lululemon athletica inc.

Financial Highlights

The summary below compares the second quarter of 2026 to the second quarter of 2025 and includes $134.5 million of International Emergency Economic Power Act ("IEEPA") tariff refunds and $4.1 million of associated interest received during the second quarter of 2026. Refer to the Import Tariffs section for more information.

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

•Comparable sales decreased 9%, or 10% on a constant dollar basis.

–Americas comparable sales decreased 12%.

–China Mainland comparable sales decreased 2%, or 8% on a constant dollar basis.

–Rest of World comparable sales decreased 4%, or 3% on a constant dollar basis.

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

•Gross margin increased 200 basis points to 60.5%, which includes an increase of 560 basis points related to IEEPA tariff refunds.

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

•Operating margin decreased 190 basis points to 18.8%, which includes an increase of 560 basis points related to IEEPA tariff refunds.

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

•Diluted earnings per share were $2.92 compared to $3.10 in the second quarter of 2025, including $0.86 per share related to IEEPA tariff refunds and associated interest, net of tax.

Market Conditions and Trends

Net revenue in the Americas decreased 8%, and comparable sales in the Americas decreased 12%. We experienced reduced traffic and lower conversion rates, as well as a decrease in average order value in the Americas. We have initiated an action plan to drive 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 4% and 5%, respectively, or decreased 2% and increased 6% on a constant dollar basis, respectively. China Mainland and Rest of World comparable sales decreased by 2% and 4%, respectively. We experienced lower conversion in these markets which led to a decrease in comparable sales. We opened 15 net new stores in China Mainland and 10 net new stores in Rest of World since the second quarter of 2025.

Across all markets, our business continues to be impacted by shifting consumer demand and brand sentiment and macroeconomic conditions, including trade policies, 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.

Import Tariffs

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

On February 20, 2026, the U.S. Supreme Court invalidated tariffs imposed under the IEEPA. The 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, 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 submitted refund claims for eligible IEEPA tariffs paid, including associated interest. During 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 be refunded, if any, remain uncertain, and as of August 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.

Because this is an evolving area, future developments may change our expectations materially. For additional information on related risks, please see “Risk Factors” in this report.

Other Factors Affecting Our Business

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