lululemon athletica inc

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. The adjusted financial measures for 2022 exclude $442.7 million of post-tax goodwill impairment and other charges recognized in relation to lululemon Studio and the post-tax net gain on the sale of an administrative building of $8.5 million.

•Net revenue increased 19% to $9.6 billion. 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. 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 operating margin increased 110 basis points to 23.2% from 22.1% in 2022.

•Income tax expense increased 31% to $625.5 million. Our effective tax rate for 2023 was 28.8% compared to 35.9% for 2022. The adjusted effective tax rate was 28.7% and 28.1% for 2023 and 2022, respectively.

•Diluted earnings per share were $12.20 for 2023 compared to $6.68 in 2022. Adjusted diluted earnings per share were $12.77 for 2023 compared to $10.07 in 2022.

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. 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.

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. We continue to monitor macroeconomic conditions and the trends in consumer demand for our products.

Supply Chain Disruption

In 2021 and 2022 we experienced supply chain disruption, including delays in inbound delivery of our products as well as in manufacturing. This supply chain disruption caused us to use higher cost modes of transport, including increasing our use of air freight. We saw an improvement in the supply chain disruption during the second half of 2022 and during 2023, including reductions in freight costs and reductions in our levels of air freight usage.

COVID-19 Pandemic

Most of our retail locations were open throughout 2023, 2022, and 2021, with certain locations temporarily closed due to COVID-19 resurgences during the first quarter of 2022 and at various times in 2021. The effect of COVID-19, including store closures, impacted our revenue and operating margins in 2021 and the first quarter of 2022 in China Mainland.