lululemon athletica inc. (NASDAQ:LULU)

The period between February 2, 2020, and February 2, 2025, demonstrates a generally positive trajectory in economic profit, though with some intermediate fluctuations. Net operating profit after taxes (NOPAT) initially decreased before experiencing substantial growth, while the cost of capital remained relatively stable. Invested capital consistently increased throughout the period, contributing to the overall economic profit performance.

Economic Profit Trend

Economic profit exhibited volatility during the observed timeframe. It began at US$210,032 thousand in February 2020, decreased to US$63,018 thousand in January 2021, then rose significantly to US$384,256 thousand in January 2022. A subsequent decline to US$177,701 thousand occurred in January 2023, followed by a strong recovery and growth to US$620,912 thousand in January 2024, and further increasing to US$850,106 thousand in February 2025. This suggests improving efficiency in capital allocation and profitability over the latter part of the period.

NOPAT Analysis

Net operating profit after taxes experienced a decrease from US$711,860 thousand in February 2020 to US$680,052 thousand in January 2021. However, a substantial increase was observed in January 2022, reaching US$1,040,291 thousand. While a slight decrease occurred in January 2023 to US$933,695 thousand, NOPAT continued to grow significantly, reaching US$1,622,788 thousand in January 2024 and US$1,928,398 thousand in February 2025. This indicates a strengthening of core operational profitability.

Cost of Capital Stability

The cost of capital remained relatively consistent throughout the period, fluctuating between 16.57% and 16.80%. This stability suggests that the company’s risk profile and financing structure remained largely unchanged during the observed years. The slight decrease in the cost of capital in February 2025 may indicate improved access to capital or a reduction in perceived risk.

Invested Capital Growth

Invested capital demonstrated a consistent upward trend, increasing from US$3,008,240 thousand in February 2020 to US$6,507,336 thousand in February 2025. This growth suggests ongoing investment in the business, potentially supporting expansion and increased operational capacity. The increasing invested capital, coupled with improving NOPAT, contributed to the overall positive trend in economic profit.

In summary, the company experienced fluctuating economic profit, driven by changes in NOPAT and influenced by a consistently growing invested capital base. The relative stability of the cost of capital provides a consistent benchmark against which to assess the company’s performance. The most recent periods show a clear positive trend in economic profit, indicating improved 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 fluctuating, yet generally positive, trend over the observed period. Initial values indicate a substantial spread, followed by a significant contraction, and then a period of expansion culminating in a peak at the end of the observation window. The company’s economic profit also exhibits volatility, but generally increases alongside the economic spread ratio.

Economic Spread Ratio - Overall Trend

The economic spread ratio began at 6.98% in February 2020. It experienced a considerable decrease to 1.72% by January 2021. A strong recovery followed, reaching 9.83% in January 2022, before declining slightly to 3.93% in January 2023. The ratio then exhibited robust growth, increasing to 10.39% in January 2024 and further to 13.06% in February 2025. This suggests improving efficiency in capital allocation and value creation over the latter part of the period.

Economic Spread Ratio - Volatility

Significant year-over-year changes are apparent. The largest decrease occurred between February 2020 and January 2021, representing a substantial contraction in the spread. The largest increase occurred between January 2023 and January 2024, indicating a significant improvement in the ratio. This volatility suggests sensitivity to underlying economic conditions or strategic shifts within the company.

Relationship to Economic Profit & Invested Capital

The economic spread ratio’s upward trajectory from January 2022 coincides with increases in both economic profit and invested capital. While invested capital consistently increased throughout the period, the economic spread ratio’s fluctuations suggest that the efficiency with which that capital is deployed is not constant. The substantial increase in the economic spread ratio in the final two years, coupled with rising economic profit, indicates a period of enhanced value creation relative to the capital employed.

In summary, the economic spread ratio indicates a company that has navigated periods of both challenge and opportunity. The recent trend suggests improved performance in generating returns above the cost of capital, but the historical volatility warrants continued monitoring.

The economic profit margin demonstrates a fluctuating, yet generally positive, trend over the analyzed period. Initial values indicate a substantial economic profit, which is then reflected in the economic profit margin. Subsequent years show variations, culminating in a peak in the most recent period.

Economic Profit Margin Trend

The economic profit margin began at 5.25% in February 2020. A significant decrease was observed in January 2021, falling to 1.42%. The margin then recovered substantially to 6.09% in January 2022, before declining again to 2.18% in January 2023. A strong upward trend is evident in the following two years, with the margin reaching 6.42% in January 2024 and further increasing to 8.03% in February 2025. This indicates improving profitability relative to capital employed in recent periods.

The relationship between adjusted net revenue and economic profit is noteworthy. While adjusted net revenue consistently increased throughout the period, the economic profit margin did not follow a strictly linear progression. This suggests that factors beyond revenue growth, such as cost of capital and operational efficiency, significantly influence the generation of economic profit.

Economic Profit and Revenue Correlation

Adjusted net revenue increased from US$4,000,297 thousand in February 2020 to US$10,589,999 thousand in February 2025. However, economic profit did not increase proportionally. The largest increase in economic profit margin occurred between January 2023 and February 2025, despite continued revenue growth. This suggests improved capital allocation or operational performance during those periods.

The substantial increase in economic profit margin in the latest period (February 2025) warrants further investigation. Understanding the drivers behind this improvement – whether through cost reductions, increased efficiency, or favorable changes in the cost of capital – is crucial for sustaining this positive trend.