Financial Data and Key Metrics Changes - For Q2, total net revenue rose 7% to $2.5 billion, with comparable sales increasing 1% [26] - Gross profit was $1.48 billion, representing 58.5% of net revenue, down from 59.6% in Q2 2024 [27][28] - Net income for the quarter was $371 million, or $3.10 per diluted share, compared to $3.15 in the same period last year [30] Business Line Data and Key Metrics Changes - Men's revenue increased 6%, women's revenue increased 5%, and accessories and other grew 15% [27] - Performance apparel continues to grow, while lounge and social product offerings have become stale, impacting sales negatively [12][13] Market Data and Key Metrics Changes - In the U.S., revenue was flat, with comparable sales down 3% [26] - China revenue increased 25%, with comparable sales up 16% [27] - The rest of the world segment saw a revenue growth of 19%, with comparable sales increasing by 9% [27] Company Strategy and Development Direction - The company is focusing on increasing the number and frequency of new styles in its product assortment, aiming to raise new styles from 23% to 35% [16] - A new Chief AI and Technology Officer has been appointed to enhance product innovation and agility [18] - The company plans to navigate increased costs from tariffs through strategic pricing and supply chain initiatives [25][22] Management's Comments on Operating Environment and Future Outlook - Management expressed dissatisfaction with current U.S. results and acknowledged the need for product innovation to meet consumer expectations [6][24] - The company expects revenue growth of 4% to 6% for the year, with a decline in U.S. revenue projected at 1% to 2% [22][32] - Management remains optimistic about international growth, particularly in China, where growth is expected to be 20% to 25% [22][32] Other Important Information - The company ended the quarter with $1.16 billion in cash and cash equivalents, and inventory increased 21% to $1.7 billion [31] - Capital expenditures for the quarter were approximately $178 million, reflecting timing of store openings [31] Q&A Session Summary Question: What changes are being made in the product department? - The focus is on maintaining momentum in performance activities, introducing new styles in lounge and social, and refreshing iconic items [46] Question: How are recent tariff increases affecting pricing strategy? - Modest price increases are being instituted on a small portion of the assortment, with ongoing evaluations of pricing strategies [49] Question: What is the right mix of casual and performance products? - A 60/40 split is considered a good benchmark, with ongoing adjustments based on consumer response to new styles [53] Question: How will the company manage inventory and course corrections before 2026? - New processes are in place to improve agility and speed in responding to consumer demand [79] Question: What impact does the de minimis exemption removal have on e-commerce? - Approximately two-thirds of U.S. e-commerce orders are fulfilled through Canada, and the removal of the exemption has a significant impact [80]

Financial Data and Key Metrics Changes - For Q2, total net revenue rose 7% to $2.5 billion, with comparable sales increasing 1% [25][26] - Gross profit was $1.48 billion, representing 58.5% of net revenue, down from 59.6% in Q2 2024 [26][27] - Net income for the quarter was $371 million, or $3.10 per diluted share, compared to $3.15 in the same period last year [28] Business Line Data and Key Metrics Changes - Men's revenue increased 6%, women's revenue increased 5%, and accessories and other grew 15% [26] - Performance apparel continues to grow, while lounge and social product offerings have become stale, impacting sales negatively [11][12] Market Data and Key Metrics Changes - In the U.S., revenue was flat, with comparable sales down 3% [25][26] - China mainland revenue increased 25%, with comparable sales up 16% [26][21] - The rest of the world segment saw a revenue growth of 19%, with comparable sales increasing by 9% [26] Company Strategy and Development Direction - The company is focusing on increasing the number and frequency of new styles in its product assortment, aiming to raise new styles from 23% to 35% by spring 2026 [15][16] - A new Chief AI and Technology Officer has been appointed to enhance product innovation and agility [17] - The company plans to navigate increased costs from tariffs and the removal of the de minimis exemption through strategic pricing and supply chain initiatives [24][20] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns over the U.S. business performance and the impact of tariffs on guidance [5][20] - The company expects revenue growth of 4% to 6% for the year, with a decline in U.S. revenue projected at 1% to 2% [20][31] - Management remains optimistic about international growth, particularly in China, where growth is expected to be 20% to 25% [20][31] Other Important Information - The company ended the quarter with $1.16 billion in cash and cash equivalents, and inventory increased 21% to $1.7 billion [30] - Capital expenditures for the quarter were approximately $178 million, reflecting timing of store openings [29] Q&A Session Summary Question: Insights on product department changes and impact on the back half of the year - The company is focusing on three key areas: maintaining momentum in performance activities, introducing new styles in lounge and social, and refreshing iconic items [47] Question: Impact of recent tariff increases on pricing strategy - The company is implementing modest price increases on a small portion of its assortment and will continue to evaluate pricing as a lever [50] Question: Context on lifestyle assortment and performance versus casual - The company believes a 60/40 split between performance and casual is a good benchmark, with ongoing innovation in both segments [54] Question: Timeline for new innovation to offset pressure from casual platforms - The company expects the new styles introduced in spring 2026 to help offset pressures from casual offerings [59] Question: Speed of supply chain improvements and lead times - The company is working to improve lead times and agility in its supply chain processes, aiming to reduce lead times significantly [66] Question: Inventory management and de minimis exemption impact - The company fulfills approximately two-thirds of U.S. e-commerce orders through Canada, which previously benefited from the de minimis exemption [81]

Financial Data and Key Metrics Changes - For Q2 2025, total net revenue rose 7% to $2.5 billion, with comparable sales increasing by 1% [27][28] - Gross profit was $1.48 billion, representing 58.5% of net revenue, a decrease from 59.6% in Q2 2024 [28][29] - Net income for the quarter was $371 million, or $3.10 per diluted share, compared to $3.15 in the same period last year [30] Business Line Data and Key Metrics Changes - Men's revenue increased by 6%, women's by 5%, and accessories and other grew by 15% [28] - The casual segment, which constitutes about 40% of the assortment, is experiencing fatigue, particularly in core franchises like Scuba and SoftStream [49][56] - Performance apparel continues to grow, with strong sales across key activities such as yoga, run, and train [12][20] Market Data and Key Metrics Changes - In China, total revenue increased by 25%, with comparable sales up by 16% [28][20] - The Americas saw revenue growth of 1%, with comparable sales down by 3% [27][28] - The rest of the world segment grew by 19%, with comparable sales increasing by 9% [28] Company Strategy and Development Direction - The company is focusing on increasing the number and frequency of new styles in its product assortment, aiming to raise new styles from 23% to 35% by spring 2026 [17][19] - A new Chief AI and Technology Officer has been appointed to enhance product innovation and agility [19] - The company plans to navigate increased costs from tariffs through strategic pricing and supply chain initiatives [26][22] Management's Comments on Operating Environment and Future Outlook - Management expressed dissatisfaction with current U.S. results and acknowledged the need for a reset in product offerings [6][24] - The company expects revenue growth of 4%-6% for the year, with a decline of 1%-2% in the U.S. market [23][32] - Management remains optimistic about international growth, particularly in China, where they anticipate continued strong performance [20][24] Other Important Information - The company ended Q2 with $1.16 billion in cash and cash equivalents, and inventory increased by 21% to $1.7 billion [31] - Capital expenditures for the quarter were approximately $178 million, reflecting timing of store openings [31] Q&A Session Summary Question: Insights on product department changes and impact on sales - Management highlighted a focus on performance activities and new styles in lounge and social categories, with two new items launching in the back half of the year [48] Question: Impact of recent tariff increases on pricing strategy - The company is implementing modest price increases on a small portion of its assortment and is pleased with the initial results [52] Question: Context on casual segment performance and timeline for new innovations - Management indicated that the casual segment is about 40% of the mix, with new styles expected to offset current pressures [49][63] Question: Supply chain initiatives and lead time improvements - The company is working to improve lead times and agility in its supply chain processes, with a focus on vendor partnerships [68] Question: Marketing strategy and brand engagement - Management plans to maintain current marketing spend as a percentage of revenue while focusing on grassroots community engagement [71] Question: Annualized impact of tariffs and pricing as a mitigation tool - The CFO noted that pricing will be a significant part of the mitigation strategy, alongside expense actions [76]

Market Domination Overtime anchor Josh Lipton breaks down the latest market news for September 4, 2025. US stocks closed in the green, with the S&P 500 notching a fresh record close. Markets and data reporter Jared Blikre breaks down the day's trading. Lululemon stock fell sharply after reporting second quarter earnings. The company cut its full-year outlook amid tariff pressure. "It's a pretty bad quarter for the company," CFRA analyst Zachary Warring says as he discussed challenges facing the retailer. #y ...

Financial Performance - Total revenue reached $2.5 billion, a 7% increase[2] - Diluted EPS was $3.10, a 2% decrease[2] - Total comparable sales increased by 1%[2] Segment Performance - Women's apparel revenue increased by 5%[7] - Men's apparel revenue increased by 6%[7] - Accessories and other revenue increased by 15%[7] - Store revenue increased by 3%[8] - Digital revenue increased by 9%[8] Market Performance - Americas revenue increased by 1%[9] - International revenue increased by 22%[9] Company Strategy - The company ended Q2 with 784 company-operated stores globally[9]

Second quarter earnings season is coming to a close, and with nearly all of the reports in, the results have been mostly positive. As of Aug. 29, 98% of S&P 500 index companies have reported results, according to FactSet data, and analysts now expect S&P 500 companies to report an 11.9% jump in earnings per share during the second quarter. Companies had lower expectations to clear coming into the quarter — analysts expected S&P 500 earnings to rise 5% in Q2, the slowest pace of earnings growth since Q4 2 ...

Core Viewpoint - Lululemon's shares fell significantly after the company provided a disappointing full-year outlook, indicating challenges in its U.S. business and the impact of tariffs on profits [1][2]. Financial Performance - The company reported second-quarter net income of $370.9 million, or $3.10 per share, compared to $392.92 million, or $3.15 per share, in the same period last year [3]. - Earnings per share exceeded expectations at $3.10 versus the anticipated $2.88 [5]. - Revenue for the second quarter was $2.53 billion, slightly below the expected $2.54 billion [5]. Future Projections - Lululemon expects full fiscal year earnings to be between $12.77 and $12.97 per share, significantly lower than Wall Street's estimate of $14.45 per share [2]. - The company anticipates full-year revenue of $10.85 billion to $11 billion, compared to Wall Street expectations of $11.18 billion [2]. - For the third quarter, projected revenues are between $2.47 billion and $2.50 billion, below the Wall Street estimate of $2.57 billion [4]. - Expected earnings per share for the next quarter are between $2.18 and $2.23, compared to an estimate of $2.93 per share [4]. Sales Performance - Same-store sales in the Americas decreased by 4%, while overall comparable sales increased by just 1%, falling short of Wall Street's estimate of 2.2% [4].

[General Information](index=1&type=section&id=General%20Information) This section provides general administrative details about the document, including the company's filing status and stock information - The document is a Quarterly Report on Form 10-Q for lululemon athletica inc., covering the quarterly period ended August 3, 2025[1](index=1&type=chunk)[2](index=2&type=chunk) - The registrant is a **Large Accelerated Filer**[4](index=4&type=chunk) Trading and Stock Information | Metric | Value | | :--- | :--- | | Trading Symbol | LULU | | Exchange | Nasdaq Global Select Market | | Common Stock Outstanding (as of Aug 29, 2025) | 113,468,082 shares | [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited interim consolidated financial statements and management's discussion and analysis of the company's financial condition and results of operations [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents the unaudited interim consolidated financial statements, offering a snapshot of the company's financial position, performance, and cash movements [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This statement provides a detailed overview of the company's assets, liabilities, and stockholders' equity at specific points in time | Metric (in thousands) | August 3, 2025 | February 2, 2025 | | :--- | :--- | :--- | | Total Assets | $7,523,439 | $7,603,292 | | Total Liabilities | $3,136,160 | $3,279,245 | | Total Stockholders' Equity | $4,387,279 | $4,324,047 | | Cash and Cash Equivalents | $1,155,794 | $1,984,336 | | Inventories | $1,722,570 | $1,442,081 | [Consolidated Statements of Operations and Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) This statement details the company's revenues, expenses, and net income, along with other comprehensive income, for the reported periods | Metric (in thousands) | Quarter Ended Aug 3, 2025 | Quarter Ended Jul 28, 2024 | Two Quarters Ended Aug 3, 2025 | Two Quarters Ended Jul 28, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $2,525,219 | $2,371,078 | $4,895,879 | $4,579,969 | | Gross Profit | $1,477,202 | $1,412,185 | $2,860,328 | $2,687,253 | | Income from Operations | $523,814 | $540,226 | $962,439 | $972,868 | | Net Income | $370,905 | $392,922 | $685,477 | $714,343 | | Diluted Earnings Per Share | $3.10 | $3.15 | $5.70 | $5.69 | - Net revenue increased by **6.5% for the quarter** and **6.9% for the two quarters** ended August 3, 2025, compared to the prior year periods[12](index=12&type=chunk) - Net income decreased by **5.6% for the quarter** and **4.0% for the two quarters** ended August 3, 2025, compared to the prior year periods[12](index=12&type=chunk) [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) This statement tracks changes in the company's equity accounts, including net income, other comprehensive income, and stock repurchases | Metric (in thousands) | Quarter Ended Aug 3, 2025 | Two Quarters Ended Aug 3, 2025 | | :--- | :--- | :--- | | Balance as of Beginning of Period | $4,289,570 (May 4, 2025) | $4,324,047 (Feb 2, 2025) | | Net Income | $370,905 | $685,477 | | Other Comprehensive Income (Loss), net of tax | $5,497 | $93,216 | | Repurchase of Common Stock, including excise tax | $(281,233) | $(715,672) | | Balance as of End of Period | $4,387,279 | $4,387,279 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement reports the cash generated and used by operating, investing, and financing activities over specific periods | Cash Flow Activity (in thousands) | Two Quarters Ended Aug 3, 2025 | Two Quarters Ended Jul 28, 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $209,722 | $570,664 | $(360,942) | | Net cash used in investing activities | $(319,960) | $(266,625) | $(53,335) | | Net cash used in financing activities | $(744,823) | $(916,543) | $171,720 | | Decrease in cash and cash equivalents | $(828,542) | $(633,859) | $(194,683) | | Cash and cash equivalents, end of period | $1,155,794 | $1,610,112 | $(454,318) | [Notes to the Unaudited Interim Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Unaudited%20Interim%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the interim consolidated financial statements [Note 1. Nature of Operations and Basis of Presentation](index=10&type=section&id=Note%201.%20Nature%20of%20Operations%20and%20Basis%20of%20Presentation) This note describes lululemon's core business, operational markets, sales channels, recent Mexico acquisition, fiscal year structure, and seasonality - lululemon operates in four regional markets: **Americas, China Mainland, Asia Pacific (APAC), and Europe and the Middle East (EMEA)**[22](index=22&type=chunk) - The company conducts business through **company-operated stores, e-commerce, outlets, wholesale, and a re-commerce program**[22](index=22&type=chunk) Company-operated Stores | Metric | August 3, 2025 | February 2, 2025 | | :--- | :--- | :--- | | Company-operated stores | 784 | 767 | - On September 10, 2024, lululemon acquired its branded retail locations and operations in Mexico from a third party[24](index=24&type=chunk) - Fiscal 2025 will be a **52-week year**, ending February 1, 2026, while Fiscal 2024 was a **53-week year**[25](index=25&type=chunk) - The company's business is seasonal, with a significant portion of operating profit recognized in the **fourth fiscal quarter** due to the holiday season[26](index=26&type=chunk) [Note 2. Recent Accounting Pronouncements](index=10&type=section&id=Note%202.%20Recent%20Accounting%20Pronouncements) This note outlines recently issued Accounting Standard Updates (ASUs) regarding income tax disclosures and disaggregation of income statement expenses, which the company is evaluating - ASU 2023-09 (Income Taxes) requires expanded disclosure within the rate reconciliation and disaggregation of annual taxes paid; effective for annual periods beginning after **December 15, 2024**[29](index=29&type=chunk) - ASU 2024-03 (Income Statement Expenses) requires disaggregated disclosures for certain income statement expense line items; effective for annual periods beginning after **December 15, 2026**[30](index=30&type=chunk) - The Company is currently evaluating the impact of these new guidances on its financial statement disclosures[29](index=29&type=chunk)[30](index=30&type=chunk) [Note 3. Revolving Credit Facilities](index=11&type=section&id=Note%203.%20Revolving%20Credit%20Facilities) This note details the company's two revolving credit facilities, an Americas facility and a China Mainland facility, and confirms compliance with covenants Revolving Credit Facilities Summary | Facility | Total Commitments | Maturity Date | Outstanding Borrowings (Aug 3, 2025) | | :--- | :--- | :--- | :--- | | Americas Revolving Credit Facility | $400.0 million | December 14, 2026 | $6.8 million (letters of credit/guarantee) | | China Mainland Revolving Credit Facility | 300.0 million CNY ($41.6 million) | Annual Review | $7.3 million (letters of credit) | - The Americas facility's interest rates and commitment fees are subject to adjustment based on **sustainability key performance indicators** (greenhouse gas emissions intensity reduction and gender pay equity)[34](index=34&type=chunk) - As of August 3, 2025, the Company was in compliance with the covenants of both credit facilities[36](index=36&type=chunk)[37](index=37&type=chunk) [Note 4. Supply Chain Financing Program](index=13&type=section&id=Note%204.%20Supply%20Chain%20Financing%20Program) This note describes the company's voluntary supply chain financing program, which allows suppliers early payment without impacting the company's obligations - The Company facilitates a voluntary supply chain financing (SCF) program for suppliers to sell receivables to a third-party financial institution[38](index=38&type=chunk) - The Company's obligations to its suppliers are not impacted, and it provides **no guarantees** under the SCF program[38](index=38&type=chunk) SCF Program Outstanding | Metric (in millions) | August 3, 2025 | February 2, 2025 | | :--- | :--- | :--- | | Outstanding under SCF program | $46.3 | $36.3 | [Note 5. Stock-Based Compensation and Benefit Plans](index=13&type=section&id=Note%205.%20Stock-Based%20Compensation%20and%20Benefit%20Plans) This note details the company's stock-based compensation plans and benefit plans, including PSUs, RSUs, stock options, and ESPP Stock-Based Compensation Expense | Metric (in millions) | First Two Quarters 2025 | First Two Quarters 2024 | | :--- | :--- | :--- | | Stock-based compensation expense | $21.1 | $46.7 | - Total unrecognized compensation cost for all stock-based compensation plans was **$144.2 million** as of August 3, 2025, expected to be recognized over a weighted-average period of **2.4 years**[41](index=41&type=chunk) - The Employee Share Purchase Plan (ESPP) allows eligible employees to contribute, with the Company matching one-third of the contribution; **4.2 million shares** remain authorized for purchase under the ESPP as of August 3, 2025[45](index=45&type=chunk) Defined Contribution Plans Net Expense | Metric (in millions) | First Two Quarters 2025 | First Two Quarters 2024 | | :--- | :--- | :--- | | Net expense for defined contribution plans | $12.2 | $11.1 | [Note 6. Fair Value Measurement](index=14&type=section&id=Note%206.%20Fair%20Value%20Measurement) This note defines the three-tier fair value hierarchy and classifies the company's money market funds and forward currency contracts within it - Fair value measurements are categorized into a three-tier hierarchy: **Level 1** (observable inputs like quoted prices in active markets), **Level 2** (inputs other than quoted prices that are directly or indirectly observable), and **Level 3** (unobservable inputs)[47](index=47&type=chunk) Fair Value Measurements | Asset/Liability (in thousands) | August 3, 2025 | Fair Value Level | | :--- | :--- | :--- | | Money market funds | $107,601 | Level 1 | | Forward currency contract assets | $714 | Level 2 | | Forward currency contract liabilities | $4,895 | Level 2 | - The fair values of forward currency contract assets and liabilities are determined using observable **Level 2 inputs**, including foreign currency spot exchange rates, forward pricing curves, and interest rates[50](index=50&type=chunk) [Note 7. Derivative Financial Instruments](index=15&type=section&id=Note%207.%20Derivative%20Financial%20Instruments) This note explains the company's use of derivative financial instruments, primarily forward currency contracts, to manage foreign currency exchange risks and mitigate credit risk - The Company uses derivative financial instruments to manage foreign currency exchange rate risks and does not enter into derivative contracts for **speculative or trading purposes**[51](index=51&type=chunk) - Forward currency contracts are used to hedge against changes in the **Canadian dollar, Chinese Yuan, Euro, and Australian dollar** exchange rates[52](index=52&type=chunk) - Forward currency contracts designated as net investment hedges for the Canadian subsidiary resulted in a **$57.3 million reduction in other comprehensive loss** for the first two quarters of 2025[181](index=181&type=chunk) Net Derivatives Recognized on Consolidated Balance Sheets | Derivative Type | August 3, 2025 (in thousands) | February 2, 2025 (in thousands) | | :--- | :--- | :--- | | Net derivatives recognized on consolidated balance sheets (Forward currency contracts) | Assets: $714, Liabilities: $4,895 | Assets: $76,848, Liabilities: $74,638 | - The Company is exposed to credit-related losses from counterparties but mitigates this risk by transacting with **investment-grade financial institutions**[64](index=64&type=chunk)[65](index=65&type=chunk) [Note 8. Earnings Per Share](index=19&type=section&id=Note%208.%20Earnings%20Per%20Share) This note details the computation of basic and diluted earnings per share and provides an update on the company's stock repurchase program Earnings Per Share | Metric | Second Quarter 2025 | Second Quarter 2024 | First Two Quarters 2025 | First Two Quarters 2024 | | :--- | :--- | :--- | :--- | :--- | | Basic earnings per share | $3.10 | $3.15 | $5.71 | $5.70 | | Diluted earnings per share | $3.10 | $3.15 | $5.70 | $5.69 | | Diluted weighted-average number of shares outstanding (in thousands) | 119,680 | 124,857 | 120,262 | 125,600 | - The Company's board of directors approved a stock repurchase program authorizing up to **$3.0 billion** in aggregate, with **$0.9 billion remaining authorized** as of August 3, 2025[69](index=69&type=chunk)[70](index=70&type=chunk) Stock Repurchases | Metric | First Two Quarters 2025 | First Two Quarters 2024 | | :--- | :--- | :--- | | Shares repurchased (in millions) | 2.5 | 2.6 | | Total cost of repurchases (in millions) | $715.7 | $888.9 | [Note 9. Supplementary Financial Information](index=21&type=section&id=Note%209.%20Supplementary%20Financial%20Information) This note provides a detailed breakdown of selected consolidated balance sheet accounts, offering granular insights into asset and liability composition Selected Consolidated Balance Sheet Accounts | Account (in thousands) | August 3, 2025 | February 2, 2025 | | :--- | :--- | :--- | | Inventories, at cost | $1,823,547 | $1,526,055 | | Inventory provisions and reserves | $(100,977) | $(83,974) | | Property and equipment, gross | $3,574,814 | $3,241,666 | | Accumulated depreciation | $(1,657,453) | $(1,461,049) | | Accrued liabilities and other | $423,933 | $559,463 | [Note 10. Segmented Information](index=22&type=section&id=Note%2010.%20Segmented%20Information) This note presents financial information segmented by Americas, China Mainland, and Rest of World, detailing net revenue and income from operations, with corporate expenses unallocated Segment Net Revenue | Segment Net Revenue (in thousands) | Second Quarter 2025 | Second Quarter 2024 | First Two Quarters 2025 | First Two Quarters 2024 | | :--- | :--- | :--- | :--- | :--- | | Americas | $1,758,217 | $1,741,433 | $3,432,775 | $3,363,697 | | China Mainland | $392,898 | $314,189 | $760,999 | $617,975 | | Rest of World | $374,104 | $315,456 | $702,105 | $598,297 | Segment Income from Operations | Segment Income from Operations (in thousands) | Second Quarter 2025 | Second Quarter 2024 | First Two Quarters 2025 | First Two Quarters 2024 | | :--- | :--- | :--- | :--- | :--- | | Americas | $619,394 | $669,427 | $1,208,725 | $1,234,267 | | China Mainland | $152,490 | $119,085 | $306,125 | $238,863 | | Rest of World | $81,243 | $74,000 | $154,099 | $140,681 | - Corporate expenses, including product design, raw material development, sourcing, supply chain, global merchandising, technology, brand and marketing, finance, human resources, and legal, are **centrally managed and not allocated to segments**[78](index=78&type=chunk) [Note 11. Disaggregated Net Revenue](index=25&type=section&id=Note%2011.%20Disaggregated%20Net%20Revenue) This note provides a detailed breakdown of net revenue by geographic area, product category, and sales channel, offering granular insights into revenue streams Net Revenue by Geographic Area | Geographic Area (in thousands) | Second Quarter 2025 | Second Quarter 2024 | First Two Quarters 2025 | First Two Quarters 2024 | | :--- | :--- | :--- | :--- | :--- | | United States | $1,415,002 | $1,421,980 | $2,777,526 | $2,762,380 | | Canada | $321,293 | $319,453 | $614,113 | $601,317 | | Mexico | $21,922 | $0 | $41,136 | $0 | | China Mainland | $392,898 | $314,189 | $760,999 | $617,975 | Net Revenue by Product Category | Product Category (in thousands) | Second Quarter 2025 | Second Quarter 2024 | First Two Quarters 2025 | First Two Quarters 2024 | | :--- | :--- | :--- | :--- | :--- | | Women's apparel | $1,547,321 | $1,476,121 | $3,082,493 | $2,911,362 | | Men's apparel | $624,598 | $587,525 | $1,169,386 | $1,093,223 | | Accessories and other categories | $353,300 | $307,432 | $644,000 | $575,384 | Net Revenue by Sales Channel | Sales Channel (in thousands) | Second Quarter 2025 | Second Quarter 2024 | First Two Quarters 2025 | First Two Quarters 2024 | | :--- | :--- | :--- | :--- | :--- | | Company-operated stores | $1,254,952 | $1,215,613 | $2,408,059 | $2,286,138 | | E-commerce | $993,093 | $910,637 | $1,953,983 | $1,816,424 | | Other channels | $277,174 | $244,828 | $533,837 | $477,407 | [Note 12. Legal Proceedings and Other Contingencies](index=25&type=section&id=Note%2012.%20Legal%20Proceedings%20and%20Other%20Contingencies) This note addresses the company's routine legal matters, including a securities class action and stockholder derivative complaints, which are not expected to materially affect financial statements - The Company is involved in routine legal matters and audits, believing their ultimate resolution will not have a **material adverse effect** on its consolidated balance sheets, results of operations, or cash flows[84](index=84&type=chunk) - A securities class action (Patel v. Lululemon Athletica Inc., et al.) was filed on August 8, 2024, alleging false and misleading public statements and omissions, which the Company intends to **defend vigorously**[85](index=85&type=chunk) - Six stockholder derivative complaints were consolidated on August 1, 2025, asserting claims against current and former directors and officers for alleged breaches of fiduciary duty and violations of the Exchange Act[86](index=86&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on lululemon's financial performance, condition, and outlook, covering operations, liquidity, and critical accounting policies [Overview](index=27&type=section&id=Overview) This section provides a general description of lululemon's business, its mission, and its product offerings - lululemon athletica inc. is a designer, distributor, and retailer of technical athletic apparel, footwear, and accessories, aiming to create **transformative products and experiences**[95](index=95&type=chunk) - The company offers a comprehensive line of technical athletic apparel, footwear, and accessories under the lululemon brand, designed for activities like yoga, running, and training, and plans to **broaden its merchandise offerings**[95](index=95&type=chunk) [Financial Highlights and Market Conditions and Trends](index=27&type=section&id=Financial%20Highlights%20and%20Market%20Conditions%20and%20Trends) This section summarizes key financial performance indicators and discusses the macroeconomic and market trends influencing the company's business Key Financial Highlights | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net revenue | $2.5 billion | $2.37 billion | +7% (+6% constant dollar) | | Comparable sales | +1% | N/A | N/A | | Gross profit | $1.5 billion | $1.41 billion | +5% | | Gross margin | 58.5% | 59.6% | -110 basis points | | Income from operations | $523.8 million | $540.2 million | -3% | | Operating margin | 20.7% | 22.8% | -210 basis points | | Diluted earnings per share | $3.10 | $3.15 | -1.6% | - Macroeconomic conditions, including trade policies, shifting consumer demand, inflation, foreign currency fluctuations, and geopolitical instability, are **negatively influencing the business**[99](index=99&type=chunk) - Americas comparable sales decreased **4% (-3% constant dollar)** due to lower conversion rates, store traffic, economic uncertainty, and lower demand for certain product offerings[100](index=100&type=chunk) - New U.S. import tariffs and the removal of the de minimis exemption are expected to have a **significant adverse effect**, increasing product costs and reducing gross margin and operating margin[103](index=103&type=chunk) - Increased tariffs and the de minimis exemption removal are estimated to reduce gross profit for 2025 by approximately **$240 million**, net of mitigation efforts[104](index=104&type=chunk) - Foreign currency fluctuations negatively impacted net revenue growth by **$10.7 million** during the first two quarters of 2025, primarily due to the appreciation of the US dollar relative to the Canadian dollar[107](index=107&type=chunk)[109](index=109&type=chunk) [Quarter-to-Date Results of Operations: Second Quarter Results](index=31&type=section&id=Quarter-to-Date%20Results%20of%20Operations%3A%20Second%20Quarter%20Results) This section provides a detailed analysis of the company's financial performance for the second fiscal quarter Second Quarter Financial Performance | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net revenue | $2,525,219 | $2,371,078 | +7% | | Cost of goods sold | $1,048,017 | $958,893 | +9.3% | | Gross profit | $1,477,202 | $1,412,185 | +4.6% | | Gross margin | 58.5% | 59.6% | -110 bps | | Selling, general and administrative expenses | $951,658 | $871,959 | +9.1% | | Income from operations | $523,814 | $540,226 | -3.0% | | Net income | $370,905 | $392,922 | -5.6% | - The decrease in gross margin was primarily due to a net decrease in product margin of **70 basis points** (higher markdowns, tariffs, other costs, partially offset by pricing and lower product costs) and a net increase in other cost of sales of **40 basis points** (occupancy, depreciation, distribution, and product department costs)[112](index=112&type=chunk)[116](index=116&type=chunk) - The increase in selling, general and administrative expenses was primarily driven by increased costs related to **operating channels ($62.8 million)** and **head office costs ($17.2 million)**[117](index=117&type=chunk) - Amortization of intangible assets of **$1.73 million** in Q2 2025 was primarily due to the acquisition of Mexico operations in September 2024[115](index=115&type=chunk) - Other income (expense), net decreased by **45.9%** primarily due to lower interest income from reduced average cash balances and interest rates[127](index=127&type=chunk) - The effective tax rate increased to **30.5%** from 29.6% due to an increase in non-deductible expenses in international jurisdictions[128](index=128&type=chunk) [Year-to-Date Results of Operations: First Two Quarters Results](index=36&type=section&id=Year-to-Date%20Results%20of%20Operations%3A%20First%20Two%20Quarters%20Results) This section provides a detailed analysis of the company's financial performance for the first two fiscal quarters First Two Quarters Financial Performance | Metric (in thousands) | First Two Quarters 2025 | First Two Quarters 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net revenue | $4,895,879 | $4,579,969 | +7% | | Cost of goods sold | $2,035,551 | $1,892,716 | +7.6% | | Gross profit | $2,860,328 | $2,687,253 | +6.4% | | Gross margin | 58.4% | 58.7% | -30 bps | | Selling, general and administrative expenses | $1,894,529 | $1,714,385 | +10.5% | | Income from operations | $962,439 | $972,868 | -1.1% | | Net income | $685,477 | $714,343 | -4.0% | - The decrease in gross margin was primarily due to a net increase in other cost of sales of **40 basis points** (occupancy, depreciation, product department costs), partially offset by a net increase in product margin of **10 basis points** (lower damages, product costs, higher pricing, offset by markdowns, freight, tariffs)[133](index=133&type=chunk) - The increase in selling, general and administrative expenses was primarily due to increased costs related to **operating channels ($100.9 million)**, **head office costs ($68.7 million)**, and **net foreign currency exchange and derivative revaluation losses ($10.5 million)**[134](index=134&type=chunk)[139](index=139&type=chunk) - Other income (expense), net decreased by **47.9%** primarily due to lower interest income from reduced average cash balances and interest rates[147](index=147&type=chunk) - The effective tax rate increased to **30.3%** from 29.6% due to a decrease in tax benefits related to stock-based compensation and an increase in non-deductible expenses in international jurisdictions[148](index=148&type=chunk) [Comparable Sales](index=41&type=section&id=Comparable%20Sales) This section defines and analyzes comparable sales, a key metric for evaluating the performance of company-operated store and e-commerce businesses - Comparable sales is a metric used to evaluate the performance of company-operated store and e-commerce businesses from an **omni-channel perspective**, excluding new or significantly expanded stores, temporarily relocated/closed stores, and other selling channels[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) - For fiscal years with 53 weeks, the 53rd week of net revenue is excluded from comparable sales calculation; in the following year, the prior year period is **shifted by one week**[154](index=154&type=chunk) Comparable Sales Change (First Two Quarters 2025) | Comparable Sales Change (First Two Quarters 2025) | Reported | Constant Dollar | | :--- | :--- | :--- | | Americas | (3)% | (2)% | | China Mainland | 12% | 12% | | Rest of World | 9% | 8% | | Total comparable sales | 1% | 1% | [Non-GAAP Financial Measures](index=43&type=section&id=Non-GAAP%20Financial%20Measures) This section explains the company's use of non-GAAP financial measures, such as constant dollar basis, to provide additional insights into financial performance - The Company reports certain financial metrics on a **constant dollar basis**, a non-GAAP financial measure, to help investors understand the underlying growth rate of net revenue by excluding foreign currency exchange rate impacts[155](index=155&type=chunk)[156](index=156&type=chunk) - Management uses these constant currency metrics internally when reviewing and assessing financial performance[156](index=156&type=chunk) - These non-GAAP financial measures are provided in addition to, and not a substitute for, the corresponding financial measures calculated in accordance with GAAP[157](index=157&type=chunk) [Seasonality](index=43&type=section&id=Seasonality) This section discusses the impact of seasonal trends, particularly the holiday season, on the company's annual net revenue and operating profit - The Company's business is affected by general seasonal trends common to the **retail apparel industry**[160](index=160&type=chunk) - Annual net revenue is typically weighted more heavily toward the **fourth fiscal quarter** due to increased sales during the holiday season, while operating expenses are generally more equally distributed throughout the year[162](index=162&type=chunk) - Approximately **42% of the full year operating profit** was generated during the fourth quarter of 2024[162](index=162&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the company's primary sources of liquidity, cash needs, and cash flow activities from operations, investing, and financing - Primary sources of liquidity include **cash and cash equivalents, cash flows from operations, and capacity under the committed revolving credit facility**[163](index=163&type=chunk) - Primary cash needs are **capital expenditures** for new/remodeling stores, distribution centers, technology, working capital, and **share repurchases**[163](index=163&type=chunk) Cash Flow Activities | Cash Flow Activity (in thousands) | First Two Quarters 2025 | First Two Quarters 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Operating activities | $209,722 | $570,664 | $(360,942) | | Investing activities | $(319,960) | $(266,625) | $(53,335) | | Financing activities | $(744,823) | $(916,543) | $171,720 | - The decrease in cash provided by operating activities was primarily due to a **$341.8 million decrease** in cash flows from changes in operating assets and liabilities, driven by timing of income tax payments, accrued liabilities, and inventory purchases[165](index=165&type=chunk) - The increase in cash used in investing activities was primarily due to **increased capital expenditures** for company-operated stores in the Americas[166](index=166&type=chunk) - The decrease in cash used in financing activities was primarily due to a decrease in stock repurchases (**$715.7 million in 2025 vs. $888.9 million in 2024**)[167](index=167&type=chunk) Liquidity Measures | Liquidity Measure (in thousands) | August 3, 2025 | | :--- | :--- | | Cash and cash equivalents | $1,155,794 | | Working capital (excluding cash and cash equivalents) | $815,588 | | Capacity under committed revolving credit facility | $393,242 | | Inventory balance | $1,700,000 (approx.) | [Critical Accounting Policies and Estimates](index=47&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the significant estimates and assumptions management makes in preparing financial statements, which could materially impact reported results - The preparation of financial statements requires management to make **significant estimates and assumptions** about matters that are highly uncertain, where different estimates could materially impact consolidated financial statements[173](index=173&type=chunk) - The Company's critical accounting policies, estimates, and judgments are discussed in **Item 7 of its 2024 Annual Report on Form 10-K**[174](index=174&type=chunk) [Operating Locations](index=48&type=section&id=Operating%20Locations) This section provides a breakdown of the company's company-operated stores and third-party retail locations by geographic market Company-Operated Stores by Market | Market | Company-Operated Stores (Aug 3, 2025) | Company-Operated Stores (Feb 2, 2025) | | :--- | :--- | :--- | | United States | 377 | 374 | | Canada | 72 | 71 | | Mexico | 18 | 17 | | Americas Total | 467 | 462 | | China Mainland | 159 | 151 | | APAC Total | 109 | 107 | | EMEA Total | 49 | 47 | | **Total Company-Operated Stores** | **784** | **767** | Retail Locations Operated by Third Parties | Market | Retail Locations Operated by Third Parties (Aug 3, 2025) | Retail Locations Operated by Third Parties (Feb 2, 2025) | | :--- | :--- | :--- | | United Arab Emirates | 11 | 10 | | Saudi Arabia | 9 | 8 | | Israel | 8 | 7 | | **Total Third-Party Locations** | **41** | **34** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to market risks, including foreign currency, interest rate, credit, and inflation, and outlines strategies to manage these exposures [Foreign Currency Exchange Risk](index=49&type=section&id=Foreign%20Currency%20Exchange%20Risk) This section discusses the company's exposure to foreign currency exchange rate fluctuations, including translation and transaction risks, and its hedging strategies - The Company is exposed to **translation risk** from converting international subsidiaries' financial statements into U.S. dollars, which reduced revenue by **$10.7 million** in the first two quarters of 2025[180](index=180&type=chunk) - Forward currency contracts are used as **net investment hedges** for the Canadian subsidiary, reducing the impact to other comprehensive loss by **$57.3 million** in the first two quarters of 2025[181](index=181&type=chunk) - **Transaction risk** arises from intercompany transactions and inventory purchases in non-functional currencies, economically hedged by forward currency contracts[182](index=182&type=chunk) - A **10% depreciation in the U.S. dollar** against hedged currencies would result in a **$19.0 million depreciation** in the net fair value of outstanding derivatives, substantially offset by the underlying hedged items[183](index=183&type=chunk) [Interest Rate Risk](index=51&type=section&id=Interest%20Rate%20Risk) This section addresses the company's exposure to market risks related to changes in interest rates, particularly concerning its variable-rate revolving credit facility - The Company is exposed to market risks relating to changes in interest rates due to its **$400.0 million variable-rate revolving credit facility**[186](index=186&type=chunk) - As of August 3, 2025, there were **no borrowings outstanding** under the facility, other than **$6.8 million in letters of credit and guarantee**[186](index=186&type=chunk) - The Company does not currently engage in interest rate hedging but may consider it in the future if outstanding balances become meaningful[186](index=186&type=chunk) - Interest generated on the **$1.2 billion cash and cash equivalents balance** is subject to variability as interest rates change[187](index=187&type=chunk) [Credit Risk](index=51&type=section&id=Credit%20Risk) This section discusses the company's exposure to credit risk from cash deposits and nonperformance by counterparties to derivative contracts - The Company is exposed to credit risk from cash deposits with financial institutions (exceeding government-insured limits) and from nonperformance by counterparties to forward currency contracts[188](index=188&type=chunk) - Credit risk is minimized by entering into transactions with **investment-grade, reputable financial institutions** and monitoring their credit standing[188](index=188&type=chunk) - The Company has not experienced any losses related to these items and believes credit risk to be **minimal**[188](index=188&type=chunk) [Inflation](index=51&type=section&id=Inflation) This section addresses the potential adverse effects of inflationary pressures on the company's operating results and consumer demand - Inflationary pressures, including higher product, transportation, labor, and raw material costs, may adversely affect operating results if not offset by pricing or operating efficiencies[189](index=189&type=chunk) - Inflation could also reduce consumer discretionary spending and negatively impact demand for the Company's products[189](index=189&type=chunk) [Item 4. Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures, with no material changes to internal control over financial reporting during the quarter - The Company maintains disclosure controls and procedures designed to ensure **timely and accurate reporting** of information required under the Securities Exchange Act of 1934[190](index=190&type=chunk) - Management, including the principal executive officer and principal financial and accounting officer, concluded that disclosure controls and procedures were **effective as of August 3, 2025**[191](index=191&type=chunk) - There were **no changes in internal control over financial reporting** during the quarter ended August 3, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[192](index=192&type=chunk) [PART II. OTHER INFORMATION](index=52&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 12 for details on legal proceedings, including routine matters and specific class action lawsuits, which are not expected to materially affect financial results - The Company is involved in routine legal matters incidental to its business, such as intellectual property, employment, product liability, and personal injury claims[194](index=194&type=chunk) - The Company believes the ultimate resolution of any current legal proceeding will not have a **material adverse effect** on its financial position, results of operations, or cash flows[194](index=194&type=chunk) - For specific legal matters, refer to **Note 12. Legal Proceedings and Other Contingencies** in Item 1 of Part I of this report[194](index=194&type=chunk) [Item 1A. Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various risks that could materially and adversely affect lululemon's business, financial condition, or results of operations across multiple categories [Risks related to our business and industry](index=52&type=section&id=Risks%20related%20to%20our%20business%20and%20industry) This section details risks inherent to the company's business model and the competitive retail apparel industry, including brand reputation and market competition - The Company's success depends on maintaining its brand value and reputation, which can be harmed by ineffective marketing, negative publicity (amplified by social media), product recalls, or failure to deliver innovative and high-quality products[196](index=196&type=chunk)[197](index=197&type=chunk) - Operating in a highly competitive market may result in **pricing pressures, reduced profit margins, or lost market share**, especially given competitors' strong brand recognition and similar product offerings due to limited patent protection[198](index=198&type=chunk)[200](index=200&type=chunk) - Failure to anticipate consumer preferences, successfully develop and introduce new products, or accurately forecast guest demand could lead to **lower sales, excess inventory, or product shortages**, harming gross margin and brand reputation[201](index=201&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) - Expansion into new international markets and product categories carries risks due to **limited operating experience, brand recognition**, and the challenges of managing new suppliers and business models[208](index=208&type=chunk)[209](index=209&type=chunk) - The inability to effectively manage growth, maintain efficiency and scalability, or attract and retain highly qualified individuals could **strain resources, erode brand image, and negatively impact financial performance**[211](index=211&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) - Changes in consumer shopping preferences and shifts in distribution channels (e.g., from stores to e-commerce) could adversely impact return on investment, lead to impairment charges, and affect overall operating margins[212](index=212&type=chunk)[214](index=214&type=chunk) - The business is affected by seasonality, with annual net revenue typically weighted more heavily toward the **fourth fiscal quarter**, leading to potential fluctuations in operating results[219](index=219&type=chunk) [Risks related to information security and technology](index=57&type=section&id=Risks%20related%20to%20information%20security%20and%20technology) This section addresses risks associated with cybersecurity breaches, data privacy regulations, technology system disruptions, and e-commerce platform effectiveness - Security breaches could expose the Company to theft or misuse of confidential information, leading to **litigation, significant legal and financial exposure, and damage to its brand and reputation**[220](index=220&type=chunk)[224](index=224&type=chunk) - The Company is subject to an evolving cybersecurity and privacy regulatory environment, and failure to comply could result in **regulatory enforcement and further financial or reputational harm**[226](index=226&type=chunk)[227](index=227&type=chunk) - Disruption of technology systems or unexpected network interruptions (e.g., system failures, viruses, natural disasters) could adversely affect e-commerce operations, transaction processing, inventory management, and timely delivery of products, harming reputation and financial results[228](index=228&type=chunk) - Failure to provide attractive, effective, reliable, and user-friendly e-commerce platforms could place the Company at a **competitive disadvantage**, result in lost sales, and harm its reputation[231](index=231&type=chunk) [Risks related to global economic, political, and regulatory conditions](index=61&type=section&id=Risks%20related%20to%20global%20economic%2C%20political%2C%20and%20regulatory%20conditions) This section covers risks stemming from changes in trade policies, macroeconomic volatility, geopolitical instability, tax laws, and compliance with international regulations - Changes to U.S. tariff and customs policy, including the elimination of the de minimis exemption, are expected to **materially increase product costs and negatively affect margins**, particularly for products sourced from certain countries and U.S. e-commerce orders fulfilled from Canada[232](index=232&type=chunk)[233](index=233&type=chunk) - Macroeconomic volatility, inflationary pressures, and shifts in consumer sentiment may **reduce demand for discretionary products**, impairing growth targets and impacting net revenue, margins, and cash flows[234](index=234&type=chunk) - Global political and economic instability, trade disputes, and changes in customs treatment or duty levels could **disrupt operations, increase costs**, and require adjustments to sourcing or distribution strategies[235](index=235&type=chunk)[237](index=237&type=chunk) - Changes in tax laws or unanticipated tax liabilities in various jurisdictions (U.S., Canada, China Mainland) could adversely affect the **effective income tax rate and profitability**, including issues related to Canadian withholding taxes and Advance Pricing Arrangement negotiations[238](index=238&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk) - Failure to comply with trade and other regulations (e.g., labeling, anti-bribery laws) could lead to **investigations, enforcement actions, significant penalties, negative publicity**, and harm to business operations[245](index=245&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk) - Fluctuations in foreign currency exchange rates, particularly given significant international operations, have affected and may continue to affect results of operations, and hedging measures may not fully offset negative impacts[250](index=250&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk) - The occurrence or resurgence of global or regional health events (e.g., COVID-19) could disrupt consumer spending, supply chains, store traffic, and employee availability, potentially leading to closures and long-term changes in consumer behavior[253](index=253&type=chunk)[254](index=254&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk) [Risks related to our supply chain](index=67&type=section&id=Risks%20related%20to%20our%20supply%20chain) This section outlines risks associated with supply chain disruptions, reliance on international suppliers, compliance failures, raw material costs, and distribution system issues - Disruptions to the supply chain due to trade restrictions, political instability, natural disasters, public health crises, war, labor shortages, or financial instability of key suppliers and carriers could **materially impair the ability to procure or distribute products**[258](index=258&type=chunk)[260](index=260&type=chunk) - Reliance on international suppliers, predominantly in APAC and China Mainland, and a relatively small number of vendors for a significant portion of products and specialty fabrics, **increases vulnerability to supply chain interruptions**[259](index=259&type=chunk)[261](index=261&type=chunk)[263](index=263&type=chunk) - Failure of suppliers and manufacturers to comply with the Vendor Code of Ethics or applicable laws, or negative publicity regarding production methods, could **adversely affect reputation and sales**[266](index=266&type=chunk) - Fluctuating costs of raw materials (petroleum-based synthetic fabrics, silver, cotton) due to weather, demand, speculation, currency, climate change, and geopolitical conditions could **significantly increase the cost of goods sold**[267](index=267&type=chunk) - Problems with the distribution system, including equipment failures, cyber threats, natural disasters, or labor difficulties, could harm the ability to deliver products, manage inventory, and meet guest expectations[268](index=268&type=chunk) - Increasing labor costs and other operational factors in South Asia and South East Asia, where a significant portion of products are produced, could **increase production costs and negatively impact earnings**[269](index=269&type=chunk) [Risks related to intellectual property](index=71&type=section&id=Risks%20related%20to%20intellectual%20property) This section addresses risks concerning the protection of the company's intellectual property, including patents, copyrights, trademarks, and trade secrets, and potential infringement claims - The Company's fabrics and manufacturing technology are generally not patented, allowing competitors to imitate products and potentially sell them at lower prices, which could **harm net revenue and profitability**[272](index=272&type=chunk) - Failure to adequately protect intellectual property rights (patents, copyrights, trademarks, trade dress, trade secrets) could **diminish the value of the brand and weaken the competitive position**, especially in international countries with weaker IP protection[273](index=273&type=chunk) - Trademarks, patents, and other proprietary rights could conflict with those of others, potentially leading to **challenges, invalidation, or preventing the Company from selling certain products**, incurring significant defense costs[274](index=274&type=chunk) - The Company faces a risk of being sued by third parties for alleged infringement of proprietary rights, which could result in **substantial damages, ongoing royalty payments, or restrictions on product offerings**, exhausting financial and management resources[275](index=275&type=chunk)[277](index=277&type=chunk) [Risks related to environmental, social, and governance issues](index=73&type=section&id=Risks%20related%20to%20environmental%2C%20social%2C%20and%20governance%20issues) This section discusses risks related to climate change (physical and transitional), increasing scrutiny of ESG practices, and evolving regulatory disclosure requirements - The Company is subject to **physical risks** (e.g., extreme weather, rising temperatures) and **transitional risks** (e.g., climate-related regulations, disclosure requirements) from climate change, which could disrupt its supply chain, increase costs, and affect consumer demand[278](index=278&type=chunk) - Increasing scrutiny and conflicting pressures from investors, regulators, and advocacy organizations regarding ESG practices and disclosures could lead to **reputational, operational, or legal consequences**[279](index=279&type=chunk)[280](index=280&type=chunk)[281](index=281&type=chunk) - Evolving regulatory requirements and divergent stakeholder expectations for ESG disclosures may increase **compliance costs, activism, and legal exposure**[281](index=281&type=chunk) [Risks related to legal and governance matters](index=73&type=section&id=Risks%20related%20to%20legal%20and%20governance%20matters) This section addresses risks stemming from stockholder actions, litigation, and anti-takeover provisions that could impact business operations and shareholder value - Actions or proposals from stockholders, political or consumer activists could be **costly, time-consuming, disrupt business operations**, and divert management attention, potentially affecting the market price and volatility of securities[282](index=282&type=chunk) - The Company is subject to periodic claims and litigation (e.g., product liability, stockholder class action, intellectual property), which could result in **significant settlement amounts, damages, fines, or other penalties**, and negatively impact its reputation[283](index=283&type=chunk) - Anti-takeover provisions in Delaware law and the Company's certificate of incorporation and bylaws (e.g., classified board, no cumulative voting, restrictions on special meetings) could **delay or discourage takeover attempts** that stockholders might consider favorable[284](index=284&type=chunk)[285](index=285&type=chunk)[286](index=286&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=76&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchases under its stock repurchase program and shares purchased through the Employee Share Purchase Plan Stock Repurchase and ESPP Activity | Stock Repurchase Program (Q2 2025) | Value | | :--- | :--- | | Total Number of Shares Purchased | 1,127,958 | | Average Price Paid per Share | $260.00 | | Maximum Dollar Value Remaining | $858,910,584 | | Employee Share Purchase Plan (Q2 2025) | Value | | Total Number of Shares Purchased | 42,336 | | Average Price Paid per Share | $256.49 | | Maximum Number of Shares Remaining | 4,192,824 | [Item 5. Other Information](index=76&type=section&id=Item%205.%20Other%20Information) This section discloses the CEO's Rule 10b5-1 trading arrangement for stock option exercises, with no other similar arrangements by directors or officers - Calvin McDonald, CEO and Director, entered into a **Rule 10b5-1 trading arrangement** on June 20, 2025[288](index=288&type=chunk) - The plan allows for the potential sale of up to **55,957 shares of common stock** in connection with the exercise of stock options expiring in March 2026[288](index=288&type=chunk) - The 10b5-1 Plan is scheduled to commence on **September 22, 2025**, and will terminate on the earlier of the date all shares are sold or **March 27, 2026**[288](index=288&type=chunk) - No other director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2025[289](index=289&type=chunk) [Item 6. Exhibits](index=77&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including officer certifications, unaudited financial statements, and interactive data files - Exhibit 31.1 and 31.2 are Certifications of the principal executive officer and principal financial and accounting officer, respectively, pursuant to **Exchange Act Rule 13a-14(a)**[291](index=291&type=chunk) - Exhibit 32.1 is the Certification of principal executive officer and principal financial and accounting officer pursuant to **18 U.S.C. Section 1350**[291](index=291&type=chunk) - Exhibit 101 contains the unaudited interim consolidated financial statements (Balance Sheets, Statements of Operations and Comprehensive Income, Statements of Stockholders' Equity, Statements of Cash Flows, and Notes) formatted in **iXBRL**[291](index=291&type=chunk) - Exhibit 104 is the Cover Page Interactive Data File, formatted in **iXBRL** and contained in Exhibit 101[291](index=291&type=chunk) [Signatures](index=78&type=section&id=Signatures) This section contains the official signature block, confirming the report was duly signed by the Chief Financial Officer on September 4, 2025 - The report is signed on behalf of lululemon athletica inc. by **Meghan Frank, Chief Financial Officer** (principal financial and accounting officer)[294](index=294&type=chunk) - The report was dated **September 4, 2025**[294](index=294&type=chunk)

[Second Quarter Fiscal 2025 Results Overview](index=1&type=section&id=Second%20Quarter%20Fiscal%202025%20Results%20Overview) Lululemon reported Q2 FY2025 net revenue of $2.5 billion, a 7% increase, with diluted EPS of $3.10, while facing declining margins and US business challenges [1.1 Key Financial Highlights (Q2 FY2025)](index=1&type=section&id=1.1%20Key%20Financial%20Highlights%20(Q2%20FY2025)) Lululemon achieved net revenue of **$2.5 billion** in Q2 FY2025, a **7% YoY increase**, with diluted EPS of **$3.10**. Comparable sales grew **1%**, but both gross and operating margins declined | Metric | Q2 FY2025 | Q2 FY2024 | Change (YoY) | | :------------------------- | :---------- | :---------- | :----------- | | Net Revenue (in billions) | $2.5 | $2.37 | +7% | | Net Revenue (constant $) | | | +6% | | Comparable Sales | +1% | | | | Americas Net Revenue | +1% | | | | International Net Revenue | +22% | | | | Americas Comparable Sales | -4% | | | | International Comparable Sales | +15% | | | | Gross Profit (in billions) | $1.5 | $1.41 | +5% | | Gross Margin | 58.5% | 59.6% | -110 bps | | Income from Operations (in millions) | $523.8 | $540.2 | -3% | | Operating Margin | 20.7% | 22.8% | -210 bps | | Diluted EPS | $3.10 | $3.15 | -1.6% | | Shares Repurchased (in millions) | 1.1 | | | | Cost of Repurchase (in millions) | $278.5 | | | | Net New Stores Added | 14 | | | | Total Stores | 784 | | | [1.2 Management Commentary](index=1&type=section&id=1.2%20Management%20Commentary) The CEO noted positive international momentum but expressed disappointment with US business performance and product execution, initiating improvement measures. The CFO stated that despite exceeding EPS expectations, revenue missed guidance due to US business and tariff challenges, leading to a revised full-year outlook - CEO Calvin McDonald stated that international regions maintained positive momentum, but expressed disappointment with US business performance and product execution, with the company taking necessary steps to strengthen its merchandise assortment and accelerate business development[2](index=2&type=chunk) - CFO Meghan Frank noted that Q2 diluted EPS exceeded expectations, but revenue missed guidance, primarily due to US business and industry-wide challenges, including higher tariffs, leading the company to revise its full-year outlook[3](index=3&type=chunk) [1.3 Balance Sheet Highlights](index=1&type=section&id=1.3%20Balance%20Sheet%20Highlights) As of Q2 FY2025 end, the company held **$1.2 billion** in cash and cash equivalents. Inventories increased **21%** year-over-year to **$1.7 billion**, or **13%** on a unit basis | Metric | Q2 FY2025 End | Q2 FY2024 End | Change (YoY) | | :---------------------- | :------------ | :------------ | :----------- | | Cash and Cash Equivalents (in billions) | $1.2 | $1.61 | -25.4% | | Revolving Credit Facility Capacity (in millions) | $393.2 | | | | Inventories (in billions) | $1.7 | $1.4 | +21% | | Inventories (unit basis) | | | +13% | [Financial Outlook](index=2&type=section&id=Financial%20Outlook) The company revised its full-year FY2025 net revenue guidance to **$10.85 billion-$11.00 billion**, reflecting anticipated impacts from tariffs and macroeconomic trends [2.1 Third Quarter Fiscal 2025 Outlook](index=2&type=section&id=2.1%20Third%20Quarter%20Fiscal%202025%20Outlook) The company projects Q3 FY2025 net revenue between **$2.47 billion** and **$2.50 billion**, a **3% to 4% YoY increase**, with diluted EPS expected to be **$2.18 to $2.23** | Metric | Q3 FY2025 Guidance | | :------------------ | :----------------- | | Net Revenue (in billions) | $2.470 - $2.500 | | Net Revenue Growth | 3% - 4% | | Diluted EPS | $2.18 - $2.23 | | Assumed Tax Rate | ~30.5% | [2.2 Full Year Fiscal 2025 Outlook](index=2&type=section&id=2.2%20Full%20Year%20Fiscal%202025%20Outlook) The company revised its full-year FY2025 net revenue outlook to **$10.85 billion to $11.00 billion**, representing **2% to 4% YoY growth** (**4% to 6%** excluding the 53rd week of FY2024). Diluted EPS is projected at **$12.77 to $12.97** | Metric | FY2025 Guidance (Revised) | | :------------------------------------ | :-------------------------- | | Net Revenue (in billions) | $10.850 - $11.000 | | Net Revenue Growth | 2% - 4% | | Net Revenue Growth (excl. 53rd week) | 4% - 6% | | Diluted EPS | $12.77 - $12.97 | | Assumed Tax Rate | ~30% | [2.3 Outlook Assumptions and Risks](index=2&type=section&id=2.3%20Outlook%20Assumptions%20and%20Risks) The FY2025 guidance includes an estimated **$240 million** reduction in gross profit due to increased US import duties and the elimination of de minimis exemptions, partially offset by vendor savings and pricing actions. This guidance excludes potential future share repurchases and is subject to risks like tariffs, consumer demand, and macroeconomic trends - The FY2025 guidance anticipates a reduction in gross profit of approximately **$240 million**, primarily due to increased US import duties and the elimination of "de minimis exemptions," partially mitigated by vendor savings and pricing actions[9](index=9&type=chunk) - This guidance does not reflect potential future share repurchases by the company[10](index=10&type=chunk) - The outlook is based on management's expectations as of the release date and does not include future unknown impacts, such as tariffs and macroeconomic trends[11](index=11&type=chunk) [Company Information](index=2&type=section&id=Company%20Information) This section provides an overview of Lululemon Athletica Inc., details regarding its Q2 FY2025 conference call, and contact information for investor and media relations [3.1 About Lululemon Athletica Inc.](index=2&type=section&id=3.1%20About%20Lululemon%20Athletica%20Inc.) Lululemon Athletica Inc. is a technical athletic apparel, footwear, and accessories company for yoga, running, training, and other activities, known for fabric innovation and functional design, collaborating with global communities for product development - Lululemon Athletica Inc. is a company providing technical athletic apparel, footwear, and accessories for yoga, running, training, and most other activities[13](index=13&type=chunk) - The company sets the standard in fabric innovation and functional design, collaborating with yogis and athletes in local communities worldwide for ongoing research and product feedback[13](index=13&type=chunk) [3.2 Conference Call Information](index=2&type=section&id=3.2%20Conference%20Call%20Information) The company held a conference call on September 4, 2025, at 4:30 PM ET to discuss Q2 results, providing details for participation and online webcast access - The conference call to discuss Q2 results was held on September 4, 2025, at 4:30 PM ET[12](index=12&type=chunk) - Participants could join by dialing 1-833-752-3550 (international 1-647-846-8290) or by listening to the webcast online via the company's website at https://corporate.lululemon.com/investors/news-and-events/events-and-presentations[12](index=12&type=chunk) [3.3 Investor and Media Contacts](index=5&type=section&id=3.3%20Investor%20and%20Media%20Contacts) The report provides contact details for Lululemon Athletica Inc. investor contacts Howard Tubin and Joseph Teklits of ICR, Inc., and media contact Madi Wallace - Investor contacts include Howard Tubin of Lululemon Athletica Inc. and Joseph Teklits of ICR, Inc[24](index=24&type=chunk) - The media contact is Madi Wallace of Lululemon Athletica Inc[24](index=24&type=chunk) [Non-GAAP Financial Measures & Reconciliations](index=2&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Reconciliations) This section explains the use of non-GAAP metrics like "constant dollar" and the adjustment for the 53rd week of FY2024 to ensure consistent financial comparisons [4.1 Explanation of Non-GAAP Measures](index=2&type=section&id=4.1%20Explanation%20of%20Non-GAAP%20Measures) The company uses "constant dollar" as a non-GAAP metric to exclude exchange rate fluctuations from net revenue growth. Due to FY2024 having 53 weeks, comparable sales are calculated on a one-week shifted basis for consistent year-over-year comparison - "Constant dollar" is a non-GAAP financial measure that assumes average foreign currency exchange rates remain consistent with the prior year, aiming to help investors understand the underlying net revenue growth rate excluding currency impacts[15](index=15&type=chunk)[18](index=18&type=chunk) - Due to the 53rd week in fiscal 2024, comparable sales are calculated on a one-week shifted basis, comparing the 13 weeks ended August 3, 2025, to the 13 weeks ended August 4, 2024[14](index=14&type=chunk)[33](index=33&type=chunk) - Fiscal 2024 included 53 weeks, while fiscal 2025 will have 52 weeks, impacting year-over-year comparisons[19](index=19&type=chunk)[36](index=36&type=chunk) [4.2 Constant Dollar Changes (Net Revenue & Comparable Sales)](index=9&type=section&id=4.2%20Constant%20Dollar%20Changes%20(Net%20Revenue%20%26%20Comparable%20Sales)) In Q2 FY2025, international net revenue grew **22%** (**20%** at constant dollars), while Americas net revenue grew **1%** (**1%** at constant dollars). International comparable sales increased **15%** (**13%** at constant dollars), while Americas comparable sales decreased **4%** (**3%** at constant dollars) 2025 Fiscal Second Quarter Net Revenue (Constant Dollar Change) | Region | Change | Foreign Exchange Impact | Change in Constant Dollars | | :---------------- | :----- | :---------------------- | :----------------------- | | United States | — % | — % | — % | | Canada | 1 % | — % | 1 % | | Americas | 1 % | — % | 1 % | | China Mainland | 25 % | (1)% | 24 % | | Rest of World | 19 % | (4)% | 15 % | | Total International | 22 % | (2)% | 20 % | | Total | 7 % | (1)% | 6 % | 2025 Fiscal Second Quarter Comparable Sales (Constant Dollar Change) | Region | Change | Foreign Exchange Impact | Change in Constant Dollars | | :---------------- | :----- | :---------------------- | :----------------------- | | Americas | (4)% | 1 % | (3)% | | China Mainland | 17 % | (1)% | 16 % | | Rest of World | 12 % | (3)% | 9 % | | Total International | 15 % | (2)% | 13 % | | Total | 1 % | — % | 1 % | [4.3 Expected Net Revenue Increase Excluding 53rd Week](index=10&type=section&id=4.3%20Expected%20Net%20Revenue%20Increase%20Excluding%2053rd%20Week) The expected net revenue increase for FY2025 is **2% to 4%**, or **4% to 6%** when excluding the impact of the 53rd week in FY2024 2025 Fiscal Year Expected Net Revenue Increase (Excluding 53rd Week Impact) | Metric | Fiscal 2025 | | :------------------------------------------ | :---------- | | Expected net revenue increase | 2% to 4% | | Impact of 53rd week | 2% | | Expected net revenue increase excluding 53rd week (non-GAAP) | 4% to 6% | [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This report contains forward-looking statements, including guidance and outlook, based on current management expectations, but involves multiple risks and uncertainties such as brand reputation, market competition, consumer preferences, international expansion, supply chain disruptions, tariff policies, macroeconomic fluctuations, and litigation; the company assumes no obligation to update these statements - Forward-looking statements, including company guidance and outlook, are based on management's current expectations but involve multiple risks and uncertainties[21](index=21&type=chunk) - Key risks include maintaining brand value, market competition, predicting consumer preferences, international market expansion, managing business complexities, changes in tariff policies, macroeconomic fluctuations, supply chain disruptions, and protecting intellectual property[21](index=21&type=chunk) - The company assumes no obligation to publicly update such forward-looking statements, unless required by law[23](index=23&type=chunk) [Condensed Consolidated Financial Statements](index=6&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents the company's condensed consolidated statements of operations, balance sheets, and cash flows for the second quarter and first two quarters of fiscal year 2025 [6.1 Condensed Consolidated Statements of Operations](index=6&type=section&id=6.1%20Condensed%20Consolidated%20Statements%20of%20Operations) In Q2 FY2025, net revenue increased to **$2.525 billion**, but net income decreased from **$392.9 million** in Q2 FY2024 to **$370.9 million**, with both gross and operating margins declining Condensed Consolidated Statements of Operations (Q2 FY2025 vs Q2 FY2024) | Metric | Q2 FY2025 (in thousands) | Q2 FY2024 (in thousands) | | :---------------------------------- | :----------------------- | :----------------------- | | Net revenue | $2,525,219 | $2,371,078 | | Costs of goods sold | $1,048,017 | $958,893 | | Gross profit | $1,477,202 | $1,412,185 | | Gross profit as % of net revenue | 58.5% | 59.6% | | Selling, general and administrative expenses | $951,658 | $871,959 | | Selling, general and administrative expenses as % of net revenue | 37.7% | 36.8% | | Income from operations | $523,814 | $540,226 | | Income from operations as % of net revenue | 20.7% | 22.8% | | Net income | $370,905 | $392,922 | | Diluted earnings per share | $3.10 | $3.15 | [6.2 Condensed Consolidated Balance Sheets](index=7&type=section&id=6.2%20Condensed%20Consolidated%20Balance%20Sheets) As of August 3, 2025, total assets were **$7.523 billion**, a slight decrease from February 2, 2025, but an increase from July 28, 2024. Cash and cash equivalents significantly decreased from the fiscal year-end, while inventories increased Condensed Consolidated Balance Sheets (August 3, 2025 vs July 28, 2024) | Metric | August 3, 2025 (in thousands) | July 28, 2024 (in thousands) | | :---------------------------------- | :---------------------------- | :---------------------------- | | Cash and cash equivalents | $1,155,794 | $1,610,112 | | Inventories | $1,722,570 | $1,429,043 | | Total current assets | $3,528,728 | $3,571,744 | | Total assets | $7,523,439 | $6,744,135 | | Total current liabilities | $1,557,346 | $1,468,651 | | Stockholders' equity | $4,387,279 | $4,031,645 | | Total liabilities and stockholders' equity | $7,523,439 | $6,744,135 | [6.3 Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=6.3%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first two quarters of FY2025, net cash from operating activities significantly decreased to **$209.7 million** from **$570.7 million** in the prior year. Investing and financing activities continued to consume cash, resulting in an **$828.5 million** total decrease in cash and cash equivalents Condensed Consolidated Statements of Cash Flows (First Two Quarters 2025 vs First Two Quarters 2024) | Metric | First Two Quarters 2025 (in thousands) | First Two Quarters 2024 (in thousands) | | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Net income | $685,477 | $714,343 | | Net cash provided by operating activities | $209,722 | $570,664 | | Net cash used in investing activities | $(319,960) | $(266,625) | | Net cash used in financing activities | $(744,823) | $(916,543) | | Decrease in cash and cash equivalents | $(828,542) | $(633,859) | | Cash and cash equivalents, end of period | $1,155,794 | $1,610,112 | [Supplemental Company Data](index=11&type=section&id=Supplemental%20Company%20Data) This section provides additional operational data, including the number of company-operated stores and their total gross square footage for recent fiscal quarters [7.1 Company-operated Store Count and Square Footage](index=11&type=section&id=7.1%20Company-operated%20Store%20Count%20and%20Square%20Footage) In Q2 FY2025, Lululemon added a net of **14** company-operated stores, reaching a total of **784**. Total gross square footage increased by **96,000 sq ft**, totaling **3.511 million sq ft** Company-operated Store Count | Quarter | Stores Open at Beginning | Stores Opened | Stores Closed | Stores Open at End | | :---------------- | :----------------------- | :------------ | :------------ | :----------------- | | Q3 2024 | 721 | 28 | — | 749 | | Q4 2024 | 749 | 21 | 3 | 767 | | Q1 2025 | 767 | 5 | 2 | 770 | | Q2 2025 | 770 | 15 | 1 | 784 | Company-operated Store Total Gross Square Footage (in thousands of square feet) | Quarter | Total Gross Square Feet at Beginning | Gross Square Feet Added | Gross Square Feet Lost | Total Gross Square Feet at End | | :---------------- | :--------------------------------- | :---------------------- | :--------------------- | :----------------------------- | | Q3 2024 | 3,075 | 156 | — | 3,231 | | Q4 2024 | 3,231 | 153 | 12 | 3,372 | | Q1 2025 | 3,372 | 50 | 7 | 3,415 | | Q2 2025 | 3,415 | 99 | 3 | 3,511 |

Core Viewpoint - Lululemon Athletica is suing Costco for selling similar products, which could significantly impact Lululemon's growth and stock performance [1][4][10] Company Overview - Lululemon's stock has decreased nearly 50% this year due to concerns over its growth and exposure to the Chinese market [2][9] - The current trading levels are the lowest since 2020, raising questions about whether Lululemon represents a good investment opportunity or a value trap [2][11] Legal Issues - The lawsuit claims Costco is selling "dupes" of Lululemon's products, infringing on its intellectual property and confusing customers [4][10] - Lululemon alleges that Costco is using identical color names, which are crucial to its branding [4] Competitive Threats - If Costco wins the lawsuit, it could severely threaten Lululemon's growth, especially as consumers are already cutting back on discretionary spending [5][10] - Lululemon's pricing power may be compromised if consumers opt for lower-priced alternatives at Costco, potentially leading to reduced prices and lower gross margins [6][10] Growth Rate Concerns - Lululemon's growth rate has sharply declined, with recent sales growth in single digits compared to previous years when it often exceeded 20% [7][10] - The potential for Costco to offer similar products could further erode Lululemon's growth prospects [9] Market Conditions - Macroeconomic conditions are unfavorable, with consumers likely to seek lower-priced options, which could constrain demand for Lululemon products [10][11] - The uncertainty surrounding tariffs and the Chinese market adds additional pressure on Lululemon's business [9]