lululemon athletica inc. (NASDAQ:LULU)

The financial performance, as measured by economic profit, demonstrates a fluctuating yet generally positive trend over the analyzed period. Net operating profit after taxes (NOPAT) experienced initial decline, followed by substantial growth, while the cost of capital remained relatively stable. Invested capital consistently increased throughout the period, contributing to the evolving economic profit figures.

Economic Profit Trend

Economic profit began at US$132,051 thousand in February 2020, decreased significantly to a loss of US$33,020 thousand in January 2021, and then rebounded strongly to US$282,101 thousand in January 2022. Subsequent years show continued positive economic profit, reaching US$60,119 thousand in January 2023, US$465,170 thousand in January 2024, and further increasing to US$683,035 thousand in February 2025. This indicates improving value creation over time, with a particularly strong performance in the latter years of the period.

NOPAT Analysis

Net operating profit after taxes decreased from US$711,860 thousand in February 2020 to US$680,052 thousand in January 2021. A significant increase was then observed, with NOPAT reaching US$1,040,291 thousand in January 2022. This growth continued, reaching US$933,695 thousand in January 2023, US$1,622,788 thousand in January 2024, and culminating in US$1,928,398 thousand in February 2025. The consistent growth in NOPAT from 2022 onwards is a key driver of the positive economic profit trend.

Cost of Capital Stability

The cost of capital remained relatively consistent throughout the period, fluctuating between 19.27% and 19.42% from February 2020 to January 2024. A slight decrease to 19.14% was observed in February 2025. This stability suggests that the company’s risk profile, as perceived by investors, did not undergo substantial changes during this timeframe.

Invested Capital Growth

Invested capital demonstrated a consistent upward trend, increasing from US$3,008,240 thousand in February 2020 to US$3,672,427 thousand in January 2021, US$3,909,051 thousand in January 2022, US$4,526,979 thousand in January 2023, US$5,978,501 thousand in January 2024, and finally reaching US$6,507,336 thousand in February 2025. This continuous growth in invested capital indicates ongoing investment in the business and expansion of operations.

The combination of increasing NOPAT, stable cost of capital, and growing invested capital resulted in a significant improvement in economic profit over the analyzed period. The negative economic profit in January 2021 appears to be an outlier, with subsequent years demonstrating a clear and positive trend in value creation.

Net Income

The net income exhibited a fluctuating yet generally upward trend over the analyzed periods. Starting at 645,596 thousand US dollars in February 2020, it declined to 588,913 thousand US dollars by January 2021. Subsequently, there was a significant increase to 975,322 thousand US dollars in January 2022, followed by a decrease to 854,800 thousand US dollars in January 2023. However, the net income surged notably in the most recent periods, reaching 1,550,190 thousand US dollars in January 2024 and further increasing to 1,814,616 thousand US dollars by February 2025. This overall trend suggests growing profitability with some volatility.

Net Operating Profit After Taxes (NOPAT)

NOPAT followed a pattern similar to net income, indicating consistent operational performance trends. Beginning at 711,860 thousand US dollars in February 2020, it experienced a reduction to 680,052 thousand US dollars in January 2021. This was followed by a sharp increase to 1,040,291 thousand US dollars in January 2022 and a slight decline to 933,695 thousand US dollars in January 2023. The figure then escalated substantially in the subsequent years to 1,622,788 thousand US dollars in January 2024 and 1,928,398 thousand US dollars by February 2025. The increase in NOPAT over time reflects enhanced operating efficiency and profitability after accounting for taxes.

Summary Insights

Both net income and NOPAT demonstrate an overall upward trajectory despite short-term decreases around the early 2021 and 2023 periods. The strong rebound and substantial increases in the latest years highlight improved profitability and operational effectiveness. The parallel trends of net income and NOPAT suggest that the company's core operations are driving earnings growth, with effective cost management and tax impacts potentially influencing fluctuations. The data points to a positive financial health outlook with expanding profit-generating capabilities over the period analyzed.

Income Tax Expense

The income tax expense demonstrates a general increasing trend over the analyzed years. Starting at approximately $252 million in early 2020, it slightly decreased to around $230 million in early 2021. Following this period, a notable upward trajectory is observed, with values rising to approximately $359 million in early 2022, then increasing more pronouncedly to about $478 million in early 2023. This upward trend continues with values reaching approximately $626 million in early 2024 and further escalating to around $761 million by early 2025.

Cash Operating Taxes

Cash operating taxes show a somewhat similar pattern, albeit with more variation. Initially, the amount decreased from roughly $233 million in early 2020 to nearly $202 million in early 2021. Subsequently, there is a significant increase to about $371 million in early 2022 and a further rise to nearly $475 million in early 2023. From early 2023 to early 2024, there is a substantial increase to approximately $664 million, followed by a slight decrease to around $717 million in early 2025.

Comparative Insights

Both income tax expense and cash operating taxes exhibit upward trends over the observed period, with the most significant growth occurring after early 2021. The cash operating taxes display higher volatility with a notable spike followed by a minor decline in the last year, whereas income tax expense consistently increases year over year after an initial dip. The rise in these tax-related expenses may reflect growth in taxable income or changes in tax regulation impacting the financial charges of the company.

Total Reported Debt & Leases

The total reported debt and leases exhibit a consistent upward trend over the examined periods. Starting from approximately 740 million US dollars in early 2020, the debt level increased steadily each year, reaching over 1.57 billion US dollars by early 2025. The most significant incremental growth appears between the years 2023 and 2024, where the debt increased by more than 330 million US dollars, indicating a possible expansion phase or increased financial leverage.

Stockholders' Equity

Stockholders' equity also shows a steady and substantial growth throughout the periods. Beginning at roughly 1.95 billion US dollars in early 2020, equity rose consistently each year, culminating in approximately 4.32 billion US dollars by early 2025. The most pronounced growth in equity occurs between 2023 and 2024, with an increase of nearly 1.1 billion US dollars, suggesting enhanced retained earnings or additional equity financing.

Invested Capital

Invested capital reflects a continuous growth trajectory over the analyzed time frame. From about 3.01 billion US dollars in early 2020, invested capital climbs steadily, reaching approximately 6.51 billion US dollars by early 2025. The largest annual increase is observed between 2023 and 2024, mirroring the substantial growth seen in both debt and equity in the same period. This pattern indicates increased overall capital investment, potentially for business expansion or asset acquisition.

Overall Summary

The financial data collectively suggest that the company is in a phase of expansion, supported by increasing leverage and equity. Both liabilities and shareholders' funds have grown significantly, with invested capital nearly doubling over the five-year span. The pronounced increases between 2023 and 2024 across all key financial measures highlight a potentially strategic deployment of resources. This expansion could be reflective of investments aimed at enhancing the company's market position or operational capacity.

The economic spread ratio demonstrates a volatile, yet generally positive, trend over the observed period. Initial values indicate a healthy spread, followed by a contraction, and subsequent expansion culminating in a substantial increase by the final period. This suggests evolving profitability relative to capital employed.

Economic Spread Ratio - Trend Analysis

The economic spread ratio began at 4.39% in February 2020. A significant decrease was observed in January 2021, falling to -0.90%, indicating that returns on invested capital were less than the cost of capital during that year. The ratio rebounded strongly in January 2022, reaching 7.22%, and continued to increase, reaching 7.78% in January 2023. Further growth is evident, with the ratio reaching 10.50% in February 2025. This represents the highest value within the observed timeframe.

The fluctuations in the economic spread ratio correlate with changes in economic profit. The negative economic profit in January 2021 directly corresponds to the negative economic spread ratio, signifying a period of value destruction. Conversely, periods of positive and increasing economic profit, such as those observed from January 2022 onwards, align with increasing economic spread ratios, indicating value creation.

Invested Capital & Economic Profit Relationship

Invested capital consistently increased throughout the period, rising from US$3,008,240 thousand in February 2020 to US$6,507,336 thousand in February 2025. While invested capital grew, economic profit experienced considerable variation. The ability to generate a positive economic spread, particularly in the later years, suggests efficient utilization of the growing capital base. The substantial increase in both economic profit and the economic spread ratio between January 2023 and February 2025 indicates improved profitability and capital allocation effectiveness.

The consistent upward trend in invested capital, coupled with the recovery and subsequent expansion of the economic spread ratio, suggests a strengthening financial performance. The company appears to be increasingly effective at generating returns exceeding its cost of capital, particularly in the most recent periods analyzed.

The economic profit margin demonstrates a volatile pattern over the observed period. Initially positive, it experienced a significant decline before recovering and exhibiting consistent growth. This analysis details the observed trends in economic profit, adjusted net revenue, and the resulting economic profit margin.

Economic Profit

Economic profit began at US$132.051 million in February 2020, then decreased substantially to a loss of US$33.020 million in January 2021. A strong recovery followed, with economic profit increasing to US$282.101 million in January 2022. Further growth was observed in subsequent years, reaching US$60.119 million in January 2023, US$465.170 million in January 2024, and culminating in US$683.035 million in February 2025. This indicates improving profitability in recent periods.

Adjusted Net Revenue

Adjusted net revenue consistently increased throughout the period. Starting at US$4.000 million in February 2020, it rose to US$4.437 million in January 2021, US$6.309 million in January 2022, US$8.154 million in January 2023, US$9.674 million in January 2024, and reached US$10.590 million in February 2025. This consistent revenue growth suggests a strong market position and effective sales strategies.

Economic Profit Margin

The economic profit margin began at 3.30% in February 2020. It experienced a significant decrease to -0.74% in January 2021, coinciding with the decline in economic profit. The margin then recovered to 4.47% in January 2022, and continued to improve, reaching 0.74% in January 2023, 4.81% in January 2024, and 6.45% in February 2025. The increasing trend in the economic profit margin suggests that the company is becoming more efficient at converting revenue into economic profit. The substantial improvement from the negative value in 2021 to 6.45% in 2025 is particularly noteworthy.

The correlation between economic profit and economic profit margin is evident. The substantial growth in both metrics in the later years of the period suggests a positive trajectory for the company’s financial performance. The consistent increase in adjusted net revenue provides a solid foundation for this improved profitability.