lululemon athletica inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) lululemon athletica inc. CONSOLIDATED BALANCE SHEETS (Unaudited; Amounts in thousands, except per share amounts) November 2, 2025 February 2, 2025 ASSETS Current assets Cash and cash equivalents $ 1,035,862 $ 1,984,336 Accounts receivable, net 250,304 120,173 Inventories 1,997,844 1,442,081 Prepaid and receivable income taxes 430,303 182,253 Prepaid expenses and other current assets 209,348 251,459 3,923,661 3,980,302 Property and equipment, net 1,952,012 1,780,617 Right-of-use lease assets 1,600,385 1,416,256 Goodwill 175,301 159,518 Intangible assets, net 7,689 11,673 Deferred income tax assets 21,581 17,085 Other non-current assets 274,563 237,841 $ 7,955,192 $ 7,603,292 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 352,160 $ 271,406 Accrued liabilities and other 621,155 559,463 Accrued compensation and related expenses 186,378 204,543 Current lease liabilities 317,482 275,154 Current income taxes payable 62,712 183,126 Unredeemed gift card liability 253,798 308,352 Other current liabilities 48,494 37,586 1,842,179 1,839,630 Non-current lease liabilities 1,445,312 1,300,637 Deferred income tax liabilities 111,590 98,188 Other non-current liabilities 54,088 40,790 3,453,169 3,279,245 Commitments and contingencies Stockholders' equity Undesignated preferred stock, $ 0.01 par value: 5,000 shares authorized; none issued and outstanding — — Exchangeable stock, no par value: 60,000 shares authorized; 5,116 and 5,116 issued and outstanding — — Special voting stock, $ 0.000005 par value: 60,000 shares authorized; 5,116 and 5,116 issued and outstanding — — Common stock, $ 0.005 par value: 400,000 shares authorized; 112,789 and 116,166 issued and outstanding 564 581 Additional paid-in capital 646,238 638,190 Retained earnings 4,204,012 4,109,717 Accumulated other comprehensive loss ( 348,791 ) ( 424,441 ) 4,502,023 4,324,047 $ 7,955,192 $ 7,603,292 See accompanying notes to the unaudited interim consolidated financial statements 3 Table of Contents lululemon athletica inc. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited; Amounts in thousands, except per share amounts) Quarter Ended Three Quarters Ended November 2, 2025 October 27, 2024 November 2, 2025 October 27, 2024 Net revenue $ 2,565,920 $ 2,396,660 $ 7,461,799 $ 6,976,629 Cost of goods sold 1,140,004 995,054 3,175,555 2,887,770 Gross profit 1,425,916 1,401,606 4,286,244 4,088,859 Selling, general and administrative expenses 988,254 909,827 2,882,783 2,624,212 Amortization of intangible assets 1,776 1,118 5,136 1,118 Income from operations 435,886 490,661 1,398,325 1,463,529 Other income (expense), net 5,854 13,743 27,377 55,020 Income before income tax expense 441,740 504,404 1,425,702 1,518,549 Income tax expense 134,905 152,534 433,390 452,336 Net income $ 306,835 $ 351,870 $ 992,312 $ 1,066,213 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment $ ( 34,543 ) $ ( 22,277 ) $ 139,936 $ ( 92,153 ) Net investment hedge gains (losses) 16,977 12,292 ( 64,286 ) 36,607 Other comprehensive income (loss), net of tax $ ( 17,566 ) $ ( 9,985 ) $ 75,650 $ ( 55,546 ) Comprehensive income $ 289,269 $ 341,885 $ 1,067,962 $ 1,010,667 Basic earnings per share $ 2.59 $ 2.87 $ 8.30 $ 8.57 Diluted earnings per share $ 2.59 $ 2.87 $ 8.29 $ 8.55 Basic weighted-average number of shares outstanding 118,535 122,697 119,589 124,471 Diluted weighted-average number of shares outstanding 118,552 122,803 119,692 124,668 See accompanying notes to the unaudited interim consolidated financial statements 4 Table of Contents lululemon athletica inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited; Amounts in thousands) Quarter Ended November 2, 2025 Exchangeable Stock Special Voting Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity Shares Shares Par Value Shares Par Value Balance as of August 3, 2025 5,116 5,116 $ — 113,828 $ 570 $ 632,375 $ 4,085,559 $ ( 331,225 ) $ 4,387,279 Net income 306,835 306,835 Other comprehensive income (loss), net of tax ( 17,566 ) ( 17,566 ) Stock-based compensation expense 16,558 16,558 Common stock issued upon settlement of stock-based compensation 5 — 71 71 Shares withheld related to net share settlement of stock-based compensation ( 2 ) — ( 246 ) ( 246 ) Repurchase of common stock, including excise tax ( 1,042 ) ( 6 ) ( 2,520 ) ( 188,382 ) ( 190,908 ) Balance as of November 2, 2025 5,116 5,116 $ — 112,789 $ 564 $ 646,238 $ 4,204,012 $ ( 348,791 ) $ 4,502,023 Quarter Ended October 27, 2024 Exchangeable Stock Special Voting Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity Shares Shares Par Value Shares Par Value Balance as of July 28, 2024 5,116 5,116 $ — 118,610 $ 593 $ 589,156 $ 3,751,713 $ ( 309,817 ) $ 4,031,645 Net income 351,870 351,870 Other comprehensive income (loss), net of tax ( 9,985 ) ( 9,985 ) Stock-based compensation expense 24,169 24,169 Common stock issued upon settlement of stock-based compensation 15 — 1,514 1,514 Shares withheld related to net share settlement of stock-based compensation ( 3 ) — ( 888 ) ( 888 ) Repurchase of common stock, including excise tax ( 1,576 ) ( 8 ) ( 3,549 ) ( 409,036 ) ( 412,593 ) Balance as of October 27, 2024 5,116 5,116 $ — 117,046 $ 585 $ 610,402 $ 3,694,547 $ ( 319,802 ) $ 3,985,732 5 Table of Contents Three Quarters Ended November 2, 2025 Exchangeable Stock Special Voting Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity Shares Shares Par Value Shares Par Value Balance as of February 2, 2025 5,116 5,116 $ — 116,166 $ 581 $ 638,190 $ 4,109,717 $ ( 424,441 ) $ 4,324,047 Net income 992,312 992,312 Other comprehensive income (loss), net of tax 75,650 75,650 Stock-based compensation expense 37,805 37,805 Common stock issued upon settlement of stock-based compensation 250 — 5,549 5,549 Shares withheld related to net share settlement of stock-based compensation ( 94 ) — ( 26,760 ) ( 26,760 ) Repurchase of common stock, including excise tax ( 3,533 ) ( 17 ) ( 8,546 ) ( 898,017 ) ( 906,580 ) Balance as of November 2, 2025 5,116 5,116 $ — 112,789 $ 564 $ 646,238 $ 4,204,012 $ ( 348,791 ) $ 4,502,023 Three Quarters Ended October 27, 2024 Exchangeable Stock Special Voting Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity Shares Shares Par Value Shares Par Value Balance as of January 28, 2024 5,116 5,116 $ — 121,106 $ 606 $ 575,369 $ 3,920,362 $ ( 264,256 ) $ 4,232,081 Net income 1,066,213 1,066,213 Other comprehensive income (loss), net of tax ( 55,546 ) ( 55,546 ) Stock-based compensation expense 71,494 71,494 Common stock issued upon settlement of stock-based compensation 239 — 7,277 7,277 Shares withheld related to net share settlement of stock-based compensation ( 90 ) — ( 34,259 ) ( 34,259 ) Repurchase of common stock, including excise tax ( 4,209 ) ( 21 ) ( 9,479 ) ( 1,292,028 ) ( 1,301,528 ) Balance as of October 27, 2024 5,116 5,116 $ — 117,046 $ 585 $ 610,402 $ 3,694,547 $ ( 319,802 ) $ 3,985,732 See accompanying notes to the unaudited interim consolidated financial statements 6 Table of Contents lululemon athletica inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; Amounts in thousands) Three Quarters Ended November 2, 2025 October 27, 2024 Cash flows from operating activities Net income $ 992,312 $ 1,066,213 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 361,703 312,931 Stock-based compensation expense 37,805 71,494 Settlement of derivatives not designated in a hedging relationship ( 18,077 ) ( 19,645 ) Changes in operating assets and liabilities: Accounts receivable ( 127,419 ) ( 19,436 ) Inventories ( 517,484 ) ( 477,682 ) Prepaid and receivable income taxes ( 248,050 ) ( 74,915 ) Prepaid expenses and other current assets 46,697 ( 31,499 ) Other non-current assets ( 41,425 ) ( 60,638 ) Accounts payable 72,810 45,579 Accrued liabilities and other 70,108 171,566 Accrued compensation and related expenses ( 22,644 ) ( 133,630 ) Current and non-current income taxes payable ( 126,764 ) 70,615 Unredeemed gift card liability ( 57,270 ) ( 66,623 ) Right-of-use lease assets and current and non-current lease liabilities 2,020 16,234 Other current and non-current liabilities 35,284 759 Net cash provided by operating activities 459,606 871,323 Cash flows from investing activities Purchase of property and equipment ( 497,602 ) ( 454,250 ) Settlement of net investment hedges 12,282 15,041 Acquisition, net of cash acquired — ( 130,996 ) Other investing activities ( 3,737 ) ( 5,009 ) Net cash used in investing activities ( 489,057 ) ( 575,214 ) Cash flows from financing activities Proceeds from settlement of stock-based compensation 5,549 7,277 Taxes paid related to net share settlement of stock-based compensation ( 26,760 ) ( 34,259 ) Repurchase of common stock ( 906,580 ) ( 1,301,528 ) Other financing activities ( 11,205 ) — Net cash used in financing activities ( 938,996 ) ( 1,328,510 ) Effect of foreign currency exchange rate changes on cash and cash equivalents 19,973 ( 23,151 ) Decrease in cash and cash equivalents ( 948,474 ) ( 1,055,552 ) Cash and cash equivalents, beginning of period $ 1,984,336 $ 2,243,971 Cash and cash equivalents, end of period $ 1,035,862 $ 1,188,419 See accompanying notes to the unaudited interim consolidated financial statements 7 Table of Contents lululemon athletica inc. INDEX FOR NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS Note 1 Nature of Operations and Basis of Presentation 9 Note 2 Recent Accounting Pronouncements 9 Note 3 Revolving Credit Facilities 10 Note 4 Supply Chain Financing Program 10 Note 5 Stock-Based Compensation and Benefit Plans 11 Note 6 Fair Value Measurement 12 Note 7 Derivative Financial Instruments 13 Note 8 Earnings Per Share 15 Note 9 Supplementary Financial Information 15 Note 10 Segmented Information 16 Note 11 Disaggregated Net Revenue 19 Note 12 Legal Proceedings and Other Contingencies 19 Note 13 Subsequent Events 20 8 Table of Contents lululemon athletica inc. NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS Note 1. Nature of Operations and Basis of Presentation Nature of operations 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 technical athletic apparel, footwear, and accessories. The Company organizes its operations into four regional markets: Americas, China Mainland, Asia Pacific ("APAC"), and Europe and the Middle East ("EMEA"). It conducts its business through a number of different channels in each market, including company-operated stores, e-commerce, outlets, temporary locations, wholesale, license and supply arrangements, and a re-commerce program. There were 796 and 767 company-operated stores as of November 2, 2025 and February 2, 2025, respectively. Basis of presentation The unaudited interim consolidated financial statements, including the financial position as of November 2, 2025 and the results of operations and cash flows for the periods disclosed, are presented in 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 February 2, 2025 is derived from the Company's audited consolidated financial statements and related notes for the fiscal year ended February 2, 2025, which are included in Item 8 in the Company's fiscal 2024 Annual Report on Form 10-K filed with the SEC on March 27, 2025. These unaudited interim consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for 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 2024 Annual Report on Form 10-K. On September 10, 2024, the Company acquired the lululemon branded retail locations and operations run by a third party in Mexico. The Company had previously granted the third party the right to operate retail locations and to sell lululemon products in Mexico. The results of operations, financial position, and cash flows of the Mexico operations have been included in the Company's consolidated financial statements since the date of acquisition. The Company's fiscal year ends on the Sunday closest to January 31 of the following year, typically resulting in a 52-week year, but occasionally giving rise to an additional week, resulting in a 53-week year. Fiscal 2025 will end on February 1, 2026 and will be a 52-week year. Fiscal 2024 was a 53-week year and ended on February 2, 2025. Fiscal 2025 and fiscal 2024 are referred to as "2025," and "2024," respectively. The first three quarters of 2025 and 2024 ended on November 2, 2025 and October 27, 2024, respectively. 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. Use of estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of net revenue and expenses during the reporting period. Actual results could differ from those estimates. Note 2. Recent Accounting Pronouncements The Company considers the applicability and impact of all Accounting Standard Updates ("ASUs"). ASUs recently issued not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company's consolidated financial position or results of operations. 9 Table of Contents Recently issued accounting pronouncements In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This disclosure requires expanded disclosure within the rate reconciliation as well as disaggregation of annual taxes paid. This amendment is effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact that this new guidance may have on its financial statement disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. Entities will be required to provide disaggregated disclosures for certain income statement expense line items. This amendment is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, and will be applied retrospectively for periods presented in the financial statements. The Company is currently evaluating the impact that this new guidance may have on its financial statement disclosures. In September 2025, the FASB issued ASU 2025‑06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350‑40): Targeted Improvements to the Accounting for Internal-Use Software. The amendment replaces the previous project-stage model with a principles-based approach for capitalizing internal-use software costs. This guidance is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact that this new guidance may have on its accounting policies and related disclosures. Note 3. Revolving Credit Facilities Americas revolving credit facility On October 15, 2025, the Company entered into an amended and restated unsecured revolving credit agreement, which provides for $ 600.0 million in commitments under an unsecured five-year revolving credit facility. The credit facility has a maturity date of October 15, 2030, subject to two one-year extensions at the request of the Company. Subject to the conditions stated in the credit agreement, the Company may request increases in aggregate commitments thereunder up to a total of $ 1.0 billion. The credit facility permits prepayment of borrowings and reductions or terminations of commitments from time to time without premium or penalty, subject to customary breakage costs. As of November 2, 2025, the Company had no borrowings outstanding under this credit facility other than $ 7.0 million in outstanding letters of credit and guarantee. Borrowings under the credit facility bear interest at variable rates based on the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York ("SOFR"), or an alternate base rate, plus applicable margin. The credit agreement contains customary financial, affirmative and negative covenants applicable to the Company and its subsidiaries, including limitations on indebtedness, liens, fundamental changes, dispositions of assets, changes in the nature of business, and restrictions on subsidiary dividends and distributions, as well as financial covenants based on leverage and fixed charge coverage ratios. The Company was in compliance with all such covenants as of November 2, 2025. China Mainland revolving credit facility The Company has an uncommitted and unsecured Chinese Yuan-denominated revolving credit facility totaling the equivalent of USD $ 42.2 million, which is reviewed annually and provides for short-term borrowing and the issuance of guarantees. As of November 2, 2025, there were no borrowings or guarantees outstanding, letters of credit totaling USD $ 7.8 million were issued, and the Company was in compliance with all applicable terms of the credit facility. Note 4. Supply Chain Financing Program The Company facilitates a voluntary supply chain financing ("SCF") program that allows its suppliers to elect to sell the receivables owed to them by the Company to a third party financial institution. Participating suppliers negotiate arrangements directly with the financial institution. If a supplier chooses to participate in the SCF program it may request an invoice be paid earlier than it would by the Company, and the financial institution at its sole and absolute discretion, may elect to make an early payment to the supplier at a discount. The Company’s obligations to its suppliers, including amounts due and scheduled payment terms, are not impacted by a supplier's participation in the arrangement and the Company provides no guarantees to any third parties under the SCF program. As of November 2, 2025 and February 2, 2025, $ 46.9 million and $ 36.3 million, respectively, were outstanding under the SCF program and presented within accounts payable. 10 Table of Contents Note 5. Stock-Based Compensation and Benefit Plans Stock-based compensation plans The Company's eligible employees participate in various stock-based compensation plans, provided directly by the Company. Stock-based compensation expense charged to income for the plans was $ 37.4 million and $ 70.5 million for the first three quarters of 2025 and 2024, respectively. Total unrecognized compensation cost for all stock-based compensation plans was $ 113.9 million as of November 2, 2025, which is expected to be recognized over a weighted-average period of 2.2 years. A summary of the balances of the Company's stock-based compensation plans as of November 2, 2025, and changes during the first three quarters of 2025, is presented below: 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 as of February 2, 2025 849 $ 314.27 177 $ 371.83 5 $ 317.86 239 $ 371.09 Granted 318 275.26 168 304.07 6 252.28 208 266.34 Exercised/released 44 135.53 100 373.03 5 317.86 101 368.24 Forfeited/expired 69 337.83 12 329.43 — — 30 328.71 Balance as of November 2, 2025 1,054 $ 308.47 233 $ 324.76 6 $ 252.28 316 $ 307.12 Exercisable as of November 2, 2025 496 $ 294.21 The Company's performance-based restricted stock units ("PSUs") are awarded to eligible employees and entitle the grantee to receive a maximum of two shares of common stock per PSU if the Company achieves specified performance goals and the grantee remains employed during the vesting period. The fair value of PSUs is based on the closing price of the Company's common stock on the grant date. Expense for PSUs 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 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 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 2025: First Three Quarters 2025 Expected term 4.00 years Expected volatility 38.70 % Risk-free interest rate 4.00 % Dividend yield — % Employee share purchase plan The Company has an Employee Share Purchase Plan ("ESPP"). 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 11 Table of Contents 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 of 2025, there were 58.7 thousand shares purchased. As of November 2, 2025, 4.1 million shares remain authorized to be purchased under the ESPP. Defined contribution pension plans The Company offers defined contribution pension plans to its eligible employees. Participating employees may elect to defer and contribute a portion of their eligible compensation to a plan up to limits stated in the plan documents, not to exceed the dollar amounts set by applicable laws. The Company matches 50 % to 75 % of the contribution depending on the participant's length of service, and the contribution is subject to a two-year vesting period. The Company's net expense for the defined contribution plans was $ 17.8 million and $ 16.4 million in the first three quarters of 2025 and 2024, respectively. Note 6. Fair Value Measurement 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: • Level 1 - defined as observable inputs such as quoted prices in active markets; • Level 2 - defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and • Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Assets and liabilities measured at fair value on a recurring basis The fair value measurement is categorized in its entirety by reference to its lowest level of significant input. As of November 2, 2025 and February 2, 2025, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis: November 2, 2025 Level 1 Level 2 Level 3 Balance Sheet Classification (In thousands) Money market funds $ 34,795 $ 34,795 $ — $ — Cash and cash equivalents Forward currency contract assets 21,800 — 21,800 — Prepaid expenses and other current assets Forward currency contract liabilities 21,527 — 21,527 — Other current liabilities February 2, 2025 Level 1 Level 2 Level 3 Balance Sheet Classification (In thousands) Money market funds $ 240,918 $ 240,918 $ — $ — Cash and cash equivalents Term deposits 8 — 8 — Cash and cash equivalents Forward currency contract assets 76,848 — 76,848 — Prepaid expenses and other current assets Forward currency contract liabilities 74,638 — 74,638 — Other current liabilities The Company records cash, 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. The Company has short-term, highly liquid investments classified as cash equivalents, which are invested in money market funds and short-term deposits with original maturities of three months or less. 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 are 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 12 Table of Contents and other similar arrangements allow net settlements under certain conditions. However, the Company records all derivatives on its consolidated balance sheets at fair value and does not offset derivative assets and liabilities. Note 7. Derivative Financial Instruments Foreign currency exchange risk 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. Net investment hedges The Company is exposed to foreign currency exchange gains and losses which arise on translation of its international subsidiaries' balance sheets into U.S. dollars. These gains and losses are recorded as 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 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 Company assesses hedge effectiveness based on changes in forward rates. The Company recorded no ineffectiveness from net investment hedges during the first three quarters of 2025. The Company classifies the cash flows at settlement of its net investment hedges within investing activities in the consolidated statements of cash flows. Derivatives not designated as hedging instruments 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 of 2025, 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 specific monetary assets and 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. Quantitative disclosures about derivative financial instruments The Company presents its derivative assets and derivative liabilities at their gross fair values within 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 November 2, 2025, there were derivative assets of $ 21.8 million and derivative liabilities of $ 21.5 million subject to enforceable netting arrangements. 13 Table of Contents The notional amounts and fair values of forward currency contracts were as follows: November 2, 2025 February 2, 2025 Gross Notional Assets Liabilities Gross Notional Assets Liabilities (In thousands) Derivatives designated as net investment hedges: Forward currency contracts $ 1,314,000 $ 21,350 $ — $ 1,969,000 $ 74,908 $ — Derivatives not designated in a hedging relationship: Forward currency contracts 1,555,024 450 21,527 2,167,657 1,940 74,638 Net derivatives recognized on consolidated balance sheets: Forward currency contracts $ 21,800 $ 21,527 $ 76,848 $ 74,638 The forward currency contracts designated as net investment hedges outstanding as of November 2, 2025 mature on different dates between November 2025 and March 2026. The forward currency contracts not designated in a hedging relationship outstanding as of November 2, 2025 mature on different dates between November 2025 and March 2026. The pre-tax gains and losses on foreign currency exchange forward contracts recorded in accumulated other comprehensive income or loss were as follows: Third Quarter First Three Quarters 2025 2024 2025 2024 (In thousands) Gains (losses) recognized in net investment hedge gains (losses): Derivatives designated as net investment hedges $ 22,882 $ 16,538 $ ( 41,276 ) $ 49,250 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 pre-tax net foreign currency exchange and derivative gains and losses recorded in the consolidated statement of operations were as follows: Third Quarter First Three Quarters 2025 2024 2025 2024 (In thousands) Gains (losses) recognized in selling, general and administrative expenses: Foreign currency exchange gains (losses) $ 16,955 $ 13,423 $ ( 51,042 ) $ 44,194 Derivatives not designated in a hedging relationship ( 25,762 ) ( 20,260 ) 33,469 ( 49,298 ) Net foreign currency exchange and derivative gains (losses) $ ( 8,807 ) $ ( 6,837 ) $ ( 17,573 ) $ ( 5,104 ) Credit risk 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 generally entered into with what the Company believes are investment grade credit worthy and reputable financial institutions that are monitored by the Company for counterparty risk. 14 Table of Contents 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. Note 8. Earnings Per Share The details of the computation of basic and diluted earnings per share are as follows: Third Quarter First Three Quarters 2025 2024 2025 2024 (In thousands, except per share amounts) Net income $ 306,835 $ 351,870 $ 992,312 $ 1,066,213 Basic weighted-average number of shares outstanding $ 118,535 $ 122,697 $ 119,589 $ 124,471 Assumed conversion of dilutive stock options and awards 17 106 103 197 Diluted weighted-average number of shares outstanding 118,552 122,803 119,692 124,668 Basic earnings per share $ 2.59 $ 2.87 $ 8.30 $ 8.57 Diluted earnings per share $ 2.59 $ 2.87 $ 8.29 $ 8.55 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 economic equivalent of common shares in all material respects. All classes of stock have, in effect, the same economic rights and share equally in undistributed net income. For the first three quarters of 2025 and 2024, 0.1 million and 0.1 million 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 March 23, 2022, the Company's board of directors approved a stock repurchase program authorizing up to $ 1.0 billion of common shares, which was fully utilized during the first quarter of 2024. Subsequently, the board of directors approved a new repurchase program authorizing up to $ 3.0 billion in aggregate, including $ 1.0 billion initially authorized on November 29, 2023, and additional $ 1.0 billion increases on May 29, 2024 and December 3, 2024. This program does not have an expiration date or require a minimum number of shares to be repurchased. Repurchases may be made on the open market at prevailing prices or through privately negotiated transactions, including under plans pursuant to Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934. The timing and amount of repurchases will depend on market conditions, trading eligibility, and other factors. As of November 2, 2025, the remaining authorized amount available under the program, excluding commissions and excise taxes, was $ 0.7 billion. During the first three quarters of 2025 and 2024, 3.5 million and 4.2 million shares, respectively, were repurchased at a total cost including commissions and excise taxes of $ 906.6 million and $ 1.3 billion, respectively. Subsequent to November 2, 2025, and up to December 5, 2025, 0.6 million shares were repurchased at a total cost including commissions and excise taxes of $ 103.9 million. Note 9. Supplementary Financial Information A summary of certain consolidated balance sheet accounts is as follows: November 2, 2025 February 2, 2025 (In thousands) Inventories: Inventories, at cost $ 2,105,155 $ 1,526,055 Inventory provisions and reserves ( 107,311 ) ( 83,974 ) $ 1,997,844 $ 1,442,081 15 Table of Contents November 2, 2025 February 2, 2025 (In thousands) Prepaid expenses and other current assets: Prepaid expenses $ 155,207 $ 147,680 Forward currency contract assets 21,800 76,848 Other current assets 32,341 26,931 $ 209,348 $ 251,459 Property and equipment, net: Land $ 77,202 $ 74,461 Buildings 28,301 27,655 Leasehold improvements 1,331,212 1,227,247 Furniture and fixtures 194,570 177,651 Computer hardware 215,891 202,479 Computer software 1,463,531 1,274,322 Equipment and vehicles 58,895 51,453 Work in progress 321,898 206,398 Property and equipment, gross 3,691,500 3,241,666 Accumulated depreciation ( 1,739,488 ) ( 1,461,049 ) $ 1,952,012 $ 1,780,617 Other non-current assets: Cloud computing arrangement implementation costs $ 182,687 $ 161,759 Security deposits 55,660 44,076 Other 36,216 32,006 $ 274,563 $ 237,841 Accrued liabilities and other: Accrued operating expenses $ 209,334 $ 166,745 Forward currency contract liabilities 21,527 74,638 Sales return allowances 72,057 73,892 Accrued freight 38,129 53,121 Accrued duty 126,189 45,400 Accrued digital marketing 29,721 45,392 Accrued capital expenditures 28,732 36,690 Accrued rent 22,333 17,962 Sales tax collected 31,921 16,967 Other 41,212 28,656 $ 621,155 $ 559,463 Note 10. Segmented Information The Company's segments are based on the financial information the Chief Operating Decision Maker ("CODM"), who is the Chief Executive Officer, uses to evaluate performance and allocate resources. The CODM approves the annual budget on a segment level, and regularly assesses the performance of the Company's segments using key financial metrics, including net revenue and segmented income from operations. The Company reports three segments: Americas, China Mainland, and Rest of World, which is comprised of its non-significant operating segments APAC and EMEA reported on a combined basis. The Company does not report capital expenditures and assets by segment as that information is not reviewed by the CODM. 16 Table of Contents Third Quarter 2025 Americas China Mainland Rest of World Total Segments Corporate (1) Total (In thousands) Net revenue $ 1,733,382 $ 465,362 $ 367,176 $ 2,565,920 $ — $ 2,565,920 Product costs (2) 583,551 110,484 100,579 794,614 — 794,614 Other cost of sales (2) 167,970 55,702 65,916 289,588 55,802 345,390 Selling, general and administrative expenses 464,373 126,160 115,724 706,257 281,997 988,254 Amortization of intangible assets — — — — 1,776 1,776 Income from operations $ 517,488 $ 173,016 $ 84,957 $ 775,461 $ ( 339,575 ) $ 435,886 Other income (expense), net 5,854 Income before income tax expense $ 441,740 Supplemental information: Depreciation and amortization (3) $ 58,035 $ 9,573 $ 9,418 $ 77,026 $ 50,433 $ 127,459 Third Quarter 2024 Americas China Mainland Rest of World Total Segments Corporate (1) Total (In thousands) Net revenue $ 1,770,382 $ 318,338 $ 307,940 $ 2,396,660 $ — $ 2,396,660 Product costs (2) 518,202 73,164 80,881 672,247 — 672,247 Other cost of sales (2) 159,259 48,555 57,105 264,919 57,888 322,807 Selling, general and administrative expenses 437,982 86,019 101,192 625,193 284,634 909,827 Amortization of intangible assets — — — — 1,118 1,118 Income from operations $ 654,939 $ 110,600 $ 68,762 $ 834,301 $ ( 343,640 ) $ 490,661 Other income (expense), net 13,743 Income before income tax expense $ 504,404 Supplemental information: Depreciation and amortization (3) $ 51,726 $ 8,136 $ 8,151 $ 68,013 $ 45,586 $ 113,599 First Three Quarters 2025 Americas China Mainland Rest of World Total Segments Corporate (1) Total (In thousands) Net revenue $ 5,166,157 $ 1,226,361 $ 1,069,281 $ 7,461,799 $ — $ 7,461,799 Product costs (2) 1,579,844 284,518 299,292 2,163,654 — 2,163,654 Other cost of sales (2) 483,007 157,114 187,587 827,708 184,193 1,011,901 Selling, general and administrative expenses 1,377,093 305,588 343,346 2,026,027 856,756 2,882,783 Amortization of intangible assets — — — — 5,136 5,136 Income from operations $ 1,726,213 $ 479,141 $ 239,056 $ 2,444,410 $ ( 1,046,085 ) $ 1,398,325 Other income (expense), net 27,377 Income before income tax expense $ 1,425,702 Supplemental information: Depreciation and amortization (3) $ 163,975 $ 27,020 $ 26,704 $ 217,699 $ 144,004 $ 361,703 17 Table of Contents First Three Quarters 2024 Americas China Mainland Rest of World Total Segments Corporate (1) Total (In thousands) Net revenue $ 5,134,079 $ 936,313 $ 906,237 $ 6,976,629 $ — $ 6,976,629 Product costs (2) 1,494,392 213,386 251,815 1,959,593 — 1,959,593 Other cost of sales (2) 456,894 142,147 156,738 755,779 172,398 928,177 Selling, general and administrative expenses 1,293,587 231,317 288,241 1,813,145 811,067 2,624,212 Amortization of intangible assets — — — — 1,118 1,118 Income from operations $ 1,889,206 $ 349,463 $ 209,443 $ 2,448,112 $ ( 984,583 ) $ 1,463,529 Other income (expense), net 55,020 Income before income tax expense $ 1,518,549 Supplemental information: Depreciation and amortization (3) $ 143,876 $ 23,923 $ 22,064 $ 189,863 $ 123,068 $ 312,931 __________ (1) Corporate includes centrally managed support functions including product design, raw material development, product innovation, sourcing, supply chain, and global merchandising which are included in other cost of sales. Administrative corporate expenses include technology, brand and marketing, finance, human resources, legal, and other head office costs. (2) Cost of goods sold is made up of product costs and other cost of sales. Product costs include the cost of purchased merchandise, costs incurred to deliver inventory to the Company's distribution centers, shrink and inventory provision expenses, the cost of digital content subscription services, and hemming costs. Other cost of sales includes occupancy and depreciation expense for company-operated stores, distribution center costs, and product department costs. (3) The amounts of depreciation and amortization disclosed by reportable segment are included within other cost of sales and selling, general and administrative expenses. 18 Table of Contents Note 11. Disaggregated Net Revenue In addition to the disaggregation of net revenue by reportable segment in Note 10. Segmented Information, the following table disaggregates the Company's net revenue by geographic area. Prior to the acquisition of the Mexico operations on September 10, 2024, wholesale sales to the third party under the license and supply arrangement by lululemon athletica canada inc. were disclosed as net revenue recognized within Canada. Third Quarter First Three Quarters 2025 2024 2025 2024 (In thousands) United States $ 1,380,973 $ 1,424,234 $ 4,158,499 $ 4,186,614 Canada 331,596 335,484 945,709 936,801 Mexico 20,813 10,664 61,949 10,664 Americas 1,733,382 1,770,382 5,166,157 5,134,079 China Mainland 465,362 318,338 1,226,361 936,313 Hong Kong SAR, Taiwan, and Macau SAR 46,463 41,050 138,201 125,349 People's Republic of China 511,825 359,388 1,364,562 1,061,662 Other geographic areas 320,713 266,890 931,080 780,888 $ 2,565,920 $ 2,396,660 $ 7,461,799 $ 6,976,629 The following table disaggregates the Company's net revenue by category. Accessories and other categories is primarily composed of accessories, footwear, and lululemon Studio. Third Quarter First Three Quarters 2025 2024 2025 2024 (In thousands) Women's apparel $ 1,644,952 $ 1,555,686 $ 4,727,445 $ 4,467,048 Men's apparel 596,241 551,430 1,765,627 1,644,653 Accessories and other categories 324,727 289,544 968,727 864,928 $ 2,565,920 $ 2,396,660 $ 7,461,799 $ 6,976,629 The following table disaggregates the Company's net revenue by channel. Third Quarter First Three Quarters 2025 2024 2025 2024 (In thousands) Company-operated stores $ 1,206,558 $ 1,210,523 $ 3,614,617 $ 3,496,661 E-commerce 1,066,750 944,777 3,020,733 2,761,201 Other channels 292,612 241,360 826,449 718,767 $ 2,565,920 $ 2,396,660 $ 7,461,799 $ 6,976,629 Note 12. Legal Proceedings and Other Contingencies In addition to the legal 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. This includes legal matters such as initiation and defense of proceedings to protect intellectual property rights, employment claims, product liability claims, personal injury claims, and similar matters. The Company believes the ultimate resolution of any such legal proceedings, audits, and inspections is not reasonably likely to have a material adverse effect on its consolidated balance sheets, results of operations or cash flows; however litigation and regulatory matters are inherently uncertain, and it is possible that an adverse outcome in one or more matters could have a material impact in a particular reporting period. The Company has recognized immaterial provisions related to the expected outcome of legal proceedings. 19 Table of Contents On August 8, 2024, lululemon athletica inc. and certain officers of the Company were named as defendants in a purported securities class action ( Patel v. Lululemon Athletica Inc., et al ., No. 1:24-cv-06033) in the United States District Court for the Southern District of New York. On March 10, 2025, plaintiffs filed an amended complaint, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on allegedly false and misleading public statements and omissions by defendants during the period December 8, 2023 to July 24, 2024 relating to lululemon's business, product offerings, and inventory allocation that plaintiffs allege artificially inflated the Company’s stock price. The amended complaint currently seeks unspecified monetary damages. On May 19, 2025, defendants moved to dismiss the amended complaint. The Company intends to defend the action vigorously. Since November 4, 2024, six stockholder derivative complaints have been filed in the United States Court for the Southern District of New York: Bhavsar v. McDonald et al. , No. 1:24-cv-08405; Muszynski v. McDonald et al. , No. 1:24-cv-08507; Holtz v. McDonald et al. , No. 1:24-cv-08572; Wong v. McDonald et al. , No. 1:24-cv-08752; Kanaly v. McDonald et al. , No. 1:24-cv-08839; and Wasserman v. McDonald et al. , No. 1:25-cv-02793 (collectively, the "Derivative Actions."). The complaints in the Derivative Actions are generally based on the same allegations alleged in the securities action complaint and assert claims against certain of the Company’s current and former directors and officers for, among other things, alleged breaches of fiduciary duty and violations of Sections 10(b), 14(a), and 20(a) of the Exchange Act. Certain of the Derivative Actions also assert claims based on alleged false and misleading statements during the period October 28, 2020 to April 25, 2024 relating to the Company’s "IDEA" program. The complaints seek, among other things, monetary damages and equitable relief on behalf of the Company, as well as an award of attorneys’ fees and costs. On May 15, 2025, plaintiff in Bhavsar v. McDonald et al. voluntarily dismissed the complaint and that action has been terminated. On August 1, 2025, the Derivative Actions were consolidated for all purposes under the caption In re lululemon athletica inc. Stockholder Derivative Litigation , Master File No. 1:24-cv-08507. The Derivative Actions are stayed pending a ruling on the motion to dismiss the securities class action. Note 13. Subsequent Events Subsequent to November 2, 2025, on December 11, 2025, the board of directors of lululemon and Calvin McDonald mutually agreed that Mr. McDonald will step down from his position as Chief Executive Officer, effective January 31, 2026. To support an orderly transition of his responsibilities, Mr. McDonald will continue with lululemon in a senior advisor capacity through March 31, 2026. Mr. McDonald is also stepping down as a member of lululemon's board of directors, effective January 31, 2026. In connection with these changes, the board of directors appointed Marti Morfitt, currently serving as chair of the board of directors, to serve as executive chair, effective immediately. The board of directors also appointed Meghan Frank, lululemon's chief financial officer, and Andre Maestrini, lululemon's president and chief commercial officer, to serve as interim co-Chief Executive Officers, effective January 31, 2026, while lululemon conducts a search for a permanent CEO.