Overview

lululemon athletica inc. is a designer, distributor, and retailer of technical athletic apparel, footwear, and accessories. The company’s mission is to inspire the world to sweat, grow, and connect. lululemon offers a comprehensive line of products marketed under the lululemon brand, including pants, shorts, tops, jackets, and fitness-inspired accessories.

Financial Highlights

• Net revenue decreased 4% to $2.4 billion, or 5% on a constant dollar basis.
• Comparable sales decreased 9%, or 10% on a constant dollar basis.
• Gross profit decreased 1% to $1.5 billion, which includes $134.5 million of tariff refunds.
• Gross margin increased 200 basis points to 60.5%, including a 560 basis point increase from the tariff refunds.
• Income from operations decreased 13% to $453.7 million, which includes the tariff refunds.
• Operating margin decreased 190 basis points to 18.8%, including a 560 basis point increase from the tariff refunds.
• Diluted earnings per share were $2.92 compared to $3.10 in the prior year quarter, including $0.86 per share related to the tariff refunds.

Market Conditions and Trends

• Net revenue in the Americas decreased 8% and comparable sales decreased 12%, due to reduced traffic, lower conversion rates, and a decrease in average order value.
• 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, with lower conversion rates leading to a decrease in comparable sales.
• The business continues to be impacted by shifting consumer demand, brand sentiment, and macroeconomic conditions, including trade policies, foreign currency fluctuations, and geopolitical instability.

Import Tariffs

• The company paid $230 million in tariffs under the IEEPA and has submitted refund claims, receiving $134.5 million in refunds during the quarter.
• There remains uncertainty regarding the duration and scope of newly initiated tariffs, as well as potential legal challenges.

Segment Results

• Americas segment income from operations decreased 4.0% due to lower net revenue and gross margin.
• China Mainland segment income from operations increased 15.7% driven by higher net revenue and gross margin.
• Rest of World segment income from operations decreased 7.7% due to lower gross margin.
• Corporate expenses increased $37.7 million, primarily due to higher employee costs, professional fees, and technology costs.

Liquidity and Capital Resources

• Cash and cash equivalents were $1.4 billion as of August 2, 2026.
• The company has $593.7 million in capacity under its committed revolving credit facility.
• Net cash provided by operating activities was $589.3 million in the first two quarters of 2026, an increase of $379.6 million compared to the prior year period.

Outlook

The company continues to face challenges from shifting consumer demand, macroeconomic conditions, and trade policies, which are expected to impact the business throughout the remainder of 2026 and beyond. However, the company believes its cash, cash flows, and credit facility will be adequate to meet its liquidity needs for at least the next 12 months.