - December 29, 2024 9,605 382.72 9,605 4,280,287 December 30, 2024 - February 2, 2025 9,915 379.66 9,915 4,270,372 Total 30,614 30,614 ___________ (1) Monthly information is presented by reference to our fiscal periods during our fourth quarter of 2024.
The authorized value of shares available to be repurchased under these programs excludes the cost of commissions and excise taxes.
The timing and actual number of common shares to be repurchased will depend upon market conditions, eligibility to trade, and other factors. The authorized value of shares available to be repurchased under this program excludes the cost of commissions and excise taxes.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSelling, General and Administrative Expenses 2022 2021 Year over year change (In thousands) (In thousands) (Percentage) Selling, general and administrative expenses $ 2,757,447 $ 2,225,034 $ 532,413 23.9 % Selling, general and administrative expenses as a percentage of net revenue 34.0 % 35.6 % (160) basis points The increase in selling, general and administrative expenses was primarily due to: • an increase in head office costs of $283.7 million, comprised of: – an increase in costs of $142.2 million primarily due to increased depreciation of $43.5 million and increased technology costs, including cloud computing amortization, of $35.7 million, as well as increased brand and community costs and professional fees; and – an increase in employee costs of $141.5 million primarily due to an increase in salaries and wages expense of $76.5 million and incentive compensation of $34.8 million, as well as increased stock-based compensation expense and travel costs, primarily as a result of headcount growth and increased wage rates. • an increase in costs related to our operating channels of $249.5 million, comprised of: – an increase in variable costs of $127.6 million primarily due to an increase in distribution costs and credit card fees, primarily as a result of increased net revenue; – an increase in employee costs of $104.2 million primarily due to an increase in salaries and wages expense and incentive compensation in our company-operated store and e-commerce channels, primarily due to growth in our business and increased wage rates; – an increase in other costs of $15.3 million primarily due to an increase in repairs and maintenance costs, depreciation, and technology costs, partially offset by a decrease in professional fees; and – an increase in brand and community costs of $2.4 million primarily due to an increase in digital marketing expenses related to our e-commerce channel, partially offset by a decrease in marketing expenses related to lululemon Studio.
Biggest changeThe increase in costs related to our operating channels was partially offset by a decrease in variable costs of $2.9 million primarily due to decreased distribution costs driven by lower rates, partially offset by increased credit card fees as a result of increased net revenue. • an increase in head office costs of $179.0 million, comprised of: – an increase in brand and community costs of $64.5 million primarily due to increased marketing expenses as well as increased charitable donations; – an increase in advisory and professional fees of $42.9 million; – an increase in technology costs, including cloud computing amortization, of $27.6 million; – an increase in other head office costs of $25.7 million; and – an increase in depreciation of $20.2 million.
Deferred taxes on undistributed net investment of foreign subsidiaries. We have not recognized U.S. state income taxes and foreign withholding taxes on the net investment in our subsidiaries which we have determined to be indefinitely reinvested. This determination is based on the cash flow projections and operational and fiscal objectives of each of our foreign subsidiaries.
We have not recognized U.S. state income taxes and foreign withholding taxes on the net investment in our subsidiaries which we have determined to be indefinitely reinvested. This determination is based on the cash flow projections and operational and fiscal objectives of each of our foreign subsidiaries.
In addition, we may make discretionary capital improvements with respect to our stores, distribution facilities, headquarters, or systems, or we may repurchase shares under an approved stock repurchase program, which we would expect to fund through the use of cash, issuance of debt or equity securities or other external financing sources to the extent we were unable to fund such expenditures out of our cash and cash equivalents and cash generated from operations.
In addition, we may make discretionary capital improvements with respect to our stores, distribution facilities, headquarters, or systems, or we may repurchase shares under an approved stock repurchase program, which we would expect to fund through the use of cash, issuance of 36 Table of Contents debt or equity securities or other external financing sources to the extent we were unable to fund such expenditures out of our cash and cash equivalents and cash generated from operations.
We provide constant dollar changes and adjusted financial results, which are non-GAAP financial measures, as supplemental information that enable evaluation of the underlying trend in our operating performance, and enable a comparison to our historical financial information.
The constant dollar changes and adjusted financial results are non-GAAP financial measures, and we provide them as supplemental information that enable evaluation of the underlying trend in our operating performance, and enable a comparison to our historical financial information.
Components of management's discussion and analysis of financial condition and results of operations include: • Overview • Financial Highlights and Market Conditions and Trends • Results o f Operations • Comparison of 2023 to 2022 • Comparison of 2022 to 2021 • Comparable Sales and Sales Per Square Foot • Non-GAAP Financial Measures • Liquidity and Capital Resources • Liquidity Outlook • Contractual Obligations and Commitments • Critical Accounting Policies and Estimates Our fiscal year ends on the Sunday closest to January 31 of the following year, typically resulting in a 52-week year, but occasionally giving rise to an additional week, resulting in a 53-week year.
Components of management's discussion and analysis of financial condition and results of operations include: • Overview • Financial Highlights and Market Conditions and Trends • Results of Operations • Comparison of 2024 to 2023 • Comparable Sales and Sales Per Square Foot • Non-GAAP Financial Measures • Liquidity and Capital Resources • Liquidity Outlook • Contractual Obligations and Commitments • Critical Accounting Policies and Estimates Our fiscal year ends on the Sunday closest to January 31 of the following year, typically resulting in a 52-week year, but occasionally giving rise to an additional week, resulting in a 53-week year.
Comparable sales excludes sales from new stores that have not been open for at least 12 full fiscal months, from stores which have not been in their significantly expanded space for at least 12 full fiscal months, from stores which have been temporarily relocated for renovations or temporarily closed, and sales from company- 38 Table of Contents operated stores that have closed.
Comparable sales excludes sales from new stores that have not been open for at least 12 full fiscal months, from stores which have not been in their significantly expanded space for at least 12 full fiscal months, from stores which have been temporarily relocated for renovations or temporarily closed, and sales from company-operated stores that have closed.
We have recognized a deferred tax liability of $41.2 million as of January 28, 2024 which represents the Canadian withholding taxes payable on the portion of our Canadian earnings that are not indefinitely reinvested and cannot be repatriated as a return of capital, and U.S. state income taxes payable upon repatriation of the amounts which are not indefinitely reinvested.
We have recognized a deferred tax liability of $107.0 million as of February 2, 2025 which represents the Canadian withholding taxes payable on the portion of our Canadian earnings that are not indefinitely reinvested and cannot be repatriated as a return of capital, and U.S. state income taxes payable upon repatriation of the amounts which are not indefinitely reinvested.
Information contained on or accessible through our websites is not incorporated into, and does not form a part of, this Annual Report or any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.
Information contained on or accessible through our websites is not incorporated into, and does not form a part of, this annual report or any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. Overview Fiscal 2024 was another year of growth for lululemon.
Please refer to Note 8. Impairment of Goodwill and Other Assets, Restructuring Costs included in Item 8 of Part II of this report.
Impairment of Goodwill and Other Assets, Restructuring Costs included in Item 8 of Part II of this report.
Capital expenditures are expected to range between $690.0 million and $710.0 million in 2024. Our current commitments with respect to inventory purchases are included within our purchase obligations outlined below.
Capital expenditures are expected to range between $740.0 million and $760.0 million in 2025. Our current commitments with respect to inventory purchases are included within our purchase obligations outlined below.
The timing and cost of our inventory purchases will vary depending on a variety of factors such as revenue growth, assortment and purchasing decisions, product costs including freight and duty, and the availability of production capacity and speed. Our inventory balance as of January 28, 2024 was $1.3 billion, a decrease of 9% from January 29, 2023.
The timing and cost of our inventory purchases will vary depending on a variety of factors such as revenue growth, assortment and purchasing decisions, product costs including freight and duty, and the availability of production capacity and speed. Our inventory balance as of February 2, 2025 was $1.4 billion, an increase of 9% from January 28, 2024.
Financing Activities The increase in cash used in financing activities was primarily the result of an increase in our stock repurchases. During 2023, 1.5 million shares were repurchased at a total cost including commissions and excise taxes of $558.7 million. During 2022, 1.4 million shares were repurchased at a total cost including commissions and excise taxes of $444.0 million.
Financing Activities The increase in cash used in financing activities was primarily the result of an increase in our stock repurchases. During 2024, we repurchased 5.1 million shares at a total cost including commissions and excise taxes of $1.6 billion. During 2023, we repurchased 1.5 million shares at a total cost including commissions and excise taxes of $558.7 million.
The increase in gross profit was partially offset by an increase in selling, general and administrative expenses primarily due to higher employee costs, as well as increased digital marketing expenses, increased packaging and distribution costs driven by higher net revenue, and increased technology costs.
The increase in selling, general and administrative expenses was primarily due to higher employee costs and increased marketing expenses, as well as increased distribution costs and packaging costs driven by higher net revenue.
We enter into standby letters of credit to secure certain of our obligations, including leases, taxes, and duties. As of January 28, 2024, letters of credit and letters of guarantee totaling $10.2 million had been issued, including $6.3 million under our committed revolving credit facility.
We enter into standby letters of credit to secure certain of our obligations, including leases, taxes, and duties. As of February 2, 2025, letters of credit and letters of guarantee totaling $12.6 million had been issued, including $6.1 million under our committed revolving credit facility.
Critical Accounting Policies and Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions. Predicting future events is inherently an imprecise activity and, as such, requires the use of significant judgment. Actual results may vary from our estimates in amounts that may be material to the financial statements.
Critical Accounting Policies and Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions. Predicting future events is inherently an imprecise activity and, as such, 37 Table of Contents requires the use of significant judgment.
Adjusted Financial Measures The following tables reconcile the most directly comparable measures calculated in accordance with GAAP with the adjusted financial measures. The 2023 and 2022 adjustments relate to certain inventory provisions, goodwill and other asset impairments, and restructuring costs recognized in relation to lululemon Studio, and their related tax effects.
Adjusted Financial Measures The following table reconciles the most directly comparable measures calculated in accordance with GAAP with the adjusted financial measures for 2023. The adjustments relate to certain inventory provisions, asset impairments, and restructuring costs recognized in relation to lululemon Studio and their related tax effects. Please refer to Note 9.
Adjusted gross profit, gross margin, income from operations, operating margin, income tax expense, effective tax rates, net income, and diluted earnings per share exclude certain inventory provisions, goodwill and other asset impairments, and restructuring costs recognized in relation to lululemon Studio, the gain on disposal of assets for the sale of an administrative office building, the MIRROR acquisition-related expenses, and the related income tax effects of these items.
For 2023, adjusted gross profit, gross margin, income from operations, operating margin, income tax expense, effective tax rates, net income, and diluted earnings per share exclude certain inventory provisions, asset impairments, and restructuring costs recognized in relation to lululemon Studio, and the related income tax effects of these items.
Investing Activities The increase in cash used in investing activities was primarily due to the settlement of net investment hedges and increased capital expenditures. The increase in capital expenditures was primarily due to investment in our distribution centers as well as other technology infrastructure and system initiatives, partially offset by a decrease in company-operated store and corporate capital expenditures.
The increase in cash used in investing activities was also due to increased capital expenditures primarily due to an increase in supply chain infrastructure, company-operated stores expenditures, and system initiatives, partially offset by a decrease in corporate infrastructure capital expenditures. The increase in cash used in investing activities was partially offset by the settlement of net investment hedges.
As of January 28, 2024, the net investment in our Canadian subsidiaries was $2.5 billion, of which $1.6 billion was determined to be indefinitely reinvested. The paid-up-capital balance of the Canadian subsidiaries was approximately $140.0 million.
As of February 2, 2025, the net investment in our Canadian subsidiaries was $3.7 billion, of which $1.6 billion was determined to be indefinitely reinvested. The paid-up-capital balance of the Canadian subsidiaries was approximately $165.2 million.
Further, due to the finite and discrete nature of these items, we do not consider them to be normal operating expenses that are necessary to run our business, or impairments or disposal gains that are expected to arise in the normal course of our operations.
Further, due to the finite and discrete nature of these items, we do not consider them to be normal operating expenses that are necessary to run our business, or impairments that are expected to arise in the normal course of our operations. Management uses these adjusted financial measures and constant currency metrics internally when reviewing and assessing financial performance.
Comparable sales also excludes sales from our selling channels other than company-operated stores and e-commerce. The comparable sales measures we report may not be equivalent to similarly titled measures reported by other companies. In fiscal years with 53 weeks, the 53rd week of net revenue is excluded from the calculation of comparable sales.
Comparable sales also excludes sales from our selling channels other than company-operated stores and e-commerce. The comparable sales measures we report may not be equivalent to similarly titled measures reported by other companies.
Please refer to Note 8. Impairment of Goodwill and Other Assets, Restructuring Costs included in Item 8 of Part II of this report for further information.
Impairment of Goodwill and Other Assets, Restructuring Costs included in Item 8 of Part II of this report for further information on the nature of these amounts.
Management uses these adjusted financial measures and constant currency metrics internally when reviewing and assessing financial performance. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or with greater prominence to, the financial information prepared and presented in accordance with GAAP.
The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or with greater prominence to, the financial information prepared and presented in accordance with GAAP.
The following table includes certain measures of our liquidity: January 28, 2024 (In thousands) Cash and cash equivalents $ 2,243,971 Working capital excluding cash and cash equivalents (1) 185,345 Capacity under committed revolving credit facility 393,661 __________ (1) Working capital is calculated as current assets of $4.1 billion less current liabilities of $1.6 billion.
The following table includes certain measures of our liquidity: February 2, 2025 (In thousands) Cash and cash equivalents $ 1,984,336 Working capital (1) excluding cash and cash equivalents 156,336 Capacity under committed revolving credit facility 393,935 __________ (1) Working capital is calculated as current assets of $4.0 billion less current liabilities of $1.8 billion.
Foreign currency fluctuations reduced the growth of our net revenue by $89.8 million when comparing 2023 to 2022, primarily due to the overall appreciation of the US dollar. We expect future exchange rate volatility to impact our results. We have also experienced increased wage rates which increased our employee costs when comparing 2023 to 2022.
Foreign currency fluctuations reduced the growth of our net revenue by $75.3 million when comparing 2024 to 2023, primarily due to the overall appreciation of the US dollar. We expect future exchange rate volatility to impact our results.
Excluding the income tax effects of the impairment and other charges recognized in 2022 and 2023 in relation to lululemon Studio, and excluding the tax effect of the gain on the sale of the administrative building in 2022, the adjusted effective tax rate increased to 28.7% in 2023 from 28.1% in 2022.
Excluding the income tax effects of the impairment and other charges recognized in relation to lululemon Studio in 2023, the adjusted effective tax rate was 28.7% in 2023.
Comparable company-operated stores have been open, or open after being significantly expanded, for at least 12 full fiscal months. Net revenue from a company-operated store is included in comparable sales beginning with the first fiscal month for which the store has a full fiscal month of sales in the prior year.
Net revenue from a company-operated store is included in comparable sales beginning with the first fiscal month for which the store has a full fiscal month of sales in the prior year.
Financial Highlights The summary below compares 2023 to 2022 and provides both GAAP and non-GAAP financial measures. The adjusted financial measures for 2023 exclude $72.1 million of post-tax asset impairment and other charges recognized in relation to lululemon Studio.
And in accessories, we continued to bring innovation across our offering of bags, which drove good response from our guests. Financial Highlights The summary below compares 2024 to 2023 and provides both GAAP and non-GAAP financial measures. The adjusted financial measures for 2023 exclude $72.1 million of post-tax asset impairment and other charges recognized in relation to lululemon Studio.
We believe that sales per square foot is useful in evaluating the performance of our company-operated stores. Sales per square foot is calculated using total net revenue from all company-operated stores divided by the average ending square footage of the stores for each period during the year.
Sales per square foot is calculated using total net revenue from all company-operated stores divided by the average ending square footage of the stores for each period during the year. In fiscal years with 53 weeks, the 53rd week of net revenue is excluded from the calculation of sales per square foot.
Other Income (Expense), Net 2023 2022 Year over year change (In thousands) (In thousands) (Percentage) Other income (expense), net $ 43,059 $ 4,163 $ 38,896 934.3 % The increase in other income, net was primarily due to an increase in interest income as a result of higher cash balances and higher interest rates.
Other Income (Expense), Net 2024 2023 Year over year change (In thousands) (In thousands) (Percentage) Other income (expense), net $ 70,380 $ 43,059 $ 27,321 63.5 % The increase in other income, net was primarily due to an increase in interest income as a result of higher average cash balances.
The sales per square foot metric we report may not be equivalent to similarly titled metrics reported by other companies. Non-GAAP Financial Measures Constant dollar changes and adjusted financial results are non-GAAP financial measures.
The square footage of our company-operated stores includes all retail related space, including selling space as well as storage and back-office areas. The sales per square foot metric we report may not be equivalent to similarly titled metrics reported by other companies. Non-GAAP Financial Measures Constant dollar changes and adjusted financial results are non-GAAP financial measures.
The increase in Americas net revenue was primarily due to an increase in comparable sales, which increased 8%, or 9% on a constant dollar basis. The increase in comparable sales was primarily a result of increased traffic, partially offset by a lower dollar value per transaction and a decrease in conversion rates.
Americas comparable sales, which excludes net revenue from the 53rd week of 2024, decreased 1%. The decrease in comparable sales was primarily a result of decreased conversion rates, partially offset by an increase in traffic and a higher dollar value per transaction.
The increase in general corporate expenses was partially offset by a decrease in net foreign currency exchange and derivative losses of $7.0 million.
The increase in selling, general and administrative expenses was partially offset by an increase in net foreign currency exchange and derivative revaluation gains of $9.9 million.
As of January 28, 2024 the net carrying value of our inventories was $1.3 billion, which included provisions for obsolete and damaged inventory of $139.7 million. The 43 Table of Contents provision is determined based upon assumptions about product quality, damages, future demand, selling prices, and market conditions, and includes a provision of $63.0 million against lululemon Studio Mirror inventory.
As of February 2, 2025, the net carrying value of our inventories was $1.4 billion, which included provisions for obsolete and damaged inventory of $82.3 million. The provision is determined based upon assumptions about product quality, damages, future demand, selling prices, and market conditions. Deferred taxes on undistributed net investment of foreign subsidiaries.
The increase in gross profit was partially offset by an increase in selling, general and administrative expenses, primarily due to higher employee costs, increased digital marketing expenses, increased credit card fees, packaging costs, and distribution costs driven by higher net revenue, and 32 Table of Contents increased depreciation, and technology costs.
The increase in selling, general and administrative expenses was primarily due to higher employee costs and increased marketing expenses, as well as increased distribution costs and credit card fees driven by higher net revenue. 32 Table of Contents Corporate Corporate expenses decreased $9.0 million to $1.3 billion in 2024 compared to 2023.
Net Income 2023 2022 Year over year change (In thousands) (In thousands) (Percentage) Net income $ 1,550,190 $ 854,800 $ 695,390 81.4 % 33 Table of Contents The increase in net income in 2023 was primarily due to an increase in gross profit of $1.1 billion, an increase in other income (expense), net of $38.9 million, and impairment and restructuring charges recognized in 2023 of $74.5 million compared to impairment charges of $407.9 million recognized in 2022, partially offset by an increase in selling, general and administrative expenses of $639.8 million, an increase in income tax expense of $147.8 million, and a gain on disposal of assets of $10.2 million in the prior year.
Net Income 2024 2023 Year over year change (In thousands) (In thousands) (Percentage) Net income $ 1,814,616 $ 1,550,190 $ 264,426 17.1 % The increase in net income in 2024 was primarily due to an increase in gross profit of $661.4 million, impairment and restructuring charges recognized in 2023 of $74.5 million, an increase in other income (expense), net of $27.3 million, partially offset by an increase in selling, general and administrative expenses of $365.2 million, and an increase in income tax expense of $135.9 million.
The increase in China Mainland net revenue was primarily due to an increase in comparable sales, which increased 39%, or 46% on a constant dollar basis. The increase in comparable sales was primarily a result of increased traffic, partially offset by a decrease in conversion rates and a lower dollar value per transaction.
China Mainland comparable sales excludes net revenue from the 53rd week of 2024. The increase in comparable sales was primarily a result of increased traffic, partially offset by a lower dollar value per transaction.
Acquisition-Related Expenses included in Item 8 of Part II of this report for further information on the nature of these amounts. 2023 Gross Profit Gross Margin Income from Operations Operating Margin Income Tax Expense Effective Tax Rate Net Income Diluted Earnings Per Share (In thousands, except per share amounts) GAAP results $ 5,609,405 58.3 % $ 2,132,676 22.2 % $ 625,545 28.8 % $ 1,550,190 $ 12.20 lululemon Studio charges: lululemon Studio obsolescence provision 23,709 0.3 23,709 0.2 23,709 0.19 Impairment of assets 44,186 0.5 44,186 0.35 Restructuring costs 30,315 0.3 30,315 0.24 Tax effect of the above 26,085 (0.1) (26,085) (0.21) 23,709 0.3 98,210 1.0 26,085 (0.1) 72,125 0.57 Adjusted results (non-GAAP) $ 5,633,114 58.6 % $ 2,230,886 23.2 % $ 651,630 28.7 % $ 1,622,315 $ 12.77 40 Table of Contents 2022 Gross Profit Gross Margin Income from Operations Operating Margin Income Tax Expense Effective Tax Rate Net Income Diluted Earnings Per Share (In thousands, except per share amounts) GAAP results $ 4,492,340 55.4 % $ 1,328,408 16.4 % $ 477,771 35.9 % $ 854,800 $ 6.68 lululemon Studio charges: lululemon Studio obsolescence provision 62,928 0.8 62,928 0.8 62,928 0.49 Impairment of goodwill and other assets 407,913 5.0 407,913 3.19 Tax effect of the above 28,171 (7.8) (28,171) (0.22) 62,928 0.8 470,841 5.8 28,171 (7.8) 442,670 3.46 Gain on disposal of assets (10,180) (0.1) (10,180) (0.08) Tax effect of the above (1,661) — 1,661 0.01 Adjusted results (non-GAAP) $ 4,555,268 56.2 % $ 1,789,069 22.1 % $ 504,281 28.1 % $ 1,288,951 $ 10.07 2021 Income from Operations Operating Margin Income Tax Expense Effective Tax Rate Net Income Diluted Earnings Per Share (In thousands, except per share amounts) GAAP results $ 1,333,355 21.3 % $ 358,547 26.9 % $ 975,322 $ 7.49 Transaction and integration costs 2,989 — 2,989 0.02 Acquisition-related compensation 38,405 0.7 38,405 0.29 Tax effect of the above 1,417 (0.7) (1,417) (0.01) Adjusted results (non-GAAP) $ 1,374,749 22.0 % $ 359,964 26.2 % $ 1,015,299 $ 7.79 Liquidity and Capital Resources Our primary sources of liquidity are our current balances of cash and cash equivalents, cash flows from operations, and capacity under our committed revolving credit facility, including to fund short-term working capital requirements.
There were no adjusted financial measures for 2024. 2023 Gross Profit Gross Margin Income from Operations Operating Margin Income Tax Expense Effective Tax Rate Net Income Diluted Earnings Per Share (In thousands, except per share amounts) GAAP results $ 5,609,405 58.3 % $ 2,132,676 22.2 % $ 625,545 28.8 % $ 1,550,190 $ 12.20 lululemon Studio charges: lululemon Studio obsolescence provision 23,709 0.3 23,709 0.2 23,709 0.19 Impairment of assets 44,186 0.5 44,186 0.35 Restructuring costs 30,315 0.3 30,315 0.24 Tax effect of the above 26,085 (0.1) (26,085) (0.21) 23,709 0.3 98,210 1.0 26,085 (0.1) 72,125 0.57 Adjusted results (non-GAAP) $ 5,633,114 58.6 % $ 2,230,886 23.2 % $ 651,630 28.7 % $ 1,622,315 $ 12.77 Liquidity and Capital Resources Our primary sources of liquidity are our current balances of cash and cash equivalents, cash flows from operations, and capacity under our committed revolving credit facility, including to fund short-term working capital requirements.
The increase in gross margin was primarily due to higher product margin as well as leverage on occupancy and other costs, partially offset by unfavorable foreign currency exchange rates.
The decrease in gross margin was primarily due to deleverage on distribution center and occupancy costs, partially offset by higher product margin.
The increase in Rest of World net revenue was primarily due to an increase in comparable sales, which increased 32%, or 33% on a constant dollar basis. The increase in comparable sales was primarily a result of increased traffic, partially offset by a decrease in conversion rates.
Rest of World comparable sales excludes net revenue from the 53rd week of 2024. The increase in comparable sales was primarily a result of increased traffic and a higher dollar value per transaction, partially offset by a decrease in conversion rates.
We believe investors would similarly find these metrics useful in assessing the performance of our business. Comparable sales includes comparable company-operated store and all e-commerce net revenue. E-commerce net revenue includes our buy online pick-up in store, back-back room, and ship from store omni-channel retailing capabilities in addition to our websites, other region-specific websites, digital marketplaces, and mobile apps.
E-commerce net revenue includes buy online pick-up in store, back-back room, and ship from store net revenue in addition to our websites, 33 Table of Contents other region-specific websites, digital marketplaces, and mobile apps.
The increase in China Mainland net revenue was also driven by a $77.5 million increase in non-comparable sales, primarily from our company-operated stores that were opened or significantly expanded since 2021. Rest of World.
The increase in China Mainland net revenue was also driven by a $156.5 million increase in in net revenue from new or expanded company-operated stores and our other channels. We have opened 24 net new company-operated stores since 2023.
Comparable Sales and Sales Per Square Foot Comparable Sales We use comparable sales to evaluate the performance of our company-operated store and e-commerce businesses from an omni-channel perspective. It allows us to monitor the performance of our business without the impact of recently opened or expanded stores.
It allows us to monitor the performance of our business without the impact of recently opened or expanded stores. We believe investors would similarly find these metrics useful in assessing the performance of our business. Comparable sales includes comparable company-operated store and all e-commerce net revenue.
On a constant dollar basis, net revenue increased 20%. • Comparable sales increased 13%, or 14% on a constant dollar basis. – Americas comparable sales increased 8%, or 9% on a constant dollar basis. – China Mainland comparable sales increased 39%, or 46% on a constant dollar basis. – Rest of World comparable sales increased 32%, or 33% on a constant dollar basis. • Gross profit increased 25% to $5.6 billion.
On a constant dollar basis, net revenue increased 11%. • Comparable sales, which excludes net revenue from the 53rd week of 2024, increased 4%. – Americas comparable sales decreased 1%. – China Mainland comparable sales increased 25%, or 27% on a constant dollar basis. – Rest of World comparable sales increased 19%, or 20% on a constant dollar basis. • Gross profit increased 12% to $6.3 billion.
Consumer purchasing behaviors and their propensity to spend in our sector have been impacted by uncertain economic conditions including inflation, higher interest rates, and other factors. While we experienced traffic and net revenue growth in 2023 in all markets, over the course of 2023 we saw moderation in the year over year traffic and net revenue growth in the Americas.
Consumer confidence, purchasing behaviors, and their propensity to spend in our sector have been impacted by uncertain economic conditions including inflation, fluctuating interest rates, and other factors. We continue to monitor the economic environment, including in the US, Canada, and China Mainland.
The following table summarizes our contractual arrangements due by fiscal year as of January 28, 2024, and the timing and effect that such commitments are expected to have on our liquidity and cash flows in future periods: Total 2024 2025 2026 2027 2028 Thereafter (In thousands) Operating leases (minimum rent) $ 1,645,318 $ 300,379 $ 287,224 $ 232,510 $ 214,519 $ 158,252 $ 452,434 Purchase obligations 688,934 656,376 5,566 10,506 2,899 13,587 — One-time transition tax payable 28,555 12,691 15,864 — — — — As of January 28, 2024, our operating lease commitments 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 following table summarizes our contractual arrangements due by fiscal year as of February 2, 2025, and the timing and effect that such commitments are expected to have on our liquidity and cash flows in future periods: Total 2025 2026 2027 2028 2029 Thereafter (In thousands) Operating leases (minimum rent) $ 1,845,624 $ 336,521 $ 314,027 $ 299,214 $ 243,199 $ 182,854 $ 469,809 Purchase obligations 803,579 725,155 22,982 16,807 25,635 13,000 — As of February 2, 2025, our minimum operating lease commitment for distribution center operating leases which have been committed to, but not yet commenced, was $274.8 million, which is not reflected in the table above.
Our leases generally have initial terms of between two and 15 years, and generally can be extended in increments between two and five years, if at all. The following table details our future minimum lease payments. Minimum lease commitments exclude variable lease expenses including contingent rent payments, common area maintenance, property taxes, and landlord's insurance. Purchase obligations.
We lease certain store and other retail locations, distribution centers, offices, and equipment under non-cancellable operating leases. Our leases generally have initial terms of between two and 15 years, and generally can be extended in increments between two and five years, if at all. The following table details our future minimum lease payments.
Adjusted operating margin increased 110 basis points to 23.2% from 22.1% in 2022. 28 Table of Contents • Income tax expense increased 31% to $625.5 million. Our effective tax rate for 2023 was 28.8% compared to 35.9% for 2022.
Adjusted operating margin increased 50 basis points. 27 Table of Contents • Income tax expense increased 22% to $761.5 million. Our effective tax rate for 2024 was 29.6% compared to 28.8% for 2023. The adjusted effective tax rate was 28.7% for 2023. • Diluted earnings per share were $14.64 for 2024 compared to $12.20 in 2023.
The credit facility has a maturity date of December 14, 2026, subject to extension under certain circumstances. As of January 28, 2024, aside from letters of credit of $6.3 million, we had no other borrowings outstanding under this credit facility. Further information regarding our credit facilities and associated covenants is outlined in Note 12.
As of February 2, 2025, aside from letters of credit of $6.1 million, we had no other borrowings outstanding under this credit facility. Further information regarding our credit facilities and associated covenants is outlined in Note 12. Revolving Credit Facilities included in Item 8 of Part II of this report. Contractual Obligations and Commitments Leases.
The increase in Rest of World net revenue was also driven by a $118.9 million increase in non-comparable sales, primarily from our company-operated stores that were opened or significantly expanded since 2022 as well as increased license and supply arrangements and outlets net revenue.
The increase in Rest of World net revenue was also driven by a $95.8 million increase in net revenue from new or expanded company-operated stores and our other channels. We have opened eight net new company-operated stores since 2023.
The increase in cash provided by operating activities was partially offset by changes in adjusting items of $224.8 million, primarily driven by goodwill and other asset impairments and restructuring costs recognized in relation to lululemon Studio, as well as increased depreciation and higher cash inflows related to derivatives.
The decrease in cash provided by operating activities was also a result of changes in impairment and other charges recognized in relation to lululemon Studio in 2023, and lower cash inflows related to derivatives, partially offset by increased deferred incomes taxes and depreciation.
The remaining 150 basis point decrease in gross margin was primarily the result of: • a decrease in product margin of 100 basis points primarily due to higher markdowns, sales mix, and increased damages and shrink, partially offset by lower air freight costs; • an increase in costs related to our product departments and distribution centers as a percentage of net revenue of 60 basis points; and • an unfavorable impact of foreign currency exchange rates of 40 basis points.
The increase in gross margin was primarily the result of a net increase in product margin of 120 basis points, comprised of: • a net increase of 120 basis points from lower product costs and lower inventory provision expense, partially offset by higher freight costs; • an increase of 30 basis points due to the lululemon Studio obsolescence provision recognized during 2023; and • an unfavorable impact of foreign currency exchange rates of 30 basis points.
In the year following a 53-week year, the prior year period is shifted by one week to compare similar calendar weeks. Non-comparable sales includes all net revenue other than comparable sales. Sales Per Square Foot We use sales per square foot to assess the performance of our company-operated stores relative to their square footage.
In fiscal years with 53 weeks, the 53rd week of net revenue is excluded from the calculation of comparable sales. In the year following a 53-week year, the prior year period is shifted by one week to compare similar calendar weeks.
Selling, General and Administrative Expenses 2023 2022 Year over year change (In thousands) (In thousands) (Percentage) Selling, general and administrative expenses $ 3,397,218 $ 2,757,447 $ 639,771 23.2 % Selling, general and administrative expenses as a percentage of net revenue 35.3 % 34.0 % 130 basis points The increase in selling, general and administrative expenses was primarily due to: • an increase in head office costs of $327.7 million, comprised of: – an increase in employee costs of $108.8 million primarily due to increased salaries and wages expense as well as increased stock-based compensation and incentive compensation, primarily as a result of headcount growth and increased wage rates; – an increase in brand and community costs of $95.4 million primarily due to increased marketing expenses; – an increase in depreciation of $46.0 million; – an increase in other head office costs of $40.4 million, primarily due to increased professional fees; and – an increase in technology costs, including cloud computing amortization, of $37.1 million. • an increase in costs related to our operating channels of $319.1 million, comprised of: – an increase in employee costs of $145.1 million primarily due to increased salaries and wages expense, incentive compensation, and benefit costs for retail employees, primarily from the growth in our business and increased wage rates; – an increase in other operating costs of $67.7 million primarily due to increased depreciation costs, technology costs, and repairs and maintenance costs; – an increase in variable costs of $66.8 million primarily due to increased credit card fees, distribution costs, and packaging costs, primarily as a result of increased net revenue; and – an increase in brand and community costs of $39.5 million primarily due to increased digital marketing expenses.
The increase in product margin was partially offset by a net increase in other cost of sales as a percentage of net revenue of 30 basis points, comprised of: • an increase in occupancy and depreciation costs of 60 basis points; • an increase in distribution center costs of 30 basis points; • a decrease in costs related to our product departments of 50 basis points; and • a favorable impact of foreign currency exchange rates of 10 basis points. 29 Table of Contents Selling, General and Administrative Expenses 2024 2023 Year over year change (In thousands) (In thousands) (Percentage) Selling, general and administrative expenses $ 3,762,379 $ 3,397,218 $ 365,161 10.7 % Selling, general and administrative expenses as a % of net revenue 35.5 % 35.3 % 20 basis points The increase in selling, general and administrative expenses was primarily due to: • an increase in costs related to our operating channels of $196.0 million, comprised of: – an increase in employee costs of $84.2 million primarily due to increased salaries and wages expense and benefit costs for retail employees primarily from the growth in our business, partially offset by decreased incentive compensation; – an increase in brand and community costs of $54.2 million primarily due to increased digital marketing expenses; – an increase in other operating costs of $41.9 million primarily due to increased depreciation costs and repairs and maintenance costs; and – an increase in technology costs of $18.7 million.
Our non-GAAP financial measures may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures reported by other companies. 39 Table of Contents Constant Dollar Changes The below changes in net revenue and comparable sales show the change compared to the corresponding period in the prior year. 2023 Compared to 2022 2022 Compared to 2021 Change Foreign exchange changes Change in constant dollars Change Foreign exchange changes Change in constant dollars Net Revenue Americas 12 % — % 12 % 29 % 1 % 30 % China Mainland 67 8 75 33 7 40 Rest of World 43 1 44 37 12 49 Total net revenue 19 % 1 % 20 % 30 % 2 % 32 % Comparable sales (1) Americas 8 % 1 % 9 % 28 % 1 % 29 % China Mainland 39 7 46 17 6 23 Rest of World 32 1 33 10 9 19 Total comparable sales 13 % 1 % 14 % 25 % 3 % 28 % __________ (1) Comparable sales includes comparable company-operated store and e-commerce net revenue.
Our non-GAAP financial measures may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures reported by other companies. 34 Table of Contents Constant Dollar Changes The below changes in net revenue and comparable sales show the change compared to the corresponding period in the prior year.
We expect our inventories to decrease during the first half of 2024 compared to the first half of 2023, and then increase in the second half of 2024 compared to the second half of 2023. 42 Table of Contents Our existing Americas credit facility provides for $400.0 million in commitments under an unsecured five-year revolving credit facility.
We expect that our inventories will continue to grow in 2025, and we expect the growth rate will exceed net revenue growth in 2025. Our existing Americas credit facility provides for $400.0 million in commitments under an unsecured five-year revolving credit facility. The credit facility has a maturity date of December 14, 2026.
Income Tax Expense 2023 2022 Year over year change (In thousands) (In thousands) (Percentage) Income tax expense $ 625,545 $ 477,771 $ 147,774 30.9 % Effective tax rate 28.8 % 35.9 % (710) basis points The decrease in the effective tax rate was primarily due the income tax impact of certain non-deductible impairment and other charges recognized in 2022 and 2023 related to lululemon Studio, partially offset by a lower tax rate on the gain on the sale of an administrative building in 2022.
The increase in the effective tax rate was partially offset by an increase in tax credits, and the income tax impact of certain non-deductible impairment and other charges related to lululemon Studio, which increased the effective tax rate by 10 basis points in 2023.
Results of Operations The following table summarizes key components of our results of operations for the periods indicated: 2023 2022 2021 2023 2022 2021 (In thousands) (Percentage of net revenue) Net revenue $ 9,619,278 $ 8,110,518 $ 6,256,617 100.0 % 100.0 % 100.0 % Cost of goods sold 4,009,873 3,618,178 2,648,052 41.7 44.6 42.3 Gross profit 5,609,405 4,492,340 3,608,565 58.3 55.4 57.7 Selling, general and administrative expenses 3,397,218 2,757,447 2,225,034 35.3 34.0 35.6 Impairment of goodwill and other assets, restructuring costs 74,501 407,913 — 0.8 5.0 — Amortization of intangible assets 5,010 8,752 8,782 0.1 0.1 0.1 Acquisition-related expenses — — 41,394 — — 0.7 Gain on disposal of assets — (10,180) — — (0.1) — Income from operations 2,132,676 1,328,408 1,333,355 22.2 16.4 21.3 Other income (expense), net 43,059 4,163 514 0.4 0.1 — Income before income tax expense 2,175,735 1,332,571 1,333,869 22.6 16.4 21.3 Income tax expense 625,545 477,771 358,547 6.5 5.9 5.7 Net income $ 1,550,190 $ 854,800 $ 975,322 16.1 % 10.5 % 15.6 % 29 Table of Contents Comparison of 2023 to 2022 Net Revenue Net revenue increased $1.5 billion, or 19%, to $9.6 billion in 2023 from $8.1 billion in 2022.
Results of Operations The following table summarizes key components of our results of operations for the periods indicated: 2024 2023 2024 2023 (In thousands) (Percentage of net revenue) Net revenue $ 10,588,126 $ 9,619,278 100.0 % 100.0 % Cost of goods sold 4,317,315 4,009,873 40.8 41.7 Gross profit 6,270,811 5,609,405 59.2 58.3 Selling, general and administrative expenses 3,762,379 3,397,218 35.5 35.3 Impairment of goodwill and other assets, restructuring costs — 74,501 — 0.8 Amortization of intangible assets 2,735 5,010 — 0.1 Income from operations 2,505,697 2,132,676 23.7 22.2 Other income (expense), net 70,380 43,059 0.7 0.4 Income before income tax expense 2,576,077 2,175,735 24.3 22.6 Income tax expense 761,461 625,545 7.2 6.5 Net income $ 1,814,616 $ 1,550,190 17.1 % 16.1 % 28 Table of Contents Comparison of 2024 to 2023 Net Revenue 2024 2023 2024 2023 Year over year change (In thousands) (Percentage of net revenue) (In thousands) (Percentage) (Constant dollar change) Americas $ 7,928,156 $ 7,631,647 74.9 % 79.3 % $ 296,509 4 % 4 % China Mainland 1,361,337 963,760 12.9 10.0 397,577 41 43 Rest of World 1,298,633 1,023,871 12.3 10.6 274,762 27 29 Net revenue $ 10,588,126 $ 9,619,278 100.0 % 100.0 % $ 968,848 10 % 11 % The increase in net revenue was primarily due to increased China Mainland net revenue.
The increase in gross profit was partially offset by an increase in selling, general and administrative expenses primarily due to higher employee costs, as well as increased digital marketing expenses, increased packaging costs, distribution costs, and credit card fees driven by higher net revenue, and increased technology costs.
Corporate expenses also decreased due to an increase in net foreign currency exchange and derivative gains of $9.9 million, as well as a decrease in employee costs. The decrease in corporate expenses was partially offset by increased professional fees and technology costs, as well as increased depreciation and marketing expenses.
The increase in Americas income from operations was primarily the result of increased gross profit of $855.2 million, driven by increased net revenue, partially offset by lower gross margin. The decrease in gross margin was primarily due to lower product margin, partially offset by leverage on occupancy and other costs.
China Mainland net revenue during the 53rd week of 2024 was $23.6 million, which contributed to the increase in China Mainland net revenue in 2024. The increase in gross margin was primarily due to higher product margin as well as leverage on occupancy and other costs.
The following table summarizes our net cash flows provided by and used in operating, investing, and financing activities for the periods indicated: 2023 2022 Year over year change (In thousands) Total cash provided by (used in): Operating activities $ 2,296,164 $ 966,463 $ 1,329,701 Investing activities (654,132) (569,937) (84,195) Financing activities (548,828) (467,487) (81,341) Effect of foreign currency exchange rate changes on cash and cash equivalents (4,100) (34,043) 29,943 Increase (decrease) in cash and cash equivalents $ 1,089,104 $ (105,004) $ 1,194,108 41 Table of Contents Operating Activities The increase in cash provided by operating activities was primarily as a result of: • an increase in cash flows from changes in operating assets and liabilities of $859.1 million, primarily driven by changes in inventories, accounts payable, and prepaid expenses and other current assets, partially offset by changes in income taxes and accrued liabilities; and • increased net income of $695.4 million.
Cash and cash equivalents in excess of our needs are held in interest bearing accounts with financial institutions, as well as in money market funds and term deposits. 35 Table of Contents The following table summarizes our net cash flows provided by and used in operating, investing, and financing activities for the periods indicated: 2024 2023 Year over year change (In thousands) Total cash provided by (used in): Operating activities $ 2,272,713 $ 2,296,164 $ (23,451) Investing activities (798,174) (654,132) (144,042) Financing activities (1,652,508) (548,828) (1,103,680) Effect of foreign currency exchange rate changes on cash and cash equivalents (81,666) (4,100) (77,566) Increase (decrease) in cash and cash equivalents $ (259,635) $ 1,089,104 $ (1,348,739) Operating Activities Net income increased $264.4 million.
We recognized a provision of $62.9 million against hardware inventory during 2022. This reduced 2022 gross margin by 80 basis points. Please refer to Note 8. Impairment of Goodwill and Other Assets, Restructuring Costs included in Item 8 of Part II of this report.
The net decrease was primarily due to an inventory obsolescence provision of $23.7 million and certain asset impairments and restructuring costs of $74.5 million in relation to lululemon Studio recognized in 2023. Please refer to Note 9. Impairment of Goodwill and Other Assets, Restructuring Costs included in Item 8 of Part II of this report for further information.
The increase in selling, general and administrative expenses was partially offset by a decrease in net foreign currency exchange and derivative revaluation losses of $7.0 million. 31 Table of Contents Impairment of Goodwill and Other Assets, Restructuring Costs 2023 2022 Year over year change (In thousands) (In thousands) (Percentage) Impairment of goodwill and other assets, restructuring costs $ 74,501 $ 407,913 $ (333,412) (81.7) % During 2023, we recognized certain asset impairments and restructuring costs, and during 2022, we recognized impairment of goodwill and other assets, each in relation to lululemon Studio.
Impairment of Goodwill and Other Assets, Restructuring Costs 2024 2023 Year over year change (In thousands) (In thousands) (Percentage) Impairment of goodwill and other assets, restructuring costs $ — $ 74,501 $ (74,501) (100.0) % During 2023, we recognized certain asset impairments and restructuring costs related to lululemon Studio. Please refer to Note 9.
Income from Operations On a segment basis, we determine income from operations without taking into account our general corporate expenses and certain other expenses. Segmented income from operations is summarized below.
The amortization of intangible assets in 2023 was primarily the result of the amortization of intangible assets recognized upon the acquisition of MIRROR, which we rebranded as lululemon Studio. Segment Results On a segment basis, we determine income from operations without taking into account corporate expenses and certain other expenses.
We continued to execute against our Power of Three ×2 growth plan, growing net revenue 19% and diluted earnings per share 83%, or 27% on an adjusted basis, as our teams were able to successfully navigate an uncertain macroeconomic environment. Our growth continued across regions, merchandise categories, and channels.
Net revenue increased 10%, operating margin expanded 150 basis points, or 50 basis points on an adjusted basis, and diluted earnings per share grew 20%, or 15% on an adjusted basis. Our teams continued to execute against our Power of Three ×2 growth plan and the compound annual growth rate in net revenue was 19% between fiscal 2021 and 2024.
Adjusted gross profit increased 24% to $5.6 billion. • Gross margin increased 290 basis points to 58.3%. Adjusted gross margin increased 240 basis points to 58.6%. • Income from operations increased 61% to $2.1 billion. Adjusted income from operations increased 25% to $2.2 billion. • Operating margin increased 580 basis points to 22.2% from 16.4% in 2022.
Adjusted gross profit increased 11%. • Gross margin increased 90 basis points to 59.2%. Adjusted gross margin increased 60 basis points. • Income from operations increased 17% to $2.5 billion. Adjusted income from operations increased 12%. • Operating margin increased 150 basis points to 23.7%.
The increase in Americas income from operations was primarily the result of increased gross profit of $691.7 million, driven by increased net revenue and higher gross margin. The increase in gross margin was primarily due to higher product margin, partially offset by deleverage on distribution center costs.
Rest of World net revenue during the 53rd week of 2024 was $21.7 million, which contributed to the increase in Rest of World net revenue in 2024. The increase in gross margin was primarily due to higher product margin.
Excluding certain inventory provisions, goodwill and other asset impairments, and restructuring costs recognized in relation to lululemon Studio in 2023 and 2022 and the gain on sale of an administrative building in 2022, and their tax effects, adjusted net income increased $333.4 million or 26%.
We provide constant dollar changes and adjusted financial results which exclude certain inventory provisions, asset impairments, and restructuring costs recognized in relation to lululemon Studio and their related tax effects.
Market Conditions and Trends Macroeconomic conditions, supply chain disruption, and the COVID-19 pandemic have impacted our business and operating costs. Certain trends are expected to continue throughout 2024, with the impact varying by market. Macroeconomic Conditions Macroeconomic conditions, including foreign currency fluctuations, have impacted our financial results.
Adjusted diluted earnings per share were $12.77 in 2023. Market Conditions and Trends Macroeconomic conditions, government actions and policies, consumer confidence and purchasing behaviors, and foreign currency fluctuations impact our business. Such factors are expected to continue to impact our business throughout 2025, with the impact varying by market.
While we continued to sell at-home hardware in 2023, we reached the decision to cease selling the lululemon Studio Mirror during the third quarter of 2023. These strategy shifts resulted in the recognition of an inventory obsolescence provision of $62.9 million in 2022 and a further provision of $23.7 million in 2023.
As a result of our decision to cease selling the lululemon Studio Mirror, we recognized an inventory obsolescence provision of $23.7 million during 2023, which reduced gross margin by 30 basis points. Adjusted gross margin increased 60 basis points. Please refer to Note 9.
Please refer to Note 9. Acquisition-Related Expenses included in Item 8 of Part II of this report for further information.
Investing Activities The increase in cash used in investing activities was primarily due to the acquisition of the lululemon branded retail locations and operations run by a third party in Mexico. Please refer to Note 6. Acquisition included in Item 8 of Part II of this Annual Report on Form 10-K for further information.
We 27 Table of Contents opened 56 net new company-operated stores, contributing to a 15% increase in square footage, while total company-operated store net revenue increased 21% and e-commerce net revenue increased 17%.
In China Mainland, revenue increased 41%, and in Rest of World, revenue grew 27%. By category, we saw a 9% increase in women's, 14% growth in men's, and an 10% increase in other categories. We expanded our retail presence by adding 56 net new company-operated stores, contributing to a 14% increase in square footage.
Amortization of Intangible Assets 2023 2022 Year over year change (In thousands) (In thousands) (Percentage) Amortization of intangible assets $ 5,010 $ 8,752 $ (3,742) (42.8) % The amortization of intangible assets was primarily the result of the amortization of intangible assets recognized upon the acquisition of MIRROR, which we rebranded as lululemon Studio.
Impairment of Goodwill and Other Assets, Restructuring Costs included in Item 8 of Part II of this report for further information. 30 Table of Contents Amortization of Intangible Assets 2024 2023 Year over year change (In thousands) (In thousands) (Percentage) Amortization of intangible assets $ 2,735 $ 5,010 $ (2,275) (45.4) % The amortization of intangible assets in 2024 was primarily the result of the amortization of intangible assets recognized upon the acquisition of the Mexico operations.
Income from operations as a percentage of China Mainland net revenue decreased primarily due to lower gross margin. Rest of World. The increase in Rest of World income from operations was primarily the result of increased gross profit of $80.9 million, driven by increased net revenue, partially offset by lower gross margin.
The increase in costs related to our head office was partially offset by a net decrease in employee costs of $1.9 million primarily due to decreased incentive compensation, partially offset by increased salaries and wages expense.
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Fiscal 2023, 2022, and 2021 were each 52-week years. Fiscal 2024 will be a 53-week year.
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Fiscal 2024 was a 53-week year. Net revenue includes results from the 53rd week; however, comparable sales exclude the 53rd week. Fiscal 2023 was a 52-week year.
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During the fourth quarter of 2023, we revised the financial information which is regularly reviewed and used by our CODM to evaluate performance and allocate resources. Historically, our segments were based on selling channel.
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We saw growth across our regions, merchandise categories, and channels as we continue to engage with guests and provide them with innovative products that help enable their wellness journey. In the Americas, revenue grew 4% driven by strength in Canada. In the United States, we have been working to increase the level of seasonal newness within our assortment mix.
Removed
As we have further executed on our omni-channel retail strategy, and with the continued expansion of our international operations, our resource allocation decisions have evolved to focus on regional markets. We organize our operations into four regional markets: Americas, China Mainland, APAC, and EMEA.
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These metrics include our stores in Mexico which we now operate directly, the result of the acquisition of the Mexico operations from our license and 26 Table of Contents supply partner in September 2024. Company-operated store net revenue increased 14% and e-commerce net revenue increased 6%.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeFluctuations in the value of the U.S. dollar affect the reported amounts of net revenue, expenses, assets, and liabilities. As a result of the fluctuation in exchange rates compared to the U.S. dollar our revenue was $89.8 million lower in 2023 in comparison to 2022.
Biggest changeAs a result of the fluctuation in exchange rates compared to the U.S. dollar our revenue was $75.3 million lower in 2024 in comparison to 2023.
Sustained increases in transportation costs, wages, and raw material costs, or other inflationary pressures in the future may have an adverse effect on our ability to maintain current levels of operating margin if the selling prices of our products do not increase with these increased costs, or we cannot identify cost efficiencies. 45 Table of Contents
Sustained increases in transportation costs, wages, and raw material costs, or other inflationary pressures in the future may have an adverse effect on our ability to maintain current levels of operating margin if the selling prices of our products do not increase with these increased costs, or we cannot identify cost efficiencies.
We also have exposure to changes in foreign currency exchange rates associated with transactions which are undertaken by our subsidiaries in currencies other than their functional currency. Such transactions include intercompany transactions and inventory purchases denominated in currencies other than the functional currency of the 44 Table of Contents purchasing entity.
Transaction Risk . We also have exposure to changes in foreign currency exchange rates associated with transactions which are undertaken by our subsidiaries in currencies other than their functional currency. Such transactions include intercompany transactions and inventory purchases denominated in currencies other than the functional currency of the purchasing entity.
As of January 28, 2024, we had certain forward currency contracts outstanding in order to economically hedge the foreign currency revaluation gains and losses recognized by our foreign subsidiaries, including our Canadian and Chinese subsidiaries, on their monetary assets and liabilities denominated in currencies other than their functional currency.
As of February 2, 2025, we had certain forward currency contracts outstanding in order to economically hedge the foreign currency revaluation gains and losses recognized by our foreign subsidiaries, including our Canadian and Chinese subsidiaries, on their monetary assets and liabilities denominated in currencies other than their functional currency.
Our cash and cash equivalent balances are held in the form of cash on hand, bank balances, and short-term deposits with original maturities of three months or less, and in money market funds. As of January 28, 2024, we held cash and cash equivalents of $2.2 billion.
Our cash and cash equivalent balances are held in the form of cash on hand, bank balances, and short-term deposits with original maturities of three months or less, and in money market funds. As of February 2, 2025, we held cash and cash equivalents of $2.0 billion.
Because our revolving credit facilities bear interest at a variable rate, we will be exposed to market risks relating to changes in interest rates, if we have a meaningful outstanding balance. As of January 28, 2024, aside from letters of credit of $6.3 million, there were no borrowings outstanding under these credit facilities.
Because our revolving credit facilities bear interest at a variable rate, we will be exposed to market risks relating to changes in interest rates, if we have a meaningful outstanding balance. As of February 2, 2025, aside from letters of credit of $6.1 million, there were no borrowings outstanding under these credit facilities.
We enter into forward currency contracts in order to hedge a portion of the foreign currency exposure associated with the translation of our net investment in our Canadian subsidiary. The impact to other comprehensive loss of translation of our Canadian subsidiaries was an increase in the loss of $9.0 million, inclusive of net investment hedge gains. Transaction Risk .
We enter into forward currency contracts in order to hedge a portion of the foreign currency exposure associated with the translation of our net investment in our Canadian subsidiary. During 2024, the impact to other comprehensive loss of translation of our Canadian subsidiaries was an increase in the loss of $134.8 million, inclusive of net investment hedge gains.
As of January 28, 2024, a 10% depreciation in the U.S. dollar against the hedged currencies would have resulted in the net fair value of outstanding derivatives depreciating by $29.8 million. The hypothetical change in the fair value of the forward currency contracts would have been substantially offset by a corresponding but directionally opposite change in the underlying hedged items.
As of February 2, 2025, a 10% depreciation in the U.S. dollar against the hedged currencies would have resulted in the net fair value of outstanding derivatives depreciating by $11.0 million. The hypothetical change in the fair value of the forward currency contracts would have been substantially offset by a corresponding but directionally opposite change in the underlying hedged items.
We perform a sensitivity analysis to determine the market risk exposure associated with the fair values of our forward currency contracts. The net fair value of outstanding derivatives as of January 28, 2024 was a liability of $2.2 million.
We perform a sensitivity analysis to determine the market risk exposure associated with the fair values of our forward currency contracts. The net fair value of outstanding derivatives as of February 2, 2025 was an asset of $2.2 million.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Foreign Currency Exchange Risk Translation Risk . The functional currency of our international subsidiaries is generally the applicable local currency. Our consolidated financial statements are presented in U.S. dollars. Therefore, the net revenue, expenses, assets, and liabilities of our international subsidiaries are translated from their functional currencies into U.S. dollars.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Foreign Currency Exchange Risk Translation Risk . The functional currency of our international subsidiaries is generally the applicable local currency. Our consolidated financial statements are presented in U.S. dollars.
We seek to limit the amount of exposure with any one counterparty. Inflation Inflationary factors such as increases in the cost of our product, as well as overhead costs and capital expenditures may adversely affect our operating results. During 2022 and 2023, our operating margin was impacted by increased wage rates.
We seek to limit the amount of exposure with any one counterparty. 39 Table of Contents Inflation Inflationary factors such as increases in the cost of our product, as well as overhead costs and capital expenditures may adversely affect our operating results.
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During 2022, our gross margin was impacted by higher air freight costs as a result of global supply chain disruption.
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Therefore, the net revenue, expenses, assets, and liabilities of 38 Table of Contents our international subsidiaries are translated from their functional currencies into U.S. dollars. Fluctuations in the value of the U.S. dollar affect the reported amounts of net revenue, expenses, assets, and liabilities.
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Inflationary pressures could also reduce consumer spending and impact the demand for our products. 40 Table of Contents