lululemon(US:LULU)2025-03-27 20:12Financial Performance - In 2024, lululemon's net revenue reached $7,928,156, representing a growth of 3.9% compared to $7,631,647 in 2023[28]. - Net revenue from China Mainland increased by 41.3% to $1,361,337 in 2024, up from $963,760 in 2023[32]. - Net revenue increased by 10% to $10.6 billion in 2024, with a constant dollar increase of 11%[199]. - Comparable sales increased by 4%, with a 25% increase in China Mainland and a 19% increase in the Rest of World, while Americas comparable sales decreased by 1%[199]. - Gross profit rose by 12% to $6.3 billion, with a gross margin increase of 90 basis points to 59.2%[199]. - Income from operations increased by 17% to $2.5 billion, with an operating margin increase of 150 basis points to 23.7%[199]. - Net income for 2024 was $1.81 billion, reflecting a 17.1% increase compared to 2023[205]. - Selling, general and administrative expenses increased by 10.7% to $3.76 billion, representing 35.5% of net revenue[209]. - The effective tax rate for 2024 was 29.6%, up from 28.8% in 2023, with income tax expense increasing by 22% to $761.5 million[205]. Revenue Sources - Women's products accounted for 63% of net revenue, while men's products contributed 24%, indicating a growing interest in the men's line[20]. - The Americas generated 75% of total net revenue in 2024, highlighting its importance to lululemon's overall business strategy[27]. - The Rest of World segment, which includes APAC and EMEA, saw net revenue growth of 26.8% to $1,298,633 in 2024[35]. - Company-operated store net revenue increased by 14%, and e-commerce net revenue increased by 6%[192]. - Revenue growth in the Americas was driven by a 4% increase, primarily from strength in Canada[190]. Expansion and Retail Strategy - The company plans to continue expanding its physical retail locations, with a total of 767 company-operated stores as of February 2, 2025, up from 711 in 2024[39]. - The company plans to continue expanding its physical retail locations to support growth objectives, despite the risks associated with shifting consumer preferences towards e-commerce[87]. - The company added 56 net new company-operated stores, contributing to a 14% increase in square footage[190]. - On September 10, 2024, lululemon acquired retail locations and operations in Mexico, previously operated by a third party[30]. Supply Chain and Manufacturing - The company sources 40% of its products from Vietnam, with the largest manufacturer producing 15% of total products[46]. - Approximately 40% of the company's products are manufactured in Vietnam, with significant contributions from Cambodia (17%), Sri Lanka (11%), Indonesia (11%), and Bangladesh (7%)[102]. - The company relies heavily on international suppliers, with potential supply chain disruptions due to geopolitical events, public health crises, and inflationary pressures[101]. - The company worked with approximately 52 vendors for product manufacturing and 67 suppliers for fabric supply in 2024[105]. Sustainability and Social Impact - Lululemon's re-commerce program, "Like New," allows guests to exchange gently used products for merchandise credit, promoting sustainability[40]. - As of February 2, 2025, the company has invested a total of $71.0 million towards its goal of advancing equity in well-being, with a target of $75.0 million by the end of 2025[54]. - The company has contributed $71.0 million to lululemon's Centre for Social Impact, with $45.5 million directed to social impact organizations[57]. - Approximately 55% of the board of directors and 60% of the senior executive leadership team are women, while 75% of the overall workforce are women as of February 2, 2025[55]. Risks and Challenges - The athletic apparel market is highly competitive, with increasing competition from established companies and new entrants[52]. - The company faces significant pressure on costs and pricing due to intense competition and inflationary pressures[79]. - The company faces risks in accurately forecasting guest demand, which could lead to excess inventory or product shortages, adversely affecting financial performance[80]. - Economic and political conditions, including trade restrictions and tariffs, could negatively affect the company's results of operations and cash flows[120]. - Global economic uncertainty may adversely impact consumer discretionary spending and demand for the company's products[118]. - The company is subject to scrutiny regarding its environmental, social, and governance (ESG) practices, which could affect its reputation and operational costs[115]. Technology and Cybersecurity - The company’s technology systems are critical for e-commerce operations, and any disruptions could lead to lost sales and harm to reputation[98]. - The board of directors oversees cybersecurity risks, with a dedicated sub-committee managing assessments and responses to incidents[159]. - The company has identified cybersecurity as a risk management priority, with regular reports provided to the board regarding the state of its information security program[160]. Financial Instruments and Currency Risks - Fluctuations in foreign currency exchange rates have historically affected the company's net revenue and expenses, with international operations primarily reported in U.S. dollars[137]. - The company has implemented financial instruments to hedge against foreign currency risks, but these measures may not fully offset negative impacts from currency fluctuations[139]. Product Development and Innovation - The company expanded its product offerings, including new styles in footwear and accessories, and launched the Daydrift trouser for women[198]. - The company has discontinued selling hardware for MIRROR, rebranded as lululemon Studio, indicating challenges in managing new product categories[83].