lululemon athletica inc 10-Q for FY2022 Q1

lululemon athletica inc. (LULU)

10-Q 2021-06-03 For: 2021-05-02

Added on April 07, 2026

About this 10-Q

lululemon athletica inc filed this 10-Q on June 3, 2021, covering the quarter ended May 2, 2021 (FY2022 Q1).

Headline figures

Quarter ended May 2, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.23B; up 88.1% from $651.96M a year earlier
Net income: $144.96M; up 406.3% from net income of $28.63M a year earlier
Diluted EPS: $1.11; up 404.5% from $0.22 a year earlier

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Delaware			20-3842867
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


Large Accelerated Filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐


		Page
PART I. FINANCIAL INFORMATION

Item 1.	F ina ncial Statements :	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations and Comprehensive Income (Loss)	4
	Consolidated Statements of Stockholders' Equity	5
	Consolidated Statements of Cash Flows	6
	Index for Notes to the Unaudited Interim Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	30

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 6.	Exhibits	44

Signatures		45


	May 2, 2021		January 31, 2021
ASSETS
Current assets
Cash and cash equivalents	$	1,179,739	$	1,150,517
Accounts receivable	56,956		62,399
Inventories	732,890		647,230
Prepaid and receivable income taxes	139,123		139,126
Prepaid expenses and other current assets	144,744		125,107
	2,253,452		2,124,379
Property and equipment, net	774,685		745,687
Right-of-use lease assets	719,139		734,835
Goodwill	387,115		386,877
Intangible assets, net	77,885		80,080
Deferred income tax assets	6,773		6,731
Other non-current assets	110,782		106,626
	$	4,329,831	$	4,185,215
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	196,934	$	172,246
Accrued inventory liabilities	9,356		14,956
Other accrued liabilities	258,642		211,911
Accrued compensation and related expenses	154,729		130,171
Current lease liabilities	168,145		166,091
Current income taxes payable	7,997		8,357
Unredeemed gift card liability	141,149		155,848
Other current liabilities	27,862		23,598
	964,814		883,178
Non-current lease liabilities	616,917		632,590
Non-current income taxes payable	38,073		43,150
Deferred income tax liabilities	60,807		58,755
Other non-current liabilities	9,365		8,976
	1,689,976		1,626,649
Commitments and contingencies
Stockholders' equity
Undesignated preferred stock, $0.01 par value: 5,000 shares authorized; none issued and outstanding	—		—
Exchangeable stock, no par value: 60,000 shares authorized; 5,203 and 5,203 issued and outstanding	—		—
Special voting stock, $0.000005 par value: 60,000 shares authorized; 5,203 and 5,203 issued and outstanding	—		—
Common stock, $0.005 par value: 400,000 shares authorized; 125,069 and 125,150 issued and outstanding	625		626
Additional paid-in capital	364,743		388,667
Retained earnings	2,408,006		2,346,428
Accumulated other comprehensive loss	(133,519)		(177,155)
	2,639,855		2,558,566
	$	4,329,831	$	4,185,215


	Quarter Ended
	May 2, 2021		May 3, 2020
Net revenue	$	1,226,465	$	651,962
Cost of goods sold	526,151		317,560
Gross profit	700,314		334,402
Selling, general and administrative expenses	496,634		299,583
Amortization of intangible assets	2,195		23
Acquisition-related expenses	7,664		2,045
Income from operations	193,821		32,751
Other income (expense), net	227		1,174
Income before income tax expense	194,048		33,925
Income tax expense	49,092		5,293
Net income	$	144,956	$	28,632

Other comprehensive income (loss):
Foreign currency translation adjustment	43,636		(60,604)
Comprehensive income (loss)	$	188,592	$	(31,972)

Basic earnings per share	$	1.11	$	0.22
Diluted earnings per share	$	1.11	$	0.22
Basic weighted-average number of shares outstanding	130,358		130,251
Diluted weighted-average number of shares outstanding	130,984		130,803


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Quarter Ended May 2, 2021
	Exchangeable Stock	Special Voting Stock			Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Shares	Shares	Par Value		Shares	Par Value
Balance as of January 31, 2021	5,203	5,203	$	—	125,150	$	626	$	388,667	$	2,346,428	$	(177,155)	$	2,558,566
Net income										144,956				144,956
Foreign currency translation adjustment												43,636		43,636

Stock-based compensation expense								14,932						14,932
Common stock issued upon settlement of stock-based compensation					324	2		4,493						4,495
Shares withheld related to net share settlement of stock-based compensation					(135)	(1)		(42,898)						(42,899)
Repurchase of common stock					(270)	(2)		(451)		(83,378)				(83,831)
Balance as of May 2, 2021	5,203	5,203	$	—	125,069	$	625	$	364,743	$	2,408,006	$	(133,519)	$	2,639,855


	Quarter Ended May 3, 2020
	Exchangeable Stock	Special Voting Stock			Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Shares	Shares	Par Value		Shares	Par Value
Balance as of February 2, 2020	6,227	6,227	$	—	124,122	$	621	$	355,541	$	1,820,637	$	(224,581)	$	1,952,218
Net income										28,632				28,632
Foreign currency translation adjustment												(60,604)		(60,604)
Common stock issued upon exchange of exchangeable shares	(745)	(745)	—		745	4		(4)						—
Stock-based compensation expense								6,128						6,128
Common stock issued upon settlement of stock-based compensation					371	2		3,133						3,135
Shares withheld related to net share settlement of stock-based compensation					(152)	(1)		(30,058)						(30,059)
Repurchase of common stock					(369)	(2)		(539)		(63,122)				(63,663)
Balance as of May 3, 2020	5,482	5,482	$	—	124,717	$	624	$	334,201	$	1,786,147	$	(285,185)	$	1,835,787


	Quarter Ended
	May 2, 2021		May 3, 2020
Cash flows from operating activities
Net income	$	144,956	$	28,632
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	50,485		43,532

Stock-based compensation expense	14,932		6,128
Settlement of derivatives not designated in a hedging relationship	21,515		(5,669)
Changes in operating assets and liabilities:
Inventories	(74,218)		(122,810)
Prepaid and receivable income taxes	767		(4,157)
Prepaid expenses and other current assets	(11,104)		(49,936)
Other non-current assets	1,105		(3,422)
Accounts payable	19,623		2,222
Accrued inventory liabilities	(6,114)		4,016
Other accrued liabilities	44,295		51,034
Accrued compensation and related expenses	22,764		(60,137)
Current and non-current income taxes payable	(5,433)		3,711
Unredeemed gift card liability	(15,838)		(13,640)

Right-of-use lease assets and current and non-current lease liabilities	1,820		(16,868)
Other current and non-current liabilities	4,554		16,121
Net cash provided by (used in) operating activities	214,109		(121,243)
Cash flows from investing activities
Purchase of property and equipment	(64,225)		(52,101)
Settlement of net investment hedges	(21,239)		6,475


Net cash used in investing activities	(85,464)		(45,626)
Cash flows from financing activities
Proceeds from settlement of stock-based compensation	4,495		3,135
Shares withheld related to net share settlement of stock-based compensation	(42,899)		(30,059)
Repurchase of common stock	(83,831)		(63,663)


Net cash used in financing activities	(122,235)		(90,587)
Effect of exchange rate changes on cash and cash equivalents	22,812		(13,043)
Increase (decrease) in cash and cash equivalents	29,222		(270,499)
Cash and cash equivalents, beginning of period	$	1,150,517	$	1,093,505
Cash and cash equivalents, end of period	$	1,179,739	$	823,006


Note 1	Nature of Operations and Basis of Presentation	8
Note 2	Recent Accounting Pronouncements	9
Note 3	Acquisition	9
Note 4	Revolving Credit Facilities	9
Note 5	Stock-Based Compensation and Benefit Plans	10
Note 6	Fair Value Measurement	12
Note 7	Derivative Financial Instruments	13
Note 8	Earnings Per Share	15
Note 9	Supplementary Financial Information	15
Note 10	Segmented Information	17
Note 11	Net Revenue by Geography and Category	17
Note 12	Legal Proceedings and Other Contingencies	18


	First Quarter
	2021		2020
	(in thousands)
Acquisition-related expenses:
Transaction and integration costs	$	496	$	2,045
Gain on existing investment	—		—
Acquisition-related compensation	7,168		—
	$	7,664	$	2,045

Income tax effects of acquisition-related expenses	$	(372)	$	—


	Stock Options			Performance-Based Restricted Stock Units			Restricted Shares			Restricted Stock Units			Restricted Stock Units (Liability Accounting)
	Number	Weighted-Average Exercise Price		Number	Weighted-Average Grant Date Fair Value		Number	Weighted-Average Grant Date Fair Value		Number	Weighted-Average Grant Date Fair Value		Number	Weighted-Average Fair Value
	(In thousands, except per share amounts)
Balance as of January 31, 2021	804	$	139.27	199	$	149.2	4	$	299.09	275	$	166.5	15	$	328.68
Granted	183	306.71		135	180.26		—	—		90	307.55		—	—
Exercised/released	40	111.23		166	100.89		—	—		117	134.79		—	—
Forfeited/expired	6	154.21		—	183.74		—	—		3	194.55		—	—
Balance as of May 2, 2021	941	$	172.88	168	$	221.93	4	$	299.09	245	$	233.16	15	$	335.27
Exercisable as of May 2, 2021	348	$	118.98


	First Quarter
	2021
Expected term	3.75 years
Expected volatility	39.32	%
Risk-free interest rate	0.50	%
Dividend yield	—	%


	May 2, 2021		Level 1		Level 2		Level 3		Balance Sheet Classification
	(In thousands)
Money market funds	$	652,482	$	652,482	$	—	$	—	Cash and cash equivalents

Term deposits	188,594		—		188,594		—		Cash and cash equivalents
Forward currency contract assets	27,789		—		27,789		—		Prepaid expenses and other current assets
Forward currency contract liabilities	30,858		—		30,858		—		Other current liabilities


	May 2, 2021						January 31, 2021
	Gross Notional		Assets		Liabilities		Gross Notional		Assets		Liabilities
	(In thousands)
Derivatives designated as net investment hedges:
Forward currency contracts	$	754,000	$	—	$	28,846	$	985,000	$	—	$	18,099
Derivatives not designated in a hedging relationship:
Forward currency contracts	857,000		27,789		2,012		1,055,000		17,364		668
Net derivatives recognized on consolidated balance sheets:
Forward currency contracts			$	27,789	$	30,858			$	17,364	$	18,767


	May 2, 2021		January 31, 2021
	(In thousands)
Inventories:
Inventories, at cost	$	768,599	$	678,200
Provision to reduce inventories to net realizable value	(35,709)		(30,970)
	$	732,890	$	647,230


	May 2, 2021		January 31, 2021
	(In thousands)
Prepaid expenses and other current assets:
Prepaid expenses	$	94,846	$	82,164
Forward currency contract assets	27,789		17,364
Other current assets	22,109		25,579
	$	144,744	$	125,107
Property and equipment, net:
Land	$	77,116	$	74,261
Buildings	31,671		30,870
Leasehold improvements	613,609		583,305
Furniture and fixtures	118,911		117,334
Computer hardware	123,682		116,239
Computer software	458,430		427,313
Equipment and vehicles	18,993		17,105
Work in progress	73,118		69,847
Property and equipment, gross	1,515,530		1,436,274
Accumulated depreciation	(740,845)		(690,587)
	$	774,685	$	745,687
Other non-current assets:
Cloud computing arrangement implementation costs	$	78,721	$	74,631
Security deposits	23,027		23,154
Other	9,034		8,841
	$	110,782	$	106,626
Other accrued liabilities
Accrued freight and other operating expenses	$	131,515	$	97,335
Accrued duty	23,405		17,404
Sales return allowances	23,665		32,560
Sales tax collected	18,489		15,246
Accrued capital expenditures	9,003		8,653
Forward currency contract liabilities	30,858		18,766
Accrued rent	9,419		8,559
Other	12,288		13,388
	$	258,642	$	211,911


	First Quarter
	2021		2020
	(In thousands)
Net revenue:
Company-operated stores	$	536,584	$	259,970
Direct to consumer	545,089		352,039
Other	144,792		39,953
	$	1,226,465	$	651,962
Segmented income from operations:
Company-operated stores	$	99,148	$	(30,154)
Direct to consumer	236,933		156,947
Other	14,506		(269)
	350,587		126,524
General corporate expense	146,907		91,705
Amortization of intangible assets	2,195		23
Acquisition-related expenses	7,664		2,045
Income from operations	193,821		32,751
Other income (expense), net	227		1,174
Income before income tax expense	$	194,048	$	33,925

Capital expenditures:
Company-operated stores	$	18,565	$	33,819
Direct to consumer	26,581		2,298
Corporate and other	19,079		15,984
	$	64,225	$	52,101
Depreciation and amortization:
Company-operated stores	$	26,800	$	25,628
Direct to consumer	5,748		2,684
Corporate and other	17,937		15,220
	$	50,485	$	43,532


	First Quarter 2021
	Net Revenue				Direct to Consumer Net Revenue
	(In thousands)		(Percentages)		(Percentages)
Change	$	574,503	88	%	55	%
Adjustments due to foreign exchange rate changes	(33,391)		(5)		(5)
Change in constant dollars	$	541,112	83	%	50	%


Number of company-operated stores by country	May 2, 2021	January 31, 2021
United States	315	315
Canada	62	62
People's Republic of China(1)	56	55
Australia	30	31
United Kingdom	16	16
South Korea	9	7
Germany	7	7
New Zealand	7	7
Japan	6	6
Singapore	4	4
France	3	3
Malaysia	2	2
Sweden	2	2
Ireland	1	1
Netherlands	1	1
Norway	1	1
Switzerland	1	1
Total company-operated stores	523	521


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)
February 1, 2021 - February 28, 2021	—	$	—	—	$	500,000,000
March 1, 2021 - April 4, 2021	—	—		—	500,000,000
April 5, 2021 - May 2, 2021	269,517	311.02		269,517	416,175,386
Total	269,517			269,517


						lululemon athletica inc.

By:						/s/ MEGHAN FRANK
						Meghan Frank
						Chief Financial Officer
						(principal financial and accounting officer)