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Case Study: Projections, NPV, Compilation Assignment Instructions

Overview

Continue working on the individual case study started in Case Study: Matrices Assignment of ABC Corporation. Complete this portion of the case study: Case Study: Projections, NPV, Compilation Assignment.

A formal, in-depth case study analysis requires you to utilize the entire strategic management process. Assume your group is a consulting team asked by the ABC Corporation to analyze its external/internal environment and make strategic recommendations. You must include exhibits to support your analysis and recommendations.

Instructions

The completed case study must include these components, with portions to be submitted over several modules as the Case Study: Matrices Assignment, the Case Study: Historical Financial Analysis Assignment, and the Case Study: Projections, NPV, Compilation Assignment.

· Cover page (must include the company name, your name, the date of submission, and a references page; the document must follow current APA guidelines)

· Reference page (follow current APA guidelines)

· Historical Financial Statements, Proforma Financial Statements, NPV Calculations and a Cost Sheet for the strategy in an Excel document

· Matrices, which must be exhibits/attachments in the appendix and not part of the body of the analysis (The Strategy Club has excellent templates/examples for exhibits and matrices).

You will use the information completed in Case Study: Matrices, and Case Study: Historical Financial Analysis as part of your Case Study: Projections, NPV, Compilation Assignment final document. Be sure to make any corrections to Part One and Part Two based on feedback given on each of the assignments.

Your Case Study: Projections, NPV, Compilation Assignment paper must include:

1. Executive Summary – this should be no more than one page and provide the reader with an overview of what will be contained in the following pages. The problem and strategic solution being recommended should be in this summary. Details for the choice and implementation and data to support the decision should be contained in the following sections.

2. Existing mission, objectives, and strategies

3. A new mission statement (include the number of the component in parenthesis before addressing that component)

4. Analysis of the firm’s existing business model

5. SWOT Analysis

6. TOWS Matrix

7. Competitive forces analysis

8. Historical Financial Statements (Income Statement, Balance Sheet, and Statement of Cash Flows) from the 3 most current years for the firm

9. Historical Ratio Analysis

10. Competitors Ratio Analysis

11. Alternative strategies (giving advantages and disadvantages for each). There should be at least two alternative strategies identified and discussed.

12. Projected Financial Statements (Income Statement, Balance Sheet and Statement of Cash Flows) for 3 years into the future. This must be broken down by year into two (2) columns: 1 column without your strategy and 1 column with your strategy. The without column should serve as the basis for your with strategy column and only those financial statement accounts that will be changed, based on your strategy, should be impacted.

13. Include Projected ratios for the without and with strategy by year. Discuss how these ratios compare and contrast with the historical findings.

14. Cost Analysis completed on an Excel tab that outlines the cost that will be incurred to implement the strategy. This information should correspond with the With Strategy on the Projected Financial Statements, linking of cells to the financial statements is encouraged.

15. Net Present Value analysis of proposed strategy’s new cash flow – you may also use Excel to solve for this. From the income statement the change in operating income between your with and without strategy should serve as your cash inflow for each year.
NOTE: To construct the first cash flow (cf1) the new revenue from your strategy(s) must be discounted back to the present value by calculating EBIT (Operating Income on the Income Statement) and that figure will be your cfn for each year. cf0 (initial cost of your strategy), cf1 (discounted cash flow first year), r (opportunity cost of capital, the rate of the next best alternative use of cash/debt/equity resources).

a.

16. Implementation strategy – how and when will the strategy be implemented, this should outline the who, how, what, and when of the implementation process.

17. Specific recommended strategy and long term objectives
Explain why you chose the strategy, discuss the advantages/benefits to organizational success and sustainability. Incude a discussion of the challenges or disadvantages that may arise as a result of the strategic choice.

18. Text must follow this order with current APA level headings for each component.

Place the results of the case study analysis in a Word document include matrices as appendices and a reference page. Submit a separate Excel document for your Historical financials, Projections, NPV, and Cost of the strategy.

Page 2 of 2

Running head: Matrices Assignment 2

Matrices Assignment 2

Matrices Assignment: Lululemon Case Study


Feedback

SWOT ANALYSIS: There could have been more direct application of external research findings (Needs to be fixed).

GROUP MAP: The graphic provided was not representative of the group/perceptual map (Needs to be redone)

Lululemon Case Study

Existing Mission, Objectives and Strategies

Mission:

“creating components for people to live longer, healthier, fun lives.”

Objectives

The company is guided by five main objectives which were set in 2007 and which have been in active follow-up. The first objective is to grow the company’s store base in North America through extension in the number of stores in the region. This is a very impactful input towards the success of the company as it enhances accessibility. The company having dealt in direct sales with the target market has a higher likelihood of maximizing the income through sales by putting in place stores in convenient and accessible areas. The second strategic objective is increasing brand awareness. As used in the business case presented, the objective of Lululemon is to increase the popularity of the company and the products offered by ensuring more consumers understand the products. Another objective is to introduce new technologies in the production process. Lululemon focuses on producing technology-oriented fabrics and possibly maximizing the performance of the company through offering competitive products. Through expansion of the product portfolio, the company can expand its customer base and possibly increase the profitability of the company. The fourth objective of the company is broadening the appeal of the products offered. This plays a vital role in building the company’s customer base by attracting new customers and retaining customers through earned customer loyalty. The fifth business objective is broadening beyond North America. This company aims at expanding to Australia and Japan and other continents such as Europe and Asia. This is also crucial in gaining large economies of scale in the global market.

Strategies

Lululemon has been focusing on appealing and gaining a larger customer base as a foundation to maximizing profitability. The company is also focused at countering the prevailing threats in the global market, such as the emergence of the COVID-19 pandemic. The issue of maximizing shareholder’s wealth has also become a key determinant in the growth and success of the company.

A New Mission Statement

‘Using our best talent and latest tech to create globally-unique components of people needed to live longer, healthier, fun lives’.

The new mission would be very considerate of the key elements of a good mission statement. One of the elements is the customer, where the mission aims at meeting the needs of the customers. The second aspect is products, where the mission specifies the firm is focused on developing products that are used for human survival, which in this case is fabrics. The mission statement also highlights the market aspect by specifying the products are ‘globally-unique’, meaning it focuses on the global market. The company is also focused on survival and sustainability of the target market, which is key to profitability and going-concern of the company. Also, it is ethical in that it seeks to improve the quality of life of a customer. By ensuring the products are unique, Lululemon will be competitive and create a unique brand reputation as a reliable brand. Lastly, the mission statement shows value for employees through the terms ‘our best talent’.

Analysis of the Firm’s Existing Business Model

Based on the case presented, the company uses bricks and clicks. This is a model that is developed in a way that customers can either buy from chain or department stores or make purchases on the company’s website (Bouwman et al, 2019). However, in Lululemon case, the brick and mortal aspect of the model is over-relied on compared to the online aspect of the business. This creates dependence on the company’s growth and success in that the majority of the revenue comes from the direct sales made in the stores than what customers buy from the website. The online business has started to be developed after the emergence of the pandemic where some shops and business activities are reopened.

SWOT Matrix and Analysis

There are both strengths and weaknesses in the company’s internal business environment. In the external business environment, there are also threats and weaknesses. Strengthens evident in Lululemon’s internal business environment include effective sales culture. The company has been in the forefront to maximize its sales volume as a key to maximizing profitability. This is evident in the estimates given that the company is likely to increase annual revenues by 5 % per year through 2026. The second strength is effective service culture, where Lululemon ensures there are effective Yoga programs. The third strength evident in the company is presence of good corporate culture where the company is focused at catering for the needs and welfare of the consumers. The fourth strength is effective internal marketing where the company creates awareness of the brand among the internal stakeholders. The fifth strength Lululemon has is a high quality staff which is skilled in designing and producing quality and high-standard products and services. The sixth strength is highly motivated staff which has contributed to the increased growth of the company over the years. The seventh strength evident in the company is strong service levels where the company understands the specific needs of the consumers or target market and tailors the service offers to maximize customer’s utility in the production of Yoga’s fabrics. The eighth strength is high staff flexibility, where the members of staff are able to quickly adapt to new conditions as they arise.

The second aspect evident in the case includes weaknesses. Lululemon is characterized by poor external marketing strategies, particularly in the global market. The second weakness is limited number of product lines which increases the risk of failure. The third weakness is poor team-building capacity among the members of staff, which limits innovation. The fourth weakness evident in the company is poor communication plan implemented in the organization to communicate organizational strategies. The company is also faced with a complex organizational structure which complicates unity of command and direction. The sixth weakness evident in the company is the lack of a defined and modern recruitment procedure and strategy to ensure there is transparency in hiring and necessary input for efficient production. The seventh weakness is the low rate of training events, which makes it difficult for the staff to understand the trends in the industry. Lastly, the eighth weakness is rigid organizational culture that does not shift to accommodate changes in the industry.

There are opportunities that can be seized by Lululemon to increase the current business growth and success. Among the opportunities include the advancement in technology where there has been increased technology devices which are used in sending messages and which can be leveraged by the company in sending promotional and marketing messages to the target customers. The second opportunity in the industry is the growth of ecommerce, where goods and services can be offered through an online market place without the company having to establish a physical office or store in a given location. This can be used in expanding the current market size by venturing into new global markets through online market stores. Among the ecommerce platforms that Lululemon can use to reach its target customers include Amazon and eBay. Customers make purchases through the ecommerce platform and the company plans deliveries to the customers. The third opportunity that gives the company an upper hand in marketing and creating awareness is the development of social media. With social media platforms such as Instagram and Facebook or Twitter, the company can easily market the products to a wide base of target customers across the world. The fourth opportunity is the growth of globalization, which has enhanced accessibility to affordable labor and the presence of successful firms that can form successful strategic alliances. This can be used by Lululemon in venturing and establishing successful operations in foreign countries. The fifth opportunity is international trade, where there are regions with a more viable market, increased access to cheaper raw materials and increased literacy in healthy lifestyles including Yoga exercises (Suppatvech et al, 2019). The company can strategize this by starting with countries that are in similar region trade statutes with its home country. The sixth opportunity is increased awareness of health literacy, particularly on exercise and physical activity. A greater number of people are now aware of the benefits of engaging in physical and mental activities such as Yoga, thus expanding Lululemon’s target customer base. The seventh opportunity the growth and accessibility of big data. In order to maximize customer experience, Lululemon needs to engage in regular research on preferences and characteristics of the target market. This is attained through sourcing data from multiple sources to understand the target market and tailoring the products and services to match the needs of the target population. With big data sources and crowd computing, the company can easily source data and analyze to predict future trends and align the business strategies to match the needs. The eighth opportunity that can be seized by the company is low concentration in substitute and complimentary products markets. There are few brands that manufacture sports products or products that are used during Yoga sessions. This creates an opportunity for Lululemon to expand the product portfolio by manufacturing complimentary products such as Yoga mats, water bottles, gym music platforms and streaming platforms among other products.

Lululemon is also faced by threats in the external business environment. The first threat facing the company is competition, particularly from Adidas and Nike. With competition, there is an increased risk of losing the current market share to the two major competitors. The second weakness includes shifts in market requirements. This may affect the business significantly due to fluctuation in demand as customers change preferences and other factors such as technology trends influence market demands. The third threat is the emergence of COVID-19 pandemic which has already affected Lululemon adversely. With the pandemic, more people prefer staying indoors and avoiding public places, including physical yoga sessions. This reduces the target customers and contract the customer base of the company. The fourth threat is a shortage of recruits with necessary skills and supply-chain problems in the new regional markets. This may affect the company, particularly when there is a need to improve operations or product design. The fifth threat to Lululemon is change in international laws where there are regular changes in the international laws regulating international and regional trade. For a company such as Lululemon which operates in more than one country, it is likely to affected by international trade. The company must comply with the new laws adopted in the regional and international trade. The sixth threat is exchange currency rates and fluctuations. This affects the ability of the company to generate income from the international trade. When there is a depreciation in the domestic currency compared to the foreign countries, the company incurs much costs of exporting the products to the foreign countries. The seventh threat is trade barriers across countries which is characterized by tariffs and other trade restrictions. This may limit Lululemon from entering into profitable target markets. The eighth threat facing Lululemon is negative critics of negative corporate culture. In 2019, the company was accused of mistreating an employee in Bangladesh. This poses a risk of loss of market share in such countries as it is associated with a negative brand image and reputation.

Strength

Weakness

Opportunities

Threats

Effective sales culture

Poor external marketing strategies

Advancement in technology

Increased competition

Effective service culture

Limited number of product lines

Growth of ecommerce

Shift in market requirements

Good corporate culture

Poor team building capacity

Development of social media

Emergency of COVID-19 pandemic

Effective internal marketing

Poor communication plan

Growth of globalization

Shortage of skilled recruits

High quality staff

Complex organizational structure

Presence and growth of international trade

Regular changes in international laws

Highly motivated staff

Lack of modern recruitment procedures and strategies

Increased awareness on health literacy

Exchange rate fluctuations

Strong service levels

Low rate of training rates

Big data

Trade barriers

High staff flexibility

Rigid organizational culture

Low concentration of substitute and complimentary products market.

Negative critics and controversies

TOWS

There are various strategies that can be implemented in the organization to maximize profitability and growth of the business. One of the strategies is the Maxi-maxi strategy, which focuses on the use of strengths to seize opportunities. This can be attained through the use of skilled members of staff to leverage the advancement in technology and ecommerce. This would maximize the profitability of the organization. Also, a maxi-maxi strategy can be implemented through the use of internal marketing strategies and insight into developing an effective marketing message for social media platforms. This would enhance the ability of the company to create brand popularity and equity.

The second strategy is the Maxi-mini strategy, which focuses on the use of strengths to minimize weaknesses and threats. One of the ways is leveraging skilled labor through regular training to increase innovation. This can be used to create differentiation advantages, which in turn reduces competition in the market. With creative products, customers will be attracted to the company, which will increase sales and enhance repeat sales. Also, with flexible staff, the company can easily shift into new practices and business models and still maximize the returns. One of the strategies to focus on is increasing online presence by focusing more on online marketing and the use of websites to sell the products. Another strength that can be used is internal marketing strength to enhance efficiency in the external marketing strategy. This involves conducting marketing research to collect data on consumer needs and developing effective strategies to reach the wide customer base. Lastly, the company can use positive corporate values to correct negative controversies about mistreating the employees and negative brand image.

TOWS Matrix

External factors

Opportunities

Threats

Internal factors

Strengths

Use skilled staff to leverage on advanced technology and ecommerce.

Use marketing insight to develop effective social media marketing.

Use skilled staff to increase product portfolio.

Enhance innovation to reduce competition.

Use of positive organizational culture to reduce controversies on the brand image.

Weaknesses

Focus on enhancing external marketing.

Ensure there is a compliance office and staff to put tabs on changes in international laws.

Group Map

The group map used in this analysis was Lean Canvas. The reason for opting for this group map is because it allows a comprehensive and detailed analysis of the problem and possible solutions for the problems outlined. From the SWOT analysis done, there are problems identified which have been analyzed at length in the group map. Also, the Lean Canvas group map allows a maximum of 10 participants, with each participant being allowed to contribute equally to the progress of the group.

Competitive Forces Analysis

From the case study, there are competitive factors that are likely to affect the performance of the company. The competitive forces can be analyzed using two main methods: PESTEL analysis and Porter’s Five forces. Based on PESTEL analysis, one of the factors that falls under political influence particularly with the objective is presence of tariffs. The presence of tariffs may affect the ability of the company to market products in other countries such as Japan and China. The second factor under political aspect of PESTEL analysis is the anti-trust law which focuses on strategic alliances between companies. The company has to ensure it is in compliance with the laws set by the jurisdiction or country market in which it ventures to. Anti-trust law is aimed at ensuring the large firms do not use their large firms to intimidate small firms. Also, the company is exposed to economic factors in the global market. The third factor under the economic factor classification is recession, which was caused by a decline in economic activities following the spread of the pandemic. The fourth competitive force that affects the company is wage rate in that the company has to ensure it follows the labor laws and standards in every country it operates in. The fifth competitive factor under social factors that are of much concern to the company include customs and beliefs. With the company aiming at expanding the product portfolio by focusing on male consumers, there is a possibility some cultures might show lower consumption. This is because yoga fabrics are more common among women. This can be used as a competitive edge by ensuring the products developed aligns with the customs and practices of the target market. The sixth competitive force is health consciousness. Lululemon is involved in the production of products that are highly associated with health, such as Yoga. Therefore, it must ensure the products meet the required health standards and are verified to meet the standards by reliable authorities.

The seventh competitive force is the cost of living of the target market. The cost of living affects the purchasing power of the target market, thus affects sales of the company. It is a competitive force in that Lululemon must align its pricing strategies to reflect the changes in the standard of living of the target population. The eighth factor is technology advancements which also falls under the technology aspect of the PESTEL analysis. The company has to ensure the products launched in the market are produced or designed using modern and latest technology if it aims at acquiring significant market share. The ninth competitive force is the use of social media as a marketing strategy. With the increased use of social media, companies are benched in terms of its social media presence. Lululemon must adapt effective social media marketing strategies that reach a wide customer base. The tenth competitive force, which falls under legal classification in the PESTEL analysis includes tax laws. Lululemon has to ensure there is compliance with laws such as tax laws across countries in which it operates in. The twelfth competitive force under legal factors is import vs. export arrangements. As a global company, Lululemon is affected by changes in currencies as it influences the price at which the company exports products to foreign countries. The thirteenth competitive force is environmental conservation and environmental laws. These falls under the environment aspect of the PESTEL analysis. Lululemon is aiming at expanding its global market presence at a time when environmental conversation and green technology is at its peak. Therefore, the company must ensure the production processes are considerate of the environment.

The competitive analysis can be done based on Porter’s Five Forces, which starts with competition in the industry where there are firms with significant market share. This can also be classified as the fourteenth competitive force that impacts Lululemon. Among the firms that pose stiff competition include Adidas and Nike. Lululemon mostly aims at differentiating the products. The fifteenth competitive force is potential new entrants into the market which are likely to reduce the current Lululemon’s market share as they claim some of the customers. Therefore, there is a need for Lululemon to set higher standards, making it less easy to copy the products (Bouwman et al, 2018). The sixteenth competitive force is the power of suppliers, where the company relies on key suppliers for raw materials. The seventeenth competitive force is the power of customers. The customers have the power to bargain and influence market prices, which combines with the threat of substitutes where the customers may threaten to opt for other fabrics. Lastly, the eighteenth competitive force is the threat of substitute, where customers may shift their loyalty to substitutes that offer affordable and high-quality benefits.

References

Bouwman, H., Nikou, S., & de Reuver, M. (2019). Digitalization, business models, and SMEs: How do business model innovation practices improve performance of digitalizing SMEs?. Telecommunications Policy43(9), 101828.

Bouwman, H., Nikou, S., Molina-Castillo, F. J., & de Reuver, M. (2018). The impact of digitalization on business models. Digital Policy, Regulation and Governance, 20(2), 105-124.

Suppatvech, C., Godsell, J., & Day, S. (2019). The roles of internet of things technology in enabling servitized business models: A systematic literature review. Industrial Marketing Management82, 70-86.

Lululemon’s Case Study: Historical Financial Analysis 19

Lululemon’s Case Study: Historical Financial Analysis

FEEDBACK: Your submission was very well-developed, with ample depth and elaboration in the narrative. Overall, the analysis provided solid support for the case study and the strategies emerging. The primary improvement opportunity would have been to include the horizontal and vertical analyses within the financial statements.

HISTORICAL FINANCIAL STATEMENTS: The statements should have included horizontal and vertical analysis (NEEDS TO BE FIXED).

RATIO ANALYSIS: Year over year changes should have been reported (NEEDS TO BE FIXED).

Lululemon Case Study: Historical Financial Analysis

Historical Financial Statements

Lululemon Athletica is a Canadian US multinational athletic apparel retailer headquartered in Vancouver. The firm began as a retailer of Yoga pants after its inception in 1998 and later expanded to sell athletic apparel, accessories, fitness products as well as personal care products. Currently, the firm has four hundred and ninety-one stores globally and is also present on e-commerce platforms like Amazon (Kosbab, 2021). Lululemon is traded on the NASDAQ stock exchange market under the ticker symbol, with its closest rivals being Nike, Adidas, and Under Armor.

The firm positioned itself strategically by manufacturing high-quality products and adopting a value-based pricing strategy such that when clients buy the company’s product, they buy into the brand, just as Lululemon dubs it “living the sweet life.” Lululemon hired PWC to audit its financial statement and analyze its response to corporate governance. This analysis uncovered Lululemon’s internal strong controls, ethical standards, and the firm’s strategic position (Kosbab, 2021). This report analyses how Lululemon’s financial position based on the calculated financial ratio influences its strategic direction and its standards against its major competitors Adidas, Nike, and Under Armor.

Ratio Analysis

Lululemon’s Profitability ratios

2021

2020

2019

gross margin

55.9759

55.8739

55.2345

operating margin,

18.6281

22.3434

21.465

return on assets

14.0713

19.6747

23.2071

Return on investment.

23.0713

33.0699

33.4585

return on equity

23.0173

33.0699

33.4585

EBITDA margin

22.8417

26.3434

21.465

net profit margin

13.3787

16.2239

14.7127

Lululemon’s Liquidity ratio

2021-01-31

2020-01-31

2019-01-31

Cash Ratio

1.67

2.08

2.05

Operating Cash Flow Ratio.

74.92

81.16

38.30

Current Ratio

2.07

2.40

2.91

2021-01-31

2020-01-31

2019-01-31

PE ratio

1.67

2.08

2.05

ROA

16.27%

22.88%

24.27%

ROE

27.57%

39.91%

33.26%

Price to Book Ratio

20.60

15.98

13.38

Lululemon’s liquidity ratios show that the firm will not have challenges meeting its short-term obligations. Lululemon’s current ratios for the fiscal year ending January 2019 to 2021 averaged 2.46. This means that the firm is able to cover its current liabilities that are due within one year with its assets 2.46 times. As such, Lululemon can maximize its current assets on the balance sheet to offset its current debts and payables. However, within the past three years, the firm’s current ratios have exhibited a declining trend in its current ratio (Kosbab, 2021).. This means that the firm has been experiencing challenges with inventory management and the possibility of ineffective standards for collecting its receivables, although the latest current ratio is within the industry average; thus, Lululemon is not badly off.

Looking back at the last five years, the company’s current ratios picked in 2019 due to the expansion of the firm’s product offering ranging from women’s yoga to men’s footwear. In the year preceding 2019, Lululemon developed a wireless fitness track that contributed to a high current ratio in 2018. In January 2021, Lulu recorded the lowest current ratio due to COVID -19. However, with a current ratio of 2.07, Lululemon has the ability to pay its short-term obligations without any problem.

Lululemon’s average cash ratio for the year ending January 2019 to 2021 is 1.93, while for the fiscal year ending January 2021, Lululemon had a cash ratio of 1.67. These figures show that Lululemon has enough cash and cash equivalent to offset its liabilities 1.6 times over. While Lululemon’s cash average ratio of 1.93 with the three financials indicates its ability to meet liabilities using cash and cash equivalents, maintaining excessive cash and near cash-assets to offset current liabilities could mean poor asset utilization as this money could be returned to shareholders or invested somewhere else to generate higher returns

Lululemon has an average leverage ratio of more than 0.5 for the year ending January 2019 to 2021. Lululemon leverage ratios deteriorated to 0.72 in 2021, higher than the company average in 2020. The ideal leverage ratio is 0.5 or less. This means that a debt ratio of above 0.5 is not healthy. A debt ratio above 0.6 is considered a higher risk that may discourage investors. With an average debt ratio of above 0.6, Lululemon’s assets are mostly financed through its liabilities. When compared to its competitors like Nike, which has a current debt to equity ratio of 0.27

Regarding asset management, Lululemon performed above the industry benchmark, despite the recent declines. Although the company’s inventory turnover ratio was reduced in 2019 to 2.99 times, it turned over inventory quicker than its industry benchmark of 2.81 times. As noted, in inventory provisions, ending inventory increased from $298 million (2017) to $647 million (2021), partly because provisions for damaged inventory are valued at $30 million. In order to combat this loss and sell out-of-style inventory, 38 outlets were established as of 1/2020, demonstrating efficiency, which will improve their turnover ratio in subsequent years. Similarly, the receivable turnover ratios were stronger than the benchmark, despite the 5-year decline.

The receivables turnover ratio shrunk from 254.82 (2017) to 70.54 times (2021), with an industry benchmark of 9.54 times. This regression is related to Lululemon’s 2016 entrance into a $150 million unsecured revolving credit facility, stating that all outstanding accounts receivable must be paid off by 12/2021. Thus, future investors must observe this ratio to determine their magnitude of credit collecting efficiency. Likewise, as seen in exhibit F, the fixed asset turnover ratio decreased from 4.73 times to 2.13 times over the last five years, falling below the industry benchmark of 2.87 times. This downward trend is in response to the adoption of FASB’s ASC 842, Leases in 2019, requiring companies to recognize lease assets on the balance sheet, increasing the right-of-use assets to an inefficient level of $619.6 million. Thus, Lululemon is strong in its utilization of assets, but ratio values have decreased due to evolving accounting standards. Lululemon should see long-term growth in asset management in the coming years, despite this short-run decline.

Lululemon’s profitability is outstanding as it has outperformed that of the industry, as exhibited by the profit margin, ROA, and equity ratios. The firm has had a substantial increase in these three profitability ratios over a period of three years. However, in correspondence to the acquisition of MIRROR and COVID-19 outbreak, the firm saw a decline in profitability ratios in 2021. Before the outbreak of COVID-19, Lululemon had shown an outstanding performance in terms of profitability. Lululemon’s return on equity ratios shows that the company is an ideal place for investment. Between 2019 and 2020, the firm had a return on investment of 33, which is two times higher than the minimum recommended of 14%. Looking at Lululemon’s operation margin ratio, we can conclude that the firm is financially healthy. Compared to its peer companies in the industry, Lululemon’s operating margin shows that the financial performance is healthy.

Lululemon’s net profit margin rose from 14.7127 in the financial year ending January 30th, 2019, to 14.7127 in the financial year ending January 31st, 2020. However, in the financial year ending January 31st, 2021, the net profit margin declined to 13.3787 due to COVID-19. In terms of EBITDA margin, Lululemon is above the industry benchmark. In the U.S, the average EBITDA margin across all the industries is approximately 16.5%. Therefore, this figure is a good benchmark.

Furthermore, there is a consensus among financial experts that EBITDA margins of higher than 15% are regarded as good because they indicate that the company has a lower operating cost relative to its total revenue. Lululemon’s EBITDA margin over the past three financial years, i.e., 2020, 2019, and 2018 were above 20, with a huge spike in the ratios in 2019. This shows that the firm has a much lower operating expense relative to its total revenue.

The corporation’s profit margin ratio rose from 12.9% (2017) to 13.4% (2021), with a spike in 2020 of 16.2%, compared to the industry benchmark of .99%. This rise in profitability is extraordinary, but profit should not be the sole piece to judge a company due to its ability to be manipulated. Likewise, Lululemon’s ROE rose from 22.3% (2017) to 23% (2021), peaking at 33.5% in 2018, and well above the industry average of 2.12%. However, Lululemon’s ROA fell from 18.3% (2017) to 14% (2021), despite its climax of 23.2% (2018). The reason for this disparity between the three ratios is due to the clothing retailer’s 2020 acquisition of MIRROR, “an invisible home gym,” which increased Lululemon’s goodwill and other fixed assets but lowered profitability. In the notes of the 2021 10-K, the company reports that they hope for the “Omni guest experience” to enhance sales, as well as generate customer value, which will reinstate high levels of profitability thanks to Lululemon’s acquisition of MIRROR.

Lululemon does exceptionally well in covering its interest obligation with a time interest earned ratio of 7454 times. This time interest earned ratio tells us that for every $1 of interest, there are 7454 times that in the firm’s earnings before interest and taxes (EBIT). This appears massive compared to the industry average because of different company financial infrastructures in relation to interest reporting. This is further proven using the cash coverage ratio, which simply accounts for depreciation in addition to EBIT (EBITDA). This shows that depreciation greatly increases the previous ratio with Lulu Lemon’s ability to generate cash from operations is 9141 times. There is plenty of cash available to meet financial obligations. This is because, for every $1 of interest, there are 9141 times that the firm possesses in EBITD. Compared to past numbers, both ratios have greatly increased since 2017. Besides Lulu’s successful outlier year in 2018, both have increased steadily.

Despite a fall in profitability partly in 2020 and 2021, the firm’s market value hit an all-time high. In consideration of profitability ratios and liquidity ratios such as price-to-earnings ratio, and the book value, Lululemon’s recent struggles triggered by the economic crisis caused by COVID-19, do not suggest any unhealthy financial trend. Price–to–earnings ratios are computed by dividing the price per share of the company’s stock by earnings per share. A higher price-to-earnings ratio implies that investors are willing to pay more for the firm’s share in the present as there are expectations for future growth and returns on their investments.

Lululemon’s price-earnings ratio was 41.62 in the fiscal year ending January 31st, 2019. However, by January 2021, the price-to-earnings ratio rose to 72.72, demonstrating a percentage increase of over 100% and nearly doubling the industry benchmark of 36 for the fiscal year ending January 31st, 2021. While the continuous increase in the price-earnings ratio does not imply a rise in market value, the PE increase over this period means that investors’ confidence keeps increasing every year, and this will aid the company in moving forward in terms of luring more investors.

Book value per share is valuable to investors because it aids in getting the real world-view of the firm’s equity value. Book value per share is calculated by dividing the firm’s book value by the number of outstanding shares. On the other hand, the price-to-book ratio is computed by dividing the company’s stock price per share by BPVS (Diao, 2021). P/B ratio has been highly favored by investors for many decades and is widely utilized by market analysts to gauge the performance of the company’s financial performance relative to the industry benchmark. Conventionally, the PB ratio value is considered good, signifying a potentially undervalued stock. Moreover, investors usually consider stocks with a price-to-book ratio of less than 3.0. BVPS, on the other hand, is a theoretical value that shareholders would receive if a firm was liquidated; therefore, as book value per share increases, the market value also increases. Lululemon’s book value per share has increased steadily over a period of the three fiscal years, reaching 19.6376 in 2021. This value is more than double that of the industry benchmark. Compared to its competitors, such as Nike, Lululemon has seen a huge rise in its book value per share. Nike, for instance, has recorded a book value per share of 9.43 per share, which is far below that of Lululemon. However, Adidas recorded a higher book value in 2021 than Lululemon making it more appealing to investors.

Lululemon’s stocks are likely to rise even higher due to several reasons. For instance, one of the reasons for the company’s recent strong results has been accelerated by the firm’s adoption of quality fitness apparel and athleisure. More people have been working from home and the workplace environments have become more flexible. The pandemic played a significant role in accelerating some of the consumer’s behaviors that have played a part in strengthening the Lululemon’s brand (Diao, 2021). As mentioned before in this analysis, the firm’s operating margin has grown rapidly. By the second quarter of the 2021 financial year, Lululemon had recorded a profit margin of 58%, which is up 390 basis points from last fiscal year’s second quarter. The rapid increase in the firm’s overall revue earnings and operating margins will push up Lululemon stock value.

Activity ratios are useful in comparing two competing businesses that operate within the same industry to establish how a certain firm stacks up among its peers. However, the activity ratios can be used in this analysis to track Lululemon’s financial year over multiple recording periods, to detect changes over the period. Lululemon’s inventory turnover ratios averaged 2, which is way below the recommended ratio of at least 5. The inventory ratio of 2 implies that Lululemon takes 182 days to clear its product stock. Lululemon’s inventory turnover ratio could mean that Lululemon has weak sales and the possibility of overstocking. This could also be attributed to poor marketing. Lululemon employs a relationship marketing strategy that may not appeal to the target market. When assessing Lululemon performance against its competitors in terms of inventory turnover ratio, the firm does not compete favorably against Nike, which has an average inventory turnover ratio of 3.8.

Lululemon’s investment turnover ratios also guide investors in making informed decisions regarding whether they should invest in the company or not. The investment turnover ratio aids in determining the firm’s efficacy in generating revenues from debts and equity. The ideal investment turnover ratio is 2.5. The firm’s working capital turnover ratio is 1.4, which is slightly below the industry benchmark of 1.4 to 2.0

Financial Analysis Narrative

When considering the valuation of the two firms, the market appears to be favoring Lululemon’s higher growth and demonstrated profit generation potential. Lululemon has demonstrated exceptional revenue growth over the three financial years. Generally, the firm’s revenue has grown by 24.5 % annually in the last three financial years as seen on the income statement. In comparison, Nike has grown at a rate of 19.1%, 95.5%, and 19.2%, respectively, over the same period. Correspondingly, Lululemon has demonstrated a greater profit generation potential. This can be seen with Lululemon’s 16.6% profit margin and 2.7 % margin growth, and a 22.5 cash flow as exhibited on the cash flow statement. Lululemon has a better debt position compared to Nike. Lululemon’s debt as a percentage of equity is zero compared to 4.1% of Nike

Nike has a more cash cushion than Lululemon. Nike’s cash as a percentage of assets is 35.7, while LULU has 26.6 %. Although LULU is expensive, it has a higher growth with zero risk, making it a better option for investment, unlike Nike, which demonstrates high risks. Furthermore, Lululemon’s average annualized return is approximately 55% compared to Nike’s 17%. Another competitor of Lululemon is Uunder Armour, which is considerably bigger in terms of revenue size. In the financial year ending January 30th, 2019, Under Armour’s total revenues were $5.2 billion, which is roughly 1.5 times more than Lululemon’s $3.2 billion over the same period. Whereas these figures indicate an average annual growth of 9.37% for Under Armour, Lululemon’s growth of 17 % is considerably higher compared to Under Armour. Lululemon has a higher operating margin than Under Armour and Nike in terms of operating margin. Lululemon’s average operating margin over the last financial years analyzed in this paper is 18%, while that of Under Armour is 115. This implies that for every one U.S dollar of revenue, Lululelom keeps 0.18 dollars but Under Armour keeps only 0.11.

Nike Inc. has a valuation of two hundred and sixty-seven billion with a P/E ratio of approximately 48. In contrast, Lululemon has a valuation of approximately fifty-nine billion with a price-earnings ratio of 60. Under Armour, PE ratio is 19.0, while Adidas’s is 22.87. This figure shows that Lululemon has the riches PE ratio while Under Amrour is relatively undervalued compared to Lululemon and other peers in the industry. Nike Inc. has the largest revenue with a record of over $12 billion in its most recent earnings and growing sixteen percent YoY. Adidas recently reported quarterly revenue of €5.8 billion, representing a three percent year–over–year increase, while Under Armour reported $1.55 billion, representing an eight percent YoY increase. Lululemon’s recent quarterly revenue was $1.45 billion, representing a thirty percent increase YoY. Although Lululemon has a small revenue base, it has got superior operating margins, and its revenue growth is outstanding.

One of the challenges facing Lululemon is the poor inventory turnover ratio, which slows down the rate at which the firm sells its inventory. To solve this problem and improve the inventory turnover ratio, Lululemon ought to work on its marketing strategies to reach more clients. The firm needs to have a less expensive product that is appealing to a larger market segment. The firm should consider venturing into emerging markets and opening more brick and motor stores in those regions to expand their business.

Lululemon can capitalize on its brand image in order to penetrate its clients’ lives as much as possible. One way, as mentioned above, is to expand its product offering into the new market segment. The firm can introduce its apparel offering to tap into the market segment dominated by people with disabilities and expectant mothers. These segments are rarely targeted by Lululemon’s competitors. They should expand their product offering to include casual wear and baby wear to appeal to the needs of its loyal clients. Lululemon can also take additional steps to enhance customer loyalty. For instance, customer loyalty programs can be highly effective in encouraging repeat buying, especially for products with high prices. Such strategies can improve the Lululemon’s inventory turnover ratios, thus appealing to investors.

Since Lululemon hasn’t achieved an optimal working capital ratio, it does not effectively generate revenues from its debt and equity. Effective inventory management can be the most powerful leverage in improving Lulu’s working capital. Attaining a higher net working capital computation can be accomplished by reducing the firm’s slow-moving inventory and enhancing the inventory turnover cycles while at the same time shunning stockpiling. While inventory is regarded as an asset in the working capital formula, less stock equates to more free cash flow.

Lululemon should incorporate just-in-time, strategic techniques of inventory. With this process, Lululemon will order inventories as needed by production and customer sales rather than piling them up before. Lululemon’s competitors like Nike and Adidas employ just-in-time inventory, and they only invest in inventory when the product is demanded to avert tying capital in the excess inventory and minimize overstocking risks. Just-in-time inventory coupled with inventory automation systems can reduce costs significantly and boost working capital.

The computed inventory turnover ratios of the DIO metric that uncovers the average number of days a firm holds its inventory prior to selling will enable LULU to understand its inventory turnover. Therefore, the company’s analytical working capital management should measure turnover ratios periodically and compare them to the industry competitors and unearth opportunities to reduce days inventory outstanding that result in increased savings as well as working capital.

References

Diao, Y. (2021). A systematical analysis framework on lululemon high-end

professional brand image and close to life promotion. In 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI), 536-541.

Kosbab, H. J. (2021). Strategic Analysis of Lululemon Athletica, Inc.

www.sec.gov

Balance SheetAll numbers in thousands

1/30/20211/30/20201/30/2019

Total Assets4,185,2153,281,3542,084,711

Total Liabilities Net Minority Interest1,626,6491,329,136638,736

Total Equity Gross Minority Interest2,558,5661,952,2181,445,975

Total Capitalization2,558,5661,952,2181,445,975

Common Stock Equity2,558,5661,952,2181,445,975

Capital Lease Obligations798,681739,961-

Net Tangible Assets2,091,6091,927,7951,421,736

Working Capital1,241,2011,187,520928,805

Invested Capital2,558,5661,952,2181,421,736

Tangible Book Value2,091,6091,927,7951,421,736

Total Debt798,681739,961

Share Issued130,353130,349129,270

Ordinary Shares Number130,353130,349129,270

Sheet1

INCOME STATEMENT
Fiscal year is February-January. All values USD Millions. 2021 2020 2019
Sales/Revenue 4,402 3,979 3,288
Sales Growth 10.62% 21.01% 24.13%
Cost of Goods Sold (COGS) incl. D&A 1,943 1,756 1,472
COGS excluding D&A 1,758 1,594 1,350
Depreciation & Amortization Expense 185 162 122
Depreciation 180 162 122
Amortization of Intangibles 5
COGS Growth 10.66% 19.28% 18.55%
Gross Income 2,459 2,223 1,816
Gross Income Growth 10.59% 22.41% 29.04%
Gross Profit Margin 55.86%
SG&A Expense 1,643 1,333 1,112
Other SG&A 1,643 1,333 1,112
SGA Growth 23.28% 19.87% 21.97%
EBIT 816 891 704
Unusual Expense -30 4 22
Non Operating Income/Expense -27 11 33
Pretax Income 819 897 715
Pretax Income Growth -8.70% 25.47% 55.49%
Pretax Margin 18.61%
Income Tax 230 252 231
Income Tax – Current Domestic 11 57 89
Income Tax – Current Foreign 186 170 123
Income Tax – Deferred Domestic 26 -6 -22
Income Tax – Deferred Foreign 8 30 41
Consolidated Net Income 589 646 484
Net Income 589 646 484
Net Income Growth -8.78% 33.44% 87.04%
Net Margin 13.38%
Net Income After Extraordinaries 589 646 484
Net Income Available to Common 589 646 484
EPS (Basic) 4.5 4.93 3.61
EPS (Basic) Growth -8.72% 36.52% 90.06%
Basic Shares Outstanding 130 130 133
EPS (Diluted) 4.5 4.93 3.61
EPS (Diluted) Growth -8.72% 36.52% 90.15%
Diluted Shares Outstanding 131 131 134
EBITDA 1,001 1,052 827
EBITDA Growth -4.88% 27.27% 36.88%
EBITDA Margin 22.74%
EBIT 816 891 704

Sheet2

Balance Sheet All numbers in thousands
1/30/2021 1/30/2020 1/30/2019
Total Assets 4,185,215 3,281,354 2,084,711
Total Liabilities Net Minority Interest 1,626,649 1,329,136 638,736
Total Equity Gross Minority Interest 2,558,566 1,952,218 1,445,975
Total Capitalization 2,558,566 1,952,218 1,445,975
Common Stock Equity 2,558,566 1,952,218 1,445,975
Capital Lease Obligations 798,681 739,961
Net Tangible Assets 2,091,609 1,927,795 1,421,736
Working Capital 1,241,201 1,187,520 928,805
Invested Capital 2,558,566 1,952,218 1,421,736
Tangible Book Value 2,091,609 1,927,795 1,421,736
Total Debt 798,681 739,961
Share Issued 130,353 130,349 129,270
Ordinary Shares Number 130,353 130,349 129,270

Sheet3

LULULEMON
CASH_FLOW
Form Type: 10-K
Period End: Sep 30, 2021
Date Filed: Nov 23, 2021
Jan-21 Jan-20 Jan-19
Net Income 588,913 645,596 483,801
Depreciation Amortization 185,478 161,933 122,484
Income Taxes – Deferred 34,908 24,129 16,786
Accounts Payable And Accrued Liabilities 82,663 -14,810 71,962
Other Working Capital -47,549 -194,071 112,875
Other Operating Activity -41,077 46,539 -65,129
OPERATING CASH FLOW $803,336 $669,316 $742,779
CASH FLOWS FROM INVESTING ACTIVITIES
PPE Investments -229,226 -283,048 -225,807
Net Acquisitions -452,581 N/A N/A
Other Investing Activity -13,725 4,640 -16,987
INVESTING CASH FLOW $-695,532 $-278,408 $-242,794
CASH FLOWS FROM FINANCING ACTIVITIES
Common Stock Repurchased -63,663 -173,399 -598,340
Other Financing Activity -17,125 -3,774 8,126
FINANCING CASH FLOW $-80,788 $-177,173 $-590,214
Exchange Rate Effect 29,996 -1,550 -18,952
Beginning Cash Position 1,093,505 881,320 990,501
End Cash Position 1,150,517 1,093,505 881,320
NET CASH FLOW $57,012 $212,185 $-109,181
FREE CASH FLOW
Operating Cash Flow 803,336 669,316 742,779
Capital Expenditure -229,226 -283,048 -225,807
Free Cash Flow 574,110 386,268 516,972

Jan-21Jan-20Jan-19

Net Income588,913645,596483,801

Depreciation Amortization185,478161,933122,484

Income Taxes – Deferred34,90824,12916,786

Accounts Payable And Accrued Liabilities82,663-14,81071,962

Other Working Capital-47,549-194,071112,875

Other Operating Activity-41,07746,539-65,129

OPERATING CASH FLOW$803,336$669,316$742,779

CASH FLOWS FROM INVESTING ACTIVITIES

PPE Investments-229,226-283,048-225,807

Net Acquisitions-452,581N/AN/A

Other Investing Activity-13,7254,640-16,987

INVESTING CASH FLOW$-695,532$-278,408$-242,794

CASH FLOWS FROM FINANCING ACTIVITIES

Common Stock Repurchased-63,663-173,399-598,340

Other Financing Activity-17,125-3,7748,126

FINANCING CASH FLOW$-80,788$-177,173$-590,214

Exchange Rate Effect29,996-1,550-18,952

Beginning Cash Position1,093,505881,320990,501

End Cash Position1,150,5171,093,505881,320

NET CASH FLOW$57,012$212,185$-109,181

FREE CASH FLOW

Operating Cash Flow803,336669,316742,779

Capital Expenditure-229,226-283,048-225,807

Free Cash Flow574,110386,268516,972

LULULEMON

CASH_FLOW

Form Type: 10-K

Period End: Sep 30, 2021

Date Filed: Nov 23, 2021

Sheet1

INCOME STATEMENT
Fiscal year is February-January. All values USD Millions. 2021 2020 2019
Sales/Revenue 4,402 3,979 3,288
Sales Growth 10.62% 21.01% 24.13%
Cost of Goods Sold (COGS) incl. D&A 1,943 1,756 1,472
COGS excluding D&A 1,758 1,594 1,350
Depreciation & Amortization Expense 185 162 122
Depreciation 180 162 122
Amortization of Intangibles 5
COGS Growth 10.66% 19.28% 18.55%
Gross Income 2,459 2,223 1,816
Gross Income Growth 10.59% 22.41% 29.04%
Gross Profit Margin 55.86%
SG&A Expense 1,643 1,333 1,112
Other SG&A 1,643 1,333 1,112
SGA Growth 23.28% 19.87% 21.97%
EBIT 816 891 704
Unusual Expense -30 4 22
Non Operating Income/Expense -27 11 33
Pretax Income 819 897 715
Pretax Income Growth -8.70% 25.47% 55.49%
Pretax Margin 18.61%
Income Tax 230 252 231
Income Tax – Current Domestic 11 57 89
Income Tax – Current Foreign 186 170 123
Income Tax – Deferred Domestic 26 -6 -22
Income Tax – Deferred Foreign 8 30 41
Consolidated Net Income 589 646 484
Net Income 589 646 484
Net Income Growth -8.78% 33.44% 87.04%
Net Margin 13.38%
Net Income After Extraordinaries 589 646 484
Net Income Available to Common 589 646 484
EPS (Basic) 4.5 4.93 3.61
EPS (Basic) Growth -8.72% 36.52% 90.06%
Basic Shares Outstanding 130 130 133
EPS (Diluted) 4.5 4.93 3.61
EPS (Diluted) Growth -8.72% 36.52% 90.15%
Diluted Shares Outstanding 131 131 134
EBITDA 1,001 1,052 827
EBITDA Growth -4.88% 27.27% 36.88%
EBITDA Margin 22.74%
EBIT 816 891 704

Sheet2

Balance Sheet All numbers in thousands
1/30/2021 1/30/2020 1/30/2019
Total Assets 4,185,215 3,281,354 2,084,711
Total Liabilities Net Minority Interest 1,626,649 1,329,136 638,736
Total Equity Gross Minority Interest 2,558,566 1,952,218 1,445,975
Total Capitalization 2,558,566 1,952,218 1,445,975
Common Stock Equity 2,558,566 1,952,218 1,445,975
Capital Lease Obligations 798,681 739,961
Net Tangible Assets 2,091,609 1,927,795 1,421,736
Working Capital 1,241,201 1,187,520 928,805
Invested Capital 2,558,566 1,952,218 1,421,736
Tangible Book Value 2,091,609 1,927,795 1,421,736
Total Debt 798,681 739,961
Share Issued 130,353 130,349 129,270
Ordinary Shares Number 130,353 130,349 129,270

Sheet3

LULULEMON
CASH_FLOW
Form Type: 10-K
Period End: Sep 30, 2021
Date Filed: Nov 23, 2021
Jan-21 Jan-20 Jan-19
Net Income 588,913 645,596 483,801
Depreciation Amortization 185,478 161,933 122,484
Income Taxes – Deferred 34,908 24,129 16,786
Accounts Payable And Accrued Liabilities 82,663 -14,810 71,962
Other Working Capital -47,549 -194,071 112,875
Other Operating Activity -41,077 46,539 -65,129
OPERATING CASH FLOW $803,336 $669,316 $742,779
CASH FLOWS FROM INVESTING ACTIVITIES
PPE Investments -229,226 -283,048 -225,807
Net Acquisitions -452,581 N/A N/A
Other Investing Activity -13,725 4,640 -16,987
INVESTING CASH FLOW $-695,532 $-278,408 $-242,794
CASH FLOWS FROM FINANCING ACTIVITIES
Common Stock Repurchased -63,663 -173,399 -598,340
Other Financing Activity -17,125 -3,774 8,126
FINANCING CASH FLOW $-80,788 $-177,173 $-590,214
Exchange Rate Effect 29,996 -1,550 -18,952
Beginning Cash Position 1,093,505 881,320 990,501
End Cash Position 1,150,517 1,093,505 881,320
NET CASH FLOW $57,012 $212,185 $-109,181
FREE CASH FLOW
Operating Cash Flow 803,336 669,316 742,779
Capital Expenditure -229,226 -283,048 -225,807
Free Cash Flow 574,110 386,268 516,972

INCOME STATEMENT

Fiscal year is February-January. All

values USD Millions.202120202019

Sales/Revenue4,4023,9793,288

Sales Growth10.62%21.01%24.13%

Cost of Goods Sold (COGS) incl.

D&A

1,9431,7561,472

COGS excluding D&A1,7581,5941,350

Depreciation & Amortization

Expense

185162122

Depreciation180162122

Amortization of Intangibles5–

COGS Growth10.66%19.28%18.55%

Gross Income2,4592,2231,816

Gross Income Growth10.59%22.41%29.04%

Gross Profit Margin55.86%–

SG&A Expense1,6431,3331,112

Other SG&A1,6431,3331,112

SGA Growth23.28%19.87%21.97%

EBIT816891704

Pretax Income819897715

Pretax Margin18.61%–

Income Tax230252231

Income Tax – Current Domestic115789

Income Tax – Current Foreign186170123

Consolidated Net Income589646484

Net Income589646484

Net Margin13.38%–

Net Income After Extraordinaries589646484

Net Income Available to Common589646484

EPS (Basic)4.54.933.61

Basic Shares Outstanding130130133

EPS (Diluted)4.54.933.61

Diluted Shares Outstanding131131134

EBITDA1,0011,052827

EBITDA Margin22.74%–

EBIT816891704

Unusual Expense-30422

Non Operating Income/Expense-271133

Pretax Income Growth-8.70%25.47%55.49%

Income Tax – Deferred Domestic26-6-22

Income Tax – Deferred Foreign83041

Net Income Growth-8.78%33.44%87.04%

EPS (Basic) Growth-8.72%36.52%90.06%

EPS (Diluted) Growth-8.72%36.52%90.15%

EBITDA Growth-4.88%27.27%36.88%

Sheet1

INCOME STATEMENT
Fiscal year is February-January. All values USD Millions. 2021 2020 2019
Sales/Revenue 4,402 3,979 3,288
Sales Growth 10.62% 21.01% 24.13%
Cost of Goods Sold (COGS) incl. D&A 1,943 1,756 1,472
COGS excluding D&A 1,758 1,594 1,350
Depreciation & Amortization Expense 185 162 122
Depreciation 180 162 122
Amortization of Intangibles 5
COGS Growth 10.66% 19.28% 18.55%
Gross Income 2,459 2,223 1,816
Gross Income Growth 10.59% 22.41% 29.04%
Gross Profit Margin 55.86%
SG&A Expense 1,643 1,333 1,112
Other SG&A 1,643 1,333 1,112
SGA Growth 23.28% 19.87% 21.97%
EBIT 816 891 704
Unusual Expense -30 4 22
Non Operating Income/Expense -27 11 33
Pretax Income 819 897 715
Pretax Income Growth -8.70% 25.47% 55.49%
Pretax Margin 18.61%
Income Tax 230 252 231
Income Tax – Current Domestic 11 57 89
Income Tax – Current Foreign 186 170 123
Income Tax – Deferred Domestic 26 -6 -22
Income Tax – Deferred Foreign 8 30 41
Consolidated Net Income 589 646 484
Net Income 589 646 484
Net Income Growth -8.78% 33.44% 87.04%
Net Margin 13.38%
Net Income After Extraordinaries 589 646 484
Net Income Available to Common 589 646 484
EPS (Basic) 4.5 4.93 3.61
EPS (Basic) Growth -8.72% 36.52% 90.06%
Basic Shares Outstanding 130 130 133
EPS (Diluted) 4.5 4.93 3.61
EPS (Diluted) Growth -8.72% 36.52% 90.15%
Diluted Shares Outstanding 131 131 134
EBITDA 1,001 1,052 827
EBITDA Growth -4.88% 27.27% 36.88%
EBITDA Margin 22.74%
EBIT 816 891 704

Sheet2

Balance Sheet All numbers in thousands
1/30/2021 1/30/2020 1/30/2019
Total Assets 4,185,215 3,281,354 2,084,711
Total Liabilities Net Minority Interest 1,626,649 1,329,136 638,736
Total Equity Gross Minority Interest 2,558,566 1,952,218 1,445,975
Total Capitalization 2,558,566 1,952,218 1,445,975
Common Stock Equity 2,558,566 1,952,218 1,445,975
Capital Lease Obligations 798,681 739,961
Net Tangible Assets 2,091,609 1,927,795 1,421,736
Working Capital 1,241,201 1,187,520 928,805
Invested Capital 2,558,566 1,952,218 1,421,736
Tangible Book Value 2,091,609 1,927,795 1,421,736
Total Debt 798,681 739,961
Share Issued 130,353 130,349 129,270
Ordinary Shares Number 130,353 130,349 129,270

Sheet3

LULULEMON
CASH_FLOW
Form Type: 10-K
Period End: Sep 30, 2021
Date Filed: Nov 23, 2021
Jan-21 Jan-20 Jan-19
Net Income 588,913 645,596 483,801
Depreciation Amortization 185,478 161,933 122,484
Income Taxes – Deferred 34,908 24,129 16,786
Accounts Payable And Accrued Liabilities 82,663 -14,810 71,962
Other Working Capital -47,549 -194,071 112,875
Other Operating Activity -41,077 46,539 -65,129
OPERATING CASH FLOW $803,336 $669,316 $742,779
CASH FLOWS FROM INVESTING ACTIVITIES
PPE Investments -229,226 -283,048 -225,807
Net Acquisitions -452,581 N/A N/A
Other Investing Activity -13,725 4,640 -16,987
INVESTING CASH FLOW $-695,532 $-278,408 $-242,794
CASH FLOWS FROM FINANCING ACTIVITIES
Common Stock Repurchased -63,663 -173,399 -598,340
Other Financing Activity -17,125 -3,774 8,126
FINANCING CASH FLOW $-80,788 $-177,173 $-590,214
Exchange Rate Effect 29,996 -1,550 -18,952
Beginning Cash Position 1,093,505 881,320 990,501
End Cash Position 1,150,517 1,093,505 881,320
NET CASH FLOW $57,012 $212,185 $-109,181
FREE CASH FLOW
Operating Cash Flow 803,336 669,316 742,779
Capital Expenditure -229,226 -283,048 -225,807
Free Cash Flow 574,110 386,268 516,972
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