lululemon athletica inc.

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

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

Net Revenue

The decrease in net revenue was primarily due to decreased Americas net revenue, partially offset by increased Rest of World and China Mainland net revenue. Global comparable sales decreased 9%, or 10% on a constant dollar basis, primarily as a result of lower conversion rates, as well as reduced store traffic and a decrease in average order value, partially offset by higher e-commerce traffic.

Gross Margin

The increase in gross margin was primarily due to a net increase in product margin of 430 basis points, comprised of:

•an increase of 560 basis points related to IEEPA tariff refunds;

•a net decrease of 150 basis points primarily from higher tariffs, as well as markdowns including credit card affiliate programs, partially offset by higher pricing and lower product costs; and

•a favorable impact of foreign currency exchange rates of 20 basis points.

The increase in gross margin was partially offset by a net increase in other cost of sales as a percentage of net revenue of 230 basis points, comprised of:

•an increase in occupancy and depreciation costs of 180 basis points, 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 50 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 $45.8 million, comprised of:

–an increase in contractor, advisory, and professional services of $14.6 million, which includes costs associated with proxy contest matters of $13.4 million in the second quarter of 2026;

–an increase in brand and community expenses of $14.1 million;

–an increase in employee costs of $7.6 million primarily due to the reversal of stock-based compensation recorded in the second quarter of 2025 and higher wage rates. The increase was partially offset by lower bonus expense due to business performance;

–an increase in technology costs, including cloud computing amortization, of $6.9 million;

–an increase in depreciation of $6.4 million; and

–a decrease in other head office costs of $3.8 million.

•a net increase in costs related to our operating channels of $7.7 million, comprised of:

–an increase in employee costs of $5.1 million;

–an increase in technology costs of $1.7 million;

–an increase in digital marketing expenses of $0.9 million;

–an increase in other operating costs of $4.2 million; and

–a decrease in variable costs of $4.2 million primarily due to lower packaging costs and credit card fees.

•a decrease in net foreign currency exchange and derivative revaluation gains of $1.2 million.

Selling, general and administrative expenses as a percentage of net revenue increased 400 basis points primarily due to an increase in head office costs of 260 basis points and an increase in costs related to our operating channels of 130 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 12%. The decrease in comparable sales was primarily a result of reduced traffic and lower conversion rates, as well as a decrease in average order value. The decrease in net revenue was partially offset by a $29.5 million increase from new or expanded company-operated stores and our other channels, including from sales to wholesale accounts and outlets. We have opened 16 net new company-operated stores in the Americas since the second quarter of 2025.

The increase in gross margin was primarily due to higher product margin driven by an increase of 830 basis points related to IEEPA tariff refunds, partially offset by higher other tariffs. The increase in gross margin was partially offset by higher occupancy, depreciation, and distribution center costs as a percentage of net revenue.

The decrease in selling, general and administrative expenses was primarily due to lower employee costs as well as lower variable costs.

China Mainland

The increase in net revenue was primarily due to a $23.0 million increase in net revenue from new or expanded company-operated stores and our other channels. We have opened 15 net new company-operated stores in China Mainland since the second quarter of 2025. The increase in net revenue was partially offset by a decrease in comparable sales, which decreased 2%, or 8% on a constant dollar basis. The decrease in comparable sales was primarily a result of lower conversion rates, partially offset by higher traffic.

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

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

Rest of World

The increase in net revenue was primarily due to a $30.2 million increase in net revenue from new or expanded company-operated stores and our other channels, including from outlets and an increased number of locations operated by third parties under license and supply arrangements. We have opened 10 net new company-operated stores in Rest of World since the second quarter of 2025. The increase in net revenue was partially offset by a decrease in comparable sales, which decreased 4%, or 3% on a constant dollar basis. The decrease in comparable sales was primarily a result of lower conversion rates as well as reduced store traffic, partially offset by higher e-commerce traffic and an increase in average order value.

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

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

Corporate

Corporate expenses increased $37.7 million to $367.0 million in the second quarter of 2026 compared to the second quarter of 2025. The net increase was primarily due to higher employee costs, professional fees, technology costs, and depreciation. Corporate expenses also increased due to a decrease in net foreign currency exchange and derivative gains of $1.2 million.

Other Income (Expense), Net

The increase in other income (expense), net was primarily due to an increase in interest income driven by $4.1 million in interest associated with IEEPA tariff refunds.

Income Tax Expense

The decrease in the effective tax rate was primarily due to a decrease in non-deductible expenses in international jurisdictions, partially offset by adjustments upon the filing of income tax returns and lower research and development tax credits.

Net Income

The decrease in net income was primarily due to an increase in selling, general and administrative expenses of $54.7 million and a decrease in gross profit of $15.3 million, which included $134.5 million of IEEPA tariff refunds. The decrease in net income was partially offset by a decrease in income tax expense of $24.5 million and an increase in other income (expense), net of $4.0 million.