lululemon athletica inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) lululemon athletica inc. CONSOLIDATED BALANCE SHEETS (Unaudited; Amounts in thousands, except per share amounts) August 2, 2026 February 1, 2026 ASSETS Current assets Cash and cash equivalents $ 1,389,737 $ 1,807,202 Accounts receivable, net 171,164 190,657 Inventories 1,711,450 1,700,753 Prepaid and receivable income taxes 479,948 352,469 Prepaid expenses and other current assets 193,288 211,620 3,945,587 4,262,701 Property and equipment, net 2,046,363 2,033,720 Right-of-use lease assets 1,947,077 1,630,181 Goodwill 185,840 184,911 Intangible assets, net 2,530 6,283 Deferred income tax assets 24,537 24,037 Other non-current assets 332,644 314,910 $ 8,484,578 $ 8,456,743 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 346,717 $ 331,421 Accrued liabilities and other 584,912 662,982 Accrued compensation and related expenses 122,747 187,887 Current lease liabilities 366,649 298,724 Current income taxes payable 67,375 43,948 Unredeemed gift card liability 277,318 316,632 Other current liabilities 35,933 45,954 1,801,651 1,887,548 Non-current lease liabilities 1,774,478 1,499,717 Deferred income tax liabilities 56,987 52,278 Other non-current liabilities 60,288 55,360 3,693,404 3,494,903 Commitments and contingencies Stockholders' equity Undesignated preferred stock, $ 0.01 par value: 5,000 shares authorized; none issued and outstanding — — Exchangeable stock, no par value: 60,000 shares authorized; 5,116 and 5,116 issued and outstanding — — Special voting stock, $ 0.000005 par value: 60,000 shares authorized; 5,116 and 5,116 issued and outstanding — — Common stock, $ 0.005 par value: 400,000 shares authorized; 106,566 and 111,380 issued and outstanding 533 557 Additional paid-in capital 695,052 669,392 Retained earnings 4,364,017 4,522,581 Accumulated other comprehensive loss ( 268,428 ) ( 230,690 ) 4,791,174 4,961,840 $ 8,484,578 $ 8,456,743 See accompanying notes to the unaudited interim consolidated financial statements 3 Table of Contents lululemon athletica inc. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited; Amounts in thousands, except per share amounts) Quarter Ended Two Quarters Ended August 2, 2026 August 3, 2025 August 2, 2026 August 3, 2025 Net revenue $ 2,415,631 $ 2,525,219 $ 4,887,234 $ 4,895,879 Cost of goods sold 953,753 1,048,017 2,086,538 2,035,551 Gross profit 1,461,878 1,477,202 2,800,696 2,860,328 Selling, general and administrative expenses 1,006,332 951,658 2,066,320 1,894,529 Amortization of intangible assets 1,893 1,730 3,777 3,360 Income from operations 453,653 523,814 730,599 962,439 Other income (expense), net 13,698 9,737 22,829 21,523 Income before income tax expense 467,351 533,551 753,428 983,962 Income tax expense 138,128 162,646 229,157 298,485 Net income $ 329,223 $ 370,905 $ 524,271 $ 685,477 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment $ ( 76,329 ) $ 4,707 $ ( 64,342 ) $ 174,479 Net investment hedge gains (losses) 25,289 790 26,604 ( 81,263 ) Other comprehensive income (loss), net of tax $ ( 51,040 ) $ 5,497 $ ( 37,738 ) $ 93,216 Comprehensive income $ 278,183 $ 376,402 $ 486,533 $ 778,693 Basic earnings per share $ 2.92 $ 3.10 $ 4.59 $ 5.71 Diluted earnings per share $ 2.92 $ 3.10 $ 4.59 $ 5.70 Basic weighted-average number of shares outstanding 112,898 119,600 114,156 120,116 Diluted weighted-average number of shares outstanding 112,919 119,680 114,201 120,262 See accompanying notes to the unaudited interim consolidated financial statements 4 Table of Contents lululemon athletica inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited; Amounts in thousands) Quarter Ended August 2, 2026 Exchangeable Stock Special Voting Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity Shares Shares Par Value Shares Par Value Balance as of May 3, 2026 5,116 5,116 $ — 109,308 $ 547 $ 681,152 $ 4,361,290 $ ( 217,388 ) $ 4,825,601 Net income 329,223 329,223 Other comprehensive income (loss), net of tax ( 51,040 ) ( 51,040 ) Stock-based compensation expense 21,089 21,089 Common stock issued upon settlement of stock-based compensation 8 — — — Shares withheld related to net share settlement of stock-based compensation ( 3 ) — ( 350 ) ( 350 ) Repurchase of common stock, including excise tax ( 2,747 ) ( 14 ) ( 6,839 ) ( 326,496 ) ( 333,349 ) Balance as of August 2, 2026 5,116 5,116 $ — 106,566 $ 533 $ 695,052 $ 4,364,017 $ ( 268,428 ) $ 4,791,174 Quarter Ended August 3, 2025 Exchangeable Stock Special Voting Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity Shares Shares Par Value Shares Par Value Balance as of May 4, 2025 5,116 5,116 $ — 114,909 $ 574 $ 632,564 $ 3,993,154 $ ( 336,722 ) $ 4,289,570 Net income 370,905 370,905 Other comprehensive income (loss), net of tax 5,497 5,497 Stock-based compensation expense ( 1,844 ) ( 1,844 ) Common stock issued upon settlement of stock-based compensation 50 — 5,257 5,257 Shares withheld related to net share settlement of stock-based compensation ( 3 ) — ( 873 ) ( 873 ) Repurchase of common stock, including excise tax ( 1,128 ) ( 4 ) ( 2,729 ) ( 278,500 ) ( 281,233 ) Balance as of August 3, 2025 5,116 5,116 $ — 113,828 $ 570 $ 632,375 $ 4,085,559 $ ( 331,225 ) $ 4,387,279 5 Table of Contents Two Quarters Ended August 2, 2026 Exchangeable Stock Special Voting Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity Shares Shares Par Value Shares Par Value Balance as of February 1, 2026 5,116 5,116 $ — 111,380 $ 557 $ 669,392 $ 4,522,581 $ ( 230,690 ) $ 4,961,840 Net income 524,271 524,271 Other comprehensive income (loss), net of tax ( 37,738 ) ( 37,738 ) Stock-based compensation expense 50,275 50,275 Common stock issued upon settlement of stock-based compensation 187 1 ( 1 ) — Shares withheld related to net share settlement of stock-based compensation ( 83 ) — ( 12,369 ) ( 12,369 ) Repurchase of common stock, including excise tax ( 4,918 ) ( 25 ) ( 12,245 ) ( 682,835 ) ( 695,105 ) Balance as of August 2, 2026 5,116 5,116 $ — 106,566 $ 533 $ 695,052 $ 4,364,017 $ ( 268,428 ) $ 4,791,174 Two Quarters Ended August 3, 2025 Exchangeable Stock Special Voting Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity Shares Shares Par Value Shares Par Value Balance as of February 2, 2025 5,116 5,116 $ — 116,166 $ 581 $ 638,190 $ 4,109,717 $ ( 424,441 ) $ 4,324,047 Net income 685,477 685,477 Other comprehensive income (loss), net of tax 93,216 93,216 Stock-based compensation expense 21,247 21,247 Common stock issued upon settlement of stock-based compensation 245 — 5,478 5,478 Shares withheld related to net share settlement of stock-based compensation ( 92 ) — ( 26,514 ) ( 26,514 ) Repurchase of common stock, including excise tax ( 2,491 ) ( 11 ) ( 6,026 ) ( 709,635 ) ( 715,672 ) Balance as of August 3, 2025 5,116 5,116 $ — 113,828 $ 570 $ 632,375 $ 4,085,559 $ ( 331,225 ) $ 4,387,279 See accompanying notes to the unaudited interim consolidated financial statements 6 Table of Contents lululemon athletica inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; Amounts in thousands) Two Quarters Ended August 2, 2026 August 3, 2025 Cash flows from operating activities Net income $ 524,271 $ 685,477 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 277,667 234,244 Stock-based compensation expense 50,275 21,247 Settlement of derivatives not designated in a hedging relationship ( 8,295 ) ( 11,921 ) Changes in operating assets and liabilities: Accounts receivable 20,370 ( 15,929 ) Inventories ( 14,350 ) ( 237,903 ) Prepaid and receivable income taxes ( 132,203 ) ( 140,974 ) Prepaid expenses and other current assets 16,308 69,037 Other non-current assets ( 40,626 ) ( 33,330 ) Accounts payable 21,715 91,154 Accrued liabilities and other ( 72,446 ) ( 131,640 ) Accrued compensation and related expenses ( 63,487 ) ( 61,249 ) Current income taxes payable 22,805 ( 165,214 ) Unredeemed gift card liability ( 37,628 ) ( 59,616 ) Right-of-use lease assets and current and non-current lease liabilities 25,201 ( 2,776 ) Other current and non-current liabilities ( 299 ) ( 30,885 ) Net cash provided by operating activities 589,278 209,722 Cash flows from investing activities Purchase of property and equipment ( 277,056 ) ( 330,161 ) Settlement of net investment hedges ( 2,807 ) 13,451 Other investing activities ( 1,939 ) ( 3,250 ) Net cash used in investing activities ( 281,802 ) ( 319,960 ) Cash flows from financing activities Proceeds from settlement of stock-based compensation — 5,478 Taxes paid related to net share settlement of stock-based compensation ( 12,369 ) ( 26,514 ) Repurchase of common stock ( 695,105 ) ( 715,672 ) Other financing activities ( 4,751 ) ( 8,115 ) Net cash used in financing activities ( 712,225 ) ( 744,823 ) Effect of foreign currency exchange rate changes on cash and cash equivalents ( 12,716 ) 26,519 Decrease in cash and cash equivalents ( 417,465 ) ( 828,542 ) Cash and cash equivalents, beginning of period $ 1,807,202 $ 1,984,336 Cash and cash equivalents, end of period $ 1,389,737 $ 1,155,794 See accompanying notes to the unaudited interim consolidated financial statements 7 Table of Contents lululemon athletica inc. INDEX FOR NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS Note 1 Nature of Operations and Basis of Presentation 9 Note 2 Recent Accounting Pronouncements 9 Note 3 Net Revenue 10 Note 4 Revolving Credit Facilities 11 Note 5 Supply Chain Financing Program 11 Note 6 Stock-Based Compensation and Benefit Plans 11 Note 7 Fair Value Measurement 13 Note 8 Derivative Financial Instruments 13 Note 9 Earnings Per Share 15 Note 10 Supplementary Financial Information 15 Note 11 Segmented Information 16 Note 12 Legal Proceedings and Other Contingencies 18 8 Table of Contents lululemon athletica inc. NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS Note 1. Nature of Operations and Basis of Presentation Nature of Operations lululemon athletica inc., a Delaware corporation, ("lululemon" and, together with its subsidiaries unless the context otherwise requires, the "Company") is engaged in the design, distribution, and retail of technical athletic apparel, footwear, and accessories. The Company organizes its operations into four regional markets: Americas, China Mainland, Asia Pacific ("APAC"), and Europe and the Middle East ("EMEA"). It conducts its business through a number of different channels in each market, including company-operated stores, e-commerce, outlets, temporary locations, wholesale, license and supply arrangements, and a re-commerce program. There were 825 and 811 company-operated stores in operation as of August 2, 2026 and February 1, 2026, respectively. Basis of Presentation The unaudited interim consolidated financial statements, including the financial position as of August 2, 2026 and the results of operations and cash flows for the periods disclosed, are presented in U.S. dollars and have been prepared by the Company under the rules and regulations of the Securities and Exchange Commission ("SEC"). The financial information is presented in accordance with United States generally accepted accounting principles ("GAAP") for interim financial information and, accordingly, does not include all of the information and footnotes required by GAAP for complete financial statements. The financial information as of February 1, 2026 is derived from the Company's audited consolidated financial statements and related notes for the fiscal year ended February 1, 2026, which are included in Item 8 in the Company's fiscal 2025 Annual Report on Form 10-K filed with the SEC on March 17, 2026. These unaudited interim consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. These unaudited interim consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and related notes included in Item 8 in the Company's fiscal 2025 Annual Report on Form 10-K. The Company's fiscal year ends on the Sunday closest to January 31 of the following year, typically resulting in a 52-week year, but occasionally giving rise to an additional week, resulting in a 53-week year. Fiscal 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 two quarters of 2026 and 2025 ended on August 2, 2026 and August 3, 2025, respectively. The Company's business is affected by the pattern of seasonality common to most retail apparel businesses. Historically, the Company has recognized a significant portion of its operating profit in the fourth fiscal quarter of each year as a result of increased net revenue during the holiday season. Events predominantly impacting the Company's international net revenue, such as those related to Lunar New Year and Singles Day, can fall in different fiscal quarters from year to year. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of net revenue and expenses during the reporting period. Actual results could differ from those estimates. Note 2. Recent Accounting Pronouncements The Company considers the applicability and impact of all Accounting Standard Updates ("ASUs"). ASUs recently issued not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company's consolidated financial position or results of operations. Recently Issued Accounting Pronouncements In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. Entities will be required to provide disaggregated disclosures for certain income statement expense line items. This amendment is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, and will be applied 9 Table of Contents retrospectively for periods presented in the financial statements. The Company is currently evaluating the impact that this new guidance may have on its financial statement disclosures. In September 2025, the FASB issued ASU 2025‑06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350‑40): Targeted Improvements to the Accounting for Internal-Use Software. The amendment replaces the previous project-stage model with a principles-based approach for capitalizing internal-use software costs. This guidance is effective for annual reporting periods beginning after December 15, 2027 and interim reporting periods within that year. The Company is currently evaluating the impact that this new guidance may have on its accounting policies and related disclosures. Note 3. Net Revenue Disaggregated Net Revenue In addition to the disaggregation of net revenue by reportable segment in Note 11. Segmented Information, the following table disaggregates the Company's net revenue by geographic area. Second Quarter First Two Quarters 2026 2025 2026 2025 (In thousands) United States $ 1,302,069 $ 1,415,002 $ 2,615,275 $ 2,777,526 Canada 285,815 321,293 569,156 614,113 Mexico 28,888 21,922 53,551 41,136 Americas 1,616,772 1,758,217 3,237,982 3,432,775 China Mainland 407,095 392,898 885,490 760,999 Hong Kong SAR, Taiwan, and Macau SAR 51,419 47,634 102,827 91,738 People's Republic of China 458,514 440,532 988,317 852,737 Other geographic areas 340,345 326,470 660,935 610,367 $ 2,415,631 $ 2,525,219 $ 4,887,234 $ 4,895,879 The following disaggregates the Company's net revenue by category. Accessories and other categories is primarily composed of accessories, footwear, and lululemon Studio. Second Quarter First Two Quarters 2026 2025 2026 2025 (In thousands) Women's apparel $ 1,488,241 $ 1,547,321 $ 3,091,226 $ 3,082,493 Men's apparel 621,380 624,598 1,203,258 1,169,386 Accessories and other categories 306,010 353,300 592,750 644,000 $ 2,415,631 $ 2,525,219 $ 4,887,234 $ 4,895,879 The following disaggregates the Company's net revenue by channel. Second Quarter First Two Quarters 2026 2025 2026 2025 (In thousands) Company-operated stores $ 1,173,747 $ 1,254,952 $ 2,366,587 $ 2,408,059 E-commerce 934,630 993,093 1,932,072 1,953,983 Other channels 307,254 277,174 588,575 533,837 $ 2,415,631 $ 2,525,219 $ 4,887,234 $ 4,895,879 10 Table of Contents Note 4. Revolving Credit Facilities Americas Revolving Credit Facility On October 15, 2025, the Company entered into an amended and restated unsecured revolving credit agreement, which provides for $ 600.0 million in commitments under an unsecured five-year revolving credit facility. The credit facility has a maturity date of October 15, 2030, subject to two one-year extensions at the request of the Company. Subject to the conditions stated in the credit agreement, the Company may request increases in aggregate commitments thereunder up to a total of $ 1.0 billion. The credit facility permits prepayment of borrowings and reductions or terminations of commitments from time to time without premium or penalty, subject to customary breakage costs. As of August 2, 2026, the Company had no borrowings outstanding under this credit facility other than $ 6.3 million in outstanding letters of credit and guarantee. Borrowings made under the credit facility bear interest at variable rates based on the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York ("SOFR"), or an alternate base rate, plus applicable margin. The credit agreement contains customary financial, affirmative and negative covenants applicable to the Company and its subsidiaries, including limitations on indebtedness, liens, fundamental changes, dispositions of assets, changes in the nature of business, and restrictions on subsidiary dividends and distributions, as well as financial covenants based on leverage and fixed charge coverage ratios. The Company was in compliance with all such covenants as of August 2, 2026. Uncommitted Revolving Credit Facilities The Company has uncommitted revolving credit facilities, including an unsecured Chinese Yuan-denominated revolving credit facility totaling the equivalent of USD $ 44.4 million, which is reviewed annually and provides for short-term borrowing and the issuance of guarantees. As of August 2, 2026, there were no borrowings or guarantees outstanding, letters of credit totaling USD $ 13.7 million were issued, and the Company was in compliance with all applicable terms of the Chinese Yuan-denominated credit facility. Note 5. Supply Chain Financing Program The Company facilitates a voluntary supply chain financing ("SCF") program that allows its suppliers to elect to sell the receivables owed to them by the Company to a third-party financial institution. Participating suppliers negotiate arrangements directly with the financial institution. If a supplier chooses to participate in the SCF program it may request an invoice be paid earlier than it would by the Company, and the financial institution at its sole and absolute discretion, may elect to make an early payment to the supplier at a discount. The Company's obligations to its suppliers, including amounts due and scheduled payment terms, are not impacted by a supplier's participation in the arrangement and the Company provides no guarantees to any third parties under the SCF program. As of August 2, 2026 and February 1, 2026, $ 39.6 million and $ 45.1 million, respectively, were outstanding under the SCF program and presented within accounts payable. Note 6. Stock-Based Compensation and Benefit Plans Stock-Based Compensation Plans The Company's eligible employees participate in various stock-based compensation plans, provided directly by the Company. Stock-based compensation expense charged to income for the plans was $ 49.7 million and $ 21.1 million for the first two quarters of 2026 and 2025, respectively. Total unrecognized compensation cost for all stock-based compensation plans was $ 173.3 million as of August 2, 2026, which is expected to be recognized over a weighted-average period of 2.4 years. 11 Table of Contents A summary of the balances of the Company's stock-based compensation plans as of August 2, 2026, and changes during the first two quarters of 2026, is presented below: Stock Options Performance-Based Restricted Stock Units Restricted Shares Restricted Stock Units Number Weighted-Average Exercise Price Number Weighted-Average Grant Date Fair Value Number Weighted-Average Grant Date Fair Value Number Weighted-Average Grant Date Fair Value (In thousands, except per share amounts) Balance as of February 1, 2026 1,269 $ 287.41 220 $ 319.19 6 $ 252.28 561 $ 257.92 Granted 421 163.24 178 184.07 — — 363 159.06 Exercised/released — — 71 358.82 6 252.28 116 328.01 Forfeited/expired 165 235.25 39 262.43 — — 49 218.06 Balance as of August 2, 2026 1,525 $ 258.81 288 $ 233.81 — $ — 759 $ 202.50 Exercisable as of August 2, 2026 552 $ 321.95 The Company's performance-based restricted stock units ("PSUs") awarded to eligible employees during 2026 entitle the grantee to receive a maximum of 2.5 shares of common stock per PSU if the Company achieves specified performance goals and the grantee remains employed during the vesting period. These PSU awards also include a market condition based on total shareholder return ("TSR"), which limits the conversion ratio to one share of common stock per PSU if TSR over the performance period is negative. The fair value of these PSUs was determined at grant date using a Monte Carlo simulation model. Expense for PSUs is recognized when it is probable that the performance goal will be achieved. The grant date fair value of stock options is estimated on the date of grant using a Black-Scholes model. The following are weighted averages of the assumptions that were used during the first two quarters of 2026: Stock Options Performance-Based Restricted Stock Units Expected term 4.25 years 2.85 years Expected volatility 43.69 % 42.40 % Risk-free interest rate 3.79 % 3.79 % Dividend yield — % — % The grant date fair value of the restricted shares and restricted stock units is based on the closing price of the Company's common stock on the grant date. Employee Share Purchase Plan The Company has an Employee Share Purchase Plan ("ESPP"). Contributions are made by eligible employees, subject to certain limits defined in the ESPP, and the Company matches one-third of the contribution. The maximum number of shares authorized to be purchased under the ESPP is 6.0 million shares. All shares purchased under the ESPP are purchased in the open market. During the second quarter of 2026, there were 78.8 thousand shares purchased. As of August 2, 2026, 3.9 million shares remain authorized to be purchased under the ESPP. Defined Contribution Pension Plans The Company offers defined contribution pension plans to eligible employees who may elect to defer and contribute a portion of their eligible compensation to a plan up to limits stated in the plan documents, not to exceed the dollar amounts set by applicable laws. The Company matches 50 % to 75 % of the contribution depending on the participant's length of service, and the Company's contribution is subject to a two-year vesting period. The Company's net expense for the defined contribution plans was $ 13.0 million and $ 12.2 million in the first two quarters of 2026 and 2025, respectively. 12 Table of Contents Note 7. Fair Value Measurement Assets and Liabilities Measured at Fair Value on a Recurring Basis As of August 2, 2026 and February 1, 2026, the Company held certain assets and liabilities that are measured at fair value on a recurring basis: August 2, 2026 Level 1 Level 2 Level 3 Balance Sheet Classification (In thousands) Money market funds $ 37,349 $ 37,349 $ — $ — Cash and cash equivalents Term deposits 83,328 — 83,328 — Cash and cash equivalents Forward currency contract assets 6,275 — 6,275 — Prepaid expenses and other current assets Forward currency contract liabilities 8,431 — 8,431 — Other current liabilities February 1, 2026 Level 1 Level 2 Level 3 Balance Sheet Classification (In thousands) Money market funds $ 354,731 $ 354,731 $ — $ — Cash and cash equivalents Forward currency contract assets 30,996 — 30,996 — Prepaid expenses and other current assets Forward currency contract liabilities 36,476 — 36,476 — Other current liabilities The Company has short-term, highly liquid investments classified as cash equivalents, which are invested in money market funds and short-term deposits with original maturities of three months or less. Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis The Company has also recorded lease termination liabilities at fair value on a non-recurring basis, determined using Level 3 inputs based on remaining lease rentals and reduced by estimated sublease income. Note 8. Derivative Financial Instruments The Company currently hedges against changes in the Canadian dollar and Chinese Yuan to the U.S. dollar exchange rate and changes in the Euro and Australian dollar to the Canadian dollar exchange rate using forward currency contracts. Net Investment Hedges The Company is exposed to foreign currency exchange gains and losses which arise on translation of its international subsidiaries' balance sheets into U.S. dollars. These gains and losses are recorded as other comprehensive income (loss), net of tax in accumulated other comprehensive income or loss within stockholders' equity. The Company holds a significant portion of its assets in Canada and enters into forward currency contracts designed to hedge a portion of the foreign currency exposure that arises on translation of a Canadian subsidiary into U.S. dollars. These forward currency contracts are designated as net investment hedges. The Company assesses hedge effectiveness based on changes in forward rates. The Company recorded no ineffectiveness from net investment hedges during the first two quarters of 2026. Derivatives Not Designated as Hedging Instruments During the first two quarters of 2026, the Company entered into certain forward currency contracts designed to economically hedge the foreign currency exchange revaluation gains and losses that are recognized by its Canadian and Chinese subsidiaries on specific monetary assets and liabilities denominated in currencies other than the functional currency of the entity. The Company has not applied hedge accounting to these instruments and the change in fair value of these derivatives is recorded within selling, general and administrative expenses. 13 Table of Contents Quantitative Disclosures about Derivative Financial Instruments The notional amounts and fair values of forward currency contracts were as follows: August 2, 2026 February 1, 2026 Gross Notional Assets Liabilities Gross Notional Assets Liabilities (In thousands) Derivatives designated as net investment hedges: Forward currency contracts $ 1,060,000 $ 6,218 $ — $ 1,548,000 $ — $ 32,510 Derivatives not designated in a hedging relationship: Forward currency contracts 1,386,219 57 8,431 1,832,471 30,996 3,966 Net derivatives recognized on consolidated balance sheets: Forward currency contracts $ 6,275 $ 8,431 $ 30,996 $ 36,476 As of August 2, 2026, there were derivative assets of $ 6.3 million and derivative liabilities of $ 8.4 million subject to enforceable netting arrangements. The forward currency contracts designated as net investment hedges outstanding as of August 2, 2026 mature on different dates between August 2026 and November 2026. The forward currency contracts not designated in a hedging relationship outstanding as of August 2, 2026 mature on different dates between August 2026 and November 2026. The pre-tax gains and losses on foreign currency exchange forward contracts recorded in accumulated other comprehensive income or loss were as follows: Second Quarter First Two Quarters 2026 2025 2026 2025 (In thousands) Gains (losses) recognized in net investment hedge gains (losses): Derivatives designated as net investment hedges $ 34,145 $ 1,065 $ 35,920 $ ( 64,158 ) No gains or losses have been reclassified from accumulated other comprehensive income or loss into net income for derivative financial instruments in a net investment hedging relationship, as the Company has not sold or liquidated (or substantially liquidated) its hedged subsidiary. The pre-tax net foreign currency exchange and derivative gains and losses recorded in the consolidated statement of operations were as follows: Second Quarter First Two Quarters 2026 2025 2026 2025 (In thousands) Gains (losses) recognized in selling, general and administrative expenses: Foreign currency exchange gains (losses) $ 36,569 $ 5,280 $ 36,170 $ ( 67,998 ) Derivatives not designated in a hedging relationship ( 36,322 ) ( 3,837 ) ( 43,683 ) 59,231 Net foreign currency exchange and derivative gains (losses) $ 247 $ 1,443 $ ( 7,513 ) $ ( 8,767 ) 14 Table of Contents Note 9. Earnings Per Share The details of the computation of basic and diluted earnings per share are as follows: Second Quarter First Two Quarters 2026 2025 2026 2025 (In thousands, except per share amounts) Net income $ 329,223 $ 370,905 $ 524,271 $ 685,477 Basic weighted-average number of shares outstanding 112,898 119,600 114,156 120,116 Assumed conversion of dilutive stock options and awards 21 80 45 146 Diluted weighted-average number of shares outstanding 112,919 119,680 114,201 120,262 Basic earnings per share $ 2.92 $ 3.10 $ 4.59 $ 5.71 Diluted earnings per share $ 2.92 $ 3.10 $ 4.59 $ 5.70 The Company's calculation of weighted-average shares includes the common stock of the Company as well as the exchangeable shares. Exchangeable shares are the economic equivalent of common shares in all material respects. All classes of stock have in effect the same economic rights and share equally in undistributed net income. For the first two quarters of 2026 and 2025, 0.3 million and 0.1 million stock options and awards, respectively, were anti-dilutive to earnings per share and therefore have been excluded from the computation of diluted earnings per share. The Company's board of directors approved a stock repurchase program authorizing up to $ 4.0 billion in aggregate, including $ 1.0 billion initially authorized on November 29, 2023, and additional $ 1.0 billion increases on May 29, 2024, December 3, 2024, and December 3, 2025. This program does not have an expiration date or require a minimum number of shares to be repurchased. Repurchases may be made on the open market at prevailing prices or through privately negotiated transactions, including under plans pursuant to Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934. The timing and amount of repurchases will depend on market conditions, trading eligibility, and other factors. As of August 2, 2026, the remaining authorized amount available under the program, excluding commissions and excise taxes, was $ 712.5 million. During the first two quarters of 2026 and 2025, 4.9 million and 2.5 million shares, respectively, were repurchased under the programs at a total cost including commissions and excise taxes of $ 695.1 million and $ 715.7 million, respectively. Subsequent to August 2, 2026, and up to August 28, 2026, 1.0 million shares were repurchased at a total cost including commissions and excise taxes of $ 118.8 million. Note 10. Supplementary Financial Information A summary of certain consolidated balance sheet accounts is as follows: August 2, 2026 February 1, 2026 (In thousands) Inventories: Inventories, at cost $ 1,810,976 $ 1,789,576 Inventory provisions and reserves ( 99,526 ) ( 88,823 ) $ 1,711,450 $ 1,700,753 Prepaid expenses and other current assets: Prepaid expenses $ 164,179 $ 144,744 Forward currency contract assets 6,275 30,996 Other current assets 22,834 35,880 $ 193,288 $ 211,620 15 Table of Contents August 2, 2026 February 1, 2026 (In thousands) Property and equipment, net: Land $ 77,309 $ 79,390 Buildings 28,287 28,816 Leasehold improvements 1,603,493 1,400,487 Furniture and fixtures 215,291 203,882 Computer hardware 232,157 224,169 Computer software 1,673,883 1,519,840 Equipment and vehicles 68,422 61,760 Work in progress 170,009 378,226 Property and equipment, gross 4,068,851 3,896,570 Accumulated depreciation ( 2,022,488 ) ( 1,862,850 ) $ 2,046,363 $ 2,033,720 Other non-current assets: Cloud computing arrangement implementation costs $ 216,619 $ 192,031 Security deposits 63,159 61,117 Other 52,866 61,762 $ 332,644 $ 314,910 Accrued liabilities and other: Accrued operating expenses $ 176,674 $ 167,052 Accrued duty 67,486 99,353 Accrued digital marketing 27,898 71,240 Sales return allowances 51,952 70,611 Accrued credit card affiliate liabilities 118,228 64,837 Forward currency contract liabilities 8,431 36,476 Accrued capital expenditures 35,323 34,860 Accrued freight 35,163 34,455 Sales tax collected 12,507 25,353 Accrued rent 17,349 20,691 Other 33,901 38,054 $ 584,912 $ 662,982 Note 11. Segmented Information The Company reports three segments: Americas, China Mainland, and Rest of World, which is comprised of its non-significant operating segments APAC and EMEA reported on a combined basis. The Company's segments are based on the financial information the Chief Operating Decision Maker ("CODM") uses to evaluate performance and allocate resources. During 2025, the Company's then-chief executive officer ("CEO"), served as CODM. Effective January 31, 2026, the former CEO stepped down, and the Company's chief financial officer and its president and chief commercial officer were appointed as interim co-CEOs and together perform the CODM function during the interim period. On April 21, 2026, the Company entered into an employment agreement to appoint a new CEO effective September 8, 2026. The CODM approves the annual budget on a segment level, and regularly assesses the performance of the Company's segments using key financial metrics, including net revenue and segmented income from operations. The Company does not report capital expenditures and assets by segment as that information is not reviewed by the CODM. 16 Table of Contents The following outlines segmented information: Second Quarter 2026 Americas China Mainland Rest of World Total Segments Corporate (1) Total (In thousands) Net revenue $ 1,616,772 $ 407,095 $ 391,764 $ 2,415,631 $ — $ 2,415,631 Product costs (2) 376,770 89,073 115,136 580,979 — 580,979 Other cost of sales (2) 190,694 56,326 72,554 319,574 53,200 372,774 Selling, general and administrative expenses 454,895 110,426 129,101 694,422 311,910 1,006,332 Amortization of intangible assets — — — — 1,893 1,893 Income from operations $ 594,413 $ 151,270 $ 74,973 $ 820,656 $ ( 367,003 ) $ 453,653 Other income (expense), net 13,698 Income before income tax expense $ 467,351 Supplemental information: Depreciation and amortization (3) $ 65,757 $ 11,144 $ 11,092 $ 87,993 $ 54,339 $ 142,332 Second Quarter 2025 Americas China Mainland Rest of World Total Segments Corporate (1) Total (In thousands) Net revenue $ 1,758,217 $ 392,898 $ 374,104 $ 2,525,219 $ — $ 2,525,219 Product costs (2) 515,473 92,219 108,449 716,141 — 716,141 Other cost of sales (2) 158,390 51,139 63,200 272,729 59,147 331,876 Selling, general and administrative expenses 464,960 97,050 121,212 683,222 268,436 951,658 Amortization of intangible assets — — — — 1,730 1,730 Income from operations $ 619,394 $ 152,490 $ 81,243 $ 853,127 $ ( 329,313 ) $ 523,814 Other income (expense), net 9,737 Income before income tax expense $ 533,551 Supplemental information: Depreciation and amortization (3) $ 54,499 $ 8,871 $ 8,574 $ 71,944 $ 47,771 $ 119,715 First Two Quarters 2026 Americas China Mainland Rest of World Total Segments Corporate (1) Total (In thousands) Net revenue $ 3,237,982 $ 885,490 $ 763,762 $ 4,887,234 $ — $ 4,887,234 Product costs (2) 922,329 189,631 215,464 1,327,424 — 1,327,424 Other cost of sales (2) 374,666 119,882 144,563 639,111 120,003 759,114 Selling, general and administrative expenses 938,094 221,638 259,339 1,419,071 647,249 2,066,320 Amortization of intangible assets — — — — 3,777 3,777 Income from operations $ 1,002,893 $ 354,339 $ 144,396 $ 1,501,628 $ ( 771,029 ) $ 730,599 Other income (expense), net 22,829 Income before income tax expense $ 753,428 Supplemental information: Depreciation and amortization (3) $ 128,011 $ 23,134 $ 21,630 $ 172,775 $ 104,892 $ 277,667 17 Table of Contents First Two Quarters 2025 Americas China Mainland Rest of World Total Segments Corporate (1) Total (In thousands) Net revenue $ 3,432,775 $ 760,999 $ 702,105 $ 4,895,879 $ — $ 4,895,879 Product costs (2) 996,293 174,034 198,713 1,369,040 — 1,369,040 Other cost of sales (2) 315,037 101,412 121,671 538,120 128,391 666,511 Selling, general and administrative expenses 912,720 179,428 227,622 1,319,770 574,759 1,894,529 Amortization of intangible assets — — — — 3,360 3,360 Income from operations $ 1,208,725 $ 306,125 $ 154,099 $ 1,668,949 $ ( 706,510 ) $ 962,439 Other income (expense), net 21,523 Income before income tax expense $ 983,962 Supplemental information: Depreciation and amortization (3) $ 105,940 $ 17,447 $ 17,286 $ 140,673 $ 93,571 $ 234,244 __________ (1) Corporate includes centrally managed support functions including product design, raw material development, product innovation, sourcing, supply chain, and global merchandising which are included in other cost of sales. Administrative corporate expenses include technology, brand and marketing, finance, human resources, legal, and other head office costs. (2) Cost of goods sold is made up of product costs and other cost of sales. Product costs include the cost of purchased merchandise, costs incurred to deliver inventory to the Company's distribution centers, shrink and inventory provision expenses, the cost of digital content subscription services, hemming costs and other product alteration costs, and product-related royalties paid to third parties. International Emergency Economic Power Act ("IEEPA") tariff refunds of $ 134.5 million during the second quarter of 2026 are included within product costs in the Americas. Other cost of sales includes occupancy and depreciation expense for company-operated stores, distribution center costs, and product department costs. (3) The amounts of depreciation and amortization disclosed by reportable segment are included within other cost of sales and selling, general and administrative expenses. Note 12. Legal Proceedings and Other Contingencies Legal Proceedings In addition to the legal proceedings described below, the Company is, from time to time, involved in routine legal matters, and audits and inspections by governmental agencies and other third parties which are incidental to the conduct of its business. This includes legal matters such as initiation and defense of proceedings to protect intellectual property rights, employment claims, product liability claims, personal injury claims, and similar matters. The Company believes the ultimate resolution of any such legal proceedings, audits, and inspections is not reasonably likely to have a material adverse effect on its consolidated balance sheets, results of operations or cash flows; however, litigation and regulatory matters are inherently uncertain, and it is possible that an adverse outcome in one or more matters could have a material impact in a particular reporting period. The Company has recognized immaterial provisions related to the expected outcome of legal proceedings. On August 8, 2024, lululemon athletica inc. and certain officers of the Company were named as defendants in a purported securities class action ( Patel v. Lululemon Athletica Inc., et al ., No. 1:24-cv-06033) in the United States District Court for the Southern District of New York. On March 10, 2025, plaintiffs filed an amended complaint, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on allegedly false and misleading public statements and omissions by defendants during the period December 8, 2023 to July 24, 2024 relating to lululemon's business, product offerings, and inventory allocation that plaintiffs allege artificially inflated the Company’s stock price. The amended complaint currently seeks unspecified monetary damages. On May 19, 2025, defendants moved to dismiss the amended complaint. On March 31, 2026, the court granted in part and denied in part defendants’ motion to dismiss the amended complaint. The Company intends to defend the action vigorously. Since November 4, 2024, six stockholder derivative complaints have been filed in the United States Court for the Southern District of New York: Bhavsar v. McDonald et al. , No. 1:24-cv-08405; Muszynski v. McDonald et al. , No. 1:24-cv-08507; Holtz v. McDonald et al. , No. 1:24-cv-08572; Wong v. McDonald et al. , No. 1:24-cv-08752; Kanaly v. McDonald et al. , No. 1:24-cv-08839; and Wasserman v. McDonald et al. , No. 1:25-cv-02793 (collectively, the "Derivative Actions."). The complaints in the Derivative Actions are generally based on the same allegations alleged in the securities action complaint and assert claims against certain of the Company’s current and former directors and officers for, among other things, alleged breaches of fiduciary duty and violations of Sections 10(b), 14(a), and 20(a) of the Exchange Act. Certain of the Derivative Actions also assert claims based on alleged false and misleading statements during the period October 28, 2020 to April 25, 2024 relating to the Company’s "IDEA" program. The complaints seek, among other things, monetary damages and equitable 18 Table of Contents relief on behalf of the Company, as well as an award of attorneys’ fees and costs. On May 15, 2025, plaintiff in Bhavsar v. McDonald et al. voluntarily dismissed the complaint and that action has been terminated. On August 1, 2025, the Derivative Actions were consolidated for all purposes under the caption In re lululemon athletica inc. Stockholder Derivative Litigation , Master File No. 1:24-cv-08507. Subject to the terms of the parties' stipulation, which the Court "so ordered" on May 18, 2026, the Derivative Actions are stayed pending resolution of the securities class action. Import Tariffs and Related Legal Proceedings On February 20, 2026, the U.S. Supreme Court invalidated tariffs imposed under the IEEPA. The U.S. Administration has initiated new tariffs at different rates under alternative legislative powers. The U.S. Administration also confirmed that the IEEPA decision does not impact the removal of the de minimis exemption. The Company has submitted refund claims for eligible IEEPA tariffs paid, including associated interest. During the second quarter of 2026, the Company 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 it may be refunded, if any, remain uncertain, and as of August 2, 2026, it has not recognized an asset in relation to further IEEPA tariff refund claims. On March 27, 2026, lululemon usa inc. was named as a defendant in a purported consumer class action ( Neuman, et al. v. Lululemon USA Inc. , No. 2:26-cv-11029) in the United States District Court for the Eastern District of Michigan, asserting equitable claims relating to alleged tariff-related pricing actions and potential governmental tariff reimbursements. The complaint seeks unspecified damages or restitution for the alleged tariff-cost component of prices charged and other relief. The Company intends to defend the lawsuit. On June 30, 2026, lululemon usa inc. was named as a defendant in a related purported consumer class action ( Alsaady, et al. v. Lululemon USA Inc. , No. 3:26-cv-05708) in the United States District Court for the Western District of Washington, asserting claims under consumer protection statutes of Washington, Michigan, and New York and equitable claims relating to alleged tariff-related pricing action and potential government tariff reimbursements. Like the first-filed case, the complaint seeks unspecified damages or restitution for the alleged tariff-cost component of prices charged and other relief. The Company intends to defend the lawsuit.