lululemon athletica inc. (LULU)
SIC breadcrumb: Manufacturing > SIC Major Group 23 > SIC 2300 Apparel & Other Finishd Prods of Fabrics & Similar Matl
SEC company page: https://www.sec.gov/edgar/browse/?CIK=1397187. Latest filing source: 0001397187-26-000020.
Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
|---|---|---|---|---|
| Revenue | 11,102,600,000 | USD | 2026 | 2026-03-17 |
| Net income | 1,579,183,000 | USD | 2026 | 2026-03-17 |
| Assets | 8,456,743,000 | USD | 2026 | 2026-03-17 |
Financials
Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-17. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001397187.json. Derived margins are computed from the extracted annual SEC facts.
| Metric | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 |
|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 2,649,181,000 | 3,288,319,000 | 3,979,296,000 | 4,401,879,000 | 6,256,617,000 | 8,110,518,000 | 9,619,278,000 | 10,588,126,000 | 11,102,600,000 | |
| Net income | 303,381,000 | 258,662,000 | 483,801,000 | 645,596,000 | 588,913,000 | 975,322,000 | 854,800,000 | 1,550,190,000 | 1,814,616,000 | 1,579,183,000 |
| Operating income | 421,152,000 | 456,001,000 | 705,836,000 | 889,110,000 | 819,986,000 | 1,333,355,000 | 1,328,408,000 | 2,132,676,000 | 2,505,697,000 | 2,210,615,000 |
| Gross profit | 1,199,617,000 | 1,398,790,000 | 1,816,287,000 | 2,223,386,000 | 2,463,991,000 | 3,608,565,000 | 4,492,340,000 | 5,609,405,000 | 6,270,811,000 | 6,284,132,000 |
| Diluted EPS | 2.21 | 1.90 | 3.61 | 4.93 | 4.50 | 7.49 | 6.68 | 12.20 | 14.64 | 13.26 |
| Assets | 1,657,541,000 | 1,998,483,000 | 2,084,711,000 | 3,281,354,000 | 4,185,215,000 | 4,942,478,000 | 5,607,038,000 | 7,091,941,000 | 7,603,292,000 | 8,456,743,000 |
| Liabilities | 297,568,000 | 401,523,000 | 638,736,000 | 1,329,136,000 | 1,626,649,000 | 2,202,432,000 | 2,458,239,000 | 2,859,860,000 | 3,279,245,000 | 3,494,903,000 |
| Stockholders' equity | 1,359,973,000 | 1,596,960,000 | 1,445,975,000 | 1,952,218,000 | 2,558,566,000 | 2,740,046,000 | 3,148,799,000 | 4,232,081,000 | 4,324,047,000 | 4,961,840,000 |
| Net margin | 9.76% | 14.71% | 16.22% | 13.38% | 15.59% | 10.54% | 16.12% | 17.14% | 14.22% | |
| Operating margin | 17.21% | 21.46% | 22.34% | 18.63% | 21.31% | 16.38% | 22.17% | 23.67% | 19.91% |
Financial Charts
Macro Cross-References
- CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- UNRATE - Unemployment Rate
- FEDFUNDS - Federal Funds Effective Rate
- CES0500000003 - Average Hourly Earnings of All Employees, Total Private
- DFEDTARU - Federal Funds Target Range - Upper Limit
- DFEDTARL - Federal Funds Target Range - Lower Limit
- DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
- CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
- CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
- PCEPI - Personal Consumption Expenditures: Chain-type Price Index
- PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- PPIACO - Producer Price Index by Commodity: All Commodities
- T10YIE - 10-Year Breakeven Inflation Rate
- U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- PAYEMS - All Employees, Total Nonfarm
- CIVPART - Labor Force Participation Rate
- EMRATIO - Employment-Population Ratio
- UNEMPLOY - Unemployed
- CE16OV - Employment Level
- ICSA - Initial Claims
- JTSJOL - Job Openings: Total Nonfarm
- JTSQUR - Quits: Total Nonfarm
- GDPC1 - Real Gross Domestic Product
- A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
- INDPRO - Industrial Production: Total Index
- TCU - Capacity Utilization: Total Index
- HOUST - New Privately-Owned Housing Units Started: Total Units
- PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- RSAFS - Advance Retail Sales: Retail Trade
- PCE - Personal Consumption Expenditures
- DSPIC96 - Real Disposable Personal Income
- PSAVERT - Personal Saving Rate
- M2SL - M2
- BOPGSTB - U.S. International Trade in Goods and Services: Balance
Latest 10-K MD&A
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. Components of this MD&A include:
•Overview
•Financial Highlights and Market Conditions and Trends
•Results of Operations
•Comparison of 2025 to 2024
•Comparable Sales and Sales Per Square Foot
•Non-GAAP Financial Measures
•Liquidity and Capital Resources
•Liquidity Outlook
•Contractual Obligations and Commitments
•Critical Accounting Policies and Estimates
Our fiscal year ends on the Sunday closest to January 31 of the following year, typically resulting in a 52-week year, but occasionally giving rise to an additional week, resulting in a 53-week year. Fiscal 2025 was a 52-week year and fiscal 2024 was a 53-week year. Net revenue for 2024 includes results from the 53rd week; however, comparable sales are calculated on a one-week shifted basis such that the 52 weeks ended February 1, 2026 are compared to the 52 weeks ended February 2, 2025 rather than January 26, 2025.
This discussion and analysis contains forward-looking statements based on current expectations that involve risks, uncertainties and assumptions, such as our plans, objectives, expectations, and intentions included in the "Special Note Regarding Forward-Looking Statements." Our actual results and the timing of events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those described under "Item 1A. Risk Factors" of this report. These statements speak only as of the date of this report, and we do not undertake to update them, except as required by law.
We use comparable sales as a metric to evaluate the performance of our business. Refer to the Comparable Sales and Sales Per Square Foot section of this MD&A for further information.
We provide constant dollar changes, which is a non-GAAP financial measure, as supplemental information to help investors understand the underlying growth rate of net revenue excluding the impact of changes in foreign currency exchange rates. Refer to the Non-GAAP Financial Measures section of this MD&A for reconciliations between the non-GAAP financial measures and the most directly comparable measures calculated in accordance with GAAP.
We disclose material non-public information through one or more of the following channels: our investor relations website (http://corporate.lululemon.com/investors), the social media channels identified on our investor relations website, press releases, SEC filings, public conference calls, and webcasts. Information contained on or accessible through our websites is not incorporated into, and does not form a part of, this annual report or any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.
Overview
In 2025, we delivered net revenue growth of 5%, with a 22% increase in our international regions offsetting a decrease of 1% in the Americas. Our international revenue growth was driven by a 29% increase in China Mainland, and a 16% increase in Rest of World.
By product category, we saw a 5% increase in women's, 4% growth in men's, and an 8% increase in accessories and other categories. We expanded our retail presence by adding 44 net new company-operated stores, contributing to an 11% increase in square footage. Company-operated store net revenue increased 1% and e-commerce net revenue increased 8%.
Operating margin decreased 380 basis points and diluted earnings per share decreased by 9%, mainly due to the impact from increased tariff rates in the United States, and the removal of the de minimis provision. We have taken mitigating actions, including selective price increases and vendor negotiations; however, we do not expect these actions to fully offset these incremental costs, and we believe tariffs and de minimis changes will continue to adversely affect gross margin and income from operations in 2026. See "Import Tariffs" below for additional information.
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Over the course of 2025, we repurchased 5.0 million shares for $1.2 billion, and in December 2025, our board of directors approved a $1.0 billion increase to our stock repurchase authorization.
Priorities and actions
We have experienced declining revenue trends in North America and have developed an action plan to drive improvement in this region, while maintaining revenue growth in our international businesses. Our action plan is structured around three strategic pillars: product creation, product activation, and enterprise efficiency.
Product Creation
The goal of our Product Creation pillar is to ensure we deliver the product that our guests expect from lululemon. We are leveraging our Science of Feel principles across our performance and lifestyle assortments. Work streams within this pillar include:
•Increasing the frequency and breadth of new styles. In 2025 new styles included Daydrift, Be Calm, Big Cozy, and Mile Maker. We are working to reinvigorate several of our key franchises including Scuba, Dance Studio, and ABC, while also maintaining a strong pipeline of new innovations across our performance offering.
•Improving our speed to market. We are executing initiatives intended to reduce our product development timelines, which we believe may support more timely introduction of new styles and innovation. In addition, we have been enhancing our chase capabilities, with the objective of enabling more responsive replenishment of select strong‑performing styles.
Product Activation
The aim of the Product Activation pillar is to ensure we are bringing our product to life for our guest in new and compelling ways across all channels. Work streams within this pillar include:
•Improving the in-store experience by maximizing the impact of our assortments through individual item count reduction, improving in-store storytelling by shifting product adjacencies, and enhancing visual merchandising.
•Improving the digital experience through continued enhancements to our website to elevate the guest experience and improve storytelling with the goal to increase conversion.
•Continued investment in integrated marketing with a plan focused on driving awareness and excitement for product newness and innovation across our performance and lifestyle assortments. We are leveraging our ambassadors as well as carefully sourced creators, with a focus on engaging guests through social channels and community activations.
Enterprise Efficiency
We continue to take actions in both the near and longer term to ensure we are operating as efficiently as possible. These actions help mitigate the cost of increased tariffs and current revenue trends in the Americas. These include enterprise-wide operating efficiency and cost-saving initiatives, selective price increases, and supply chain initiatives.
Financial Highlights
The summary below compares 2025 to 2024:
•Net revenue increased 5% to $11.1 billion.
•Comparable sales increased 2%.
–Americas comparable sales decreased 3%.
–China Mainland comparable sales increased 20%, or 19% on a constant dollar basis.
–Rest of World comparable sales increased 9%, or 7% on a constant dollar basis.
•Gross profit was consistent at $6.3 billion.
•Gross margin decreased 260 basis points to 56.6%.
•Income from operations decreased 12% to $2.2 billion.
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•Operating margin decreased 380 basis points to 19.9%.
•Income tax expense decreased 13% to $659.8 million. Our effective tax rate for 2025 was 29.5% compared to 29.6% for 2024.
•Diluted earnings per share were $13.26 for 2025 compared to $14.64 in 2024.
Market Conditions and Trends
Segment Trends
Net revenue in the Americas decreased 1% and comparable sales in the Americas decreased 3%. We experienced lower conversion rates, store traffic, and average order value in the Americas, partially reflective of certain product categories, including core categories, experiencing lower demand. The decline in Americas comparable sales also contributed to a decline in global sales per square foot. We experienced a decrease in product margin in the Americas segment of 340 basis points, primarily reflective of the impact of tariffs and increased markdowns. We have initiated an action plan to drive sustainable net revenue growth in the Americas, as outlined in the overview section, which includes a plan to reduce the percentage of markdowns on our products.
Net revenue in China Mainland and Rest of World increased 29% and 16%, and comparable sales increased 20% and 9%, respectively. We experienced increased traffic in these markets partially due to brand awareness and product category growth, which led to higher comparable sales, and opening 21 net new stores in China Mainland and nine net new stores in Rest of World contributed to the respective increases in net revenue.
Across all markets, our business continues to be influenced by macroeconomic conditions, including trade policies, shifting consumer demand, 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 2026 and beyond.
Import Tariffs
On April 2, 2025, the U.S. Administration announced the implementation of a 10% baseline tariff on imports from nearly all countries with higher country-specific tariff rates scheduled to begin April 9, 2025. Subsequently, certain countries, including Vietnam, announced trade deals with the United States and most negotiated tariff rates are higher than the 10% baseline rate. The U.S. Administration eliminated the de minimis exemption for all countries effective August 29, 2025, with legislation enacted to repeal the statutory exemption entirely by July 1, 2027.
These changes in the tariff landscape, including the de minimis removal, had a significant adverse effect on our business and results of operations. The countries from which we source the majority of our products are now subject to higher tariffs on imports into the United States. Further, the majority of our sales to U.S. e-commerce guests are currently fulfilled from distribution centers in Canada, and historically a significant proportion of these orders qualified for the de minimis exemption. The removal of this exemption increased the cost of fulfilling those orders. The unmitigated impact of increased tariffs and the removal of the de minimis exemption resulted in a reduction to gross profit for 2025 of approximately $275 million. As part of our enterprise efficiency efforts, we continue to take actions in both the near and longer term to help mitigate the cost of increased tariffs.
On February 20, 2026, the U.S. Supreme Court invalidated tariffs imposed under the International Emergency Economic Power Act ("IEEPA"). Immediately following this IEEPA decision, the U.S. Administration 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. In 2025, we remitted $216 million of tariffs under the IEEPA; however, the IEEPA decision did not address the processes or timing for refund claims, and the ultimate amounts, if any, that we may recover remain uncertain.
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. Based on the current landscape, mitigating actions are not expected to fully offset the effect of imposed tariffs and the removal of the de minimis exemption, and we expect continued decline in our gross margin and operating margin in 2026.
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.
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Our updated forecasts, inclusive of the trends above, resulted in changes in the probability of achieving performance conditions of performance-based restricted stock units. Therefore, we recognized a reversal of stock-based compensation expense of $26.3 million during the second quarter of 2025.
Other Factors Affecting Our Business
Foreign currency fluctuations positively impacted our financial results during 2025, increasing net revenue growth by $27.6 million compared to 2024. We expect ongoing exchange rate volatility to continue affecting our financial results.
The OBBBA includes, among other provisions, the permanent extension of certain provisions of the Tax Cuts and Jobs Act, the reinstatement of 100% bonus depreciation, the immediate expensing of qualifying research and development costs, and modifications to the international tax framework including changes to global intangible low-tax income, the base erosion and anti-abuse tax, and foreign-derived intangible income. Based on our current evaluation of the legislation, we do not expect these tax law changes to have a material impact on our consolidated financial statements. We will continue to assess the potential impacts of OBBBA as additional regulatory guidance becomes available.
Results of Operations
The following table summarizes key components of our results of operations for the periods indicated:
2025
2024
2025
2024
(In thousands)
(Percentage of net revenue)
Net revenue
$
11,102,600
$
10,588,126
100.0
%
100.0
%
Cost of goods sold
4,818,468
4,317,315
43.4
40.8
Gross profit
6,284,132
6,270,811
56.6
59.2
Selling, general and administrative expenses
4,066,556
3,762,379
36.6
35.5
Amortization of intangible assets
6,961
2,735
0.1
—
Income from operations
2,210,615
2,505,697
19.9
23.7
Other income (expense), net
28,352
70,380
0.3
0.7
Income before income tax expense
2,238,967
2,576,077
20.2
24.3
Income tax expense
659,784
761,461
5.9
7.2
Net income
$
1,579,183
$
1,814,616
14.2
%
17.1
%
Comparison of 2025 to 2024
Net Revenue
2025
2024
2025
2024
Year over year change
(In thousands)
(Percentage of net revenue)
(In thousands)
(Percentage)
(Constant dollar change)
Americas
$
7,847,044
$
7,928,156
70.7
%
74.9
%
$
(81,112)
(1)
%
(1)
%
China Mainland
1,754,799
1,361,337
15.8
12.9
393,462
29
28
Rest of World
1,500,757
1,298,633
13.5
12.3
202,124
16
14
Net revenue
$
11,102,600
$
10,588,126
100.0
%
100.0
%
$
514,474
5
%
5
%
The increase in net revenue was primarily due to increased China Mainland and Rest of World net revenue. Comparable sales increased 2%. The increase in comparable sales was primarily a result of higher e-commerce traffic, partially offset by lower conversion rates and a decrease in average order value. We had total net revenue of $163.2 million during the 53rd week of 2024, which partially offset the increase in net revenue.
Gross Margin
2025
2024
Year over year change
(In thousands)
(In thousands)
(Percentage)
Gross profit
$
6,284,132
$
6,270,811
$
13,321
0.2
%
Gross margin
56.6
%
59.2
%
(260) basis points
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The decrease in gross margin was primarily due to:
•a net decrease in product margin of 230 basis points, comprised of:
–a net decrease of 240 basis points primarily from higher tariffs, as well as increased markdowns and new credit card affiliate programs. This was partially offset by higher pricing, lower product costs, and lower damages; and
–a favorable 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:
–an increase in occupancy and depreciation costs of 40 basis points; and
–a decrease in costs related to our product departments of 10 basis points.
Selling, General and Administrative Expenses
2025
2024
Year over year change
(In thousands)
(In thousands)
(Percentage)
Selling, general and administrative expenses
$
4,066,556
$
3,762,379
$
304,177
8.1
%
Selling, general and administrative expenses as a % of net revenue
36.6
%
35.5
%
110 basis points
The increase in selling, general and administrative expenses was primarily due to:
•an increase in costs related to our operating channels of $204.8 million, comprised of:
–an increase in employee costs of $77.0 million primarily due to increased salaries and wages expense for retail employees primarily due to increased labor hours, partially offset by decreased incentive compensation and benefit costs;
–an increase in digital marketing expenses of $49.0 million;
–an increase in variable costs of $38.8 million primarily due to higher credit card fees, distribution costs, and packaging costs as a result of higher net revenue;
–an increase in occupancy and depreciation costs of $22.5 million;
–an increase in technology costs of $9.5 million; and
–an increase in other operating costs of $8.0 million.
•an increase in head office costs of $67.3 million, comprised of:
–an increase in technology costs, including software support and licensing, of $32.9 million;
–an increase in depreciation of $15.0 million;
–an increase in contractor, advisory, and professional fees of $12.4 million, which includes costs associated with proxy contest matters of $5.1 million in 2025;
–an increase in brand and community expenses of $7.8 million;
–an increase in other head office costs of $4.9 million; and
–a decrease in employee costs of $5.7 million primarily due to decreased incentive compensation, including 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 and executive transition costs of $15.2 million in 2025.
•an increase in net foreign currency exchange and derivative revaluation losses of $32.1 million.
Selling, general and administrative expenses as a percentage of net revenue increased 110 basis points, primarily due to an increase in costs related to our operating channels of 90 basis points. Executive transition costs contributed 10 basis points to the increase.
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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
2025
2024
Year over year change
(In thousands)
(In thousands)
(Percentage)
Net revenue
$
7,847,044
$
7,928,156
$
(81,112)
(1.0)
%
Product costs
2,585,483
2,336,251
249,232
10.7
Other cost of sales
674,020
641,699
32,321
5.0
Gross profit
4,587,541
4,950,206
(362,665)
(7.3)
Selling, general and administrative expenses
2,026,883
1,934,649
92,234
4.8
Segmented income from operations
$
2,560,658
$
3,015,557
$
(454,899)
(15.1)
%
Product margin
67.1
%
70.5
%
(340) basis points
Gross margin
58.5
%
62.4
%
(390) basis points
Selling, general and administrative expenses as a % of net revenue
25.8
%
24.4
%
140 basis points
Segmented income from operations as a % of net revenue
32.6
%
38.0
%
(540) basis points
The decrease in net revenue was primarily due to a decrease in comparable sales, which decreased 3%. 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, which was partially driven by the impact of credit card affiliate programs. Net revenue during the 53rd week of 2024 was $118.0 million, which also contributed to the decrease in net revenue. The decrease in net revenue was partially offset by a $192.4 million increase from new or expanded company-operated stores and our other channels. We have opened 14 net new company-operated stores since 2024.
The decrease in gross margin was primarily due to lower product margin driven by higher tariffs and increased markdowns, as well as higher occupancy costs as a percentage of net revenue.
The increase in selling, general and administrative expenses was primarily due to higher marketing expenses and employee costs.
China Mainland
2025
2024
Year over year change
(In thousands)
(In thousands)
(Percentage)
Net revenue
$
1,754,799
$
1,361,337
$
393,462
28.9
%
Product costs
414,504
324,237
90,267
27.8
Other cost of sales
221,680
198,373
23,307
11.7
Gross profit
1,118,615
838,727
279,888
33.4
Selling, general and administrative expenses
417,492
328,868
88,624
26.9
Segmented income from operations
$
701,123
$
509,859
$
191,264
37.5
%
Product margin
76.4
%
76.2
%
20 basis points
Gross margin
63.7
%
61.6
%
210 basis points
Selling, general and administrative expenses as a % of net revenue
23.8
%
24.2
%
(40) basis points
Segmented income from operations as a % of net revenue
40.0
%
37.5
%
250 basis points
The increase in net revenue was primarily due to an increase in comparable sales, which increased 20%, or 19% on a constant dollar basis. The increase in comparable sales was primarily a result of higher e-commerce traffic, partially offset by a decrease in average order value. The increase in net revenue was also driven by a $166.9 million increase in net revenue from new or expanded company-operated stores and our other channels. We have opened 21 net new company-operated stores since 2024. Net revenue during the 53rd week of 2024 was $23.6 million, which partially offset the increase in net revenue.
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The increase in gross margin was primarily due to lower occupancy and depreciation costs as a percentage of net revenue.
The increase in selling, general and administrative expenses was primarily due to higher employee costs and marketing expenses, as well as higher variable costs.
Rest of World
2025
2024
Year over year change
(In thousands)
(In thousands)
(Percentage)
Net revenue
$
1,500,757
$
1,298,633
$
202,124
15.6
%
Product costs
428,044
364,906
63,138
17.3
Other cost of sales
255,756
217,536
38,220
17.6
Gross profit
816,957
716,191
100,766
14.1
Selling, general and administrative expenses
471,056
401,245
69,811
17.4
Segmented income from operations
$
345,901
$
314,946
$
30,955
9.8
%
Product margin
71.5
%
71.9
%
(40) basis points
Gross margin
54.4
%
55.1
%
(70) basis points
Selling, general and administrative expenses as a % of net revenue
31.4
%
30.9
%
50 basis points
Segmented income from operations as a % of net revenue
23.0
%
24.3
%
(130) basis points
The increase in net revenue was primarily due to a $121.4 million increase in net revenue from new or expanded company-operated stores and our other channels, including from an increased number of locations operated by third parties under license and supply arrangements. We have opened nine net new company-operated stores since 2024. The increase in net revenue was also driven by an increase in comparable sales, which increased 9%, or 7% on a constant dollar basis. The increase in comparable sales was primarily a result of higher traffic, partially offset by lower conversion rates and a decrease in average order value. Net revenue during the 53rd week of 2024 was $21.7 million, which partially offset the increase in net revenue.
The decrease in gross margin was primarily due to lower product margin and higher 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 marketing expenses and variable costs.
Corporate
Corporate expenses increased $62.4 million to $1.4 billion in 2025 compared to 2024. The increase in corporate expenses is primarily due to an increase in net foreign currency exchange and derivative revaluation losses of $32.1 million and higher technology costs, as well as higher depreciation costs. The increase in corporate expenses was partially offset by lower employee costs and marketing expenses.
Other Income (Expense), Net
2025
2024
Year over year change
(In thousands)
(In thousands)
(Percentage)
Other income (expense), net
$
28,352
$
70,380
$
(42,028)
(59.7)
%
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.
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Income Tax Expense
2025
2024
Year over year change
(In thousands)
(In thousands)
(Percentage)
Income tax expense
$
659,784
$
761,461
$
(101,677)
(13.4)
%
Effective tax rate
29.5
%
29.6
%
(10) basis points
The decrease in the effective tax rate was primarily due to lower tax rates on foreign-derived intangible income ("FDII") and tax benefits related to foreign exchange losses. The decrease in the effective tax rate was partially offset by an increase in nondeductible expenses in international jurisdictions.
Net Income
2025
2024
Year over year change
(In thousands)
(In thousands)
(Percentage)
Net income
$
1,579,183
$
1,814,616
$
(235,433)
(13.0)
%
The decrease in net income in 2025 was primarily due to an increase in selling, general and administrative expenses of $304.2 million and a decrease in other income (expense), net of $42.0 million, partially offset by a decrease in income tax expense of $101.7 million and an increase in gross profit of $13.3 million.
Comparable Sales and Sales Per Square Foot
Comparable Sales
We use comparable sales to evaluate the performance of our company-operated store and e-commerce businesses from an omni-channel perspective. It allows us to monitor the performance of our business without the impact of recently opened or expanded stores. We believe investors would similarly find these metrics useful in assessing the performance of our business. The comparable sales measures we report may not be equivalent to similarly titled measures reported by other companies.
Comparable sales includes comparable company-operated store and all e-commerce net revenue. E-commerce net revenue includes buy online pick up in store, back-back room, and ship from store net revenue in addition to our websites, other region-specific websites, third-party online marketplaces, and mobile apps. Our back-back room capability allows our store educators to access inventory located at our other locations and have product shipped directly to a guest's address or a store. Comparable company-operated stores have been open, or open after being significantly expanded, for at least 12 full fiscal months. Net revenue from a company-operated store is included in comparable sales beginning with the month for which the store has a full fiscal month of sales in the prior year. Comparable sales excludes sales from new stores that have not been open for at least 12 full fiscal months, from stores which have not been in their significantly expanded space for at least 12 full fiscal months, from stores which have been temporarily relocated for renovations or temporarily closed, and sales from company-operated stores that have closed. Comparable sales also excludes sales from our selling channels other than company-operated stores and e-commerce.
Company-operated stores acquired as a result of the acquisition of the Mexico operations were considered comparable beginning October 2025, after 12 full fiscal months of sales from the date of acquisition. Prior to the acquisition, wholesale sales were made to a third party under a license and supply arrangement.
In fiscal years with 53 weeks, the 53rd week of net revenue is excluded from the calculation of comparable sales. In the year following a 53-week year, the prior year period is shifted by one week to compare similar calendar weeks.
Sales Per Square Foot
We use sales per square foot to assess the performance of our company-operated stores relative to their square footage. We believe that sales per square foot is useful in evaluating the performance of our company-operated stores. Sales per square foot is calculated using total net revenue from all company-operated stores divided by the average ending square footage of the stores for each period during the year. In fiscal years with 53 weeks, the 53rd week of net revenue is excluded from the calculation of sales per square foot. The square footage of our company-operated stores includes all retail related space, including selling space as well as storage and back-office areas. The sales per square foot metric we report may not be equivalent to similarly titled metrics reported by other companies.
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Non-GAAP Financial Measures
We report certain financial metrics on a constant dollar basis, which is a non-GAAP financial measure.
A constant dollar basis assumes the average foreign currency exchange rates for the period remained constant with the average foreign currency exchange rates for the same period of the prior year. We use constant dollar metrics to facilitate comparison of underlying performance excluding the impact of changes in foreign currency exchange rates. Management uses these constant currency metrics internally when reviewing and assessing financial performance.
These non-GAAP financial measures are provided in addition to, and not a substitute for, the corresponding financial measures calculated in accordance with GAAP. A reconciliation of the non-GAAP financial measures follows, which includes more detail on the GAAP financial measure that is most directly comparable to each non-GAAP financial measure, and the related reconciliations between these financial measures. Our non-GAAP financial measures may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures reported by other companies.
Constant Dollar Changes
The below changes in net revenue show the change compared to the corresponding period in the prior year. Due to the 53rd week in 2024, comparable sales are calculated on a one-week shifted basis such that the 52 weeks ended February 1, 2026 are compared to the 52 weeks ended February 2, 2025 rather than January 26, 2025.
2025 Compared to 2024
Change
Foreign exchange changes
Change in constant dollars
Net Revenue
Americas
(1)
%
—
%
(1)
%
China Mainland
29
(1)
28
Rest of World
16
(2)
14
Total net revenue
5
%
—
%
5
%
Comparable sales(1)
Americas
(3)
%
—
%
(3)
%
China Mainland
20
(1)
19
Rest of World
9
(2)
7
Total comparable sales
2
%
—
%
2
%
__________
(1)Comparable sales includes comparable company-operated store and e-commerce net revenue.
Liquidity and Capital Resources
Our primary sources of liquidity are our current balances of cash and cash equivalents, cash flows from operations, and capacity under our committed revolving credit facility, including to fund short-term working capital requirements. Our primary cash needs are capital expenditures for opening new stores and remodeling or relocating existing stores, investing in our distribution centers, investing in technology and making system enhancements, funding working capital requirements, and making other strategic capital investments. We may also use cash to repurchase shares of our common stock. Cash and cash equivalents in excess of our needs are held in interest-bearing accounts with financial institutions, as well as in money market funds and term deposits.
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The following table summarizes our net cash flows provided by and used in operating, investing, and financing activities for the periods indicated:
2025
2024
Year over year change
(In thousands)
Total cash provided by (used in):
Operating activities
$
1,602,477
$
2,272,713
$
(670,236)
Investing activities
(662,118)
(798,174)
136,056
Financing activities
(1,208,656)
(1,652,508)
443,852
Effect of foreign currency exchange rate changes on cash and cash equivalents
91,163
(81,666)
172,829
Increase (decrease) in cash and cash equivalents
$
(177,134)
$
(259,635)
$
82,501
Operating Activities
Net income decreased $235.4 million. The decrease in cash provided by operating activities was primarily as a result of a decrease in cash flows from changes in operating assets and liabilities of $357.5 million, primarily driven by the timing of income tax payments due to timing of foreign tax installment payments, accounts receivable, and inventory purchases, partially offset by the timing of accounts payable and changes in accrued compensation. The decrease in cash provided by operating activities was also a result of decreased deferred income taxes and lower stock-based compensation expense, partially offset by increased depreciation and higher cash inflows related to derivatives.
Investing Activities
The decrease in cash used in investing activities was primarily due to the acquisition of the lululemon branded retail locations and operations run by a third party in Mexico in 2024. Please refer to Note 7. Acquisition included in Item 8 of Part II of this Annual Report on Form 10-K for further information. The decrease in cash used in investing activities was also due to decreased capital expenditures primarily due to a decrease in corporate and supply chain related infrastructure capital expenditures, partially offset by an increase in capital expenditures for opening, remodeling, and relocating company-operated stores, primarily in the Americas and China Mainland. The decrease in cash used in investing activities was partially offset by the settlement of net investment hedges.
Financing Activities
The decrease in cash used in financing activities was primarily the result of a decrease in cash paid for our stock repurchases. During 2025, we repurchased 5.0 million shares at a total cost including commissions and excise taxes of $1.2 billion. During 2024, we repurchased 5.1 million shares at a total cost including commissions and excise taxes of $1.6 billion. The common stock was repurchased in the open market at prevailing market prices, including under plans complying with the provisions of Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934, with the timing and actual number of shares repurchased depending upon market conditions, eligibility to trade, and other factors.
Liquidity Outlook
We believe our cash and cash equivalent balances, cash generated from operations, and borrowings available to us under our committed revolving credit facility will be adequate to meet our liquidity needs and capital expenditure requirements for at least the next 12 months. Our ability to access borrowings under the credit facility depends on our ongoing compliance with the covenants in the credit agreement, and a failure to maintain such compliance could adversely affect our liquidity. Our cash from operations may be negatively impacted by a decrease in demand for our products as well as the other factors described in "Item 1A. Risk Factors". In addition, we may make discretionary capital improvements with respect to our stores, distribution facilities, headquarters, or systems, or we may repurchase shares under an approved stock repurchase program, which we would expect to fund through the use of cash, issuance of debt or equity securities or other
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external financing sources to the extent we were unable to fund such expenditures out of our cash and cash equivalents and cash generated from operations.
The following table includes certain measures of our liquidity:
February 1, 2026
(In thousands)
Cash and cash equivalents
$
1,807,202
Working capital(1) excluding cash and cash equivalents
567,951
Capacity under committed revolving credit facility
593,635
__________
(1)Working capital is calculated as current assets of $4.3 billion less current liabilities of $1.9 billion.
Capital expenditures are expected to range between $725.0 million and $745.0 million in 2026.
Our current commitments with respect to inventory purchases are included within our purchase obligations outlined below. The timing and cost of our inventory purchases will vary depending on a variety of factors such as revenue growth, assortment and purchasing decisions, product costs including freight and duty, and the availability of production capacity and speed. Our inventory balance as of February 1, 2026 was $1.7 billion, an increase of 18% from February 2, 2025. We expect that our inventories will increase in the mid-single digits by the end of 2026. On a unit basis, we expect inventories to slightly decrease.
Our existing Americas credit facility provides for $600.0 million in commitments under an unsecured five-year revolving credit facility. The credit facility has a maturity date of October 15, 2030. As of February 1, 2026, no borrowings were outstanding under this facility other than letters of credit and guarantee of $6.4 million. Further information regarding our credit facilities and associated covenants is outlined in Note 13. Revolving Credit Facilities included in Item 8 of Part II of this report.
Contractual Obligations and Commitments
Leases. We lease certain store and other retail locations, distribution centers, offices, and equipment under non-cancelable operating leases. Our leases generally have initial terms of between two and 15 years, and generally can be extended in increments between two and five years, if at all. The following table details our future minimum lease payments. Minimum lease commitments exclude variable lease expenses including contingent rent payments, common area maintenance, property taxes, and landlord's insurance.
Purchase obligations. The amounts listed for purchase obligations in the table below represent agreements (including open purchase orders) to purchase products and for other expenditures in the ordinary course of business that are enforceable and legally binding and that specify all significant terms. In some cases, values are subject to change, such as for product purchases throughout the production process. The reported amounts exclude liabilities included in our consolidated balance sheets as of February 1, 2026.
The following table summarizes our contractual arrangements due by fiscal year as of February 1, 2026, and the timing and effect that such commitments are expected to have on our liquidity and cash flows in future periods:
Total
2026
2027
2028
2029
2030
Thereafter
(In thousands)
Operating leases (minimum rent)
$
2,103,820
$
370,705
$
391,976
$
334,124
$
287,375
$
182,005
$
537,635
Purchase obligations
631,644
578,093
16,347
24,204
13,000
—
—
As of February 1, 2026, our minimum operating lease commitment for distribution center operating leases which have been committed to, but not yet commenced, was $278.5 million, which is not reflected in the table above.
We enter into standby letters of credit to secure certain of our obligations, including leases, taxes, and duties. As of February 1, 2026, letters of credit and letters of guarantee totaling $14.5 million had been issued, including $6.4 million under our committed revolving credit facility.
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Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions. Predicting future events is inherently an imprecise activity and, as such, requires the use of significant judgment. Actual results may vary from our estimates in amounts that may be material to the financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our consolidated financial statements. Management has reviewed these critical accounting policies and estimates and discussed them with the audit committee.
Our critical accounting policies, estimates, and judgments are as follows, and see Note 2. Summary of Significant Accounting Policies included in Item 8 of Part II for additional information:
Inventory provision
Inventory is valued at the lower of cost and net realizable value. We periodically review our inventories and make a provision for obsolescence and goods that have quality issues or that are damaged. We record a provision at an amount that is equal to the difference between the inventory cost and its net realizable value. As of February 1, 2026, the net carrying value of our inventories was $1.7 billion, which included provisions for obsolete and damaged inventory of $87.1 million. The provision is determined based upon assumptions about product quality, damages, future demand, selling prices, and market conditions. A decrease in product demand due to changing consumer preferences, or increased competition could impact the Company's evaluation of its inventory, and additional reserves might be required.
Deferred taxes on undistributed net investment of foreign subsidiaries.
We have not recognized U.S. state income taxes and foreign withholding taxes on the net investment in our subsidiaries which we have determined to be indefinitely reinvested. This determination is based on the cash flow projections and operational and fiscal objectives of each of our foreign subsidiaries. Such estimates are inherently imprecise since many assumptions utilized in the projections are subject to revision in the future.
For the portion of our net investment in our Canadian subsidiaries that is not indefinitely reinvested, we have recorded a deferred tax liability for the taxes which would be due upon repatriation. For distributions made by our Canadian subsidiaries, the amount of tax payable is partially dependent on how the repatriation transactions are made. The deferred tax liability has been recorded on the basis that we would choose to make the repatriation transactions in the most tax-efficient manner. Specifically, to the extent that the Canadian subsidiaries have sufficient paid-up capital, any such distributions would be made as a return of capital, rather than as a dividend, and therefore would not be subject to Canadian withholding tax.
As of February 1, 2026, the net investment in our Canadian subsidiaries was $3.3 billion, of which $1.6 billion was determined to be indefinitely reinvested. The paid-up capital balance of the Canadian subsidiaries was approximately $368.7 million.
We have recognized a deferred tax liability of $80.7 million as of February 1, 2026 which represents the Canadian withholding taxes payable on the portion of our Canadian earnings and other foreign earnings that are not indefinitely reinvested and cannot be repatriated as a return of capital, and U.S. state income taxes payable upon repatriation of the amounts which are not indefinitely reinvested.
In future periods, if the net investment in our Canadian subsidiaries and other foreign subsidiaries continues to grow, whether due to the accumulation of profits by these subsidiaries or due to a change in the amount that is indefinitely reinvested, we will record additional deferred tax liabilities, including both Canadian and foreign withholding taxes for the amounts in excess of the paid-up capital balance and U.S. state income taxes.
Contingencies
We are involved in legal proceedings regarding contractual and employment relationships and a variety of other matters. We record contingent liabilities when a loss is assessed to be probable and its amount is reasonably estimable. If it is reasonably possible that a material loss could occur through ongoing litigation, we provide disclosure in the footnotes to our financial statements. Assessing probability of loss and estimating the amount of probable losses requires analysis of multiple factors, including in some cases judgments about the potential actions of third-party claimants and courts. Should we experience adverse court judgments or should negotiated outcomes differ to our expectations with respect to such ongoing litigation, it could have a material adverse effect on our results of operations, financial position, and cash flows.
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