lululemon athletica inc

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

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

Net Revenue

The increase in net revenue was primarily due to increased China Mainland net revenue. Americas and Rest of World net revenue also increased and global comparable sales increased 1%.

Gross Profit

The increase in gross margin was primarily the result of a net increase in product margin of 110 basis points, comprised of:

•a net increase of 130 basis points from lower product costs and higher average unit retail, as well as lower damages, partially offset by higher freight costs; and

•an unfavorable impact of foreign currency exchange rates of 20 basis points.

The increase in product margin was partially offset by a net increase in other cost of sales as a percentage of net revenue of 50 basis points, comprised of:

•an increase in occupancy and depreciation costs of 30 basis points; and

•an increase in costs related to our product departments of 20 basis points.

Selling, General and Administrative Expenses

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

•an increase in head office costs of $51.6 million, comprised of:

–an increase in employee costs of $11.5 million primarily due to increased salaries and wages expense;

–an increase in technology costs, including cloud computing amortization, of $11.0 million;

–an increase in contractor, advisory, and professional services of $8.9 million;

–an increase in brand and community costs of $8.8 million;

–an increase in depreciation of $7.3 million; and

–an increase in other head office costs of $4.1 million.

•an increase in costs related to our operating channels of $38.1 million, comprised of:

–an increase in employee costs of $25.4 million primarily due to increased salaries and wages expense for retail employees;

–an increase in other operating costs of $9.5 million primarily due to increased depreciation and occupancy costs;

–an increase in digital marketing costs of $9.4 million; and

–an increase in technology costs of $2.6 million.

The increase in costs related to our operating channels was partially offset by a decrease in variable costs of $8.8 million primarily due to decreased distribution cost rates, partially offset by increased credit card fees as a result of higher net revenue.

•an increase in net foreign currency exchange and derivative revaluation losses of $10.8 million.

Amortization of Intangible Assets

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

Segment Results

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

Americas

The increase in Americas net revenue was primarily due to a $57.1 million increase from new or expanded company-operated stores and our other channels. We added 22 net new company-operated stores in the Americas since the first quarter of 2024, including 14 company-operated stores from the acquisition of the Mexico operations. Americas comparable sales decreased 2%, or 1% on a constant dollar basis. The decrease in comparable sales was primarily a result of decreased conversion rates and a decrease in store traffic, partially offset by a higher dollar value per transaction and an increase in e-commerce traffic.

The increase in gross margin was primarily due to higher product margin partially offset by deleverage on occupancy and depreciation costs.

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

China Mainland

The increase in China Mainland net revenue was primarily due to a $38.3 million increase in net revenue from new or expanded company-operated stores and our other channels. We have opened 27 net new company-operated stores in China Mainland since the first quarter of 2024. The increase in China Mainland net revenue was also driven by an increase in comparable sales, which increased 7%, or 8% on a constant dollar basis. The increase in comparable sales was primarily a result of increased traffic, partially offset by a lower dollar value per transaction.

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

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

Rest of World

The increase in Rest of World net revenue was primarily due to a $25.5 million increase in net revenue from new or expanded company-operated stores and our other channels. We have opened 10 net new company-operated stores in Rest of World since the first quarter of 2024. The increase in Rest of World net revenue was also driven by an increase in comparable sales, which increased 6%, or 7% on a constant dollar basis. The increase in comparable sales was primarily a result of increased traffic.

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

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

Corporate

Corporate expenses increased $58.5 million to $377.2 million in the first quarter of 2025 compared to the first quarter of 2024. The net increase was primarily due to higher technology costs, employee costs, professional fees, and depreciation. Corporate expenses also increased due to an increase in net foreign currency exchange and derivative losses of $10.8 million.

Other Income (Expense), Net

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

Income Tax Expense

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

Net Income

The decrease in net income was primarily due to an increase in selling, general and administrative expenses of $100.4 million, a decrease in other income (expense), net of $11.5 million, and an increase in income tax expense of $1.3 million, partially offset by an increase in gross profit of $108.1 million.