lululemon athletica inc

Previous wording

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. Fiscal 2024 will end on February 2, 2025 and will be a 53-week year. Fiscal 2023 was a 52-week year and ended on January 28, 2024. Fiscal 2024 and fiscal 2023 are referred to as "2024," and "2023," respectively. The first quarter of 2024 and 2023 ended on April 28, 2024 and April 30, 2023, respectively.

Current wording

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. Fiscal 2024 will end on February 2, 2025 and will be a 53-week year. Fiscal 2023 was a 52-week year and ended on January 28, 2024. Fiscal 2024 and fiscal 2023 are referred to as "2024," and "2023," respectively. The first two quarters of 2024 and 2023 ended on July 28, 2024 and July 30, 2023, respectively.

Previous wording

As reported in the fiscal 2023 Annual Report on Form 10-K filed with the SEC on March 21, 2024, we changed our operating segments during the fourth quarter of fiscal 2023. We report three segments: Americas, China Mainland, and Rest of World, which is Asia Pacific (“APAC”) and Europe and the Middle East (“EMEA”) on a combined basis. Previously, our segments were based on selling channel. We have recast our previously reported amounts for segmented net revenue and segmented income from operations to reflect the current presentation.

Current wording

As reported in our fiscal 2023 Annual Report on Form 10-K filed with the SEC on March 21, 2024, we changed our operating segments during the fourth quarter of fiscal 2023. We report three segments: Americas, China Mainland, and Rest of World, which is Asia Pacific (“APAC”) and Europe and the Middle East (“EMEA”) on a combined basis. Previously, our segments were based on selling channel. We have recast our previously reported amounts for segmented net revenue and segmented income from operations to reflect the current presentation.

Previous wording

The summary below compares the first quarter of 2024 to the first quarter of 2023:

Current wording

The summary below compares the second quarter of 2024 to the second quarter of 2023:

Previous wording

–China Mainland comparable sales increased 26%, or 33% on a constant dollar basis.

Current wording

–China Mainland comparable sales increased 21%, or 23% on a constant dollar basis.

Previous wording

–Rest of World comparable sales increased 23%, or 26% on a constant dollar basis.

Current wording

–Rest of World comparable sales increased 17%, or 20% on a constant dollar basis.

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•Gross margin increased 20 basis points to 57.7%.

Current wording

•Gross margin increased 80 basis points to 59.6%.

Previous wording

•Income tax expense increased 13% to $134.5 million. Our effective tax rate for the first quarter of 2024 was 29.5% compared to 29.1% for the first quarter of 2023.

Current wording

•Income tax expense increased 14% to $165.3 million. Our effective tax rate for the second quarter of 2024 was 29.6% compared to 29.8% for the second quarter of 2023.

Previous wording

•Diluted earnings per share were $2.54 compared to $2.28 in the first quarter of 2023.

Current wording

•Diluted earnings per share were $3.15 compared to $2.68 in the second quarter of 2023.

Previous wording

Macroeconomic conditions, including foreign currency fluctuations and consumer purchasing behaviors, impact our business and operating costs. Such factors are expected to continue to impact our business throughout 2024, with the impact varying by market.

Current wording

Macroeconomic conditions, including consumer purchasing behaviors and foreign currency fluctuations, impact our business and operating costs. Such factors are expected to continue to impact our business throughout 2024, with the impact varying by market.

Previous wording

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 the first quarter of 2024 in all markets, we saw continued moderation in our quarterly net revenue growth in the Americas, particularly in the United States. We continue to monitor macroeconomic conditions and the trends in consumer demand for our products.

Current wording

While we experienced traffic growth in the first two quarters of 2024 in all markets, we saw continued moderation in our quarterly net revenue growth in the Americas. In the United States, net revenue declined by $2.9 million in the second quarter of 2024 compared to the second quarter of 2023. We continue to monitor macroeconomic conditions and the trends in consumer demand for our products.

Previous wording

Foreign currency fluctuations have impacted our financial results. Foreign currency fluctuations reduced the growth of our net revenue by $21.8 million when comparing the first quarter of 2024 to 2023, primarily due to the overall appreciation of the US dollar. We expect future exchange rate volatility to impact our results.

Current wording

Foreign currency fluctuations have adversely impacted our financial results. Foreign currency fluctuations reduced the growth of our net revenue by $43.9 million when comparing the first two quarters of 2024 to the first two quarters of 2023, primarily due to the overall appreciation of the US dollar. We expect future exchange rate volatility to impact our results.

Previous wording

Net revenue increased $208.1 million, or 10%, to $2.2 billion for the first quarter of 2024 from $2.0 billion for the first quarter of 2023. On a constant dollar basis, net revenue increased 11%. Comparable sales increased 6%, or 7% on a constant dollar basis. The increase in net revenue was primarily due to increased China Mainland net revenue. Rest of World and Americas net revenue also increased.

Current wording

Net revenue increased $161.9 million, or 7%, to $2.4 billion for the second quarter of 2024 from $2.2 billion for the second quarter of 2023. On a constant dollar basis, net revenue increased 8%. Comparable sales increased 2%, or 3% on a constant dollar basis. The increase in net revenue was primarily due to increased China Mainland and Rest of World net revenue. Americas net revenue also increased.

Previous wording

Net revenue for the first quarter of 2024 and 2023 is summarized below:

Current wording

Net revenue for the second quarter of 2024 and 2023 is summarized below:

Previous wording

China Mainland. The increase in China Mainland net revenue was primarily due to an increase in comparable sales, which increased 26%, or 33% 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. The increase in China Mainland net revenue was also driven by a $41.7 million increase in net revenue from new or expanded company-operated stores and our other channels. We have opened 26 net new stores in China Mainland since the first quarter of 2023.

Current wording

China Mainland. The increase in China Mainland net revenue was primarily due to an increase in comparable sales, which increased 21%, or 23% 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. The increase in China Mainland net revenue was also driven by a $34.3 million increase in net revenue from new or expanded company-operated stores and our other channels. We have opened 25 net new stores in China Mainland since the second quarter of 2023.

Previous wording

•a decrease in costs related to our product departments as a percentage of net revenue of 50 basis points.

Current wording

•a decrease in costs related to our product departments as a percentage of net revenue of 80 basis points.

Previous wording

•an increase in head office costs of $47.3 million, comprised of:

Current wording

•an increase in head office costs of $28.9 million, comprised of:

Previous wording

–an increase in brand and community costs of $21.1 million primarily due to increased marketing expenses and brand campaigns;

Current wording

–an increase in brand and community costs of $16.1 million primarily due to increased marketing expenses and brand campaigns;

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–an increase in technology costs, including cloud computing amortization, of $4.9 million; and

Current wording

–an increase in technology costs, including cloud computing amortization, of $5.3 million;

Previous wording

–an increase in depreciation of $1.1 million.

Current wording

–an increase in depreciation of $4.5 million; and

Previous wording

–an increase in employee costs of $14.1 million primarily due to increased salaries and wages expense, and benefit costs for retail employees, partially offset by decreased incentive compensation; and

Current wording

–an increase in employee costs of $12.1 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;

Previous wording

–an increase in brand and community costs of $2.5 million primarily due to increased digital marketing expenses and events.

Current wording

–an increase in brand and community costs of $9.1 million primarily due to increased digital marketing expenses; and

Previous wording

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.

Current wording

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. These assets were fully impaired during the third quarter of 2023.

Previous wording

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.

Current wording

The increase in other income, net was primarily due to an increase in interest income as a result of higher cash balances.

Previous wording

The increase in net income was primarily due to an increase in gross profit of $124.3 million and an increase in other income (expense), net of $15.3 million, partially offset by an increase in selling, general and administrative expenses of $94.9 million, and an increase in income tax expense of $15.5 million.

Current wording

The increase in net income was primarily due to an increase in gross profit of $113.7 million and an increase in other income (expense), net of $10.6 million, partially offset by an increase in selling, general and administrative expenses of $54.6 million and an increase in income tax expense of $20.3 million.

Previous wording

Americas. The increase in Americas net revenue was primarily due to a $50.9 million increase from new or expanded company-operated stores and our other channels. We have opened 14 net new stores in the Americas since the first quarter of 2023. Americas comparable sales were flat compared to the first quarter of 2023. This was primarily a result of increased traffic, offset by a decrease in conversion rates.

Current wording

Americas. The increase in Americas net revenue was primarily due to a $108.6 million increase from new or expanded company-operated stores and our other channels. We have opened 15 net new stores in the Americas since the second quarter of 2023. Americas comparable sales 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.

Previous wording

Rest of World. The increase in Rest of World net revenue was primarily due to an increase in comparable sales, which increased 23%, or 26% on a constant dollar basis. 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. The increase in Rest of World net revenue was also driven by a $19.9 million increase in net revenue from new or expanded company-operated stores and our other channels. We have opened nine net new stores in Rest of World since the first quarter of 2023.

Current wording

Rest of World. The increase in Rest of World net revenue was primarily due to an increase in comparable sales, which increased 20%, or 23% on a constant dollar basis. 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. The increase in Rest of World net revenue was also driven by a $43.7 million increase in net revenue from new or expanded company-operated stores and our other channels. We have opened nine net new stores in Rest of World since the second quarter of 2023.

Previous wording

•a net increase in product margin of 120 basis points, primarily due to lower product costs including lower freight costs, as well as lower inventory provisions. This was partially offset by higher markdowns in the current year; and

Current wording

•a net increase in product margin of 120 basis points, primarily due to lower product costs, as well as lower inventory provisions in the current year, which was modestly offset by higher markdowns in the current year; and

Previous wording

The increase in gross margin was partially offset by an increase in occupancy costs as a percentage of net revenue of 70 basis points, an increase in distribution center costs as a percentage of net revenue of 50 basis points, and an unfavorable impact of foreign currency exchange rates of 30 basis points.

Current wording

The increase in gross margin was partially offset by an increase in occupancy and depreciation costs as a percentage of net revenue of 70 basis points, an increase in distribution center costs as a percentage of net revenue of 50 basis points, and an unfavorable impact of foreign currency exchange rates of 20 basis points.

Previous wording

–an increase in employee costs of $5.5 million primarily due to increased salaries and wages expense as well as increased stock-based compensation and benefit costs, partially offset by decreased other incentive compensation;

Current wording

–an increase in employee costs of $26.2 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;

Previous wording

–an increase in other operating costs of $15.4 million primarily due to increased depreciation, technology costs, and repairs and maintenance costs;

Current wording

–an increase in other operating costs of $22.9 million primarily due to increased depreciation costs, technology costs, and repairs and maintenance costs;

Previous wording

–an increase in variable costs of $17.6 million primarily due to increased distribution costs, packaging costs, and credit card fees, primarily as a result of increased net revenue;

Current wording

–an increase in variable costs of $11.3 million primarily due to increased packaging costs and credit card fees, primarily as a result of increased net revenue.

Previous wording

Americas. The decrease in Americas income from operations was primarily the result of increased selling, general and administrative expenses. The increase in selling, general and administrative expenses was primarily due to increased marketing expenses, increased distribution costs and packaging costs driven by higher net revenue, and increased depreciation, technology costs, and repairs and maintenance costs. The increase in selling, general and administrative expenses was partially offset by increased gross profit of $23.7 million, which was driven by increased net revenue, partially offset by lower gross margin. The decrease in gross margin was primarily due to deleverage in distribution center and occupancy costs, partially offset by leverage on costs from our product teams and higher product margin. Income from operations as a percentage of Americas net revenue decreased due to deleverage on selling, general and administrative expenses and lower gross margin.

Current wording

Americas. The decrease in Americas income from operations was primarily the result of increased selling, general and administrative expenses. The increase in selling, general and administrative expenses was primarily due to increased marketing expenses, higher depreciation, and higher technology costs, partially offset by lower employee costs. The increase in selling, general and administrative expenses was partially offset by increased gross profit of $31.1 million, driven by increased net revenue, partially offset by lower gross margin. The decrease in gross margin was primarily due to deleverage on distribution center and occupancy costs, partially offset by higher product margin. Income from operations as a percentage of Americas net revenue decreased primarily due to deleverage on selling, general and administrative expenses and lower gross margin.

Previous wording

China Mainland. The increase in China Mainland income from operations was primarily the result of increased gross profit of $61.3 million, driven by increased net revenue and higher gross margin. 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 increase in gross profit was partially offset by an increase in selling, general and administrative expenses, primarily due to higher employee costs, increased packaging costs driven by higher net revenue, and increased marketing expenses. Income from operations as a percentage of China Mainland net revenue increased due to leverage on selling, general and administrative expenses and higher gross margin.

Current wording

China Mainland. The increase in China Mainland income from operations was primarily the result of increased gross profit of $118.9 million, driven by increased net revenue and higher gross margin. 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 increase in gross profit was partially offset by an increase in selling, general and administrative expenses, primarily due to higher employee costs and increased marketing expenses, as well as increased packaging and distribution costs driven by higher net revenue. Income from operations as a percentage of China Mainland net revenue increased primarily due to higher gross margin and leverage on selling, general and administrative expenses.

Previous wording

Rest of World. The increase in Rest of World income from operations was primarily the result of increased gross profit of $40.2 million, driven by increased net revenue and higher gross margin. The increase in gross margin was primarily due to higher product margin as well as leverage on occupancy costs, partially offset by unfavorable foreign currency exchange rates. The increase in gross profit was partially offset by an increase in selling, general and administrative expenses primarily due to higher employee costs and increased marketing expenses, as well as increased credit card fees and distribution costs driven by higher net revenue. Income from operations as a percentage of Rest of World net revenue increased due to higher gross margin and leverage on selling, general and administrative expenses.

Current wording

Rest of World. The increase in Rest of World income from operations was primarily the result of increased gross profit of $79.6 million, driven by increased net revenue and higher gross margin. The increase in gross margin was primarily due to higher product margin as well as leverage on occupancy costs, partially offset by unfavorable foreign currency exchange rates. The increase in gross profit was partially offset by an increase in selling, general and administrative expenses, 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. Income from operations as a percentage of Rest of World net revenue increased primarily due to higher gross margin and leverage on selling, general and administrative expenses.

Previous wording

General Corporate Expense. The increase in general corporate expense was primarily due to increased advisory and professional fees, employee costs, technology costs, and depreciation. The increase in general corporate expense was partially offset by a decrease in net foreign currency exchange and derivative revaluation losses of $2.0 million.

Current wording

General Corporate Expense. The increase in general corporate expense was primarily due to increased advisory and professional fees, technology costs, depreciation, and employee costs. The increase was also due to a decrease in net foreign currency exchange and derivative revaluation gains of $1.2 million. The increase in general corporate expense was partially offset by decreased charitable donations.

Previous wording

The increase in the effective tax rate was primarily due to a decrease in tax benefits related to stock-based compensation and an increase in non-deductible expenses in international jurisdictions.

Current wording

The increase in the effective tax rate was primarily due to a decrease in tax benefits related to stock-based compensation and adjustments upon the filing of certain income tax returns, partially offset by an increase in tax credits.

Previous wording

A constant dollar basis assumes the average foreign currency exchange rates for the period remained constant with the average foreign currency exchange rates for the same period of the prior year. We provide constant dollar changes in our results to help investors understand the underlying growth rate of net revenue excluding the impact of changes in foreign currency exchange rates.

Current wording

A constant dollar basis assumes the average foreign currency exchange rates for the period remained constant with the average foreign currency exchange rates for the same period of the prior year. We provide constant dollar changes in our results to help investors understand the underlying growth rate of net revenue excluding the impact of changes in foreign currency exchange rates. Management uses these constant currency metrics internally when reviewing and assessing financial performance.

Previous wording

The increase in cash provided by operating activities was primarily as a result of:

Current wording

The increase in cash provided by operating activities was primarily as a result of increased net income of $82.3 million. The increase in cash provided by operating activities was partially offset by a decrease in cash flows from the changes in operating assets and liabilities of $25.1 million, primarily driven by changes in accounts payable, accrued compensation, and other current assets, partially offset by changes in income taxes, inventories, and accrued liabilities. The increase in cash provided by operating activities was also partially offset by changes in adjusting items of $8.7 million, primarily driven by lower cash inflows related to derivatives, partially offset by increased depreciation.

Previous wording

The decrease in cash used in investing activities was primarily due to decreased capital expenditures. The decrease in capital expenditures was primarily due to a decrease in corporate capital expenditures and decreased investment in our distribution centers as well as other technology infrastructure and system initiatives, partially offset by an increase in company-operated store expenditures.

Current wording

The decrease in cash used in investing activities was primarily due to the settlement of net investment hedges and decreased capital expenditures, partially offset by an increase in other investing activities. The modest decrease in capital expenditures was primarily due to a decrease in corporate capital expenditures, while we had similar levels of capital expenditures across distribution centers, technology infrastructure and system initiatives, and company-operated stores.

Previous wording

The increase in cash used in financing activities was primarily the result of an increase in our stock repurchases. During the first quarter of 2024, 0.8 million shares were repurchased at a total cost including commissions and excise taxes of $299.5 million. During the first quarter of 2023, 0.3 million shares were repurchased at a total cost including commissions and excise taxes of $98.5 million. The common stock was repurchased in the open market 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, with the timing and actual number of shares repurchased depending upon market conditions, eligibility to trade, and other factors.

Current wording

The increase in cash used in financing activities was primarily the result of an increase in our stock repurchases. During the first two quarters of 2024, we repurchased 2.6 million shares at a total cost including commissions and excise taxes of $888.9 million. During the first two quarters of 2023, we repurchased 0.8 million shares at a total cost including commissions and excise taxes of $292.0 million. We repurchased the shares of common stock in the open market 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, with the timing and actual number of shares repurchased depending upon market conditions, eligibility to trade, and other factors.