lululemon athletica inc.

Year-to-Date Results of Operations: First Three Quarters 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. Americas net revenue also increased, and global comparable sales increased 1%.

Gross Profit

The decrease in gross margin was primarily due to:

•a net decrease in product margin of 90 basis points, comprised of:

–a net decrease of 80 basis points primarily from higher tariffs as well as markdowns and credit card affiliate programs, partially offset by higher pricing, lower product costs, and lower damages; and

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

•a net increase in other cost of sales as a percentage of net revenue of 30 basis points, comprised of higher occupancy and depreciation costs.

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 $167.6 million, comprised of:

–an increase in employee costs of $77.3 million primarily due to increased salaries and wages expense for retail employees, partially offset by decreased incentive compensation;

–an increase in digital marketing expenses of $29.9 million;

–an increase in variable costs of $19.6 million primarily due to increased credit card fees and packaging costs as a result of higher net revenue; and

–an increase in technology costs of $10.9 million; and

–an increase in other operating costs of $29.9 million primarily due to increased depreciation and occupancy costs.

•an increase in head office costs of $78.5 million, comprised of:

–an increase in technology costs, including cloud computing amortization, of $26.5 million;

–an increase in brand and community expenses of $21.3 million;

–an increase in depreciation of $16.9 million;

–an increase in in contractor, advisory, and professional services of $10.9 million;

–an increase in other head office costs of $9.2 million; and

–a decrease in employee costs of $6.3 million primarily due to a reversal of stock-based compensation expense during the second quarter of 2025 due to a change in the probability of achieving performance conditions, partially offset by increased salaries and wages expense.

•an increase in net foreign currency exchange and derivative revaluation losses of $12.5 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 increase in Americas net revenue was primarily due to a $163.9 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 increase in Americas net revenue was partially offset by a decrease in comparable sales, which decreased 3%. The decrease in comparable sales was primarily a result of 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 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 higher employee costs, marketing expenses, depreciation, and professional fees.

China Mainland

The increase in China Mainland net revenue was primarily due to an increase in comparable sales, which increased 16%, or 17% on a constant dollar basis. The increase in comparable sales was primarily a result of increased e-commerce traffic, partially offset by a decrease in average order value. The increase in China Mainland net revenue was also driven by a $122.3 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 higher employee costs, marketing expenses, variable costs, and technology costs.

Rest of World

The increase in Rest of World net revenue was primarily due to a $91.7 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%, or 8% on a constant dollar basis. The increase in comparable sales was primarily a result of increased traffic, partially offset by a decrease in average order value.

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

Corporate

Corporate expenses increased $61.5 million to $1.0 billion in the first three quarters of 2025 compared to the first three quarters of 2024. The net increase was primarily due to higher technology costs, depreciation, marketing expenses, and professional fees. Corporate expenses also increased due to an increase in net foreign currency exchange and derivative losses of $12.5 million. The increase in corporate expenses was partially offset by lower employee costs driven by decreased incentive compensation.

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 $258.6 million and a decrease in other income (expense), net of $27.6 million, partially offset by an increase in gross profit of $197.4 million, and a decrease in income tax expense of $18.9 million.