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 and Rest of World net revenue, partially offset by decreased Americas net revenue. Global comparable sales increased 1%, or decreased 2% on a constant dollar basis, primarily due to lower conversion rates as well as a decrease in average order value, partially offset by higher traffic.

Gross Margin

The decrease in gross margin was primarily due to:

•a net decrease in product margin of 270 basis points, comprised of:

–a net decrease of 330 basis points primarily from higher tariffs as well as markdowns including credit card affiliate programs and higher inventory provisions, partially offset by higher pricing and lower product costs; and

–a favorable impact of foreign currency exchange rates of 60 basis points.

•a net increase in other cost of sales as a percentage of net revenue of 140 basis points, comprised of:

–an increase in occupancy and depreciation costs of 130 basis points, primarily driven by new and expanded company-operated stores 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.

Selling, General and Administrative Expenses

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

•a net increase in head office costs of $63.1 million, comprised of:

–an increase in employee costs of $29.6 million primarily due to increased salaries and wages expense, primarily as a result of increased wage rates;

–an increase in brand and community expenses of $22.5 million;

–an increase in technology costs, including cloud computing amortization, of $6.5 million;

–an increase in depreciation of $4.5 million;

–a net increase in contractor, advisory, and professional services of $1.1 million, which includes costs associated with proxy contest matters of $11.4 million in 2026, partially offset by lower other advisory and professional fees; and

–a decrease in other head office costs of $1.1 million.

•an increase in costs related to our operating channels of $56.4 million, comprised of:

–an increase in employee costs of $31.2 million primarily due to increased salaries and wages expense for retail employees;

–an increase in variable costs of $14.3 million primarily due to increased distribution costs;

–an increase in digital marketing expenses of $3.5 million;

–an increase in technology costs of $2.9 million; and

–an increase in other operating costs of $4.5 million.

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

Selling, general and administrative expenses as a percentage of net revenue increased 310 basis points, primarily due to an increase in head office costs of 180 basis points and an increase in costs related to our operating channels of 140 basis points.

Segment Results

On a segment basis, we determine income from operations without taking into account corporate 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 net revenue was primarily due to a decrease in comparable sales, which decreased 5%, or 6% on a constant dollar basis. The decrease in comparable sales was primarily a result of lower conversion rates, reduced store traffic, and a decrease in average order value, partially offset by higher e-commerce traffic. The decrease in comparable sales was partially offset by a $15.8 million increase from new or expanded company-operated stores and our other channels. We have opened 14 net new company-operated stores in the Americas since the first quarter of 2025.

The decrease in gross margin was primarily due to lower product margin driven mainly by higher tariffs, as well as higher depreciation, occupancy costs, and distribution center costs as a percentage of net revenue.

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

China Mainland

The increase in net revenue was primarily due to an increase in comparable sales, which increased 20%, or 13% on a constant dollar basis. The increase in comparable sales was primarily a result of increased traffic partially offset by lower conversion rates. The increase in China Mainland net revenue was also driven by a $45.2 million increase in net revenue from new or expanded company-operated stores and our other channels. We have opened 19 net new company-operated stores in China Mainland since the first quarter of 2025.

The increase in gross margin was primarily due to a higher product margin driven mainly by a favorable impact of foreign currency exchange rates, as well as lower distribution center costs as a percentage of net revenue.

The increase in selling, general and administrative expenses was primarily due to higher employee costs as well as higher technology costs.

Rest of World

The increase in net revenue was primarily due to a $29.4 million increase in net revenue from new or expanded company-operated stores and our other channels. We have opened 13 net new company-operated stores in Rest of World since the first quarter of 2025. The increase in Rest of World net revenue was also driven by an increase in comparable sales, which increased 5%, or 1% on a constant dollar basis. The increase in comparable sales was primarily a result of increased traffic, partially offset by lower conversion rates.

The decrease in gross margin was primarily due to higher occupancy costs as a percentage of net revenue, partially offset by higher product margin driven by a favorable impact of foreign currency exchange rates.

The increase in selling, general and administrative expenses was primarily due to higher employee costs as well as higher marketing expenses.

Corporate

Corporate expenses increased $26.8 million to $404.0 million in the first quarter of 2026 compared to the first quarter of 2025. The net increase was primarily due to higher employee costs, as well as higher technology costs and depreciation. The increase in corporate expenses was partially offset by lower professional fees and a decrease in net foreign currency exchange and derivative losses of $2.4 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.

Net Income

The decrease in net income was primarily due to an increase in selling, general and administrative expenses of $117.1 million, a decrease in gross profit of $44.3 million, and a decrease in other income (expense), net of $2.7 million, partially offset by a decrease in income tax expense of $44.8 million.