LULU 10-K & 10-Q changes, risk factors and insider trading

In addition to the other information contained in this Form 10-K, the following risk factors should be considered in evaluating our business. Our business, financial condition, or results of operations could be materially adversely affected as a result of any of the progression, resultant effects, or outcome of these risks.

Our success depends on our ability to maintain theour brand value and reputation of our brand.reputation.

The lululemon name is integral to our business as well as to the implementation ofand our expansion strategies. Maintaining, promoting, and positioning our brand will depend largely on the success of our marketing and merchandising efforts and our ability to provide a consistent, high qualityhigh-quality product, and guest experience. As we grow, ourOur brand positioning, products, and marketing efforts may not be considered distinct, culturally relevant, or desirable to guests, employees, and other stakeholders.

We rely on social media, as one of our marketing strategies, to have a positive impact on both our brand value and reputation. Our brand and reputation could be adversely affected if we fail to achieve these objectives, if our public image was to be tarnished by negative publicity, which could be amplified by social media, if we fail to deliver innovative and high qualityhigh-quality products acceptable to our guests, or if we face or mishandle a product recall.recall, which could be amplified by social media. Our reputation could also be impacted by adverse publicity, whether or not valid, regarding allegations that we, or persons associated with uscurrently or formerlypreviously associated with us, have violated applicable laws or regulations, including but not limited to those related to safety, employment, discrimination, harassment, whistle-blowing, privacy, corporate citizenship, improper business practices, or cybersecurity. Certain activities on the part of stakeholders, including nongovernmental organizations and governmental institutions, could cause reputational damage, distract senior management, and disrupt our business. Additionally, while we devote considerable effort and resources to protecting our intellectual property, if these efforts are not successful the value of our brand may be harmed. Any harm to our brand and reputation could have a material adverse effect on our financial condition.

We may fail to acknowledge or react appropriately to the entry or growth of a viable competitor or disruptive force, and could struggle to continue to innovate, differentiate, and sustain the growthvalue of our brand. TheOur increasingbrand dominancepresence and presencevisibility ofin ourcertain brandmarkets may alsoencourage drivesome guests towardsto alternativetry or migrate to emerging competitors.

In addition, because we hold limited patents and exclusive intellectual property rights in the technology, fabrics or processes underlying our products, our current and future competitors are able to manufacture and sell products with performance characteristics, fabrication techniques, and styling similar to ours. Even when these products infringe our products.intellectual property rights, we may not be able to identify all infringing parties, enforce our rights effectively, or obtain timely and meaningful relief. If "dupe" or imitation products proliferate, whether through traditional retail channels or social media-driven trends, and lead consumers to perceive less differentiation between our products and lower-priced alternatives, our ability to maintain our brand premium, drive net revenue growth, and sustain our profitability could be adversely affected.

Our success depends on our ability to identify and originate product trends as well as to anticipate and react to changing consumer demandspreferences inon a timely manner.basis Alland ofeffectively. ourOur products are subject to changing consumer preferences that cannot be predictedanticipated with certainty. If we are unable to introduce new products or novel technologies inon a timely mannerbasis, or if our new products or technologiesofferings are not accepted by our guests, our competitors may introduce similar products in a more timely fashion,quickly, which could hurtundermine our goal to be viewed as a leader in technical athletic apparel innovation. Our new products may not receivemeet consumer acceptanceneeds asand consumer preferences could shift rapidly to different types of athletic apparel or away from thesethe types of products we make altogether, and our future success depends in part on our ability to anticipate and respond to these changes. Our failure to anticipate and respond in a timely mannereffectively to changing consumer preferences could lead to, among other things, lower salessales, lower margins, and excess inventory levels. We may not have or successfully leverage the relevant data to effectively understand and react to consumer preferences and expectations. Even if we are successful in anticipating consumer preferences, our ability to adequately react to and address those preferences will in part depend upon our continued ability to develop and introduce innovative, high-quality products. Our failure to effectively introduce new products that are accepted by consumers could result in a decrease in net revenue and excess inventory levels, which could have a material adverse effect on our financial condition.

We have occasionally received, and may in the future receive, product shipments of products that fail to comply with our technical specifications or that fail to conform to our quality control standards. We have also received, and may in the future receive, products that are otherwise unacceptable to us or our guests.guests, including if they fail to meet quality, performance, and fit expectations. Under these circumstances, unless we are able to obtain replacement products in a timely manner, we risk the loss of net revenue resulting from the inability to sell those products and related increased administrative and shipping costs. Additionally, if the unacceptability of our products is not discovered until after such products are sold, our guests could lose confidence in our products orproducts, we could face a product recallrecall, we could have regulatory exposure, and our results of operations could suffer and our business, reputation, and brand could be harmed.

The complex hardware previously sold by our lululemon Studio subsidiary, as well as the services currently offered, can be affected by design and manufacturing defects. Sophisticated operating system software and applications, such as those offered by lululemon Studio, often have issues that can unexpectedly interfere with the intended operation of hardware or software products. Defects may also exist in components and products that we source from third parties. Any defects could make our products and services unsafe and create a risk of environmental or property damage or personal injury and we may become subject to the hazards and uncertainties of product liability claims and related litigation.injury. The occurrence of real or perceived defects in any of our products, now or in the future, could result in additional negative publicity, regulatory investigations, or lawsuits filed against us, particularly if guests or others who use or purchase our lululemon Studio products are injured. Even if injuries are not the result of any defects, if they are perceived to be, we may incur expenses to defend or settle any claims and our brand and reputation may be harmed.us.

Our business is subject to significant pressure on costs and pricing caused by many factors, including tariffs, intense competition, constrained sourcing capacity and relatedcapacity, inflationary pressure, the availability of qualified labor and wage inflation, pricing pressure from consumers to reduce the prices we charge for our products,consumers, and changes in consumer demand. These and other factors have, and may in the future, cause us to experience increased costs, reduce our selling prices to consumers or experience reduced sales in response to increased prices, any of which could cause our operating margin to decline if we are unable to offset these factors with reductions in operating costs and could have a material adverse effect on our financial condition, operating results, and cash flows. Unionization efforts or other employee organizing activities could lead to higher people costs or reduce our flexibility to manage our employees which may negatively disrupt our operations.

To ensure adequate inventory supply, we must forecast inventory needs and place orders with our manufacturers based on our estimates of future demand for particular products.demand. Our ability to accurately forecast demand for our products could be affected by many factors, including an increase or decrease in guest demand for our products or for products of our competitors,competitors' products, our failure to accurately forecast guest acceptance of new products, product introductions by competitors, unanticipated changes in general market conditions (for example, because of global economic concernsconditions such as inflation, an economic downturn, or delays and disruptions resulting from local and international shipping delays and labor shortages), and weakening of economic conditions or consumer confidence in future economic conditions (for example, because of inflationary pressures, or because of sanctions, restrictions, and other responses related to geopolitical events). If we fail to accurately forecast guest demand, we may experience excess inventory levels or a shortage of products available for sale in our stores or for delivery to guests.sale.

Inventory levels in excess of guest demand may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would cause our gross margin to suffer and could impair the strength and exclusivity of our brand. Conversely, if we underestimate guest demand for our products,demand, our manufacturers may not be able to deliver products to meet our requirements, and this could result in damage to our reputation and guest relationships.

Our future growth depends in part on our expansion efforts outside of the Americas. We have limited experience with regulatory environments and market practices internationally, and we may not be able to penetrate or successfully operate in any new market. In connection with our expansion effortsefforts, we may encounter obstacles we did not face in the Americas, including cultural and linguistic differences, differences in regulatory environments, labor practices and market practices, difficulties in keeping abreast of market, business and technical developments, and international guests' tastes and preferences. We may also encounter difficulty expanding into new international markets because of limited brand recognition leading to delayed acceptance of our technical athletic apparel by guests in these new international markets. Our failure to develop our business in new international markets or disappointing growth outside of existing markets could harm our business and results of operations.

In addition, our continued growth depends in part on our ability to expand our product categories and introduce new product lines. We may not be able to successfully manage integration of new product categories or the new product lines with our existing products. SellingSuccessfully selling new product categories and lines will require our management to testdeveloping and developtesting different strategies in order to be successful.strategies. We may be unsuccessful in entering new product categories and developing or launching new product lines, which requires management of new suppliers, potential new customers, and new business models. Our managementWe may not have the experience of selling in these new product categories and we may not be able to grow our business as planned. For example, in July 2020, we acquired MIRROR,MIRROR in 2020, which was rebranded as lululemon Studio, and in 2023, we discontinued selling its hardware and offering its digital app-only subscription. If we are unable to effectively and successfully further develop current and future new product categories and lines, we may not be able to increase or maintain our sales and our operating margins may be adversely affected. This may also divert the attention of management and cause additional expenses.

We may be unable to achieve our growth objectives if we do not have the right level of efficiency and scalability in our processes and operations. We may experience difficulties in obtaining sufficient raw materials and manufacturing capacity to produce our products,capacity, as well as delays in production and shipments, as our products are subject to risks associated with overseas sourcing and manufacturing. We could be required to continue to expand our sales and marketing, product development and distribution functions, to upgrade our management information systems and other processes and technology, and to obtain more space for our expanding workforce. This expansionExpansion could increase the strain on our resources, and we could experience operating difficulties, including difficulties in hiring, training, and managing an increasing number of employees. These difficulties could result in the erosion of our brand image which could haveand a material adverse effect on our financial condition.

We operate an omni-channel retail model and aim to efficiently and effectively serve our guests in the ways most convenient to them. We operate a combination of physical retail locations and e-commerce services via our websites, other region-specific websites, digitalthird-party online marketplaces, and mobile apps. The rapid rise of artificial intelligence ("AI")‑enabled shopping tools may reduce our control over consumer decision‑making and brand loyalty, as third‑party AI platforms increasingly influence product discovery and purchases on behalf of customers. Our physical retail locations remain a key part of our growth strategy and we view them as a valuable tool in helping us build our brand and product line as well as enabling our omni-channel capabilities. We plan to continue to expand square footage and open new company-operated stores to support our growth objectives. The diversion of sales from our company-operated stores could adversely impact our return on investment and could lead to impairment charges and store closures, including incurring lease exit costs. We could have difficulty in recreating the in-store experience through direct channels. Our failure to successfully integrate our digital and physical channels and respond to these risks might adversely impact our business and results of operations, as well as damage our reputation and brand. In addition, our channels have different operating margins and shifts to diversified distribution channels could negatively impact our overall operating margins and results of operations.

We lease the majority of our stores underand operatingmany leasesof our distribution centers, and our inability to secure appropriate real estate or lease terms could impact our operations or ability to grow.deliver our products to the market. Our leases generally have initial terms of between two and 15 years, and generally can be extended in increments between two and five years, if at all. We generally cannot cancel these leases at our option. If an existing or new store is not profitable, and we decide to close it, as we have done in the past and may do in the future, we may nonetheless beremain committed to perform our obligationsobligated under the applicable lease including, among other things, paying the base rent for the balance of the lease term. Similarly, we may be committed to perform our obligations under the applicable leases even if current locations of our stores become unattractive as demographic patterns change. In addition, as each of our leases expire, we may fail to negotiate renewals, either on commercially acceptable terms or at all, which could require us to close stores in desirable locations.

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,season in the Americas, while our operating expenses are more equally distributed throughout the year. ThisEvents seasonality,predominantly impacting our international net revenue, such as those related to Lunar New Year and Singles Day, can fall in different fiscal quarters from year to year. Seasonality, along with other factors that are beyond our control,control includingsuch as weather conditions and the effects of climate change, could adversely affect our business and cause our results of operations to fluctuate.

Risks related to informationglobal securityeconomic, political, and technologyregulatory conditions

Disruptions of our supply chainchain, which is dependent on international suppliers, could have a material adverse effect on our operating and financial results.

Disruption of our supply chain capabilities due to trade restrictions, political instability, war (including the conflicts in the Middle East), terrorism, severe weather, natural disasters, public health crises, war, terrorism, product recalls, labor supply shortages or stoppages, the financial or operational instability of key suppliers and carriers, changes in diplomatic or trade relationships (including any sanctions, restrictions, tariffs, and other responses such as those related to current geopolitical events), or other reasons could impair our ability to distribute our products. To the extent we are unable to mitigate the likelihood or potential impact of such events, there could be a material adverse effect on our operating and financial results.

WeIn addition, we do not manufacture our products or raw materials and rely on suppliers and manufacturers located predominantly in APAC and China Mainland. We also source other materials used in our products, including items such as content labels, elastics, buttons, clasps, and drawcords, from suppliers located primarily in this region. Based on cost, during 20242025:

•Approximately 40% of our products were manufactured in Vietnam, 17%18% in Cambodia, 11% in Sri Lanka, 11% in Indonesia, and 7% in Bangladesh, and the remainder in other regions.regions; and

•Approximately 35%34% of the fabric used in our products originated from Taiwan, 28%29% from China Mainland, 11%10% from South Korea, 10% from Vietnam, and the remainder from other regions. Our concentration of fabric sourcing in Taiwan exposes us to geopolitical risks, including the possibility of military conflict, trade restrictions, or disruptions affecting that region.

Many of the specialty fabrics used in our products are technically advanced textile products developed and manufactured by third parties and may be available, in the short-term,short term, from only one or a limited number of sources. We have no long-term contracts with any of our suppliers or manufacturers for the production and supply of our raw materials and products, and we compete with other companies for fabrics, other raw materials, and production. During 2024,2025, we worked with approximately 5251 vendors to manufacture our products and 6765 suppliers to provide the fabric for our products. Based on cost, during 20242025:

Management'sThis discussionManagement’s Discussion and analysisAnalysis of financialFinancial conditionCondition and resultsResults of operationsOperations ("MD&A") is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. Components of management'sthis discussion and analysis of financial condition and results of operationsMD&A include:

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 was a 52-week year and fiscal 2024 was a 53-week year. Net revenue for 2024 includes results from the 53rd week; however, comparable sales excludeare calculated on a one-week shifted basis such that the 53rd52 week.weeks Fiscalended 2023February was1, a2026 52-weekare year.compared to the 52 weeks ended February 2, 2025 rather than January 26, 2025.

This discussion and analysis contains forward-looking statements based on current expectations that involve risks, uncertainties and assumptions, such as our plans, objectives, expectations, and intentions included in the "Special Note Regarding Forward-Looking Statements." Our actual results and the timing of events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those described in theunder "Item 1A. Risk Factors" sectionof this report. These statements speak only as of the date of this report, and elsewherewe indo thisnot Annualundertake Reportto onupdate Formthem, 10-K.except as required by law.

We use comparable sales as a metric to evaluate the performance of our business. Refer to the Comparable Sales and Sales Per Square Foot section of this management's discussion and analysis of financial condition and results of operationsMD&A for further information.

We provide constant dollar changes and adjusted financial resultschanges, which excludeis certain inventory provisions, asset impairments, and restructuring costs recognized in relation to lululemon Studio and their related tax effects. The constant dollar changes and adjusted financial results area non-GAAP financial measures, and we provide themmeasure, as supplemental information thatto enablehelp evaluationinvestors ofunderstand the underlying trendgrowth rate of net revenue excluding the impact of changes in ourforeign operatingcurrency performance,exchange and enable a comparison to our historical financial information.rates. Refer to the Non-GAAP Financial Measures section of this management's discussion and analysis of financial condition and results of operationsMD&A for reconciliations between the adjusted non-GAAP financial measures and the most directly comparable measures calculated in accordance with GAAP.

WeOver the course of 2025, we repurchased 5.15.0 million shares for $1.6$1.2 billionbillion, and in 2024,December and2025, our board of directors approved increasesa in$1.0 billion increase to our stock repurchase authorization totaling $2.0 billion during 2024.authorization.

Brand CampaignsPriorities and Activationsactions

Product InnovationCreation

•Net revenue increased 10%5% to $10.6$11.1 billion. On a constant dollar basis, net revenue increased 11%.

–Americas comparable•Comparable sales decreasedincreased 1%.2%.

–Rest of WorldAmericas comparable sales increaseddecreased 19%, or 20% on a constant dollar basis.3%.

•Gross profit increasedwas 12%consistent toat $6.3 billion. Adjusted gross profit increased 11%.

•Gross margin increaseddecreased 90260 basis points to 59.2%. Adjusted gross margin increased 60 basis points.56.6%.

•Operating margin increaseddecreased 150380 basis points to 23.7%. Adjusted operating margin increased 50 basis points.19.9%.

•Income tax expense increaseddecreased 22%13% to $761.5$659.8 million. Our effective tax rate for 20242025 was 29.6%29.5% compared to 28.8%29.6% for 2023. The adjusted effective tax rate was 28.7% for 2023.2024.

•Diluted earnings per share were $14.64$13.26 for 20242025 compared to $12.20$14.64 in 2023. Adjusted diluted earnings per share were $12.77 in 2023.2024.

MacroeconomicAcross all markets, our business continues to be influenced by macroeconomic conditions, governmentincluding actions andtrade policies, shifting consumer confidence and purchasing behaviors, anddemand, foreign currency fluctuationsfluctuations, impactand geopolitical instability. These factors have had varying effects across our business.markets Such factorsand are expected to continue to impact our business throughout 2025,2026 withand the impact varying by market.beyond.

The lululemon name is integral to our business and our expansion strategies. Maintaining, promoting, and positioning our brand will depend largely on the success of our marketing and merchandising efforts and our ability to provide a consistent, high-quality product, and guest experience. Our brand positioning, products, and marketing efforts may not be considered distinct, culturally relevant,relevant or appropriate, or desirable to guests, employees, and other stakeholders.

Our brand and reputation could be adversely affected by negative publicity, if we fail to deliver innovative and high-quality products acceptable to our guests, or if we face or mishandle a marketing event or product recall, which could be amplified by social media. Our reputation could also be impacted by adverse publicity, whether or not valid, regarding allegations that we, or persons currently or previously associated with us, have violated laws or regulations, including but not limited to those related to safety, employment, discrimination, harassment, whistle-blowing, privacy, corporate citizenship, improper business practices, or cybersecurity. Certain activities on the part of stakeholders, including nongovernmental organizations and governmental institutions, could cause reputational damage, distract senior management, and disrupt our business. Additionally, while we devote considerable effort and resources to protecting our intellectual property, if these efforts are not successful the value of our brand may be harmed. Any harm to our brand and reputation could have a material adverse effect on our financial condition.

Our future growth depends in part on our expansion efforts outside of the Americas. We have limited experience with regulatory environments and market practices internationally, and we may not be able to penetrate or successfully operate in any new market. In connection with our expansion efforts, we have encountered, and may continue to encounter obstacles we did not face in the Americas, including cultural and linguistic differences, local customs and sensitivities, differences in regulatory environments, labor practices and market practices, difficulties in keeping abreast of market, business and technical developments, and international guests' tastes and preferences. We may also encounter difficulty expanding into new international markets because of limited brand recognition leading to delayed acceptance of our technical athletic apparel by guests in these new international markets. Our failure to develop our business in new international markets or disappointing growth outside of existing markets could harm our business and results of operations.

Our former Chief Executive Officer "CEO" stepped down effective January 31, 2026, and we appointed interim co-CEOs to lead during the transition period. On April 21, 2026, we entered into an employment agreement to appoint Heidi O’Neill as CEO effective September 8, 2026. In addition, we have had other recent changes at the senior executive level. These changes may create uncertainty and divert management’s attention and resources. Our interimCEO leadership modeltransition may not align with expectations of employees, vendor partners, or other external stakeholders, and could negatively affect our operations, strategic initiatives, employee engagement, and retention. These changes may also lead to negative public perception, including among consumers and our brand community. Any resulting disruption could have a material adverse impact on our business, financial performance, or the market price of our stock.

On February 20, 2026, the U.S. Supreme Court invalidated tariffs imposed under the IEEPA. Immediately following this IEEPA decision, theThe 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.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 commenced submittingsubmitted refund claims for eligible IEEPA tariffs paid, including associated interest. TheDuring the second quarter of 2026, we received $134.5 million of IEEPA tariff refunds; however, the ultimate additional amounts that we may recoverbe refunded, if any, remain uncertain. Additionally, our U.S. operating entity was named as a defendant in a purported consumer class actionactions relating to alleged tariff-related pricing actions and potential governmental tariff reimbursements.

We engage in a number of intercompany transactions across multiple tax jurisdictions. Although we believe that these transactions reflect the accurate economic allocation of profit, the profit allocation and transfer pricing terms may be scrutinized by local tax authorities during an audit, and any resulting changes may impact our mix of earnings in countries with differing statutory tax rates. Our bilateral Advance Pricing Arrangement ("APA") with the Internal Revenue Service ("IRS") and Canada Revenue Agency ("CRA") expired at the end of 2020. During 2020, we entered into bilateral negotiations with the IRS and CRA to renew the APA, and in October 2025, the CRA withdrew from bilateral APA negotiations. We continue to apply (1) PRC includes China Mainland, Hong Kong SAR, Taiwan, and Macau SAR.

IRS and CRA to renew the APA, and in August 2026, the IRS withdrew from bilateral APA negotiations. We continue to apply our transfer pricing methodology, but this may be subject to audit, and could result in changes to our profit allocation and effective tax rate. We are in the process of reapplying under the APA program and intend to file a new APA submission with the CRA and IRS in fiscal 2026. We are also negotiating an APA with China Mainland's State Tax Administration, the outcome of which could impact our effective tax rate.

Current economic and political conditions make tax rules in any jurisdiction subject to significant change. Changes in applicable U.S., Canadian, Chinese, or other international tax laws and regulations, or their interpretation, including the possibility of retroactive effect, could affect our income tax expense and profitability. On July 4, 2025, the U.S. passed the One Big Beautiful Bill Act ("OBBBA"), which includes the permanent extension of certain provisions of the Tax Cuts and Jobs Act of 2017, the immediate expensing of domestic research and experimental expenditures, the reinstatement of accelerated depreciation for qualified property, and modifications to the international tax provisions including changes to the global intangible low-tax income ("GILTI"), the foreign-derived intangiblededuction-eligible income ("FDIIFDDEI") and the base erosion and anti-abuse tax ("BEAT") provisions. On January 5, 2026, the Organization for Economic Cooperation and Development ("OECD") released administrative guidance containing a Side-by-Side ("SbS") system which modifies the operation of the OECD's Pillar Two Global Anti-Base Erosion ("GloBE") Model Rules. The SbS system provides a safe harbor for multinational enterprise ("MNE") groups with an ultimate parent entity in the United States, which will exempt a U.S. headquartered MNE group from the application of two of the three Pillar Two top-up taxes. We are currently evaluating the impact of these tax law changes on our financial statements, and they may impact our income tax expense, profitability, and capital allocation decisions.

Responding to the prior proxy contest and related actions caused us to incur substantial costs and, if we are subject to additional proxy contests in the future, may cause us to incur additional costs and be time-consuming. Future instances of suchSuch matters have in the past and may in the future disrupt our business and operations and divert the attention of our board of directors, management, and employees from pursuing our business strategies. Stockholders, political or consumer activists, or others have in the past and may in the future create perceived uncertainties as to the future direction of our business or strategy, which may be exploited by our competitors and may make it more difficult to attract and retain qualified personnel and potential guests, and may affect our relationships with current guests, vendors, investors, and other third parties. Other actions or proposals could include responses to geopolitical conflict, including between the PRC and other countries, or to our perceived positions on social, political, or cultural issues in the United States or elsewhere. Consumer boycotts, negative social media campaigns, or other forms of public pressure, whether based on accurate perceptions or not, could adversely affect our brand reputation, guest relationships, and sales. The perceived uncertainties as to our future direction also could affect the market price and volatility of our securities.

From time to time, we are involved in litigation and other proceedings, including matters related to product liability claims, consumer class action claims, stockholder class action and derivative claims, commercial disputes and intellectual property, as well as trade, regulatory, employment, and other claims related to our business. AnyWe ofare thesecurrently involved in securities and stockholder derivative litigation, as described in Note 12. Legal Proceedings and Other Contingencies to the consolidated financial statements included in this report. Litigation and other proceedings could result in significant settlement amounts, damages, fines, or other penalties, divert financial and management resources, and result in significant legal fees. An unfavorable outcome of any particular proceeding could exceed the limits of our insurance policies, or the carriers may decline to fund such final settlements and/or judgments and could have an adverse impact on our business, financial condition, and results of operations. In addition, any proceeding could negatively impact our reputation among our guests and our brand image.

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 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 quartertwo quarters of 2026 and 2025 ended on MayAugust 3,2, 2026 and MayAugust 4,3, 2025, respectively.

Overview lululemon athletica inc. is principally a designer, distributor, and retailer of technical athletic apparel, footwear, and accessories. Our visionmission is to createinspire transformativethe productsworld to sweat, grow, and experiences that build meaningful connections, unlocking greater possibility and wellbeing for all.connect. Since our inception, we have fostered a distinctive corporate culture; we promote a set of core values in our business which include taking personal responsibility, acting with courage, valuing connection and inclusion, and choosing to have fun. 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."

•Net revenue increaseddecreased 4% to $2.5$2.4 billion. On a constant dollar basis, net revenue increaseddecreased 2%.5%.

–Americas comparable•Comparable sales decreased 5%,9%, or 6%10% on a constant dollar basis.

–China MainlandAmericas comparable sales increaseddecreased 20%, or 13% on a constant dollar basis.12%.

–RestChina of WorldMainland comparable sales increaseddecreased 5%,2%, or 1%8% on a constant dollar basis.

•Gross profit decreased 3%1% to $1.3$1.5 billion.billion, which includes $134.5 million of IEEPA tariff refunds.

•Income from operations decreased 37%13% to $276.9$453.7 million.million, which includes $134.5 million of IEEPA tariff refunds.

•Operating margin decreased 730190 basis points to 11.2%.18.8%, which includes an increase of 560 basis points related to IEEPA tariff refunds.

•Income tax expense decreased 33%15% to $91.0$138.1 million. Our effective tax rate for the firstsecond quarter of 2026 was 31.8%29.6%, compared to 30.2%30.5% for the firstsecond quarter of 2025.

•Diluted earnings per share were $1.69$2.92 compared to $2.60$3.10 in the firstsecond quarter of 2025.2025, including $0.86 per share related to IEEPA tariff refunds and associated interest, net of tax.

Net revenue in the Americas decreased 3%,8%, and comparable sales in the Americas decreased 5%.12%. We experienced reduced traffic and lower conversion rates, reducedas storewell traffic, andas 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%4% and 13%,5%, respectively, or decreased 2% and increased 6% on a constant dollar basis, respectively. China Mainland and Rest of World comparable sales increaseddecreased 20%by 2% and 5%,4%, respectively. We experienced increasedlower trafficconversion in these markets which led to highera decrease in comparable sales. We opened 1915 net new stores in China Mainland and 1310 net new stores in Rest of World which contributed tosince the respectivesecond increasesquarter inof net revenue.2025.

Across all markets, our business continues to be influencedimpacted by shifting consumer demand and brand sentiment and 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.

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

On February 20, 2026, the U.S. Supreme Court invalidated tariffs imposed under the IEEPA. Immediately following this IEEPA decision, theThe 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.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 commenced submittingsubmitted refund claims for eligible IEEPA tariffs paid, including associated interest. TheDuring 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 recoverbe refunded, if any, remain uncertainuncertain, and as of MayAugust 3,2, 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.

Foreign currency fluctuations positively impacted our financial results during the first quartertwo quarters of 2026, increasing net revenue growth by $52.2$69.6 million compared to the first quartertwo quarters of 2025. We expect ongoing exchange rate volatility to continue to affect our financial results.

Quarter-to-Date Results of Operations: FirstSecond Quarter Results

The increasedecrease in net revenue was primarily due to increaseddecreased China Mainland and Rest of WorldAmericas net revenue, partially offset by decreasedincreased AmericasRest of World and China Mainland net revenue. Global comparable sales increaseddecreased 1%,9%, or decreased 2%10% on a constant dollar basis, primarily dueas toa result of lower conversion ratesrates, as well as reduced store traffic and a decrease in average order value, partially offset by higher e-commerce traffic.

•The increase in gross margin was primarily due to a net decreaseincrease in product margin of 270430 basis points, comprised of:

–•a net decrease of 330150 basis points primarily from higher tariffstariffs, as well as markdowns including credit card affiliate programs and higher inventory provisions,programs, partially offset by higher pricing and lower product costs; and –a favorable impact of foreign currency exchange rates of 60 basis points.

•The increase in gross margin was partially offset by a net increase in other cost of sales as a percentage of net revenue of 140230 basis points, comprised of:

–•an increase in occupancy and depreciation costs of 130180 basis points, primarily driven by new and expanded company-operated storesstores, as well as increased penetration in China Mainland and Rest of World; and –an increase in costs related to our distribution centers and product departments of 10 basis points.

–a netan increase in contractor, advisory, and professional services of $1.1$14.6 million, which includes costs associated with proxy contest matters of $11.4$13.4 million in 2026,the partiallysecond offset by lower other advisory and professional fees; and –a decrease in other head office costsquarter of $1.1 million.2026;

–an increase in digitalbrand marketingand community expenses of $3.5$14.1 million;

–an increase in technology costsdepreciation of $2.9$6.4 million; and –ana increasedecrease in other operatinghead office costs of $4.5$3.8 million.

The increase in selling, general and administrative expenses was partially offset by •a decrease in net foreign currency exchange and derivative revaluation lossesgains of $2.4$1.2 million.

Selling, general and administrative expenses as a percentage of net revenue increased 310400 basis points,points primarily due to an increase in head office costs of 180260 basis points and an increase in costs related to our operating channels of 140130 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.12%. The decrease in comparable sales was primarily a result of reduced traffic and lower conversion rates, reducedas storewell traffic, andas a decrease in average order value, partially offset by higher e-commerce traffic.value. The decrease in comparablenet salesrevenue was partially offset by a $15.8$29.5 million increase from new or expanded company-operated stores and our other channels.channels, including from sales to wholesale accounts and outlets. We have opened 1416 net new company-operated stores in the Americas since the firstsecond quarter of 2025.

The decreaseincrease in gross margin was primarily due to lowerhigher product margin driven mainlyby an increase of 830 basis points related to IEEPA tariff refunds, partially offset by higher tariffs,other astariffs. wellThe asincrease in gross margin was partially offset by higher occupancy, depreciation, occupancy costs, and distribution center costs as a percentage of net revenue.