Lululemon Athletica LULU · USD

Segmented InformationThe Company reports three segments: Americas, China Mainland, and Rest of World, which is comprised of its non-significant operating segments APAC and EMEA reported on a combined basis. The Company's segments are based on the financial information the Chief Operating Decision Maker ("CODM") uses to evaluate performance and allocate resources. Effective January 31, 2026, the Company's chief executive officer ("CEO") stepped down, and the Company's chief financial officer and its president and chief commercial officer were appointed as interim co-CEOs. The CODM of the Company during 2025 was the CEO, and during the interim period, the interim co-CEOs are the Company's CODM. The CODM approves the annual budget on a segment level, and regularly assesses the performance of the Company's segments using key financial metrics, including net revenue and segmented income from operations. The Company does not report capital expenditures and assets by segment as that information is not reviewed by the CODM.

Net RevenueDisaggregated net revenueIn addition to the disaggregation of net revenue by reportable segment in Note 24. Segmented Information, the following table disaggregates the Company's net revenue by geographic area.Prior to the acquisition of the Mexico operations on September 10, 2024, wholesale sales to the third party under the license and supply arrangement by lululemon athletica canada inc. were disclosed as net revenue recognized within Canada.202520242023(In thousands)United States$6,328,380 $6,483,183 $6,346,392 Canada1,423,178 1,411,673 1,285,255 Mexico95,486 33,300 — Americas7,847,044 7,928,156 7,631,647 China Mainland1,754,799 1,361,337 963,760 Hong Kong SAR, Taiwan, and Macau SAR199,079 180,092 170,533 People's Republic of China1,953,878 1,541,429 1,134,293 Other geographic areas1,301,678 1,118,541 853,338 $11,102,600 $10,588,126 $9,619,278 The following disaggregates the Company's net revenue by category. Accessories and other categories is primarily composed of accessories, footwear, and lululemon Studio.202520242023(In thousands)Women's apparel$6,995,365 $6,692,630 $6,147,372 Men's apparel2,663,986 2,558,380 2,252,753 Accessories and other categories1,443,249 1,337,116 1,219,153 $11,102,600 $10,588,126 $9,619,278 The following disaggregates the Company's net revenue by channel.202520242023(In thousands)Company-operated stores$5,049,744 $5,007,872 $4,410,956 E-commerce4,918,697 4,570,446 4,311,110 Other channels1,134,159 1,009,808 897,212 $11,102,600 $10,588,126 $9,619,278 Gift card net revenueDuring 2025, 2024, and 2023, the Company recognized net revenue of $179.2 million, $180.9 million, and $151.4 million, respectively, that was included in the opening balance of the unredeemed gift card liability at the beginning of each year. For 2025, 2024, and 2023, net revenue recognized on unredeemed gift card balances was $37.8 million, $36.2 million, and $28.5 million, respectively.

Commitments and ContingenciesCommitmentsLeases. The Company has obligations under operating leases for its store and other retail locations, distribution centers, offices, and equipment. Please refer to Note 19. Leases for further details regarding lease commitments and the timing of future minimum lease payments.License and supply arrangements. The Company has entered into license and supply arrangements with partners which grant them the right to operate lululemon branded retail locations and sell lululemon products on websites in specific countries. Under these arrangements, the Company supplies the partners with lululemon products, training, and other support. As of February 1, 2026, there were 45 licensed locations, including 13 in the United Arab Emirates, nine in Saudi Arabia, eight in Israel, four in Kuwait, four in Qatar, three in Turkey, two in Belgium, one in Bahrain, and one in Denmark. On September 10, 2024, the Company acquired the lululemon branded retail locations and operations run by a third party in Mexico. The Company had previously granted the third party the right to operate retail locations and to sell lululemon products in Mexico. Please refer to Note 7. Acquisition for further information.ContingenciesLegal proceedingsIn addition to the legal proceedings described below, the Company is, from time to time, involved in routine legal matters, and audits and inspections by governmental agencies and other third parties which are incidental to the conduct of its business. This includes legal matters such as initiation and defense of proceedings to protect intellectual property rights, employment claims, product liability claims, personal injury claims, and similar matters. The Company believes the ultimate resolution of any such legal proceedings, audits, and inspections is not reasonably likely to have a material adverse effect on its consolidated balance sheets, results of operations or cash flows; however, litigation and regulatory matters are inherently uncertain, and it is possible that an adverse outcome in one or more matters could have a material impact in a particular reporting period. The Company has recognized immaterial provisions related to the expected outcome of legal proceedings.On August 8, 2024, lululemon athletica inc. and certain officers of the Company were named as defendants in a purported securities class action (Patel v. Lululemon Athletica Inc., et al., No.

Income TaxesThe Company's domestic and foreign income before income tax expense and current and deferred income taxes from federal, state, and foreign sources were as follows: 202520242023(In thousands)Income before income tax expenseDomestic$598,174 $479,956 $458,041 Foreign1,640,793 2,096,121 1,717,694 $2,238,967 $2,576,077 $2,175,735 Current income tax expenseFederal$177,390 $86,851 $140,726 State36,771 31,983 42,476 Foreign494,677 584,248 469,090 $708,838 $703,082 $652,292 Deferred income tax expense (recovery)Federal$(41,413)$61,386 $(14,741)State(9,733)14,047 (3,097)Foreign2,092 (17,054)(8,909)$(49,054)$58,379 $(26,747)Income tax expense$659,784 $761,461 $625,545 The Company's income tax expense for 2023 included a discrete income tax recovery of $26.1 million related to the impairment of assets and restructuring costs. Please refer to Note 10. Impairment of Assets and Restructuring Costs for further information.As of February 1, 2026, the Company's net investment in its Canadian subsidiaries was $3.3 billion, of which $1.6 billion was determined to be indefinitely reinvested. A deferred income tax liability of $80.7 million has been recognized in relation to the portion of the Company's net investment in its Canadian and Hong Kong SAR subsidiaries that is not indefinitely reinvested, representing the Canadian withholding taxes and U.S. state income taxes which would be due upon repatriation. This deferred tax liability has been recorded on the basis that the Company would choose to make the repatriation transactions in the most tax-efficient manner. Specifically, to the extent that the Canadian subsidiaries have paid-up capital, any such distributions would be structured as a return of capital, and therefore not subject to Canadian withholding tax. The unrecognized deferred income tax liability on the indefinitely reinvested amount is approximately $89.1 million.As of February 1, 2026, the Company had cash and cash equivalents of $935.1 million outside of the United States. The reconciliation of the federal statutory income tax rate to the Company's effective tax rate was as follows:202520242023AmountPercentAmountPercentAmountPercent(In thousands, except percentages)Federal income tax at statutory rate$470,183 21.0 %$540,976 21.0 %$456,904 21.0 %DomesticDomestic federal reconciling items:Tax credits(4,746)(0.2)(5,923)(0.2)(5,289)(0.2)Nontaxable or nondeductible items2,309 0.1 3,891 0.2 4,207 0.2 Effect of cross-border tax laws(9,251)(0.4)2,004 0.

Stock-Based Compensation and Benefit PlansStock-based compensation plansThe Company's eligible employees participate in various stock-based compensation plans, provided directly by the Company.In June 2023, the Company's stockholders approved the adoption of the lululemon athletica inc. 2023 Equity Incentive Plan. The 2023 Equity Incentive Plan provides for awards in the form of stock options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, RSUs, performance shares, PSUs, cash-based awards, other stock-based awards, and deferred compensation awards to employees (including officers and directors who are also employees), consultants, and directors of the Company.The awards granted under the 2014 Equity Incentive Plan remain outstanding and continue to vest under their original conditions. No further awards will be granted under the 2014 Equity Incentive Plan.The Company has granted stock options, PSUs, RSUs, and restricted shares. Stock options granted to date generally have a four-year vesting period and vest at a rate of 25% each year on the anniversary date of the grant. Stock options generally expire on the earlier of seven or 10 years from the date of grant, or a specified period of time following termination. PSUs issued generally vest three years from the grant date and restricted shares generally vest one year from the grant date. RSUs granted generally have a three-year vesting period and vest at a certain percentage each year on the anniversary date of the grant.The Company issues previously unissued shares upon the exercise of Company options, vesting of PSUs or RSUs that are settled in common stock, and granting of restricted shares.Stock-based compensation expense charged to income for the plans was $61.8 million, $88.6 million, and $92.7 million for 2025, 2024, and 2023, respectively.Total unrecognized compensation cost for all stock-based compensation plans was $150.9 million as of February 1, 2026, which is expected to be recognized over a weighted-average period of 2.5 years, and was $122.3 million as of February 2, 2025 over a weighted-average period of 2.0 years.

LeasesThe Company has obligations under operating leases for its store and other retail locations, distribution centers, offices, and equipment. As of February 1, 2026, the initial lease terms of the various leases generally range from two to 15 years. The majority of the Company's leases include renewal options at the sole discretion of the Company. The lease term includes options to extend or terminate the lease when it is reasonably certain those options will be exercised.The following table details the Company's net lease expense. Certain of the Company's leases include rent escalation clauses, rent holidays, and leasehold rental incentives. The majority of the Company's leases for store premises also include contingent rental payments based on sales volume. The variable lease expenses disclosed below include contingent rent payments and other non-fixed lease-related costs, including common area maintenance, property taxes, and landlord's insurance. 202520242023(In thousands)Net lease expense:Operating lease expense$405,987 $338,756 $282,888 Short-term lease expense13,172 13,588 15,289 Variable lease expense196,869 188,358 152,791 Sublease income(9,803)(2,805)— $606,225 $537,897 $450,968 The following table presents future minimum lease payments by fiscal year and the impact of discounting.February 1, 2026(In thousands)2026$370,705 2027391,976 2028334,124 2029287,375 2030182,005 Thereafter537,635 Future minimum lease payments$2,103,820 Impact of discounting(305,379)Present value of lease liabilities$1,798,441 Balance sheet classification:Current lease liabilities$298,724 Non-current lease liabilities1,499,717 $1,798,441 As of February 1, 2026, the Company's minimum 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.The weighted-average remaining lease terms and weighted-average discount rates were as follows: February 1, 2026February 2, 2025Weighted-average remaining lease term6.59 years6.68 yearsWeighted-average discount rate4.4 %4.

AcquisitionOn September 10, 2024, the Company acquired the lululemon branded retail locations and operations run by a third party in Mexico. The Company acquired all outstanding shares of the third party, and had previously granted it the right to operate retail locations and to sell lululemon products in Mexico. The following table summarizes the fair value of the consideration transferred, as well as the calculation of goodwill based on the excess of consideration over the fair value of net assets acquired. September 10, 2024(In thousands)Fair value of consideration transferred:Cash paid to shareholders$159,380 Contingent consideration15,000 Settlement of intercompany balances6,975 181,355 Less cash acquired(5,234)Fair value of consideration transferred, net of cash and cash equivalents acquired$176,121 Less fair value of net assets acquired:Assets acquired:Inventories$15,275 Intangible assets15,500 Other current and non-current assets14,013 44,788 Liabilities assumed(15,668)Net assets acquired$29,120 Goodwill$147,001 Goodwill relates to the assembled workforce and benefits expected as a result of the acquisition and has been allocated to the Americas segment. None of the goodwill is expected to be deductible for income tax purposes. Reacquired franchise rights were valued using the future expected cash flows of the remaining contractual franchise period until November 2026. These intangible assets have a fair value of $15.5 million, which is being amortized until November 2026. Contingent consideration of $15.0 million relates to performance-related conditions from the acquisition date to December 31, 2025, and has been recognized at fair value. As of February 1, 2026, $10.1 million in consideration payments has been paid.The Company has not disclosed pro forma information of the combined business as the transaction is not material to net revenue or net earnings.During 2024, the Company recognized $3.5 million in acquisition-related expenses within selling, general and administrative expenses primarily related to legal, accounting, valuation, and other professional services.

Our CISO is responsible for our cybersecurity program, including risk assessments, information security activities, and controls. The CISO is responsible for establishing and maintaining corporate information security policies and overseeing our risk management activities, which prioritize vulnerability management, risk reduction, and prevention. Our CISO also leads our Cyber Defense and Incident Response (“CDIR”) team which identifies, assesses, escalates, and remediates cybersecurity incidents. Our current CISO, who joined lululemon in March 2026, has approximately 20 years of technology experience, including with cybersecurity, data science, and production engineering teams. Our previous CISO is currently serving in an advisor role during the transition. The CDIR team monitors and manages key cybersecurity risks, including threats related to third parties, cloud security, malicious code, e-commerce systems, and store technology, as well as identifying and assessing new potential cyber threats. It also conducts security reviews, assesses vulnerabilities, and analyzes threat intelligence to strengthen our cyber defenses and incident response efforts. As part of our cybersecurity program, we conduct cybersecurity awareness training including phishing simulations and supplemental campaigns as well as mandatory e-learning for all our employees. Our employees have multiple mechanisms for reporting cybersecurity and data privacy concerns. We work with third-party cybersecurity advisors to undertake assessments of our critical systems and to remediate any high-risk vulnerabilities identified. We also engage third parties to perform penetration testing on our key systems to identify potential weaknesses.As part of our cyber incident response plan, we utilize an established framework to assess the severity of cybersecurity incidents. Under the plan, incidents are escalated to relevant senior management, and the board of directors, as appropriate, based on their severity. Our disclosure committee assesses the materiality of severe incidents including both quantitative and qualitative factors.