LULU Filings — Lululemon Athletica Inc. - FilingSpy
LULU
Lululemon Athletica Inc.
A maker of technical athletic apparel, footwear, and accessories known for yoga pants and its Align and Wunder Under leggings, lululemon sells through hundreds of company-run stores across dozens of countries plus its website. Chip Wilson founded the company in 1998 in Vancouver, and picked the name because the letter "L" doesn't exist in Japanese, making it sound exotic there. He famously joked he added three L's just to see if he could get Westerners to mispronounce it.
Q1 FY2026 gross margin fell 410 bps to 54.2% as tariffs and markdowns cut profit
fell 410 to 54.2%, the lowest quarterly level in four years. rose 4.3% to $2,471.6M but dropped 36.9% to $276.9M as tariffs and SG&A growth of 12.4% compressed earnings, with at $1.69 down 35% from a year ago. The company is absorbing tariff costs it does not expect to fully offset in 2026.
Key takeaways
contracted 410 to 54.2%, driven by a 330-basis-point product margin decline from higher tariffs and markdowns plus higher occupancy costs.
fell 36.9% to $276.9M and dropped 35% to $1.69 as rose 12.4% to $1.06B, including $11.4M in proxy contest costs.
Net rose 4.3% to $2,471.6M, with China Mainland up 30% and Rest of World up 13% while Americas revenue declined 3%.
Section summaries
Management's Discussion and Analysis
Q1 FY2026 net revenue rose 4% to $2.5B, but gross margin fell 410 bps to 54.2% and operating income dropped 37% on higher tariffs and SG&A.
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Net increased 4% to $2.5 billion, driven by 30% growth in and 13% in , while revenue declined 3%.
swung to a $214.4M inflow from a $119.0M outflow a year earlier on changes; the company repurchased $361.8M of shares.
The company submitted refund claims for $230M in paid but recognized no asset, and launched an Americas action plan focused on full-price selling.
China Mainland grew 32.2% while Americas segment income fell 30.7% on tariff-driven .
What changed
FY2025 flagged FY2026 margin declines as anticipated from tariffs and de minimis removal; Q1 at 54.2% is down 4.2 points and below the 54.9% Q4 FY2025, confirming the trajectory.
The permanent CEO was set to start in September 2026 per the FY2025 report; the Q1 risk factors confirm interim co-CEOs remain in place after the January 2026 resignation with the permanent CEO start still ahead.
China Mainland growth was flagged to watch after 28.9% FY2025 and 46% Q3 FY2025; Q1 came in at 30%, a deceleration from those rates but still the lead growth engine.
Americas was flagged for comparable-sales recovery after a 1% FY2025 decline and -5% Q3 ; Q1 FY2026 revenue declined 3% and the region's income fell 30.7%, showing no recovery.
Cash ended Q1 at $1,514.7M, up 14.3% but down 16.2% from Q4 FY2025's $1,807.2M after $1.2B FY2025 buybacks and $361.8M Q1 repurchases.
The proxy contest with founder Chip Wilson noted in FY2025 as resolved via cooperation agreement reappears in Q1 via $11.4M proxy costs and a risk factor on future activist actions.
What to watch
Q2 FY2026 as the company pursues $230M IEEPA tariff refunds not yet recognized and expects tariff costs to keep compressing margins.
Americas and in Q2 FY2026 to see if the full-price action plan reverses the 3% revenue decline.
China Mainland growth in Q2 FY2026 after the 30% Q1 rate to see if deceleration continues.
Permanent CEO start in September 2026 and whether interim co-CEO strategy holds.
contracted 410 to 54.2%, primarily due to a 330-basis-point decline from higher tariffs and markdowns, plus higher occupancy costs.
expenses rose 12.4% to $1.06 billion, including $11.4 million in proxy contest costs, higher employee and marketing expenses, pushing the SG&A ratio up 310 to 42.9%.
fell 37% to $276.9 million, with income down 30.7% on tariff-driven , while segment income grew 32.2%.
swung to a $214.4 million inflow from a $119.0 million outflow last year, helped by changes; the company repurchased $361.8 million in shares.
The company is pursuing refund claims for $230 million in IEEPA tariffs paid but has not recognized any asset, and it launched an action plan focused on full-price selling.
Quantitative and Qualitative Disclosures About Market Risk
The company faces FX translation and transaction risk, limited interest rate risk, and credit risk, using forward contracts to hedge key exposures.
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was $52.2 million higher in Q1 2026 versus Q1 2025 due to USD exchange rate fluctuations.
The company hedges a portion of its net investment in its Canadian subsidiary with forward contracts, reducing the translation loss in other comprehensive loss by $7.0 million.
As of May 3, 2026, a 10% in the USD against hedged currencies would decrease the of outstanding derivatives by $30.7 million, substantially offset by the underlying hedged items.
The net of outstanding was a $2.7 million liability as of May 3, 2026.
There were no borrowings outstanding under the $600 million variable-rate , and the company does not currently hedge interest rate risk.
Credit risk is managed by transacting with investment-grade counterparties and limiting exposure to any single one.
In addition to the legal matters described in Note 12. Legal Proceedings and Other Contingencies included in Item 1 of Part I of this report and in our 2025 Annual Report on Form 10-K, we are, from time to time, involved in routine legal matters incidental to the conduct of our…
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In addition to the legal matters described in Note 12. Legal Proceedings and Other Contingencies included in Item 1 of Part I of this report and in our 2025 Annual Report on Form 10-K, we are, from time to time, involved in routine legal matters incidental to the conduct of our business, including 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. We believe the ultimate resolution of any such current proceeding is not reasonably likely to have a material adverse effect on our financial position, results of operations or cash flows.
Tariff policy volatility, including the de minimis removal, has materially increased costs, while CEO transition and competitive pressures add uncertainty.
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U.S. tariff changes, including the removal of the and new tariffs under alternative powers, have significantly increased product costs and compressed margins, with $230 million in tariffs paid and refund claims submitted.
The company faces a consumer class action related to tariff-driven pricing and potential governmental reimbursements, while ongoing policy volatility complicates cost forecasting and supply chain planning.
CEO transition creates leadership uncertainty: the former CEO stepped down in January 2026, interim co-CEOs were appointed, and a permanent CEO is set to start in September 2026, which may disrupt operations and strategy.
Intense competition and the proliferation of lower-priced imitations threaten the brand's premium positioning, as limited patent protection allows competitors to replicate performance fabrics and styling.
Supply chain concentration poses geopolitical and operational risks, with approximately 40% of products manufactured in Vietnam and 34% of fabric sourced from Taiwan, exposing the company to potential disruptions from regional conflicts.
A recent with founder Chip Wilson was resolved via a cooperation agreement, but future activist actions could divert management attention and create perceived strategic uncertainty.