Intangible Assets, Goodwill and Other Assets |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Impairment of Goodwill and Other | Impairment of Goodwill and Other AssetsEvents as of January 29, 2023 indicated the Company should conduct an impairment test for the goodwill, intangible assets, and property and equipment related to lululemon Studio (formerly MIRROR). Sales of hardware units did not meet the Company's fourth quarter expectations and the Company revised its short and long term forecasts for lululemon Studio, with an adverse impact on expected cash flows. As a result, the Company updated its strategy for the lululemon Studio reporting unit. During the fourth quarter of 2022, the Company recorded impairment of goodwill and other assets related to the lululemon Studio business unit. The following table summarizes the amounts recognized:
Goodwill To perform the goodwill impairment test on January 29, 2023, the Company used a discounted cash flow model to estimate the fair value of the lululemon Studio reporting unit based on the updated strategic plans, supplemented by market comparable analysis, which indicated the fair value of lululemon Studio was lower than its carrying value, and led to a recognition of an impairment of goodwill of $362.5 million. The key assumptions used to estimate the fair value of the lululemon Studio reporting unit were the revenue growth rates, operating profit margins, and the discount rate. The fair value of the lululemon Studio reporting unit is a Level 3 fair value measurement. Intangible assets Undiscounted cash flows of the lululemon Studio asset group to which the intangible assets belong were less than their carrying value, and therefore the Company calculated the fair value of the asset group, which was also less than its carrying value. This resulted in impairments of $40.6 million relating to the MIRROR brand, which is associated with in-home hardware, and to the customer relationship intangible assets that were recognized as part of the acquisition. The carrying value of individual long-lived assets was not reduced to lower than their fair value. The fair values of the brand and the customer relationships were based on a relief from royalty method and a discounted cash flow model respectively, and are Level 3 fair value measurements. Inventories The change in strategy related to lululemon Studio to focus on digital app-based services means the Company no longer expects to be able to sell all of the lululemon Studio hardware inventory above cost and it recognized an obsolescence provision of $62.9 million as of January 29, 2023. The net realizable value was determined based on hardware sales forecasts and assumptions regarding liquidation value. If the Company does not achieve its hardware sales forecasts, has to sell the hardware at prices lower than forecast, or is unable to liquidate excess inventory this could result in additional expense in the period in which such a determination is made.
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