Name of the student

Assignment number:

Date:

1
TABLE OF CONTENTS:

1. Comp-any description…………………………………………………………. 3
2. Organization Structure……………………………………………………… 3
3. The company’s Vision………………………………………………………………6
4. Core Values…………………………………………………………………. 6
5. Official name and headquarters……………………………………………………7
6. Fiscal year-end of the corporation…………………………………………………..7
7. Accounting principles and measurement used by the company……………………8
8. audit report ………………………………………………………………………8
9. Treasury shares ……………………………………………………………………9
10. equity method…………………………………………………………………….9
11. Consolidation method…………………………………………………………….10
12. Dividends………………………………………………………………………….10
13. Stock split…………………………………………………………………………10
14. Discussion on major items in the balance sheets………………………………….10
15. Income statement………………………………………………………………….13
16. Statement of cashflow…………………………………………………………….15
17. the effect of including or excluding of items like equity earnings/ discontinued
operation………………………………………………………………………….17
18. Vertical analysis of income statement of lululemon………………………………..18
19. Vertical analysis of income statement of nike (competitor of lululemon)…………20
20. Income statement ratio analysis of lululemon …………………………………….23
21. Vertical/common-size analysis of balance sheet of lululemon……………………..25
22. Vertical/common-size analysis of balance sheet of nike (competitor of lululemon)…26
23. References……………………………………………………………………………..33

2
LULULEMON ATHLETICA:

COMPANY DESCRIPTION:

Located in Vancouver, Canada, Lululemon Athletica Inc. sells athletic wear all around the world.

Chip Wilson established the business in 1998 under the name "Lululemon Athletica," which was

then changed to "Lululemon" in 2003. Lululemon specializes on athletic gear with a yoga

aesthetic and other fitness-related clothing for both sexes. Lululemon is renowned for

emphasizing high-quality goods that combine performance, functionality, and style. Yoga tops,

bottoms, leggings, sweaters, jackets and accessories like purses, socks and mats are all part of

their product line. The business mostly caters to ladies, but it has lately increased its selection to

include clothing for males. (yahoo finance,2023)

Over the years, Lululemon has grown significantly in terms of financial performance. A variety

of elements, including the growth of their internet business and the expansion of their store base,

have contributed to their revenue. The business has a robust direct-to-consumer channel, with

physical storefronts and online shopping sites both contributing to sales.

Lululemon has a fulltime employee up to 34,000, and is an Apparel retail industry in consumer

cyclical Sector. It conducts business in the US, China, Canada, Australia, and multiple other

countries. (commission, 2022)

ORGANIZATION STRUCTURE:

Lululemon include the following honorable leaders:

1. CALVIN MCDONALD, CEO LULULEMON

3
Calvin McDonald is an enthusiastic leader who places a strong emphasis on driving growth. He

has a proven track record of assisting big businesses in growing, innovating, and improving

customer interaction in both physical locations and online platforms. He has guided the

company's international business to treble its levels from 2021 and accelerated efforts to ensure

that 100% of lululemon products are created using sustainable materials by 2030. As CEO, he

has routinely delivered double-digit revenue growth.

Mr McDonald served as president and CEO, at a component of the LVMH luxury brand, until

joining lululemon in August 2018. His five-year term saw substantial expansion for Sephora

America. He formerly held the positions of President and CEO of Sears Canada for two years

and spent 17 years working for Canada's largest store, Loblaw Companies Limited.

2. MICHAEL ARAGON, CHIEF EXECUTIVE OFFICER

Michael Aragon, who has over 25 years of experience in strategic and operational roles, oversees

the creation of the lululemon Studio platform and is particularly interested in bringing digital

fitness to life across all of the company's platforms.

Mr. Aragon spent five years as Chief Content Officer at Twitch, an Amazon company, before

joining lululemon. Twitch has become a top live streaming platform and

creative community as a result of his successful expansion of the platform's

creator base and diversification of its content offerings. Mr. Aragon is

passionate about health and fitness in addition to his professional

endeavours.

4
 3. JULIE AVIRIL EXECUTIVE VICE PRESIDENT, CHIEF INFORMATION

OFFICER

With the use of cutting-edge technology, Julie Averill, who joined

lululemon in 2017, has revolutionised the company's retail operations and

improved consumer experiences. She served as REI's chief information

officer before joining lululemon and worked at Nordstrom for more than

ten years in a variety of IT leadership positions. Ms. Averill has a BA in computer science from

Seattle Pacific University and an MBA from the University of Washington. She regularly

participates in STEM boards and advisory positions for education in addition to her professional

activities to promote technology professions and educational access.

4. CELESTE BORGONYE, PRESIDENT

Since joining lululemon in 2006, Celeste Burgoyne has held a number of

important roles, including executive vice president of the Americas and

global guest innovation, senior vice president of retail for North America,

vice president of store operations, and general manager of U.S. operations. She obtained

expertise at Abercrombie & Fitch, where she worked for eleven years, including as Senior

Director of Stores, before joining lululemon. In 1996, Celeste graduated with a Bachelor of Arts

from the University of San Diego. She takes pleasure in doing yoga, cycling, and running.

Celeste loves living in Vancouver with her two young sons, and the family frequently travels to

Whistler for the winter season.

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 5. SUN CHOE, CPO

Sun Choe, the head of lululemon's international teams, is in charge of

developing the goods that make the business successful. She joined the

company in 2016 as the Senior VP of Global Merchandising, and since

then, she has been instrumental in strengthening merchandising

capabilities by working with design leadership to provide excellent product assortments that are

in line with lululemon's vision for customers. Ms. Choe worked in multi-channel merchandising

at companies like West Elm, madwell etc.. She has a proven track record of getting things done

and developing top-notch teams. The University of Maryland College Park is where Ms. Choe

obtained her undergraduate degree.

LULULEMON’S VISION

Lululemon’s vision is to craft life-changing products and experiences that foster meaningful

connections, unlocking boundless potential and promoting overall well-being for everyone.

LULULEMON’S CORE VALUES

Lululemon upholds the following basic values, which direct their behavior and define their

culture:

Personal Responsibility: They place a high value on honesty and integrity and accept full

responsibility for their decisions and the results they produce.

Connection: Lululemon fosters trusted relationships and creates connections by valuing and

showcasing each person's distinctive traits.

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To ensure that everyone has a feeling of belonging and inclusion, they work to remove obstacles

to equity.

Courage: Lululemon exemplifies courage by unafraid taking on large, difficult tasks for the

benefit of their neighborhood and the globe.

Fun: All facets of their job are imbued with joy and laughter, making it a joyful and delightful

experience.

Lululemon is dedicated to encouraging inclusivity for all people and cultivating a setting where

everybody is welcomed, respected, and cherished.

OFFICIAL NAME AND HEADQUARTERS:

Lululemon Athletica Inc. is the corporation's legal name. Its corporate headquarters are located in

Los Angeles. Vancouver, British Columbia, Canada.

FISCAL YEAR-END OF THE CORPORATION

Each year, Lululemon's fiscal year concludes on January 31, a 52-week year, but on occasion

ending in a 53-week year due to the occurrence of an extra week. This indicates that the financial

reporting period for the company corresponds to the calendar year. Lululemon may capitalize on

the holiday season, which is a significant time for retail firms, especially in the apparel industry,

by concluding its fiscal year in January. As a result, the business is able to incorporate in its

annual reports crucial sales data and financial outcomes from the hectic holiday shopping season.

Given that many retailers use a comparable fiscal year, the January fiscal year-end also makes it

easier to compare and analyze Lululemon's financial performance with that of other businesses in

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the sector. Due to the ease with which financial reports can be contrasted on a foundation of

standardization, this alignment makes benchmarking and industry comparisons simpler.

ACCOUNTING PRINCIPLES AND MEASUREMENT USED BY THE COMPANY

Lululemon Athletica Inc. prepare financial statements in accordance with Generally Accepted

Accounting Standards (GAAP). The standardized structure offered by GAAP for recording and

reporting financial data ensures uniformity and comparability among various firms.

Regardless of when cash is collected or paid, the corporation uses the accrual basis of

accounting, which records expenses and revenue as they incur. By aligning revenues with the

costs incurred to produce those revenues, this strategy enables a more realistic portrayal of

Lululemon's financial performance. (marketscreener, 2023)

AUDIT REPORT

Every year, Lululemon Athletica Inc. commissions an independent auditing company to review

its financial statements. In order to reassure shareholders and other stakeholders about the

veracity of the financial data disclosed, the audit report offers an unbiased opinion on the fairness

and dependability of Lululemon's financial statements. The report of independent listed financial

accounting firm of lululemon is signed by PricewaterhouseCoopers which is a firm of

professional chartered accountants in Vancouver, Canada. (yahoo finance,2023)

TREASURY SHARES

Treasury shares are Lululemon's own shares that have been repurchased. Since the firm owns the

repurchased shares, they are not regarded as outstanding shares. The company has the right to

reissue or retire treasury shares.

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The following is the description of repurchase stock as per the Statement of changes in Equity of

lululemon for 3 years:

Description Repurchase of common stock (value in thousands)

as of Feb 3rd 2019, as of Feb 2nd 2020, as of 31st Jan 2021,

Shares of common stock 1056 369 2202

Par value 5 2 11

(commission,2022)

EQUITY METHOD

The whole market value of the amount transferred, including the market/fair value of the

Company's previous equity interests as of acquisition date, is used for calculating the purchase

price of an acquisition. The acquisition price is divided among the fair market values of the

obligations incurred, the purchased fixed assets, and any excess is recorded as goodwill. The use

of considerable estimates and assumptions may be necessary for these fair value assessments,

which call for judgement. whilst a measurement period of up to one year, the purchase price

allocation may be considered provisional in order to provide for a fair amount of time to gather

the data needed to identify and value the assets bought and obligations taken on. The period in

which the adjustment amount is decided is when any such measurement period modifications are

recognized. Acquisition-related transaction costs are deducted when they are incurred.

CONSOLIDATION METHOD

When a firm has control over one or more other entities, they adopt the consolidation approach.

for a full picture of company's financial status and performance, Lululemon consolidates its

subsidiaries and other controlled entities, combining their financial statements with its own

9
DIVIDENDS

Since Lululemon Athletica doesn't currently pay dividends, it is safe to assume that all of its

profits have been reinvested in the company. (NASDAQ,2023)

STOCK SPLIT

The stock of lululemon athletica has undergone a single stock split in total.

The split of the stock took place on July 12, 2011. (companiesmarketcap,n.d)

Prior to July 12, 2011, one LULU share would be worth two LULU shares today.

DISCUSSION ON MAJOR ITEMS IN THE BALANCE SHEETS

Inventory:

Lululemon's inventories show the worth of the products that are kept on hand for sale. Inventory

stood at $647.2 million as of January 31, 2021, up from $518.5 million on February 2, 2020. The

rise in inventories demonstrates the business's ongoing development and growth.

Inventory reduction to net realizable value is a policy of Lululemon. As of January 31, 2021, this

provision was worth $30.97 million, and as of February 2, 2020, it was worth $22.07 million.

The allowance is intended to cover anticipated quality problems, obsolescence, and inventory

damage. (commission,2022)

The company also reports that it had net write-offs for inventory that was assessed to be out-of-

date, defective, or damaged of $20.5 million, $28.6 million, and $25.3 million in 2020, 2019, and

2018, respectively.

Prepaid expenses and other current assets

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Prepaid expenses and other current assets are sums that have been pre-paid for products or

services that will be used during the upcoming fiscal year. Prepaid expenses and other current

assets reached $125.1 million as of January 31, 2021, up from $70.5 million on February 2,

2020.

Prepaid expenses, assets from forward currency contracts, government payroll subsidy

receivables, and other current assets are some of the things that make up other current assets and

prepaid expenses. These assets represent a variety of pre-paid expenses and anticipated future

gains that will be realized quite soon.

Property, plant and Equipment:

Land, buildings, leasehold improvements, furniture etc. are all included in Lululemon's property

Property and equipment had a gross value of $1.44 billion as of January 31, 2021, a net value of

$745.7 billion due to cumulative depreciation of $690.6 million. On February 2, 2020, the net

worth was $671.7 million.

The business reveals the specifics of each type of real estate and equipment, as well as the

capitalized expenses related to in-house software development. In addition, the cost of

depreciating property and equipment for 2020 was $180.1 million.

Intangible assets:

Lululemon's intangible assets include things like brand value, client relationships, technology,

content, and other distinguishable intangible assets. Net intangible assets were $80.1 million as

of January 31, 2021, up from $0.2 million on February 2, 2020. The acquisition of MIRROR,

which led to the recognition of brand value, customer relationships, technology, and content, is

primarily responsible for the increase in intangible assets.

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Using generally recognized valuation methods, the latest market value of the separately

identifiable intangible assets acquired as part of the MIRROR transaction was established.

Depending on the type of acquired assets, these strategies may include discounted cash flows,

and replacement cost methodologies etc. The intangible assets expected useful lifetimes range

from 4.4 years to 19.4 years. (commission,2022)

Other Non-Current Assets:

Lululemon's other assets include things like implementation fees for cloud computing

arrangements, security deposits, and other unrelated assets. Other non-current assets totaled

$106.6 million as of January 31, 2021, up from $56.2 million as of February 2, 2020. The growth

is attributable to acquisition of numerous long-term assets to support its business. (yahoo

finance,2023)

Other Accrued Liabilities:

These obligations have been incurred, but they have not yet been paid or documented. Other

accrued obligations as of January 31, 2021 were in an amount to be determined from the facts

available.

These liabilities consist of things like delayed consideration, accumulated compensation, and

other accruals. Based on the company's estimates and computations, they are recognized and

reported.

INCOME STATEMENT

Revenue recognition:

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Lululemon recognizes its net revenue from a number of sources, including company-operated

stores, other retail locations, wholesale accounts, income from MIRROR, outlets, time being

locations, warehouse, license and supply agreements, and other sources. After subtracting

markdowns, discounts, customer-paid sales taxes, and returns, net revenue is recorded.

Lululemon checks if each performance duties are different for customer contracts with numerous

performance expectations. Each performance obligation's share of the transaction price, net of

discounts, is determined by looking at each individual selling price. When ownership of the

goods or services is given to the customer, revenue recognized. When the client has legal

ownership, physical possession, and acceptance—which together constitute the power to direct

the use of the goods and get its benefits—control is regarded to have transferred.

Lululemon shows revenue excluding anticipated refunds. The asset for the value of anticipated

returned merchandise is recognised in other prepaid and other current assets, but the liability for

sales return is recorded in other current liabilities. (commission,2022)

Cost of Goods Sold:

The cost of goods sold consists of a number of expenses, such as the price of purchased goods

(including acquisition and production costs), delivery fees to distribution centers, distribution

center fees, production fees, rent for company-owned retail locations, hemming fees, inventory

provision costs, and fees for digital content subscription services.

Selling, general, and administrative expenses:

Included in these expenditures are salaries and benefits for employees, travel expenses, expert

fees, technology, accounting, legal, rent, and depreciation and amortization etc.

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Store Pre-Opening Expenses:

Selling, general, and administrative expenses comprise operating expenses incurred prior to the

opening of new stores.

Income Taxes:

The liability method is what Lululemon use to account for income taxes.

The value of the deferred income tax assets is reduced if it is more likely than not that some or

all of the assets won't be realised. Variables include things like projected taxable income, tax

planning strategies, and planned reversals of deferred tax liabilities. It could impact the timing of

the recognition of a deferred income tax asset. The company evaluates its tax positions and

ascertains the largest tax benefit that will probably be upheld in the event that tax authorities look

into the situation. Interest expenses and tax-related penalties are reported as needed.

The overall revenue recognition policies, cost of products sold, operating expenses, pre-opening

costs, and income tax accounting procedures used by Lululemon are all reflected in these income

statement line items.

STATEMENT OF CASHFLOW

Following are some insights on and important conclusions from cashflow statements of

lululemon:

Strong Operating Cash Flow:

Lululemon showed a good ability to generate cash from its daily operations. From $669.3 million

in 2020 to $803.3 million in 2021 and then to $1.39 billion in 2022, net cash produced by

14
operating activities climbed dramatically. This suggests enhanced profitability and effective

working capital management.

Working Capital Management:

The operating cash flow was strongly impacted by changes in operating assets and liabilities.

Notably, inventory management significantly improved, as seen by decreases in inventories of

$323.6 million in 2022, $96.5 million in 2021, and $117.6 million in 2020. Effective inventory

management reduced possible write-offs and helped free up cash.

Investments and Capital Expenditures:

Lululemon continued to make significant investments in property and equipment, demonstrating

its dedication to infrastructure improvements, store expansion, and technological advancements.

The business made a $394.5 million investment in 2022, $229.2 million in 2021, and $283

million in 2020. For supporting growth and enhancing the customer experience, these

expenditures are essential.

Acquisitions & Mergers:

A large acquisition by Lululemon in 2021 resulted in a net cash outflow of $452.6 million.

Acquisitions can give the company a strategic edge and aid in business diversification, but it's

important to carefully consider the financial ramifications and integration issues involved with

such transactions.

Financing Activities and Share Repurchases:

Lululemon set aside a sizeable sum of cash for share repurchases as part of its financing

activities. In 2022, 2021, and 2020, the business repurchased common shares totaling $812.6,

15
$63.7, and $173.4 million, respectively. Repurchasing shares can be a successful strategy for

increasing shareholder value and expressing faith in the company's future prospects.

Gift card impact:

An intriguing feature is the acknowledgment of revenue from unused gift cards. In proportion to

the value of the gift cards redeemed, Lululemon reduced net revenue to account for the

percentage that was not used. This strategy offers clarity and is in line with how the business

anticipates future gift card redemptions.

Foreign Exchange Rates:

Changes in foreign exchange rates may have an effect on cash and cash equivalents. Changes in

currency rates had a tiny net outflow of $6.9 million on cash and cash equivalents in 2022,

compared to a net inflow of $30.0 million in 2021. This emphasizes how crucial controlling

currency risk is in today's increasingly international company environment.

THE EFFECT OF INCLUDING OR EXCLUDING OF ITEMS LIKE EQUITY

EARNINGS/ DISCONTINUED OPERATION.

The earnings per share (EPS) calculation and the financial performance of Lululemon can be

impacted significantly by the inclusion or removal of particular factors, such as equity earnings

and discontinued activities.

Diluted EPS

Dilution of outstanding shares from stock options and awards is taken into account in the diluted

EPS. In each of the three years, the diluted weighted-average number of shares outstanding for

16
Lululemon is marginally larger than the basic weighted-average number of shares outstanding.

This suggests that there were potentially dilutive securities that, if converted into common stock,

may raise the number of outstanding shares. However, according to the declaration, some stock

options and awards were anti-dilutive and were therefore not included in the calculation of

diluted EPS.

Impact on EPS:

While ceased operations may produce gains or losses that can affect EPS, equity earnings can

positively impact net income and enhance EPS. It is difficult to determine exactly how these

items may affect Lululemon's EPS without particular information about them.

PART 2

VERTICAL ANALYSIS OF INCOME STATEMENT OF LULULEMON

Value in percentage of revenue

Description 2023 2022 2021 2020 2019

Revenue
100.0% 100.0% 100.0% 100.0% 100.0%

COGS
44.7% 42.5% 44.1% 44.1% 44.8%

Gross Profit
55.3% 57.5% 55.9% 55.95% 55.2%

General and 33.9% 35.4% 37.3% 33.% 33.8%

Administrative

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 Expense

Selling and Marketing

Expense 0.0% 35.45% 37.35% 33.5% 33.8%

Interest Expense
5.9% 5.7% 5.2% 6.3% 7.0%

Net Income
10.5% 15.6% 13.4% 16.2% 14.7%

EPS (basic)
0.1 0.1 0.1 0.1 0.1

(COMMISSION, 2022)

The following graph represents the income statement line items yearly variation

Yearly Representation of Income

Statement(lululemon)
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
2023 2022 2021 2020 2019

COGS Gross Profit

General and Administrative Expense Selling and Marketing Expense

VERTICAL ANALYSIS OF INCOME STATEMENT OF NIKE (COMPETITOR OF

LULULEMON)

Value in percentage of revenue

18
 Description 2023 2022 2021 2020 2019

Revenue 100.0% 100.0% 100.0% 100.0%

COGS 54.0% 55.2% 56.6% 55.3%

Gross Profit 46.0%5 44.8% 43.4% 44.7%

General and

Administrative Expense 31.7% 29.2% 35.1% 32.5%

Selling and Marketing

Expense
0.0 0.0 0.0 0.0

Interest Expense

Net Income 12.9% 12.9% 6.8% 10.3%

EPS (basic)

(COMMISSION, 2022)

income statement line item ratios of nike

60.0

50.0

40.0

30.0

20.0

10.0

0.0
2022 2021 2020 2019

COGS Gross Profit

General and Administrative Expense Selling and Marketing Expense

ANALYSIS:

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We may observe and compare the following trends based on the vertical analysis of Lululemon

and Nike's financial statements:

Product or Service Cost Control:

Lululemon: Over the years, Lululemon has maintained a cost of goods sold (COGS) as a

proportion of revenue that varies between 42.5% and 44.7%. This implies that they have real

control over how much it costs to make their goods.

Nike: Nike's COGS has been higher, ranging from 54.0% to 56.6% of revenue.

Controlling operating costs:

Lululemon: From 37.3% in 2021 to 33.9% in 2023, Lululemon showed improvement in

managing general and administrative costs as a proportion of revenue. This shows effective

control of overhead expenses.

Nike: Nike also demonstrated progress in managing general and administrative costs, with a drop

from 35.1% in 2021 to 31.7% in 2023. Their costs are still greater than Lululemon's, though.

Debt management

Lululemon: Lululemon's interest costs have generally been stable, ranging from 5.2% to 6.3% of

revenue. This shows that the business has handled its debt obligations well.

Profitability:

Lululemon: With a range of 13.4% to 16.2%, Lululemon has consistently maintained respectable

levels of net income as a percentage of revenue. This suggests solid profitability and effective

business practices.

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Nike: Nike's net income has fluctuated somewhat, ranging from 6.8% to 12.9% of revenue. As a

result, it appears that Nike is less profitable than Lululemon.

Change from Year to Year (2019–2022):

Lululemon's gross profit margin increased slightly in 2022 and 2023, but otherwise stayed

largely steady through time. An improvement in cost control may be seen in the fact that the

general and administrative expense as a proportion of revenue dropped from 37.3% in 2021 to

33.9% in 2023. Additionally, net income increased little from 13.4% in 2021 to 15.6% in 2022

and 10.5% in 2023.

Comparative analysis of the rival (Nike)

Compared to Nike, Lululemon often displays better net income margins and gross profit margins.

Additionally, Lululemon has improved more steadily in terms of managing general and

administrative costs.

Nike: Compared to Lululemon, Nike has lower net income margins and a higher COGS as a %

of revenue, which may indicate that its products are more expensive and less profitable.

Overall, according to the vertical analysis, Lululemon appears to be more profitable than Nike,

have better control over operating and product costs, and have consistently improved expense

management.

INCOME STATEMENT RATIO ANALYSIS OF LULULEMON

21
Gross Descriptio 202 202 202 202 201 Profit

n 3 2 1 0 9

Income

statement

ratios

gross

profit (Gross Profit / Revenue) * 55 58 56 56 55

margin 100 % % % % %

operating
profit margin ratios
profit (Operating Profit / Revenue) 55 58 56 56 55
70%

margin
60% * 100 % % % % %
50%
net profit 11 16 13 16 15
40%
margin (Net Profit / Revenue) * 100 % % % % %
30%

20% (Net Income - Preferred

10%
Dividends) / Weighted
0%
2023 2022 2021 2020 2019
earnings Average Common Shares
gross profit margin operating profit margin net profit margin
per share Outstanding 6.68 7.49 4.5 4.93 3.61

Margin: After deducting the cost of goods sold (COGS), the gross profit margin calculates the

proportion of revenue that is left over. Over the previous five years, Lululemon's gross profit

margin has remained largely consistent, ranging from 55% to 58%. This shows that the

business's core operations have allowed it to consistently generate a profit.

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Operating Profit Margin: The operating profit margin represents the portion of revenue that is

left over after other operating costs and the cost of goods sold have been subtracted. The

operating profit margin for Lululemon is steady between 55% to 58%, matching the gross profit

margin. This shows that the business has maintained a high degree of operational efficiency and

has successfully managed its running expenses.

Net Profit Margin: The amount of income that is left over as net profit after all costs, such as

interest, taxes, and non-operating items, have been taken into account is known as the net profit

margin. Over the past five years, Lululemon's net profit margin has varied between 11% and

16%. Despite periodic fluctuations, the business has consistently managed to maintain a good

level of profitability with double-digit net profit margins.

Earnings Per Share (EPS): The amount of a company's profit assigned to each outstanding

share of common stock is expressed as an amount per share. Earnings per share for Lululemon

have increased over time, rising from $3.61 in 2019 to $7.49 in 2022. This shows that the

business has been successful in increasing earnings and distributing them to its shareholders.

VERTICAL/COMMON-SIZE ANALYSIS OF BALANCE SHEET OF LULULEMON

Description value in percentage

2023 2022 2021 2020 2019

current assets 56% 53% 51% 55% 69%

23
 property plant and equipment 58% 52% 52% 57% 47%

all other assets 3% 3% 3% 2% 2%

Total Assets 100% 100% 100% 100% 100%

Current liabilities 27% 28% 21% 19% 24%

total liabilities 44% 45% 39% 41% 31%

Stock Holder's Equity 56% 55% 61% 59% 69%

total liabilities and equity 100% 100% 100% 100% 100%

(COMMISSION, 2022)

VERTICAL/COMMON-SIZE ANALYSIS OF BALANCE SHEET OF NIKE

(COMPETITOR OF LULULEMON)

Description value in percentage

2023 2022 2021 2020 2019

24
 current assets 70% 70% 66% 70%

property plant and equipment 19% 21% 25% 20%

all other assets

Total Assets 100% 100% 100% 100%

Current liabilities 27% 26% 26% 33%

total liabilities 62% 66% 74% 62%

Stock Holder's Equity 38% 34% 26% 38%

total liabilities and equity 100% 100% 100% 100%

We may infer the following facts about Lululemon from a vertical study of its and Nike's balance

sheets:

Current Assets:

25
 current assets(nike)
71%
69%
67%
65%
63%
2022 2021 2020 2019

current
assets(lululemon)
80%
60%
40%
20%
0%
2023 2022 2021 2020 2019

As a fraction of total assets, Lululemon's current assets have been declining over time,

suggesting a lower share of short-term assets than the total asset base. This shows that

Lululemon's asset structure may change in the future.

As a percentage of total assets, Nike has continuously maintained a greater ratio of current

assets.

Property, plant, and equipment:

property plant and property plant and

equipment(lululemon) equipment(nike)
70% 30%
60% 25%
50%
20%
40%
15%
30%
20% 10%
10% 5%
0% 0%
2023 2022 2021 2020 2019 2022 2021 2020 2019

26
As a fraction of total assets, Lululemon's PP&E has increased over time, showing a bigger share

of fixed assets than the entire asset base. This advises making investments in long-term assets

and infrastructure.

While Nike's PP&E as a percentage of total assets has fluctuated, it has consistently remained

lower than Lululemon's.

Equity and Liabilities:

Equity and Liabili- Equity and Liabilites(nike)

ties(lululemon)
80%
80% 70%
60%
60% 50%
40%
40%
30%
20% 20%
10%
0% 0%
2023 2022 2021 2020 2019 2022 2021 2020 2019

total liabilities Stock Holder's Equity total liabilities Stock Holder's Equity

 As a fraction of its total liabilities and equity, Lululemon's current liabilities have

increased over time, showing a bigger percentage of short-term obligations than the

company's overall liabilities and equity. This shows that the company's debt profile may

change in the future.

 The stockholders' equity of Lululemon has changed over the years, but has consistently

maintained a similar proportion of its total liabilities and equity.

 In contrast, Nike's stockholder ownership as a percentage of total liabilities and equity

has demonstrated a declining tendency, suggesting probable changes in their capital

structure.
27
 BALANCE SHEET RATIO ANALYSIS OF LULULEMON:

Description Formulas 2023 2022 2021 2020 2019

Balance sheet

ratios

current ratio current assets/current liabilities 2.1 1.9 2.4 2.9 2.9

(Current assets- inventory)/

quick ratio current liabilities 1 1 2 2 1

debt to equity ratio total debt/total equity 0.8 0.8 0.6 0.7 0.4

interest coverage

ratio EBITDA/interest expense 4.2 4.5 4.4 4.2 3.6

debt to EBITDA

ratio total debt/EBITDA 1.2 1.4 1.6 1.3 0.8

(Net Income / Total Assets)

return on assets *100 15% 20% 14% 20% 23%

(Net Income / Total equity) *

return on equity 100 27% 36% 23% 33% 33%

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 ratio analysis
5.0
4.0
3.0
2.0
1.0
0.0
2023 2022 2021 2020 2019

current ratio quick ratio

debt to equity ratio interest coverage ratio
debt to EBITDA ratio

Current Ratio: The current ratio gauges how well a corporation can use its current assets to

fulfil its short-term liabilities. Over the previous five years, Lululemon's current ratio

continuously exceeded 1, ranging from 1.9 to 2.9. This shows the corporation has a solid

liquidity position because its current assets are greater than its current obligations.

Quick Ratio: Also called the acid-test ratio, the quick ratio gauges a company's capacity to

satisfy short-term obligations without resorting to inventories. Over the previous five years,

Lululemon's quick ratio has been constant at 1. This indicates that the company's most liquid

assets, excluding inventories, have a little ability to satisfy its short-term commitments.

Debt to Equity Ratio: This ratio reveals how much debt financing there is in comparison to

equity financing. Over the past five years, Lululemon's debt to equity ratio has been very

consistent, fluctuating between 0.6 and 0.8. This shows that the business has kept its capital

structure balanced, with a reasonable amount of debt in relation to equity.

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Interest Coverage Ratio: The interest coverage ratio measures how well a corporation can use

its earnings to pay its interest commitments. Over the previous five years, Lululemon's interest

coverage ratio has consistently exceeded 3.6, ranging from 4.2 to 4.5. This implies that the

business earns enough revenue to comfortably meet its interest costs.

Debt to EBITDA Ratio: This ratio assesses how much debt a business has in relation to its

earnings before interest, taxes, depreciation, and amortization. Over the previous five years,

Lululemon's debt to EBITDA ratio has been between 1.2 and 1.6. This shows that, in relation to

its earnings, the company has a reasonable degree of debt.

Return on Assets (ROA): ROA gauges how profitable a business is in relation to its total assets.

Over the previous five years, Lululemon has continuously kept a solid ROA, ranging from 14%

to 23%. This shows that the business has been successful in making money off of its assets.

Return on Equity (ROE):

It quantifies how profitable a firm is in relation to its equity. Over the previous five years,

Lululemon has consistently demonstrated a ROE of between 23% and 36%. This shows that the

business has been effective in giving its shareholders a return on their investment.

Through its balance sheet ratios, Lululemon has generally shown good financial performance

and health. The company has continuously kept its current ratio over 1, which indicates that it

has a favorable liquidity situation. Additionally, it has successfully managed its debt levels,

maintaining a constant debt to equity ratio. The profitability statistics for Lululemon, such as

30
ROA and ROE, show that company has been effective in making use of its resources and

producing returns for its shareholders.

31
REFERENCES

 COMMISSION, U. S. (2022). ANNUAL REPORT PURSUANT TO SECTION 13 OR

15(d) OF THE SECURITIES EXCHANGE ACT OF 1984 For the fiscal year ended

January 30, 2022. Vancouver.

 companiesmarketcap. (n.d.). Stock split history for lululemon athletica (LULU).

Retrieved from companiesmarketcap: https://companiesmarketcap.com/lululemon-

athletica/stock-splits/

 FINANCE, Y. (2023). Lululemon Athletica Inc. (LULU). VANCOUVER: YAHOO

FINANCE.

 marketscreener. (2023, july). LULULEMON ATHLETICA INC. Retrieved from

marketscreener: https://www.marketscreener.com/quote/stock/LULULEMON-

ATHLETICA-INC-40449575/news/LULULEMON-ATHLETICA-MANAGEMENT-S-

DISCUSSION-AND-ANALYSIS-OF-FINANCIAL-CONDITION-AND-RESULTS-OF-

OPE-32842858/

 NASDAQ. (2023, july). NASDAQ. Retrieved from lululemon athletica inc. Common

Stock (LULU): https://www.nasdaq.com/market-activity/stocks/lulu/dividend-history

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