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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 28, 2024
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 001-33608

lululemon Yogo.jpg
lululemon athletica inc.
(Exact name of registrant as specified in its charter)
Delaware20-3842867
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1818 Cornwall Avenue, Vancouver, British Columbia V6J 1C7
(Address of principal executive offices)

Registrant's telephone number, including area code:
604-732-6124
Former name, former address and former fiscal year, if changed since last report:
N/A
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $0.005 per shareLULUNasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer☑Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐ No ☑
As of August 23, 2024, there were 117,660,550 shares of the registrant's common stock, par value $0.005 per share, outstanding.
Exchangeable and Special Voting Shares:
As of August 23, 2024, there were outstanding 5,115,961 exchangeable shares of Lulu Canadian Holding, Inc., a wholly-owned subsidiary of the registrant. Exchangeable shares are exchangeable for an equal number of shares of the registrant's common stock.
In addition, as of August 23, 2024, the registrant had outstanding 5,115,961 shares of special voting stock, through which the holders of exchangeable shares of Lulu Canadian Holding, Inc. may exercise their voting rights with respect to the registrant. The special voting stock and the registrant's common stock generally vote together as a single class on all matters on which the common stock is entitled to vote.

TABLE OF CONTENTS
 
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
lululemon athletica inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited; Amounts in thousands, except per share amounts)
July 28,
2024		January 28,
2024
ASSETS
Current assets
Cash and cash equivalents$1,610,112 $2,243,971 
Accounts receivable, net126,121 124,769 
Inventories1,429,043 1,323,602 
Prepaid and receivable income taxes210,969 183,733 
Prepaid expenses and other current assets195,499 184,502 
3,571,744 4,060,577 
Property and equipment, net1,614,893 1,545,811 
Right-of-use lease assets1,302,947 1,265,610 
Goodwill23,925 24,083 
Deferred income tax assets9,098 9,176 
Other non-current assets221,528 186,684 
$6,744,135 $7,091,941 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable$317,348 $348,441 
Accrued liabilities and other396,423 348,555 
Accrued compensation and related expenses174,702 326,110 
Current lease liabilities278,067 249,270 
Current income taxes payable19,231 12,098 
Unredeemed gift card liability250,754 306,479 
Other current liabilities32,126 40,308 
1,468,651 1,631,261 
Non-current lease liabilities1,180,823 1,154,012 
Non-current income taxes payable— 15,864 
Deferred income tax liabilities28,876 29,522 
Other non-current liabilities34,140 29,201 
2,712,490 2,859,860 
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; 5,116 and 5,116 issued and outstanding
— — 
Special voting stock, $0.000005 par value: 60,000 shares authorized; 5,116 and 5,116 issued and outstanding
— — 
Common stock, $0.005 par value: 400,000 shares authorized; 118,610 and 121,106 issued and outstanding
593 606 
Additional paid-in capital589,156 575,369 
Retained earnings3,751,713 3,920,362 
Accumulated other comprehensive loss(309,817)(264,256)
4,031,645 4,232,081 
$6,744,135 $7,091,941 
See accompanying notes to the unaudited interim consolidated financial statements
3
lululemon athletica inc.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited; Amounts in thousands, except per share amounts)
Quarter EndedTwo Quarters Ended
July 28,
2024		July 30,
2023		July 28,
2024		July 30,
2023
Net revenue$2,371,078 $2,209,165 $4,579,969 $4,209,957 
Cost of goods sold958,893 910,654 1,892,716 1,760,641 
Gross profit1,412,185 1,298,511 2,687,253 2,449,316 
Selling, general and administrative expenses871,959 817,375 1,714,385 1,564,888 
Amortization of intangible assets— 1,879 — 3,757 
Income from operations540,226 479,257 972,868 880,671 
Other income (expense), net17,994 7,362 41,277 15,387 
Income before income tax expense558,220 486,619 1,014,145 896,058 
Income tax expense165,298 145,016 299,802 264,050 
Net income$392,922 $341,603 $714,343 $632,008 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment$(25,571)$54,786 $(69,876)$12,036 
Net investment hedge gains (losses)10,834 (17,014)24,315 706 
Other comprehensive income (loss), net of tax$(14,737)$37,772 $(45,561)$12,742 
Comprehensive income$378,185 $379,375 $668,782 $644,750 
Basic earnings per share$3.15 $2.69 $5.70 $4.97 
Diluted earnings per share$3.15 $2.68 $5.69 $4.96 
Basic weighted-average number of shares outstanding124,721 126,969 125,358 127,108 
Diluted weighted-average number of shares outstanding124,857 127,263 125,600 127,442 
See accompanying notes to the unaudited interim consolidated financial statements
4
lululemon athletica inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited; Amounts in thousands)
Quarter Ended July 28, 2024
 Exchangeable StockSpecial Voting StockCommon StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders' Equity
 SharesSharesPar ValueSharesPar Value
Balance as of April 28, 20245,116 5,116 $— 120,470 $602 $570,286 $3,944,000 $(295,080)$4,219,808 
Net income392,922 392,922 
Other comprehensive income (loss), net of tax(14,737)(14,737)
Stock-based compensation expense21,567 21,567 
Common stock issued upon settlement of stock-based compensation24 — 2,370 2,370 
Shares withheld related to net share settlement of stock-based compensation(2)— (829)(829)
Repurchase of common stock, including excise tax(1,882)(9)(4,238)(585,209)(589,456)
Balance as of July 28, 20245,116 5,116 $— 118,610 $593 $589,156 $3,751,713 $(309,817)$4,031,645 

Quarter Ended July 30, 2023
 Exchangeable StockSpecial Voting StockCommon StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders' Equity
 SharesSharesPar ValueSharesPar Value
Balance as of April 30, 20235,116 5,116 $— 122,099 $610 $478,496 $3,118,584 $(277,614)$3,320,076 
Net income341,603 341,603 
Other comprehensive income (loss), net of tax37,772 37,772 
Stock-based compensation expense24,283 24,283 
Common stock issued upon settlement of stock-based compensation33 — 4,228 4,228 
Shares withheld related to net share settlement of stock-based compensation(2)— (942)(942)
Repurchase of common stock, including excise tax(517)(2)(938)(192,598)(193,538)
Balance as of July 30, 20235,116 5,116 $— 121,613 $608 $505,127 $3,267,589 $(239,842)$3,533,482 









5
Two Quarters Ended July 28, 2024
 Exchangeable StockSpecial Voting StockCommon StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders' Equity
 SharesSharesPar ValueSharesPar Value
Balance as of January 28, 20245,116 5,116 $— 121,106 $606 $575,369 $3,920,362 $(264,256)$4,232,081 
Net income714,343 714,343 
Other comprehensive income (loss), net of tax(45,561)(45,561)
Stock-based compensation expense47,325 47,325 
Common stock issued upon settlement of stock-based compensation224 — 5,763 5,763 
Shares withheld related to net share settlement of stock-based compensation(87)— (33,371)(33,371)
Repurchase of common stock, including excise tax(2,633)(13)(5,930)(882,992)(888,935)
Balance as of July 28, 20245,116 5,116 $— 118,610 $593 $589,156 $3,751,713 $(309,817)$4,031,645 

Two Quarters Ended July 30, 2023
 Exchangeable StockSpecial Voting StockCommon StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders' Equity
 SharesSharesPar ValueSharesPar Value
Balance as of January 29, 20235,116 5,116 $— 122,205 $611 $474,645 $2,926,127 $(252,584)$3,148,799 
Net income632,008 632,008 
Other comprehensive income (loss), net of tax12,742 12,742 
Stock-based compensation expense45,584 45,584 
Common stock issued upon settlement of stock-based compensation307 — 16,101 16,101 
Shares withheld related to net share settlement of stock-based compensation(90)— (29,735)(29,735)
Repurchase of common stock, including excise tax(809)(3)(1,468)(290,546)(292,017)
Balance as of July 30, 20235,116 5,116 $— 121,613 $608 $505,127 $3,267,589 $(239,842)$3,533,482 
See accompanying notes to the unaudited interim consolidated financial statements
6
lululemon athletica inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Amounts in thousands)
Two Quarters Ended
July 28,
2024		July 30,
2023
Cash flows from operating activities
Net income$714,343 $632,008 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization199,332 178,125 
Stock-based compensation expense47,325 45,584 
Settlement of derivatives not designated in a hedging relationship(12,816)18,870 
Changes in operating assets and liabilities:
Inventories(126,076)(234,050)
Prepaid and receivable income taxes(28,554)(39,275)
Prepaid expenses and other current assets(15,968)37,595 
Other non-current assets(48,768)(16,554)
Accounts payable(23,683)126,007 
Accrued liabilities and other60,123 8,538 
Accrued compensation and related expenses(147,810)(55,716)
Current and non-current income taxes payable(8,662)(167,216)
Unredeemed gift card liability(54,226)(35,377)
Right-of-use lease assets and current and non-current lease liabilities18,878 14,049 
Other current and non-current liabilities(2,774)9,625 
Net cash provided by operating activities570,664 522,213 
Cash flows from investing activities
Purchase of property and equipment(275,767)(282,453)
Settlement of net investment hedges14,151 (549)
Other investing activities(5,009)(658)
Net cash used in investing activities(266,625)(283,660)
Cash flows from financing activities
Proceeds from settlement of stock-based compensation5,763 16,101 
Shares withheld related to net share settlement of stock-based compensation(33,371)(29,735)
Repurchase of common stock(888,935)(292,017)
Net cash used in financing activities(916,543)(305,651)
Effect of foreign currency exchange rate changes on cash and cash equivalents(21,355)19,761 
Decrease in cash and cash equivalents(633,859)(47,337)
Cash and cash equivalents, beginning of period$2,243,971 $1,154,867 
Cash and cash equivalents, end of period$1,610,112 $1,107,530 
See accompanying notes to the unaudited interim consolidated financial statements

7
lululemon athletica inc.
INDEX FOR NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS

8
lululemon athletica inc.
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
Note 1. Nature of Operations and Basis of Presentation
Nature of operations
lululemon athletica inc., a Delaware corporation, ("lululemon" and, together with its subsidiaries unless the context otherwise requires, the "Company") is engaged in the design, distribution, and retail of technical athletic apparel, footwear, and accessories. The Company organizes its operations into four regional markets: Americas, China Mainland, Asia Pacific ("APAC"), and Europe and the Middle East ("EMEA"). It conducts its business through a number of different channels in each market, including company-operated stores, e-commerce, temporary locations, wholesale, outlets, a re-commerce program, and license and supply arrangements. There were 721 and 711 company-operated stores as of July 28, 2024 and January 28, 2024, respectively.
Basis of presentation
The unaudited interim consolidated financial statements, including the financial position as of July 28, 2024 and the results of operations and cash flows for the periods disclosed, are presented in U.S. dollars and have been prepared by the Company under the rules and regulations of the Securities and Exchange Commission ("SEC"). The financial information is presented in accordance with United States generally accepted accounting principles ("GAAP") for interim financial information and, accordingly, does not include all of the information and footnotes required by GAAP for complete financial statements. The financial information as of January 28, 2024 is derived from the Company's audited consolidated financial statements and related notes for the fiscal year ended January 28, 2024, which are included in Item 8 in the Company's fiscal 2023 Annual Report on Form 10-K filed with the SEC on March 21, 2024. These unaudited interim consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. These unaudited interim consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and related notes included in Item 8 in the Company's fiscal 2023 Annual Report on Form 10-K. Note 2. Recent Accounting Pronouncements sets out the impact of recent accounting pronouncements.
The Company's 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.
The Company's business is affected by the pattern of seasonality common to most retail apparel businesses. Historically, the Company has recognized a significant portion of its operating profit in the fourth fiscal quarter of each year as a result of increased net revenue during the holiday season.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of net revenue and expenses during the reporting period. Actual results could differ from those estimates.
Note 2. Recent Accounting Pronouncements
The Company considers the applicability and impact of all Accounting Standard Updates ("ASUs"). ASUs recently issued not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company's consolidated financial position or results of operations.
Recently issued accounting pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. Entities will be required to provide disclosures of significant segmented expenses and other categories used by the Chief Operating Decision Maker ("CODM") in order to enhance disclosure at the segment level. This amendment is effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024,
9
and is applied retrospectively for periods presented in the financial statements. The Company is currently evaluating the impact that this new guidance may have on its financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This disclosure requires expanded disclosure within the rate reconciliation as well as disaggregation of annual taxes paid. This amendment is effective for annual periods beginning after December 15, 2023, and is applied prospectively. The Company is currently evaluating the impact that this new guidance may have on its financial statement disclosures.
Note 3. Revolving Credit Facilities
Americas revolving credit facility
On December 14, 2021, the Company entered into an amended and restated credit agreement extending its existing credit facility, which 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, subject to extension under certain circumstances. Borrowings under the credit facility may be prepaid and commitments may be reduced or terminated without premium or penalty (other than customary breakage costs).
As of July 28, 2024, aside from letters of credit of $6.3 million, the Company had no other borrowings outstanding under this credit facility.
Borrowings made under the credit facility bear interest at a rate per annum equal to, at the Company's option, either (a) a rate based on the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York ("SOFR"), or (b) an alternate base rate, plus, in each case, an applicable margin. The applicable margin is determined by reference to a pricing grid, based on the ratio of indebtedness to earnings before interest, tax, depreciation, amortization, and rent ("EBITDAR") and ranges between 1.000%-1.375% for SOFR loans and 0.000%-0.375% for alternate base rate or Canadian prime rate loans. Additionally, a commitment fee of between 0.100%-0.200%, also determined by reference to the pricing grid, is payable on the average daily unused amounts under the credit facility.
The applicable interest rates and commitment fees are subject to adjustment based on certain sustainability key performance indicators ("KPIs"). The two KPIs are based on greenhouse gas emissions intensity reduction and gender pay equity, and the Company's performance against certain targets measured on an annual basis could result in positive or negative sustainability rate adjustments of 2.50 basis points to its drawn pricing and positive or negative sustainability fee adjustments of 0.50 basis points to its undrawn pricing.
The credit agreement contains negative covenants that, among other things and subject to certain exceptions, limit the ability of the Company's subsidiaries to incur indebtedness, incur liens, undergo fundamental changes, make dispositions of all or substantially all of their assets, alter their businesses and enter into agreements limiting subsidiary dividends and distributions.
The Company's financial covenants include maintaining an operating lease adjusted leverage ratio of not greater than 3.25:1.00 and the ratio of consolidated EBITDAR to consolidated interest charges (plus rent) of not less than 2.00:1.00. The credit agreement also contains certain customary representations, warranties, affirmative covenants, and events of default (including, among others, an event of default upon the occurrence of a change of control). If an event of default occurs, the credit agreement may be terminated, and the maturity of any outstanding amounts may be accelerated. As of July 28, 2024, the Company was in compliance with the covenants of the credit facility.
China Mainland revolving credit facility
The Company has an uncommitted and unsecured 240.0 million Chinese Yuan ($33.1 million) revolving credit facility with terms that are reviewed on an annual basis. It is comprised of a revolving loan of up to 200.0 million Chinese Yuan ($27.6 million) and a financial guarantee facility of up to 40.0 million Chinese Yuan ($5.5 million), or its equivalent in another currency. Loans are available for a period not to exceed 12 months, at an interest rate equal to the loan prime rate plus a spread of 0.5175%. The Company is required to follow certain covenants. As of July 28, 2024, the Company was in compliance with the covenants and, aside from letters of credit of 40.3 million Chinese Yuan ($5.6 million), there were no other borrowings or guarantees outstanding under this credit facility.
Note 4. Supply Chain Financing Program
The Company facilitates a voluntary supply chain financing ("SCF") program that allows its suppliers to elect to sell the receivables owed to them by the Company to a third party financial institution. Participating suppliers negotiate arrangements
10
directly with the financial institution. If a supplier chooses to participate in the SCF program it may request an invoice be paid earlier than it would by the Company, and the financial institution at its sole and absolute discretion, may elect to make an early payment to the supplier at a discount. The Company’s obligations to its suppliers, including amounts due and scheduled payment terms, are not impacted by a supplier's participation in the arrangement and the Company provides no guarantees to any third parties under the SCF program.
As of July 28, 2024 and January 28, 2024, $52.1 million and $42.1 million, respectively, were outstanding under the SCF program and presented within accounts payable.
Note 5. Stock-Based Compensation and Benefit Plans
Stock-based compensation plans
The Company's eligible employees participate in various stock-based compensation plans, provided directly by the Company.
Stock-based compensation expense charged to income for the plans was $46.7 million and $45.2 million for the first two quarters of 2024 and 2023, respectively. Total unrecognized compensation cost for all stock-based compensation plans was $189.0 million as of July 28, 2024, which is expected to be recognized over a weighted-average period of 2.3 years.
A summary of the balances of the Company's stock-based compensation plans as of July 28, 2024, and changes during the first two quarters then ended, is presented below:
Stock OptionsPerformance-Based Restricted Stock UnitsRestricted SharesRestricted Stock Units
NumberWeighted-Average Exercise PriceNumberWeighted-Average Grant Date Fair ValueNumberWeighted-Average Grant Date Fair ValueNumberWeighted-Average Grant Date Fair Value
(In thousands, except per share amounts)
Balance as of January 28, 2024783 $285.69 175 $349.84 4 $370.85 223 $359.12 
Granted224 386.28 122 355.79 5 319.19 127 382.22 
Exercised/released31 183.32 98 309.89 4 371.33 90 347.17 
Forfeited/expired38 369.21 19 373.95 — — 14 374.55 
Balance as of July 28, 2024938 $309.79 180 $373.12 5 $317.86 246 $374.52 
Exercisable as of July 28, 2024470 $250.42 
The Company's performance-based restricted stock units are awarded to eligible employees and entitle the grantee to receive a maximum of two shares of common stock per performance-based restricted stock unit if the Company achieves specified performance goals and the grantee remains employed during the vesting period. The fair value of performance-based restricted stock units is based on the closing price of the Company's common stock on the grant date. Expense for performance-based restricted stock units is recognized when it is probable that the performance goal will be achieved.
The grant date fair value of the restricted shares and restricted stock units is based on the closing price of the Company's common stock on the grant date.
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The grant date fair value of each stock option granted is estimated on the date of grant using the Black-Scholes model. The closing price of the Company's common stock on the grant date is used in the model. The assumptions used to calculate the fair value of the options granted are evaluated and revised, as necessary, to reflect market conditions and the Company's historical experience. The expected term of the options is based upon the historical experience of similar awards, giving consideration to expectations of future employee exercise behavior. Expected volatility is based upon the historical volatility of the Company's common stock for the period corresponding with the expected term of the options. The risk-free interest rate is based on the U.S. Treasury yield curve for the period corresponding with the expected term of the options. The following are weighted averages of the assumptions that were used in calculating the fair value of stock options granted during the first two quarters of 2024:
First Two Quarters
 2024
Expected term3.75 years
Expected volatility37.39 %
Risk-free interest rate4.30 %
Dividend yield— %
Employee share purchase plan
The Company has an Employee Share Purchase Plan ("ESPP"). Contributions are made by eligible employees, subject to certain limits defined in the ESPP, and the Company matches one-third of the contribution. The maximum number of shares authorized to be purchased under the ESPP is 6.0 million shares. All shares purchased under the ESPP are purchased in the open market. During the second quarter of 2024, there were 34.0 thousand shares purchased. As of July 28, 2024, 4.3 million shares remain authorized to be purchased under the ESPP.
Defined contribution pension plans
The Company offers defined contribution pension plans to its eligible employees. Participating employees may elect to defer and contribute a portion of their eligible compensation to a plan up to limits stated in the plan documents, not to exceed the dollar amounts set by applicable laws. The Company matches 50% to 75% of the contribution depending on the participant's length of service, and the contribution is subject to a two year vesting period. The Company's net expense for the defined contribution plans was $11.1 million and $9.6 million in the first two quarters of 2024 and 2023, respectively.
Note 6. Fair Value Measurement
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are made using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value:
•Level 1 - defined as observable inputs such as quoted prices in active markets;
•Level 2 - defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
•Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
12
Assets and liabilities measured at fair value on a recurring basis
The fair value measurement is categorized in its entirety by reference to its lowest level of significant input. As of July 28, 2024 and January 28, 2024, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis:
July 28,
2024		Level 1Level 2Level 3Balance Sheet Classification
(In thousands)
Money market funds$499,260 $499,260 $— $— Cash and cash equivalents
Term deposits31 — 31 — Cash and cash equivalents
Forward currency contract assets19,658 — 19,658 — Prepaid expenses and other current assets
Forward currency contract liabilities19,553 — 19,553 — Other current liabilities

January 28,
2024		Level 1Level 2Level 3Balance Sheet Classification
(In thousands)
Money market funds$1,102,119 $1,102,119 $— $— Cash and cash equivalents
Term deposits8 — 8 — Cash and cash equivalents
Forward currency contract assets647 — 647 — Prepaid expenses and other current assets
Forward currency contract liabilities2,872 — 2,872 — Other current liabilities
The Company records cash, accounts receivable, accounts payable, and accrued liabilities at cost. The carrying values of these instruments approximate their fair value due to their short-term maturities.
The Company has short-term, highly liquid investments classified as cash equivalents, which are invested in money market funds and short-term deposits with original maturities of three months or less. The Company records cash equivalents at their original purchase prices plus interest that has accrued at the stated rate.
The fair values of the forward currency contract assets and liabilities are determined using observable Level 2 inputs, including foreign currency spot exchange rates, forward pricing curves, and interest rates. The fair values consider the credit risk of the Company and its counterparties. The Company's Master International Swap Dealers Association, Inc., Agreements and other similar arrangements allow net settlements under certain conditions. However, the Company records all derivatives on its consolidated balance sheets at fair value and does not offset derivative assets and liabilities.
Note 7. Derivative Financial Instruments
Foreign currency exchange risk
The Company is exposed to risks associated with changes in foreign currency exchange rates and uses derivative financial instruments to manage its exposure to certain of these foreign currency exchange rate risks. The Company does not enter into derivative contracts for speculative or trading purposes.
The Company currently hedges against changes in the Canadian dollar and Chinese Yuan to the U.S. dollar exchange rate and changes in the Euro and Australian dollar to the Canadian dollar exchange rate using forward currency contracts.
Net investment hedges
The Company is exposed to foreign currency exchange gains and losses which arise on translation of its international subsidiaries' balance sheets into U.S. dollars. These gains and losses are recorded as other comprehensive income (loss), net of tax in accumulated other comprehensive income or loss within stockholders' equity.
The Company holds a significant portion of its assets in Canada and enters into forward currency contracts designed to hedge a portion of the foreign currency exposure that arises on translation of a Canadian subsidiary into U.S. dollars. These forward currency contracts are designated as net investment hedges. The Company assesses hedge effectiveness based on
13
changes in forward rates. The Company recorded no ineffectiveness from net investment hedges during the first two quarters of 2024.
The Company classifies the cash flows at settlement of its net investment hedges within investing activities in the consolidated statements of cash flows.
Derivatives not designated as hedging instruments
The Company is exposed to gains and losses arising from changes in foreign currency exchange rates associated with transactions which are undertaken by its subsidiaries in currencies other than their functional currency. Such transactions include intercompany transactions and inventory purchases. These transactions result in the recognition of certain foreign currency denominated monetary assets and liabilities which are remeasured to the quarter-end or settlement date foreign currency exchange rate. The resulting foreign currency gains and losses are recorded in selling, general and administrative expenses.
During the first two quarters of 2024, the Company entered into certain forward currency contracts designed to economically hedge the foreign currency exchange revaluation gains and losses that are recognized by its Canadian and Chinese subsidiaries on specific monetary assets and liabilities denominated in currencies other than the functional currency of the entity. The Company has not applied hedge accounting to these instruments and the change in fair value of these derivatives is recorded within selling, general and administrative expenses.
The Company classifies the cash flows at settlement of its forward currency contracts which are not designated in hedging relationships within operating activities in the consolidated statements of cash flows.
Quantitative disclosures about derivative financial instruments
The Company presents its derivative assets and derivative liabilities at their gross fair values within prepaid expenses and other current assets and other current liabilities on the consolidated balance sheets. However, the Company's Master International Swap Dealers Association, Inc., Agreements and other similar arrangements allow net settlements under certain conditions. As of July 28, 2024, there were derivative assets of $19.7 million and derivative liabilities of $19.6 million subject to enforceable netting arrangements.
The notional amounts and fair values of forward currency contracts were as follows:
July 28, 2024January 28, 2024
Gross NotionalAssetsLiabilitiesGross NotionalAssetsLiabilities
(In thousands)
Derivatives designated as net investment hedges:
Forward currency contracts$1,205,000 $18,303 $— $1,242,000 $— $258 
Derivatives not designated in a hedging relationship:
Forward currency contracts1,445,167 1,355 19,553 1,543,351 647 2,614 
Net derivatives recognized on consolidated balance sheets:
Forward currency contracts$19,658 $19,553 $647 $2,872 
The forward currency contracts designated as net investment hedges outstanding as of July 28, 2024 mature on different dates between August 2024 and November 2024.
The forward currency contracts not designated in a hedging relationship outstanding as of July 28, 2024 mature on different dates between August 2024 and October 2024.
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The pre-tax gains and losses on foreign currency exchange forward contracts recorded in accumulated other comprehensive income or loss were as follows:
Second QuarterFirst Two Quarters
2024202320242023
(In thousands)
Gains (losses) recognized in net investment hedge gains (losses):
Derivatives designated as net investment hedges$14,575 $(23,166)$32,712 $961 
No gains or losses have been reclassified from accumulated other comprehensive income or loss into net income for derivative financial instruments in a net investment hedging relationship, as the Company has not sold or liquidated (or substantially liquidated) its hedged subsidiary.
The pre-tax net foreign currency exchange and derivative gains and losses recorded in the consolidated statement of operations were as follows:
Second QuarterFirst Two Quarters
2024202320242023
(In thousands)
Gains recognized in selling, general and administrative expenses:
Foreign currency exchange gains (losses)$15,836 $(38,426)$30,771 $(30,099)
Derivatives not designated in a hedging relationship(14,711)42,729 (29,038)33,023 
Net foreign currency exchange and derivative gains$1,125 $4,303 $1,733 $2,924 
Credit risk
The Company is exposed to credit-related losses in the event of nonperformance by the counterparties to the forward currency contracts. The credit risk amount is the Company's unrealized gains on its derivative instruments, based on foreign currency rates at the time of nonperformance.
The Company's forward currency contracts are generally entered into with what the Company believes are investment grade credit worthy and reputable financial institutions that are monitored by the Company for counterparty risk.
The Company's derivative contracts contain certain credit risk-related contingent features. Under certain circumstances, including an event of default, bankruptcy, termination, and cross default under the Company's revolving credit facility, the Company may be required to make immediate payment for outstanding liabilities under its derivative contracts.
Note 8. Earnings Per Share
The details of the computation of basic and diluted earnings per share are as follows:
Second QuarterFirst Two Quarters
2024202320242023
(In thousands, except per share amounts)
Net income$392,922 $341,603 $714,343 $632,008 
Basic weighted-average number of shares outstanding124,721 126,969 125,358 127,108 
Assumed conversion of dilutive stock options and awards136 294 242 334 
Diluted weighted-average number of shares outstanding124,857 127,263 125,600 127,442 
Basic earnings per share$3.15 $2.69 $5.70 $4.97 
Diluted earnings per share$3.15 $2.68 $5.69 $4.96 
The Company's calculation of weighted-average shares includes the common stock of the Company as well as the exchangeable shares. Exchangeable shares are the economic equivalent of common shares in all material respects. All classes of stock have, in effect, the same economic rights and share equally in undistributed net income. For the first two quarters of 2024 and 2023, 0.1 million and 0.1 million stock options and awards, respectively, were anti-dilutive to earnings per share and therefore have been excluded from the computation of diluted earnings per share.
15
On March 23, 2022, the Company's board of directors approved a stock repurchase program for up to $1.0 billion of the Company's common shares on the open market or in privately negotiated transactions. During the first quarter of 2024, the Company completed the remaining stock repurchases under this program.
On November 29, 2023, the Company's board of directors approved an additional stock repurchase program for up to $1.0 billion of the Company's common shares on the open market or in privately negotiated transactions. On May 29, 2024, the Company's board of directors approved a $1.0 billion increase to the existing stock repurchase program. 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 timing and actual number of common shares to be repurchased will depend upon market conditions, eligibility to trade, and other factors, in accordance with Securities and Exchange Commission requirements. The authorized value of shares available to be repurchased under this program excludes the cost of commissions and excise taxes and as of July 28, 2024, the remaining authorized value was $1.3 billion.
During the first two quarters of 2024 and 2023, 2.6 million and 0.8 million shares, respectively, were repurchased at a total cost including commissions and excise taxes of $888.9 million and $292.0 million, respectively.
Subsequent to July 28, 2024, and up to August 23, 2024, 1.0 million shares were repurchased at a total cost including commissions and excise taxes of $239.3 million.
Note 9. Supplementary Financial Information
A summary of certain consolidated balance sheet accounts is as follows:
July 28,
2024		January 28,
2024
(In thousands)
Inventories:
Inventories, at cost$1,536,505 $1,465,076 
Provision to reduce inventories to net realizable value(107,462)(141,474)
$1,429,043 $1,323,602 
Prepaid expenses and other current assets:
Prepaid expenses$150,768 $137,203 
Forward currency contract assets19,658 647 
Other current assets25,073 46,652 
$195,499 $184,502 
Property and equipment, net:
Land$78,145 $79,498 
Buildings28,523 29,032 
Leasehold improvements1,147,438 1,006,926 
Furniture and fixtures162,232 156,656 
Computer hardware184,298 176,597 
Computer software1,170,495 1,032,567 
Equipment and vehicles47,447 34,017 
Work in progress155,973 247,943 
Property and equipment, gross2,974,551 2,763,236 
Accumulated depreciation(1,359,658)(1,217,425)
$1,614,893 $1,545,811 
Other non-current assets:
Cloud computing arrangement implementation costs$153,025 $133,597 
Security deposits38,114 31,825 
Other30,389 21,262 
$221,528 $186,684 
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July 28,
2024		January 28,
2024
(In thousands)
Accrued liabilities and other:
Accrued operating expenses$164,896 $147,215 
Sales return allowances49,104 61,634 
Accrued freight43,925 41,241 
Accrued capital expenditures22,256 31,936 
Accrued duty37,601 25,817 
Accrued rent18,052 12,522 
Accrued inventory liabilities10,293 4,783 
Sales tax collected13,417 3,088 
Forward currency contract liabilities19,553 2,872 
Other17,326 17,447 
$396,423 $348,555 
Note 10. Segmented Information
The Company's operating segments are based on the financial information the CODM, who is the Chief Executive Officer, uses to evaluate performance and allocate resources.
During the fourth quarter of 2023, the financial information the CODM regularly uses to evaluate performance and allocate resources was revised. As the Company has further executed on its omni-channel retail strategy, and with the continued expansion of its international operations, the CODM has shifted resource allocation decisions to be focused by regional market, rather than by selling channel. This resulted in a change in the Company's operating segments.
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Since January 28, 2024, the Company has reported three segments: Americas, China Mainland, and Rest of World, which is APAC and EMEA on a combined basis. The Company does not report capital expenditures and assets by segment as that information is not reviewed by the CODM. Previously, the Company's operating segments were comprised of company-operated stores, direct to consumer (or "e-commerce"), and other. The Company has recast the prior period information to reflect its new operating segments.
Second QuarterFirst Two Quarters
2024202320242023
(In thousands)
Net revenue:
Americas$1,741,433 $1,719,773 $3,363,697 $3,287,511 
China Mainland314,189 234,445 617,975 444,513 
Rest of World315,456 254,947 598,297 477,933 
$2,371,078 $2,209,165 $4,579,969 $4,209,957 
Segmented income from operations:
Americas$669,427 $660,570 $1,234,267 $1,241,792 
China Mainland119,085 83,481 238,863 157,366 
Rest of World74,000 51,292 140,681 95,086 
862,512 795,343 1,613,811 1,494,244 
General corporate expense322,286 314,207 640,943 609,816 
Amortization of intangible assets— 1,879 — 3,757 
Income from operations540,226 479,257 972,868 880,671 
Other income (expense), net17,994 7,362 41,277 15,387 
Income before income tax expense$558,220 $486,619 $1,014,145 $896,058 
Depreciation and amortization:
Americas$47,824 $44,514 $92,150 $79,650 
China Mainland7,762 5,794 15,787 11,759 
Rest of World7,407 5,755 13,913 11,053 
Corporate40,580 37,946 77,482 75,663 
$103,573 $94,009 $199,332 $178,125 
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Note 11. Disaggregated Net Revenue
In addition to the disaggregation of net revenue by reportable segment in Note 10. Segmented Information, the following table disaggregates the Company's net revenue by geographic area.
Second QuarterFirst Two Quarters
2024202320242023
(In thousands)
United States$1,421,980 $1,424,926 $2,762,380 $2,739,317 
Canada319,453 294,847 601,317 548,194 
China Mainland314,189 234,445 617,975 444,513 
Hong Kong SAR, Taiwan, and Macau SAR
42,035 43,055 84,299 82,672 
People's Republic of China356,224 277,500 702,274 527,185 
Other geographic areas273,421 211,892 513,998 395,261 
$2,371,078 $2,209,165 $4,579,969 $4,209,957 
The following table disaggregates the Company's net revenue by category. Other categories is primarily composed of accessories, footwear, and lululemon Studio.
Second QuarterFirst Two Quarters
2024202320242023
(In thousands)
Women's product$1,476,121 $1,396,327 $2,911,362 $2,705,155 
Men's product587,525 530,723 1,093,223 968,888 
Other categories307,432 282,115 575,384 535,914 
$2,371,078 $2,209,165 $4,579,969 $4,209,957 
The following table disaggregates the Company's net revenue by channel.
Second QuarterFirst Two Quarters
2024202320242023
(In thousands)
Company-operated stores$1,215,613 $1,096,939 $2,286,138 $2,055,026 
E-commerce910,637 893,673 1,816,424 1,728,615 
Other channels244,828 218,553 477,407 426,316 
$2,371,078 $2,209,165 $4,579,969 $4,209,957 
Note 12. Legal Proceedings and Other Contingencies
In addition to the legal proceedings described below, the Company is, from time to time, involved in routine legal matters, and audits and inspections by governmental agencies and other third parties which are incidental to the conduct of its business. This includes legal matters such as initiation and defense of proceedings to protect intellectual property rights, employment claims, product liability claims, personal injury claims, and similar matters. The Company believes the ultimate resolution of any such legal proceedings, audits, and inspections will not have a material adverse effect on its consolidated balance sheets, results of operations or cash flows. The Company has recognized immaterial provisions related to the expected outcome of legal proceedings.
On July 12, 2024, lululemon and its subsidiary, lululemon usa inc., were named as defendants in a putative consumer class action (Gyani v. Lululemon Athletica Inc., et al., No. 1:24-cv-22651-BB) in the United States District Court for the Southern District of Florida. The complaint asserts claims under the Florida Deceptive and Unfair Trade Practices Act and for unjust enrichment based on statements by the Company relating to the sustainability and environmental impact of the Company's products and actions during the period October 28, 2020 to present. The complaint seeks monetary damages, as
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well as non-monetary relief such as an injunction to end the alleged unlawful practices. The Company intends to defend the action vigorously.
On August 8, 2024, lululemon athletica inc. and certain officers of the Company were named as defendants in a purported securities class action (Patel v. Lululemon Athletica Inc., et al., No. 1:24-cv-06033) in the United States District Court for the Southern District of New York. The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on allegedly false and misleading public statements and omissions by Defendants during the period December 7, 2023 to July 24, 2024 relating to lululemon's business, product offerings, and inventory allocation that Plaintiff alleges artificially inflated the Company’s stock price. The complaint currently seeks unspecified monetary damages. The Company intends to defend the action vigorously.
Note 13. Pending Acquisition
During the second quarter of 2024, the Company entered into an agreement to acquire the operations and lululemon branded retail locations being run by a third party under a license and supply arrangement in Mexico for approximately $160.0 million in cash. The Company had previously granted this third party the right to operate lululemon branded retail locations and to sell lululemon products in Mexico. The transaction is subject to customary closing conditions and regulatory approval.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Some of the statements contained in this Form 10-Q and any documents incorporated herein by reference constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included or incorporated in this Form 10-Q are forward-looking statements, particularly statements which relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, the development and introduction of new products, and the implementation of our marketing and branding strategies. In many cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "intends," "predicts," "potential" or the negative of these terms or other comparable terminology.
The forward-looking statements contained in this Form 10-Q and any documents incorporated herein by reference reflect our current views about future events and are subject to risks, uncertainties, assumptions, and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance, or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, those factors described in "Risk Factors" and elsewhere in this report.
The forward-looking statements contained in this Form 10-Q reflect our views and assumptions only as of the date of this Form 10-Q and are expressly qualified in their entirety by the cautionary statements included in this Form 10-Q. Except as required by applicable securities law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
This information should be read in conjunction with the unaudited interim consolidated financial statements and the notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations, contained in our fiscal 2023 Annual Report on Form 10-K filed with the SEC on March 21, 2024.
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.
Components of management's discussion and analysis of financial condition and results of operations include:
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We use comparable sales as a metric to evaluate the performance of our business. Refer to the Comparable Sales section of this management's discussion and analysis of financial condition and results of operations for further information.
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.
We disclose material non-public information through one or more of the following channels: our investor relations website (http://corporate.lululemon.com/investors), the social media channels identified on our investor relations website, press releases, SEC filings, public conference calls, and webcasts. Information contained on or accessible through our websites is not incorporated into, and does not form a part of, this Quarterly 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.
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.
Overview
lululemon athletica inc. is principally a designer, distributor, and retailer of technical athletic apparel, footwear, and accessories. We have a vision to create transformative products and experiences that build meaningful connections, unlocking greater possibility and wellbeing for all. Since our inception, we have fostered a distinctive corporate culture; we promote a set of core values in our business which include taking personal responsibility, acting with courage, valuing connection and inclusion, and choosing to have fun. 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."
We offer a comprehensive line of technical athletic apparel, footwear, and accessories marketed under the lululemon brand. Our apparel assortment includes items such as pants, shorts, tops, and jackets designed for a healthy lifestyle including athletic activities such as yoga, running, training, and most other activities. We also offer apparel designed for being on the move and fitness-inspired accessories. We expect to continue to broaden our merchandise offerings through expansion across these product areas.
Financial Highlights
The summary below compares the second quarter of 2024 to the second quarter of 2023:
•Net revenue increased 7% to $2.4 billion. On a constant dollar basis, net revenue increased 8%.
•Comparable sales increased 2%, or 3% on a constant dollar basis.
–Americas comparable sales decreased 3%, or 2% on a constant dollar basis.
–China Mainland comparable sales increased 21%, or 23% on a constant dollar basis.
–Rest of World comparable sales increased 17%, or 20% on a constant dollar basis.
•Gross profit increased 9% to $1.4 billion.
•Gross margin increased 80 basis points to 59.6%.
•Income from operations increased 13% to $540.2 million.
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•Operating margin increased 110 basis points to 22.8%.
•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.
•Diluted earnings per share were $3.15 compared to $2.68 in the second quarter of 2023.
Market Conditions and Trends
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.
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.
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.
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.
Quarter-to-Date Results of Operations: Second Quarter Results
The following table summarizes key components of our results of operations for the periods indicated:
 Second Quarter
 2024202320242023
 (In thousands)(Percentage of net revenue)
Net revenue$2,371,078 $2,209,165 100.0 %100.0 %
Cost of goods sold958,893 910,654 40.4 41.2 
Gross profit1,412,185 1,298,511 59.6 58.8 
Selling, general and administrative expenses871,959 817,375 36.8 37.0 
Amortization of intangible assets— 1,879 — 0.1 
Income from operations540,226 479,257 22.8 21.7 
Other income (expense), net17,994 7,362 0.8 0.3 
Income before income tax expense558,220 486,619 23.5 22.0 
Income tax expense165,298 145,016 7.0 6.6 
Net income$392,922 $341,603 16.6 %15.5 %
Net Revenue
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.
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Net revenue for the second quarter of 2024 and 2023 is summarized below:
 Second Quarter
 2024202320242023Year over year change
 (In thousands)(Percentage of net revenue)(In thousands)(Percentage)(Constant dollar change)
Americas$1,741,433 $1,719,773 73.4 %77.8 %$21,660 1 %2 %
China Mainland314,189 234,445 13.3 10.6 79,744 34 %37 %
Rest of World315,456 254,947 13.3 11.5 60,509 24 %27 %
Net revenue$2,371,078 $2,209,165 100.0 %100.0 %$161,913 7 %8 %
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.
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.
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.
Gross Profit
Second Quarter
20242023Year over year change
(In thousands)(In thousands)(Percentage)
Gross profit
$1,412,185 $1,298,511 $113,674 8.8 %
Gross margin
59.6 %58.8 %
80 basis points
The increase in gross margin was primarily the result of:
•a net increase in product margin of 130 basis points, primarily due to lower product costs; and
•a decrease in costs related to our product departments as a percentage of net revenue of 80 basis points.
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 40 basis points, and an unfavorable impact of foreign currency exchange rates of 20 basis points.
Selling, General and Administrative Expenses
Second Quarter
20242023Year over year change
(In thousands)(In thousands)(Percentage)
Selling, general and administrative expenses
$871,959 $817,375 $54,584 6.7 %
Selling, general and administrative expenses as a percentage of net revenue
36.8 %37.0 %
(20) basis points
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The increase in selling, general and administrative expenses was primarily due to:
•an increase in head office costs of $28.9 million, comprised of:
–an increase in brand and community costs of $16.1 million primarily due to increased marketing expenses and brand campaigns;
–an increase in advisory and professional fees of $9.2 million;
–an increase in technology costs, including cloud computing amortization, of $5.3 million;
–an increase in depreciation of $4.5 million; and
–an increase in other head office costs of $2.1 million.
The increase in costs related to our head office was partially offset by a net decrease in employee costs of $8.3 million primarily due to decreased incentive compensation, partially offset by increased salaries and wages expense.
•an increase in costs related to our operating channels of $22.5 million, comprised of:
–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;
–an increase in brand and community costs of $9.1 million primarily due to increased digital marketing expenses; and
–an increase in other operating costs of $7.6 million primarily due to increased technology costs, repairs and maintenance costs, and security costs.
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.
•a decrease in net foreign currency exchange and derivative revaluation gains of $3.2 million.
Amortization of Intangible Assets
Second Quarter
20242023Year over year change
(In thousands)(In thousands)(Percentage)
Amortization of intangible assets
$— $1,879 $(1,879)(100.0)%
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.
Income from Operations
On a segment basis, we determine income from operations without taking into account our general corporate expenses and certain other expenses. General corporate expenses include centrally managed support functions and other head office
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