During the third quarter of 2023, the Company decided to cease selling the lululemon Studio Mirror hardware. It also contracted with Peloton Interactive, Inc. to be the exclusive digital fitness content provider to existing lululemon Studio subscribers, and stopped producing its own digital fitness content. The Company ceased selling the lululemon Studio Mirror and new digital content subscriptions in December 2023.

During the third quarter of 2023, the Company recognized certain inventory provisions, asset impairments, and restructuring costs related to lululemon Studio. The following table summarizes the amounts recognized:


	Third Quarter
	2024		2023
	(In thousands)
Costs recorded in cost of goods sold:
lululemon Studio obsolescence provision	$	—	$	23,709

Costs recorded in operating expenses:
Impairment of assets:
Impairment of intangible assets	$	—	$	16,951
Impairment of cloud computing arrangement implementation costs	—		16,074
Impairment of property and equipment	—		11,161
	$	—	$	44,186
Restructuring costs	—		30,315
Impairment of assets and restructuring costs	$	—	$	74,501

Total pre-tax charges	$	—	$	98,210

Income tax effects of charges	$	—	$	(26,085)
Total after-tax charges	$	—	$	72,125

As a result of the decision to cease selling the lululemon Studio Mirror, the Company recognized an inventory obsolescence provision of $23.7 million during the third quarter of 2023. The net realizable value of the lululemon Studio inventory was based on assumptions regarding liquidation value.

As a result of the Company's decision to no longer produce digital fitness content and to cease the sale of the lululemon Studio Mirror, the Company performed impairment testing for the lululemon Studio asset group as of October 29, 2023. The undiscounted cash flows of the lululemon Studio asset group 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. As a result of the impairment test, the Company recognized asset impairments totaling $44.2 million during the third quarter of 2023. The fair value of long-lived

assets was based on a discounted cash flow model, and is a Level 3 non-recurring fair value measurement. The key assumptions used to estimate the fair value were subscriber churn rates and operating costs.

The Company recognized restructuring costs of $30.3 million for lululemon Studio primarily related to contract termination costs, employee severance costs, and professional fees during the third quarter of 2023.