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Published: 2021-06-03

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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 May 2, 2021

☐ 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 athletica inc.

(Exact name of registrant as specified in its charter)

Delaware

20-3842867

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1818 Cornwal 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 class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.005 per share

LULU

Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed al 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 electronical y every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T during the preceding 12 months (of 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 smal er reporting company, or an emerging

growth company. See the definitions of "large accelerated filer," "accelerated filer," "smal er reporting company," and "emerging growth company" in Rule 12b-2

of the Exchange Act. (Check one):

Large Accelerated Filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smal er 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 shel company (as defined in Rule 12b-2 of the Exchange Act). Yes

☐ No ☑

At May 28, 2021, there were 124,952,259 shares of the registrant's common stock, par value $0.005 per share, outstanding.Exchangeable and Special Voting Shares:At May 28, 2021, there were outstanding 5,203,012 exchangeable shares of Lulu Canadian Holding, Inc., a whol y-owned subsidiary of the registrant. Exchangeable

shares are exchangeable for an equal number of shares of the registrant's common stock.In addition, at May 28, 2021, the registrant had outstanding 5,203,012 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 general y vote

together as a single class on al matters on which the common stock is entitled to vote.

		Table of Contents
TABLE OF CONTENTS

			Page
PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements:	3
		Consolidated Balance Sheets	3
		Consolidated Statements of Operations and Comprehensive Income (Loss)	4
		Consolidated Statements of Stockholders' Equity	5
		Consolidated Statements of Cash Flows	6
		Index for Notes to the Unaudited Interim Consolidated Financial Statements	7
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
	Item 4.	Controls and Procedures	30
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	31
	Item 1A. Risk Factors		31
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
	Item 6.	Exhibits	44
	Signatures		45
				2

		Table of Contents
PART I
	FINANCIAL INFORMATION
		ITEM 1. FINANCIAL STATEMENTS
	lululemon athletica inc.
	CONSOLIDATED BALANCE SHEETS
			(Unaudited; Amounts in thousands, except per share amounts)
				May 2,	January 31,
				2021	2021
		ASSETSCurrent assets
		Cash and cash equivalents		$	1,179,739 $	1,150,517
		Accounts receivable			56,956		62,399
		Inventories			732,890	647,230
		Prepaid and receivable income taxes			139,123	139,126
		Prepaid expenses and other current assets			144,744	125,107
					2,253,452	2,124,379
		Property and equipment, net			774,685	745,687
		Right-of-use lease assets			719,139	734,835
		Goodwil			387,115	386,877
		Intangible assets, net			77,885		80,080
		Deferred income tax assets			6,773		6,731
		Other non-current assets			110,782	106,626
				$	4,329,831 $	4,185,215
		LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities
		Accounts payable		$	196,934 $	172,246
		Accrued inventory liabilities			9,356		14,956
		Other accrued liabilities			258,642	211,911
		Accrued compensation and related expenses			154,729	130,171
		Current lease liabilities			168,145	166,091
		Current income taxes payable			7,997		8,357
		Unredeemed gift card liability			141,149	155,848
		Other current liabilities			27,862		23,598
					964,814	883,178
		Non-current lease liabilities			616,917	632,590
		Non-current income taxes payable			38,073		43,150
		Deferred income tax liabilities			60,807		58,755
		Other non-current liabilities			9,365		8,976
					1,689,976	1,626,649
		Commitments and contingenciesStockholders' equity
		Undesignated preferred stock, $0.01 par value: 5,000 shares authorized; none issued and outstanding					—	—
		Exchangeable stock, no par value: 60,000 shares authorized; 5,203 and 5,203 issued and outstanding					—	—
		Special voting stock, $0.000005 par value: 60,000 shares authorized; 5,203 and 5,203 issued and
		outstanding					—	—
		Common stock, $0.005 par value: 400,000 shares authorized; 125,069 and 125,150 issued and outstanding					625	626
		Additional paid-in capital			364,743	388,667
		Retained earnings			2,408,006	2,346,428
		Accumulated other comprehensive loss			(133,519)	(177,155)
					2,639,855	2,558,566
				$	4,329,831 $	4,185,215
								See accompanying notes to the unaudited interim consolidated financial statements
3

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lululemon athletica inc.
	CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
		(Unaudited; Amounts in thousands, except per share amounts)
			Quarter Ended
			May 2,	May 3,
			2021	2020
					Net revenue	$ 1,226,465 $	651,962
					Cost of goods sold		526,151	317,560
					Gross profit		700,314	334,402
					Sel ing, general and administrative expenses		496,634	299,583
					Amortization of intangible assets		2,195		23
					Acquisition-related expenses		7,664	2,045
					Income from operations		193,821	32,751
					Other income (expense), net		227	1,174
					Income before income tax expense		194,048	33,925
					Income tax expense		49,092	5,293
					Net income	$	144,956 $	28,632
					Other comprehensive income (loss):Foreign currency translation adjustment
							43,636	(60,604)
					Comprehensive income (loss)	$	188,592 $	(31,972)
					Basic earnings per share	$	1.11 $		0.22
					Diluted earnings per share	$	1.11 $		0.22
					Basic weighted-average number of shares outstanding		130,358	130,251
					Diluted weighted-average number of shares outstanding		130,984	130,803
	See accompanying notes to the unaudited interim consolidated financial statements

								4

			Table of Contents
lululemon athletica inc.
	CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited; Amounts in thousands)
		Quarter Ended May 2, 2021
				Exchangeable
							Accumulated
				Stock	Special Voting Stock	Common Stock
					Additional		Other
					Paid-in	Retained	Comprehensive	Par
					Capital	Earnings	Loss	Total		Shares	Shares	Value		Shares	Par Value
			Balance as of January
			31, 2021		5,203								5,203 $	— 125,150 $							626 $ 388,667 $ 2,346,428 $	(177,155) $ 2,558,566
			Net income				144,956		144,956
			Foreign currency
			translation
			adjustment								43,636	43,636
			Stock-based
			compensation
			expense			14,932				14,932
			Common stock issued
			upon settlement of
			stock-based
			compensation										324			2	4,493			4,495
			Shares withheld
			related to net share
			settlement of stock-
			based compensation										(135)			(1)	(42,898)		(42,899)
			Repurchase of
			common stock										(270)			(2)					(451)	(83,378)	(83,831)
			Balance as of May 2,
			2021		5,203								5,203 $	— 125,069 $							625 $ 364,743 $ 2,408,006 $	(133,519) $ 2,639,855
		Quarter Ended May 3, 2020
				Exchangeable
				Stock	Special Voting Stock	Common Stock					Accumulated
					Additional		Other
					Paid-in	Retained	Comprehensive	Par
					Capital	Earnings	Loss	Total		Shares	Shares	Value		Shares	Par Value
			Balance as of February
			2, 2020		6,227								6,227 $	— 124,122 $							621 $ 355,541 $ 1,820,637 $	(224,581) $ 1,952,218
			Net income				28,632			28,632
			Foreign currency
			translation adjustment								(60,604) (60,604)
			Common stock issued
			upon exchange of
			exchangeable shares		(745)								(745)	—		745		4					(4)	—
			Stock-based
			compensation expense			6,128				6,128
			Common stock issued
			upon settlement of
			stock-based
			compensation										371			2	3,133			3,135
			Shares withheld
			related to net share
			settlement of stock-
			based compensation										(152)			(1)	(30,058)		(30,059)
			Repurchase of
			common stock										(369)			(2)					(539)	(63,122)	(63,663)
			Balance as of May 3,
			2020		5,482								5,482 $	— 124,717 $							624 $ 334,201 $ 1,786,147 $	(285,185) $ 1,835,787
				See accompanying notes to the unaudited interim consolidated financial statements
		5

					Table of Contents
lululemon athletica inc.
	CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Amounts in thousands)
		Quarter Ended
			May 2, 2021	May 3, 2020
					Cash flows from operating activities
					Net income	$	144,956 $			28,632
					Adjustments to reconcile net income to net cash provided by operating activities:
					Depreciation and amortization		50,485			43,532
					Stock-based compensation expense		14,932			6,128
					Settlement of derivatives not designated in a hedging relationship		21,515			(5,669)
					Changes in operating assets and liabilities:
					Inventories		(74,218)		(122,810)
					Prepaid and receivable income taxes		767			(4,157)
					Prepaid expenses and other current assets		(11,104)			(49,936)
					Other non-current assets		1,105			(3,422)
					Accounts payable		19,623			2,222
					Accrued inventory liabilities		(6,114)			4,016
					Other accrued liabilities		44,295			51,034
					Accrued compensation and related expenses		22,764			(60,137)
					Current and non-current income taxes payable		(5,433)			3,711
					Unredeemed gift card liability		(15,838)			(13,640)
					Right-of-use lease assets and current and non-current lease liabilities		1,820			(16,868)
					Other current and non-current liabilities		4,554			16,121
					Net cash provided by (used in) operating activities		214,109		(121,243)
					Cash flows from investing activities
					Purchase of property and equipment		(64,225)			(52,101)
					Settlement of net investment hedges		(21,239)			6,475
					Net cash used in investing activities		(85,464)			(45,626)
					Cash flows from financing activities
					Proceeds from settlement of stock-based compensation		4,495			3,135
					Shares withheld related to net share settlement of stock-based compensation		(42,899)			(30,059)
					Repurchase of common stock		(83,831)			(63,663)
					Net cash used in financing activities		(122,235)			(90,587)
					Effect of exchange rate changes on cash and cash equivalents		22,812			(13,043)
					Increase (decrease) in cash and cash equivalents		29,222		(270,499)
					Cash and cash equivalents, beginning of period	$ 1,150,517 $ 1,093,505
					Cash and cash equivalents, end of period	$ 1,179,739 $	823,006
							See accompanying notes to the unaudited interim consolidated financial statements
								6

			Table of Contents
lululemon athletica inc.
	INDEX FOR NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL
		STATEMENTS
			Note 1	Nature of Operations and Basis of Presentation	8
			Note 2	Recent Accounting Pronouncements	9
			Note 3	Acquisition	9
			Note 4	Revolving Credit Facilities	9
			Note 5	Stock-Based Compensation and Benefit Plans	10
			Note 6	Fair Value Measurement	12
			Note 7	Derivative Financial Instruments	13
			Note 8	Earnings Per Share	15
			Note 9	Supplementary Financial Information	15
			Note 10	Segmented Information	17
			Note 11	Net Revenue by Geography and Category	17
			Note 12	Legal Proceedings and Other Contingencies	18
						7

			Table of Contents
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 healthy lifestyle inspired athletic
			apparel and accessories, which are sold through a chain of company-operated stores, direct to consumer through e-
			commerce, outlets, sales from temporary locations, sales to wholesale accounts, and license and supply arrangements. The
			Company operates stores in the United States, Canada, the People's Republic of China ("PRC"), Australia, the United Kingdom,
			South Korea, Germany, New Zealand, Japan, Singapore, France, Malaysia, Sweden, Ireland, the Netherlands, Norway, and
			Switzerland. There were 523 and 521 company-operated stores as of May 2, 2021 and January 31, 2021, respectively.
				On July 7, 2020, the Company acquired Curiouser Products Inc., dba MIRROR, ("MIRROR") which has been consolidated
			from the date of acquisition. MIRROR generates net revenue from the sale of in-home fitness equipment and associated
			content subscriptions. Please refer to Note 3. Acquisition for further information.
			COVID-19 Pandemic
				The outbreak of a novel strain of coronavirus ("COVID-19") has caused governments and public health officials to
			impose restrictions and to recommend precautions to mitigate the spread of the virus. The Company temporarily closed its
			retail locations for periods of time during the first two quarters of fiscal 2020. While most of the Company's retail locations
			remained open throughout the first quarter of fiscal 2021, certain locations were temporarily closed based on government
			and health authority guidance in those markets, including in parts of Europe and Canada, as wel as other markets.
				In accordance with relevant government and health authority guidance, the Company continues to operate its
			distribution centers and retail locations with restrictive and precautionary measures in place. These measures are market
			dependent and can include restricted occupancy levels, physical distancing, enhanced cleaning and sanitation, and reduced
			operating hours.
				During the first quarter of fiscal 2020, the Company recognized $14.3 mil ion of government payrol subsidies as a
			reduction in sel ing, general, and administrative expenses. These subsidies partial y offset the wages paid to employees while
			its retail locations were temporarily closed due to COVID-19. The Company did not recognize any payrol subsidies in the first
			quarter of fiscal 2021.
			Basis of presentation
				The unaudited interim consolidated financial statements as of May 2, 2021 and for the quarters ended May 2, 2021 and
			May 3, 2020 are presented in U.S. dol ars 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
			general y accepted accounting principles ("GAAP") for interim financial information and, accordingly, does not include al of
			the information and footnotes required by GAAP for complete financial statements. The financial information as of
			January 31, 2021 is derived from the Company's audited consolidated financial statements and related notes for the fiscal
			year ended January 31, 2021, which are included in Item 8 in the Company's fiscal 2020 Annual Report on Form 10-K filed with
			the SEC on March 30, 2021. These unaudited interim consolidated financial statements reflect al 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 2020 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 fol owing year, typical y resulting in a 52-
			week year, but occasional y giving rise to an additional week, resulting in a 53-week year. Fiscal 2021 wil end on January 30,
			2022 and wil be a 52-week year. Fiscal 2020 was a 52-week year and ended on January 31, 2021. Fiscal 2021 and fiscal 2020
			are referred to as "2021," and "2020," respectively. The first quarter of 2021 and 2020 ended on May 2, 2021 and May 3,
			2020, respectively.
				The Company's business is affected by the pattern of seasonality common to most retail apparel businesses.
			Historical y, 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.
					8

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Note 2. Recent Accounting Pronouncements
Recently adopted accounting pronouncements
	In December 2019, the FASB issued guidance on ASC 740, Income Taxes. The amendments in this update simplify the
accounting for income taxes by removing certain exceptions to the general principles in ASC 740. The amendments also
improve consistent application and make simplifications in other areas of this topic by clarifying and amending existing
guidance. The Company adopted this update during the first quarter of 2021 and it did not have a material impact on the
Company's consolidated financial statements.
Recently issued accounting pronouncements
	The Company considers the applicability and impact of al Accounting Standard Updates ("ASUs"). Recently issued ASUs
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. Acquisition
	On July 7, 2020, the Company acquired al of the outstanding shares of MIRROR, an in-home fitness company with an
interactive workout platform that features live and on-demand classes. The results of operations, financial position, and cash
flows of MIRROR have been included in the Company's consolidated financial statements since the date of acquisition. The
fair value of the consideration paid, net of cash acquired, was $452.6 mil ion. This resulted in the recognition of intangible
assets of $85.0 mil ion and goodwil of $362.5 mil ion. The purchase price al ocation was finalized as of January 31, 2021 with
no measurement period adjustments.
Acquisition-related expenses
	In connection with the acquisition, the Company recognized certain acquisition-related expenses which are expensed as
incurred. These expenses are recognized within acquisition-related expenses in the consolidated statements of operations
include the fol owing amounts:
	•	transaction and integration costs, including fees for advisory and professional services incurred as part of the
	acquisition and integration costs subsequent to the acquisition;
	•	acquisition-related compensation, including the partial acceleration of vesting of certain stock options, and amounts
	due to sel ing shareholders that are contingent upon continuing employment; and
	•	gain recognized on the Company's existing investment in the acquiree as of the acquisition date.
	The fol owing table summarizes the acquisition-related expenses recognized:
		First Quarter
		2021	2020
		(in thousands)
Acquisition-related expenses:
Transaction and integration costs				$	496 $	2,045
Gain on existing investment					—		—
Acquisition-related compensation					7,168		—
				$	7,664 $	2,045
Income tax effects of acquisition-related expenses				$	(372) $		—
Note 4. Revolving Credit Facilities
North America revolving credit facility
	During 2016, the Company obtained a $150.0 mil ion committed and unsecured five-year revolving credit facility with
major financial institutions. During 2018, the Company amended the credit agreement to provide for:
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i.	an increase in the aggregate commitments under the revolving credit facility to $400.0 mil ion, with an increase of
the sub-limits for the issuance of letters of credit and extensions of swing line loans to $50.0 mil ion for each;
i . an increase in the option, subject to certain conditions, to request increases in commitments from $400.0 mil ion to
$600.0 mil ion; and
i i. an extension in the maturity of the facility from December 15, 2021 to June 6, 2023. Borrowings under the facility
may be made in U.S. Dol ars, Euros, Canadian Dol ars, and in other currencies, subject to the lenders' approval.
As of May 2, 2021, aside from letters of credit of $2.7 mil ion, there were no other borrowings outstanding under this
facility.
Borrowings under the facility bear interest at a rate equal to, at the Company's option, either (a) rates based on
deposits on the interbank market for U.S. Dol ars or the applicable currency in which the borrowings are made ("LIBOR") or (b)
an alternate base rate, plus, an applicable margin 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
1.00%-1.50% for LIBOR loans and 0.00%-0.50% for alternate base rate loans. Additional y, a commitment fee of between
0.10%-0.20% is payable on the average unused amounts under the revolving credit facility, and fees of 1.00%-1.50% are
payable on unused letters of credit.
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 al
or substantial y al of their assets, alter their businesses and enter into agreements limiting subsidiary dividends and
distributions.
The Company is also required to maintain a consolidated rent-adjusted leverage ratio of not greater than 3.5:1 and to
maintain the ratio of consolidated EBITDAR to consolidated interest charges (plus rent) below 2:1. 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). As of May 2, 2021, the Company was in compliance
with the covenants of the credit facility.
Mainland China revolving credit facility
In December 2019, the Company entered into an uncommitted and unsecured 130.0 mil ion Chinese Yuan revolving
credit facility with terms that are reviewed on an annual basis. The credit facility was increased to 230.0 mil ion Chinese Yuan
during 2020. It is comprised of a revolving loan of up to 200.0 mil ion Chinese Yuan and a financial guarantee facility of up to
30.0 mil ion Chinese Yuan, 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 fol ow certain covenants.
As of May 2, 2021, the Company was in compliance with the covenant and there were no borrowings or guarantees
outstanding under this credit facility.
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 $16.2 mil ion and $6.6 mil ion for the first
quarter of 2021 and 2020, respectively. Total unrecognized compensation cost for al stock-based compensation plans was
$132.6 mil ion as of May 2, 2021, which is expected to be recognized over a weighted-average period of 2.5 years.
	10

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A summary of the balances of the Company's stock-based compensation plans as of May 2, 2021, and changes during

the first quarter then ended, is presented below:

Performance-Based

Restricted Stock Units

Stock Options

Restricted Stock Units

Restricted Shares

Restricted Stock Units

(Liability Accounting)

Weighted

-Average

Grant

Weighted

Exercise

Date Fair

-Average

Number

Price

Number

Value

Number

Value

Number

Value

Number

Fair Value

(In thousands, except per share amounts)

Balance as of

January 31, 2021

804 $ 139.27

199 $ 149.2

4 $ 299.09

275 $ 166.5

15 $ 328.68

Granted

183 306.71

135 180.26

—

90 307.55

—

Exercised/released

40 111.23

166 100.89

—

117 134.79

—

Forfeited/expired

6 154.21

— 183.74

—

3 194.55

—

Balance as of May 2,

2021

941 $ 172.88

168 $ 221.93

4 $ 299.09

245 $ 233.16

15 $ 335.27

Exercisable as of

May 2, 2021

348 $ 118.98

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 award date. Expense for

performance-based restricted stock units is recognized when it is probable that the performance goal wil 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 award date. Restricted stock units that are settled in cash or common stock at the election

of the employee are remeasured to fair value at the end of each reporting period until settlement. This fair value is based on

the closing price of the Company's common stock on the last business day before each period end.

The grant date fair value of each stock option granted is estimated on the date of grant using the Black-Scholes 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 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 fol owing are weighted averages of the assumptions that were used in calculating the fair value of

stock options granted during the first quarter of 2021:

First Quarter

2021

Expected term

3.75 years

Expected volatility

39.32 %

Risk-free interest rate

0.50 %

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 mil ion shares. Al shares purchased under the ESPP are purchased in the open market. During the first quarter of 2021,

there were 19.5 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 dol ar amounts set by applicable laws. The Company matches 50% to 75% of the contribution depending on the

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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 $2.8 mil ion and $2.3 mil ion in the first quarter of 2021 and 2020, respectively.

Note 6. Fair Value Measurement

Fair value is defined as the price that would be received to sel 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.

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 May 2,

2021 and January 31, 2021, the Company held certain assets and liabilities that are required to be measured at fair value on a

recurring basis:

May 2, 2021

Level 1

Level 2

Level 3

Balance Sheet Classification

(In thousands)

Money market funds

652,482 $

— $

— Cash and cash equivalents

Term deposits

188,594

—

188,594

— Cash and cash equivalents

Forward currency contract

Prepaid expenses and other

assets

27,789

—

27,789

—

current assets

Forward currency contract

liabilities

30,858

—

30,858

— Other current liabilities

January 31,

2021

Level 1

Level 2

Level 3

Balance Sheet Classification

(In thousands)

Money market funds

671,817 $

— $

— Cash and cash equivalents

Term deposits

183,015

—

183,015

— Cash and cash equivalents

Forward currency contract

Prepaid expenses and other

assets

17,364

—

17,364

—

current assets

Forward currency contract

liabilities

18,767

—

18,767

— 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, Treasury bil s, 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 al ow net settlements under certain conditions. However, the Company records al derivatives

on its consolidated balance sheets at fair value and does not offset derivative assets and liabilities.

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Note 7. Derivative Financial Instruments
Foreign 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 dol ar and Chinese Yuan to the U.S. dol ar exchange
rate and changes in the Euro and Australian dol ar to the Canadian dol ar exchange rate using forward currency contracts.
Net investment hedges
	The Company is exposed to foreign exchange gains and losses which arise on translation of its international subsidiaries'
balance sheets into U.S. dol ars. These gains and losses are recorded as a foreign currency translation adjustment 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. dol ars. These
forward currency contracts are designated as net investment hedges. The Company assesses hedge effectiveness based on
changes in forward rates. The Company recorded no ineffectiveness from net investment hedges during the first quarter of
2021.
	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 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 exchange rate. The
resulting foreign currency gains and losses are recorded in sel ing, general and administrative expenses.
	During the first quarter of 2021, the Company entered into certain forward currency contracts designed to economical y
hedge the foreign 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 sel ing, 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 al ow net settlements under certain
conditions. As of May 2, 2021, there were derivative assets of $27.8 mil ion and derivative liabilities of $30.9 mil ion subject to
enforceable netting arrangements.
		13

							Table of Contents
The notional amounts and fair values of forward currency contracts were as fol ows:
	May 2, 2021	January 31, 2021
			Gross		Gross
			Notional	Assets		Liabilities	Notional	Assets				Liabilities
						(In thousands)
							Derivatives designated as net
							investment hedges:
Forward currency contracts			$	754,000 $					— $	28,846 $	985,000 $		— $	18,099
							Derivatives not designated in a
							hedging relationship:
Forward currency contracts				857,000					27,789	2,012	1,055,000		17,364	668
							Net derivatives recognized on
							consolidated balance sheets:
Forward currency contracts	$							27,789 $	30,858	$					17,364 $	18,767
The forward currency contracts designated as net investment hedges outstanding as of May 2, 2021 mature on
							different dates between May 2021 and October 2021.
The forward currency contracts not designated in a hedging relationship outstanding as of May 2, 2021 mature on
							different dates between May 2021 and October 2021.
The pre-tax gains and losses on foreign exchange forward contracts recorded in accumulated other comprehensive
							income or loss were as fol ows:
									First Quarter
											2021	2020
									(In thousands)
							Gains (losses) recognized in foreign currency translation adjustment:
Derivatives designated as net investment hedges		$							(31,986) $	28,256
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
							substantial y liquidated) its hedged subsidiary.
The pre-tax net foreign exchange and derivative gains and losses recorded in the consolidated statement of operations
							were as fol ows:
									First Quarter
											2021	2020
									(In thousands)
							Gains (losses) recognized in sel ing, general and administrative expenses:
Foreign exchange gains (losses)		$							(33,540) $	27,742
Derivatives not designated in a hedging relationship									30,592	(27,520)
							Net foreign exchange and derivative gains (losses)	$					(2,948) $	222
							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 entered into with large, 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.
								14

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Note 8. Earnings Per Share
	The details of the computation of basic and diluted earnings per share are as fol ows:
		First Quarter
		2021	2020
				(In thousands, except per share
		amounts)
Net income				$	144,956 $	28,632
Basic weighted-average number of shares outstanding					130,358	130,251
Assumed conversion of dilutive stock options and awards					626		552
Diluted weighted-average number of shares outstanding					130,984	130,803
Basic earnings per share				$	1.11 $	0.22
Diluted earnings per share				$	1.11 $	0.22
	The Company's calculation of weighted-average shares includes the common stock of the Company as wel as the
exchangeable shares. Exchangeable shares are the equivalent of common shares in al material respects. Al classes of stock
have, in effect, the same rights and share equal y in undistributed net income. For each of the first quarters of 2021 and 2020,
0.1 mil ion stock options and awards were anti-dilutive to earnings per share and therefore have been excluded from the
computation of diluted earnings per share.
	On January 31, 2019, the Company's board of directors approved a stock repurchase program for up to $500.0 mil ion of
the Company's common shares on the open market or in privately negotiated transactions. On December 1, 2020, the
Company's board of directors approved an increase in the remaining authorization of the existing stock repurchase program
from $263.6 mil ion to $500.0 mil ion. 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 wil depend upon market conditions, eligibility to trade, and other
factors, in accordance with Securities and Exchange Commission requirements. As of May 2, 2021, the remaining value of
shares available to be repurchased under this program was $416.2 mil ion.
	During the first quarter of 2021 and 2020, 0.3 mil ion and 0.4 mil ion shares, respectively, were repurchased under the
program at a total cost of $83.8 mil ion and $63.7 mil ion, respectively.
	Subsequent to May 2, 2021, and up to May 28, 2021, 0.1 mil ion shares were repurchased at a total cost of $40.4
mil ion.
Note 9. Supplementary Financial Information
	A summary of certain consolidated balance sheet accounts is as fol ows:
				May 2,	January 31,
		2021	2021
		(In thousands)
Inventories:
Inventories, at cost				$	768,599 $	678,200
Provision to reduce inventories to net realizable value					(35,709)	(30,970)
				$	732,890 $	647,230
						15

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	May 2,			January 31,
	2021		2021
		(In thousands)
Prepaid expenses and other current assets:
Prepaid expenses	$	94,846 $	82,164
Forward currency contract assets		27,789	17,364
Other current assets		22,109	25,579
	$	144,744 $	125,107
Property and equipment, net:
Land	$	77,116 $	74,261
Buildings		31,671	30,870
Leasehold improvements		613,609	583,305
Furniture and fixtures		118,911	117,334
Computer hardware		123,682	116,239
Computer software		458,430	427,313
Equipment and vehicles		18,993	17,105
Work in progress		73,118	69,847
Property and equipment, gross		1,515,530		1,436,274
Accumulated depreciation		(740,845)	(690,587)
	$	774,685 $	745,687
Other non-current assets:
Cloud computing arrangement implementation costs	$	78,721 $	74,631
Security deposits		23,027	23,154
Other		9,034	8,841
	$	110,782 $	106,626
Other accrued liabilities
Accrued freight and other operating expenses	$	131,515 $	97,335
Accrued duty		23,405	17,404
Sales return al owances		23,665	32,560
Sales tax col ected		18,489	15,246
Accrued capital expenditures		9,003	8,653
Forward currency contract liabilities		30,858	18,766
Accrued rent		9,419	8,559
Other		12,288	13,388
	$	258,642 $	211,911
					16

Table of Contents
Note 10. 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 (i ) direct to consumer. The remainder of its operations which includes
outlets, temporary locations, sales to wholesale accounts, license and supply arrangements, and MIRROR are included within
Other.
		First Quarter
		2021	2020
		(In thousands)
Net revenue:
Company-operated stores		$	536,584 $	259,970
Direct to consumer			545,089	352,039
Other			144,792	39,953
		$ 1,226,465 $	651,962
Segmented income from operations:
Company-operated stores		$	99,148 $	(30,154)
Direct to consumer			236,933	156,947
Other			14,506	(269)
			350,587	126,524
General corporate expense			146,907	91,705
Amortization of intangible assets			2,195		23
Acquisition-related expenses			7,664	2,045
Income from operations			193,821	32,751
Other income (expense), net					227	1,174
Income before income tax expense		$	194,048 $	33,925
Capital expenditures:
Company-operated stores		$	18,565 $	33,819
Direct to consumer			26,581	2,298
Corporate and other			19,079	15,984
		$	64,225 $	52,101
Depreciation and amortization:
Company-operated stores		$	26,800 $	25,628
Direct to consumer			5,748	2,684
Corporate and other			17,937	15,220
		$	50,485 $	43,532
Note 11. Net Revenue by Geography and Category
	The fol owing table disaggregates the Company's net revenue by geographic area.
		First Quarter
		2021	2020
		(In thousands)
United States		$	849,614 $	459,352
Canada			167,729	99,497
Outside of North America			209,122	93,113
		$ 1,226,465 $	651,962
	The fol owing table disaggregates the Company's net revenue by category. During the fourth quarter of 2020, the
Company determined that a portion of certain sales returns which had been recorded within Other categories were more
						17

Table of Contents
appropriately classified within Women's product and Men's product. Accordingly, comparative figures have been reclassified
to conform to the presentation adopted for the current year.
	First Quarter
	2021	2020
	(In thousands)
Women's product			$	849,645 $	477,627
Men's product				274,307	128,391
Other categories				102,513	45,944
			$ 1,226,465 $	651,962
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 intel ectual property rights,
personal injury claims, product liability claims, employment claims, and similar matters. The Company believes the ultimate
resolution of any such legal proceedings, audits, and inspections wil 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.
				In March 2020, a former retail employee filed a representative action in the Los Angeles Superior Court al eging
violation of the Private Attorney General Act ("PAGA") based on purported California labor code violations including failure to
pay wages, failure to pay overtime, failure to provide accurate itemized statements, and failure to provide meal and rest
periods. The plaintiff is seeking to recover civil penalties under PAGA. The Company intends to vigorously defend this matter.
				In April 2020, Ali gn Activation Wear, LLC filed a lawsuit in the United States District Court for the Central District of
California al eging federal trademark infringement, false designation of origin and unfair competition. The plaintiff is seeking
injunctive relief, monetary damages and declaratory relief. The Company intends to vigorously defend this matter.
				In April 2021, DISH Technologies L.L.C., and Sling TV L.L.C. (DISH) filed a complaint in the United States District Court for
the District of Delaware and, along with DISH DBS Corporation, also with the United States International Trade Commission
(ITC) under Section 337 of the Tariff Act of 1930 against the Company and its Curiouser Products subsidiary (MIRROR), along
with ICON Health & Fitness, Inc., FreeMotion Fitness, Inc., NordicTrack, Inc., and Peloton Interactive, Inc., al eging
infringement of various patents related to fitness devices containing internet-streaming enabled video displays. In the ITC
complaint, DISH seeks an exclusion order barring the importation of MIRROR fitness devices, streaming components and
systems containing components that infringe one or more of the asserted patents as wel as a cease and desist order
preventing the Company from carrying out commercial activities within the United States related to those products. In the
District of Delaware complaint, DISH is seeking an order permanently enjoining the Company from infringing the asserted
patents, an award of damages for the infringement of the asserted patents, and an award of damages for lost sales. The
Company has moved to extend the date to respond to the ITC complaint from June 7, 2021 to June 18, 2021. The Company
has also moved to stay the District of Delaware litigation pending resolution of the ITC investigation. The Company intends to
vigorously defend this matter.
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. Al 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, the impact of the COVID-19 pandemic on our business and results of operations, expectations related to our
acquisition of MIRROR, 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," "wil ," "should," "expects," "plans," "anticipates," "believes," "estimates," "intends,"
"predicts," "potential" or the negative of these terms or other comparable terminology.
					18

	Table of Contents
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 material y 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
	2020 Annual Report on Form 10-K filed with the SEC on March 30, 2021. Fiscal 2021 and fiscal 2020 are referred to as "2021,"
	and "2020," respectively. The first quarter of 2021 and 2020 ended on May 2, 2021 and May 3, 2020, respectively.
	Components of management's discussion and analysis of financial condition and results of operations include:
•	Overview and COVID-19 Update
•	Financial Highlights
•	Quarter-to-Date Results of Operations
•	Comparable Store Sales and Total Comparable Sales
•	Non-GAAP Financial Measures
•	Seasonality
•	Liquidity and Capital Resources
•	Revolving Credit Facilities
•	Off-Balance Sheet Arrangements
•	Critical Accounting Policies and Estimates
•	Operating Locations
We disclose material non-public information through one or more of the fol owing channels: our investor relations
	website (http://investor.lululemon.com/), the social media channels identified on our investor relations website, press
	releases, SEC filings, public conference cal s, and webcasts.
	Overview
lululemon athletica inc. is principal y a designer, distributor, and retailer of healthy lifestyle inspired athletic apparel and
	accessories. We have a vision to be the experiential brand that ignites a community of people through sweat, grow, and
	connect, which we cal "living the sweatlife." 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, nurturing entrepreneurial spirit,
	acting with honesty and 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 the world by unleashing the ful potential within every one of us."
Our healthy lifestyle inspired athletic apparel and accessories are marketed under the lululemon brand. We offer a
	comprehensive line of apparel and accessories. 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 sweaty pursuits. We
	also offer apparel designed for being On the Move and fitness-related accessories. We expect to continue to broaden our
	merchandise offerings through expansion across these product areas.
During the second quarter of 2020, we acquired Curiouser Products Inc., dba MIRROR. MIRROR is an in-home fitness
	company with an interactive workout platform that features live and on-demand classes. The acquisition of MIRROR bolsters
	our digital sweatlife offerings and brings immersive and personalized in-home sweat and mindfulness content to new and
	existing lululemon guests.
		19

Table of Contents
COVID-19 Update
	COVID-19 continues to impact the global economy, result in disruption and volatility, and cause changes in consumer
demand and behavior. While most of our retail locations remained open throughout the first quarter of fiscal 2021, certain
locations were temporarily closed based on government and health authority guidance in those markets, including in parts of
Europe and Canada, as wel as other markets.
	In accordance with relevant government and health authority guidance, we continue to operate our distribution centers
and retail locations with restrictive and precautionary measures in place. These measures are market dependent and can
include restricted occupancy levels, physical distancing, enhanced cleaning and sanitation, and reduced operating hours.
	Governments and public health officials around the world have imposed and continue to impose restrictions and to
recommend precautions to mitigate the spread of the virus. These restrictions are not coordinated among various markets
and we believe we wil continue to experience differing levels of disruption and volatility, market by market.
	Prior to the COVID-19 pandemic, guest shopping preferences were shifting towards digital platforms and we had been
investing in our websites, mobile apps, and omni-channel capabilities. We believe COVID-19 further shifted guest shopping
behavior and we have seen significant increases in traffic to our websites and digital apps. This increased traffic contributed to
the significant growth in our direct to consumer net revenue in 2020 and in the first quarter of 2021. While we expect our
direct to consumer business to grow in fiscal 2021, we expect the year over year growth rate to moderate compared to 2020.
	There remains significant uncertainty regarding the extent and duration of the impact that COVID-19 wil have on our
operations. Continued proliferation of the virus, resurgence, or the emergence of new variants may result in further or
prolonged closures of our retail locations and distribution centers, reduce operating hours, interrupt our supply chain, cause
changes in guest behavior, and reduce discretionary spending. Such factors are beyond our control and could elicit further
actions and recommendations from governments and public health authorities.
Financial Highlights
	For the first quarter of 2021, compared to the first quarter of 2020:
	•	Net revenue increased 88% to $1.2 bil ion. On a constant dol ar basis, net revenue increased 83%.
	•	Company-operated stores net revenue increased 106% to $536.6 mil ion.
	•	Direct to consumer net revenue increased 55% to 545.1 mil ion, or increased 50% on a constant dol ar basis.
	•	Gross profit increased 109% to $700.3 mil ion.
	•	Gross margin increased 580 basis points to 57.1%.
	•	Income from operations increased 492% to $193.8 mil ion.
	•	Operating margin increased 1,080 basis points to 15.8%.
	•	Income tax expense increased 827% to $49.1 mil ion. Our effective tax rate for the first quarter of 2021 was 25.3%
	compared to 15.6% for the first quarter of 2020.
	•	Diluted earnings per share were $1.11 compared to $0.22 in the first quarter of 2020. This includes $7.3 mil ion and
	$2.0 mil ion of after-tax costs related to the MIRROR acquisition in the first quarter of 2021 and 2020, respectively,
	which reduced diluted earnings per share by $0.05 and $0.01 in the first quarter of 2021 and 2020, respectively.
	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 constant
dol ar changes in net revenue and direct to consumer net revenue and the most directly comparable measures calculated in
accordance with GAAP.
		20

Table of Contents
Quarter-to-Date Results of Operations: First Quarter Results
	The fol owing table summarizes key components of our results of operations for the periods indicated:
		First Quarter
			2021	2020		2021	2020
			(In thousands)	(Percentage of net revenue)
Net revenue			$ 1,226,465 $	651,962		100.0 %	100.0 %
Cost of goods sold				526,151	317,560		42.9	48.7
Gross profit				700,314	334,402		57.1	51.3
Sel ing, general and administrative expenses				496,634	299,583		40.5	46.0
Amortization of intangible assets				2,195	23		0.2		—
Acquisition-related expenses				7,664	2,045		0.6	0.3
Income from operations				193,821	32,751		15.8	5.0
Other income (expense), net							227	1,174						—	0.2
Income before income tax expense				194,048	33,925		15.8	5.2
Income tax expense				49,092	5,293		4.0	0.8
Net income			$	144,956 $	28,632		11.8 %	4.4 %
Net Revenue
	Net revenue increased $574.5 mil ion, or 88%, to $1.2 bil ion for the first quarter of 2021 from $652.0 mil ion for the
first quarter of 2020. On a constant dol ar basis, assuming the average exchange rates for the first quarter of 2021 remained
constant with the average exchange rates for the first quarter of 2020, net revenue increased $541.1 mil ion, or 83%.
	The increase in net revenue was primarily due to increased company-operated store and other net revenue, primarily
due to retail locations that were temporarily closed during the first quarter of 2020, as a result of COVID-19, being open
during the first quarter of 2021. Direct to consumer net revenue also increased, partial y due to a shift in the way guests are
shopping as a result COVID-19.
	Net revenue for the first quarter of 2021 and 2020 is summarized below.
			First Quarter
									2021	2020	2021	2020		Year over year change
									(In thousands)	(Percentages)	(In thousands)	(Percentages)
Company-operated stores									$	536,584 $	259,970	43.8 %	39.9 % $		276,614	106.4 %
Direct to consumer										545,089	352,039	44.4	54.0				193,050	54.8
Other										144,792	39,953	11.8	6.1				104,839	262.4
Net revenue									$ 1,226,465 $	651,962	100.0 %	100.0 % $		574,503	88.1 %
	Company-Operated Stores. The increase in net revenue from our company-operated stores was primarily due to most of
our stores being open for the entire first quarter of 2021. Al of our stores in North America, Europe, and certain countries in
Asia Pacific were closed for a significant portion of the first quarter of 2020 as a result of COVID-19. We opened 34 net new
company-operated stores since the first quarter of 2020 which also contributed to the increase in net revenue. This included
16 stores in Asia Pacific, 15 stores in North America, and three stores in Europe.
	Direct to Consumer. Direct to consumer net revenue increased 55%, and increased 50% on a constant dol ar basis. The
increase in net revenue from our direct to consumer segment was primarily a result of increased traffic, as wel as improved
conversion rates and an increase in dol ar value per transaction. The increase in traffic was partial y due to a shift in the way
guests are shopping as a result COVID-19.
	Other channels. The increase in net revenue from our other channels was primarily due to most of our temporary retail
locations and outlets being open for the entire first quarter of 2021. Al of our retail locations in North America, Europe, and
certain countries in Asia Pacific were closed for a significant portion of the first quarter of 2020, as a result of COVID-19. Net
revenue from MIRROR, which we acquired during the second quarter of 2020, also contributed to the increase in other net
revenue.
												21

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Gross Profit

First Quarter

2021

2020

Year over year change

(In thousands)

(Percentage)

Gross profit

700,314

334,402

365,912

109.4 %

Gross margin

57.1 %

51.3 %

580 basis points

The increase in gross margin was primarily the result of:

•

a decrease in depreciation and occupancy costs as a percentage of net revenue of 540 basis points, driven primarily

by the increase in net revenue;

•

a decrease in costs related to our product departments and our distribution centers as a percentage of net revenue

of 100 basis points, primarily due to the increase in net revenue; and

•

a favorable impact of foreign exchange rates of 50 basis points.

The increase in gross margin was partial y offset by a decrease in product margin of 110 basis points, primarily due to

higher air freight costs as a result of COVID-19 impacts on logistics availability and costs, partial y offset by lower markdowns

and inventory provision expenses.

Sel ing, General and Administrative Expenses

First Quarter

2021

2020

Year over year change

(In thousands)

(Percentage)

Sel ing, general and administrative expenses

496,634

299,583

197,051

65.8 %

Sel ing, general and administrative expenses as a percentage of net

revenue

40.5 %

46.0 %

(550) basis points

The increase in sel ing, general and administrative expenses was primarily due to:

•

an increase in costs related to our operating channels of $106.5 mil ion, comprised of:

– an increase in employee costs of $38.7 mil ion primarily due to higher incentive compensation expenses for

our company-operated stores and other retail locations, as wel as higher salaries and wages expense in our

company-operated stores, other, and direct to consumer channels primarily from the growth in our

business;

– an increase in variable costs of $38.2 mil ion primarily due to an increase in distribution costs, credit card

fees, and packaging costs as a result of increased net revenue;

– an increase in brand and community costs of $25.4 mil ion primarily due to an increase in digital marketing

expenses; and

– an increase in operating costs of $4.2 mil ion primarily due to depreciation and information technology

costs;

•

an increase in head office costs of $73.1 mil ion, comprised of:

– an increase in costs of $37.6 mil ion primarily due to increased professional fees, information technology

costs, brand and community costs, and depreciation; and

– an increase in employee costs of $35.5 mil ion primarily due to increased salaries and wages expense

primarily as a result of headcount growth, higher incentive compensation expense, and increased stock-

based compensation expense, partial y offset by decreased travel expenses primarily due to restrictions

related to the pandemic;

•

a decrease in government payrol subsidies of $14.3 mil ion due to no government payrol subsidies being recognized

in the first quarter of 2021; and

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•	an increase in net foreign exchange and derivative revaluation losses of $3.2 mil ion.
Amortization of intangible assets
	First Quarter
		2021	2020		Year over year change
		(In thousands)	(In thousands)	(Percentage)
Amortization of intangible assets		$	2,195 $	23 $		2,172		n/a
The increase in the amortization of intangible assets was the result of the amortization of intangible assets recognized
upon the acquisition of MIRROR during the second quarter of 2020.
Acquisition-related expenses
	First Quarter
		2021	2020		Year over year change
		(In thousands)	(In thousands)	(Percentage)
Acquisition-related expenses		$	7,664 $	2,045 $		5,619	274.8 %
In connection with our acquisition of MIRROR, we recognized acquisition-related compensation expenses of $7.2 mil ion
for deferred consideration for certain continuing MIRROR employees in the first quarter of 2021. We also recognized
transaction and integration related costs of $0.5 mil ion and $2.0 mil ion in the first quarter of 2021 and 2020, respectively.
Income from Operations
On a segment basis, we determine income from operations without taking into account our general corporate
expenses. Segmented income from operations is summarized below.
		First Quarter
						2021	2020	2021	2020		Year over year change
		(Percentage of net revenue of
						(In thousands)	respective operating segment)	(In thousands)	(Percentage)
Segmented income from
operations:
Company-operated stores						$	99,148	$	(30,154)	18.5 %	(11.6) % $		129,302		n/a
Direct to consumer							236,933		156,947	43.5	44.6			79,986		51.0 %
Other							14,506		(269)	10.0	(0.7)		14,775		n/a
						$	350,587	$	126,524	$	224,063	177.1 %
General corporate expense							146,907		91,705		55,202		60.2
Amortization of intangible assets							2,195		23		2,172		n/a
Acquisition-related expenses							7,664		2,045		5,619	274.8
Income from operations						$	193,821	$	32,751	$	161,070	491.8 %
Operating margin						15.8 %	5.0 %	1,080 basis points
Company-Operated Stores. The increase in income from operations from our company-operated stores was primarily
the result of increased gross profit of $177.6 mil ion, driven by increased net revenue and higher gross margin. The increase in
gross profit was partial y offset by an increase in sel ing, general and administrative expenses, primarily due to higher people
and operating costs. People costs increased primarily due to higher incentive compensation and higher salaries and wages
expense as a result of an increased number of company-operated stores. Store operating costs increased primarily due to
government payrol subsidies that were recognized during the first quarter of 2020. No government payrol subsidies were
recognized during the first quarter of 2021. There were also increases in distribution costs and credit card fees as a result of
higher net revenue. Income from operations as a percentage of company-operated stores net revenue increased due to
higher gross margin and leverage on sel ing, general and administrative expenses.
Direct to Consumer. The increase in income from operations from our direct to consumer segment was primarily the
result of increased gross profit of $129.7 mil ion driven by increased net revenue. The increase in gross profit was partial y
offset by an increase in sel ing, general and administrative expenses, primarily due to higher operating costs, driven by higher
variable costs including distribution costs, credit card fees, and packaging as a result of higher net revenue, as wel as higher
								23

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digital marketing expenses, employee costs, and information technology expenses. Income from operations as a percentage

of direct to consumer net revenue decreased primarily due to deleverage on sel ing, general and administrative expenses.

Other channels. The increase in income from operations was primarily the result of increased gross profit of $58.7

mil ion, primarily due to increased net revenue. The increase in gross profit was partial y offset by an increase in sel ing,

general and administrative expenses driven by MIRROR digital marketing expenses, higher salaries and wages and incentive

compensation, as wel as increased credit card fees and distribution costs as a result of higher net revenue. Income from

operations as a percentage of other net revenue increased primarily due to an increase in gross margin, partial y offset by

deleverage on sel ing, general and administrative expenses.

General Corporate Expenses. The increase in general corporate expenses was primarily due to increased people costs

primarily from the growth in our business as wel as increased professional fees, information technology costs, brand and

community costs, and depreciation. An increase in net foreign exchange and derivative revaluation losses of $3.2 mil ion also

contributed to the increase in general corporate expenses. The increase in general corporate expense was partial y offset by

decreased travel expenses primarily related to restrictions related to the pandemic.

Other Income (Expense), Net

First Quarter

2021

2020

Year over year change

(In thousands)

(Percentage)

Other income (expense), net

227 $

1,174 $

(947)

(80.7) %

The decrease in other income, net was primarily due to a decrease in interest income as a result of lower interest rates.

Income Tax Expense

First Quarter

2021

2020

Year over year change

(In thousands)

(Percentage)

Income tax expense

49,092

5,293

43,799

827.5 %

Effective tax rate

25.3 %

15.6 %

970 basis points

The increase in the effective tax rate was primarily due to higher pre-tax income in the first quarter of 2021. The lower

level of pre-tax income in the first quarter of 2020 meant that discrete tax deductions related to stock-based compensation in

that quarter represented a higher proportion of income before tax expense and so reduced the overal effective tax rate.

Net Income

First Quarter

2021

2020

Year over year change

(In thousands)

(Percentage)

Net income

144,956 $

28,632 $

116,324

406.3 %

The increase in net income was primarily due to an increase in gross profit of $365.9 mil ion, partial y offset by an

increase in sel ing, general and administrative expenses of $197.1 mil ion, an increase in income tax expense of $43.8 mil ion,

acquisition-related expenses of $7.7 mil ion, amortization of intangible assets of $2.2 mil ion, and a decrease in other income

(expense), net of $0.9 mil ion.

Comparable Store Sales and Total Comparable Sales

We use comparable store sales to assess the performance of our existing stores as it al ows us to monitor the

performance of our business without the impact of recently opened or expanded stores. We use total comparable sales to

evaluate the performance of our business from an omni-channel perspective. We therefore believe that investors would

similarly find these metrics useful in assessing the performance of our business. However, as the temporary store closures

from COVID-19 during the first quarter of 2020 resulted in a significant number of stores being removed from our comparable

store calculations, we believe total comparable sales and comparable store sales are not currently representative of the

underlying trends of our business. We do not believe these metrics are currently useful to investors in understanding

performance, therefore we have not included these metrics in our discussion and analysis of results of operations.

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Non-GAAP Financial Measures
	Constant dol ar changes in net revenue and direct to consumer net revenue are non-GAAP financial measures.
	A constant dol ar basis assumes the average foreign exchange rates for the period remained constant with the average
foreign exchange rates for the same period of the prior year. We provide constant dol ar changes in our results to help
investors understand the underlying growth rate of net revenue excluding the impact of changes in foreign exchange rates.
	The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or with
greater prominence to, the financial information prepared and presented in accordance with GAAP. A reconciliation of the
non-GAAP financial measures fol ows, which includes more detail on the GAAP financial measure that is most directly
comparable to each non-GAAP financial measure, and the related reconciliations between these financial measures.
Constant dol ar changes in net revenue
	The below changes in net revenue show the change compared to the corresponding period in the prior year.
		First Quarter 2021
				Direct to
			Net Revenue	Consumer Net
				Revenue
					(In thousands)	(Percentages)	(Percentages)
Change					$	574,503		88 %	55 %
Adjustments due to foreign exchange rate changes						(33,391)		(5)	(5)
Change in constant dol ars					$	541,112		83 %	50 %
Seasonality
	Our business is affected by the general seasonal trends common to the retail apparel industry. Our annual net revenue
is weighted more heavily toward our fourth fiscal quarter, reflecting our historical strength in sales during the holiday season,
while our operating expenses are more equal y distributed throughout the year. As a result, a substantial portion of our
operating profits are generated in the fourth quarter of our fiscal year. For example, we generated approximately 56% and
47% of our ful year operating profit during the fourth quarters of 2020 and 2019, respectively. Due to a significant number of
our company-operated stores being temporarily closed due to COVID-19 during the first two quarters of 2020, we earned a
higher proportion of our operating profit during the last two quarters of 2020 compared to prior years.
Liquidity and Capital Resources
	Our primary sources of liquidity are our current balances of cash and cash equivalents, cash flows from operations, and
capacity under our committed revolving credit facility. Our primary cash needs are capital expenditures for opening new
stores and remodeling or relocating existing stores, investing in information technology and making system enhancements,
funding working capital requirements, and making other strategic capital investments both in North America and
international y. We may also use cash to repurchase shares of our common stock. Cash and cash equivalents in excess of our
needs are held in interest bearing accounts with financial institutions, as wel as in money market funds, treasury bil s, and
term deposits.
	We believe that our cash and cash equivalent balances, cash generated from operations, and borrowings available to us
under our committed revolving credit facility wil be adequate to meet our liquidity needs and capital expenditure
requirements for at least the next 12 months. Our cash from operations may be negatively impacted by a decrease in demand
for our products, as wel as the other factors described in "Item 1A. Risk Factors". In addition, we may make discretionary
capital improvements with respect to our stores, distribution facilities, headquarters, or systems, or we may repurchase
shares under an approved stock repurchase program, which we would expect to fund through the use of cash, issuance of
debt or equity securities or other external financing sources to the extent we were unable to fund such capital expenditures
out of our cash and cash equivalents and cash generated from operations.
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The fol owing table includes certain measures of our liquidity:
	May 2, 2021
	(In thousands)
		Cash and cash equivalents	$ 1,179,739
		Working capital excluding cash and cash equivalents(1)		108,899
		Capacity under committed revolving credit facility		397,271
		__________(1)
Working capital is calculated as current assets of $2.3 bil ion less current liabilities of $1.0 bil ion.
The fol owing table summarizes our net cash flows provided by and used in operating, investing, and financing activities
		for the periods indicated:
			First Quarter
	Year over year
				2021	2020	change
			(In thousands)
		Total cash provided by (used in):
Operating activities				$	214,109 $	(121,243) $	335,352
Investing activities					(85,464)	(45,626)	(39,838)
Financing activities					(122,235)	(90,587)	(31,648)
Effect of exchange rate changes on cash					22,812	(13,043)	35,855
		Increase (decrease) in cash and cash equivalents		$	29,222 $	(270,499) $	299,721
		Operating Activities
The increase in cash provided by operating activities was primarily as a result of:
•	increased net income of $116.3 mil ion;
•	an increase in cash flows from the changes in operating assets and liabilities of $176.1 mil ion. This increase was
driven by changes in accrued compensation, our inventory levels, and prepaid expenses and other current assets;
and
•	changes in adjusting items of $42.9 mil ion, primarily driven by higher cash inflows related to derivatives not
designated in a hedging relationship, and due to increased stock-based compensation and depreciation expense.
		Investing Activities
The increase in cash used in investing activities was primarily the result of the settlement of net investment hedges and
		an increase in capital expenditures. The increase in capital expenditures was primarily due to increased capital expenditures
		for our direct to consumer segment driven by investment in our distribution centers. This was partial y offset by decreased
		expenditures for our company-operated stores.
		Financing Activities
The increase in cash used in financing activities was primarily the result of an increase in stock repurchases. Cash used in
		financing activities for the first quarter of 2021 included $83.8 mil ion to repurchase 0.3 mil ion shares of our common stock
		compared to $63.7 mil ion to repurchase 0.4 mil ion shares for the first quarter of 2020. The common stock was repurchased
		in the open market 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, with the timing and actual number of shares repurchased depending upon
		market conditions, eligibility to trade, and other factors.
		Revolving Credit Facilities
		North America revolving credit facility
During 2016, we obtained a $150.0 mil ion committed and unsecured five-year revolving credit facility with major
		financial institutions. On June 6, 2018, we amended the credit agreement to provide for (i) an increase in the aggregate
		commitments under the revolving credit facility to $400.0 mil ion, with an increase of the sub-limits for the issuance of letters
							26

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of credit and extensions of swing line loans to $50.0 mil ion for each, (i ) an increase in the option, subject to certain
conditions, to request increases in commitments from $400.0 mil ion to $600.0 mil ion and (i i) an extension in the maturity of
the facility from December 15, 2021 to June 6, 2023. Borrowings under the facility may be made in U.S. Dol ars, Euros,
Canadian Dol ars, and in other currencies, subject to the lenders' approval.
	As of May 2, 2021, aside from letters of credit of $2.7 mil ion, we had no other borrowings outstanding under this credit
facility.
	Borrowings under the facility bear interest at a rate equal to, at our option, either (a) rates based on deposits on the
interbank market for U.S. Dol ars or the applicable currency in which the borrowings are made ("LIBOR") or (b) an alternate
base rate, plus, an applicable margin 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 1.00%-1.50% for LIBOR loans and
0.00%-0.50% for alternate base rate loans. Additional y, a commitment fee of between 0.10%-0.20% is payable on the average
unused amounts under the revolving credit facility, and fees of 1.00%-1.50% are payable on unused letters of credit.
	The credit agreement contains negative covenants that, among other things and subject to certain exceptions, limit the
ability of our subsidiaries to incur indebtedness, incur liens, undergo fundamental changes, make dispositions of al or
substantial y al of their assets, alter their businesses and enter into agreements limiting subsidiary dividends and
distributions.
	We are also required to maintain a consolidated rent-adjusted leverage ratio of not greater than 3.5:1 and to maintain
the ratio of consolidated EBITDAR to consolidated interest charges (plus rent) below 2:1. 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). As of May 2, 2021, we were in compliance with the covenants of
the credit facility.
Mainland China revolving credit facility
	In December 2019, we entered into an uncommitted and unsecured 130.0 mil ion Chinese Yuan revolving credit facility
with terms that are reviewed on an annual basis. The credit facility was increased to 230.0 mil ion Chinese Yuan during 2020.
It is comprised of a revolving loan of up to 200.0 mil ion Chinese Yuan and a financial guarantee facility of up to 30.0 mil ion
Chinese Yuan, 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%. We are required to comply with certain covenants. As of May 2,
2021, we were in compliance with the covenant and there were no borrowings or guarantees outstanding under this credit
facility.
Off-Balance Sheet Arrangements
	We enter into standby letters of credit to secure certain of our obligations, including leases, taxes, and duties. As of
May 2, 2021, letters of credit and letters of guarantee totaling $3.2 mil ion had been issued, including $2.7 mil ion under our
committed revolving credit facility.
	We have not entered into any transactions, agreements or other contractual arrangements to which an entity
unconsolidated with us is a party and under which we have (i) any obligation under a guarantee, (i ) any retained or
contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to
such entity, (i i) any obligation under derivative instruments that are indexed to our shares and classified as equity in our
consolidated balance sheets, or (iv) any obligation arising out of a variable interest in any unconsolidated entity that provides
financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services
with us.
Critical Accounting Policies and Estimates
	The preparation of financial statements in conformity with U.S. general y accepted accounting principles requires
management to make estimates and assumptions. Predicting future events is inherently an imprecise activity and, as such,
requires the use of judgment. Actual results may vary from our estimates in amounts that may be material to the financial
statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on
assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that
reasonably could have been used or changes in the accounting estimates that are reasonably likely to occur periodical y, could
material y impact our consolidated financial statements.
	Our critical accounting policies and estimates are discussed within "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" of our 2020 Annual Report on Form 10-K filed with the SEC on March 30, 2021.
		27

Table of Contents
Operating Locations
	Our company-operated stores by country as of May 2, 2021 and January 31, 2021 are summarized in the table below.
		May 2,	January 31,
Number of company-operated stores by country		2021	2021
United States				315	315
Canada				62	62
People's Republic of China(1)				56	55
Australia				30	31
United Kingdom				16	16
South Korea				9	7
Germany				7	7
New Zealand				7	7
Japan				6	6
Singapore				4	4
France				3	3
Malaysia				2	2
Sweden				2	2
Ireland				1	1
Netherlands				1	1
Norway				1	1
Switzerland				1	1
Total company-operated stores				523	521
__________(1)
	PRC included seven stores in Hong Kong, Special Administrative Region, two stores in Macao, Special Administration Region, and two stores in Taiwan
	as of May 2, 2021 and January 31, 2021.
	Retail locations operated by third parties under license and supply arrangements are not included in the above table. As
of May 2, 2021, there were eight licensed locations, including four in Mexico, three in the United Arab Emirates, and one in
Qatar.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	Foreign Currency Exchange Risk. The functional currency of our international subsidiaries is general y the applicable
local currency. Our consolidated financial statements are presented in U.S. dol ars. Therefore, the net revenue, expenses,
assets, and liabilities of our international subsidiaries are translated from their functional currencies into U.S. dol ars.
Fluctuations in the value of the U.S. dol ar affect the reported amounts of net revenue, expenses, assets, and liabilities.
Foreign exchange differences which arise on translation of our international subsidiaries' balance sheets into U.S. dol ars are
recorded as a foreign currency translation adjustment in accumulated other comprehensive income or loss within
stockholders' equity.
	We also have exposure to changes in foreign exchange rates associated with transactions which are undertaken by our
subsidiaries in currencies other than their functional currency. Such transactions include intercompany transactions and
inventory purchases denominated in currencies other than the functional currency of the purchasing entity. As a result, we
have been impacted by changes in exchange rates and may be impacted for the foreseeable future. The potential impact of
currency fluctuation increases as our international expansion increases.
	As of May 2, 2021, we had certain forward currency contracts outstanding in order to hedge a portion of the foreign
currency exposure that arises on translation of a Canadian subsidiary into U.S. dol ars. We also had certain forward currency
contracts outstanding in an effort to reduce our exposure to the foreign exchange revaluation gains and losses that are
recognized by our Canadian and Chinese subsidiaries on U.S. dol ar denominated monetary assets and liabilities. Please refer
to Note 7. Derivative Financial Instruments included in Item 1 of Part I of this report for further information, including details
of the notional amounts outstanding.
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	Table of Contents
In the future, in an effort to reduce foreign exchange risks, we may enter into further derivative financial instruments
	including hedging additional currency pairs. We do not, and do not intend to, engage in the practice of trading derivative
	securities for profit.
We currently generate a significant portion of our net revenue and incur a significant portion of our expenses in Canada.
	We also hold a significant portion of our net assets in Canada. The reporting currency for our consolidated financial
	statements is the U.S. dol ar. A strengthening of the U.S. dol ar against the Canadian dol ar results in:
•	the fol owing impacts to the consolidated statements of operations:
		– a decrease in our net revenue upon translation of the sales made by our Canadian operations into U.S.
		dol ars for the purposes of consolidation;
		– a decrease in our sel ing, general and administrative expenses incurred by our Canadian operations upon
		translation into U.S. dol ars for the purposes of consolidation;
		– foreign exchange revaluation gains by our Canadian subsidiaries on U.S. dol ar denominated monetary
		assets and liabilities; and
		– derivative valuation losses on forward currency contracts not designated in a hedging relationship;
•	the fol owing impacts to the consolidated balance sheets:
		– a decrease in the foreign currency translation adjustment which arises on the translation of our Canadian
		subsidiaries' balance sheets into U.S. dol ars; and
		– an increase in the foreign currency translation adjustment from derivative valuation losses on forward
		currency contracts, entered into as net investment hedges of a Canadian subsidiary.
During the first quarter of 2021, the change in the relative value of the U.S. dol ar against the Canadian dol ar resulted in
	a $67.1 mil ion reduction in accumulated other comprehensive loss within stockholders' equity. During the first quarter of
	2020, the change in the relative value of the U.S. dol ar against the Canadian dol ar resulted in a $74.4 mil ion increase in
	accumulated other comprehensive loss within stockholders' equity.
A 10% appreciation in the relative value of the U.S. dol ar against the Canadian dol ar compared to the exchange rates in
	effect for the first quarter of 2021 would have resulted in lower income from operations of approximately $11.6 mil ion. This
	assumes a consistent 10% appreciation in the U.S. dol ar against the Canadian dol ar over the first quarter of 2021. The timing
	of changes in the relative value of the U.S. dol ar combined with the seasonal nature of our business, can affect the magnitude
	of the impact that fluctuations in foreign exchange rates have on our income from operations.
Interest Rate Risk. Our committed revolving credit facility provides us with available borrowings in an amount up to
	$400.0 mil ion. Because our revolving credit facilities bear interest at a variable rate, we wil be exposed to market risks
	relating to changes in interest rates, if we have a meaningful outstanding balance. As of May 2, 2021, aside from letters of
	credit of $2.7 mil ion, there were no borrowings outstanding under these credit facilities. We currently do not engage in any
	interest rate hedging activity and currently have no intention to do so. However, in the future, if we have a meaningful
	outstanding balance under our revolving facility, in an effort to mitigate losses associated with these risks, we may at times
	enter into derivative financial instruments, although we have not historical y done so. These may take the form of forward
	contracts, option contracts, or interest rate swaps. We do not, and do not intend to, engage in the practice of trading
	derivative securities for profit.
Our cash and cash equivalent balances are held in the form of cash on hand, bank balances, short-term deposits and
	treasury bil s with original maturities of three months or less, and in money market funds. We do not believe these balances
	are subject to material interest rate risk.
Credit Risk. We have cash on deposit with various large, reputable financial institutions and have invested in U.S. and
	Canadian Treasury Bil s, and in AAA-rated money market funds. The amount of cash and cash equivalents held with certain
	financial institutions exceeds government-insured limits. We are also exposed to credit-related losses in the event of
	nonperformance by the financial institutions that are counterparties to our forward currency contracts. The credit risk
	amount is our unrealized gains on our derivative instruments, based on foreign currency rates at the time of nonperformance.
	We have not experienced any losses related to these items, and we believe credit risk to be minimal. We seek to minimize our
	credit risk by entering into transactions with credit worthy and reputable financial institutions and by monitoring the credit
			29

Table of Contents
standing of the financial institutions with whom we transact. We seek to limit the amount of exposure with any one
counterparty.
Inflation
	Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating
results. Although we do not believe that inflation has had a material impact on our financial position or results of operations
to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross
margin and sel ing, general and administrative expenses as a percentage of net revenue if the sel ing prices of our products do
not increase with these increased costs.
ITEM 4. CONTROLS AND PROCEDURES
	We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed
by us in the reports we file or submit under the Securities Exchange Act of 1934, is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and
communicated to our management, including our principal executive officer and principal financial and accounting officer, to
al ow timely decisions to be made regarding required disclosure. We have established a Disclosure Committee, consisting of
certain members of management, to assist in this evaluation. The Disclosure Committee meets on a quarterly basis, and as
needed.
	Our management, including our principal executive officer and principal financial and accounting officer, evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the
Exchange Act) at May 2, 2021. Based on that evaluation, our principal executive officer and principal financial and accounting
officer concluded that, at May 2, 2021, our disclosure controls and procedures were effective.
	There were no changes in our internal control over financial reporting during the quarter ended May 2, 2021 that have
material y affected, or are reasonably likely to material y affect, our internal control over financial reporting.
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PART II
	OTHER INFORMATION
		ITEM 1. LEGAL PROCEEDINGS
			In addition to the legal matters described in Note 12. Legal Proceedings and Other Contingencies included in Item 1 of
		Part I of this report and in our 2020 Annual Report on Form 10-K, we are, from time to time, involved in routine legal matters
		incidental to the conduct of our business, including legal matters such as initiation and defense of proceedings to protect
		intel ectual property rights, personal injury claims, product liability claims, employment claims, and similar matters. We
		believe the ultimate resolution of any such current proceeding wil not have a material adverse effect on our financial
		position, results of operations or cash flows.
		ITEM 1A. RISK FACTORS
			In addition to the other information contained in this Form 10-Q and in our 2020 Annual Report on Form 10-K, the
		fol owing risk factors should be considered in evaluating our business. Our business, financial condition, or results of operations
		could be material y adversely affected as a result of any of these risks. Please note that additional risks not presently known to
		us or that we currently deem immaterial could also impair our business and operations.
		Risks related to our business and industry
		Our success depends on our ability to maintain the value and reputation of our brand.
			The lululemon name is integral to our business as wel as to the implementation of our expansion strategies.
		Maintaining, promoting, and positioning our brand wil depend largely on the success of our marketing and merchandising
		efforts and our ability to provide a consistent, high quality product, and guest experience. We rely on social media, as one of
		our marketing strategies, to have a positive impact on both our brand value and reputation. Our brand and reputation could
		be adversely affected if we fail to achieve these objectives, if our public image was to be tarnished by negative publicity,
		which could be amplified by social media, if we fail to deliver innovative and high quality products acceptable to our guests, or
		if we face or mishandle a product recal . Our reputation could also be impacted by adverse publicity, whether or not valid,
		regarding al egations that we, or persons associated with us or formerly associated with us, have violated applicable laws or
		regulations, including but not limited to those related to safety, employment, discrimination, harassment, whistle-blowing,
		privacy, corporate citizenship, improper business practices, or cybersecurity. Certain activities on the part of stakeholders,
		including nongovernmental organizations and governmental institutions, could cause reputational damage, distract senior
		management, and disrupt our business. Additional y, while we devote considerable effort and resources to protecting our
		intel ectual property, if these efforts are not successful the value of our brand may be harmed. Any harm to our brand and
		reputation could have a material adverse effect on our financial condition.
		The current COVID-19 coronavirus pandemic and related government, private sector, and individual consumer responsive
		actions have and could continue to affect our business operations, store traffic, employee availability, financial condition,
		liquidity, and cash flow.
			The spread of COVID-19 has caused health officials to impose restrictions and recommend precautions to mitigate the
		spread of the virus, especial y when congregating in heavily populated areas, such as mal s and lifestyle centers. Our stores
		have experienced temporary closures, and we have implemented precautionary measures in line with guidance from local
		authorities in the stores that are open. These measures include restrictions such as limitations on the number of guests
		al owed in our stores at any single time, minimum physical distancing requirements, and limited operating hours. We do not
		know how the measures recommended by local authorities or implemented by us may change over time or what the duration
		of these restrictions wil be.
			Further resurgences in COVID-19 cases, including from variants, could cause additional restrictions, including
		temporarily closing al or some of our stores again. An outbreak at one of our locations, even if we fol ow appropriate
		precautionary measures, could negatively impact our employees, guests, and brand. There is uncertainty over the impact of
		COVID-19 on the U.S., Canadian, and global economies, consumer wil ingness to visit stores, mal s, and lifestyle centers, and
		employee wil ingness to staff our stores as the pandemic continues and if there are future resurgences. There is also
		uncertainty regarding potential long-term changes to consumer shopping behavior and preferences and whether consumer
		demand wil recover when restrictions are lifted.
			We may be impacted by other business disruptions related to COVID-19, including disruptions to our sourcing and
		manufacturing or to our distribution facilities. Our distribution centers have experienced temporary closures due to COVID-19.
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The COVID-19 situation is changing rapidly and the extent to which COVID-19 impacts our results wil depend on future
	developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning
	the severity of COVID-19 and its variants and the actions taken to contain it or treat its impact, including vaccinations.
	Changes in consumer shopping preferences, and shifts in distribution channels could material y impact our results of
	operations.
We sel our products through a variety of channels, with a significant portion through traditional brick-and-mortar retail
	channels. The COVID-19 pandemic has shifted guest shopping preferences away from brick-and-mortar and towards digital
	platforms. As strong e-commerce channels emerge and develop, we are evolving towards an omni-channel approach to
	support the shopping behavior of our guests. This involves country and region specific websites, social media, product
	notification emails, mobile apps, including mobile apps on in-store devices that al ow demand to be fulfil ed via our
	distribution centers, and online order fulfil ment through stores. The diversion of sales from our company-operated stores
	could adversely impact our return on investment and could lead to impairment charges and store closures, including lease exit
	costs. We could have difficulty in recreating the in-store experience through direct channels. Our failure to successful y
	integrate our digital and physical channels and respond to these risks might adversely impact our business and results of
	operations, as wel as damage our reputation and brands.
	If any of our products have manufacturing or design defects or are otherwise unacceptable to us or our guests, our business
	could be harmed.
We have occasional y received, and may in the future receive, shipments of products that fail to comply with our
	technical specifications or that fail to conform to our quality control standards. We have also received, and may in the future
	receive, products that are otherwise unacceptable to us or our guests. Under these circumstances, unless we are able to
	obtain replacement products in a timely manner, we risk the loss of net revenue resulting from the inability to sel those
	products and related increased administrative and shipping costs. Additional y, if the unacceptability of our products is not
	discovered until after such products are sold, our guests could lose confidence in our products or we could face a product
	recal and our results of operations could suffer and our business, reputation, and brand could be harmed.
Our MIRROR subsidiary offers complex hardware and software products and services that can be affected by design and
	manufacturing defects. Sophisticated operating system software and applications, such as those offered by MIRROR, often
	have issues that can unexpectedly interfere with the intended operation of hardware or software products. Defects may also
	exist in components and products that we source from third parties. Any defects could make our products and services unsafe
	and create a risk of environmental or property damage or personal injury and we may become subject to the hazards and
	uncertainties of product liability claims and related litigation. The occurrence of real or perceived defects in any of our
	products, now or in the future, could result in additional negative publicity, regulatory investigations, or lawsuits filed against
	us, particularly if guests or others who use or purchase our MIRROR products are injured. Even if injuries are not the result of
	any defects, if they are perceived to be, we may incur expenses to defend or settle any claims and our brand and reputation
	may be harmed.
	We operate in a highly competitive market and the size and resources of some of our competitors may al ow them to
	compete more effectively than we can, resulting in a loss of our market share and a decrease in our net revenue and
	profitability.
The market for technical athletic apparel is highly competitive. Competition may result in pricing pressures, reduced
	profit margins or lost market share, or a failure to grow or maintain our market share, any of which could substantial y harm
	our business and results of operations. We compete directly against wholesalers and direct retailers of athletic apparel,
	including large, diversified apparel companies with substantial market share, and established companies expanding their
	production and marketing of technical athletic apparel, as wel as against retailers specifical y focused on women's athletic
	apparel. We also face competition from wholesalers and direct retailers of traditional commodity athletic apparel, such as
	cotton T-shirts and sweatshirts. Many of our competitors are large apparel and sporting goods companies with strong
	worldwide brand recognition. Because of the fragmented nature of the industry, we also compete with other apparel sel ers,
	including those specializing in yoga apparel and other activewear. Many of our competitors have significant competitive
	advantages, including longer operating histories, larger and broader customer bases, more established relationships with a
	broader set of suppliers, greater brand recognition and greater financial, research and development, store development,
	marketing, distribution, and other resources than we do.
Our competitors may be able to achieve and maintain brand awareness and market share more quickly and effectively
	than we can. In contrast to our grassroots community-based marketing approach, many of our competitors promote their
	brands through traditional forms of advertising, such as print media and television commercials, and through celebrity
	endorsements, and have substantial resources to devote to such efforts. Our competitors may also create and maintain brand
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awareness using traditional forms of advertising more quickly than we can. Our competitors may also be able to increase sales
in their new and existing markets faster than we do by emphasizing different distribution channels than we do, such as
catalog sales or an extensive franchise network.
	In addition, because we hold limited patents and exclusive intel ectual property rights in the technology, fabrics or
processes underlying our products, our current and future competitors are able to manufacture and sel products with
performance characteristics, fabrication techniques, and styling similar to our products.
Our sales and profitability may decline as a result of increasing product costs and decreasing sel ing prices.
	Our business is subject to significant pressure on costs and pricing caused by many factors, including intense
competition, constrained sourcing capacity and related inflationary pressure, pressure from consumers to reduce the prices
we charge for our products, and changes in consumer demand. These factors may cause us to experience increased costs,
reduce our prices to consumers or experience reduced sales in response to increased prices, any of which could cause our
operating margin to decline if we are unable to offset these factors with reductions in operating costs and could have a
material adverse effect on our financial condition, operating results, and cash flows.
If we are unable to anticipate consumer preferences and successful y develop and introduce new, innovative, and
differentiated products, we may not be able to maintain or increase our sales and profitability.
	Our success depends on our ability to identify and originate product trends as wel as to anticipate and react to
changing consumer demands in a timely manner. Al of our products are subject to changing consumer preferences that
cannot be predicted with certainty. If we are unable to introduce new products or novel technologies in a timely manner or
our new products or technologies are not accepted by our guests, our competitors may introduce similar products in a more
timely fashion, which could hurt our goal to be viewed as a leader in technical athletic apparel innovation. Our new products
may not receive consumer acceptance as consumer preferences could shift rapidly to different types of athletic apparel or
away from these types of products altogether, and our future success depends in part on our ability to anticipate and respond
to these changes. Our failure to anticipate and respond in a timely manner to changing consumer preferences could lead to,
among other things, lower sales and excess inventory levels. Even if we are successful in anticipating consumer preferences,
our ability to adequately react to and address those preferences wil in part depend upon our continued ability to develop and
introduce innovative, high-quality products. Our failure to effectively introduce new products that are accepted by consumers
could result in a decrease in net revenue and excess inventory levels, which could have a material adverse effect on our
financial condition.
Our results of operations could be material y harmed if we are unable to accurately forecast guest demand for our
products.
	To ensure adequate inventory supply, we must forecast inventory needs and place orders with our manufacturers
based on our estimates of future demand for particular products. Our ability to accurately forecast demand for our products
could be affected by many factors, including an increase or decrease in guest demand for our products or for products of our
competitors, our failure to accurately forecast guest acceptance of new products, product introductions by competitors,
unanticipated changes in general market conditions (for example, because of unexpected effects on inventory supply and
consumer demand caused by the current COVID-19 coronavirus pandemic), and weakening of economic conditions or
consumer confidence in future economic conditions. If we fail to accurately forecast guest demand, we may experience excess
inventory levels or a shortage of products available for sale in our stores or for delivery to guests.
	Inventory levels in excess of guest demand may result in inventory write-downs or write-offs and the sale of excess
inventory at discounted prices, which would cause our gross margin to suffer and could impair the strength and exclusivity of
our brand. Conversely, if we underestimate guest demand for our products, our manufacturers may not be able to deliver
products to meet our requirements, and this could result in damage to our reputation and guest relationships.
Our limited operating experience and limited brand recognition in new international markets may limit our expansion and
cause our business and growth to suffer.
	Our future growth depends in part on our expansion efforts outside of North America. We have limited experience with
regulatory environments and market practices international y, and we may not be able to penetrate or successful y operate in
any new market. In connection with our expansion efforts we may encounter obstacles we did not face in North America,
including cultural and linguistic differences, differences in regulatory environments, labor practices and market practices,
difficulties in keeping abreast of market, business and technical developments, and international guests' tastes and
preferences. We may also encounter difficulty expanding into new international markets because of limited brand recognition
leading to delayed acceptance of our technical athletic apparel by guests in these new international markets. Our failure to
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develop our business in new international markets or disappointing growth outside of existing markets could harm our
business and results of operations.
We may not realize the potential benefits and synergies sought with the acquisition of MIRROR.
	During 2020, we acquired MIRROR as part of our growth plan, which includes driving business through omni-guest
experiences. The potential benefits of enhancing our digital and interactive capabilities and deepening our roots in the
sweatlife might not be realized ful y, if at al . Further, the expected synergies between lululemon and MIRROR, such as those
related to our connections with our guests and communities as wel as our store and direct to consumer infrastructure, may
not materialize. A significant portion of the purchase price was al ocated to goodwil and if our acquisition does not yield
expected returns, we may be required to record impairment charges, which would adversely affect our results of operations.
	Our management team has limited experience in addressing the chal enges of integrating management teams,
strategies, cultures, and organizations of two companies. This integration may divert the attention of management and cause
additional expenses. Management also has limited experience outside of the retail industry, including with the specialized
hardware and software sold and licensed by MIRROR. If MIRROR has inadequate or ineffective controls and procedures, our
internal control over financial reporting could be adversely impacted. The acquisition may not be wel received by the
customers or employees of either company, and this could hurt our brand and result in the loss of key employees. If we are
unable to successful y integrate MIRROR, including its people and technologies, we may not be able to manage operations
efficiently, which could adversely affect our results of operations. The acquisition of MIRROR may also divert management
time and other resources away from our existing business.
	In addition, we may, from time to time, evaluate and pursue other strategic investments or acquisitions. These involve
various inherent risks and the benefits sought may not be realized. The acquisition of MIRROR or other strategic investments
or acquisitions may not create value and may harm our brand and adversely affect our business, financial condition, and
results of operations.
We may not be able to grow the MIRROR business and have it achieve profitability.
	We may be unable to attract and retain subscribers to MIRROR. If we do not provide the delivery and instal ation
service that our guests expect, offer engaging and innovative classes, and support and continue to improve the technology
used, we may not be able to maintain and grow the number of subscribers. This could adversely impact our results of
operations.
	We are dependent on information technology systems to provide live and recorded classes to our customers with
MIRROR subscriptions, to maintain its software, and to manage subscriptions. If we experience issues such as cybersecurity
threats or actions, or interruptions or delays in our information technology systems, the data privacy and overal experience
of subscribers could be negatively impacted and could therefore damage our brand and adversely affect our results of
operations.
	Competition, including from other in-home fitness providers as wel as in-person fitness studios, and trends of
consumer preferences, could also impact the level of subscriptions and therefore our results of operations.
If we continue to grow at a rapid pace, we may not be able to effectively manage our growth and the increased complexity
of our business and as a result our brand image and financial performance may suffer.
	We have expanded our operations rapidly since our inception in 1998 and our net revenue has increased from
$40.7 mil ion in fiscal 2004 to $4.4 bil ion in 2020. If our operations continue to grow at a rapid pace, we may experience
difficulties in obtaining sufficient raw materials and manufacturing capacity to produce our products, as wel as delays in
production and shipments, as our products are subject to risks associated with overseas sourcing and manufacturing. We
could be required to continue to expand our sales and marketing, product development and distribution functions, to upgrade
our management information systems and other processes and technology, and to obtain more space for our expanding
workforce. This expansion could increase the strain on our resources, and we could experience operating difficulties, including
difficulties in hiring, training, and managing an increasing number of employees. These difficulties could result in the erosion
of our brand image which could have a material adverse effect on our financial condition.
We are subject to risks associated with leasing retail and distribution space subject to long-term and non-cancelable leases.
	We lease the majority of our stores under operating leases and our inability to secure appropriate real estate or lease
terms could impact our ability to grow. Our leases general y have initial terms of between five and 15 years, and general y can
be extended in five-year increments if at al . We general y cannot cancel these leases at our option. If an existing or new store
is not profitable, and we decide to close it, as we have done in the past and may do in the future, we may nonetheless be
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committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the
balance of the lease term. Similarly, we may be committed to perform our obligations under the applicable leases even if
current locations of our stores become unattractive as demographic patterns change. In addition, as each of our leases expire,
we may fail to negotiate renewals, either on commercial y acceptable terms or at al , which could require us to close stores in
desirable locations.
	We also lease the majority of our distribution centers and our inability to secure appropriate real estate or lease terms
could impact our ability to deliver our products to the market.
We may not be able to successful y open new store locations in a timely manner, if at al , which could harm our results of
operations.
	Our growth wil largely depend on our ability to successful y open and operate new stores, which depends on many
factors, including, among others, our ability to:
	•	identify suitable store locations, the availability of which is outside of our control;
	•	gain brand recognition and acceptance, particularly in markets that are new to us;
	•	negotiate acceptable lease terms, including desired tenant improvement al owances;
	•	hire, train and retain store personnel and field management;
	•	immerse new store personnel and field management into our corporate culture;
	•	source sufficient inventory levels; and
	•	successful y integrate new stores into our existing operations and information technology systems.
	We may be unsuccessful in identifying new markets where our technical athletic apparel and other products and brand
image wil be accepted. In addition, we may not be able to open or profitably operate new stores in existing, adjacent, or new
markets due to the impact of COVID-19, which could have a material adverse effect on us.
Our future success is substantial y dependent on the service of our senior management and other key employees.
	In the last few years, we have had changes to our senior management team including new hires, departures, and role
and responsibility changes. The performance of our senior management team and other key employees may not meet our
needs and expectations. Also, the loss of services of any of these key employees, or any negative public perception with
respect to these individuals, may be disruptive to, or cause uncertainty in, our business and could have a negative impact on
our ability to manage and grow our business effectively. Such disruption could have a material adverse impact on our financial
performance, financial condition, and the market price of our stock.
Our business is affected by seasonality.
	Our business is affected by the general seasonal trends common to the retail apparel industry. This seasonality may
adversely affect our business and cause our results of operations to fluctuate.
Risks related to our supply chain
Our reliance on suppliers to provide fabrics for and to produce our products could cause problems if we experience a supply
chain disruption and we are unable to secure additional suppliers of fabrics or other raw materials, or manufacturers of our
end products.
	We do not manufacture our products or the raw materials for them and rely instead on suppliers. Many of the specialty
fabrics used in our products are technical y advanced textile products developed and manufactured by third parties and may
be available, in the short-term, from only one or a limited number of sources. We have no long-term contracts with any of our
suppliers or manufacturers for the production and supply of our raw materials and products, and we compete with other
companies for fabrics, other raw materials, and production. The fol owing statistics are based on cost.
	We work with a group of approximately 40 vendors that manufacture our products, five of which produced 59% of our
products in 2020. During 2020, the largest single manufacturer produced approximately 17% of our products. During 2020,
approximately 33% of our products were manufactured in Vietnam, 20% in Cambodia, 12% in Sri Lanka, and 9% in the PRC,
including 2% in Taiwan.
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We work with a group of approximately 65 suppliers to provide the fabrics for our products. In 2020, 65% of our fabrics
	were produced by our top five fabric suppliers, and the largest single manufacturer produced approximately 29% of fabric
	used. During 2020, approximately 45% of our fabrics originated from Taiwan, 18% from Mainland China, 16% from Sri Lanka,
	and the remainder from other regions.
We also source other raw materials which are used in our products, including items such as content labels, elastics,
	buttons, clasps, and drawcords from suppliers located predominantly in the Asia Pacific region.
We have experienced, and may in the future experience, a significant disruption in the supply of fabrics or raw materials
	and may be unable to locate alternative suppliers of comparable quality at an acceptable price, or at al . In addition, if we
	experience significant increased demand, or if we need to replace an existing supplier or manufacturer, we may be unable to
	locate additional supplies of fabrics or raw materials or additional manufacturing capacity on terms that are acceptable to us,
	or at al , or we may be unable to locate any supplier or manufacturer with sufficient capacity to meet our requirements or fil
	our orders in a timely manner. Identifying a suitable supplier is an involved process that requires us to become satisfied with
	its quality control, responsiveness and service, financial stability, and labor and other ethical practices. Even if we are able to
	expand existing or find new manufacturing or fabric sources, we may encounter delays in production and added costs as a
	result of the time it takes to train our suppliers and manufacturers in our methods, products, and quality control standards.
	Our supply of fabric or manufacture of our products could be disrupted or delayed by the impact of health pandemics,
	including the current COVID-19 pandemic, and the related government and private sector responsive actions such as border
	closures, restrictions on product shipments, and travel restrictions. Delays related to supplier changes could also arise due to
	an increase in shipping times if new suppliers are located farther away from our markets or from other participants in our
	supply chain. Any delays, interruption, or increased costs in the supply of fabric or manufacture of our products could have an
	adverse effect on our ability to meet guest demand for our products and result in lower net revenue and income from
	operations both in the short and long term.
	The operations of many of our suppliers are subject to additional risks that are beyond our control.
Almost al of our suppliers are located outside of North America, and as a result, we are subject to risks associated with
	doing business abroad, including:
•	the impact of health conditions, including COVID-19, and related government and private sector responsive actions,
and other changes in local economic conditions in countries where our suppliers or manufacturers are located;
•	political unrest, terrorism, labor disputes, and economic instability resulting in the disruption of trade from
international countries in which our products are manufactured;
•	fluctuations in foreign currency exchange rates;
•	the imposition of new laws and regulations, including those relating to labor conditions, quality and safety
standards, imports, duties, taxes and other charges on imports, as wel as trade restrictions and restrictions on
currency exchange or the transfer of funds;
•	reduced protection for intel ectual property rights, including trademark protection, in some countries, particularly in
the PRC; and
•	disruptions or delays in shipments whether due to port congestion, labor disputes, product regulations and/or
inspections or other factors, natural disasters or health pandemics, or other transportation disruptions.
These and other factors beyond our control could interrupt our suppliers' production in offshore facilities, influence the
	ability of our suppliers to export our products cost-effectively or at al and inhibit our suppliers' ability to procure certain
	materials, any of which could harm our business, financial condition, and results of operations.
	Our business could be harmed if our suppliers and manufacturers do not comply with our Vendor Code of Ethics or
	applicable laws.
While we require our suppliers and manufacturers to comply with our Vendor Code of Ethics, which includes labor,
	health and safety, and environment standards, we do not control their practices. If suppliers or contractors do not comply
	with these standards or applicable laws or there is negative publicity regarding the production methods of any of our
	suppliers or manufacturers, even if unfounded or not material to our supply chain, our reputation and sales could be
	adversely affected, we could be subject to legal liability, or could cause us to contract with alternative suppliers or
	manufacturing sources.
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The fluctuating cost of raw materials could increase our cost of goods sold.
	The fabrics used to make our products include synthetic fabrics whose raw materials include petroleum-based products.
Our products also include silver and natural fibers, including cotton. Our costs for raw materials are affected by, among other
things, weather, consumer demand, speculation on the commodities market, the relative valuations and fluctuations of the
currencies of producer versus consumer countries, and other factors that are general y unpredictable and beyond our control.
Increases in the cost of raw materials, including petroleum or the prices we pay for silver and our cotton yarn and cotton-
based textiles, could have a material adverse effect on our cost of goods sold, results of operations, financial condition, and
cash flows.
If we encounter problems with our distribution system, our ability to deliver our products to the market and to meet guest
expectations could be harmed.
	We rely on our distribution facilities for substantial y al of our product distribution. Our distribution facilities include
computer control ed and automated equipment, which means their operations may be subject to a number of risks related to
security or computer viruses, the proper operation of software and hardware, electronic or power interruptions, or other
system failures. In addition, our operations could also be interrupted by labor difficulties, extreme or severe weather
conditions or by floods, fires, or other natural disasters near our distribution centers. If we encounter problems with our
distribution system, our ability to meet guest expectations, manage inventory, complete sales, and achieve objectives for
operating efficiencies could be harmed.
Increasing labor costs and other factors associated with the production of our products in South Asia and South East Asia
could increase the costs to produce our products.
	A significant portion of our products are produced in South Asia and South East Asia and increases in the costs of labor
and other costs of doing business in the countries in this area could significantly increase our costs to produce our products
and could have a negative impact on our operations and earnings. Factors that could negatively affect our business include
labor shortages and increases in labor costs, difficulties and additional costs in transporting products manufactured from
these countries to our distribution centers and significant revaluation of the currencies used in these countries, which may
result in an increase in the cost of producing products. Also, the imposition of trade sanctions or other regulations against
products imported by us from, or the loss of "normal trade relations" status with any country in which our products are
manufactured, could significantly increase our cost of products and harm our business.
Risks related to information security and technology
We may be unable to safeguard against security breaches which could damage our customer relationships and result in
significant legal and financial exposure.
	As part of our normal operations, we receive confidential, proprietary, and personal y identifiable information, including
credit card information, and information about our customers, our employees, job applicants, and other third parties. Our
business employs systems and websites that al ow for the storage and transmission of this information. However, despite our
safeguards and security processes and protections, security breaches could expose us to a risk of theft or misuse of this
information, and could result in litigation and potential liability. The retail industry, in particular, has been the target of many
recent cyber-attacks. We may not have the resources or technical sophistication to be able to anticipate or prevent rapidly
evolving types of cyber-attacks. Attacks may be targeted at us, our vendors or customers, or others who have entrusted us
with information. In addition, despite taking measures to safeguard our information security and privacy environment from
security breaches, our customers and our business could stil be exposed to risk. Actual or anticipated attacks may cause us to
incur increasing costs including costs to deploy additional personnel and protection technologies, train employees and engage
third party experts and consultants. Advances in computer capabilities, new technological discoveries or other developments
may result in the technology used by us to protect transaction or other data being breached or compromised. Measures we
implement to protect against cyber-attacks may also have the potential to impact our customers' shopping experience or
decrease activity on our websites by making them more difficult to use. Data and security breaches can also occur as a result
of non-technical issues including intentional or inadvertent breach by employees or persons with whom we have commercial
relationships that result in the unauthorized release of personal or confidential information. Any compromise or breach of our
security could result in a violation of applicable privacy and other laws, significant legal and financial exposure, and damage to
our brand and reputation or other harm to our business.
Privacy and data protection laws increase our compliance burden.
	We are subject to a variety of privacy and data protection laws and regulations that change frequently and have
requirements that vary from jurisdiction to jurisdiction. For example, we are subject to significant compliance obligations
under privacy laws such as the General Data Privacy Regulation ("GDPR") in the European Union, the Personal Information
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Protection and Electronic Documents Act (“PIPEDA”) in Canada, and the California Consumer Privacy Act ("CCPA"). Some
privacy laws prohibit the transfer of personal information to certain other jurisdictions. We are subject to privacy and data
protection audits or investigations by various government agencies. Our failure to comply with these laws subjects us to
potential regulatory enforcement activity, fines, private litigation including class actions, and other costs. Our efforts to
comply with privacy laws complications our operations and adds to our compliance costs. A significant privacy breach or
failure to comply with privacy or data protection laws might have a material y adverse impact on our reputation, business
operations and our financial condition or results of operations.
Disruption of our information technology systems or unexpected network interruption could disrupt our business.
	We are increasingly dependent on information technology systems and third-parties to operate our e-commerce
websites, process transactions, respond to guest inquiries, manage inventory, purchase, sel and ship goods on a timely basis,
and maintain cost-efficient operations. The failure of our information technology systems to operate properly or effectively,
problems with transitioning to upgraded or replacement systems, or difficulty in integrating new systems, could adversely
affect our business. In addition, we have e-commerce websites in the United States, Canada, and international y. Our
information technology systems, websites, and operations of third parties on whom we rely, may encounter damage or
disruption or slowdown caused by a failure to successful y upgrade systems, system failures, viruses, computer "hackers",
natural disasters, or other causes. These could cause information, including data related to guest orders, to be lost or delayed
which could, especial y if the disruption or slowdown occurred during the holiday season, result in delays in the delivery of
products to our stores and guests or lost sales, which could reduce demand for our products and cause our sales to decline.
The concentration of our primary offices, two of our distribution centers, and a number of our stores along the west coast of
North America could amplify the impact of a natural disaster occurring in that area to our business, including to our
information technology systems. In addition, if changes in technology cause our information systems to become obsolete, or if
our information systems are inadequate to handle our growth, we could lose guests. We have limited back-up systems and
redundancies, and our information technology systems and websites have experienced system failures and electrical outages
in the past which have disrupted our operations. Any significant disruption in our information technology systems or websites
could harm our reputation and credibility, and could have a material adverse effect on our business, financial condition, and
results of operations.
Our technology-based systems that give our customers the ability to shop with us online may not function effectively.
	Many of our customers shop with us through our e-commerce websites and mobile apps. Increasingly, customers are
using tablets and smart phones to shop online with us and with our competitors and to do comparison shopping. We are
increasingly using social media and proprietary mobile apps to interact with our customers and as a means to enhance their
shopping experience. Any failure on our part to provide attractive, effective, reliable, user-friendly e-commerce platforms that
offer a wide assortment of merchandise with rapid delivery options and that continual y meet the changing expectations of
online shoppers could place us at a competitive disadvantage, result in the loss of e-commerce and other sales, harm our
reputation with customers, have a material adverse impact on the growth of our e-commerce business global y and could
have a material adverse impact on our business and results of operations.
Risks related to environmental, social, and governance issues
Climate change, and related legislative and regulatory responses to climate change, may adversely impact our business.
	There is increasing concern that a gradual rise in global average temperatures due to increased concentration of carbon
dioxide and other greenhouse gases in the atmosphere wil cause significant changes in weather patterns around the globe,
an increase in the frequency, severity, and duration of extreme weather conditions and natural disasters, and water scarcity
and poor water quality. These events could adversely impact the cultivation of cotton, which is a key resource in the
production of our products, disrupt the operation of our supply chain and the productivity of our contract manufacturers,
increase our production costs, impose capacity restraints and impact the types of apparel products that consumers purchase.
These events could also compound adverse economic conditions and impact consumer confidence and discretionary
spending. As a result, the effects of climate change could have a long-term adverse impact on our business and results of
operations. In many countries, governmental bodies are enacting new or additional legislation and regulations to reduce or
mitigate the potential impacts of climate change. If we, our suppliers, or our contract manufacturers are required to comply
with these laws and regulations, or if we choose to take voluntary steps to reduce or mitigate our impact on climate change,
we may experience increased costs for energy, production, transportation, and raw materials, increased capital expenditures,
or increased insurance premiums and deductibles, which could adversely impact our operations. Inconsistency of legislation
and regulations among jurisdictions may also affect the costs of compliance with such laws and regulations. Any assessment
of the potential impact of future climate change legislation, regulations or industry standards, as wel as any international
treaties and accords, is uncertain given the wide scope of potential regulatory change in the countries in which we operate.
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Increased scrutiny from investors and others regarding our environmental, social, governance, or sustainability,
responsibilities could result in additional costs or risks and adversely impact our reputation, employee retention, and
wil ingness of customers and suppliers to do business with us.
	Investor advocacy groups, certain institutional investors, investment funds, other market participants, stockholders, and
customers have focused increasingly on the environmental, social and governance ("ESG") or “sustainability” practices of
companies. These parties have placed increased importance on the implications of the social cost of their investments. If our
ESG practices do not meet investor or other industry stakeholder expectations and standards, which continue to evolve, our
brand, reputation and employee retention may be negatively impacted based on an assessment of our ESG practices. Any
sustainability report that we publish or otherwise sustainability disclosure we make may include our policies and practices on
a variety of social and ethical matters, including corporate governance, environmental compliance, employee health and
safety practices, human capital management, product quality, supply chain management, and workforce inclusion and
diversity. It is possible that stakeholders may not be satisfied with our ESG practices or the speed of their adoption. We could
also incur additional costs and require additional resources to monitor, report, and comply with various ESG practices. Also,
our failure, or perceived failure, to meet the standards included in any sustainability disclosure could negatively impact our
reputation, employee retention, and the wil ingness of our customers and suppliers to do business with us.
Risks related to global economic, political, and regulatory conditions
An economic recession, depression, downturn or economic uncertainty in our key markets may adversely affect consumer
discretionary spending and demand for our products.
	Many of our products may be considered discretionary items for consumers. Some of the factors that may influence
consumer spending on discretionary items include general economic conditions, high levels of unemployment, health
pandemics (such as the impact of the current COVID-19 coronavirus pandemic, including reduced store traffic and widespread
temporary closures of retail locations), higher consumer debt levels, reductions in net worth based on market declines and
uncertainty, home foreclosures and reductions in home values, fluctuating interest and foreign currency rates and credit
availability, government austerity measures, fluctuating fuel and other energy costs, fluctuating commodity prices, tax rates
and general uncertainty regarding the overal future economic environment. To date, COVID-19 and related restrictions and
mitigation measures have negatively impacted the global economy and created significant volatility and disruption of financial
markets. While the duration and severity of the economic impact of COVID-19 is unknown, any recession, depression or
general downturn in the global economy could negatively affect consumer confidence and discretionary spending. As global
economic conditions continue to be volatile or economic uncertainty remains, trends in consumer discretionary spending also
remain unpredictable and subject to reductions due to credit constraints and uncertainties about the future. Unfavorable
economic conditions may lead consumers to delay or reduce purchases of our products. Consumer demand for our products
may not reach our targets, or may decline, when there is an economic downturn or economic uncertainty in our key markets.
Our sensitivity to economic cycles and any related fluctuation in consumer demand may have a material adverse effect on our
financial condition.
Global economic and political conditions and global events such as health pandemics could adversely impact our results of
operations.
	Uncertain or chal enging global economic and political conditions could impact our performance, including our ability to
successful y expand international y. Global economic conditions could impact levels of consumer spending in the markets in
which we operate, which could impact our sales and profitability. Political unrest could negatively impact our guests and
employees, reduce consumer spending, and adversely impact our business and results of operations. Health pandemics, such
as the current COVID-19 coronavirus pandemic, and the related governmental, private sector and individual consumer
responses could contribute to a recession, depression, or global economic downturn, reduce store traffic and consumer
spending, result in temporary or permanent closures of retail locations, offices, and factories, and could negatively impact the
flow of goods.
We may be unable to source and sel our merchandise profitably or at al if new trade restrictions are imposed or existing
restrictions become more burdensome.
	The United States and the countries in which our products are produced or sold have imposed and may impose
additional quotas, duties, tariffs, or other restrictions or regulations, or may adversely adjust prevailing quota, duty, or tariff
levels. The results of any audits or related disputes regarding these restrictions or regulations could have an adverse effect on
our financial statements for the period or periods for which the applicable final determinations are made. Countries impose,
modify, and remove tariffs and other trade restrictions in response to a diverse array of factors, including global and national
economic and political conditions, which make it impossible for us to predict future developments regarding tariffs and other
trade restrictions. Trade restrictions, including tariffs, quotas, embargoes, safeguards, and customs restrictions, could increase
		39

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the cost or reduce the supply of products available to us, could increase shipping times, or may require us to modify our
supply chain organization or other current business practices, any of which could harm our business, financial condition, and
results of operations.
	We are dependent on international trade agreements and regulations. The countries in which we produce and sel our
products could impose or increase tariffs, duties, or other similar charges that could negatively affect our results of
operations, financial position, or cash flows.
	Adverse changes in, or withdrawal from, trade agreements or political relationships between the United States and the
PRC, Canada, or other countries where we sel or source our products, could negatively impact our results of operations or
cash flows. Any tariffs imposed between the United States and the PRC could increase the costs of our products. General
geopolitical instability and the responses to it, such as the possibility of sanctions, trade restrictions, and changes in tariffs,
including recent sanctions against the PRC, tariffs imposed by the United States and the PRC, and the possibility of additional
tariffs or other trade restrictions between the United States and Mexico, could adversely impact our business. It is possible
that further tariffs may be introduced, or increased. Such changes could adversely impact our business and could increase the
costs of sourcing our products from the PRC, or could require us to source more of our products from other countries.
	There could be changes in economic conditions in the United Kingdom ("UK") or European Union ("EU"), including due
to the UK's withdrawal from the EU, foreign exchange rates, and consumer markets. Our business could be adversely affected
by these changes, including by additional duties on the importation of our products into the UK from the EU and as a result of
shipping delays or congestion.
Changes in tax laws or unanticipated tax liabilities could adversely affect our effective income tax rate and profitability.
	We are subject to the income tax laws of the United States, Canada, and several other international jurisdictions. Our
effective income tax rates could be unfavorably impacted by a number of factors, including changes in the mix of earnings
amongst countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in
tax laws, new tax interpretations and guidance, the outcome of income tax audits in various jurisdictions around the world,
and any repatriation of unremitted earnings for which we have not previously accrued applicable U.S. income taxes and
international withholding taxes. We may face unanticipated tax liabilities in connection with our acquisition of MIRROR.
	Repatriations from our Canadian subsidiaries are not subject to Canadian withholding taxes if such distributions are
made as a return of capital. We have not accrued for any Canadian withholding taxes that could be payable on future
repatriations from our Canadian subsidiaries because we believe the current net investment in our Canadian subsidiaries is
expected to be indefinitely reinvested, or can be repatriated free of withholding tax. The extent to which future increases in
the net assets of our Canadian subsidiaries can be repatriated free of withholding tax is dependent on, among other things,
the amount of paid-up-capital in our Canadian subsidiaries and transactions undertaken by our exchangeable shareholders.
We are unable to determine the timing and extent to which such transactions may occur. Accordingly, increases in our
Canadian net assets may result in an increase to our effective tax rate.
	We and our subsidiaries engage in a number of intercompany transactions across multiple tax jurisdictions. Although we
believe that these transactions reflect the accurate economic al ocation of profit and that proper transfer pricing
documentation is in place, the profit al ocation and transfer pricing terms and conditions may be scrutinized by local tax
authorities during an audit and any resulting changes may impact our mix of earnings in countries with differing statutory tax
rates. At the end of 2020, our Advance Pricing Arrangement ("APA") with the Internal Revenue Service and the Canada
Revenue Agency expired. This APA stipulates the al ocation of certain profits between the U.S. and Canada. We are currently
in the process of negotiating the renewal of this arrangement and the final agreed upon terms and conditions thereof could
impact our effective tax rate.
	Current economic and political conditions make tax rules in any jurisdiction, including the United States and Canada,
subject to significant change. Changes in applicable U.S., Canadian, or other international tax laws and regulations, or their
interpretation and application, including the possibility of retroactive effect, could affect our income tax expense and
profitability, as they did in fiscal 2017 and fiscal 2018 upon passage of the U.S. Tax Cuts and Jobs Act and in 2020 with the
passage of the "CARES Act".
Our failure to comply with trade and other regulations could lead to investigations or actions by government regulators
and negative publicity.
	The labeling, distribution, importation, marketing, and sale of our products are subject to extensive regulation by
various federal agencies, including the Federal Trade Commission, Consumer Product Safety Commission and state attorneys
general in the United States, the Competition Bureau and Health Canada in Canada, as wel as by various other federal, state,
provincial, local, and international regulatory authorities in the countries in which our products are distributed or sold. If we
		40

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fail to comply with any of these regulations, we could become subject to enforcement actions or the imposition of significant
penalties or claims, which could harm our results of operations or our ability to conduct our business. In addition, any audits
and inspections by governmental agencies related to these matters could result in significant settlement amounts, damages,
fines, or other penalties, divert financial and management resources, and result in significant legal fees. An unfavorable
outcome of any particular proceeding could have an adverse impact on our business, financial condition, and results of
operations. In addition, the adoption of new regulations or changes in the interpretation of existing regulations may result in
significant compliance costs or discontinuation of product sales and could impair the marketing of our products, resulting in
significant loss of net revenue.
	Our international operations are also subject to compliance with the U.S. Foreign Corrupt Practices Act, or FCPA, and
other anti-bribery laws applicable to our operations. In many countries, particularly in those with developing economies, it
may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the
FCPA or other U.S. and international laws and regulations applicable to us. Although we have implemented procedures
designed to ensure compliance with the FCPA and similar laws, some of our employees, agents, or other partners, as wel as
those companies to which we outsource certain of our business operations, could take actions in violation of our policies. Any
such violation could have a material and adverse effect on our business.
Because a significant portion of our net revenue and expenses are generated in countries other than the United States,
fluctuations in foreign currency exchange rates have affected our results of operations and may continue to do so in the
future.
	The functional currency of our international subsidiaries is general y the applicable local currency. Our consolidated
financial statements are presented in U.S. dol ars. Therefore, the net revenue, expenses, assets, and liabilities of our
international subsidiaries are translated from their functional currencies into U.S. dol ars. Fluctuations in the value of the U.S.
dol ar affect the reported amounts of net revenue, expenses, assets, and liabilities. Foreign exchange differences which arise
on translation of our international subsidiaries' balance sheets into U.S. dol ars are recorded as a foreign currency translation
adjustment in accumulated other comprehensive income or loss within stockholders' equity.
	We also have exposure to changes in foreign exchange rates associated with transactions which are undertaken by our
subsidiaries in currencies other than their functional currency. Such transactions include intercompany transactions and
inventory purchases denominated in currencies other than the functional currency of the purchasing entity. As a result, we
have been impacted by changes in exchange rates and may be impacted for the foreseeable future. The potential impact of
currency fluctuation increases as our international expansion increases.
	Although we use financial instruments to hedge certain foreign currency risks, these measures may not succeed in ful y
offsetting the negative impact of foreign currency rate movements.
	We are exposed to credit-related losses in the event of nonperformance by the counterparties to forward currency
contracts used in our hedging strategies.
Risks related to intel ectual property
Our fabrics and manufacturing technology general y are not patented and can be imitated by our competitors. If our
competitors sel products similar to ours at lower prices, our net revenue and profitability could suffer.
	The intel ectual property rights in the technology, fabrics, and processes used to manufacture our products general y
are owned or control ed by our suppliers and are general y not unique to us. Our ability to obtain intel ectual property
protection for our products is therefore limited. We hold limited patents and exclusive intel ectual property rights in the
technology, fabrics or processes underlying our products. As a result, our current and future competitors are able to
manufacture and sel products with performance characteristics, fabrics and styling similar to our products. Because many of
our competitors have significantly greater financial, distribution, marketing, and other resources than we do, they may be
able to manufacture and sel products based on our fabrics and manufacturing technology at lower prices than we can. If our
competitors sel products similar to ours at lower prices, our net revenue and profitability could suffer.
Our failure or inability to protect our intel ectual property rights could diminish the value of our brand and weaken our
competitive position.
	We currently rely on a combination of copyright, trademark, trade dress, and unfair competition laws, as wel as
confidentiality procedures and licensing arrangements, to establish and protect our intel ectual property rights. The steps we
take to protect our intel ectual property rights may not be adequate to prevent infringement of these rights by others,
including imitation of our products and misappropriation of our brand. In addition, intel ectual property protection may be
unavailable or limited in some international countries where laws or law enforcement practices may not protect our
		41

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intel ectual property rights as ful y as in the United States or Canada, and it may be more difficult for us to successful y
chal enge the use of our intel ectual property rights by other parties in these countries. If we fail to protect and maintain our
intel ectual property rights, the value of our brand could be diminished, and our competitive position may suffer.
Our trademarks and other proprietary rights could potential y conflict with the rights of others and we may be prevented
from sel ing some of our products.
	Our success depends in large part on our brand image. We believe that our trademarks and other proprietary rights
have significant value and are important to identifying and differentiating our products from those of our competitors and
creating and sustaining demand for our products. We have applied for and obtained some United States, Canada, and
international trademark registrations, and wil continue to evaluate the registration of additional trademarks as appropriate.
However, some or al of these pending trademark applications may not be approved by the applicable governmental
authorities. Moreover, even if the applications are approved, third parties may seek to oppose or otherwise chal enge these
registrations. Additional y, we may face obstacles as we expand our product line and the geographic scope of our sales and
marketing. Third parties may assert intel ectual property claims against us, particularly as we expand our business and the
number of products we offer. Our defense of any claim, regardless of its merit, could be expensive and time consuming and
could divert management resources. Successful infringement claims against us could result in significant monetary liability or
prevent us from sel ing some of our products. In addition, resolution of claims may require us to redesign our products,
license rights from third parties, or cease using those rights altogether. Any of these events could harm our business and
cause our results of operations, liquidity, and financial condition to suffer.
Risks related to legal and governance matters
We are subject to periodic claims and litigation that could result in unexpected expenses and could ultimately be resolved
against us.
	From time to time, we are involved in litigation and other proceedings, including matters related to product liability
claims, stockholder class action and derivative claims, commercial disputes and intel ectual property, as wel as trade,
regulatory, employment, and other claims related to our business. Any of these proceedings could result in significant
settlement amounts, damages, fines, or other penalties, divert financial and management resources, and result in significant
legal fees. An unfavorable outcome of any particular proceeding could exceed the limits of our insurance policies or the
carriers may decline to fund such final settlements and/or judgments and could have an adverse impact on our business,
financial condition, and results of operations. In addition, any proceeding could negatively impact our reputation among our
guests and our brand image.
Our business could be negatively affected as a result of actions of activist stockholders or others.
	We may be subject to actions or proposals from stockholders or others that may not align with our business strategies
or the interests of our other stockholders. Responding to such actions can be costly and time-consuming, disrupt our business
and operations, and divert the attention of our board of directors, management, and employees from the pursuit of our
business strategies. Such activities could interfere with our ability to execute our strategic plan. Activist stockholders or others
may create perceived uncertainties as to the future direction of our business or strategy which may be exploited by our
competitors and may make it more difficult to attract and retain qualified personnel and potential guests, and may affect our
relationships with current guests, vendors, investors, and other third parties. In addition, a proxy contest for the election of
directors at our annual meeting would require us to incur significant legal fees and proxy solicitation expenses and require
significant time and attention by management and our board of directors. The perceived uncertainties as to our future
direction also could affect the market price and volatility of our securities.
Anti-takeover provisions of Delaware law and our certificate of incorporation and bylaws could delay and discourage
takeover attempts that stockholders may consider to be favorable.
	Certain provisions of our certificate of incorporation and bylaws and applicable provisions of the Delaware General
Corporation Law may make it more difficult or impossible for a third-party to acquire control of us or effect a change in our
board of directors and management. These provisions include:
	•	the classification of our board of directors into three classes, with one class elected each year;
	•	prohibiting cumulative voting in the election of directors;
	•	the ability of our board of directors to issue preferred stock without stockholder approval;
	•	the ability to remove a director only for cause and only with the vote of the holders of at least 66 2/3% of our voting
	stock;
		42

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•

a special meeting of stockholders may only be cal ed by our chairman or Chief Executive Officer, or upon a

resolution adopted by an affirmative vote of a majority of the board of directors, and not by our stockholders;

•

prohibiting stockholder action by written consent; and

•

our stockholders must comply with advance notice procedures in order to nominate candidates for election to our

board of directors or to place stockholder proposals on the agenda for consideration at any meeting of our

stockholders.

In addition, we are governed by Section 203 of the Delaware General Corporation Law which, subject to some specified

exceptions, prohibits "business combinations" between a Delaware corporation and an "interested stockholder," which is

general y defined as a stockholder who becomes a beneficial owner of 15% or more of a Delaware corporation's voting stock,

for a three-year period fol owing the date that the stockholder became an interested stockholder. Section 203 could have the

effect of delaying, deferring, or preventing a change in control that our stockholders might consider to be in their best

interests.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The fol owing table provides information regarding our purchases of shares of our common stock during the first

quarter of 2021 related to our stock repurchase program:

Maximum Dollar

Total Number of

Value of Shares

Shares Purchased

that May Yet Be

Total Number of

Average

as Part of Publicly

Purchased Under

Price Paid per

Announced Plans

the Plans or

Period(1)

Purchased(2)

or Programs(2)

Programs(2)

February 1, 2021 - February 28, 2021

— $

—

— $

500,000,000

March 1, 2021 - April 4, 2021

—

500,000,000

April 5, 2021 - May 2, 2021

269,517

311.02

269,517

416,175,386

Total

269,517

__________(1)

Monthly information is presented by reference to our fiscal periods during our first quarter of 2021.

(2)

On January 31, 2019, our board of directors approved a stock repurchase program of up to $500 mil ion of our common shares on the open market or

in privately negotiated transactions. On December 1, 2020, our board of directors approved an increase in the remaining authorization of our existing

stock repurchase program from $264 mil ion to $500 mil ion. 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

wil depend upon market conditions, eligibility to trade, and other factors.

The fol owing table provides information regarding our purchases of shares of our common stock during the first

quarter of 2021 related to our Employee Share Purchase Plan:

Maximum

Total Number of

Number of Shares

Shares Purchased

that May Yet Be

Total Number of

Average

as Part of Publicly

Purchased Under

Price Paid per

Announced Plans

the Plans or

Period(1)

Purchased(2)

or Programs(2)

Programs(2)

February 1, 2021 - February 28, 2021

5,236 $

333.82

5,236

4,654,176

March 1, 2021 - April 4, 2021

8,589

322.02

8,589

4,645,587

April 5, 2021 - May 2, 2021

5,646

331.22

5,646

4,639,941

Total

19,471

__________(1)

Monthly information is presented by reference to our fiscal periods during our first quarter of 2021.

(2)

The ESPP was approved by our board of directors and stockholders in September 2007. Al shares purchased under the ESPP are purchased on the

Nasdaq Global Select Market (or such other stock exchange as we may designate). Unless our board terminates the ESPP earlier, it wil continue until

al shares authorized for purchase have been purchased. The maximum number of shares authorized to be purchased under the ESPP was 6,000,000.

Excluded from this disclosure are shares withheld to settle statutory employee tax withholding related to the vesting of

stock-based compensation awards.

Table of Contents

ITEM 6. EXHIBITS

Incorporated by Reference

ExhibitFiledExhibitFiling

No.

Exhibit Title

Herewith

Form

No.

File No.

Date

31.1

Certification of principal executive officer Pursuant to

Exchange Act Rule 13a-14(a)

31.2

Certification of principal financial and accounting officer

Pursuant to Exchange Act Rule 13a-14(a)

32.1*

Certification of principal executive officer and principal

financial and accounting officer Pursuant to 18 U.S.C.

Section 1350 as Adopted Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

101

The fol owing unaudited interim consolidated financial

statements from the Company's Quarterly Report on Form

10-Q for the fiscal quarter ended May 2, 2021, formatted in

iXBRL: (i) Consolidated Balance Sheets, (i ) Consolidated

Statements of Operations and Comprehensive Income (Loss),

(i i) Consolidated Statements of Stockholders' Equity, (iv)

Consolidated Statements of Cash Flows (v) Notes to the

Unaudited Interim Consolidated Financial Statements

Furnished herewith.

		Table of Contents
SIGNATURES
	Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
		signed on its behalf by the undersigned, thereunto duly authorized.

			lululemon athletica inc.
			By: /s/ MEGHAN FRANK
			Meghan FrankChief Financial Officer(principal financial and accounting officer)
		Dated: June 3, 2021
				45

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Exhibit Index

Incorporated by Reference

Exhibit

Filed

Exhibit

Filing

No.

Exhibit Title

Herewith

Form

No.

File No.

Date

31.1

Certification of principal executive officer Pursuant to

Exchange Act Rule 13a-14(a)

31.2

Certification of principal financial and accounting officer

Pursuant to Exchange Act Rule 13a-14(a)

32.1*

Certification of principal executive officer and principal

financial and accounting officer Pursuant to 18 U.S.C.

Section 1350 as Adopted Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

101

The fol owing unaudited interim consolidated financial

statements from the Company's Quarterly Report on Form

10-Q for the fiscal quarter ended May 2, 2021, formatted in

iXBRL: (i) Consolidated Balance Sheets, (i ) Consolidated

Statements of Operations and Comprehensive Income (Loss),

(i i) Consolidated Statements of Stockholders' Equity, (iv)

Consolidated Statements of Cash Flows (v) Notes to the

Unaudited Interim Consolidated Financial Statements

Furnished herewith.

Exhibit 31.1
	I, Calvin McDonald, certify that:
		1. I have reviewed this quarterly report on Form 10-Q of lululemon athletica inc.;
		2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
	material fact necessary to make the statements made, in light of the circumstances under which such statements were made,
	not misleading with respect to the period covered by this report;
		3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
	present in al material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
	periods presented in this report;
		4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
	procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
	defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
			(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
	designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
	subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
	prepared;
			(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting
	to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
	preparation of financial statements for external purposes in accordance with general y accepted accounting principles;
			(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
	our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
	report based on such evaluation; and
			(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
	during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
	material y affected, or is reasonably likely to material y affect, the registrant’s internal control over financial reporting; and
		5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
	over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
	performing the equivalent functions):
			(a) Al significant deficiencies and material weaknesses in the design or operation of internal control over financial
	reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
	financial information; and
			(b) Any fraud, whether or not material, that involves management or other employees who have a significant role
	in the registrant’s internal control over financial reporting.

				By: /s/ CALVIN MCDONALD
					Calvin McDonaldChief Executive Officer and Director(principal executive officer)
	Date: June 3, 2021

Exhibit 31.2
	I, Meghan Frank, certify that:
		1. I have reviewed this quarterly report on Form 10-Q of lululemon athletica inc.;
		2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
	material fact necessary to make the statements made, in light of the circumstances under which such statements were made,
	not misleading with respect to the period covered by this report;
		3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
	present in al material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
	periods presented in this report;
		4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
	procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
	defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
			(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
	designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
	subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
	prepared;
			(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting
	to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
	preparation of financial statements for external purposes in accordance with general y accepted accounting principles;
			(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
	our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
	report based on such evaluation; and
			(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
	during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
	material y affected, or is reasonably likely to material y affect, the registrant’s internal control over financial reporting; and
		5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
	over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
	performing the equivalent functions):
			(a) Al significant deficiencies and material weaknesses in the design or operation of internal control over financial
	reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
	financial information; and
			(b) Any fraud, whether or not material, that involves management or other employees who have a significant role
	in the registrant’s internal control over financial reporting.

				By: /s/ MEGHAN FRANK
					Meghan FrankChief Financial Officer(principal financial and accounting officer)
	Date: June 3, 2021

Exhibit 32.1
	CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
		AS ADOPTED PURSUANT TO SECTION 906 OF
		THE SARBANES-OXLEY ACT OF 2002
			In connection with the Quarterly Report of lululemon athletica inc. (the “Company”) on Form 10-Q for the first quarter
				of fiscal 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the
				undersigned officers of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-
				Oxley Act of 2002, that, to such officer’s knowledge:
					(1) The Report ful y complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
				1934; and
					(2) The information contained in the Report fairly presents, in al material respects, the financial condition and
				results of operations of the Company.

						By: /s/ CALVIN MCDONALD
							Calvin McDonaldChief Executive Officer and Director(principal executive officer)
				Date: June 3, 2021

						By: /s/ MEGHAN FRANK
							Meghan FrankChief Financial Officer(principal financial and accounting officer)
				Date: June 3, 2021
			The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the
				Report or as a separate disclosure document.