What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-06-04 compared with 2025-12-11 · 117 added, 298 removed, 237 unchanged (64% of the section changed)

6 unchanged sentences

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 2025 will end on February 1, 2026 and will be a 52-week year.

Fiscal 2026 will end on January 31, 2027 and will be a 52-week year.

Fiscal 2025 was a 52-week year and ended on February 1, 2026.

Fiscal 2026 and fiscal 2025 are referred to as "2026," and "2025," respectively.

The first three quarters of 2025 and 2024 ended on November 2, 2025 and October 27, 2024, respectively.

The first quarter of 2026 and 2025 ended on May 3, 2026 and May 4, 2025, respectively.

Components of this MD&A include:

1 unchanged sentence

• Quarter-to-Date Results of Operations

• Year-to-Date Results of Operations

• Comparable Sales

5 unchanged sentences

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

Due to the 53rd week in 2024, comparable sales are calculated on a one-week shifted basis such that the 13 or 39 weeks ended November 2, 2025 is compared to the 13 or 39 weeks ended November 3, 2024 rather than October 27, 2024.

Refer to the Comparable Sales section of this MD&A for further information.

6 unchanged sentences

is principally a designer, distributor, and retailer of technical athletic apparel, footwear, and accessories.

We have a vision to create transformative products and experiences that build meaningful connections, unlocking greater possibility and wellbeing for all.

Our vision is to create transformative products and experiences that build meaningful connections, unlocking greater possibility and wellbeing for all.

Since our inception, we have fostered a distinctive corporate culture;

1 unchanged sentence

These core values attract passionate and motivated employees who are driven to achieve personal and professional goals, and share our purpose "to elevate human potential by helping people feel their best."

We offer a comprehensive line of technical athletic apparel, footwear, and accessories marketed under the lululemon brand.

Our apparel assortment includes items such as pants, shorts, tops, and jackets designed for a healthy lifestyle including athletic activities such as yoga, running, training, and most other activities.

We also offer apparel designed for being on the move and fitness-inspired accessories.

We expect to continue to broaden our merchandise offerings through expansion across these product areas.

We offer a comprehensive line of technical athletic apparel, footwear, and accessories marketed under the lululemon brand which includes:

• Pants, shorts, tops, and jackets designed for a healthy lifestyle including athletic activities such as yoga, running, training, and most other activities;

• Apparel designed for being on the move;

• Fitness-inspired accessories.

Financial Highlights

The summary below compares the third quarter of 2025 to the third quarter of 2024:

The summary below compares the first quarter of 2026 to the first quarter of 2025:

• Net revenue increased 4% to $2.5 billion.

• Comparable sales increased 1%, or 2% on a constant dollar basis.

– Americas comparable sales decreased 5%.

On a constant dollar basis, net revenue increased 2%.

• Comparable sales increased 1%, or decreased 2% on a constant dollar basis.

– Americas comparable sales decreased 5%, or 6% on a constant dollar basis.

– China Mainland comparable sales increased 20%, or 13% on a constant dollar basis.

– Rest of World comparable sales increased 9%.

• Gross profit increased 2% to $1.4 billion.

– Rest of World comparable sales increased 5%, or 1% on a constant dollar basis.

• Gross profit decreased 3% to $1.3 billion.

• Gross margin decreased 410 basis points to 54.2%.

2 unchanged sentences

• Income tax expense decreased 33% to $91.0 million.

Our effective tax rate for the third quarter of 2025 was 30.5% compared to 30.2% for the third quarter of 2024.

• Diluted earnings per share were $2.59 compared to $2.87 in the third quarter of 2024.

Our effective tax rate for the first quarter of 2026 was 31.8% compared to 30.2% for the first quarter of 2025.

• Diluted earnings per share were $1.69 compared to $2.60 in the first quarter of 2025.

Market Conditions and Trends

Across all markets, our business continues to be negatively influenced by macroeconomic conditions, including trade policies, shifting consumer demand, inflation, 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 2025 and beyond.

While total net revenue increased during the third quarter of 2025, net revenue in the Americas decreased 2% and comparable sales in the Americas decreased 5%.

We experienced lower average order value, conversion rates, and store traffic in the Americas, partially reflective of economic uncertainty, lower consumer confidence, changes in discretionary spending, and certain product categories experiencing lower demand.

Net revenue in the Americas decreased 3%, and comparable sales in the Americas decreased 5%.

We experienced lower conversion rates, reduced store traffic, and a decrease in average order value in the Americas.

We also experienced a decrease in product margin in the Americas segment of 500 basis points, primarily reflective of the impact of higher tariffs.

We have initiated an action plan to drive sustainable net revenue growth in the Americas, structured around three strategic pillars:

product creation, product activation, and enterprise enablement.

This includes a plan to increase the reliance of full price selling to drive sustainable revenue growth.

Net revenue in China Mainland and Rest of World increased 30% and 13%, respectively, and comparable sales increased 20% and 5%, respectively.

We experienced increased traffic in these markets which led to higher comparable sales.

We opened 19 net new stores in China Mainland and 13 net new stores in Rest of World which 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 and sentiment, 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 the remainder of 2026 and beyond.

Import Tariffs

On April 2, 2025, the United States 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.

The implementation of country-specific tariffs was subsequently delayed to allow negotiations.

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

There has been significant volatility in U.S.

tariff and customs policy, and trade negotiations between the United States and other countries are ongoing.

The United States also approved the One Big Beautiful Bill Act ("OBBBA") on July 4, 2025, which removed the de minimis exemption for low value shipments imported into the United States in 2027.

On July 30, 2025, the President of the United States issued an executive order removing the de minimis exemption for all countries beginning August 29, 2025.

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

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 increases the cost of fulfilling those orders.

We are taking steps to mitigate the financial impact which includes vendor negotiations and selective price increases.

These actions are not anticipated to fully offset the effect of higher tariffs and the removal of the de minimis exemption, and we anticipate a significant reduction in our gross margin and operating margin.

The impact of increased tariffs, net of mitigating activities, resulted in a reduction to income from operations for the first three quarters of 2025 of approximately $60 million.

We estimate, based on the information available to us today, that increased tariffs, and the removal of the de minimis exemption, will reduce income from operations for 2025 by approximately $210 million, net of mitigation efforts.

This estimate is our best current view and may change materially as conditions evolve and new information becomes available.

It reflects a number of assumptions including (i) the tariff rates and timing of implementation, (ii) the duration and scope of the de minimis exemption removal, (iii) the potential application of transshipment tariff rules, (iv) our ability to execute vendor savings, and (v) customer demand elasticity and pricing response.

Actual results may differ materially from this estimate, whether because these assumptions prove inaccurate or because of subsequent changes in tariff policy, trade negotiations, sourcing conditions, consumer demand for our products, or other factors outside our control.

During 2025, the United States implemented a series of trade-related policies, including removing the de minimis exemption for low-value shipments imported into the United States, and implementing higher tariffs under different statutes, including under the International Emergency Economic Power Act ("IEEPA").

These changes in the tariff landscape, including the de minimis exemption removal, had a significant adverse effect on our business and results of operations in 2025, which continues in 2026.

On February 20, 2026, the U.S.

Supreme Court invalidated tariffs imposed under the 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.

We paid $230 million of tariffs under the IEEPA and have commenced submitting refund claims for eligible IEEPA tariffs paid, including associated interest.

The ultimate amounts that we may recover remain uncertain and as of May 3, 2026, we have not recognized an asset in relation to IEEPA refund claims.

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, or currently enforced tariffs may be invalidated through legal challenges.

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 quarterly 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.

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

Other Factors Affecting Our Business

Foreign currency fluctuations negatively impacted our financial results during the first three quarters of 2025, reducing net revenue growth by $15.4 million compared to the first three quarters of 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.

Foreign currency fluctuations positively impacted our financial results during the first quarter of 2026, increasing net revenue growth by $52.2 million compared to the first quarter of 2025.

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

Quarter-to-Date Results of Operations:

Third Quarter Results

First Quarter Results

The following table summarizes key components of our results of operations for the periods indicated:

Third Quarter

First Quarter

2026 2025 2026 2025

10 unchanged sentences

Net income $ 195,048 $ 314,572 7.9 % 13.3 %

Third Quarter

First Quarter

2026 2025 2026 2025 Year over year change

5 unchanged sentences

The increase in net revenue was primarily due to increased China Mainland and Rest of World net revenue, partially offset by decreased Americas net revenue.

Global comparable sales increased 1%, or 2% on a constant dollar basis.

Third Quarter

Global comparable sales increased 1%, or decreased 2% on a constant dollar basis, primarily due to lower conversion rates as well as a decrease in average order value, partially offset by higher traffic.

First Quarter

2026 2025 Year over year change

4 unchanged sentences

• a net decrease in product margin of 270 basis points, comprised of:

– a net decrease of 290 basis points primarily from higher tariffs as well as markdowns and credit card affiliate programs, partially offset by higher pricing and lower product costs;

– an unfavorable impact of foreign currency exchange rates of 10 basis points.

• a net decrease in other cost of sales as a percentage of net revenue of 10 basis points, comprised of:

– a decrease in costs related to our product departments of 40 basis points;

– an increase in occupancy and depreciation costs of 30 basis points.

– a net decrease of 330 basis points primarily from higher tariffs as well as markdowns including credit card affiliate programs and higher inventory provisions, partially offset by higher pricing and lower product costs;

– a favorable impact of foreign currency exchange rates of 60 basis points.

• a net increase in other cost of sales as a percentage of net revenue of 140 basis points, comprised of:

– an increase in occupancy and depreciation costs of 130 basis points, primarily driven by new and expanded company-operated stores as well as increased penetration in China Mainland and Rest of World;

– an increase in costs related to our distribution centers and product departments of 10 basis points.

Selling, General and Administrative Expenses

Third Quarter

First Quarter

2026 2025 Year over year change

5 unchanged sentences

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

• an increase in costs related to our operating channels of $66.7 million, comprised of:

– an increase in employee costs of $28.2 million primarily due to increased salaries and wages expense for retail employees;

– an increase in variable costs of $15.1 million primarily due to increased distribution costs and higher credit card fees as a result of higher net revenue;

– an increase in digital marketing expenses of $9.5 million;

– an increase in technology costs of $5.2 million;

– an increase in other operating costs of $8.7 million primarily due to increased depreciation and occupancy costs.

• a net increase in head office costs of $63.1 million, comprised of:

– an increase in employee costs of $29.6 million primarily due to increased salaries and wages expense, primarily as a result of increased wage rates;

– an increase in brand and community expenses of $22.5 million;

1 unchanged sentence

– an increase in depreciation of $4.5 million;

– a net decrease in employee costs of $7.7 million primarily due to decreased incentive compensation, partially offset by increased salaries and wages expense;

– a decrease in contractor, advisory, and professional services of $1.5 million;

– a net increase in contractor, advisory, and professional services of $1.1 million, which includes costs associated with proxy contest matters of $11.4 million in 2026, partially offset by lower other advisory and professional fees;

– a decrease in other head office costs of $1.1 million.

• an increase in net foreign currency exchange and derivative revaluation losses of $2.0 million.

Amortization of Intangible Assets

Third Quarter

2025 2024 Year over year change

(In thousands) (In thousands) (Percentage)

Amortization of intangible assets

$ 1,776 $ 1,118 $ 658 58.9 %

The amortization of intangible assets in 2025 was primarily the result of the amortization of intangible assets recognized upon the September 2024 acquisition of the Mexico operations.

• an increase in costs related to our operating channels of $56.4 million, comprised of:

– an increase in employee costs of $31.2 million primarily due to increased salaries and wages expense for retail employees;

– an increase in variable costs of $14.3 million primarily due to increased distribution costs;

– an increase in digital marketing expenses of $3.5 million;

– an increase in technology costs of $2.9 million;

– an increase in other operating costs of $4.5 million.

The increase in selling, general and administrative expenses was partially offset by a decrease in net foreign currency exchange and derivative revaluation losses of $2.4 million.

Selling, general and administrative expenses as a percentage of net revenue increased 310 basis points, primarily due to an increase in head office costs of 180 basis points and an increase in costs related to our operating channels of 140 basis points.

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.

Administrative corporate expenses include technology, brand and marketing, finance, human resources, legal, and other head office costs.

Third Quarter

First Quarter

2026 2025 Year over year change

10 unchanged sentences

Segmented income from operations as a % of net revenue 25.2 % 35.2 % (1000) basis points

The decrease in Americas net revenue was primarily due to a decrease in comparable sales, which decreased 5%.

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

The decrease in net revenue was primarily due to a decrease in comparable sales, which decreased 5%, or 6% on a constant dollar basis.

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.

The decrease in comparable sales was partially offset by a $15.8 million increase from new or expanded company-operated stores and our other channels.

We opened 11 net new company-operated stores in the Americas since the third quarter of 2024.

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

The increase in selling, general and administrative expenses was primarily due to increased employee costs, variable costs, and depreciation.

China Mainland

Third Quarter

2025 2024 Year over year change

(In thousands) (In thousands) (Percentage)

Net revenue $ 465,362 $ 318,338 $ 147,024 46.2 %

Product costs 110,484 73,164 37,320 51.0

Other cost of sales 55,702 48,555 7,147 14.7

Gross profit 299,176 196,619 102,557 52.2

Selling, general and administrative expenses 126,160 86,019 40,141 46.7

Segmented income from operations $ 173,016 $ 110,600 $ 62,416 56.4 %

Product margin 76.3 % 77.0 % (70) basis points

64.3 % 61.8 % 250 basis points

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

27.1 % 27.0 % 10 basis points

Segmented income from operations as a % of net revenue

37.2 % 34.7 % 250 basis points

The increase in China Mainland net revenue was primarily due to an increase in comparable sales, which increased 24%, or 25% on a constant dollar basis.

The increase in comparable sales was primarily a result of increased e-commerce traffic, partially driven by the timing of Singles Day events, partially offset by a decrease in average order value.

The increase in China Mainland net revenue was also driven by a $46.6 million increase in net revenue from new or expanded company-operated stores and our other channels.

We have opened 27 new company-operated stores in China Mainland since the third quarter of 2024.

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

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

Rest of World

Third Quarter

2025 2024 Year over year change

(In thousands) (In thousands) (Percentage)

Net revenue $ 367,176 $ 307,940 $ 59,236 19.2 %

Product costs 100,579 80,881 19,698 24.4

Other cost of sales 65,916 57,105 8,811 15.4

Gross profit 200,681 169,954 30,727 18.1

Selling, general and administrative expenses 115,724 101,192 14,532 14.4

Segmented income from operations $ 84,957 $ 68,762 $ 16,195 23.6 %

Product margin 72.6 % 73.7 % (110) basis points

54.7 % 55.2 % (50) basis points

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

31.5 % 32.9 % (140) basis points

Segmented income from operations as a % of net revenue

23.1 % 22.3 % 80 basis points

The increase in Rest of World net revenue was primarily due to a $35.1 million increase in net revenue from new or expanded company-operated stores and our other channels.

We have opened nine net new company-operated stores in Rest of World since the third quarter of 2024.

The increase in Rest of World net revenue was also driven by an increase in comparable sales, which increased 9%.

The increase in comparable sales was primarily a result of increased traffic.

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

The increase in selling, general and administrative expenses was primarily due to higher employee costs and other operating and head office costs.

Corporate expenses decreased $4.1 million to $339.6 million in the third quarter of 2025 compared to the third quarter of 2024.

The net decrease was primarily due to lower employee costs driven by decreased incentive compensation as well as lower professional fees.

The decrease in corporate expenses was partially offset by higher technology costs, depreciation, marketing expenses, as well as an increase in net foreign currency exchange and derivative losses of $2.0 million.

Other Income (Expense), Net

Third Quarter

2025 2024 Year over year change

(In thousands) (In thousands) (Percentage)

Other income (expense), net

$ 5,854 $ 13,743 $ (7,889) (57.4) %

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

Third Quarter

2025 2024 Year over year change

(In thousands) (In thousands) (Percentage)

Income tax expense

$ 134,905 $ 152,534 $ (17,629) (11.6) %

Effective tax rate

30.5 % 30.2 % 30 basis points

The increase in the effective tax rate was primarily due to adjustments upon the filing of income tax returns.

Third Quarter

2025 2024 Year over year change

(In thousands) (In thousands) (Percentage)

$ 306,835 $ 351,870 $ (45,035) (12.8) %

The decrease in net income was primarily due to an increase in selling, general and administrative expenses of $78.4 million and a decrease in other income (expense), net of $7.9 million, partially offset by an increase in gross profit of $24.3 million, and a decrease in income tax expense of $17.6 million.

Year-to-Date Results of Operations:

First Three Quarters Results

The following table summarizes key components of our results of operations for the periods indicated:

First Three Quarters

2025 2024 2025 2024

(In thousands) (Percentage of net revenue)

Net revenue $ 7,461,799 $ 6,976,629 100.0 % 100.0 %

Cost of goods sold 3,175,555 2,887,770 42.6 41.4

Gross profit 4,286,244 4,088,859 57.4 58.6

Selling, general and administrative expenses 2,882,783 2,624,212 38.6 37.6

Amortization of intangible assets 5,136 1,118 0.1 —

Income from operations 1,398,325 1,463,529 18.7 21.0

Other income (expense), net 27,377 55,020 0.4 0.8

Income before income tax expense 1,425,702 1,518,549 19.1 21.8

Income tax expense 433,390 452,336 5.8 6.5

Net income $ 992,312 $ 1,066,213 13.3 % 15.3 %

First Three Quarters

2025 2024 2025 2024 Year over year change

(In thousands) (Percentage of net revenue) (In thousands) (Percentage) (Constant dollar change)

Americas $ 5,166,157 $ 5,134,079 69.2 % 73.6 % $ 32,078 1 % 1 %

China Mainland 1,226,361 936,313 16.4 13.4 290,048 31 % 31 %

Rest of World 1,069,281 906,237 14.3 13.0 163,044 18 % 17 %

Net revenue $ 7,461,799 $ 6,976,629 100.0 % 100.0 % $ 485,170 7 % 7 %

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

Americas net revenue also increased, and global comparable sales increased 1%.

First Three Quarters

2025 2024 Year over year change

(In thousands) (In thousands) (Percentage)

$ 4,286,244 $ 4,088,859 $ 197,385 4.8 %

57.4 % 58.6 % (120) basis points

The decrease in gross margin was primarily due to:

• a net decrease in product margin of 90 basis points, comprised of:

– a net decrease of 80 basis points primarily from higher tariffs as well as markdowns and credit card affiliate programs, partially offset by higher pricing, lower product costs, and lower damages;

– an unfavorable 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 higher occupancy and depreciation costs.

Selling, General and Administrative Expenses

First Three Quarters

2025 2024 Year over year change

(In thousands) (In thousands) (Percentage)

Selling, general and administrative expenses

$ 2,882,783 $ 2,624,212 $ 258,571 9.9 %

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

38.6 % 37.6 % 100 basis points

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

• an increase in costs related to our operating channels of $167.6 million, comprised of:

– an increase in employee costs of $77.3 million primarily due to increased salaries and wages expense for retail employees, partially offset by decreased incentive compensation;

– an increase in digital marketing expenses of $29.9 million;

– an increase in variable costs of $19.6 million primarily due to increased credit card fees and packaging costs as a result of higher net revenue;

– an increase in technology costs of $10.9 million;

– an increase in other operating costs of $29.9 million primarily due to increased depreciation and occupancy costs.

• an increase in head office costs of $78.5 million, comprised of:

– an increase in technology costs, including cloud computing amortization, of $26.5 million;

– an increase in brand and community expenses of $21.3 million;

– an increase in depreciation of $16.9 million;

– an increase in in contractor, advisory, and professional services of $10.9 million;

– an increase in other head office costs of $9.2 million;

– a decrease in employee costs of $6.3 million primarily due to 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.

• an increase in net foreign currency exchange and derivative revaluation losses of $12.5 million.

Amortization of Intangible Assets

First Three Quarters

2025 2024 Year over year change

(In thousands) (In thousands) (Percentage)

Amortization of intangible assets

$ 5,136 $ 1,118 $ 4,018 359.4 %

The amortization of intangible assets in 2025 was primarily the result of the amortization of intangible assets recognized upon the September 2024 acquisition of the Mexico operations.

Segment Results

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

Administrative corporate expenses include technology, brand and marketing, finance, human resources, legal, and other head office costs.

First Three Quarters

2025 2024 Year over year change

(In thousands) (In thousands) (Percentage)

Net revenue $ 5,166,157 $ 5,134,079 $ 32,078 0.6 %

Product costs 1,579,844 1,494,392 85,452 5.7

Other cost of sales 483,007 456,894 26,113 5.7

Gross profit 3,103,306 3,182,793 (79,487) (2.5)

Selling, general and administrative expenses 1,377,093 1,293,587 83,506 6.5

Segmented income from operations $ 1,726,213 $ 1,889,206 $ (162,993) (8.6) %

Product margin

69.4 % 70.9 % (150) basis points

60.1 % 62.0 % (190) basis points

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

26.7 % 25.2 % 150 basis points

Segmented income from operations as a % of net revenue

33.4 % 36.8 % (340) basis points

The increase in Americas net revenue was primarily due to a $163.9 million increase from new or expanded company-operated stores and our other channels.

We opened 11 net new company-operated stores in the Americas since the third quarter of 2024.

The increase in Americas net revenue was partially offset by a decrease in comparable sales, which decreased 3%.

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

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

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

We have opened 14 net new company-operated stores in the Americas since the first quarter of 2025.

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

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

China Mainland

First Three Quarters

First Quarter

2026 2025 Year over year change

12 unchanged sentences

42.4 % 41.7 % 70 basis points

The increase in China Mainland net revenue was primarily due to an increase in comparable sales, which increased 16%, or 17% on a constant dollar basis.

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

The increase in net revenue was primarily due to an increase in comparable sales, which increased 20%, or 13% on a constant dollar basis.

The increase in comparable sales was primarily a result of increased traffic partially offset by lower conversion rates.

The increase in China Mainland net revenue was also driven by a $45.2 million increase in net revenue from new or expanded company-operated stores and our other channels.

We have opened 27 new company-operated stores in China Mainland since the third quarter of 2024.

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

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

We have opened 19 net new company-operated stores in China Mainland since the first quarter of 2025.

The increase in gross margin was primarily due to a higher product margin driven mainly by a favorable impact of foreign currency exchange rates, as well as lower 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 technology costs.

Rest of World

First Three Quarters

First Quarter

2026 2025 Year over year change

12 unchanged sentences

18.7 % 22.2 % (350) basis points

The increase in Rest of World net revenue was primarily due to a $91.7 million increase in net revenue from new or expanded company-operated stores and our other channels.

We have opened nine net new company-operated stores in Rest of World since the third quarter of 2024.

The increase in net revenue was primarily due to a $29.4 million increase in net revenue from new or expanded company-operated stores and our other channels.

We have opened 13 net new company-operated stores in Rest of World since the first quarter of 2025.

The increase in Rest of World net revenue was also driven by an increase in comparable sales, which increased 5%, or 1% on a constant dollar basis.

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

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

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

Corporate expenses increased $61.5 million to $1.0 billion in the first three quarters of 2025 compared to the first three quarters of 2024.

The net increase was primarily due to higher technology costs, depreciation, marketing expenses, and professional fees.

Corporate expenses also increased due to an increase in net foreign currency exchange and derivative losses of $12.5 million.

The increase in corporate expenses was partially offset by lower employee costs driven by decreased incentive compensation.

The increase in comparable sales was primarily a result of increased traffic, partially offset by lower conversion rates.

The decrease in gross margin was primarily due to higher occupancy costs as a percentage of net revenue, partially offset by higher product margin driven by a favorable impact of foreign currency exchange rates.

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

Corporate expenses increased $26.8 million to $404.0 million in the first quarter of 2026 compared to the first quarter of 2025.

The net increase was primarily due to higher employee costs, as well as higher technology costs and depreciation.

The increase in corporate expenses was partially offset by lower professional fees and a decrease in net foreign currency exchange and derivative losses of $2.4 million.

Other Income (Expense), Net

First Three Quarters

First Quarter

2026 2025 Year over year change

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Income Tax Expense

First Three Quarters

First Quarter

2026 2025 Year over year change

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31.8 % 30.2 % 160 basis points

The increase in the effective tax rate was primarily due to a decrease in tax benefits related to stock-based compensation and an increase in non-deductible expenses in international jurisdictions.

First Three Quarters

The increase in the effective tax rate was primarily due to a decrease in tax benefits related to stock-based compensation.

First Quarter

2026 2025 Year over year change

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$ 195,048 $ 314,572 $ (119,524) (38.0) %

The decrease in net income was primarily due to an increase in selling, general and administrative expenses of $258.6 million and a decrease in other income (expense), net of $27.6 million, partially offset by an increase in gross profit of $197.4 million, and a decrease in income tax expense of $18.9 million.

The decrease in net income was primarily due to an increase in selling, general and administrative expenses of $117.1 million, a decrease in gross profit of $44.3 million, and a decrease in other income (expense), net of $2.7 million, partially offset by a decrease in income tax expense of $44.8 million.

Comparable Sales

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It allows us to monitor the performance of our business without the impact of recently opened or expanded stores.

We believe investors also find these metrics useful in assessing performance.

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

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.

Comparable sales excludes sales from:

• new stores that have not been open for at least 12 full fiscal months;

• stores which have not been in their significantly expanded space for at least 12 full fiscal months;

• stores which have been temporarily relocated for renovations or temporarily closed;

• sales from company-operated stores that have closed;

• 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 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.

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 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.

In fiscal years with 53 weeks, the 53rd week of net revenue is excluded from the calculation of comparable sales.

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Constant Dollar Changes

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, the below changes in comparable sales are calculated on a one-week shifted basis such that the 13 or 39 weeks ended November 2, 2025 is compared to the 13 or 39 weeks ended November 3, 2024 rather than October 27, 2024.

Third Quarter 2025

First Three Quarters 2025

Change Foreign exchange changes Change in constant dollars Change Foreign exchange changes Change in constant dollars

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

First Quarter 2026

Change Foreign exchange changes Change in constant dollars

Americas (3) % (1) % (4) %

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Our business is affected by the general seasonal trends common to the retail apparel industry.

Our annual net revenue is typically weighted more heavily toward our fourth fiscal quarter, reflecting our historical strength in sales during the holiday season in the Americas, while our operating expenses are generally more equally distributed throughout the year.

Net revenue is typically higher during our fourth fiscal quarter, reflecting our historical strength in sales during the holiday season in the Americas, while our operating expenses are generally more equally distributed throughout the year.

As a result, a substantial portion of our operating profits are typically generated in the fourth quarter of our fiscal year.

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The following table summarizes our net cash flows provided by and used in operating, investing, and financing activities for the periods indicated:

First Three Quarters

First Quarter

2026 2025 Year over year change

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Net income decreased $119.5 million.

The decrease in cash provided by operating activities was primarily due to a decrease in cash flows from changes in operating assets and liabilities of $354.5 million, primarily driven by the timing of income tax payments, accounts receivable, and inventory purchases, partially offset by changes in accrued compensation and the timing of accounts payable.

The decrease in cash provided by operating activities was partially offset by increased depreciation, partially offset by lower stock-based compensation expense.

The increase in cash provided by operating activities was primarily due to an increase in cash flows from changes in operating assets and liabilities of $375.4 million, primarily driven by changes in inventories and the timing of income tax payments, as well as changes in accrued compensation and accounts receivable, partially offset by the timing of accounts payable and changes in accrued liabilities.

The increase in cash provided by operating activities was also a result of higher cash inflows related to derivatives.

Investing Activities

The decrease in cash used in investing activities was primarily due to the acquisition of lululemon branded retail locations and operations run by a third party in Mexico during the third quarter of 2024, partially offset by increased capital expenditures.

The increase in capital expenditures was primarily due to increased capital expenditures for company-operated stores in the Americas and e-commerce related technology systems, partially offset by a decrease in corporate and foundational supply chain infrastructure capital expenditures.

The increase in cash used in investing activities was primarily due to the settlement of net investment hedges, partially offset by decreased capital expenditures.

The decrease in capital expenditures was primarily due to decreased investment in supply chain infrastructure and e-commerce related technology system capital expenditures, partially offset by an increase in capital expenditures for opening, remodeling, and relocating company-operated stores, primarily in the Americas.

Financing Activities

The decrease in cash used in financing activities was primarily due to a decrease in our stock repurchases.

During the first three quarters of 2025, we repurchased 3.5 million shares at a total cost including commissions and excise taxes of $906.6 million.

During the first three quarters of 2024, we repurchased 4.2 million shares at a total cost including commissions and excise taxes of $1.3 billion.

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

During the first quarter of 2026, we repurchased 2.2 million shares at a total cost including commissions and excise taxes of $361.8 million.

During the first quarter of 2025, we repurchased 1.4 million shares at a total cost including commissions and excise taxes of $434.4 million.

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.

Liquidity Outlook

We believe that our cash and cash equivalent balances, cash generated from operations, and borrowings available to us under our committed revolving credit facility will be adequate to meet our liquidity needs and capital expenditure requirements for at least the next 12 months.

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.

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The following table includes certain measures of our liquidity:

November 2, 2025

(In thousands)

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Capacity under committed revolving credit facility 593,623

(1) Working capital is calculated as current assets of $3.9 billion less current liabilities of $1.8 billion.

(1) Working capital excluding cash and cash equivalents is calculated as current assets of $4.0 billion less cash and cash equivalents of $1.5 billion and current liabilities of $1.8 billion.

We enter into standby letters of credit and guarantee to secure certain of our obligations, including leases, taxes, and duties.

As of November 2, 2025, letters of credit and guarantee totaling $15.0 million had been issued, including $7.0 million under our committed revolving credit facility.

As of May 3, 2026, letters of credit and guarantee totaling $20.2 million had been issued, including $6.4 million under our committed revolving credit facility.

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 October 15, 2030.

As of November 2, 2025, no borrowings were outstanding under this facility other than letters of credit and guarantee of $7.0 million.

As of May 3, 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 4.

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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 November 2, 2025 was $2.0 billion, an increase of 11% from October 27, 2024.

Our inventory balance as of May 3, 2026 was $1.7 billion, an increase of 2% from May 4, 2025.

Critical Accounting Policies and Estimates

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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.

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

Our critical accounting policies, estimates, and judgments are discussed within "Item 7.

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Operating Locations

Our company-operated stores by market as of November 2, 2025 and February 2, 2025 are summarized in the table below.

Number of company-operated stores by market November 2,

Our company-operated stores by market as of May 3, 2026 and February 1, 2026 are summarized in the table below.

Number of company-operated stores by market May 3,

2026 February 1,

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Switzerland 1 1

Rest of World 167 163

Total company-operated stores 816 811

Retail locations operated by third parties by market as of November 2, 2025 and February 2, 2025 are summarized in the table below.

Number of retail locations operated by third parties by market November 2,

Retail locations operated by third parties by market as of May 3, 2026 and February 1, 2026 are summarized in the table below.

Number of retail locations operated by third parties by market May 3,

2026 February 1,

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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-Q

Item 2. Management’s Discussion and Analysis