What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-09-03 compared with 2026-06-04 · 266 added, 95 removed, 259 unchanged (58% of the section changed)

9 unchanged sentences

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

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

The first two quarters of 2026 and 2025 ended on August 2, 2026 and August 3, 2025, respectively.

Components of this MD&A include:

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• Quarter-to-Date Results of Operations

• Year-to-Date Results of Operations

• Comparable Sales

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

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

Our mission is to inspire the world to sweat, grow, and connect.

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

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Financial Highlights

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

• Net revenue increased 4% to $2.5 billion.

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 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%.

• Income from operations decreased 37% to $276.9 million.

• Operating margin decreased 730 basis points to 11.2%.

The summary below compares the second quarter of 2026 to the second quarter of 2025 and includes $134.5 million of International Emergency Economic Power Act ("IEEPA") tariff refunds and $4.1 million of associated interest received during the second quarter of 2026.

Refer to the Import Tariffs section for more information.

• Net revenue decreased 4% to $2.4 billion.

On a constant dollar basis, net revenue decreased 5%.

• Comparable sales decreased 9%, or 10% on a constant dollar basis.

– Americas comparable sales decreased 12%.

– China Mainland comparable sales decreased 2%, or 8% on a constant dollar basis.

– Rest of World comparable sales decreased 4%, or 3% on a constant dollar basis.

• Gross profit decreased 1% to $1.5 billion, which includes $134.5 million of IEEPA tariff refunds.

• Gross margin increased 200 basis points to 60.5%, which includes an increase of 560 basis points related to IEEPA tariff refunds.

• Income from operations decreased 13% to $453.7 million, which includes $134.5 million of IEEPA tariff refunds.

• Operating margin decreased 190 basis points to 18.8%, which includes an increase of 560 basis points related to IEEPA tariff refunds.

• Income tax expense decreased 15% to $138.1 million.

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.

Our effective tax rate for the second quarter of 2026 was 29.6%, compared to 30.5% for the second quarter of 2025.

• Diluted earnings per share were $2.92 compared to $3.10 in the second quarter of 2025, including $0.86 per share related to IEEPA tariff refunds and associated interest, net of tax.

Market Conditions and Trends

Net revenue in the Americas decreased 8%, and comparable sales in the Americas decreased 12%.

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:

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

We have initiated an action plan to drive 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.

Net revenue in China Mainland and Rest of World increased 4% and 5%, respectively, or decreased 2% and increased 6% on a constant dollar basis, respectively.

China Mainland and Rest of World comparable sales decreased by 2% and 4%, respectively.

We experienced lower conversion in these markets which led to a decrease in comparable sales.

We opened 15 net new stores in China Mainland and 10 net new stores in Rest of World since the second quarter of 2025.

Across all markets, our business continues to be impacted by shifting consumer demand and brand sentiment and macroeconomic conditions, including trade policies, 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

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.

These changes in tariffs, including the de minimis exemption removal, have had a significant adverse effect on our business and results of operations in 2025 and 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.

Administration has 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, and this was upheld by the U.S.

Court of International Trade on August 13, 2026.

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

During the second quarter of 2026, we received $134.5 million of IEEPA tariff refunds, which has been recognized in cost of goods sold, and $4.1 million of associated interest, which has been recognized in other income (expense), net.

However, the ultimate additional amounts that we may be refunded, if any, remain uncertain, and as of August 2, 2026, we have not recognized an asset in relation to further IEEPA tariff 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.

Additionally, our U.S.

operating entity was named as a defendant in purported consumer class actions relating to alleged tariff-related pricing actions and potential governmental tariff reimbursements.

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

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Other Factors Affecting Our Business

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.

Foreign currency fluctuations positively impacted our financial results during the first two quarters of 2026, increasing net revenue by $69.6 million compared to the first two quarters of 2025.

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

Quarter-to-Date Results of Operations:

First Quarter Results

Second Quarter Results

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

First Quarter

Second Quarter

2026 2025 2026 2025

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Net income $ 329,223 $ 370,905 13.6 % 14.7 %

First Quarter

Second Quarter

2026 2025 2026 2025 Year over year change

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Net revenue $ 2,415,631 $ 2,525,219 100.0 % 100.0 % $ (109,588) (4) % (5) %

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 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

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

Global comparable sales decreased 9%, or 10% on a constant dollar basis, primarily as a result of lower conversion rates, as well as reduced store traffic and a decrease in average order value, partially offset by higher e-commerce traffic.

Second Quarter

2026 2025 Year over year change

2 unchanged sentences

60.5 % 58.5 % 200 basis points

The decrease in gross margin was primarily due to:

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

– 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;

The increase in gross margin was primarily due to a net increase in product margin of 430 basis points, comprised of:

• an increase of 560 basis points related to IEEPA tariff refunds;

• a net decrease of 150 basis points primarily from higher tariffs, as well as markdowns including credit card affiliate programs, partially offset by higher pricing and lower product costs;

• a favorable impact of foreign currency exchange rates of 20 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;

The increase in gross margin was partially offset by a net increase in other cost of sales as a percentage of net revenue of 230 basis points, comprised of:

• an increase in occupancy and depreciation costs of 180 basis points, 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 50 basis points.

Selling, General and Administrative Expenses

First Quarter

Second Quarter

2026 2025 Year over year change

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• a net increase in head office costs of $45.8 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 contractor, advisory, and professional services of $14.6 million, which includes costs associated with proxy contest matters of $13.4 million in the second quarter of 2026;

– an increase in brand and community expenses of $14.1 million;

– an increase in employee costs of $7.6 million primarily due to the reversal of stock-based compensation recorded in the second quarter of 2025 and higher wage rates.

The increase was partially offset by lower bonus expense due to business performance;

– an increase in technology costs, including cloud computing amortization, of $6.9 million;

– an increase in depreciation of $6.4 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 $3.8 million.

• 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;

• a net increase in costs related to our operating channels of $7.7 million, comprised of:

– an increase in employee costs of $5.1 million;

– an increase in technology costs of $1.7 million;

– an increase in digital marketing expenses of $0.9 million;

– an increase in other operating costs of $4.2 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.

– a decrease in variable costs of $4.2 million primarily due to lower packaging costs and credit card fees.

• a decrease in net foreign currency exchange and derivative revaluation gains of $1.2 million.

Selling, general and administrative expenses as a percentage of net revenue increased 400 basis points primarily due to an increase in head office costs of 260 basis points and an increase in costs related to our operating channels of 130 basis points.

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

First Quarter

Second Quarter

2026 2025 Year over year change

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Segmented income from operations as a % of net revenue 36.8 % 35.2 % 160 basis points

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 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.

The decrease in net revenue was primarily due to a decrease in comparable sales, which decreased 12%.

The decrease in comparable sales was primarily a result of reduced traffic and lower conversion rates, as well as a decrease in average order value.

The decrease in net revenue was partially offset by a $29.5 million increase from new or expanded company-operated stores and our other channels, including from sales to wholesale accounts and outlets.

We have opened 16 net new company-operated stores in the Americas since the second quarter of 2025.

The increase in gross margin was primarily due to higher product margin driven by an increase of 830 basis points related to IEEPA tariff refunds, partially offset by higher other tariffs.

The increase in gross margin was partially offset by higher occupancy, depreciation, and distribution center costs as a percentage of net revenue.

The decrease in selling, general and administrative expenses was primarily due to lower employee costs as well as lower variable costs.

China Mainland

First Quarter

Second Quarter

2026 2025 Year over year change

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37.2 % 38.8 % (160) basis points

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 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.

The increase in net revenue was primarily due to a $23.0 million increase in net revenue from new or expanded company-operated stores and our other channels.

We have opened 15 net new company-operated stores in China Mainland since the second quarter of 2025.

The increase in net revenue was partially offset by a decrease in comparable sales, which decreased 2%, or 8% on a constant dollar basis.

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

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

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

Rest of World

First Quarter

Second Quarter

2026 2025 Year over year change

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19.1 % 21.7 % (260) basis points

The increase in net revenue was primarily due to a $30.2 million increase in net revenue from new or expanded company-operated stores and our other channels, including from outlets and an increased number of locations operated by third parties under license and supply arrangements.

We have opened 10 net new company-operated stores in Rest of World since the second quarter of 2025.

The increase in net revenue was partially offset by a decrease in comparable sales, which decreased 4%, or 3% on a constant dollar basis.

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

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

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

Corporate expenses increased $37.7 million to $367.0 million in the second quarter of 2026 compared to the second quarter of 2025.

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

Corporate expenses also increased due to a decrease in net foreign currency exchange and derivative gains of $1.2 million.

Other Income (Expense), Net

Second Quarter

2026 2025 Year over year change

(In thousands) (In thousands) (Percentage)

Other income (expense), net

$ 13,698 $ 9,737 $ 3,961 40.7 %

The increase in other income (expense), net was primarily due to an increase in interest income driven by $4.1 million in interest associated with IEEPA tariff refunds.

Income Tax Expense

Second Quarter

2026 2025 Year over year change

(In thousands) (In thousands) (Percentage)

Income tax expense

$ 138,128 $ 162,646 $ (24,518) (15.1) %

Effective tax rate

29.6 % 30.5 % (90) basis points

The decrease in the effective tax rate was primarily due to a decrease in non-deductible expenses in international jurisdictions, partially offset by adjustments upon the filing of income tax returns and lower research and development tax credits.

Second Quarter

2026 2025 Year over year change

(In thousands) (In thousands) (Percentage)

$ 329,223 $ 370,905 $ (41,682) (11.2) %

The decrease in net income was primarily due to an increase in selling, general and administrative expenses of $54.7 million and a decrease in gross profit of $15.3 million, which included $134.5 million of IEEPA tariff refunds.

The decrease in net income was partially offset by a decrease in income tax expense of $24.5 million and an increase in other income (expense), net of $4.0 million.

Year-to-Date Results of Operations:

First Two Quarters Results

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

First Two Quarters

2026 2025 2026 2025

(In thousands) (Percentage of net revenue)

Net revenue $ 4,887,234 $ 4,895,879 100.0 % 100.0 %

Cost of goods sold 2,086,538 2,035,551 42.7 41.6

Gross profit 2,800,696 2,860,328 57.3 58.4

Selling, general and administrative expenses 2,066,320 1,894,529 42.3 38.7

Amortization of intangible assets 3,777 3,360 0.1 0.1

Income from operations 730,599 962,439 14.9 19.7

Other income (expense), net 22,829 21,523 0.5 0.4

Income before income tax expense 753,428 983,962 15.4 20.1

Income tax expense 229,157 298,485 4.7 6.1

Net income $ 524,271 $ 685,477 10.7 % 14.0 %

First Two Quarters

2026 2025 2026 2025 Year over year change

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

Americas $ 3,237,982 $ 3,432,775 66.3 % 70.1 % $ (194,793) (6) % (6) %

China Mainland 885,490 760,999 18.1 15.5 124,491 16 % 10 %

Rest of World 763,762 702,105 15.6 14.3 61,657 9 % 7 %

Net revenue $ 4,887,234 $ 4,895,879 100.0 % 100.0 % $ (8,645) — % (2) %

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

Global comparable sales decreased 4%, or 6% on a constant dollar basis, primarily as a result of lower conversion rates as well as a decrease in average order value and reduced store traffic, partially offset by higher e-commerce traffic.

First Two Quarters

2026 2025 Year over year change

(In thousands) (In thousands) (Percentage)

$ 2,800,696 $ 2,860,328 $ (59,632) (2.1) %

57.3 % 58.4 % (110) basis points

The decrease in gross margin was primarily due to a net increase in other cost of sales as a percentage of net revenue of 190 basis points, comprised of:

• an increase in occupancy and depreciation costs of 160 basis points, 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 30 basis points.

The decrease in gross margin was partially offset by a net increase in product margin of 80 basis points, comprised of:

• an increase of 280 basis points related to IEEPA tariff refunds;

• a net decrease of 240 basis points primarily from higher tariffs as well as markdowns including credit card affiliate programs, partially offset by higher pricing and lower product costs;

• a favorable impact of foreign currency exchange rates of 40 basis points.

Selling, General and Administrative Expenses

First Two Quarters

2026 2025 Year over year change

(In thousands) (In thousands) (Percentage)

Selling, general and administrative expenses

$ 2,066,320 $ 1,894,529 $ 171,791 9.1 %

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

42.3 % 38.7 % 360 basis points

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

• a net increase in head office costs of $109.0 million, comprised of:

– an increase in employee costs of $37.3 million primarily due to higher wage rates and the reversal of stock-based compensation recorded in the second quarter of 2025.

The increase was partially offset by lower bonus expense due to business performance;

– an increase in brand and community expenses of $36.7 million;

– an increase in contractor, advisory, and professional services of $15.7 million, which includes costs associated with proxy contest matters of $24.8 million in the first two quarters of 2026, partially offset by lower other advisory and professional fees;

– an increase in technology costs, including cloud computing amortization, of $13.4 million;

– an increase in depreciation of $10.9 million;

– a decrease in other head office costs of $5.0 million.

• an increase in costs related to our operating channels of $64.1 million, comprised of:

– an increase in employee costs of $36.2 million primarily due to increased salaries and wages expense for retail employees;

– an increase in variable costs of $10.1 million primarily due to increased distribution costs, partially offset by lower packaging costs;

– an increase in technology costs of $4.6 million;

– an increase in digital marketing expenses of $4.4 million;

– an increase in other operating costs of $8.8 million primarily due to increased repairs and maintenance costs and occupancy costs.

The increase in selling, general and administrative expenses was partially offset by a decrease in net foreign currency exchange and derivative revaluation losses of $1.3 million.

Selling, general and administrative expenses as a percentage of net revenue increased 360 basis points due to an increase in head office costs of 230 basis points and an increase in costs related to our operating channels of 130 basis points.

Segment Results

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.

First Two Quarters

2026 2025 Year over year change

(In thousands) (In thousands) (Percentage)

Net revenue $ 3,237,982 $ 3,432,775 $ (194,793) (5.7) %

Product costs 922,329 996,293 (73,964) (7.4)

Other cost of sales 374,666 315,037 59,629 18.9

Gross profit 1,940,987 2,121,445 (180,458) (8.5)

Selling, general and administrative expenses 938,094 912,720 25,374 2.8

Segmented income from operations $ 1,002,893 $ 1,208,725 $ (205,832) (17.0) %

Product margin

71.5 % 71.0 % 50 basis points

59.9 % 61.8 % (190) basis points

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

29.0 % 26.6 % 240 basis points

Segmented income from operations as a % of net revenue

31.0 % 35.2 % (420) basis points

The decrease in net revenue was primarily due to a decrease in comparable sales, which decreased 8%, or 9% on a constant dollar basis.

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

The decrease in net revenue was partially offset by a $45.3 million increase from new or expanded company-operated stores and our other channels, including from outlets and sales to wholesale accounts.

We opened 16 net new company-operated stores in the Americas since the second quarter of 2025.

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

The decrease in gross margin was partially offset by higher product margin driven by an increase of 420 basis points related to IEEPA tariff refunds, partially offset by higher other tariffs.

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

China Mainland

First Two Quarters

2026 2025 Year over year change

(In thousands) (In thousands) (Percentage)

Net revenue $ 885,490 $ 760,999 $ 124,491 16.4 %

Product costs 189,631 174,034 15,597 9.0

Other cost of sales 119,882 101,412 18,470 18.2

Gross profit 575,977 485,553 90,424 18.6

Selling, general and administrative expenses 221,638 179,428 42,210 23.5

Segmented income from operations $ 354,339 $ 306,125 $ 48,214 15.7 %

Product margin 78.6 % 77.1 % 150 basis points

65.0 % 63.8 % 120 basis points

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

25.0 % 23.6 % 140 basis points

Segmented income from operations as a % of net revenue

40.0 % 40.2 % (20) basis points

The increase in net revenue was primarily due to a $68.2 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 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.

We have opened 15 new company-operated stores in China Mainland since the second quarter of 2025.

The increase in net revenue was also driven by an increase in comparable sales, which increased 8%, or 2% on a constant dollar basis.

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

The increase in gross margin was primarily due to higher product margin driven by a favorable impact of foreign currency exchange rates, as well as lower distribution center costs as a percentage of net revenue, partially offset by higher depreciation and occupancy 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.

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

Rest of World

First Two Quarters

2026 2025 Year over year change

(In thousands) (In thousands) (Percentage)

Net revenue $ 763,762 $ 702,105 $ 61,657 8.8 %

Product costs 215,464 198,713 16,751 8.4

Other cost of sales 144,563 121,671 22,892 18.8

Gross profit 403,735 381,721 22,014 5.8

Selling, general and administrative expenses 259,339 227,622 31,717 13.9

Segmented income from operations $ 144,396 $ 154,099 $ (9,703) (6.3) %

Product margin 71.8 % 71.7 % 10 basis points

52.9 % 54.4 % (150) basis points

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

34.0 % 32.4 % 160 basis points

Segmented income from operations as a % of net revenue

18.9 % 21.9 % (300) basis points

The increase in net revenue was primarily due to a $59.7 million increase in net revenue from new or expanded company-operated stores and our other channels, including from outlets and an increased number of locations operated by third parties under license and supply arrangements.

We have opened 10 net new company-operated stores in Rest of World since the second quarter of 2025.

Comparable sales were flat, or decreased 1% on a constant dollar basis, compared to the first two quarters of 2025.

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

The decrease in gross margin was primarily due to higher occupancy, depreciation, and 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.

Corporate expenses increased $64.5 million to $771.0 million in the first two quarters of 2026 compared to the first two quarters 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.

The increase in corporate expenses was partially offset by a decrease in net foreign currency exchange and derivative losses of $1.3 million.

Other Income (Expense), Net

First Quarter

First Two Quarters

2026 2025 Year over year change

2 unchanged sentences

$ 22,829 $ 21,523 $ 1,306 6.1 %

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.

A net increase in interest income contributed to the increase in other income (expense), net.

The net increase in interest income was primarily due to $4.1 million in interest associated with IEEPA tariff refunds, partially offset by lower average cash balances and lower interest rates.

Income Tax Expense

First Quarter

First Two Quarters

2026 2025 Year over year change

4 unchanged sentences

30.4 % 30.3 % 10 basis points

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

First Quarter

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

First Two Quarters

2026 2025 Year over year change

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$ 524,271 $ 685,477 $ (161,206) (23.5) %

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.

The decrease in net income was primarily due to an increase in selling, general and administrative expenses of $171.8 million and a decrease in gross profit of $59.6 million, which included $134.5 million of IEEPA tariff refunds.

The decrease in net income was partially offset by a decrease in income tax expense of $69.3 million and an increase in other income (expense), net of $1.3 million.

Comparable Sales

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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.

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.

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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

Second Quarter 2026

First Two Quarters 2026

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

Americas (8) % — % (8) % (6) % — % (6) %

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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 Quarter

First Two Quarters

2026 2025 Year over year change

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Net income decreased $161.2 million.

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.

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 $464.7 million, driven by changes in inventories and the timing of income tax payments, as well as changes in accrued liabilities and accounts receivable, partially offset by the timing of accounts payable and changes in other current assets.

The increase in cash provided by operating activities was also a result of increased depreciation and stock-based compensation expense.

Investing Activities

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.

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

Financing Activities

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 decrease in cash used in financing activities was primarily due to a decrease in cash paid for our stock repurchases as well as a decrease in taxes paid related to the net share settlement of stock-based compensation.

During the first two quarters of 2026, we repurchased 4.9 million shares at a total cost including commissions and excise taxes of $695.1 million.

During the first two quarters of 2025, we repurchased 2.5 million shares at a total cost including commissions and excise taxes of $715.7 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.

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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:

August 2, 2026

(In thousands)

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

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.

As of August 2, 2026, letters of credit and guarantee totaling $20.2 million had been issued, including $6.3 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 May 3, 2026, no borrowings were outstanding under this facility other than letters of credit and guarantee of $6.4 million.

As of August 2, 2026, no borrowings were outstanding under this facility other than letters of credit and guarantee of $6.3 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 May 3, 2026 was $1.7 billion, an increase of 2% from May 4, 2025.

Our inventory balance as of August 2, 2026 was $1.7 billion, a decrease of 1% from August 3, 2025.

Critical Accounting Policies and Estimates

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Operating Locations

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,

Our company-operated stores by market as of August 2, 2026 and February 1, 2026 are summarized in the table below.

Number of company-operated stores by market August 2,

2026 February 1,

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Total company-operated stores 825 811

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,

Retail locations operated by third parties by market as of August 2, 2026 and February 1, 2026 are summarized in the table below.

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

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