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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 October 29, 2023
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 FilerAccelerated 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 December 1, 2023, there were 121,074,786 shares of the registrant's common stock, par value $0.005 per share, outstanding.
Exchangeable and Special Voting Shares:
As of December 1, 2023, 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 December 1, 2023, 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)
October 29,
2023
January 29,
2023
ASSETS
Current assets
Cash and cash equivalents$1,091,138 $1,154,867 
Accounts receivable, net107,004 132,906 
Inventories1,663,617 1,447,367 
Prepaid and receivable income taxes300,258 185,641 
Prepaid expenses and other current assets202,882 238,672 
3,364,899 3,159,453 
Property and equipment, net1,413,918 1,269,614 
Right-of-use lease assets1,048,607 969,419 
Goodwill23,912 24,144 
Intangible assets, net 21,961 
Deferred income tax assets5,896 6,402 
Other non-current assets165,032 156,045 
$6,022,264 $5,607,038 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable$309,324 $172,732 
Accrued liabilities and other392,949 399,223 
Accrued compensation and related expenses250,479 248,167 
Current lease liabilities217,138 207,972 
Current income taxes payable27,231 174,221 
Unredeemed gift card liability213,256 251,478 
Other current liabilities37,737 38,405 
1,448,114 1,492,198 
Non-current lease liabilities950,954 862,362 
Non-current income taxes payable15,864 28,555 
Deferred income tax liabilities53,833 55,084 
Other non-current liabilities27,650 20,040 
2,496,415 2,458,239 
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; 121,122 and 122,205 issued and outstanding
606 611 
Additional paid-in capital536,390 474,645 
Retained earnings3,304,683 2,926,127 
Accumulated other comprehensive loss(315,830)(252,584)
3,525,849 3,148,799 
$6,022,264 $5,607,038 
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 EndedThree Quarters Ended
October 29,
2023
October 30,
2022
October 29,
2023
October 30,
2022
Net revenue$2,204,218 $1,856,889 $6,414,175 $5,338,680 
Cost of goods sold947,554 818,037 2,708,195 2,373,959 
Gross profit1,256,664 1,038,852 3,705,980 2,964,721 
Selling, general and administrative expenses842,795 684,236 2,407,683 1,954,340 
Impairment of assets and restructuring costs74,501  74,501  
Amortization of intangible assets1,253 2,189 5,010 6,579 
Gain on disposal of assets   (10,180)
Income from operations338,115 352,427 1,218,786 1,013,982 
Other income (expense), net9,842 331 25,229 454 
Income before income tax expense347,957 352,758 1,244,015 1,014,436 
Income tax expense99,243 97,288 363,293 279,447 
Net income$248,714 $255,470 $880,722 $734,989 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment$(96,478)$(105,016)$(84,442)$(122,149)
Net investment hedge gains (losses)20,490 25,492 21,196 26,259 
Other comprehensive income (loss), net of tax$(75,988)$(79,524)$(63,246)$(95,890)
Comprehensive income$172,726 $175,946 $817,476 $639,099 
Basic earnings per share$1.97 $2.00 $6.94 $5.75 
Diluted earnings per share$1.96 $2.00 $6.92 $5.74 
Basic weighted-average number of shares outstanding126,460 127,511 126,892 127,736 
Diluted weighted-average number of shares outstanding126,770 127,820 127,218 128,089 
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 October 29, 2023
 Exchangeable StockSpecial Voting StockCommon StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders' Equity
 SharesSharesPar ValueSharesPar Value
Balance as of July 30, 20235,116 5,116 $ 121,613 $608 $505,127 $3,267,589 $(239,842)$3,533,482 
Net income248,714 248,714 
Other comprehensive income (loss), net of tax(75,988)(75,988)
Stock-based compensation expense24,573 24,573 
Common stock issued upon settlement of stock-based compensation67 2 8,834 8,836 
Shares withheld related to net share settlement of stock-based compensation(5)— (1,142)(1,142)
Repurchase of common stock, including excise tax(553)(4)(1,002)(211,620)(212,626)
Balance as of October 29, 20235,116 5,116 $ 121,122 $606 $536,390 $3,304,683 $(315,830)$3,525,849 

Quarter Ended October 30, 2022
 Exchangeable StockSpecial Voting StockCommon StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders' Equity
 SharesSharesPar ValueSharesPar Value
Balance as of July 31, 20225,203 5,203 $ 122,334 $612 $433,092 $2,636,377 $(212,283)$2,857,798 
Net income255,470 255,470 
Other comprehensive income (loss), net of tax(79,524)(79,524)
Stock-based compensation expense20,312 20,312 
Common stock issued upon settlement of stock-based compensation45 — 4,057 4,057 
Shares withheld related to net share settlement of stock-based compensation(6)— (1,917)(1,917)
Repurchase of common stock(55)— (100)(16,892)(16,992)
Balance as of October 30, 20225,203 5,203 $ 122,318 $612 $455,444 $2,874,955 $(291,807)$3,039,204 



5

Three Quarters Ended October 29, 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 income880,722 880,722 
Other comprehensive income (loss), net of tax(63,246)(63,246)
Stock-based compensation expense70,157 70,157 
Common stock issued upon settlement of stock-based compensation374 2 24,935 24,937 
Shares withheld related to net share settlement of stock-based compensation(95)— (30,877)(30,877)
Repurchase of common stock, including excise tax(1,362)(7)(2,470)(502,166)(504,643)
Balance as of October 29, 20235,116 5,116 $ 121,122 $606 $536,390 $3,304,683 $(315,830)$3,525,849 

Three Quarters Ended October 30, 2022
 Exchangeable StockSpecial Voting StockCommon StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders' Equity
 SharesSharesPar ValueSharesPar Value
Balance as of January 30, 20225,203 5,203 $ 123,297 $616 $422,507 $2,512,840 $(195,917)$2,740,046 
Net income734,989 734,989 
Other comprehensive income (loss), net of tax(95,890)(95,890)
Stock-based compensation expense59,487 59,487 
Common stock issued upon settlement of stock-based compensation308 2 10,241 10,243 
Shares withheld related to net share settlement of stock-based compensation(104)— (34,695)(34,695)
Repurchase of common stock(1,183)(6)(2,096)(372,874)(374,976)
Balance as of October 30, 20225,203 5,203 $ 122,318 $612 $455,444 $2,874,955 $(291,807)$3,039,204 
See accompanying notes to the unaudited interim consolidated financial statements

6

lululemon athletica inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Amounts in thousands)
Three Quarters Ended
October 29,
2023
October 30,
2022
Cash flows from operating activities
Net income$880,722 $734,989 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization276,094 211,629 
lululemon Studio obsolescence provision23,709  
Impairment of assets and restructuring costs74,501  
Gain on disposal of assets (10,180)
Stock-based compensation expense70,157 59,487 
Settlement of derivatives not designated in a hedging relationship29,499 (19,202)
Changes in operating assets and liabilities:
Inventories(301,801)(832,024)
Prepaid and receivable income taxes(114,616)(77,458)
Prepaid expenses and other current assets41,202 (90,512)
Other non-current assets(30,513)(25,725)
Accounts payable141,685 26,537 
Accrued liabilities and other(16,238)31,767 
Accrued compensation and related expenses(1,496)(13,694)
Current and non-current income taxes payable(153,539)(54,354)
Unredeemed gift card liability(35,927)(33,481)
Right-of-use lease assets and current and non-current lease liabilities19,898 15,285 
Other current and non-current liabilities8,729 (2,865)
Net cash provided by (used in) operating activities912,066 (79,801)
Cash flows from investing activities
Purchase of property and equipment(445,353)(431,677)
Settlement of net investment hedges686 29,158 
Other investing activities(658)15,657 
Net cash used in investing activities(445,325)(386,862)
Cash flows from financing activities
Proceeds from settlement of stock-based compensation24,937 10,243 
Shares withheld related to net share settlement of stock-based compensation(30,877)(34,695)
Repurchase of common stock(504,643)(374,976)
Net cash used in financing activities(510,583)(399,428)
Effect of foreign currency exchange rate changes on cash and cash equivalents(19,887)(41,156)
Increase (decrease) in cash and cash equivalents(63,729)(907,247)
Cash and cash equivalents, beginning of period$1,154,867 $1,259,871 
Cash and cash equivalents, end of period$1,091,138 $352,624 
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, which are sold through company-operated stores, direct to consumer through e-commerce, outlets, sales to wholesale accounts, license and supply arrangements, recommerce, and sales from temporary locations. The Company operates stores in the United States, the People's Republic of China ("PRC"), Canada, Australia, the United Kingdom, South Korea, Germany, New Zealand, Singapore, Japan, France, Ireland, Spain, Malaysia, Sweden, the Netherlands, Norway, Switzerland, and Thailand. There were 686 and 655 company-operated stores as of October 29, 2023 and January 29, 2023, respectively.
Basis of presentation
The unaudited interim consolidated financial statements, including the financial position as of October 29, 2023 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 29, 2023 is derived from the Company's audited consolidated financial statements and related notes for the fiscal year ended January 29, 2023, which are included in Item 8 in the Company's fiscal 2022 Annual Report on Form 10-K filed with the SEC on March 28, 2023. These unaudited interim consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to 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 2022 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 2023 will end on January 28, 2024 and will be a 52-week year. Fiscal 2022 was a 52-week year and ended on January 29, 2023. Fiscal 2023 and fiscal 2022 are referred to as "2023," and "2022," respectively. The first three quarters of 2023 and 2022 ended on October 29, 2023 and October 30, 2022, 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.
Certain comparative figures have been reclassified to conform to the financial presentation adopted for the current year.
Use of estimates
The preparation of financial statements in conformity with GAAP in the United States 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
Recently adopted accounting pronouncements
The Company considers the applicability and impact of all Accounting Standard Updates ("ASUs"). ASUs adopted by the Company during the first three quarters of 2023 not listed below were assessed, and determined to be either not applicable or are expected to have minimal impact on its consolidated financial position or results of operations.
9

In September 2022, the FASB issued ASC 405-50, Liabilities - Supplier Finance Programs, to require annual and interim disclosures about the key terms of supplier finance programs used in connection with the purchase of goods and services along with information about the obligations under these programs, including the amount outstanding at the end of each reporting period and a rollforward of those obligations. The Company adopted this update during the first quarter of 2023 and the related disclosures are included in Note 5. Revolving Credit Facilities and Supply Chain Financing Program.
Recently issued accounting pronouncements
ASUs recently issued were assessed and determined to be either not applicable or are expected to have minimal impact on its consolidated financial position or results of operations.
Note 3. Impairment of Assets and Restructuring Costs
During the third quarter of 2023, the Company contracted with Peloton Interactive, Inc. to be the exclusive digital fitness content provider for the lululemon Studio Mirror and decided it would no longer produce its own digital fitness content. While the Company will continue to provide services and support to existing lululemon Studio subscribers, it also decided that it would cease selling the Mirror hardware and end its digital app-only subscription. The Company ceased selling the Mirror in December 2023.
During the third quarter of 2023, the Company recognized certain inventory provisions, asset impairments, and restructuring costs related to lululemon Studio. The following table summarizes the amounts recognized:
2023
(In thousands)
Costs recorded in cost of goods sold:
lululemon Studio obsolescence provision$23,709 
Costs recorded in operating expenses:
Impairment of assets:
Impairment of intangible assets$16,951 
Impairment of cloud computing arrangement implementation costs16,074 
Impairment of property and equipment11,161 
$44,186 
Restructuring costs30,315 
Impairment of assets and restructuring costs$74,501 
Total pre-tax charges$98,210 
Income tax effects of charges$(26,085)
Total after-tax charges$72,125 
lululemon Studio obsolescence provision
As a result of the decision to cease selling the lululemon Studio Mirror, the Company recognized an inventory provision of $23.7 million during the third quarter of 2023.
Impairment of assets
As a result of the Company's decisions to no longer produce digital fitness content and to cease the sale of the lululemon Studio Mirror, the Company identified an impairment trigger for the lululemon Studio asset group and conducted an impairment test as of October 29, 2023. The undiscounted cash flows of the lululemon Studio asset group were less than their carrying value, and therefore the Company calculated the fair value of the asset group, which was also less than its carrying value. As a result of the impairment test, the Company recognized asset impairments totaling $44.2 million during the third quarter of 2023. The fair value of long-lived assets was based on a discounted cash flow model, and is a Level 3 non-recurring fair value measurement. The key assumptions used to estimate the fair value were subscriber churn rates and operating costs. lululemon Studio is included within Other in the Company's segment disclosures.
10

Restructuring costs
The Company recorded restructuring costs of $30.3 million primarily related to contract termination costs, employee severance costs, and professional fees. The accrued costs are expected to be settled within one year.
Note 4. Gain on Disposal of Assets
During the second quarter of 2022, the Company completed the sale of an administrative office building, which resulted in a pre-tax gain of $10.2 million. The income tax effect of the gain on disposal of assets was an expense of $1.7 million.
Note 5. Revolving Credit Facilities and Supply Chain Financing Program
North America 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 October 29, 2023, aside from letters of credit and guarantee of $6.6 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 October 29, 2023, the Company was in compliance with the covenants of the credit facility.
China Mainland revolving credit facility
In December 2019, the Company entered into an uncommitted and unsecured 130.0 million Chinese Yuan ($17.8 million) revolving credit facility with terms that are reviewed on an annual basis. The credit facility was increased to 230.0 million Chinese Yuan ($31.4 million) during 2020. It is comprised of a revolving loan of up to 200.0 million Chinese Yuan ($27.3 million) and a financial guarantee facility of up to 30.0 million Chinese Yuan ($4.1 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 October 29, 2023, the Company was in compliance with the covenants and, aside from letters of credit and guarantee of 29.9 million Chinese Yuan ($4.1 million), there were no other borrowings or guarantees outstanding under this credit facility.
11

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 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 October 29, 2023 and January 29, 2023, $29.0 million and $17.6 million, respectively, were outstanding under the SCF program and presented within accounts payable.
Note 6. 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 $69.5 million and $58.8 million for the first three quarters of 2023 and 2022, respectively. Total unrecognized compensation cost for all stock-based compensation plans was $156.9 million as of October 29, 2023, which is expected to be recognized over a weighted-average period of 2.2 years.
A summary of the balances of the Company's stock-based compensation plans as of October 29, 2023, and changes during the first three 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 29, 2023866 $230.78 166 $295.93 5 $308.66 221 $323.89 
Granted212 358.97 121 296.14 4 368.36 127 359.69 
Exercised/released166 150.49 104 201.56 5 308.66 99 291.10 
Forfeited/expired28 332.37 8 350.89 1 368.36 19 348.82 
Balance as of October 29, 2023884 $273.39 175 $349.78 3 $368.36 230 $355.73 
Exercisable as of October 29, 2023423 $203.17 
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.
12

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 three quarters of 2023:
First Three Quarters
 2023
Expected term3.75 years
Expected volatility42.35 %
Risk-free interest rate3.49 %
Dividend yield %
Employee share purchase plan
The Company's board of directors and stockholders approved the Company's Employee Share Purchase Plan ("ESPP") in September 2007. 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 third quarter of 2023, there were 25.7 thousand shares purchased.
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 $14.6 million and $10.1 million in the first three quarters of 2023 and 2022, respectively.
Note 7. 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.
13

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 October 29, 2023 and January 29, 2023, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis:
October 29,
2023
Level 1Level 2Level 3Balance Sheet Classification
(In thousands)
Money market funds$316,770 $316,770 $ $ Cash and cash equivalents
Term deposits47  47  Cash and cash equivalents
Forward currency contract assets15,854  15,854  Prepaid expenses and other current assets
Forward currency contract liabilities11,497  11,497  Other current liabilities

January 29,
2023
Level 1Level 2Level 3Balance Sheet Classification
(In thousands)
Money market funds$568,000 $568,000 $ $ Cash and cash equivalents
Term deposits8  8  Cash and cash equivalents
Forward currency contract assets16,707  16,707  Prepaid expenses and other current assets
Forward currency contract liabilities25,625  25,625  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 AAA-rated money market funds, which include investments in government bonds, and term deposits. 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 8. 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
14

changes in forward rates. The Company recorded no ineffectiveness from net investment hedges during the first three quarters of 2023.
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 three quarters of 2023, 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 October 29, 2023, there were derivative assets of $15.9 million and derivative liabilities of $11.5 million subject to enforceable netting arrangements.
The notional amounts and fair values of forward currency contracts were as follows:
October 29, 2023January 29, 2023
Gross NotionalAssetsLiabilitiesGross NotionalAssetsLiabilities
(In thousands)
Derivatives designated as net investment hedges:
Forward currency contracts$617,500 $10,961 $ $1,070,000 $ $17,211 
Derivatives not designated in a hedging relationship:
Forward currency contracts991,145 4,893 11,497 1,605,284 16,707 8,414 
Net derivatives recognized on consolidated balance sheets:
Forward currency contracts$15,854 $11,497 $16,707 $25,625 
The forward currency contracts designated as net investment hedges outstanding as of October 29, 2023 mature on different dates between November 2023 and March 2024.
The forward currency contracts not designated in a hedging relationship outstanding as of October 29, 2023 mature on different dates between November 2023 and May 2024.
15

The pre-tax gains and losses on foreign currency exchange forward contracts recorded in accumulated other comprehensive income or loss were as follows:
Third QuarterFirst Three Quarters
2023202220232022
(In thousands)
Gains (losses) recognized in net investment hedge gains (losses):
Derivatives designated as net investment hedges$27,898 $34,519 $28,859 $35,558 
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:
Third QuarterFirst Three Quarters
2023202220232022
(In thousands)
Gains (losses) recognized in selling, general and administrative expenses:
Foreign currency exchange gains (losses)$18,154 $4,845 $(11,944)$(11,395)
Derivatives not designated in a hedging relationship(17,962)(11,033)15,060 (3,325)
Net foreign currency exchange and derivative gains (losses) $192 $(6,188)$3,116 $(14,720)
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 9. Earnings Per Share
The details of the computation of basic and diluted earnings per share are as follows:
Third QuarterFirst Three Quarters
2023202220232022
(In thousands, except per share amounts)
Net income$248,714 $255,470 $880,722 $734,989 
Basic weighted-average number of shares outstanding126,460 127,511 126,892 127,736 
Assumed conversion of dilutive stock options and awards310 309 326 353 
Diluted weighted-average number of shares outstanding126,770 127,820 127,218 128,089 
Basic earnings per share$1.97 $2.00 $6.94 $5.75 
Diluted earnings per share$1.96 $2.00 $6.92 $5.74 
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 equivalent of common shares in all material respects. All classes of stock have, in effect, the same rights and share equally in undistributed net income. For the first three quarters of 2023 and 2022, 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.
16

On January 31, 2019, the Company's board of directors approved a stock repurchase program for up to $500.0 million of the Company's common shares. On December 1, 2020, it approved an increase in the remaining authorization from $263.6 million to $500.0 million, and on October 1, 2021, it approved an increase in the remaining authorization from $141.2 million to $641.2 million. During the first quarter of 2022, the Company completed the remaining stock repurchases under this program.
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. 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 October 29, 2023, the remaining authorized value was $243.2 million.
During the first three quarters of 2023, 1.4 million shares were repurchased at a total cost including commissions and excise taxes of $504.6 million. During the first three quarters of 2022, 1.2 million shares were repurchased at a total cost including commissions of $375.0 million.
Subsequent to October 29, 2023, and up to December 1, 2023, 0.1 million shares were repurchased at a total cost including commissions and excise taxes of $20.4 million.
Note 10. Supplementary Financial Information
A summary of certain consolidated balance sheet accounts is as follows:
October 29,
2023
January 29,
2023
(In thousands)
Inventories:
Inventories, at cost$1,852,525 $1,571,981 
Provision to reduce inventories to net realizable value(188,908)(124,614)
$1,663,617 $1,447,367 
Prepaid expenses and other current assets:
Prepaid expenses$136,501 $142,003 
Forward currency contract assets15,854 16,707 
Other current assets50,527 79,962 
$202,882 $238,672 
Property and equipment, net:
Land$77,173 $80,692 
Buildings28,479 28,850 
Leasehold improvements921,629 818,071 
Furniture and fixtures145,813 144,572 
Computer hardware161,029 166,768 
Computer software947,878 742,295 
Equipment and vehicles31,766 30,766 
Work in progress224,258 244,898 
Property and equipment, gross2,538,025 2,256,912 
Accumulated depreciation(1,124,107)(987,298)
$1,413,918 $1,269,614 
Other non-current assets:
Cloud computing arrangement implementation costs$121,276 $114,700 
Security deposits29,839 28,447 
Other13,917 12,898 
$165,032 $156,045 
17

October 29,
2023
January 29,
2023
(In thousands)
Accrued liabilities and other:
Accrued operating expenses$172,962 $169,429 
Accrued freight47,235 57,692 
Sales return allowances52,692 55,528 
Forward currency contract liabilities11,497 25,625 
Accrued duty29,177 21,046 
Sales tax collected23,349 20,183 
Accrued capital expenditures21,386 19,365 
Accrued rent13,735 12,223 
Accrued inventory liabilities6,330 4,345 
Other14,586 13,787 
$392,949 $399,223 
18

Note 11. Segmented Information
The Company's segments are based on the financial information it uses in managing its business and comprise two reportable segments: (i) company-operated stores and (ii) direct to consumer. The remainder of its operations, which includes outlets, sales to wholesale accounts, license and supply arrangements, recommerce, temporary locations, and lululemon Studio, are included within Other.
Third QuarterFirst Three Quarters
2023202220232022
(In thousands)
Net revenue:
Company-operated stores$1,073,973 $903,060 $3,128,999 $2,537,741 
Direct to consumer908,127 767,351 2,636,742 2,264,029 
Other222,118 186,478 648,434 536,910 
$2,204,218 $1,856,889 $6,414,175 $5,338,680 
Segmented income from operations:
Company-operated stores$310,510 $242,733 $910,021 $660,246 
Direct to consumer384,393 321,742 1,137,716 933,272 
Other53,527 24,911 146,293 74,064 
748,430 589,386 2,194,030 1,667,582 
General corporate expense310,852 234,770 872,024 657,201 
lululemon Studio obsolescence provision23,709  23,709  
Impairment of assets and restructuring costs74,501  74,501  
Amortization of intangible assets1,253 2,189 5,010 6,579 
Gain on disposal of assets   (10,180)
Income from operations338,115 352,427 1,218,786 1,013,982 
Other income (expense), net9,842 331 25,229 454 
Income before income tax expense$347,957 $352,758 $1,244,015 $1,014,436 
Capital expenditures:
Company-operated stores$73,329 $96,509 $168,511 $182,360 
Direct to consumer29,295 29,933 83,674 72,024 
Corporate and other60,276 49,165 193,168 177,293 
$162,900 $175,607 $445,353 $431,677 
Depreciation and amortization:
Company-operated stores$39,283 $33,482 $113,983 $96,807 
Direct to consumer17,001 9,805 42,562 27,281 
Corporate and other41,685 35,901 119,549 87,541 
$97,969 $79,188 $276,094 $211,629 
19

Note 12. Net Revenue by Geography and Category
In addition to the disaggregation of net revenue by reportable segment in Note 11. Segmented Information, the following table disaggregates the Company's net revenue by geographic area.
Third QuarterFirst Three Quarters
2023202220232022
(In thousands)
United States$1,423,574 $1,268,512 $4,162,891 $3,645,202 
Canada308,824 271,823 857,018 785,389 
People's Republic of China266,891 174,152 794,076 485,599 
Rest of world204,929 142,402 600,190 422,490 
$2,204,218 $1,856,889 $6,414,175 $5,338,680 
The following table disaggregates the Company's net revenue by category. Other categories is primarily composed of accessories, lululemon Studio, and footwear.
Third QuarterFirst Three Quarters
2023202220232022
(In thousands)
Women's product$1,433,927 $1,204,835 $4,139,082 $3,484,395 
Men's product504,828 440,564 1,473,716 1,276,872 
Other categories265,463 211,490 801,377 577,413 
$2,204,218 $1,856,889 $6,414,175 $5,338,680 
Note 13. Legal Proceedings and Other Contingencies
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.
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.
20

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 2022 Annual Report on Form 10-K filed with the SEC on March 28, 2023. Fiscal 2023 and fiscal 2022 are referred to as "2023," and "2022," respectively. The first three quarters of 2023 and 2022 ended on October 29, 2023 and October 30, 2022, respectively. Components of management's discussion and analysis of financial condition and results of operations include:
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.
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 performance 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 third quarter of 2023 to the third quarter of 2022, and provides both GAAP and non-GAAP financial measures. The adjusted financial measures for 2023 exclude $72.1 million of post-tax asset impairment and other charges recognized in relation to lululemon Studio.
Net revenue increased 19% to $2.2 billion.
Total comparable sales increased 13%, or 14% on a constant dollar basis.
Comparable store sales increased 9%.
Direct to consumer net revenue increased 18%, or 19% on a constant dollar basis.
Gross profit increased 21% to $1.3 billion. Adjusted gross profit increased 23% to $1.3 billion.
Gross margin increased 110 basis points to 57.0%. Adjusted gross margin increased 220 basis points to 58.1%.
21

Income from operations decreased 4% to $338.1 million. Adjusted income from operations increased 24% to $436.3 million.
Operating margin decreased 370 basis points to 15.3%. Adjusted operating margin increased 80 basis points to 19.8%.
Income tax expense increased 2% to $99.2 million. Our effective tax rate for the third quarter of 2023 was 28.5% compared to 27.6% for the third quarter of 2022. The adjusted effective tax rate was 28.1% for the third quarter of 2023.
We have contracted with Peloton Interactive, Inc. to be the exclusive digital fitness content provider for the lululemon Studio Mirror and will no longer produce our own digital fitness content. While we will continue to provide services and support to existing lululemon Studio subscribers, we have ceased selling the Mirror hardware. We recognized post-tax inventory provisions, asset impairments, and restructuring costs related to lululemon Studio totaling $72.1 million during the third quarter of 2023.
Diluted earnings per share were $1.96 compared to $2.00 in the third quarter of 2022. Adjusted diluted earnings per share were $2.53 in the third quarter of 2023.
Refer to the non-GAAP reconciliation tables contained in the "Non-GAAP Financial Measures" section of this "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" for reconciliations between the above adjusted non-GAAP financial measures and the most directly comparable measures calculated in accordance with GAAP.
Market Conditions and Trends
Macroeconomic conditions, supply chain disruption, and the COVID-19 pandemic have impacted our business and operating costs. Certain trends are expected to continue throughout 2023, with the impact varying by market.
Macroeconomic Conditions
Macroeconomic conditions, including foreign currency fluctuations, have impacted our financial results. Foreign currency fluctuations reduced the growth of our net revenue by $82.2 million when comparing the first three quarters of 2023 to the first three quarters of 2022, primarily due to the overall appreciation of the US dollar. We expect that future exchange rate volatility will impact our results. We have also experienced increased wage rates when comparing the first three quarters of 2023 to the first three quarters of 2022.
Guest traffic in our company-operated stores and online increased during the first three quarters of 2023, compared to the first three quarters of 2022. Consumer purchasing behaviors may be impacted by current economic conditions including inflation, higher interest rates, and other macroeconomic factors which may have an adverse effect on our future operating margins.
Supply chain disruption
In 2021 and 2022 we experienced supply chain disruption, including delays in inbound delivery of our products as well as in manufacturing. This supply chain disruption caused us to use higher cost modes of transport, including increasing our use of air freight. We saw an improvement in the supply chain disruption during the second half of 2022 and during the first three quarters of 2023, including reductions in freight costs and reductions in our levels of air freight usage.
During the first three quarters of 2023 compared to the first three quarters of 2022, our product margin increased by 320 basis points excluding the impact of the lululemon Studio inventory provision, primarily due to lower freight costs from rate reductions and reduced air freight usage. We expect that the reduction in freight costs for the fourth quarter of 2023 will be less significant than in the first three quarters of 2023.
COVID-19 Pandemic
Most of our retail locations were open throughout the first three quarters of 2023 and 2022, with certain locations temporarily closed due to COVID-19 resurgences during the first quarter of 2022, including certain company-operated stores and our third party distribution center in the People's Republic of China ("PRC"). Net revenue from the PRC increased 64% in the first three quarters of 2023 compared to the first three quarters of 2022, with improvements in COVID-19 trading conditions contributing to this increase.
22

Quarter-to-Date Results of Operations: Third Quarter Results
The following table summarizes key components of our results of operations for the periods indicated:
 Third Quarter
 2023202220232022
 (In thousands)(Percentage of net revenue)
Net revenue$2,204,218 $1,856,889 100.0 %100.0 %
Cost of goods sold947,554 818,037 43.0 44.1 
Gross profit1,256,664 1,038,852 57.0 55.9 
Selling, general and administrative expenses842,795 684,236 38.2 36.8 
Impairment of assets and restructuring costs74,501 — 3.4 — 
Amortization of intangible assets1,253 2,189 0.1 0.1 
Income from operations338,115 352,427 15.3 19.0 
Other income (expense), net9,842 331 0.4 — 
Income before income tax expense347,957 352,758 15.8 19.0 
Income tax expense99,243 97,288 4.5 5.2 
Net income$248,714 $255,470 11.3 %13.8 %
Net Revenue
Net revenue increased $347.3 million, or 19%, to $2.2 billion for the third quarter of 2023 from $1.9 billion for the third quarter of 2022. On a constant dollar basis, assuming the average foreign currency exchange rates for the third quarter of 2023 remained constant with the average foreign currency exchange rates for the third quarter of 2022, net revenue increased $358.4 million, or 19%.
The increase in net revenue was primarily due to increased company-operated store net revenue, including from new company-operated stores and increased comparable store sales, as well as due to increased direct to consumer net revenue. Other net revenue also increased.
Total comparable sales, which includes comparable store sales and direct to consumer net revenue, increased 13% for the third quarter of 2023 compared to the third quarter of 2022. Total comparable sales increased 14% on a constant dollar basis.
Net revenue for the third quarter of 2023 and 2022 is summarized below.
 Third Quarter
 2023202220232022Year over year change
 (In thousands)(Percentage of net revenue)(In thousands)(Percentage)
Company-operated stores$1,073,973 $903,060 48.7 %48.6 %$170,913 18.9 %
Direct to consumer908,127 767,351 41.2 41.3 140,776 18.3 
Other222,118 186,478 10.1 10.0 35,640 19.1 
Net revenue$2,204,218 $1,856,889