lululemon athletica inc.

Quarter-to-Date Results of Operations: Third 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 and Rest of World net revenue, partially offset by decreased Americas net revenue. Global comparable sales increased 1%, or 2% on a constant dollar basis.

Gross Profit

The decrease in gross margin was primarily due to:

•a net decrease in product margin of 300 basis points, comprised of:

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

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

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

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

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

Selling, General and Administrative Expenses

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

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

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

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

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

–an increase in technology costs of $5.2 million; and

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

•a net increase in head office costs of $9.7 million, comprised of:

–an increase in brand and community expenses of $8.6 million;

–an increase in technology costs, including cloud computing amortization, of $6.4 million;

–an increase in depreciation of $4.2 million;

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

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

–a decrease in other head office costs of $0.3 million.

•an increase in net foreign currency exchange and derivative revaluation losses of $2.0 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 September 2024 acquisition of the Mexico operations.

Segment Results

On a segment basis, we determine income from operations without taking into account corporate expenses and certain other expenses. 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 decrease in Americas net revenue was primarily due to a decrease in comparable sales, which decreased 5%. The decrease in comparable sales was primarily a result of a decrease in average order value, lower conversion rates, and reduced store traffic, partially offset by higher e-commerce traffic, which was partially driven by the impact of credit card affiliate programs. The decrease in comparable sales was partially offset by a $50.3 million increase from new or expanded company-operated stores and our other channels. We opened 11 net new company-operated stores in the Americas since the third quarter of 2024.

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

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

China Mainland

The increase in China Mainland net revenue was primarily due to an increase in comparable sales, which increased 24%, or 25% on a constant dollar basis. The increase in comparable sales was primarily a result of increased e-commerce traffic, partially driven by the timing of Singles Day events, partially offset by a decrease in average order value. The increase in China Mainland net revenue was also driven by a $46.6 million increase in net revenue from new or expanded company-operated stores and our other channels. We have opened 27 new company-operated stores in China Mainland since the third quarter of 2024.

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

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

Rest of World

The increase in Rest of World net revenue was primarily due to a $35.1 million increase in net revenue from new or expanded company-operated stores and our other channels. We have opened nine net new company-operated stores in Rest of World since the third quarter of 2024. The increase in Rest of World net revenue was also driven by an increase in comparable sales, which increased 9%. The increase in comparable sales was primarily a result of increased traffic.

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

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

Corporate

Corporate expenses decreased $4.1 million to $339.6 million in the third quarter of 2025 compared to the third quarter of 2024. The net decrease was primarily due to lower employee costs driven by decreased incentive compensation as well as lower professional fees. The decrease in corporate expenses was partially offset by higher technology costs, depreciation, marketing expenses, as well as an increase in net foreign currency exchange and derivative losses of $2.0 million.

Other Income (Expense), Net

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 adjustments upon the filing of income tax returns.

Net Income

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