lululemon athletica inc., a Delaware corporation, ("lululemon" and, together with its subsidiaries unless the context otherwise requires, the "Company") is engaged in the design, distribution, and retail of ~~healthy lifestyle inspired~~technical athletic apparel, footwear, and accessories, which isare sold through a chain of company-operated stores, direct to consumer through e-commerce, outlets, ~~showrooms,~~sales from temporary locations, sales to wholesale accounts, license and supply arrangements, and ~~through warehouse sales. Its apparel~~recommerce. Recommerce is ~~marketed under~~ the ~~lululemon and ivivva brand names.~~sale of repurchased product via the Company's "Like New" program. The Company operates stores in the United States, the People's Republic of China ("PRC"), Canada, Australia, the United Kingdom, ~~China, New Zealand, Hong Kong, Singapore,~~ South Korea, Germany, New Zealand, Singapore, Japan, Ireland, ~~Japan, Puerto Rico, Switzerland,~~France, Malaysia, Spain, Sweden, the Netherlands, Norway, and ~~Taiwan.~~Switzerland. There were ~~a total of 388~~623 and ~~406~~574 company-operated stores ~~in operation~~ as of October ~~29, 2017~~30, 2022 and January ~~29, 2017,~~30, 2022, respectively.

The unaudited interim consolidated financial statements as of October ~~29, 2017~~30, 2022 and for the quarters and three quarters ended October ~~29, 2017~~30, 2022 and October ~~30, 2016~~31, 2021 are presented in ~~United States~~U.S. dollars and have been prepared by the Company under the rules and regulations of the Securities and Exchange Commission ("SEC"). The financial information is presented in accordance with United States generally accepted accounting principles ("GAAP") for interim financial information and, accordingly, does not include all of the information and footnotes required by GAAP for complete financial statements. The financial information as of January ~~29, 2017~~30, 2022 is derived from the Company's audited consolidated financial statements and related notes for the fiscal year ended January ~~29, 2017,~~30, 2022, which are included in Item 8 in the Company's fiscal ~~2016~~2021 Annual Report on Form 10-K filed with the SEC on March 29, ~~2017.~~2022. These unaudited interim consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. These unaudited interim consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and related notes included in Item 8 in the Company's fiscal ~~2016~~2021 Annual Report on Form 10-K. Note 2. Recent Accounting Pronouncements sets out the impact of recent accounting pronouncements.

The Company's business is affected by the pattern of seasonality common to most retail apparel businesses. Historically, the Company has recognized a significant portion of its operating profit in the fourth fiscal quarter of each year as a result of increased net revenue during the holiday season.

The Company considers the ~~Financial~~applicability and impact of all Accounting ~~Standards Board~~Standard Updates ("~~FASB") issued Accounting Standards Update ("ASU") 2014-09,~~ ~~Revenue from Contracts with Customers~~ ~~("ASC 606"~~ASUs"). ~~This ASU supersedes the revenue recognition requirements in ASC Topic 605~~ ~~Revenue Recognition~~, including most industry-specific revenue recognition guidance. ASU 2014-09 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, and expands the related disclosure requirements. In 2015, the FASB deferred the effective date for this guidance, and in 2016, the FASB issued several updates that clarify the guidance in this topic. ASC 606 may be adopted either on a full retrospective basis or using a modified retrospective method with a cumulative adjustment to equity. This guidance will beASUs adopted by the Company ~~beginning in its~~during the first ~~quarter~~three quarters of ~~fiscal 2018. The Company continues~~2022 not listed below were assessed, and determined to ~~evaluate the~~be either not applicable or are expected to have minimal impact ~~that this new guidance may have~~ on its consolidated financial ~~statements, and the method~~position or results of ~~retrospective adoption that it will elect, but does not expect ASC 606 to materially~~operations.

ASUs recently issued not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on its consolidated financial ~~statements.~~position or results of operations.

In ~~February 2016,~~September 2022, the FASB issued ASC ~~Topic 842,~~ ~~Leases~~ ~~("ASC 842")~~405-50, Liabilities - Supplier Finance Programs, to ~~increase transparency~~require annual and ~~comparability among organizations by recognizing lease assets~~interim disclosures about the key terms of supplier finance programs used in connection with the purchase of goods and ~~lease liabilities on the balance sheet and disclosing key~~services along with information about ~~leasing arrangements. Under~~ the ~~new guidance, lessees are required to recognize a lease liability, which represents~~obligations under these programs, including the ~~discounted obligation to make future minimum lease payments,~~amount outstanding at the end of each reporting period and a ~~corresponding right-of-use asset on the balance sheet for most leases. This~~rollforward of those obligations. The guidance ~~will be~~is effective for ~~the Company~~fiscal years beginning after December 15, 2022, including interim periods in ~~its first quarter of~~those fiscal ~~2019,~~years, with early application permitted. The Company will adopt ASC 842 in its first quarter of fiscal 2019. While the Company is currently evaluating the impact that this new guidance will have on its consolidated financial statements, it is expected that the primary impact upon adoption will be the recognition, on a discounted basis, of the Company's minimum commitments under noncancelable operating leases as right of use assets and obligations on the consolidated balance sheets. It is expected that this will result in a significant increase in assets and liabilities on the consolidated balance sheets.

On July 7, 2020, the Company acquired all of the outstanding shares of MIRROR, an in-home fitness company with an interactive workout platform that features live and on-demand classes. In connection with the acquisition, the Company recognized certain acquisition-related expenses which were expensed within acquisition-related expenses in the consolidated statements of operations. The third quarter of 2021 included accelerated compensation expense related to the transition of the former MIRROR Chief Executive Officer to a temporary advisory role with the Company. The following table summarizes the acquisition-related expenses recognized:

During the second quarter of 2022, the Company completed the sale of an administrative office building, which resulted in a pre-tax gain of $10.2 million. The income tax effect of the gain on disposal of assets was an expense of $1.7 million. The building's carrying value of $5.4 million was first classified as held for sale and recognized within other current assets as of May 1, 2022.

On December 14, 2021, the Company entered into an amended and restated credit agreement extending its existing credit facility, which provides for $400.0 million in commitments under an unsecured five-year revolving credit facility. The credit facility has a maturity date of December 14, 2026, subject to extension under certain circumstances. Borrowings under the credit facility may be prepaid and commitments may be reduced or terminated without premium or penalty (other than customary breakage costs).

As of October 30, 2022, aside from letters of credit of $5.2 million, the Company had no other borrowings outstanding under this credit facility.

Borrowings made under the credit facility bear interest at a rate per annum equal to, at the Company's option, either (a) a rate based on the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York ("SOFR"), or (b) an alternate base rate, plus, in each case, an applicable margin. The applicable margin is determined by reference to a pricing grid, based on the ratio of indebtedness to earnings before interest, tax, depreciation, amortization, and rent ("EBITDAR") and ranges between 1.000%-1.375% for SOFR loans and 0.000%-0.375% for alternate base rate or Canadian prime rate loans. Additionally, a commitment fee of between 0.100%-0.200%, also determined by reference to the pricing grid, is payable on the average daily unused amounts under the credit facility.

The applicable interest rates and commitment fees are subject to adjustment based on certain sustainability key performance indicators ("KPIs"). The two KPIs are based on greenhouse gas emissions intensity reduction and gender pay equity, and the Company's performance against certain targets measured on an annual basis could result in positive or negative sustainability rate adjustments of 2.50 basis points to its drawn pricing and positive or negative sustainability fee adjustments of 0.50 basis points to its undrawn pricing.

The credit agreement contains negative covenants that, among other things and subject to certain exceptions, limit the ability of the Company's subsidiaries to incur indebtedness, incur liens, undergo fundamental changes, make dispositions of all or substantially all of their assets, alter their businesses and enter into agreements limiting subsidiary dividends and distributions.

The Company's financial covenants include maintaining an operating lease adjusted leverage ratio of not greater than 3.25:1.00 and the ratio of consolidated EBITDAR to consolidated interest charges (plus rent) of not less than 2.00:1.00. The credit agreement also contains certain customary representations, warranties, affirmative covenants, and events of default (including, among others, an event of default upon the occurrence of a change of control). If an event of default occurs, the credit agreement may be terminated, and the maturity of any outstanding amounts may be accelerated. As of October 30, 2022, the Company was in compliance with the covenants of the credit facility.

In December 2019, the Company entered into an uncommitted and unsecured 130.0 million Chinese Yuan ($18.1 million) revolving credit facility with terms that are reviewed on an annual basis. The credit facility was increased to 230.0 million Chinese Yuan ($32.1 million) during 2020. It is comprised of a revolving loan of up to 200.0 million Chinese Yuan ($27.9 million) and a financial guarantee facility of up to 30.0 million Chinese Yuan ($4.2 million), or its equivalent in another currency. Loans are available for a period not to exceed 12 months, at an interest rate equal to the loan prime rate plus a spread of 0.5175%. The Company is required to follow certain covenants. As of October 30, 2022, the Company was in compliance with the covenants and, aside from letters of credit of 11.7 million Chinese Yuan ($1.6 million), there were no other borrowings or guarantees outstanding under this credit facility.

The Company's eligible employees participate in various stock-based compensation plans, ~~which are~~ provided directly by the ~~Company directly.~~Company.

Stock-based compensation expense charged to income for the plans was ~~$13.0~~$58.8 million and ~~$12.9~~$49.6 million for the first three quarters ~~ended October 29, 2017~~of 2022 and ~~October 30, 2016,~~2021, respectively. Total unrecognized compensation cost for all stock-based compensation plans was ~~$40.2~~$132.8 million atas of October ~~29, 2017,~~30, 2022, which is expected to be recognized over a weighted-average period of ~~2.3~~2.2 years.

A summary of the balances of the Company's ~~stock option, performance-based restricted stock unit, restricted share, and restricted stock unit activity~~stock-based compensation plans as of October ~~29, 2017,~~30, 2022, and changes during the first three quarters then ended, is presented below:

The Company's performance-based restricted stock units are awarded to eligible employees and entitle the grantee to receive a maximum of two shares of common stock per performance-based restricted stock unit if the Company achieves specified performance goals and the grantee remains employed during the vesting period. The fair value of performance-based restricted stock units is based on the closing price of the Company's common stock on the ~~award~~grant date. Expense for performance-based restricted stock units is recognized when it is probable that the performance goal will be achieved.

The grant date fair value of the restricted shares and restricted stock units is based on the closing price of the Company's common stock on the ~~award~~grant date.

The grant date fair value of each stock option granted is estimated on the date of grant using the Black-Scholes model. The closing price of the Company's common stock on the grant date is used in the model. The assumptions used to calculate the fair value of the options granted are evaluated and revised, as necessary, to reflect market conditions and the Company's historical experience. The expected term of the options is based upon the historical experience of similar awards, giving consideration to expectations of future employee exercise behavior. Expected volatility is based upon the historical volatility of the Company's common stock for the period corresponding with the expected term of the options. The risk-free interest rate is based on the U.S. Treasury yield curve for the period corresponding with the expected term of the options. The following are weighted averages of the assumptions that were used in calculating the fair value of stock options granted during the first three quarters of 2022:

The Company's board of directors and stockholders approved the Company's Employee Share Purchase Plan ("ESPP") in September 2007. Contributions are made by eligible employees, subject to certain limits defined in the ESPP, and the Company matches one-third of the contribution. The maximum number of shares authorized to be purchased under the ESPP is 6.0 million shares. All shares purchased under the ESPP are purchased in the open market. During the third quarter ~~ended October 29, 2017,~~of 2022, there were ~~34.2~~25.6 thousand shares purchased.

~~During the second quarter of fiscal 2016, the~~The Company ~~began offering~~offers defined contribution pension plans to its eligible ~~employees in Canada and the United States.~~employees. Participating employees may elect to defer and contribute a portion of their eligible

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are made using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value:

The fair value measurement is categorized in its entirety by reference to its lowest level of significant input. As of October ~~29, 2017,~~30, 2022 and January 30, 2022, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis:

The Company records cash, ~~and cash equivalents,~~ accounts receivable, accounts payable, and accrued liabilities at cost. The carrying values of these instruments approximate their fair value due to their short-term maturities.

~~In addition to~~The Company has short-term, highly liquid investments classified as cash equivalents, which are invested in money market funds and term deposits. The Company records cash equivalents at their original purchase prices plus interest that has accrued at the stated rate.

The fair values of the forward currency contract assets and liabilities ~~that~~ are ~~recorded~~determined using observable Level 2 inputs, including foreign currency spot exchange rates, forward pricing curves, and interest rates. The fair values consider the credit risk of the Company and its counterparties. The Company's Master International Swap Dealers Association, Inc., Agreements and other similar arrangements allow net settlements under certain conditions. However, the Company records all derivatives on its consolidated balance sheets at fair value ~~on a recurring basis, the Company has impaired certain long-lived~~and does not offset derivative assets and recorded them at their estimated fair value on a non-recurring basis. The fair value of these long-lived assets was determined using Level 3 inputs, principally the present value of the estimated future cash flows expected from their use and eventual disposition.liabilities.

The Company is exposed to risks associated with changes in foreign currency exchange rates and uses derivative financial instruments to manage its exposure to certain of these foreign currency exchange rate risks. The Company does not enter into derivative contracts for speculative or trading purposes.

The Company currently hedges against changes in the Canadian dollar and Chinese Yuan to the U.S. dollar exchange rate and changes in the Euro and Australian dollar to the Canadian dollar exchange rate using forward currency contracts.

The Company is exposed to foreign currency exchange gains and losses which arise on translation of its ~~foreign~~international subsidiaries' balance sheets into U.S. dollars. These gains and losses are recorded as ~~a foreign currency translation adjustment~~other comprehensive income (loss), net of tax in accumulated other comprehensive income or loss within stockholders' equity.

The Company holds a significant portion of its assets in Canada and ~~during the three quarters ended October 29, 2017, it entered~~enters into forward currency contracts designed to hedge a portion of the foreign currency exposure that arises on translation of a Canadian subsidiary into U.S. dollars. These forward currency contracts are designated as net investment hedges. The effective portions of the hedges are reported in accumulated other comprehensive income or loss and will subsequently be reclassified to net earnings in the period in which the hedged investment is either sold or substantially liquidated. The Company assesses hedge effectiveness based on

The Company classifies the cash flows at settlement of its net investment hedges within investing activities in the consolidated statements of cash flows.

The Company is exposed to gains and losses arising from changes in foreign currency exchange rates associated with transactions which are undertaken by its subsidiaries in currencies other than their functional currency. Such transactions include intercompany transactions and inventory purchases. These transactions result in the recognition of certain foreign currency denominated monetary assets and liabilities which are remeasured to the quarter-end or settlement date foreign currency exchange rate. The resulting foreign currency gains and losses are recorded in selling, general and administrative expenses.

During the first three quarters ~~ended October 29, 2017~~of 2022, the Company entered into certain forward currency contracts designed to economically hedge the foreign currency exchange revaluation gains and losses that are recognized by its Canadian and Chinese subsidiaries on ~~U.S. dollar denominated~~specific monetary assets and ~~liabilities.~~liabilities denominated in currencies other than the functional currency of the entity. The Company has not applied hedge accounting to these instruments and the change in fair value of these derivatives is recorded within selling, general and administrative expenses.

The Company classifies the cash flows at settlement of its forward currency contracts which are not designated in hedging relationships within operating activities in the consolidated statements of cash flows.

The Company presents its derivative assets and derivative liabilities at their gross fair values within ~~other~~ prepaid expenses and other current assets and other current liabilities on the consolidated balance sheets. However, the Company's Master International Swap Dealers Association, Inc., Agreements and other similar arrangements allow net settlements under certain conditions. As of October ~~29, 2017,~~30, 2022, there were derivative assets of ~~$1.2~~$46.8 million and derivative liabilities of ~~$1.5~~$24.9 million subject to enforceable netting arrangements.

The notional amounts and fair values of forward currency contracts were as follows:

October 29, 2017 October 30, 2016
(In thousands)
Derivatives designated as net investment hedges, recognized within:
Other current liabilities $ 2,902
$ —
Derivatives not designated in a hedging relationship, recognized within:
Other prepaid expenses and other current assets 2,319
—
The forward currency contracts designated as net investment hedges outstanding as of October 30, 2022 mature on different dates between November 2022 and August 2023.

The forward currency contracts not designated in a hedging relationship outstanding as of October 30, 2022 mature on different dates between November 2022 and May 2023.

The pre-tax gains and losses on foreign currency exchange forward contracts recorded in accumulated other comprehensive income ~~and in the consolidated statement of operations, are~~or loss were as follows:

No gains or losses have been reclassified from accumulated other comprehensive income or loss into net income for derivative financial instruments in a net investment hedging relationship, as the Company has not sold or liquidated (or substantially liquidated) its hedged subsidiary.

The Company is exposed to credit-related losses in the event of nonperformance by the counterparties to the forward currency contracts. The credit risk amount is the Company's unrealized gains on its derivative instruments, based on foreign currency rates at the time of nonperformance.

The Company's forward currency contracts are entered into with large, reputable financial institutions that are monitored by the Company for counterparty risk.

The Company's derivative contracts contain certain credit risk-related contingent features. Under certain circumstances, including an event of default, bankruptcy, termination, and cross default under the Company's revolving credit facility, the Company may be required to make immediate payment for outstanding liabilities under its derivative contracts.

The details of the computation of basic and diluted earnings per share are as follows:

The Company's calculation of weighted-average shares includes the common stock of the Company as well as the exchangeable shares. Exchangeable shares are the equivalent of common shares in all material respects. All classes of stock have, in effect, the same rights and share equally in undistributed net income. For the first three quarters ~~ended October 29, 2017~~of 2022 and ~~October 30, 2016, 0.2 million~~2021, 50.1 thousand and ~~0.1 million~~48.0 thousand stock options and awards, respectively, were anti-dilutive to earnings per share and therefore have been excluded from the computation of diluted earnings per share.

On ~~June 11, 2014,~~January 31, 2019, the Company's board of directors approved a stock repurchase program for up to ~~repurchase shares~~$500.0 million of the Company's common ~~stock up to an aggregate value of $450.0 million. This stock repurchase program was completed during the second quarter of fiscal 2016.~~

On March 23, 2022, the Company's board of directors approved a stock repurchase program for up to ~~repurchase shares~~$1.0 billion of the Company's common ~~stock up to an aggregate value of $100.0 million. The common stock was repurchased in~~shares on the open market or in privately negotiated transactions. The repurchase plan has no time limit and does not require the repurchase of a minimum number of shares. Common shares repurchased on the open market are at prevailing market prices, including under plans complying with the provisions of Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of ~~1934, with the~~1934. The timing and actual number of common shares to be repurchased ~~depending~~will depend upon market conditions, eligibility to trade, and other ~~factors. This stock repurchase~~factors, in accordance with Securities and Exchange Commission requirements. As of October 30, 2022, the remaining authorized value of shares available to be repurchased under this program was ~~completed during the third quarter of fiscal 2017.~~$812.5 million.

During the first three quarters ~~ended October 29, 2017~~of 2022 and ~~October 30, 2016, 1.8~~2021, 1.2 million and ~~0.4~~1.4 million shares, respectively, were repurchased under the program at a total cost of ~~$99.3~~$375.0 million and ~~$28.6~~$491.3 million, respectively.

Subsequent to October 30, 2022, and up to December 2, 2022, 9.2 thousand shares were repurchased at a total cost of $3.4 million.

A summary of certain consolidated balance sheet accounts is as follows:

~~NOTE 11. LEGAL PROCEEDINGS~~The following table disaggregates the Company's net revenue by geographic area.

In addition to the disaggregation of net revenue by reportable segment, the following table disaggregates the Company's net revenue by category. Other categories is primarily composed of accessories, lululemon Studio, and footwear.

In addition to the legal ~~matter~~proceedings described below, the Company is, from time to time, involved in routine legal matters, and audits and inspections by governmental agencies and other third parties which are incidental to the conduct of its ~~business, including~~business. This includes legal matters such as initiation and defense of proceedings to protect intellectual property rights, personal injury claims, product liability claims, employment claims, and similar matters. The Company believes the ultimate resolution of any such ~~current proceeding~~legal proceedings, audits, and inspections will not have a material adverse effect on its consolidated balance sheets, results of operations or cash flows. The Company has recognized immaterial provisions related to the expected outcome of legal proceedings.

~~On October 9, 2015, certain current~~In April 2021, DISH Technologies L.L.C., and ~~former hourly employees of the Company~~Sling TV L.L.C. (DISH) filed a ~~class action lawsuit~~complaint in ~~the Supreme Court of New York entitled~~ ~~Rebecca Gathmann-Landini et al v. lululemon USA inc.~~ ~~On December 2, 2015, the case was moved to~~ the United States District Court for the ~~Eastern~~ District of ~~New York. The lawsuit alleges that~~Delaware and, along with DISH DBS Corporation, also with the United States International Trade Commission (ITC) under Section 337 of the Tariff Act of 1930 against the Company ~~violated~~and its Curiouser Products subsidiary (MIRROR), along with ICON Health & Fitness, Inc., FreeMotion Fitness, Inc., NordicTrack, Inc., and Peloton Interactive, Inc., alleging infringement of various ~~New York labor codes by failing~~patents related to ~~pay all earned wages, including overtime compensation. The plaintiffs are~~fitness devices containing internet-streaming enabled video displays. In the ITC complaint, DISH seeks an exclusion order barring the importation of MIRROR fitness devices, streaming components and systems containing components that infringe one or more of the asserted patents as well as a cease and desist order preventing the Company from carrying out commercial activities within the United States related to those products. In the District of Delaware complaint, DISH is seeking an ~~unspecified amount~~order permanently enjoining the Company from infringing the asserted patents, an award of ~~damages.~~damages for the infringement of the asserted patents, and an award of damages for lost sales. In the ITC investigation, an Administrative Law Judge has issued an Initial Determination recommending an Exclusion Order and Cease and Desist Order be entered against the Company. The Company ~~intends to vigorously defend this matter.~~

Some of the statements contained in this Form 10-Q and any documents incorporated herein by reference constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the ~~Private~~ Securities ~~Litigation Reform~~Exchange Act of ~~1995.~~1934. All statements, other than statements of historical facts, included or incorporated in this Form 10-Q are forward-looking statements, particularly statements which relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, the development and introduction of new products, and the implementation of our marketing and branding strategies. In many cases, you can identify forward-looking statements by

The forward-looking statements contained in this Form 10-Q and any documents incorporated herein by reference reflect our current views about future events and are subject to risks, uncertainties, assumptions, and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance, or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, those factors described in "Risk Factors" and elsewhere in this report.

The forward-looking statements contained in this Form 10-Q reflect our views and assumptions only as of the date of this Form 10-Q and are expressly qualified in their entirety by the cautionary statements included in this Form 10-Q. Except as required by applicable securities law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

This information should be read in conjunction with the unaudited interim consolidated financial statements and the notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations, contained in our fiscal ~~2016~~2021 Annual Report on Form 10-K filed with the SEC on March 29, ~~2017.~~2022. Fiscal 2022 and fiscal 2021 are referred to as "2022," and "2021," respectively. The first three quarters of 2022 and 2021 ended on October 30, 2022 and October 31, 2021, respectively. Components of management's discussion and analysis of financial condition and results of operations include:

We disclose material non-public information through one or more of the following channels: our investor relations website (http://~~investor.lululemon.com/)~~corporate.lululemon.com/investors), the social media channels identified on our investor relations website, press releases, SEC filings, public conference calls, and webcasts.

lululemon athletica inc. is principally a designer, distributor, and retailer of ~~healthy lifestyle inspired~~technical athletic ~~apparel.~~apparel, footwear, and accessories. We have a vision to create transformative products and experiences that build meaningful connections, unlocking greater possibility and wellbeing for all. Since our inception, we have ~~developed~~fostered a distinctive corporate ~~culture, and~~culture; we ~~have a mission to produce products which create transformational experiences for people to live happy, healthy, fun lives. We~~ promote a set of core values in our business which include taking personal responsibility, ~~nurturing entrepreneurial spirit,~~ acting with ~~honesty and~~ courage, valuing connection and inclusion, and choosing to have fun. These core values attract passionate and motivated employees who are driven to ~~succeed~~achieve personal and professional goals, and share our purpose ~~of "elevating~~"to elevate human potential by helping people feel their best."

Our performance apparel and footwear are marketed under the ~~world from mediocrity to greatness."~~

For the third quarter of ~~fiscal 2017,~~2022, compared to the third quarter of ~~fiscal 2016:~~2021:

Refer to the non-GAAP reconciliation tables contained in the ~~"Results of Operations"~~"Non-GAAP Financial Measures" section of this ~~"Item~~Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" for reconciliations between constant dollar changes in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue and ~~adjusted~~

Macroeconomic conditions, COVID-19, and supply chain disruption continue to impact our business and operating costs, with the impact varying by market.

Macroeconomic conditions, including foreign currency fluctuations and inflationary pressures have impacted our financial results. This includes higher air freight costs and increased wage rates during the first three quarters of 2022 compared to 2021. We have not increased the retail prices on the significant proportion of our products. Inflation and other macroeconomic factors could also impact consumer purchasing behaviors and sustained increases in costs may have an adverse effect on our operating margins.

Most of our retail locations were open throughout the first three quarters of 2022 and 2021, with certain locations temporarily closed due to COVID-19 resurgences, including certain closures during 2022 in the People's Republic of China ("PRC").

In 2021 and 2022 we have experienced supply chain disruption, including delays in inbound delivery of our products as well as in manufacturing. This supply chain disruption caused us to use higher cost modes of transport, including increasing our use of air freight. The supply chain disruption we have experienced has contributed to the 85% increase in our inventory balance compared to October 31, 2021. We expect that the growth rate in our inventory balance will moderate in the fourth quarter of 2022 as a result of higher sales made during the holiday season, but expect the growth rate in our inventories to remain higher than the growth rate in our sales.

The use of air freight reduced our gross margin during the first three quarters of 2022, however we have begun to see improvement in the supply chain disruption and lower inbound freight costs.

The following table summarizes key components of our results of operations for the ~~quarters ended October 29, 2017 and October 30, 2016. The percentages are presented as a percentage of net revenue.~~periods indicated:

Net revenue increased ~~$74.6~~$406.5 million, or ~~14%~~28%, to ~~$619.0 million~~$1.9 billion for the third quarter of ~~fiscal 2017~~2022 from ~~$544.4 million~~$1.5 billion for the third quarter of ~~fiscal 2016.~~2021. On a constant dollar basis, assuming the average foreign currency exchange rates for the third quarter of ~~fiscal 2017~~2022 remained constant with the average foreign currency exchange rates for the third quarter of ~~fiscal 2016,~~2021, net revenue increased ~~$67.8~~$455.4 million, or ~~12%~~31%.

The increase in net revenue was primarily due to increased company-operated store net revenue, ~~generated by~~including from new company-operated stores and increased comparable store sales, as well as due to increased direct to consumer net revenue. Other net revenue also increased.

Total comparable sales, which includes comparable store sales and direct to consumer net revenue, increased ~~8% in~~22% for the third quarter of ~~fiscal 2017~~2022 compared to the third quarter of ~~fiscal 2016.~~2021. Total comparable sales increased 7%25% on a constant dollar basis.

Net revenue ~~on a segment basis~~ for ~~the quarters ended October 29, 2017 and October 30, 2016 is summarized below. The percentages are presented as a percentage of total net revenue.~~

The amortization of intangible assets was primarily the result of the amortization of intangible assets recognized upon the acquisition of MIRROR.

In connection with our acquisition of MIRROR, we recognized acquisition-related compensation expenses of $23.8 million and ~~derivative revaluation gains~~integration related costs of ~~$2.7~~$0.3 million in the third quarter of ~~fiscal 2017 compared to net foreign exchange revaluation gains of $4.3 million~~2021. There were no acquisition-related expenses in the third quarter of fiscal 2016. The net foreign exchange gains and losses primarily relate to the revaluation of U.S. dollar denominated monetary assets and liabilities held by Canadian subsidiaries, and the derivatives are designed to economically hedge these gains and losses.

On a segment basis, we determine income from operations without taking into account our general corporate ~~expenses and the costs we incur in connection with the restructuring of our ivivva operations.~~

The increase in other income, net was primarily due to an increase in ~~gross margin.~~interest income from higher interest rates.

Certain non-deductible expenses incurred in connection with the MIRROR acquisition increased ~~$2.9 million, or 6%, to $50.8 million for~~ the third quarter of fiscal 2017 from $47.8 million for the third quarter of fiscal 2016. This increase was primarily due to increases in information technology costs, head office employee costs, and other brand and community costs, partially offset by decreased professional fees. There was also a decrease in net foreign exchange and derivative revaluation gains of $1.6 million. There were net foreign exchange and derivative revaluation gains of $2.7 millioneffective tax rate in the third quarter of fiscal 2017 compared to net foreign exchange revaluation gains of $4.3 million in the third quarter of fiscal 2016. The net foreign exchange gains and losses primarily relate to the revaluation of U.S. dollar denominated monetary assets and liabilities held2021 by ~~Canadian subsidiaries, and the derivatives are designed to economically hedge these gains and losses.~~

The effective tax rate for the third quarter of fiscal 2017 was 32.0% compared to 27.0% for the third quarter of fiscal 2016. The adjusted effective tax rate was 30.8% for the third quarter of fiscal 2017 compared to 31.3% for the third quarter of fiscal 2016. The decrease in the adjusted effective tax rate2022 has increased compared to the third quarter of ~~fiscal 2016 is~~2021 primarily due to the accrual of withholding taxes on unremitted foreign earnings and a decrease in deductions related to stock-based compensation. This was partially offset by favorable adjustments upon the filing of certain ~~adjustments which were recorded during the third quarter of fiscal 2017 following the finalization of our U.S.~~income tax ~~return.~~returns.

The increase in net income ~~decreased $9.3 million, or 14%, to $58.9 million for the third quarter of fiscal 2017 from $68.3 million for the third quarter of fiscal 2016. This~~ was primarily due to an increase in gross profit of $209.5 million, and a decrease in acquisition-related expenses of $24.1 million, partially offset by an increase in selling, general and administrative expenses of ~~$29.9~~$139.1 million ~~asset impairment~~ and ~~restructuring costs of $21.0 million,~~ an increase in income tax expense of ~~$2.4 million, partially offset by an increase in gross profit of $43.5 million and an increase in other income (expense), net of $0.4~~$27.1 million.

The following table summarizes key components of our results of operations for the ~~first three quarters ended October 29, 2017 and October 30, 2016. The percentages are presented as a percentage of net revenue.~~periods indicated:

Net revenue increased ~~$165.9 million,~~$1.2 billion, or ~~11%~~29%, to ~~$1.720~~$5.3 billion for the first three quarters of ~~fiscal 2017~~2022 from ~~$1.554~~$4.1 billion for the first three quarters of ~~fiscal 2016.~~2021. On a constant dollar basis, assuming the average foreign currency exchange rates for the first three quarters of ~~fiscal 2017~~2022 remained constant with the average foreign currency exchange rates for the first three quarters of ~~fiscal 2016,~~2021, net revenue increased ~~$162.9 million,~~$1.3 billion, or ~~10%~~32%.

The increase in net revenue was primarily due to increased company-operated store net revenue, ~~generated by~~including from new company-operated stores and increased comparable store sales, as well as due to increased direct to consumer net revenue. Other net revenue also increased.

Total comparable sales, which includes comparable store sales and direct to consumer net revenue, increased ~~5% in~~24% for the first three quarters of ~~fiscal 2017~~2022 compared to the first three quarters of ~~fiscal 2016.~~2021. Total comparable sales increased 4%26% on a constant dollar basis.

Net revenue ~~on a segment basis~~ for the first three quarters ~~ended October 29, 2017~~of 2022 and ~~October 30, 2016~~2021 is summarized below. ~~The percentages are presented as a percentage of total net revenue.~~

~~Gross profit as a percentage of net revenue, or gross margin, increased 130 basis points, to 50.9% in the first three quarters of fiscal 2017 from 49.6% in the first three quarters of fiscal 2016.~~ The ~~increase~~decrease in gross margin was primarily the result of:

The decrease in gross margin was partially offset by a decrease in occupancy and depreciation costs as a percentage of net revenue of 60 basis points, ~~and costs incurred~~driven primarily by the increase in ~~connection with the restructuring of our ivivva operations of 50 basis points.~~

The amortization of intangible assets was primarily the result of the amortization of intangible assets recognized upon the acquisition of MIRROR.

In connection with our acquisition of MIRROR, we recognized acquisition-related compensation expenses of $38.1 million and ~~derivative revaluation gains~~integration related costs of ~~$6.9~~$1.9 million in the first three quarters of ~~fiscal 2017 compared to net foreign exchange revaluation losses of $4.1 million~~2021. There were no acquisition-related expenses in the first three quarters of ~~fiscal 2016. The net foreign exchange gains and losses primarily relate to~~2022.

During the ~~revaluation~~second quarter of ~~U.S. dollar denominated monetary assets and liabilities held by Canadian subsidiaries, and~~2022, we completed the ~~derivatives are designed to economically hedge these gains and losses.~~

On a segment basis, we determine income from operations without taking into account our general corporate ~~expenses and the costs we incur in connection with the restructuring of our ivivva operations.~~

The increase in other income, net was primarily due to an increase in interest income from higher ~~gross margin.~~ interest rates, partially offset by an increase in other expenses.

Certain non-deductible expenses incurred in connection with the MIRROR acquisition increased the effective tax rate in the first three quarters of 2021 by 120 basis points.

A lower tax rate on the capital gain on the sale of an administrative building reduced our effective tax rate in the first three quarters of 2022 by 20 basis points

The increase in the effective tax rate was primarily due to the accrual of withholding taxes on unremitted foreign earnings and a decrease in deductions related to stock-based compensation. This was partially offset by a reduction in non-deductible expenses in international jurisdictions and favorable adjustments upon the filing of certain income tax returns.

The increase in net income was primarily due to an increase in gross profit ~~was~~of $592.3 million, a decrease in acquisition-related expenses of $39.9 million, and a gain on disposal of assets of $10.2 million in the current year, partially offset by an increase in selling, general and administrative expenses ~~including increased employee costs, increased brand and community costs, and increased operating expenses associated with new locations and higher net revenues. Income from operations as a percentage~~ of other net revenue increased 250 basis points primarily due to an increase in gross margin partially offset by deleverage of selling, general and administrative expenses as a percentage of other net revenue.

We ~~separately track~~use comparable store sales ~~which~~to assess the performance of our existing stores as it allows us to monitor the performance of our business without the impact of recently opened or expanded stores. We use total comparable sales to evaluate the performance of our business from an omni-channel perspective. We believe investors would similarly find these metrics useful in assessing the performance of our business.

Comparable store sales reflect net revenue from company-operated stores that have been open, or open after being significantly expanded, for at least 12 ~~months, or open for at least 12 months after being significantly expanded.~~full fiscal months. Net revenue from a store is included in comparable store sales beginning with the first fiscal month for which the store has a full fiscal month of sales in the prior year. Comparable store sales exclude sales from new stores that have not been open for at least 12 full fiscal months, from stores which have not been in their significantly expanded space for at least 12 full fiscal months, and from stores which have been temporarily relocated for ~~renovations.~~renovations or temporarily closed. Comparable store sales also exclude sales from direct to consumer ~~outlets, showrooms, temporary locations, wholesale accounts, license~~ and ~~supply arrangements, warehouse sales, and~~our other operations, as well as sales from company-operated stores that we have closed.

Total comparable sales combines comparable store sales and direct to consumer ~~sales.~~net revenue.

In fiscal years with 53 weeks, the 53rd week of net revenue is excluded from the calculation of comparable sales. In the year following a 53 week year, the prior year period is shifted by one week to compare similar calendar weeks.

Opening new stores and expanding existing stores is an important part of our growth strategy. Accordingly, total comparable sales is just one way of assessing the success of our growth strategy insofar as comparable sales do not reflect the performance of stores opened, or significantly expanded, within the last 12 full fiscal months. The comparable sales measures we report may not be equivalent to similarly titled measures reported by other companies.

Constant dollar changes in net revenue, total comparable sales, comparable store sales, and direct to consumer net revenue ~~and the adjusted financial results~~ are non-GAAP financial measures.

A constant dollar basis assumes the average foreign currency exchange rates for the period remained constant with the average foreign currency exchange rates for the same period of the prior year. We provide constant dollar changes in ~~net revenue, total comparable sales, comparable store sales, and direct~~our results to ~~consumer net revenue because we use these measures to~~help investors understand the underlying growth rate of net revenue excluding the impact of changes in foreign currency exchange rates. ~~We believe that disclosing these measures on a constant dollar basis is useful to investors because it enables them to better understand the level of growth of our business.~~

The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or with greater prominence to, the financial information prepared and presented in accordance with GAAP. A reconciliation of the non-GAAP financial measures follows, which includes more detail on the GAAP financial measure that is most directly comparable to each non-GAAP financial measure, and the related reconciliations between these financial measures.

The below changes in net revenue show the change compared to the corresponding period in the prior year.

Our business is affected by the general seasonal trends common to the retail apparel industry. Our annual net revenue is weighted more heavily toward our fourth fiscal quarter, reflecting our historical strength in sales during the holiday season, while our operating expenses are more equally distributed throughout the year. As a result, a substantial portion of our operating profits are generated in the fourth quarter of our fiscal year. For example, we generated approximately ~~47%, 45%,~~44% and ~~42%~~56% of our full year operating profit during the fourth quarters of ~~fiscal 2016, fiscal 2015,~~2021 and ~~fiscal 2014,~~2020, respectively. Due to a significant number of our company-operated stores being temporarily closed due to COVID-19 during the first two quarters of 2020, we earned a higher proportion of our operating profit during the last two quarters of 2020 compared to 2021.

Our primary sources of liquidity are our current balances of cash and cash equivalents, cash flows from operations, and capacity under our committed revolving credit ~~facility.~~facility, including to fund short-term working capital requirements. Our primary cash needs are capital expenditures for opening new stores and remodeling or relocating existing stores, investing in our distribution centers, investing in technology and making ~~information technology~~ system enhancements, funding working capital requirements, and making other strategic capital investments both in North America and internationally. We may also use cash to repurchase shares of our common stock. Cash and cash equivalents in excess of our needs are held in interest bearing accounts with financial ~~institutions.~~institutions, as well as in money market funds and term deposits.

~~Cash flows provided by~~The increase in cash used in operating activities ~~consist primarily of net income adjusted for certain items including depreciation and amortization, stock-based compensation expense, and the effect of changes in operating assets and liabilities.~~

~~Cash flows~~The increase in cash used in investing activities ~~relate~~was primarily due to increased capital expenditures, partially offset by the settlement of net investment hedges and other investing activities. The increase in capital expenditures ~~were~~was primarily ~~for opening new company-operated stores, remodeling or relocating certain stores, and ongoing store refurbishment. We also had capital~~due to corporate expenditures ~~related to information~~driven by investment in technology and business systems ~~related to~~and increased expenditures on corporate ~~buildings, and for opening retail locations other than company-operated stores.~~

The decrease in cash used in financing activities was primarily the result of ~~directors approved~~ a ~~program to repurchase shares of our common~~decrease in stock ~~up to an aggregate value of $100.0 million. This stock repurchase program was completed during the third quarter of fiscal 2017.~~

We believe that our cash and cash equivalent balances, cash generated from operations, and borrowings available to us under our committed revolving credit facility will be adequate to meet our liquidity needs and capital expenditure requirements for at least the next 12 months. Our cash from operations may be negatively impacted by a decrease in demand for our products, as well as the other factors described in ~~Item 1 of Part II of this Quarterly Report on Form 10-Q.~~"Item 1A. Risk Factors". In addition, we may make discretionary capital improvements with respect to our stores, distribution facilities, headquarters, or systems, or we may repurchase shares under an approved stock repurchase program, which we would expect to fund through the use of cash, issuance of debt or equity securities or other external financing sources to the extent we were unable to fund such ~~capital~~ expenditures out of our cash and cash equivalents and cash generated from operations.

Our future growth depends in part on our expansion efforts outside of North America. We have limited experience with regulatory environments and market practices internationally, and we may not be able to penetrate or successfully operate in any new market. In connection with our expansion efforts we may encounter obstacles we did not face in North America, including cultural and linguistic differences, differences in regulatory environments, labor practices and market practices, difficulties in keeping abreast of market, business and technical developments, and ~~foreign~~international guests' tastes and preferences. We may also encounter difficulty expanding into new international markets because of limited brand recognition leading to delayed acceptance of our technical athletic apparel by guests in these new international markets. Our failure to develop our business in new international markets or ~~experiencing~~ disappointing growth outside of existing markets could harm our business and results of operations.

~~If we encounter problems with~~In addition, our ~~distribution system,~~continued growth depends in part on our ability to ~~deliver~~expand our ~~products~~product categories and introduce new product lines. We may not be able to successfully manage integration of new product categories or the ~~market~~new product lines with our existing products. Selling new product categories and lines will require our management to ~~meet guest expectations could~~learn different strategies in order to be ~~harmed.~~successful. We may be unsuccessful in entering new product categories and developing or launching new product lines, which requires management of new suppliers, potential new customers, and new business models. Our management may not have the experience of selling in these new product categories and we may not be able to grow our business as planned. For example, in July 2020, we acquired MIRROR, an in-home fitness company with an interactive workout platform that features live and on-demand classes. If we are unable to effectively and successfully further develop these and future new product categories and lines, we may not be able to increase or maintain our sales and our operating margins may be adversely affected.

We may be ~~subject~~unable to ~~a number of risks related~~attract and retain subscribers to security or computer viruses, the proper operation of software and hardware, electronic or power interruptions, or other system failures. In addition, because substantially all of our products are distributed from four locations, our operations could also be interrupted by labor difficulties, extreme or severe weather conditions or by floods, fires or other natural disasters near our distribution centers.lululemon Studio. If ~~we encounter problems with our distribution system, our ability to meet guest expectations, manage inventory, complete sales, and achieve objectives for operating efficiencies could be harmed.~~

We are dependent on technology systems to provide live and recorded classes to our ~~fabrics~~customers with lululemon Studio subscriptions, to maintain its software, and ~~manufacturing~~to manage subscriptions. If we experience issues such as cybersecurity threats or actions, or interruptions or delays in our technology ~~at lower prices than we can. If our competitors do sell similar products to ours at lower prices, our net revenue~~systems, the data privacy and ~~profitability~~overall experience of subscribers could ~~suffer.~~

~~We currently rely on a combination of copyright, trademark, trade dress, and unfair competition laws,~~Competition, including from other in-home fitness providers as well as ~~confidentiality procedures~~in-person fitness studios, and ~~licensing arrangements, to establish~~trends of consumer preferences, could also impact the level of subscriptions and ~~protect~~therefore our ~~intellectual property rights. The steps we take to protect our intellectual property rights~~results of operations. We also may not ~~be adequate~~successfully adapt the lululemon Studio strategy in response to ~~prevent infringement of these rights by others, including imitation of our products~~changing market conditions and misappropriation of our brand. In addition, intellectual property protection may be unavailable or limited in some foreign countries where laws or law enforcement practices may not protect our intellectual property rights as fully as in the United States or Canada, and it may be more difficult for us to successfully challenge the use of our intellectual property rights by other parties in these countries. If we fail to protect and maintain our intellectual property rights, the value of our brand could be diminished and our competitive position may suffer.

We have expanded our operations rapidly since our inception in 1998 and our net revenue has increased from $40.7 million in fiscal 2004 to ~~$2.3~~$6.3 billion in ~~fiscal 2016.~~2021. If our operations continue to grow at a rapid pace, we may experience difficulties in obtaining sufficient raw materials and manufacturing capacity to produce our products, as well as delays in production and shipments, as our products are subject to risks associated with overseas sourcing and manufacturing. We could be required to continue to expand our sales and marketing, product development and distribution functions, to upgrade our management information systems and other processes and technology, and to obtain more space for our expanding workforce. This expansion could increase the strain on our resources, and we could experience operating difficulties, including difficulties in hiring, training, and managing an increasing number of employees. These difficulties could result in the erosion of our brand image which could have a material adverse effect on our financial condition.

We lease the majority of our stores under operating leases and our inability to secure appropriate real estate or lease terms could impact our ability to grow. Our leases generally have initial terms of between five and ~~ten~~15 years, and generally can be extended ~~only~~ in five-year increments if at all. We generally cannot cancel these leases at our option. If an existing or new store is not profitable, and we decide to close it, as we have done in the past and may do in the future, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. Similarly, we may be committed to perform our obligations under the applicable leases even if

We also lease the majority of our distribution centers and our inability to secure appropriate real estate or lease terms could impact our ability to deliver our products to the market.

Our growth will largely depend on our ability to successfully open and operate new stores. We may be unsuccessful in identifying new locations and markets where our technical athletic apparel and other products and brand image will be accepted. In addition, we may not be able to open or profitably operate new stores in existing, adjacent, or new markets due to the impact of COVID-19, political instability, inflationary pressures, or other economic conditions, which could have a material adverse effect on us.

In the last few years, we have had changes to our senior management team including new hires, departures, and role and responsibility changes. The performance of our senior management team and other key employees may not meet our needs and expectations. Also, the loss of services of any of these key employees, or any negative public perception with respect to these individuals, may be disruptive to, or cause uncertainty in, our business and could have a negative impact on our ability to manage and grow our business effectively. Such disruption could have a material adverse impact on our financial performance, financial condition, and the market price of our stock.

Our business is affected by the general seasonal trends common to the retail apparel industry. Our annual net revenue is weighted more heavily toward our fourth fiscal quarter, reflecting our historical strength in sales during the holiday season, while our operating expenses are more equally distributed throughout the year. This seasonality, along with other factors that are beyond our control, including weather conditions and the effects of climate change, could adversely affect our business and cause our results of operations to fluctuate.

Disruption of our supply chain capabilities due to trade restrictions, political instability, severe weather, natural disasters, public health crises such as the ongoing COVID-19 pandemic, war, terrorism, product recalls, labor supply or stoppages, the financial or operational instability of key suppliers and carriers, changes in diplomatic or trade relationships (including any sanctions, restrictions, and other responses such as those related to current geopolitical events), or other reasons could impair our ability to distribute our products. To the extent we are unable to mitigate the likelihood or potential impact of such events, there could be a material adverse effect on our operating and financial results.

We do not manufacture our products or raw materials and rely on suppliers and manufacturers located predominantly in the Asia Pacific region, including the PRC. We also source other materials used in our products, including items such as content labels, elastics, buttons, clasps, and drawcords, from suppliers located primarily in this region. Based on cost, during 2021:

The entire apparel industry, including our company, continues to face supply chain challenges as a result of the impacts of COVID-19, political instability, inflationary pressures, macroeconomic conditions, and other factors, including reduced freight availability and increased costs, port disruption, manufacturing facility closures, and related labor shortages and other supply chain disruptions.

Our supply chain capabilities may be disrupted due to these or other factors, such as severe weather, natural disasters, war or other military conflicts, terrorism, labor supply shortages or stoppages, the financial or operational instability of key suppliers or the countries in which they operate, or changes in diplomatic or trade relationships (including any sanctions, restrictions, and other responses to geopolitical events). Any significant disruption in our supply chain capabilities could impair our ability to procure or distribute our products, which would adversely affect our business and results of operations.

Many of the specialty fabrics used in our products are technically advanced textile products developed and manufactured by third parties and may be available, in the short-term, from only one or a limited number of sources. We have no long-term contracts with any of our suppliers or manufacturers for the production and supply of our raw materials and products, and we compete with other companies for fabrics, other raw materials, and production. During 2021, we worked with approximately 41 vendors to manufacture our products and 65 suppliers to provide the fabric for our products. Based on cost, during 2021:

We have experienced, and may in the future experience, a significant disruption in the supply of fabrics or raw materials and may be unable to locate alternative suppliers of comparable quality at an acceptable price, or at all. In addition, if we experience significant increased demand, or if we need to replace an existing supplier or manufacturer, we may be unable to locate additional supplies of fabrics or raw materials or additional manufacturing capacity on terms that are acceptable to us, or at all, or we may be unable to locate any supplier or manufacturer with sufficient capacity to meet our requirements or fill our orders in a timely manner. Identifying a suitable supplier is an involved process that requires us to become satisfied with its quality control, responsiveness and service, financial stability, and labor and other ethical practices. Even if we are able to expand existing or find new manufacturing or fabric sources, we may encounter delays in production and added costs as a result of the time it takes to train our suppliers and manufacturers in our methods, products, and quality control standards.

Our supply of fabric or manufacture of our products could be disrupted or delayed by economic or political conditions, and by the impact of COVID-19, and the related government and private sector responsive actions such as closures, restrictions on product shipments, and travel restrictions. Delays related to supplier changes could also arise due to an increase in shipping times if new suppliers are located farther away from our markets or from other participants in our supply chain. The receipt of inventory sourced from areas impacted by COVID-19 has been slowed or disrupted and our manufacturers may also face similar challenges in receiving fabric and fulfilling our orders. In addition, freight capacity issues continue to persist worldwide as there is much greater demand for shipping and reduced capacity and equipment. Any delays, interruption, or increased costs in the supply of fabric or manufacture of our products could have an adverse effect on our ability to meet guest demand for our products and result in lower net revenue and income from operations both in the short and long term.

While we require our suppliers and manufacturers to comply with our Vendor Code of Ethics, which includes labor, health and safety, and environment standards, we do not control their operations. If suppliers or contractors do not comply with these standards or applicable laws or there is negative publicity regarding the production methods of any of our suppliers or manufacturers, even if unfounded or not specific to our supply chain, our reputation and sales could be adversely affected, we could be subject to legal liability, or could cause us to contract with alternative suppliers or manufacturing sources.

The fabrics used to make our products include synthetic fabrics whose raw materials include petroleum-based products. Our products also include silver and natural fibers, including cotton. Our costs for raw materials are affected by, among other things, weather, consumer demand, speculation on the commodities market, the relative valuations and fluctuations of the currencies of producer versus consumer countries, and other factors that are generally unpredictable and beyond our control. Any and all of these factors may be exacerbated by global climate change. In addition, ongoing impacts of the pandemic, political instability, trade relations, sanctions, inflationary pressure, or other geopolitical or economic conditions could cause

We rely on our distribution facilities for substantially all of our product distribution. Our distribution facilities include computer controlled and automated equipment, which means their operations may be subject to a number of risks related to security or computer viruses, the proper operation of software and hardware, electronic or power interruptions, or other system failures. In addition, our operations could also be interrupted by labor difficulties, pandemics (such as the COVID-19 pandemic), the impacts of climate change, extreme or severe weather conditions or by floods, fires, or other natural disasters near our distribution centers. If we encounter problems with our distribution system, our ability to meet guest expectations, manage inventory, complete sales, and achieve objectives for operating efficiencies could be harmed.

A significant portion of our products are produced in South Asia and South East Asia and increases in the costs of labor and other costs of doing business in the countries in this area could significantly increase our costs to produce our products and could have a negative impact on our operations and earnings. Factors that could negatively affect our business include labor shortages and increases in labor costs, labor disputes, pandemics, the impacts of climate change, difficulties and additional costs in transporting products manufactured from these countries to our distribution centers and significant revaluation of the currencies used in these countries, which may result in an increase in the cost of producing products. Also, the imposition of trade sanctions or other regulations against products imported by us from, or the loss of "normal trade relations" status with any country in which our products are manufactured, could significantly increase our cost of products and harm our business.

As part of our normal operations, we receive confidential, proprietary, and personally identifiable information, including credit card information, and information about our customers, our employees, job applicants, and other third parties. Our business employs systems and websites that allow for the storage and transmission of this information. However, despite our safeguards and security processes and protections, security breaches could expose us to a risk of theft or misuse of this information, and could result in litigation and potential liability.

The retail industry, in particular, has been the target of many recent cyber-attacks. We may not have the resources or technical sophistication to be able to anticipate or prevent rapidly evolving types of cyber-attacks. Attacks may be targeted at us, our vendors or customers, or others who have entrusted us with information. In addition, despite taking measures to safeguard our information security and privacy environment from security breaches, our customers and our business could still be exposed to risk. Actual or anticipated attacks may cause us to incur increasing costs including costs to deploy additional personnel and protection technologies, train employees and engage third party experts and consultants. Advances in computer capabilities, new technological discoveries or other developments may result in the technology used by us to protect transaction or other data being breached or compromised. Measures we implement to protect against cyber-attacks may also have the potential to impact our customers' shopping experience or decrease activity on our websites by making them more difficult to use.

Data and security breaches can also occur as a result of non-technical issues including intentional or inadvertent breach by employees or persons with whom we have commercial relationships that result in the unauthorized release of personal or confidential information. Any compromise or breach of our security could result in a violation of applicable privacy and other laws, significant legal and financial exposure, and damage to our brand and reputation or other harm to our business.

In addition, the increased use of employee-owned devices for communications as well as work-from-home arrangements, such as those implemented in response to the COVID-19 pandemic, present additional operational risks to our technology systems, including increased risks of cyber-attacks. Further, like other companies in the retail industry, we have in the past experienced, and we expect to continue to experience, cyber-attacks, including phishing, and other attempts to breach, or gain unauthorized access to, our systems. To date, these attacks have not had a material impact on our operations, but they may have an impact in the future.

We are subject to a variety of privacy and data protection laws and regulations that change frequently and have requirements that vary from jurisdiction to jurisdiction. For example, we are subject to significant compliance obligations under privacy laws such as the General Data Privacy Regulation ("GDPR") in the European Union, the Personal Information Protection and Electronic Documents Act (“PIPEDA”) in Canada, the California Consumer Privacy Act ("CCPA") modified by the California Privacy Rights Act (“CPRA”), and the Personal Information Protection Law (“PIPL”) in the PRC. Some privacy laws prohibit the transfer of personal information to certain other jurisdictions. We are subject to privacy and data protection audits or investigations by various government agencies. Our failure to comply with these laws subjects us to potential regulatory enforcement activity, fines, private litigation including class actions, and other costs. Our efforts to comply with privacy laws may complicate our operations and add to our compliance costs. A significant privacy breach or failure or perceived failure by us or our third-party service providers to comply with privacy or data protection laws, regulations, policies or regulatory guidance might have a materially adverse impact on our reputation, business operations and our financial condition or results of operations.

We are increasingly dependent on technology systems and third-parties to operate our e-commerce websites, process transactions, respond to guest inquiries, manage inventory, purchase, sell and ship goods on a timely basis, and maintain cost-efficient operations. The failure of our technology systems to operate properly or effectively, problems with transitioning to upgraded or replacement systems, or difficulty in integrating new systems, could adversely affect our business. In addition, we have e-commerce websites in the United States, Canada, and internationally. Our technology systems, websites, and operations of third parties on whom we rely, may encounter damage or disruption or slowdown caused by a failure to successfully upgrade systems, system failures, viruses, computer "hackers", natural disasters, or other causes. These could cause information, including data related to guest orders, to be lost or delayed which could, especially if the disruption or slowdown occurred during the holiday season, result in delays in the delivery of products to our stores and guests or lost sales, which could reduce demand for our products and cause our sales to decline. The concentration of our primary offices, two of our distribution centers, and a number of our stores along the west coast of North America could amplify the impact of a natural disaster occurring in that area to our business, including to our technology systems. In addition, if changes in technology cause our information systems to become obsolete, or if our information systems are inadequate to handle our growth, we could lose guests. We have limited back-up systems and redundancies, and our technology systems and websites have experienced system failures and electrical outages in the past which have disrupted our operations. Any significant disruption in our technology systems or websites could harm our reputation and credibility, and could have a material adverse effect on our business, financial condition, and results of operations.

There is increasing concern that a gradual rise in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere will cause significant changes in weather patterns around the globe, an increase in the frequency, severity, and duration of extreme weather conditions and natural disasters, and water scarcity and poor water quality. These events could adversely impact the cultivation of cotton, which is a key resource in the production of our products, disrupt the operation of our supply chain and the productivity of our contract manufacturers, increase our production costs, impose capacity restraints and impact the types of apparel products that consumers purchase. These events could also compound adverse economic conditions and impact consumer confidence and discretionary spending. As a result, the effects of climate change could have a long-term adverse impact on our business and results of operations. In many countries, governmental bodies are enacting new or additional legislation and regulations to reduce or mitigate the potential impacts of climate change. If we, our suppliers, or our contract manufacturers are required to comply

Investor advocacy groups, certain institutional investors, investment funds, other market participants, stockholders, and customers have focused increasingly on the environmental, social and governance ("ESG") or “sustainability” practices of companies, including those associated with climate change. These parties have placed increased importance on the implications of the social cost of their investments. If our ESG practices do not meet investor or other industry stakeholder expectations and standards, which continue to evolve, our brand, reputation and employee retention may be negatively impacted based on an assessment of our ESG practices. Any sustainability report that we publish or other sustainability disclosures we make may include our policies and practices on a variety of social and ethical matters, including corporate governance, environmental compliance, employee health and safety practices, human capital management, product quality, supply chain management, and workforce inclusion and diversity. It is possible that stakeholders may not be satisfied with our ESG practices or the speed of their adoption. We could also incur additional costs and require additional resources to monitor, report, and comply with various ESG practices. Also, our failure, or perceived failure, to meet the standards included in any sustainability disclosure could negatively impact our reputation, employee retention, and the willingness of our customers and suppliers to do business with us.

Many of our products may be considered discretionary items for consumers. Some of the factors that may influence consumer spending on discretionary items include general economic conditions, high levels of unemployment, health pandemics (such as the impact of the current COVID-19 coronavirus pandemic, including reduced store traffic and widespread temporary closures of retail locations), higher consumer debt levels, reductions in net worth based on market declines and uncertainty, home foreclosures and reductions in home values, fluctuating interest and foreign currency exchange rates and credit availability, government austerity measures, fluctuating fuel and other energy costs, fluctuating commodity prices, inflationary pressure, tax rates and general uncertainty regarding the overall future economic environment. Global economic conditions are uncertain and volatile, due in part to the impacts of COVID-19 and related restrictions and mitigation measures, the potential impacts of increasing inflation, the potential impacts of geopolitical uncertainties, and any potential sanctions, restrictions or responses to those conditions. As global economic conditions continue to be volatile or economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable and subject to reductions due to credit constraints and uncertainties about the future. Unfavorable economic conditions may lead consumers to delay or reduce purchases of our products. Consumer demand for our products may not reach our targets, or may decline, when there is an economic downturn or economic uncertainty in our key markets. Our sensitivity to economic cycles and any related fluctuation in consumer demand may have a material adverse effect on our financial condition.

The COVID-19 pandemic has negatively impacted the global economy, disrupted consumer spending and global supply chains, and created significant volatility and disruption of financial markets. COVID-19 negatively impacted our business and operations in 2020. While conditions improved in 2021, the extent and duration of ongoing impacts remain uncertain. Certain stores and our third party distribution center in the PRC experienced temporary closures during the first quarter of 2022, and there is uncertainty regarding the ongoing impact of COVID-19 on our operations in the PRC.

Further resurgences in COVID-19 cases, including from variants, could cause additional restrictions, including temporarily closing all or some of our stores again. An outbreak at one of our locations, even if we follow appropriate precautionary measures, could negatively impact our employees, guests, and brand. There is uncertainty over the impact of COVID-19 on the U.S., Canadian, PRC, and global economies, consumer willingness to visit stores, malls, and lifestyle centers, and employee willingness to staff our stores as the pandemic continues and if there are future resurgences. There is also uncertainty regarding potential long-term changes to consumer shopping behavior and preferences and whether consumer demand will recover when restrictions are lifted.

The COVID-19 pandemic also has the potential to significantly impact our supply chain if the factories that manufacture our products, the distribution centers where we manage our inventory, or the operations of our logistics and other service providers are disrupted, temporarily closed, or experience worker shortages. In particular, we have seen disruptions and delays in shipments, and we may see negative impacts to pricing of certain components of our products as a result of the COVID-19 pandemic.

The COVID-19 situation is changing rapidly and the extent to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and its variants and the actions taken to contain it or treat its impact, including vaccinations.

The United States and the countries in which our products are produced or sold ~~internationally~~ have imposed and may impose additional quotas, duties, tariffs, or other restrictions or regulations, or may adversely adjust prevailing quota, duty, or tariff levels. WeThe results of any audits or related disputes regarding these restrictions or regulations could have ~~expanded~~an adverse effect on our ~~relationships with suppliers outside of China,~~financial statements for the period or periods for which ~~among other things has resulted in increased costs and shipping times for some products.~~the applicable final determinations are made. Countries impose, modify, and remove tariffs and other trade restrictions in response to a diverse array of factors, including global and national economic and political conditions, which make it impossible for us to predict future developments regarding tariffs and other trade restrictions. Trade restrictions, including tariffs, quotas, embargoes, safeguards, and customs restrictions, could increase the cost or reduce the supply of products available to us, could increase shipping times, or may require us to modify our supply chain organization or other current business practices, any of which could harm our business, financial condition, and results of operations.

We are dependent on international trade agreements and regulations. ~~If the United States were to withdraw from or materially modify certain international trade agreements, our business could be adversely affected.~~

Adverse changes in, or withdrawal from, trade agreements or political relationships between the United States and the PRC, Canada, or other countries where we sell or source our products, could negatively impact our results of operations or cash flows. Any tariffs imposed between the United States and the PRC could increase the costs of our products. General geopolitical instability and the responses to it, such as the possibility of sanctions, trade restrictions, and changes in tariffs, including recent sanctions against the PRC, tariffs imposed by the United States and the PRC, and the possibility of additional tariffs or other trade restrictions between the United States and Mexico, could adversely impact our business. It is possible that further tariffs may be introduced, or increased. Such changes could adversely impact our business ~~include a potential significant revaluation~~and could increase the

There could be changes in ~~these countries, which may result in an increase~~economic conditions in the ~~cost of producing products, labor shortage~~United Kingdom ("UK") or European Union ("EU"), including due to the UK's withdrawal from the EU, foreign currency exchange rates, and ~~increases in labor costs, and difficulties in moving products manufactured out of the countries in which they are manufactured and through the ports~~consumer markets. Our business could be adversely affected by these changes, including by additional duties on the ~~western coast~~importation of North America, whether due to port congestion, labor disputes, product regulations and/or inspections or other factors, and natural disasters or health pandemics. A labor strike or other transportation disruption affecting these ports could significantly disrupt our business. Also, the imposition of trade sanctions or other regulations against products imported by us from, or the loss of "normal trade relations" status with any country in which our products ~~are manufactured,~~into the UK from the EU and as a result of shipping delays or congestion.

~~The operations of many of our suppliers~~We are subject to ~~additional risks~~the income tax laws of the United States, Canada, and several other international jurisdictions. Our effective income tax rates could be unfavorably impacted by a number of factors, including changes in the mix of earnings amongst countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, new tax interpretations and guidance, the outcome of income tax audits in various jurisdictions around the world, and any repatriation of unremitted earnings for which we have not previously accrued applicable U.S. income taxes and international withholding taxes.

Repatriations from our Canadian subsidiaries are not subject to Canadian withholding taxes if such distributions are made as a return of capital. Historically, we have not accrued any significant amounts for Canadian withholding taxes that would be payable on repatriations from our Canadian subsidiaries because the net investment in our Canadian subsidiaries is indefinitely reinvested, or could be repatriated free of withholding tax. The extent to which increases in the net assets of our Canadian subsidiaries can be repatriated free of withholding tax is dependent on, among other things, the amount of paid-up-capital in our Canadian subsidiaries and transactions undertaken by our exchangeable shareholders. As of October 30, 2022, we had 5.2 million exchangeable shares outstanding. If there are ~~beyond~~insufficient transactions by our ~~control~~exchangeable shareholders between now and ~~that could harm~~the end of 2022, and our ~~business, financial condition, and results of operations.~~

We engage in ~~South Asia, approximately 15%~~a number of intercompany transactions across multiple tax jurisdictions. Although we believe that these transactions reflect the accurate economic allocation of profit and that proper transfer pricing documentation is in ~~China, approximately 1%~~place, the profit allocation and transfer pricing terms and conditions may be scrutinized by local tax authorities during an audit and any resulting changes may impact our mix of earnings in ~~North America,~~countries with differing statutory tax rates. At the end of 2020, our Advance Pricing Arrangement ("APA") with the Internal Revenue Service and the ~~remainder~~Canada Revenue Agency expired. This APA stipulated the allocation of certain profits between the U.S. and Canada. We are currently in ~~other regions. As a result~~the process of negotiating the renewal of this arrangement and the final agreed upon terms and conditions thereof could impact our ~~international suppliers, we are~~effective tax rate.

Current economic and political conditions make tax rules in any jurisdiction, including the United States and Canada, subject to ~~risks associated with doing business abroad, including:~~

The labeling, distribution, importation, marketing, and sale of our products are subject to extensive regulation by various federal agencies, including the Federal Trade Commission, Consumer Product Safety Commission and state attorneys general in the United States, the Competition Bureau and Health Canada in Canada, the State Administration for Market Regulation of the PRC, General Administration of Customs of the PRC, as well as by various other federal, state, provincial, local, and international regulatory authorities in the countries in which our products are distributed or sold. If we fail to comply with any of these regulations, we could become subject to enforcement actions or the imposition of significant penalties or claims, which could harm our results of operations or our ability to conduct our business. In addition, any audits and inspections by governmental agencies related to these matters could result in significant settlement amounts, damages, fines, or other penalties, divert financial and management resources, and result in significant legal fees. An unfavorable outcome of any particular proceeding could have an adverse impact on our business, financial condition, and results of operations. In addition, the adoption of new regulations or changes in the interpretation of existing regulations may result in

Our international operations are also subject to compliance with the U.S. Foreign Corrupt Practices Act, or FCPA, and other anti-bribery laws applicable to our operations. In many ~~foreign~~ countries, particularly in those with developing economies, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the FCPA or other U.S. and ~~foreign~~international laws and regulations applicable to us. Although we have implemented procedures designed to ensure compliance with the FCPA and similar laws, some of our employees, agents, or other ~~channel~~ partners, as well as those companies to which we outsource certain of our business operations, could take actions in violation of our policies. Any such violation could have a material and adverse effect on our business.

The functional currency of our ~~foreign~~international subsidiaries is generally the applicable local currency. Our consolidated financial statements are presented in U.S. dollars. Therefore, the net revenue, expenses, assets, and liabilities of our ~~foreign~~international subsidiaries are translated from their functional currencies into U.S. dollars. Fluctuations in the value of the U.S. dollar affect the reported amounts of net revenue, expenses, assets, and liabilities. Foreign currency exchange differences which arise on translation of our ~~foreign~~international subsidiaries' balance sheets into U.S. dollars are recorded as ~~a foreign currency translation adjustment~~other comprehensive income (loss), net of tax in accumulated other comprehensive income or loss within stockholders' equity.

We also have exposure to changes in foreign currency exchange rates associated with transactions which are undertaken by our subsidiaries in currencies other than their functional currency. Such transactions include intercompany transactions and inventory purchases denominated in currencies other than the functional currency of the purchasing entity. As a result, we have been impacted by changes in foreign currency exchange rates and may be impacted for the foreseeable future. The potential impact of currency fluctuation increases as our international expansion increases.

Although we use financial instruments to hedge certain foreign currency risks, these measures may not succeed in fully offsetting the negative impact of foreign currency rate movements.

We are exposed to credit-related losses in the event of nonperformance by the counterparties to ~~the~~ forward currency ~~contracts.~~contracts used in our hedging strategies.

The intellectual property rights in the technology, fabrics, and processes used to manufacture our products generally are owned or controlled by our suppliers and are generally not unique to us. Our ability to obtain intellectual property protection for our products is therefore limited. We ~~may see higher than anticipated costs associated with,~~hold limited patents and exclusive intellectual property rights in the technology, fabrics or ~~not realize the benefits of,~~processes underlying our ~~efforts to restructure our ivivva business.~~

We currently rely on a combination of patent, copyright, trademark, trade dress, trade secret, and unfair competition laws, as well as confidentiality procedures and licensing arrangements, to establish and protect our intellectual property rights. The steps we take to protect our intellectual property rights may not be adequate to prevent infringement of these ~~events~~rights by others, including imitation of our products and ~~circumstances, delays and unexpected costs~~misappropriation of our brand. In addition, any of our intellectual property rights may ~~occur,~~be challenged, which could result in ~~higher costs than we anticipate~~them being narrowed in scope or declared invalid or unenforceable, or our intellectual property protection may be unavailable or limited in some international countries where laws or law enforcement practices may not ~~realizing all,~~protect our intellectual property rights as fully as in the United States or ~~any,~~Canada, and it may be more difficult for us to successfully challenge the use of our intellectual property rights by other parties in these countries. If we fail to protect and maintain our intellectual property rights, the ~~anticipated benefits~~value of ~~these restructuring efforts.~~our brand could be diminished, and our competitive position may suffer.

Our success depends in large part on our brand image. We believe that our trademarks, patents, and other proprietary rights have significant value and are important to identifying and differentiating our products from those of our competitors and creating and sustaining demand for our products. We have ~~obtained~~applied for and ~~applied for~~obtained some United States, Canada, and ~~foreign~~international trademark registrations and patents, and will continue to evaluate ~~the registration of~~ additional trademarks and patents as appropriate. However, some or all of these pending trademark or patent applications may not be approved by the applicable governmental authorities. Moreover, even if the applications are approved, third parties may seek to oppose or otherwise challenge these applications or registrations. Additionally, we may face obstacles as we expand our product line and the geographic scope of our sales and marketing. Third parties may assert intellectual property claims against us, particularly as we expand our business and the number of products we offer. Our defense of any claim, regardless of its merit, could be expensive and time consuming and could divert management resources. Successful infringement claims against us could result in significant monetary liability or prevent us from selling some of our products. In addition, resolution of claims may require us to redesign our products, license rights from third parties, or cease using those rights altogether. Any of these events could harm our business and cause our results of operations, liquidity, and financial condition to suffer.

43

From time to time, we are involved in litigation and other proceedings, including matters related to product liability claims, stockholder class action and derivative claims, commercial disputes and intellectual property, as well as trade, regulatory, employment, and other claims related to our business. Any of these proceedings could result in significant settlement amounts, damages, fines, or other penalties, divert financial and management resources, and result in significant legal fees. An unfavorable outcome of any particular proceeding could exceed the limits of our insurance policies or the carriers may decline to fund such final settlements and/or judgments and could have an adverse impact on our business, financial condition, and results of operations. In addition, any proceeding could negatively impact our reputation among our guests and our brand image.

We may be subject to actions or proposals from stockholders or others that may not align with our business strategies or the ~~trading value~~interests of our ~~securities.~~

Certain provisions of our certificate of incorporation and bylaws and applicable provisions of the Delaware General Corporation Law may make it more difficult or impossible for a third-party to acquire control of us or effect a change in our board of directors and management. These provisions include:

In addition, we are governed by Section 203 of the Delaware General Corporation Law which, subject to some specified exceptions, prohibits "business combinations" between a Delaware corporation and an "interested stockholder," which is generally defined as a stockholder who becomes a beneficial owner of 15% or more of a Delaware corporation's voting stock, for a three-year period following the date that the stockholder became an interested stockholder. Section 203 could have the effect of delaying, deferring, or preventing a change in control that our stockholders might consider to be in their best interests.

The following table provides information regarding our purchases of shares of our common stock during the third quarter ~~ended October 29, 2017~~of 2022 related to our stock repurchase program:

The following table provides information regarding our purchases of shares of our common stock during the third quarter ~~ended October 29, 2017~~of 2022 related to our Employee Share Purchase Plan:

Excluded from this disclosure are shares withheld to settle statutory employee tax withholding related to the vesting of stock-based compensation awards.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



Delaware		20-3842867
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~1818 Cornwall Avenue~~ ~~Vancouver, British Columbia~~	~~V6J 1C7~~
~~(Address of principal executive offices)~~	~~(Zip Code)~~



Large ~~accelerated filer~~Accelerated Filer	þ☑	Accelerated filer	o☐
Non-accelerated filer	o ~~(Do not check if a smaller reporting company)~~ ☐	Smaller reporting company	o☐
Emerging growth company	o☐


				Page
PART I. FINANCIAL INFORMATION

Item 1.			Financial Statements:	~~Page~~ 3
			Consolidated Balance Sheets	3
			Consolidated Statements of Operations and Comprehensive Income	4
			Consolidated Statements of Stockholders' Equity	5
			Consolidated Statements of Cash Flows	7
			Index for Notes to the Unaudited Interim Consolidated Financial Statements	8
Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.			Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.			Controls and Procedures	36

~~PART I. FINANCIAL INFORMATION~~

~~Item 1.~~	~~FINANCIAL STATEMENTS:~~	3
	~~CONSOLIDATED BALANCE SHEETS~~	3
	~~CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME~~	4
	~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY~~	5
	~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~	6
	~~INDEX FOR NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~	7
~~Item 2.~~	~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~	18
~~Item 3.~~	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~	34
~~Item 4.~~	~~CONTROLS AND PROCEDURES~~	35

PART II. OTHER INFORMATION

Item 1.			~~LEGAL PROCEEDINGS~~Legal Proceedings	3637
Item 1A.			~~RISK FACTORS~~Risk Factors	3637
Item 2.			~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~Unregistered Sales of Equity Securities and Use of Proceeds	4550
Item 6.			~~EXHIBITS~~Exhibits	4652

~~SIGNATURES~~Signatures				4753


	October 29, 2017			January 29, 2017				October 30, 2022		January 30, 2022
ASSETS
Current assets							Current assets
Cash and cash equivalents	$	650,054		$	734,846		Cash and cash equivalents	$	352,624	$	1,259,871
Accounts receivable	21,281			9,200			Accounts receivable	96,179		77,001
Inventories	396,892			298,432			Inventories	1,741,716		966,481
Prepaid and receivable income taxes	77,625			81,190			Prepaid and receivable income taxes	196,385		118,928
Other prepaid expenses and other current assets	42,496			39,069
Prepaid expenses and other current assets							Prepaid expenses and other current assets	247,277		192,572
	1,188,348			1,162,737				2,634,181		2,614,853
Property and equipment, net	440,403			423,499			Property and equipment, net	1,122,490		927,710
Goodwill and intangible assets, net	24,476			24,557
Right-of-use lease assets							Right-of-use lease assets	946,687		803,543
Goodwill							Goodwill	386,515		386,880
Intangible assets, net							Intangible assets, net	64,719		71,299
Deferred income tax assets	37,583			26,256			Deferred income tax assets	5,587		6,091
Other non-current assets	29,639			20,492			Other non-current assets	149,257		132,102
	$	1,720,449		$	1,657,541			$	5,309,436	$	4,942,478
LIABILITIES AND STOCKHOLDERS' EQUITY							LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities							Current liabilities
Accounts payable	$	14,113		$	24,846		Accounts payable	$	300,870	$	289,728
Accrued inventory liabilities	23,420			8,601
Accrued liabilities and other							Accrued liabilities and other	357,365		330,800
Accrued compensation and related expenses	62,387			55,238			Accrued compensation and related expenses	184,122		204,921
Income taxes payable	4,403			30,290
Current lease liabilities							Current lease liabilities	188,110		188,996
Current income taxes payable							Current income taxes payable	80,947		133,852
Unredeemed gift card liability	52,500			70,454			Unredeemed gift card liability	171,659		208,195
Lease termination liabilities	12,164			—
Other current liabilities	71,590			52,561			Other current liabilities	39,762		48,842
	240,577			241,990				1,322,835		1,405,334
Non-current lease liabilities							Non-current lease liabilities	850,373		692,056
Non-current income taxes payable							Non-current income taxes payable	28,555		38,074
Deferred income tax liabilities	—			7,262			Deferred income tax liabilities	50,884		53,352
Other non-current liabilities	58,596			48,316			Other non-current liabilities	17,585		13,616
	299,173			297,568				2,270,232		2,202,432
Commitments and contingencies							Commitments and contingencies
Stockholders' equity							Stockholders' equity
Undesignated preferred stock, $0.01 par value: 5,000 shares authorized; none issued and outstanding	—			—			Undesignated preferred stock, $0.01 par value: 5,000 shares authorized; none issued and outstanding	—		—
Exchangeable stock, no par value: 60,000 shares authorized; 9,781 and 9,781 issued and outstanding	—			—
Special voting stock, $0.000005 par value: 60,000 shares authorized; 9,781 and 9,781 issued and outstanding	—			—
Common stock, $0.005 par value: 400,000 shares authorized; 125,592 and 127,304 issued and outstanding	628			637
Exchangeable stock, no par value: 60,000 shares authorized; 5,203 and 5,203 issued and outstanding							Exchangeable stock, no par value: 60,000 shares authorized; 5,203 and 5,203 issued and outstanding	—		—
Special voting stock, $0.000005 par value: 60,000 shares authorized; 5,203 and 5,203 issued and outstanding							Special voting stock, $0.000005 par value: 60,000 shares authorized; 5,203 and 5,203 issued and outstanding	—		—
Common stock, $0.005 par value: 400,000 shares authorized; 122,318 and 123,297 issued and outstanding							Common stock, $0.005 par value: 400,000 shares authorized; 122,318 and 123,297 issued and outstanding	612		616
Additional paid-in capital	275,871			266,622			Additional paid-in capital	455,444		422,507
Retained earnings	1,336,216			1,294,214			Retained earnings	2,874,955		2,512,840
Accumulated other comprehensive loss	(191,439		)	(201,500		)	Accumulated other comprehensive loss	(291,807)		(195,917)
	1,421,276			1,359,973				3,039,204		2,740,046
	$	1,720,449		$	1,657,541			$	5,309,436	$	4,942,478


	Quarter Ended						Three Quarters Ended					Quarter Ended				Three Quarters Ended
	October 29, 2017			October 30, 2016			October 29, 2017		October 30, 2016			October 30, 2022		October 31, 2021		October 30, 2022		October 31, 2021
Net revenue	$	619,018		$	544,416		$	1,720,379	$	1,554,452	Net revenue	$	1,856,889	$	1,450,421	$	5,338,680	$	4,127,504
Cost of goods sold	297,056			265,990			844,100		782,734		Cost of goods sold	818,037		621,028		2,373,959		1,755,111
Gross profit	321,962			278,426			876,279		771,718		Gross profit	1,038,852		829,393		2,964,721		2,372,393
Selling, general and administrative expenses	215,367			185,451			640,032		547,195		Selling, general and administrative expenses	684,236		545,124		1,954,340		1,583,075
Asset impairment and restructuring costs	21,007			—			36,524		—
Amortization of intangible assets											Amortization of intangible assets	2,189		2,195		6,579		6,585
Acquisition-related expenses											Acquisition-related expenses	—		24,127		—		39,934
Gain on disposal of assets											Gain on disposal of assets	—		—		(10,180)		—
Income from operations	85,588			92,975			199,723		224,523		Income from operations	352,427		257,947		1,013,982		742,799
Other income (expense), net	1,052			628			2,771		720		Other income (expense), net	331		15		454		338
Income before income tax expense	86,640			93,603			202,494		225,243		Income before income tax expense	352,758		257,962		1,014,436		743,137
Income tax expense	27,696			25,318			63,593		57,997		Income tax expense	97,288		70,174		279,447		202,319
Net income	$	58,944		$	68,285		$	138,901	$	167,246	Net income	$	255,470	$	187,788	$	734,989	$	540,818

Other comprehensive (loss) income:
Other comprehensive income (loss), net of tax:											Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	(31,018		)	(24,748		)	10,061		20,762		Foreign currency translation adjustment	$	(105,016)	$	17,481	$	(122,149)	$	48,708
Net investment hedge gains (losses)											Net investment hedge gains (losses)	25,492		(7,207)		26,259		(18,318)
Other comprehensive income (loss), net of tax											Other comprehensive income (loss), net of tax	$	(79,524)	$	10,274	$	(95,890)	$	30,390
Comprehensive income	$	27,926		$	43,537		$	148,962	$	188,008	Comprehensive income	$	175,946	$	198,062	$	639,099	$	571,208

Basic earnings per share	$	0.44		$	0.50		$	1.02	$	1.22	Basic earnings per share	$	2.00	$	1.45	$	5.75	$	4.16
Diluted earnings per share	$	0.43		$	0.50		$	1.02	$	1.22	Diluted earnings per share	$	2.00	$	1.44	$	5.74	$	4.14
Basic weighted-average number of shares outstanding	135,364			137,033			136,191		137,095		Basic weighted-average number of shares outstanding	127,511		129,684		127,736		130,019
Diluted weighted-average number of shares outstanding	135,578			137,237			136,357		137,321		Diluted weighted-average number of shares outstanding	127,820		130,189		128,089		130,557



þ☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



o☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Quarter Ended October 30, 2022
	Exchangeable Stock	Special Voting Stock			Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Shares	Shares	Par Value		Shares	Par Value
Balance as of July 31, 2022	5,203	5,203	$	—	122,334	$	612	$	433,092	$	2,636,377	$	(212,283)	$	2,857,798
Net income										255,470				255,470
Other comprehensive income (loss), net of tax												(79,524)		(79,524)

Stock-based compensation expense								20,312						20,312
Common stock issued upon settlement of stock-based compensation					45	—		4,057						4,057
Shares withheld related to net share settlement of stock-based compensation					(6)	—		(1,917)						(1,917)
Repurchase of common stock					(55)	—		(100)		(16,892)				(16,992)
Balance as of October 30, 2022	5,203	5,203	$	—	122,318	$	612	$	455,444	$	2,874,955	$	(291,807)	$	3,039,204


	Quarter Ended October 31, 2021
	Exchangeable Stock	Special Voting Stock			Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Shares	Shares	Par Value		Shares	Par Value
Balance as of August 1, 2021	5,203	5,203	$	—	124,644	$	623	$	381,737	$	2,445,845	$	(157,039)	$	2,671,166
Net income										187,788				187,788
Other comprehensive income (loss), net of tax												10,274		10,274

Stock-based compensation expense								21,657						21,657
Common stock issued upon settlement of stock-based compensation					83	—		7,907						7,907
Shares withheld related to net share settlement of stock-based compensation					(9)	—		(3,914)						(3,914)
Repurchase of common stock					(583)	(2)		(974)		(235,447)				(236,423)
Balance as of October 31, 2021	5,203	5,203	$	—	124,135	$	621	$	406,413	$	2,398,186	$	(146,765)	$	2,658,455


																												Three Quarters Ended October 30, 2022
	Exchangeable Stock	Special Voting Stock			Common Stock					Additional Paid-in Capital				Retained Earnings			Accumulated Other Comprehensive Loss				Total							Exchangeable Stock			Special Voting Stock					Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total
	Shares	Shares	Par Value		Shares		Par Value													Shares							Shares			Par Value		Shares			Par Value
Balance at January 29, 2017	9,781	9,781	$	—	127,304		$	637					$		266,622				$	1,294,214					$	(201,500	)	$	1,359,973
Balance as of January 30, 2022																								Balance as of January 30, 2022				5,203			5,203		$	—		123,297	$	616		$	422,507		$	2,512,840		$	(195,917)		$	2,740,046
Net income														138,901							138,901			Net income																		734,989						734,989
Foreign currency translation adjustment																	10,061				10,061
Other comprehensive income (loss), net of tax																								Other comprehensive income (loss), net of tax																					(95,890)			(95,890)

Stock-based compensation expense										13,048											13,048			Stock-based compensation expense															59,487									59,487
Common stock issued upon settlement of stock-based compensation					194		1			1,647											1,648			Common stock issued upon settlement of stock-based compensation												308	2		10,241									10,243
Shares withheld related to net share settlement of stock-based compensation					(58	)	—			(3,086		)									(3,086		)	Shares withheld related to net share settlement of stock-based compensation												(104)	—		(34,695)									(34,695)
Repurchase of common stock					(1,848	)	(10		)	(2,360		)		(96,899		)					(99,269		)	Repurchase of common stock												(1,183)	(6)		(2,096)			(372,874)						(374,976)
Balance at October 29, 2017	9,781	9,781	$	—	125,592		$	628		$	275,871			$	1,336,216		$	(191,439	)		$	1,421,276
Balance as of October 30, 2022																								Balance as of October 30, 2022				5,203			5,203		$	—		122,318	$	612	$	455,444		$	2,874,955		$	(291,807)		$	3,039,204


	Three Quarters Ended October 31, 2021
	Exchangeable Stock	Special Voting Stock			Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Shares	Shares	Par Value		Shares	Par Value
Balance as of January 31, 2021	5,203	5,203	$	—	125,150	$	626	$	388,667	$	2,346,428	$	(177,155)	$	2,558,566
Net income										540,818				540,818
Other comprehensive income (loss), net of tax												30,390		30,390

Stock-based compensation expense								51,878						51,878
Common stock issued upon settlement of stock-based compensation					495	2		17,618						17,620
Shares withheld related to net share settlement of stock-based compensation					(152)	(1)		(49,480)						(49,481)
Repurchase of common stock					(1,358)	(6)		(2,270)		(489,060)				(491,336)
Balance as of October 31, 2021	5,203	5,203	$	—	124,135	$	621	$	406,413	$	2,398,186	$	(146,765)	$	2,658,455



Note 1			Nature of Operations and Basis of Presentation	89
Note 2			Recent Accounting Pronouncements	89
Note 3			Acquisition-Related Expenses	10
Note 4			Gain on Disposal of Assets	10
Note 5			Revolving Credit Facilities	10
Note 6			Stock-Based Compensation and Benefit Plans	911
Note 47			Fair Value Measurement	1112
Note 58			Derivative Financial Instruments	1113
Note 69			~~Asset Impairment and Restructuring~~	13
~~Note 7~~	~~Income Taxes~~	15
~~Note 8~~	Earnings Per Share	15
Note 910			Supplementary Financial Information	1516
Note 1011			~~Segment Reporting~~Segmented Information	1718
Note 1112			~~Legal Proceedings~~Net Revenue by Geography and Category	1819
Note 1213			~~Subsequent Event~~Legal Proceedings and Other Contingencies	1819


	Third Quarter				First Three Quarters
	2022		2021		2022		2021
	(In thousands)
Acquisition-related expenses:
Transaction and integration costs	$	—	$	328	$	—	$	1,859
Acquisition-related compensation	—		23,799		—		38,075
	$	—	$	24,127	$	—	$	39,934

Income tax effects of acquisition-related expenses	$	—	$	(611)	$	—	$	(1,417)



	Stock Options			Performance-Based Restricted Stock Units			Restricted Shares			Restricted Stock Units
	Number	Weighted-Average Exercise Price		Number	Weighted-Average Grant Date Fair Value		Number	Weighted-Average Grant Date Fair Value		Number	Weighted-Average Grant Date Fair Value
	(In thousands, except per share amounts)
Balance at January 29, 2017	918	$	59.20	390	$	61.05	14	$	70.54	360	$	62.99
Granted	614	52.16		191	52.21		24	52.38		332	52.65
Exercised/released	40	40.70		—	—		14	70.29		131	60.74
Forfeited	247	58.18		224	54.72		3	51.72		111	57.18
Balance at October 29, 2017	1,245	$	56.53	357	$	60.30	21	$	52.45	450	$	57.46
Exercisable at October 29, 2017	350	$	56.14



	~~Three Quarters Ended~~ ~~October 29, 2017~~
~~Expected term~~	~~4.00 years~~
~~Expected volatility~~	~~38.28~~	%
~~Risk-free interest rate~~	~~1.72~~	%
~~Dividend yield~~	—	%


	October 30, 2022		January 30, 2022
	(In thousands)
Inventories:
Inventories, at cost	$	1,815,410	$	1,004,526
Provision to reduce inventories to net realizable value	(73,694)		(38,045)
	$	1,741,716	$	966,481
Prepaid expenses and other current assets:
Prepaid inventories	$	18	$	42,691
Other prepaid expenses	136,608		98,254
Forward currency contract assets	46,813		19,077
Other current assets	63,838		32,550
	$	247,277	$	192,572
Property and equipment, net:
Land	$	69,244	$	74,297
Buildings	26,834		30,880
Leasehold improvements	743,770		676,762
Furniture and fixtures	133,120		125,213
Computer hardware	148,933		130,393
Computer software	682,674		532,819
Equipment and vehicles	27,734		23,060
Work in progress	208,631		163,420
Property and equipment, gross	2,040,940		1,756,844
Accumulated depreciation	(918,450)		(829,134)
	$	1,122,490	$	927,710



	October 29, 2017			January 29, 2017
	(In thousands)
Inventories:
Finished goods	$	412,648		$	306,087
Provision to reduce inventories to net realizable value	(15,756		)	(7,655		)
	$	396,892		$	298,432
Property and equipment, net:
Land	$	79,852		$	78,561
Buildings	38,144			32,174
Leasehold improvements	289,775			273,801
Furniture and fixtures	88,545			84,479
Computer hardware	63,882			58,270
Computer software	199,601			160,835
Equipment and vehicles	14,858			13,704
Accumulated depreciation and impairment	(334,254		)	(278,325		)
	$	440,403		$	423,499
Goodwill and intangible assets, net:
Goodwill	$	25,496		$	25,496
Changes in foreign currency exchange rates	(1,156		)	(1,263		)
	24,340			24,233
Intangibles - reacquired franchise rights	10,150			10,150
Accumulated amortization	(10,009		)	(9,807		)
Changes in foreign currency exchange rates	(5		)	(19		)
	136			324
	$	24,476		$	24,557
Other non-current assets:
Security deposits	$	10,484		$	9,009
Deferred lease assets	10,099			10,560
Other	9,056			923
	$	29,639		$	20,492
Other current liabilities:
Accrued duty, freight, and other operating expenses	$	42,923		$	27,477
Sales tax collected	11,686			10,182
Accrued rent	5,620			5,562
Other	11,361			9,340
	$	71,590		$	52,561
Other non-current liabilities:
Deferred lease liabilities	$	26,763		$	26,648


	First Three Quarters
	2022
Expected term	3.75 years
Expected volatility	40.00	%
Risk-free interest rate	2.51	%
Dividend yield	—	%


	October 30, 2022		Level 1		Level 2		Level 3		Balance Sheet Classification
	(In thousands)
Money market funds	$	19,600	$	19,600	$	—	$	—	Cash and cash equivalents

Term deposits	8		—		8		—		Cash and cash equivalents
Forward currency contract assets	46,813		—		46,813		—		Prepaid expenses and other current assets
Forward currency contract liabilities	24,857		—		24,857		—		Other current liabilities


	October 30, 2022						January 30, 2022
	Gross Notional		Assets		Liabilities		Gross Notional		Assets		Liabilities
	(In thousands)
Derivatives designated as net investment hedges:
Forward currency contracts	$	710,000	$	24,868	$	—	$	1,502,000	$	18,468	$	—
Derivatives not designated in a hedging relationship:
Forward currency contracts	1,177,116		21,945		24,857		1,597,878		609		18,985
Net derivatives recognized on consolidated balance sheets:
Forward currency contracts			$	46,813	$	24,857			$	19,077	$	18,985



	Quarter Ended October 29, 2017			Three Quarters Ended October 29, 2017
	(In thousands)
Costs recorded in cost of goods sold:
Provision to reduce inventories to net realizable value	$	1,934		$	4,838
Loss (reversal of loss) on committed inventory purchases	(2,286		)	250
Accelerated depreciation	1,530			3,753
	1,178			8,841
Costs recorded in operating expenses:
Lease termination costs	19,441			19,884
Impairment of property and equipment	—			11,593
Employee related costs	804			4,000
Other restructuring costs	762			1,047
Asset impairment and restructuring costs	21,007			36,524
Restructuring and related costs	$	22,185		$	45,365


–	~~Comparable store sales increased 2%, or increased 1% on a constant dollar basis.~~


–	~~Direct to consumer net revenue increased 26%, or increased 25% on a constant dollar basis.~~


–	~~an increase in employee costs of $7.7 million primarily from a growth in labor hours and benefits, mainly associated with new company-operated stores and other new operating locations;~~


–	~~an increase in variable costs of $3.7 million primarily due to an increase in credit card fees and packaging costs as a result of increased net revenue; and~~


–	an increase in other costs of $13.9 million primarily due to an increase in digital marketing expenses, website related costs including photography costs, brand and community costs, and other costs associated with our operating locations;


–	an increase in other costs of $1.0 million primarily due to increases in information technology related costs, an increase in brand and community costs, partially offset by a decrease in professional fees; and


–	~~an increase in employee costs of $26.8 million, primarily from a growth in labor hours and benefits, mainly associated with new company-operated stores and other new operating locations;~~


–	~~an increase in variable costs of $6.8 million, primarily due to an increase in credit card fees and distribution costs as a result of increased net revenue; and~~


–	an increase in other costs of $29.7 million, primarily due to an increase in digital marketing expenses, website related costs, brand and community costs, and other costs associated with our operating locations; and


–	~~an increase in employee costs of $13.4 million primarily due to additional employees to support the growth in our business; and~~


–	an increase in other costs of $27.2 million primarily due to a global brand campaign, increases in other brand and community costs, professional fees, depreciation, and information technology related costs.


	Third Quarter 2022				First Three Quarters 2022
	Net Revenue					Net Revenue
	(In thousands)		(Percentages)			(In thousands)		(Percentages)
Change	$	406,468	28	%		$	1,211,176	29	%
Adjustments due to foreign currency exchange rate changes	48,946		3			91,338		3	%
Change in constant dollars	$	455,414	31	%		$	1,302,514	32	%



	Quarter Ended October 29, 2017		Three Quarters Ended October 29, 2017
Change in total comparable sales^1,2	8	%	5	%
Adjustments due to foreign exchange rate changes	(1	)	(1	)
Change in total comparable sales in constant dollars^1,2	7	%	4	%


	Third Quarter 2022						First Three Quarters 2022
	Total Comparable Sales1,2		Comparable Store Sales2		Direct to Consumer Net Revenue		Total Comparable Sales1,2		Comparable Store Sales2		Direct to Consumer Net Revenue
Change	22	%	14	%	31	%	24	%	17	%	31	%
Adjustments due to foreign currency exchange rate changes	3		3		3		2		2		2
Change in constant dollars	25	%	17	%	34	%	26	%	19	%	33	%



	Quarter Ended October 29, 2017									Quarter Ended October 30, 2016
	GAAP Results			Adjustments			Adjusted Results (Non-GAAP)			GAAP Results			Adjustments			Adjusted Results (Non-GAAP)
Gross profit¹	$	321,962		$	1,178		$	323,140		$	278,426		$	—		$	278,426
Gross margin¹	52.0		%	0.2		%	52.2		%	51.1		%	—		%	51.1		%
Income from operations^1,2	85,588			22,186			107,774			92,975			—			92,975
Operating margin^1,2	13.8		%	3.6		%	17.4		%	17.1		%	—		%	17.1		%
Income before income tax expense^1,2,3	86,640			22,185			108,825			93,603			186			93,789
Income tax expense^3,4	27,696			5,813			33,509			25,318			4,005			29,323
Effective tax rate^3,4	32.0		%	(1.2		)%	30.8		%	27.0		%	4.3		%	31.3		%
Diluted earnings per share^1,2,3,4	$	0.43		$	0.13		$	0.56		$	0.50		$	(0.03	)	$	0.47



	Three Quarters Ended October 29, 2017									Three Quarters Ended October 30, 2016
	GAAP Results			Adjustments			Adjusted Results (Non-GAAP)			GAAP Results			Adjustments			Adjusted Results (Non-GAAP)
Gross profit¹	$	876,279		$	8,841		$	885,120		$	771,718		$	—		$	771,718
Gross margin¹	50.9		%	0.5		%	51.4		%	49.6		%	—		%	49.6		%
Income from operations^1,2	199,723			45,365			245,088			224,523			—			224,523
Operating margin^1,2	11.6		%	2.6		%	14.2		%	14.4		%	—		%	14.4		%
Income before income tax expense^1,2,3	202,494			45,365			247,859			225,243			1,696			226,939
Income tax expense^3,4	63,593			11,886			75,479			57,997			11,576			69,573
Effective tax rate^3,4	31.4		%	(0.9		)%	30.5		%	25.7		%	5.0		%	30.7		%
Diluted earnings per share^1,2,3,4	$	1.02		$	0.24		$	1.26		$	1.22		$	(0.07	)	$	1.15