Lululemon Athletica (LULU) risk factors, FY2025 10-K

Risks related to our business and industry

1. 01Our success depends on our ability to maintain the value and reputation of our brand
2. 02We operate in a highly competitive market and our competitors may compete more effectively than we can, resulting in a loss of our market share and a decrease in our net revenue and profitability
3. 03If we are unable to anticipate consumer preferences and successfully develop and introduce new, innovative, and differentiated products, we may not be able to maintain or increase our sales and profitability
4. 04If any of our products have manufacturing or design defects or are otherwise unacceptable to us or our guests, our business could be harmed
5. 05Our sales and profitability may decline as a result of increasing costs and decreasing selling prices
6. 06Our results of operations could be materially harmed if we are unable to accurately forecast guest demand for our products
7. 07Our limited operating experience and limited brand recognition in new international markets and new product categories may limit our expansion and cause our business and growth to suffer
8. 08We may not be able to effectively manage our growth and the increased complexity of our business and as a result our brand image and financial performance may suffer
9. 09Changes in consumer shopping preferences, and shifts in distribution channels could materially impact our results of operations
10. 10We are subject to risks associated with leasing retail and distribution space subject to long-term and non-cancelable leases
11. 11Our future success is substantially dependent on the service of our senior management and our ability to maintain our culture and to attract, manage, and retain highly qualified individuals
12. 12Our business is affected by seasonality, which could result in fluctuations in our operating results

Risks related to information security and technology

1. 13We may be unable to safeguard against security breaches which could damage our customer relationships and result in significant legal and financial exposure
2. 14Privacy and data protection laws increase our compliance burden
3. 15Disruption of our technology systems or unexpected network interruption could disrupt our business
4. 16Our technology-based systems that give our customers the ability to shop with us online may not function effectively

Risks related to our supply chain

1. 17Disruptions of our supply chain could have a material adverse effect on our operating and financial results
2. 18We rely on international suppliers and any significant disruption to our supply chain could impair our ability to procure or distribute our products
3. 19A relatively small number of vendors supply and manufacture a significant portion of our products, and losing one or more of these vendors could adversely affect our business and results of operations
4. 20Our business could be harmed if our suppliers and manufacturers do not comply with our Vendor Code of Ethics or applicable laws
5. 21The fluctuating cost of raw materials could increase our cost of goods sold
6. 22If we encounter problems with our distribution system, our ability to deliver our products to the market and to meet guest expectations could be harmed
7. 23Increasing labor costs and other factors associated with the production of our products in South Asia and South East Asia could increase the costs to produce our products

Risks related to environmental, social, and governance issues

1. 24Climate change, and related legislative and regulatory responses to climate change, may adversely impact our business
2. 25Increased scrutiny from investors and others regarding our environmental, social, governance, or sustainability responsibilities could result in additional costs or risks and adversely impact our reputation, employee retention, and willingness of customers and suppliers to do business with us

Risks related to global economic, political, and regulatory conditions

1. 26An economic recession, depression, downturn, periods of inflation, or economic uncertainty in our key markets may adversely affect consumer discretionary spending and demand for our products
2. 27Global economic and political conditions could adversely impact our results of operations
3. 28We may be unable to source and sell our merchandise profitably or at all if new trade restrictions are imposed or existing restrictions become more burdensome
4. 29We are dependent on international trade agreements and regulations. The countries in which we produce and sell our products could impose or increase tariffs, duties, or other similar charges that could negatively affect our results of operations, financial position, or cash flows
5. 30Changes in tax laws or unanticipated tax liabilities could adversely affect our effective income tax rate and profitability
6. 31In 2025, assuming there are no exchange transactions by our exchangeable shareholders, we will continue to recognize Canadian withholding taxes on the accumulated earnings of our Canadian subsidiaries which are not indefinitely reinvested
7. 32Our failure to comply with trade and other regulations could lead to investigations or actions by government regulators and negative publicity
8. 33Because a significant portion of our net revenue and expenses are generated in countries other than the United States, fluctuations in foreign currency exchange rates have affected our results of operations and may continue to do so in the future
9. 34Our financial condition could be adversely affected by global or regional health events such as the COVID-19 pandemic and related government, private sector, and individual consumer responsive actions

Risks related to intellectual property

1. 35Our fabrics and manufacturing technology generally are not patented and can be imitated by our competitors. If our competitors sell products similar to ours at lower prices, our net revenue and profitability could suffer
2. 36Our failure or inability to protect our intellectual property rights could diminish the value of our brand and weaken our competitive position
3. 37Our trademarks, patents, and other proprietary rights could potentially conflict with the rights of others and we may be prevented from selling some of our products
4. 38We have been, and in the future may be, sued by third parties for alleged infringement of their proprietary rights

Risks related to legal and governance matters

1. 39Our business could be negatively affected as a result of actions of stockholders, activists, or others
2. 40We are subject to periodic claims and litigation that could result in unexpected expenses and could ultimately be resolved against us
3. 41Anti-takeover provisions of Delaware law and our certificate of incorporation and bylaws could delay and discourage takeover attempts that stockholders may consider to be favorable