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Item 7. Management’s Discussion and Analysis

2026-03-17 compared with 2025-03-27 · 195 added, 217 removed, 224 unchanged (65% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's discussion and analysis of financial condition and results of operations is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.

Components of management's discussion and analysis of financial condition and results of operations include:

This Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.

Components of this MD&A include:

• Financial Highlights and Market Conditions and Trends

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Our 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 2024 was a 53-week year.

Net revenue includes results from the 53rd week;

however, comparable sales exclude the 53rd week.

Fiscal 2023 was a 52-week year.

This discussion and analysis contains forward-looking statements based on current expectations that involve risks, uncertainties and assumptions, such as our plans, objectives, expectations, and intentions included in the "Special Note Regarding Forward-Looking Statements." Our actual results and the timing of events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those described in the "Item 1A.

Risk Factors" section and elsewhere in this Annual Report on Form 10-K.

Fiscal 2025 was a 52-week year and fiscal 2024 was a 53-week year.

Net revenue for 2024 includes results from the 53rd week;

however, comparable sales are calculated on a one-week shifted basis such that the 52 weeks ended February 1, 2026 are compared to the 52 weeks ended February 2, 2025 rather than January 26, 2025.

Risk Factors" of this report.

These statements speak only as of the date of this report, and we do not undertake to update them, except as required by law.

We use comparable sales as a metric to evaluate the performance of our business.

Refer to the Comparable Sales and Sales Per Square Foot section of this management's discussion and analysis of financial condition and results of operations for further information.

We provide constant dollar changes and adjusted financial results which exclude certain inventory provisions, asset impairments, and restructuring costs recognized in relation to lululemon Studio and their related tax effects.

The constant dollar changes and adjusted financial results are non-GAAP financial measures, and we provide them as supplemental information that enable evaluation of the underlying trend in our operating performance, and enable a comparison to our historical financial information.

Refer to the Non-GAAP Financial Measures section of this management's discussion and analysis of financial condition and results of operations for reconciliations between the adjusted non-GAAP financial measures and the most directly comparable measures calculated in accordance with GAAP.

Refer to the Comparable Sales and Sales Per Square Foot section of this MD&A for further information.

We provide constant dollar changes, which is a non-GAAP financial measure, as supplemental information to help investors understand the underlying growth rate of net revenue excluding the impact of changes in foreign currency exchange rates.

Refer to the Non-GAAP Financial Measures section of this MD&A for reconciliations between the non-GAAP financial measures and the most directly comparable measures calculated in accordance with GAAP.

We disclose material non-public information through one or more of the following channels:

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Information contained on or accessible through our websites is not incorporated into, and does not form a part of, this annual report or any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

Fiscal 2024 was another year of growth for lululemon.

Net revenue increased 10%, operating margin expanded 150 basis points, or 50 basis points on an adjusted basis, and diluted earnings per share grew 20%, or 15% on an adjusted basis.

Our teams continued to execute against our Power of Three ×2 growth plan and the compound annual growth rate in net revenue was 19% between fiscal 2021 and 2024.

We saw growth across our regions, merchandise categories, and channels as we continue to engage with guests and provide them with innovative products that help enable their wellness journey.

In the Americas, revenue grew 4% driven by strength in Canada.

In the United States, we have been working to increase the level of seasonal newness within our assortment mix.

In China Mainland, revenue increased 41%, and in Rest of World, revenue grew 27%.

By category, we saw a 9% increase in women's, 14% growth in men's, and an 10% increase in other categories.

We expanded our retail presence by adding 56 net new company-operated stores, contributing to a 14% increase in square footage.

These metrics include our stores in Mexico which we now operate directly, the result of the acquisition of the Mexico operations from our license and

supply partner in September 2024.

In 2025, we delivered net revenue growth of 5%, with a 22% increase in our international regions offsetting a decrease of 1% in the Americas.

Our international revenue growth was driven by a 29% increase in China Mainland, and a 16% increase in Rest of World.

By product category, we saw a 5% increase in women's, 4% growth in men's, and an 8% increase in accessories and other categories.

We expanded our retail presence by adding 44 net new company-operated stores, contributing to an 11% increase in square footage.

Company-operated store net revenue increased 1% and e-commerce net revenue increased 8%.

We repurchased 5.1 million shares for $1.6 billion in 2024, and our board of directors approved increases in our stock repurchase authorization totaling $2.0 billion during 2024.

Brand Campaigns and Activations

Deepening our relationship with existing guests while also bringing new guests into the lululemon brand remains an important priority for us.

We believe our unaided brand awareness is relatively low across most of the regions where we operate.

In 2024, we brought several activations to life aimed at increasing loyalty with existing guests while, at the same time, attracting new guests into our brand.

Our partnership with the Canadian Olympic Committee and Canadian Paralympic Committee was on full display during the Paris Olympics, as we outfitted the athletes for their off-field activities.

In the Americas, we continued to grow our membership program and began offering new benefits including our Partner Perks program which provides members with exclusive experiences and perks from select partner brands.

In China Mainland, we expanded our Summer Sweat Games to over 70 stores across nearly 40 cities and for World Mental Health Day, we hosted activities in nine cities across China Mainland, anchored by our event along the West Bund in Shanghai.

We also extended our World Mental Health Day activations to additional countries, including South Korea, Germany, the United Kingdom, and the United States.

In 2024, we also welcomed additional new ambassadors to the brand, including six-time PGA tour winner Max Homa, Chinese director, actress, and screenwriter Jia Ling, and Frances Tiafoe our newest tennis ambassador.

Product Innovation

We continue to seek to create product that solves the unmet needs of our guests.

We believe our technical product is a key competitive advantage for us, and our positioning as a premium athletic brand, with high style and high performance product, helps differentiate us from our peers.

In 2024, we remained focused on our core activities of yoga, run, and train and also our newer "play" activities including golf and tennis.

In women's, Align, Define, and Scuba continued to be key product franchises for us, and towards the end of the year, we launched our Daydrift trouser;

a refined, casual pant to be worn all day into night.

For men, guests continued to respond to our lounge franchises including Steady State, Soft Jersey, and Smooth Spacer, and our performance franchises including Pacebreaker and Zeroed In.

In footwear, we expanded our offering with new casual and performance styles including our first collection for men.

And in accessories, we continued to bring innovation across our offering of bags, which drove good response from our guests.

Operating margin decreased 380 basis points and diluted earnings per share decreased by 9%, mainly due to the impact from increased tariff rates in the United States, and the removal of the de minimis provision.

We have taken mitigating actions, including selective price increases and vendor negotiations;

however, we do not expect these actions to fully offset these incremental costs, and we believe tariffs and de minimis changes will continue to adversely affect gross margin and income from operations in 2026.

See "Import Tariffs" below for additional information.

Over the course of 2025, we repurchased 5.0 million shares for $1.2 billion, and in December 2025, our board of directors approved a $1.0 billion increase to our stock repurchase authorization.

Priorities and actions

We have experienced declining revenue trends in North America and have developed an action plan to drive improvement in this region, while maintaining revenue growth in our international businesses.

Our action plan is structured around three strategic pillars:

product creation, product activation, and enterprise efficiency.

Product Creation

The goal of our Product Creation pillar is to ensure we deliver the product that our guests expect from lululemon.

We are leveraging our Science of Feel principles across our performance and lifestyle assortments.

Work streams within this pillar include:

• Increasing the frequency and breadth of new styles.

In 2025 new styles included Daydrift, Be Calm, Big Cozy, and Mile Maker.

We are working to reinvigorate several of our key franchises including Scuba, Dance Studio, and ABC, while also maintaining a strong pipeline of new innovations across our performance offering.

• Improving our speed to market.

We are executing initiatives intended to reduce our product development timelines, which we believe may support more timely introduction of new styles and innovation.

In addition, we have been enhancing our chase capabilities, with the objective of enabling more responsive replenishment of select strong‑performing styles.

Product Activation

The aim of the Product Activation pillar is to ensure we are bringing our product to life for our guest in new and compelling ways across all channels.

Work streams within this pillar include:

• Improving the in-store experience by maximizing the impact of our assortments through individual item count reduction, improving in-store storytelling by shifting product adjacencies, and enhancing visual merchandising.

• Improving the digital experience through continued enhancements to our website to elevate the guest experience and improve storytelling with the goal to increase conversion.

• Continued investment in integrated marketing with a plan focused on driving awareness and excitement for product newness and innovation across our performance and lifestyle assortments.

We are leveraging our ambassadors as well as carefully sourced creators, with a focus on engaging guests through social channels and community activations.

Enterprise Efficiency

We continue to take actions in both the near and longer term to ensure we are operating as efficiently as possible.

These actions help mitigate the cost of increased tariffs and current revenue trends in the Americas.

These include enterprise-wide operating efficiency and cost-saving initiatives, selective price increases, and supply chain initiatives.

Financial Highlights

The summary below compares 2024 to 2023 and provides both GAAP and non-GAAP financial measures.

The adjusted financial measures for 2023 exclude $72.1 million of post-tax asset impairment and other charges recognized in relation to lululemon Studio.

There were no adjusted financial measures for 2024.

The summary below compares 2025 to 2024:

• Net revenue increased 5% to $11.1 billion.

On a constant dollar basis, net revenue increased 11%.

• Comparable sales, which excludes net revenue from the 53rd week of 2024, increased 4%.

• Comparable sales increased 2%.

– Americas comparable sales decreased 3%.

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– Rest of World comparable sales increased 9%, or 7% on a constant dollar basis.

• Gross profit increased 12% to $6.3 billion.

Adjusted gross profit increased 11%.

• Gross margin increased 90 basis points to 59.2%.

Adjusted gross margin increased 60 basis points.

• Income from operations increased 17% to $2.5 billion.

Adjusted income from operations increased 12%.

• Operating margin increased 150 basis points to 23.7%.

Adjusted operating margin increased 50 basis points.

• Income tax expense increased 22% to $761.5 million.

• Gross profit was consistent at $6.3 billion.

• Gross margin decreased 260 basis points to 56.6%.

• Income from operations decreased 12% to $2.2 billion.

• Operating margin decreased 380 basis points to 19.9%.

• Income tax expense decreased 13% to $659.8 million.

Our effective tax rate for 2025 was 29.5% compared to 29.6% for 2024.

The adjusted effective tax rate was 28.7% for 2023.

• Diluted earnings per share were $13.26 for 2025 compared to $14.64 in 2024.

Adjusted diluted earnings per share were $12.77 in 2023.

Market Conditions and Trends

Macroeconomic conditions, government actions and policies, consumer confidence and purchasing behaviors, and foreign currency fluctuations impact our business.

Such factors are expected to continue to impact our business throughout 2025, with the impact varying by market.

Consumer confidence, purchasing behaviors, and their propensity to spend in our sector have been impacted by uncertain economic conditions including inflation, fluctuating interest rates, and other factors.

We continue to monitor the economic environment, including in the US, Canada, and China Mainland.

We experienced revenue and traffic growth in 2024 compared to 2023 in all regions, but have experienced a reduction in our revenue growth rate in the Americas compared to the growth we had in previous years, driven by our operations in the United States.

During 2024, Americas comparable sales decreased 1%.

We are monitoring government policies in the Americas, including changes in tariffs, and while we do not expect current changes to have a material impact on the cost of our products, tariffs and related uncertainties could impact consumer confidence, traffic, and demand for our products.

Foreign currency fluctuations have adversely impacted our financial results.

Foreign currency fluctuations reduced the growth of our net revenue by $75.3 million when comparing 2024 to 2023, primarily due to the overall appreciation of the US dollar.

We expect future exchange rate volatility to impact our results.

Segment Trends

Net revenue in the Americas decreased 1% and comparable sales in the Americas decreased 3%.

We experienced lower conversion rates, store traffic, and average order value in the Americas, partially reflective of certain product categories, including core categories, experiencing lower demand.

The decline in Americas comparable sales also contributed to a decline in global sales per square foot.

We experienced a decrease in product margin in the Americas segment of 340 basis points, primarily reflective of the impact of tariffs and increased markdowns.

We have initiated an action plan to drive sustainable net revenue growth in the Americas, as outlined in the overview section, which includes a plan to reduce the percentage of markdowns on our products.

Net revenue in China Mainland and Rest of World increased 29% and 16%, and comparable sales increased 20% and 9%, respectively.

We experienced increased traffic in these markets partially due to brand awareness and product category growth, which led to higher comparable sales, and opening 21 net new stores in China Mainland and nine net new stores in Rest of World contributed to the respective increases in net revenue.

Across all markets, our business continues to be influenced by macroeconomic conditions, including trade policies, shifting consumer demand, foreign currency fluctuations, and geopolitical instability.

These factors have had varying effects across our markets and are expected to continue to impact our business throughout 2026 and beyond.

Import Tariffs

On April 2, 2025, the U.S.

Administration announced the implementation of a 10% baseline tariff on imports from nearly all countries with higher country-specific tariff rates scheduled to begin April 9, 2025.

Subsequently, certain countries, including Vietnam, announced trade deals with the United States and most negotiated tariff rates are higher than the 10% baseline rate.

Administration eliminated the de minimis exemption for all countries effective August 29, 2025, with legislation enacted to repeal the statutory exemption entirely by July 1, 2027.

These changes in the tariff landscape, including the de minimis removal, had a significant adverse effect on our business and results of operations.

The countries from which we source the majority of our products are now subject to higher tariffs on imports into the United States.

Further, the majority of our sales to U.S.

e-commerce guests are currently fulfilled from distribution centers in Canada, and historically a significant proportion of these orders qualified for the de minimis exemption.

The removal of this exemption increased the cost of fulfilling those orders.

The unmitigated impact of increased tariffs and the removal of the de minimis exemption resulted in a reduction to gross profit for 2025 of approximately $275 million.

As part of our enterprise efficiency efforts, we continue to take actions in both the near and longer term to help mitigate the cost of increased tariffs.

On February 20, 2026, the U.S.

Supreme Court invalidated tariffs imposed under the International Emergency Economic Power Act ("IEEPA").

Immediately following this IEEPA decision, the U.S.

Administration initiated new tariffs at different rates under alternative legislative powers.

Administration also confirmed that the IEEPA decision does not impact the removal of the de minimis exemption.

In 2025, we remitted $216 million of tariffs under the IEEPA;

however, the IEEPA decision did not address the processes or timing for refund claims, and the ultimate amounts, if any, that we may recover remain uncertain.

There remains significant uncertainty regarding the duration and scope of newly initiated tariffs and whether the United States will pursue additional trade actions or impose further tariffs.

Based on the current landscape, mitigating actions are not expected to fully offset the effect of imposed tariffs and the removal of the de minimis exemption, and we expect continued decline in our gross margin and operating margin in 2026.

Because this is an evolving area, future developments may change our expectations materially.

For additional information on related risks, please see “Risk Factors” in this report.

Our updated forecasts, inclusive of the trends above, resulted in changes in the probability of achieving performance conditions of performance-based restricted stock units.

Therefore, we recognized a reversal of stock-based compensation expense of $26.3 million during the second quarter of 2025.

Other Factors Affecting Our Business

Foreign currency fluctuations positively impacted our financial results during 2025, increasing net revenue growth by $27.6 million compared to 2024.

We expect ongoing exchange rate volatility to continue affecting our financial results.

The OBBBA includes, among other provisions, the permanent extension of certain provisions of the Tax Cuts and Jobs Act, the reinstatement of 100% bonus depreciation, the immediate expensing of qualifying research and development costs, and modifications to the international tax framework including changes to global intangible low-tax income, the base erosion and anti-abuse tax, and foreign-derived intangible income.

Based on our current evaluation of the legislation, we do not expect these tax law changes to have a material impact on our consolidated financial statements.

We will continue to assess the potential impacts of OBBBA as additional regulatory guidance becomes available.

Results of Operations

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Cost of goods sold

4,818,468 4,317,315 43.4 40.8

Gross profit 6,284,132 6,270,811 56.6 59.2

Selling, general and administrative expenses 4,066,556 3,762,379 36.6 35.5

Impairment of goodwill and other assets, restructuring costs — 74,501 — 0.8

Amortization of intangible assets

6,961 2,735 0.1 —

Income from operations 2,210,615 2,505,697 19.9 23.7

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Income tax expense 659,784 761,461 5.9 7.2

Net income $ 1,814,616 $ 1,550,190 17.1 % 16.1 %

$ 1,579,183 $ 1,814,616 14.2 % 17.1 %

Comparison of 2025 to 2024

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Rest of World 1,500,757 1,298,633 13.5 12.3 202,124 16 14

Net revenue $ 10,588,126 $ 9,619,278 100.0 % 100.0 % $ 968,848 10 % 11 %

The increase in net revenue was primarily due to increased China Mainland net revenue.

Americas and Rest of World net revenue also increased.

We had total net revenue of $163.2 million during the 53rd week of 2024 which contributed to the total increase in net revenue in 2024.

Comparable sales, which excludes net revenue from the 53rd week of 2024, increased 4%.

$ 11,102,600 $ 10,588,126 100.0 % 100.0 % $ 514,474 5 % 5 %

The increase in net revenue was primarily due to increased China Mainland and Rest of World net revenue.

Comparable sales increased 2%.

The increase in comparable sales was primarily a result of higher e-commerce traffic, partially offset by lower conversion rates and a decrease in average order value.

We had total net revenue of $163.2 million during the 53rd week of 2024, which partially offset the increase in net revenue.

2025 2024 Year over year change

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Gross profit $ 6,284,132 $ 6,270,811 $ 13,321 0.2 %

59.2 % 58.3 % 90 basis points

Gross margin increased 90 basis points.

As a result of our decision to cease selling the lululemon Studio Mirror, we recognized an inventory obsolescence provision of $23.7 million during 2023, which reduced gross margin by 30 basis points.

Adjusted gross margin increased 60 basis points.

Please refer to Note 9.

Impairment of Goodwill and Other Assets, Restructuring Costs included in Item 8 of Part II of this report.

The increase in gross margin was primarily the result of a net increase in product margin of 120 basis points, comprised of:

• a net increase of 120 basis points from lower product costs and lower inventory provision expense, partially offset by higher freight costs;

• an increase of 30 basis points due to the lululemon Studio obsolescence provision recognized during 2023;

• an unfavorable impact of foreign currency exchange rates of 30 basis points.

The increase in product margin was partially offset by a net increase in other cost of sales as a percentage of net revenue of 30 basis points, comprised of:

Gross margin 56.6 % 59.2 % (260) basis points

The decrease in gross margin was primarily due to:

• a net decrease in product margin of 230 basis points, comprised of:

– a net decrease of 240 basis points primarily from higher tariffs, as well as increased markdowns and new credit card affiliate programs.

This was partially offset by higher pricing, lower product costs, and lower damages;

– a favorable impact of foreign currency exchange rates of 10 basis points.

• a net increase in other cost of sales as a percentage of net revenue of 30 basis points, comprised of:

– an increase in occupancy and depreciation costs of 40 basis points;

• an increase in distribution center costs of 30 basis points;

– a decrease in costs related to our product departments of 10 basis points.

• a favorable impact of foreign currency exchange rates of 10 basis points.

Selling, General and Administrative Expenses

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Selling, general and administrative expenses $ 4,066,556 $ 3,762,379 $ 304,177 8.1 %

Selling, general and administrative expenses as a % of net revenue

35.5 % 35.3 % 20 basis points

Selling, general and administrative expenses as a % of net revenue 36.6 % 35.5 % 110 basis points

The increase in selling, general and administrative expenses was primarily due to:

• an increase in costs related to our operating channels of $204.8 million, comprised of:

– an increase in employee costs of $84.2 million primarily due to increased salaries and wages expense and benefit costs for retail employees primarily from the growth in our business, partially offset by decreased incentive compensation;

– an increase in brand and community costs of $54.2 million primarily due to increased digital marketing expenses;

– an increase in other operating costs of $41.9 million primarily due to increased depreciation costs and repairs and maintenance costs;

– an increase in employee costs of $77.0 million primarily due to increased salaries and wages expense for retail employees primarily due to increased labor hours, partially offset by decreased incentive compensation and benefit costs;

– an increase in digital marketing expenses of $49.0 million;

– an increase in variable costs of $38.8 million primarily due to higher credit card fees, distribution costs, and packaging costs as a result of higher net revenue;

– an increase in occupancy and depreciation costs of $22.5 million;

– an increase in technology costs of $9.5 million;

The increase in costs related to our operating channels was partially offset by a decrease in variable costs of $2.9 million primarily due to decreased distribution costs driven by lower rates, partially offset by increased credit card fees as a result of increased net revenue.

– an increase in other operating costs of $8.0 million.

• an increase in head office costs of $67.3 million, comprised of:

– an increase in brand and community costs of $64.5 million primarily due to increased marketing expenses as well as increased charitable donations;

– an increase in advisory and professional fees of $42.9 million;

– an increase in technology costs, including cloud computing amortization, of $27.6 million;

– an increase in other head office costs of $25.7 million;

– an increase in technology costs, including software support and licensing, of $32.9 million;

– an increase in depreciation of $15.0 million;

The increase in costs related to our head office was partially offset by a net decrease in employee costs of $1.9 million primarily due to decreased incentive compensation, partially offset by increased salaries and wages expense.

The increase in selling, general and administrative expenses was partially offset by an increase in net foreign currency exchange and derivative revaluation gains of $9.9 million.

Impairment of Goodwill and Other Assets, Restructuring Costs

2024 2023 Year over year change

(In thousands) (In thousands) (Percentage)

Impairment of goodwill and other assets, restructuring costs $ — $ 74,501 $ (74,501) (100.0) %

During 2023, we recognized certain asset impairments and restructuring costs related to lululemon Studio.

Please refer to Note 9.

Impairment of Goodwill and Other Assets, Restructuring Costs included in Item 8 of Part II of this report for further information.

Amortization of Intangible Assets

2024 2023 Year over year change

(In thousands) (In thousands) (Percentage)

Amortization of intangible assets

$ 2,735 $ 5,010 $ (2,275) (45.4) %

The amortization of intangible assets in 2024 was primarily the result of the amortization of intangible assets recognized upon the acquisition of the Mexico operations.

The amortization of intangible assets in 2023 was primarily the result of the amortization of intangible assets recognized upon the acquisition of MIRROR, which we rebranded as lululemon Studio.

– an increase in contractor, advisory, and professional fees of $12.4 million, which includes costs associated with proxy contest matters of $5.1 million in 2025;

– an increase in brand and community expenses of $7.8 million;

– an increase in other head office costs of $4.9 million;

– a decrease in employee costs of $5.7 million primarily due to decreased incentive compensation, including a reversal of stock-based compensation expense during the second quarter of 2025 due to a change in the probability of achieving performance conditions, partially offset by increased salaries and wages expense and executive transition costs of $15.2 million in 2025.

• an increase in net foreign currency exchange and derivative revaluation losses of $32.1 million.

Selling, general and administrative expenses as a percentage of net revenue increased 110 basis points, primarily due to an increase in costs related to our operating channels of 90 basis points.

Executive transition costs contributed 10 basis points to the increase.

Segment Results

On a segment basis, we determine income from operations without taking into account corporate expenses and certain other expenses.

On a segment basis, we determine income from operations without taking into account corporate expenses.

Corporate expenses include the cost of 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.

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Segmented income from operations $ 2,560,658 $ 3,015,557 $ (454,899) (15.1) %

Product margin

70.5 % 70.1 % 40 basis points

62.4 % 62.5 % (10) basis points

Selling, general and administrative expenses as a % of net revenue

24.4 % 24.0 % 40 basis points

Segmented income from operations as a % of net revenue

38.0 % 38.5 % (50) basis points

The increase in Americas net revenue was primarily due to a $263.5 million increase from new or expanded company-operated stores and our other channels.

We added 24 net new company-operated stores in the Americas since 2023, including 14 company-operated stores from the acquisition of the Mexico operations.

Americas net revenue during the 53rd week of 2024 was $118.0 million, which contributed to the increase in Americas net revenue in 2024.

Americas comparable sales, which excludes net revenue from the 53rd week of 2024, decreased 1%.

The decrease in comparable sales was primarily a result of decreased conversion rates, partially offset by an increase in traffic and a higher dollar value per transaction.

The decrease in gross margin was primarily due to deleverage on distribution center and occupancy costs, partially offset by higher product margin.

The increase in selling, general and administrative expenses was primarily due to increased marketing expenses, higher depreciation, and higher employee costs, partially offset by decreased distribution cost rates.

Product margin 67.1 % 70.5 % (340) basis points

Gross margin 58.5 % 62.4 % (390) basis points

Selling, general and administrative expenses as a % of net revenue 25.8 % 24.4 % 140 basis points

Segmented income from operations as a % of net revenue 32.6 % 38.0 % (540) basis points

The decrease in net revenue was primarily due to a decrease in comparable sales, which decreased 3%.

The decrease in comparable sales was primarily a result of lower conversion rates, reduced store traffic, and a decrease in average order value, partially offset by higher e-commerce traffic, which was partially driven by the impact of credit card affiliate programs.

Net revenue during the 53rd week of 2024 was $118.0 million, which also contributed to the decrease in net revenue.

The decrease in net revenue was partially offset by a $192.4 million increase from new or expanded company-operated stores and our other channels.

We have opened 14 net new company-operated stores since 2024.

The decrease in gross margin was primarily due to lower product margin driven by higher tariffs and increased markdowns, as well as higher occupancy costs as a percentage of net revenue.

The increase in selling, general and administrative expenses was primarily due to higher marketing expenses and employee costs.

China Mainland

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Other cost of sales 221,680 198,373 23,307 11.7

Gross profit 838,727 567,961 270,766 47.7

1,118,615 838,727 279,888 33.4

Selling, general and administrative expenses 417,492 328,868 88,624 26.9

Segmented income from operations

$ 701,123 $ 509,859 $ 191,264 37.5 %

Product margin 76.4 % 76.2 % 20 basis points

61.6 % 58.9 % 270 basis points

Selling, general and administrative expenses as a % of net revenue

24.2 % 23.9 % 30 basis points

Segmented income from operations as a % of net revenue

37.5 % 35.0 % 250 basis points

The increase in China Mainland net revenue was primarily due to an increase in comparable sales, which increased 25%, or 27% on a constant dollar basis.

China Mainland comparable sales excludes net revenue from the 53rd week of 2024.

The increase in comparable sales was primarily a result of increased traffic, partially offset by a lower dollar value per transaction.

The increase in China Mainland net revenue was also driven by a $156.5 million increase in in net revenue from new or expanded company-operated stores and our other channels.

Gross margin 63.7 % 61.6 % 210 basis points

Selling, general and administrative expenses as a % of net revenue 23.8 % 24.2 % (40) basis points

Segmented income from operations as a % of net revenue 40.0 % 37.5 % 250 basis points

The increase in net revenue was primarily due to an increase in comparable sales, which increased 20%, or 19% on a constant dollar basis.

The increase in comparable sales was primarily a result of higher e-commerce traffic, partially offset by a decrease in average order value.

The increase in net revenue was also driven by a $166.9 million increase in net revenue from new or expanded company-operated stores and our other channels.

We have opened 21 net new company-operated stores since 2024.

China Mainland net revenue during the 53rd week of 2024 was $23.6 million, which contributed to the increase in China Mainland net revenue in 2024.

The increase in gross margin was primarily due to higher product margin as well as leverage on occupancy and other costs.

The increase in selling, general and administrative expenses was primarily due to higher employee costs and increased marketing expenses, as well as increased distribution costs and packaging costs driven by higher net revenue.

Net revenue during the 53rd week of 2024 was $23.6 million, which partially offset the increase in net revenue.

The increase in gross margin was primarily due to lower occupancy and depreciation costs as a percentage of net revenue.

The increase in selling, general and administrative expenses was primarily due to higher employee costs and marketing expenses, as well as higher variable costs.

Rest of World

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Product margin 71.5 % 71.9 % (40) basis points

55.1 % 52.3 % 280 basis points

Selling, general and administrative expenses as a % of net revenue

30.9 % 32.6 % (170) basis points

Segmented income from operations as a % of net revenue

24.3 % 19.7 % 460 basis points

The increase in Rest of World net revenue was primarily due to an increase in comparable sales, which increased 19%, or 20% on a constant dollar basis.

Rest of World comparable sales excludes net revenue from the 53rd week of 2024.

The increase in comparable sales was primarily a result of increased traffic and a higher dollar value per transaction, partially offset by a decrease in conversion rates.

The increase in Rest of World net revenue was also driven by a $95.8 million increase in net revenue from new or expanded company-operated stores and our other channels.

We have opened eight net new company-operated stores since 2023.

Rest of World net revenue during the 53rd week of 2024 was $21.7 million, which contributed to the increase in Rest of World net revenue in 2024.

The increase in gross margin was primarily due to higher product margin.

Corporate expenses decreased $9.0 million to $1.3 billion in 2024 compared to 2023.

The net decrease was primarily due to an inventory obsolescence provision of $23.7 million and certain asset impairments and restructuring costs of $74.5 million in relation to lululemon Studio recognized in 2023.

Please refer to Note 9.

Impairment of Goodwill and Other Assets, Restructuring Costs included in Item 8 of Part II of this report for further information.

Corporate expenses also decreased due to an increase in net foreign currency exchange and derivative gains of $9.9 million, as well as a decrease in employee costs.

The decrease in corporate expenses was partially offset by increased professional fees and technology costs, as well as increased depreciation and marketing expenses.

Gross margin 54.4 % 55.1 % (70) basis points

Selling, general and administrative expenses as a % of net revenue 31.4 % 30.9 % 50 basis points

Segmented income from operations as a % of net revenue 23.0 % 24.3 % (130) basis points

The increase in net revenue was primarily due to a $121.4 million increase in net revenue from new or expanded company-operated stores and our other channels, including from an increased number of locations operated by third parties under license and supply arrangements.

We have opened nine net new company-operated stores since 2024.

The increase in net revenue was also driven by an increase in comparable sales, which increased 9%, or 7% on a constant dollar basis.

The increase in comparable sales was primarily a result of higher traffic, partially offset by lower conversion rates and a decrease in average order value.

Net revenue during the 53rd week of 2024 was $21.7 million, which partially offset the increase in net revenue.

The decrease in gross margin was primarily due to lower product margin and higher distribution center costs as a percentage of net revenue.

The increase in selling, general and administrative expenses was primarily due to higher employee costs, as well as higher marketing expenses and variable costs.

Corporate expenses increased $62.4 million to $1.4 billion in 2025 compared to 2024.

The increase in corporate expenses is primarily due to an increase in net foreign currency exchange and derivative revaluation losses of $32.1 million and higher technology costs, as well as higher depreciation costs.

The increase in corporate expenses was partially offset by lower employee costs and marketing expenses.

Other Income (Expense), Net

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$ 28,352 $ 70,380 $ (42,028) (59.7) %

The increase in other income, net was primarily due to an increase in interest income as a result of higher average cash balances.

The decrease in other income, net was primarily due to a decrease in interest income as a result of lower average cash balances and lower interest rates.

Income Tax Expense

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29.5 % 29.6 % (10) basis points

The increase in the effective tax rate was primarily due to an increase in non-deductible expenses in international jurisdictions, a decrease in tax benefits related to stock-based compensation, adjustments upon the filing of certain income tax returns, and an increase in net revenue outside of the United States.

The increase in the effective tax rate was partially offset by an increase in tax credits, and the income tax impact of certain non-deductible impairment and other charges related to lululemon Studio, which increased the effective tax rate by 10 basis points in 2023.

Excluding the income tax effects of the impairment and other charges recognized in relation to lululemon Studio in 2023, the adjusted effective tax rate was 28.7% in 2023.

The decrease in the effective tax rate was primarily due to lower tax rates on foreign-derived intangible income ("FDII") and tax benefits related to foreign exchange losses.

The decrease in the effective tax rate was partially offset by an increase in nondeductible expenses in international jurisdictions.

2025 2024 Year over year change

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$ 1,579,183 $ 1,814,616 $ (235,433) (13.0) %

The increase in net income in 2024 was primarily due to an increase in gross profit of $661.4 million, impairment and restructuring charges recognized in 2023 of $74.5 million, an increase in other income (expense), net of $27.3 million, partially offset by an increase in selling, general and administrative expenses of $365.2 million, and an increase in income tax expense of $135.9 million.

Excluding the impairment and other charges recognized in relation to lululemon Studio in 2023, and their tax effects, adjusted net income increased $192.3 million or 12%.

The decrease in net income in 2025 was primarily due to an increase in selling, general and administrative expenses of $304.2 million and a decrease in other income (expense), net of $42.0 million, partially offset by a decrease in income tax expense of $101.7 million and an increase in gross profit of $13.3 million.

Comparable Sales and Sales Per Square Foot

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We believe investors would similarly find these metrics useful in assessing the performance of our business.

The comparable sales measures we report may not be equivalent to similarly titled measures reported by other companies.

Comparable sales includes comparable company-operated store and all e-commerce net revenue.

E-commerce net revenue includes buy online pick-up in store, back-back room, and ship from store net revenue in addition to our websites,

other region-specific websites, digital marketplaces, and mobile apps.

E-commerce net revenue includes buy online pick up in store, back-back room, and ship from store net revenue in addition to our websites, other region-specific websites, third-party online marketplaces, and mobile apps.

Our back-back room capability allows our store educators to access inventory located at our other locations and have product shipped directly to a guest's address or a store.

Comparable company-operated stores have been open, or open after being significantly expanded, for at least 12 full fiscal months.

Net revenue from a company-operated store is included in comparable sales beginning with the first fiscal month for which the store has a full fiscal month of sales in the prior year.

Net revenue from a company-operated store is included in comparable sales beginning with the month for which the store has a full fiscal month of sales in the prior year.

Comparable sales excludes 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, from stores which have been temporarily relocated for renovations or temporarily closed, and sales from company-operated stores that have closed.

Comparable sales also excludes sales from our selling channels other than company-operated stores and e-commerce.

The comparable sales measures we report may not be equivalent to similarly titled measures reported by other companies.

Company-operated stores acquired as a result of the acquisition of the Mexico operations will be considered comparable beginning October 2025, after 12 full fiscal months of sales from the date of acquisition.

Company-operated stores acquired as a result of the acquisition of the Mexico operations were considered comparable beginning October 2025, after 12 full fiscal months of sales from the date of acquisition.

Prior to the acquisition, wholesale sales were made to a third party under a license and supply arrangement.

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Non-GAAP Financial Measures

Constant dollar changes and adjusted financial results are non-GAAP financial measures.

We report certain financial metrics on a constant dollar basis, which is a non-GAAP financial measure.

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 our results to help investors understand the underlying growth rate of net revenue excluding the impact of changes in foreign currency exchange rates.

For 2023, adjusted gross profit, gross margin, income from operations, operating margin, income tax expense, effective tax rates, net income, and diluted earnings per share exclude certain inventory provisions, asset impairments, and restructuring costs recognized in relation to lululemon Studio, and the related income tax effects of these items.

We believe these adjusted financial measures are useful to investors as they provide supplemental information that enable evaluation of the underlying trend in our operating performance, and enable a comparison to our historical financial information.

Further, due to the finite and discrete nature of these items, we do not consider them to be normal operating expenses that are necessary to run our business, or impairments that are expected to arise in the normal course of our operations.

Management uses these adjusted financial measures and constant currency metrics internally when reviewing and assessing financial performance.

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.

We use constant dollar metrics to facilitate comparison of underlying performance excluding the impact of changes in foreign currency exchange rates.

Management uses these constant currency metrics internally when reviewing and assessing financial performance.

These non-GAAP financial measures are provided in addition to, and not a substitute for, the corresponding financial measures calculated 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.

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Constant Dollar Changes

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

Comparable sales exclude net revenue from the 53rd week of 2024.

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

Due to the 53rd week in 2024, comparable sales are calculated on a one-week shifted basis such that the 52 weeks ended February 1, 2026 are compared to the 52 weeks ended February 2, 2025 rather than January 26, 2025.

2025 Compared to 2024

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(1) Comparable sales includes comparable company-operated store and e-commerce net revenue.

Adjusted Financial Measures

The following table reconciles the most directly comparable measures calculated in accordance with GAAP with the adjusted financial measures for 2023.

The adjustments relate to certain inventory provisions, asset impairments, and restructuring costs recognized in relation to lululemon Studio and their related tax effects.

Please refer to Note 9.

Impairment of Goodwill and Other Assets, Restructuring Costs included in Item 8 of Part II of this report for further information on the nature of these amounts.

There were no adjusted financial measures for 2024.

Gross Profit Gross Margin Income from Operations Operating Margin Income Tax Expense Effective Tax Rate Net Income Diluted Earnings Per Share

(In thousands, except per share amounts)

GAAP results $ 5,609,405 58.3 % $ 2,132,676 22.2 % $ 625,545 28.8 % $ 1,550,190 $ 12.20

lululemon Studio charges:

lululemon Studio obsolescence provision 23,709 0.3 23,709 0.2 23,709 0.19

Impairment of assets 44,186 0.5 44,186 0.35

Restructuring costs 30,315 0.3 30,315 0.24

Tax effect of the above 26,085 (0.1) (26,085) (0.21)

23,709 0.3 98,210 1.0 26,085 (0.1) 72,125 0.57

Adjusted results (non-GAAP) $ 5,633,114 58.6 % $ 2,230,886 23.2 % $ 651,630 28.7 % $ 1,622,315 $ 12.77

Liquidity and Capital Resources

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Operating Activities

Net income increased $264.4 million.

The decrease in cash provided by operating activities was primarily as a result of a decrease in cash flows from changes in operating assets and liabilities of $251.1 million, primarily driven by changes in accounts payable, inventories, accrued compensation, and other assets, partially offset by changes in income taxes and accrued liabilities.

The decrease in cash provided by operating activities was also a result of changes in impairment and other charges recognized in relation to lululemon Studio in 2023, and lower cash inflows related to derivatives, partially offset by increased deferred incomes taxes and depreciation.

Net income decreased $235.4 million.

The decrease in cash provided by operating activities was primarily as a result of a decrease in cash flows from changes in operating assets and liabilities of $357.5 million, primarily driven by the timing of income tax payments due to timing of foreign tax installment payments, accounts receivable, and inventory purchases, partially offset by the timing of accounts payable and changes in accrued compensation.

The decrease in cash provided by operating activities was also a result of decreased deferred income taxes and lower stock-based compensation expense, partially offset by increased depreciation and higher cash inflows related to derivatives.

Investing Activities

The increase in cash used in investing activities was primarily due to the acquisition of the lululemon branded retail locations and operations run by a third party in Mexico.

The decrease in cash used in investing activities was primarily due to the acquisition of the lululemon branded retail locations and operations run by a third party in Mexico in 2024.

Please refer to Note 7.

Acquisition included in Item 8 of Part II of this Annual Report on Form 10-K for further information.

The increase in cash used in investing activities was also due to increased capital expenditures primarily due to an increase in supply chain infrastructure, company-operated stores expenditures, and system initiatives, partially offset by a decrease in corporate infrastructure capital expenditures.

The increase in cash used in investing activities was partially offset by the settlement of net investment hedges.

The decrease in cash used in investing activities was also due to decreased capital expenditures primarily due to a decrease in corporate and supply chain related infrastructure capital expenditures, partially offset by an increase in capital expenditures for opening, remodeling, and relocating company-operated stores, primarily in the Americas and China Mainland.

The decrease in cash used in investing activities was partially offset by the settlement of net investment hedges.

Financing Activities

The increase in cash used in financing activities was primarily the result of an increase in our stock repurchases.

The decrease in cash used in financing activities was primarily the result of a decrease in cash paid for our stock repurchases.

During 2025, we repurchased 5.0 million shares at a total cost including commissions and excise taxes of $1.2 billion.

During 2023, we repurchased 1.5 million shares at a total cost including commissions and excise taxes of $558.7 million.

During 2024, we repurchased 5.1 million shares at a total cost including commissions and excise taxes of $1.6 billion.

The common stock was repurchased in the open market 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 timing and actual number of shares repurchased depending upon market conditions, eligibility to trade, and other factors.

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We believe 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 ability to access borrowings under the credit facility depends on our ongoing compliance with the covenants in the credit agreement, and a failure to maintain such compliance could adversely affect our liquidity.

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 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 expenditures out of our cash and cash equivalents and cash generated from operations.

external financing sources to the extent we were unable to fund such expenditures out of our cash and cash equivalents and cash generated from operations.

The following table includes certain measures of our liquidity:

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The timing and cost of our inventory purchases will vary depending on a variety of factors such as revenue growth, assortment and purchasing decisions, product costs including freight and duty, and the availability of production capacity and speed.

Our inventory balance as of February 2, 2025 was $1.4 billion, an increase of 9% from January 28, 2024.

We expect that our inventories will continue to grow in 2025, and we expect the growth rate will exceed net revenue growth in 2025.

Our inventory balance as of February 1, 2026 was $1.7 billion, an increase of 18% from February 2, 2025.

We expect that our inventories will increase in the mid-single digits by the end of 2026.

On a unit basis, we expect inventories to slightly decrease.

Our existing Americas credit facility provides for $600.0 million in commitments under an unsecured five-year revolving credit facility.

The credit facility has a maturity date of December 14, 2026.

As of February 2, 2025, aside from letters of credit of $6.1 million, we had no other borrowings outstanding under this credit facility.

The credit facility has a maturity date of October 15, 2030.

As of February 1, 2026, no borrowings were outstanding under this facility other than letters of credit and guarantee of $6.4 million.

Further information regarding our credit facilities and associated covenants is outlined in Note 13.

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Contractual Obligations and Commitments

We lease certain store and other retail locations, distribution centers, offices, and equipment under non-cancellable operating leases.

We lease certain store and other retail locations, distribution centers, offices, and equipment under non-cancelable operating leases.

Our leases generally have initial terms of between two and 15 years, and generally can be extended in increments between two and five years, if at all.

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generally accepted accounting principles requires management to make estimates and assumptions.

Predicting future events is inherently an imprecise activity and, as such,

requires the use of significant judgment.

Predicting future events is inherently an imprecise activity and, as such, requires the use of significant judgment.

Actual results may vary from our estimates in amounts that may be material to the financial statements.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our consolidated financial statements.

Our critical accounting policies, estimates, and judgements are as follows, and see Note 2.

Management has reviewed these critical accounting policies and estimates and discussed them with the audit committee.

Our critical accounting policies, estimates, and judgments are as follows, and see Note 2.

Summary of Significant Accounting Policies included in Item 8 of Part II for additional information:

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The provision is determined based upon assumptions about product quality, damages, future demand, selling prices, and market conditions.

A decrease in product demand due to changing consumer preferences, or increased competition could impact the Company's evaluation of its inventory, and additional reserves might be required.

Deferred taxes on undistributed net investment of foreign subsidiaries.

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The paid-up capital balance of the Canadian subsidiaries was approximately $368.7 million.

We have recognized a deferred tax liability of $107.0 million as of February 2, 2025 which represents the Canadian withholding taxes payable on the portion of our Canadian earnings that are not indefinitely reinvested and cannot be repatriated as a return of capital, and U.S.

We have recognized a deferred tax liability of $80.7 million as of February 1, 2026 which represents the Canadian withholding taxes payable on the portion of our Canadian earnings and other foreign earnings that are not indefinitely reinvested and cannot be repatriated as a return of capital, and U.S.

state income taxes payable upon repatriation of the amounts which are not indefinitely reinvested.

In future periods, if the net investment in our Canadian subsidiaries continues to grow, whether due to the accumulation of profits by these subsidiaries or due to a change in the amount that is indefinitely reinvested, we will record additional deferred tax liabilities, including both Canadian withholding taxes for the amount in excess of the paid-up capital balance and U.S.

In future periods, if the net investment in our Canadian subsidiaries and other foreign subsidiaries continues to grow, whether due to the accumulation of profits by these subsidiaries or due to a change in the amount that is indefinitely reinvested, we will record additional deferred tax liabilities, including both Canadian and foreign withholding taxes for the amounts in excess of the paid-up capital balance and U.S.

state income taxes.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis