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 two quarters of 2024 and 2023 ended on July 28, 2024 and July 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 three quarters of 2024 and 2023 ended on October 27, 2024 and October 29, 2023, respectively.

Previous wording

We provide constant dollar changes, which is a non-GAAP financial measure, as supplemental information to help investors understand the underlying growth rate of net revenue excluding the impact of changes in foreign currency exchange rates. Refer to the Non-GAAP Financial Measures section of this management's discussion and analysis of financial condition and results of operations for reconciliations between the non-GAAP financial measures and the most directly comparable measures calculated in accordance with GAAP.

Current wording

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. Refer to the Non-GAAP Financial Measures section of this management's discussion and analysis of financial condition and results of operations for reconciliations between the adjusted non-GAAP financial measures and the most directly comparable measures calculated in accordance with GAAP.

Previous wording

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

Current wording

The summary below compares the third quarter of 2024 to the third quarter of 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.

Previous wording

•Net revenue increased 7% to $2.4 billion. On a constant dollar basis, net revenue increased 8%.

Current wording

•Net revenue increased 9% to $2.4 billion. On a constant dollar basis, net revenue increased 8%.

Previous wording

•Comparable sales increased 2%, or 3% on a constant dollar basis.

Current wording

•Comparable sales increased 4%, or 3% on a constant dollar basis.

Previous wording

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

Current wording

–China Mainland comparable sales increased 27%, or 24% on a constant dollar basis.

Previous wording

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

Current wording

–Rest of World comparable sales increased 23%, or 20% on a constant dollar basis.

Previous wording

•Gross profit increased 9% to $1.4 billion.

Current wording

•Gross profit increased 12% to $1.4 billion. Adjusted gross profit increased 9%.

Previous 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.

Current wording

•Income tax expense increased 54% to $152.5 million. Our effective tax rate for the third quarter of 2024 was 30.2% compared to 28.5% for the third quarter of 2023. The adjusted effective tax rate was 28.1% for the third quarter of 2023.

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, which has adversely impacted consumer demand for our products.

Current 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, which has adversely impacted consumer demand for our products. We continue to monitor macroeconomic conditions and the trends in consumer demand for our products, including the economic environment in China Mainland.

Previous 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.

Current wording

Foreign currency fluctuations have adversely impacted our financial results. Foreign currency fluctuations reduced the growth of our net revenue by $25.7 million when comparing the first three quarters of 2024 to the first three 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 $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.

Current wording

Net revenue increased $192.4 million, or 9%, to $2.4 billion for the third quarter of 2024 from $2.2 billion for the third quarter of 2023. On a constant dollar basis, net revenue increased 8%. Comparable sales increased 4%, 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 second quarter of 2024 and 2023 is summarized below:

Current wording

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

Previous 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.

Current wording

Americas. The increase in Americas net revenue was primarily due to a $71.6 million increase from new or expanded company-operated stores and our other channels. We added 28 net new company-operated stores in the Americas since the third quarter of 2023, including 14 company-operated stores from the acquisition of the Mexico operations. Americas comparable sales decreased 2%. The decrease in comparable sales was primarily a result of decreased conversion rates, partially offset by a higher dollar value per transaction and an increase in e-commerce traffic.

Previous wording

China Mainland. The increase in China Mainland net revenue was primarily due to an increase in comparable sales, which increased 24%, or 28% 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 $76.0 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.

Current wording

China Mainland. The increase in China Mainland net revenue was primarily due to an increase in comparable sales, which increased 27%, or 24% 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 $35.7 million increase in net revenue from new or expanded company-operated stores and our other channels. We have opened 24 net new company-operated stores in China Mainland since the third quarter of 2023.

Previous 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.

Current 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 20% 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 $19.6 million increase in net revenue from new or expanded company-operated stores and our other channels. We have opened 11 net new company-operated stores in Rest of World since the third quarter of 2023.

Previous 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

Current wording

•a net increase in product margin of 50 basis points, primarily due to lower inventory provisions, as well as lower product costs, partially offset by higher freight costs in the current year; and

Previous 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.

Current wording

The increase in adjusted gross margin was partially offset by an increase in occupancy and depreciation costs as a percentage of net revenue of 70 basis points, and an increase in distribution center costs as a percentage of net revenue of 20 basis points.

Previous 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;

Current wording

–an increase in employee costs of $13.9 million primarily due to increased salaries and wages expense 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 $9.1 million primarily due to increased digital marketing expenses; and

Current wording

–an increase in brand and community costs of $12.9 million primarily due to increased digital marketing expenses;

Previous wording

–an increase in other operating costs of $7.6 million primarily due to increased technology costs, repairs and maintenance costs, and security costs.

Current wording

–an increase in other operating costs of $7.5 million primarily due to increased depreciation and security costs; and

Previous wording

The increase in costs related to our operating channels was partially offset by a decrease in variable costs of $6.3 million primarily due to decreased distribution cost rates, partially offset by increased credit card fees and packaging costs as a result of higher net revenue.

Current wording

The 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 cost rates, partially offset by increased credit card fees and packaging costs as a result of higher net revenue.

Previous wording

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

Current wording

•an increase in head office costs of $22.7 million, comprised of:

Previous wording

–an increase in advisory and professional fees of $9.2 million;

Current wording

–an increase in advisory and professional fees of $10.9 million;

Previous wording

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

Current wording

–an increase in technology costs, including cloud computing amortization, of $7.4 million;

Previous wording

–an increase in depreciation of $4.5 million; and

Current wording

–an increase in depreciation of $5.3 million; and

Previous wording

The increase in costs related to our head office was partially offset by a net decrease in employee costs of $2.8 million primarily due to decreased incentive compensation, partially offset by increased salaries and wages expense.

Current wording

The increase in costs related to our head office was partially offset by a net decrease in employee costs of $5.5 million primarily due to decreased incentive compensation, partially offset by increased salaries and wages expense.

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

Current wording

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. 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.

Previous wording

Americas. The increase in Americas income from operations was primarily the result of increased gross profit of $7.4 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. The increase in Americas income from operations was also driven by a decrease in selling, general and administrative expenses, primarily due to decreased distribution cost rates and lower employee costs, partially offset by increased marketing expenses. Income from operations as a percentage of Americas net revenue was consistent with the second quarter of 2023, primarily due to leverage on selling, general and administrative expenses, offset by lower gross margin.

Current wording

Americas. The increase in Americas income from operations was primarily the result of increased gross profit of $14.1 million, driven by increased net revenue, partially offset by lower gross margin. The decrease in gross margin was primarily due to deleverage on occupancy costs and distribution center costs. The increase in Americas income from operations was also driven by a decrease in selling, general and administrative expenses, primarily due to decreased distribution cost rates and lower employee costs, partially offset by increased marketing expenses. Income from operations as a percentage of Americas net revenue increased primarily due to leverage on selling, general and administrative expenses, partially offset by lower gross margin.

Previous wording

China Mainland. The increase in China Mainland income from operations was primarily the result of increased gross profit of $57.6 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 increased marketing expenses and higher employee costs, as well as increased 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, partially offset by deleverage on selling, general and administrative expenses.

Current wording

China Mainland. The increase in China Mainland income from operations was primarily the result of increased gross profit of $61.8 million, driven by increased net revenue and higher gross margin. The increase in gross margin was primarily due to leverage on occupancy costs, favorable foreign currency exchange rates, as well as higher product margin. The increase in gross profit was partially offset by an increase in selling, general and administrative expenses, primarily due to increased marketing expenses and higher employee costs, as well as increased technology costs. Income from operations as a percentage of China Mainland net revenue increased primarily due to higher gross margin, partially offset by deleverage 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 $39.4 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 distribution center 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 increased marketing expenses and higher employee costs, as well as increased distribution costs 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.

Current wording

Rest of World. The increase in Rest of World income from operations was primarily the result of increased gross profit of $41.4 million, driven by increased net revenue and higher gross margin. The increase in gross margin was primarily due to higher product margin and favorable foreign currency exchange rates, partially offset by deleverage on occupancy costs. 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 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, technology costs, and depreciation. The increase was also due to a decrease in net foreign currency exchange and derivative revaluation gains of $3.2 million. The increase in general corporate expense was partially offset by lower employee costs, driven by decreased incentive compensation.

Current wording

General Corporate Expense. The increase in general corporate expense was primarily due to increased advisory and professional fees, technology costs and depreciation. The increase was also due to an increase in net foreign currency exchange and derivative revaluation losses of $7.0 million. The increase in general corporate expense was partially offset by a net decrease in employee costs and decreased brand and community costs.

Previous 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.

Current wording

The increase in the effective tax rate was primarily due to a decrease in tax benefits related to stock-based compensation, an increase in non-deductible expenses in international jurisdictions, and adjustments upon the filing of certain income tax returns. 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.

Previous wording

The increase in net income was primarily due to an increase in gross profit of $237.9 million and an increase in other income (expense), net of $25.9 million, partially offset by an increase in selling, general and administrative expenses of $149.5 million and an increase in income tax expense of $35.8 million.

Current wording

The increase in net income was primarily due to an increase in gross profit of $144.9 million, impairment and other charges recognized in the third quarter of 2023 of $74.5 million, an increase in other income (expense), net of $3.9 million, partially offset by an increase in selling, general and administrative expenses of $67.0 million, and an increase in income tax expense of $53.3 million.

Previous wording

Year-to-Date Results of Operations: First Two Quarters Results

Current wording

Year-to-Date Results of Operations: First Three Quarters Results

Previous wording

Net revenue increased $370.0 million, or 9%, to $4.6 billion for the first two quarters of 2024 from $4.2 billion for the first two quarters of 2023. On a constant dollar basis, net revenue increased 10%. Comparable sales increased 4%, or 5% 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.

Current wording

Net revenue increased $562.5 million, or 9%, to $7.0 billion for the first three quarters of 2024 from $6.4 billion for the first three quarters of 2023. Comparable sales increased 4%. 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 two quarters of 2024 and 2023 is summarized below:

Current wording

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

Previous wording

Americas. The increase in Americas net revenue was primarily due to a $57.8 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 3%, or 2% on a constant dollar basis. 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.

Current wording

Americas. The increase in Americas net revenue was primarily due to a $180.2 million increase from new or expanded company-operated stores and our other channels. We added 28 net new company-operated stores in the Americas since the third quarter of 2023, including 14 company-operated stores from the acquisition of the Mexico operations. Americas comparable sales decreased 2%, or 1% on a constant dollar basis. 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

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.

Current wording

China Mainland. The increase in China Mainland net revenue was primarily due to an increase in comparable sales, which increased 25%, or 27% 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 $111.6 million increase in net revenue from new or expanded company-operated stores and our other channels. We have opened 24 net new company-operated stores in China Mainland since the third quarter of 2023.

Previous wording

Rest of World. The increase in Rest of World net revenue was primarily due to an increase in comparable sales, which increased 17%, or 20% 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 $23.8 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.

Current wording

Rest of World. The increase in Rest of World net revenue was primarily due to an increase in comparable sales, which increased 21%, or 22% 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 $63.3 million increase in net revenue from new or expanded company-operated stores and our other channels. We have opened 11 net new company-operated stores in Rest of World since the third quarter of 2023.