AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-3: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 31/10/2026
Moat25
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 1/4 · Direct feedback and a premium brand provide differentiation capabilities, but premium superiority is management's claim. Supplier-controlled, generally nonexclusive technology permits similar competing products. The passages establish weak structural protection and no demonstrated network effect, switching barrier, cost advantage or efficient-scale protection.
durability · 1/4 · Fiscal 2021–2024 revenue growth demonstrates sustained historical traction. However, Americas revenue declined in fiscal 2025, followed by second-quarter 2026 comparable-sales declines across all three disclosed regions. Combined with imitable underlying technology, these outcomes support fragile durability rather than a demonstrated enduring moat.
customer dependency · 1/4 · Management-reported franchise engagement indicates affinity, but no dependency or switching friction is demonstrated. Lower Americas traffic and conversion and subsequent comparable-sales declines indicate fragile continuing demand. This assessment uses indirect operating evidence; comparable sales include stores and e-commerce and do not measure customer-level retention.
erosion resilience · 1/4 · Historical revenue growth and first-quarter 2026 China comparable growth show resilience in earlier periods. Subsequent comparable declines across regions and gross-margin deterioration excluding tariff refunds outweigh that counterevidence. Tariffs and other costs complicate attribution; the conditional imitation disclosure does not prove realized substitution.
Pricing power31
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 1/4 · Lower Americas average order value alongside weaker traffic and conversion, together with disclosure of experienced selling-price or price-response pressures, supports weak pricing outcomes. Average order value includes basket size and mix; the broader pressure disclosure does not isolate which effect occurred or quantify unit-price reductions or elasticity.
retention · 1/4 · Franchise engagement is management-reported evidence of customer affinity. Lower traffic and conversion and second-quarter comparable-sales declines indicate weak continuing demand despite that affinity. Retention is assessed indirectly from operating results, with no inferred churn or repeat-purchase rate and no assumption that all comparable-sales changes reflect customer losses.
margin resilience · 1/4 · Fiscal 2024 gross margin improved, but second-quarter 2026's 200-basis-point increase included 560 basis points from tariff refunds, implying a 360-basis-point decline excluding that benefit. Operating margin declined despite refunds. First-quarter Americas product-margin pressure was primarily tariff-related, demonstrating limited cost absorption without establishing competition as the sole cause.
contractual freedom · 2/4 · The supplied retail terms explicitly permit Platform pricing to differ from in-store pricing, demonstrating channel-specific pricing latitude. This supports a bounded mixed assessment. The excerpt does not establish unrestricted repricing of accepted orders or comprehensive freedom from pricing constraints; October 19, 2026 is its retrieval date.
Predictability94
5 consecutive published annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 9.38
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 5.04
- observedAnnualPeriods
- 5.00
Financial strength100
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or reported pretax profit plus reported gross interest expense. Reported EBIT is distinct from GAAP operating income and gross interest. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope. An original fully reconciled nonnegative liability partition proves the existing endpoint grade across every permitted borrowing amount and original rounding interval. The bounded component does not estimate a debt amount or leverage ratio.
- debtFcfGrade
- 100.00
- netDebtEbitGrade
- 100.00
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 100.00
- borrowingLowerBound
- 0.00
- borrowingUpperBound
- 719.99
- Current ratio (x)
- 2.26
- cashInterestPaid
- 1.03
- cashInterestCoverage
- 1558.83
Capital allocation96
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or EBIT calculated from reported pretax profit plus reported gross interest expense; the issuer-reported EBIT is distinct from GAAP operating income and gross interest; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. ROIC remains undefined for nonpositive invested capital; the explicit asset-return alternative does not change the ROIC chart. Missing financial inputs alone never trigger an alternative. Return grade is exactly 100: the minimum three-year average pretax return exceeds 25% even with all reported liabilities as the upper borrowing bound and every input within its original stated accuracy. Exact debt and return percentages remain unknown; no ROIC percentage is imputed. Does not establish acquisition quality or buyback timing.
- operatingReturnGrade
- 100.00
- 3-year average dilution (%)
- -2.31
- 3-year average SBC / revenue (%)
- 0.79
- cashConversionGrade
- 83.93
- operatingReturnLowerBound
- 43.26
Management56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Substantial operating cash generation and an undrawn credit facility support discipline. However, fiscal 2025 capital expenditure plus repurchases exceeded operating cash flow; first-half 2026 repurchases exceeded operating cash flow before investment. Studio impairments evidence unsuccessful deployment, while working-capital timing supported recent cash improvement. Repurchase value creation is unestablished.
incentive alignment · 3/4 · Implemented 2024 bonuses equally weighted revenue and operating income and paid 80.9% of target. A completed multiyear PSU award paid against disclosed performance, while actual 2026 PSUs require performance and continued employment. These demonstrate strong alignment mechanisms, though complete current ownership, thresholds and durable shareholder outcomes remain missing.
execution · 2/4 · Historical revenue growth and first-quarter 2026 China comparable growth demonstrate achievements. Americas deterioration and subsequent comparable-sales declines across regions offset them. Execution is inferred from operating outcomes, not isolated management causality. October restructuring and appointments effective October 26 offer potential improvement but supply no demonstrated turnaround results.
governance · 2/4 · October disclosure of 12 independent directors on a 13-member board supports oversight. Classified-board provisions and restrictions on removal, special meetings and written consent limit accountability. Shareholders approved a declassification proposal in June, but implementation is not established and subsequent classified-board disclosures persist. These facts support a mixed assessment.
Evidence
We believe we successfully compete on the basis of our premium brand image, our technical product innovation, and our commitment to creating highest quality product for our guests.
2025 Form 10-K, filed March 17, 2026: competition; management's claimed differentiation · Filed 17/03/2026
Through our vertical retail strategy and direct connection with our customers, whom we refer to as guests, we are able to collect feedback and incorporate unique performance and fashion needs into our design process.
2025 Form 10-K: business; direct customer feedback and product design · Filed 17/03/2026
Our Business
Our teams continued to execute against our Power of Three ×2 growth plan and the compound annual growth rate in net revenue was 19% between fiscal 2021 and 2024.
2025 proxy, filed April 29, 2025: business review; fiscal 2021–2024 revenue growth · Filed 29/04/2025
•Continued to see strong guest engagement with key franchises, including Align, Softstreme, and Fast and Free in women's, and Pace Breaker, Zeroed In, and Soft Jersey in men's.
2025 proxy: fiscal 2024 product review; management-reported franchise engagement · Filed 29/04/2025
–China Mainland comparable sales increased 20%, or 13% on a constant dollar basis.
First-quarter 2026 Form 10-Q, filed June 4, 2026: China Mainland comparable sales · Filed 04/06/2026
The intellectual property rights in the technology, fabrics, and processes used to manufacture our products generally are owned or controlled by our suppliers and are generally not unique to us.
2025 Form 10-K: intellectual property; supplier ownership and nonexclusive technology · Filed 17/03/2026
As a result, our current and future competitors are able to manufacture and sell products with performance characteristics, fabrics and styling similar to our products.
2025 Form 10-K: intellectual property; competitors' ability to sell similar products · Filed 17/03/2026
2025 2024 (In thousands) Net revenue $ 7,847,044 $ 7,928,156 Net revenue change (1.0) % 3.9 % Our operations in the Americas are core to our business and we aim to maintain and grow our net revenue in this market through ongoing product innovation by increasing new style penetration, as well as improving our localized assortment by store and by market.
2025 Form 10-K: Americas revenue; fiscal 2025 versus fiscal 2024, amounts in thousands · Filed 17/03/2026
The summary below compares the second quarter of 2026 to the second quarter of 2025 and includes $134.5 million of International Emergency Economic Power Act ("IEEPA") tariff refunds and $4.1 million of associated interest received during the second quarter of 2026.
Second-quarter 2026 Form 10-Q, filed September 3, 2026: comparison period and tariff-refund scope · Filed 03/09/2026
•Comparable sales decreased 9%, or 10% on a constant dollar basis.
Second-quarter 2026 Form 10-Q: consolidated comparable-sales decline · Filed 03/09/2026
–Americas comparable sales decreased 12%.
Second-quarter 2026 Form 10-Q: Americas comparable-sales decline · Filed 03/09/2026
–China Mainland comparable sales decreased 2%, or 8% on a constant dollar basis.
Second-quarter 2026 Form 10-Q: China Mainland comparable-sales decline, reported and constant dollars · Filed 03/09/2026
–Rest of World comparable sales decreased 4%, or 3% on a constant dollar basis.
Second-quarter 2026 Form 10-Q: Rest of World comparable-sales decline, reported and constant dollars · Filed 03/09/2026
We experienced lower conversion rates, reduced store traffic, and a decrease in average order value in the Americas.
First-quarter 2026 Form 10-Q: Americas conversion, store traffic and average order value · Filed 04/06/2026
20
Table of Contents
•Gross margin increased 200 basis points to 60.5%, which includes an increase of 560 basis points related to IEEPA tariff refunds.
Second-quarter 2026 Form 10-Q: gross margin and tariff-refund contribution · Filed 03/09/2026
•Operating margin decreased 190 basis points to 18.8%, which includes an increase of 560 basis points related to IEEPA tariff refunds.
Second-quarter 2026 Form 10-Q: operating margin and tariff-refund contribution · Filed 03/09/2026
If "dupe" or imitation products proliferate, whether through traditional retail channels or social media-driven trends, and lead consumers to perceive less differentiation between our products and lower-priced alternatives, our ability to maintain our brand premium, drive net revenue growth, and sustain our profitability could be adversely affected.
Second-quarter 2026 Form 10-Q: conditional imitation and brand-premium risk · Filed 03/09/2026
These and other factors have, and may in the future, cause us to experience increased costs, reduce our selling prices or experience reduced sales in response to increased prices, any of which could cause our operating margin to decline if we are unable to offset these factors with reductions in operating costs and could have a material adverse effect on our financial condition, operating results, and cash flows.
Second-quarter 2026 Form 10-Q: experienced and potential cost, selling-price and demand pressures · Filed 03/09/2026
•Gross margin increased 90 basis points to 59.2%.
2025 proxy: fiscal 2024 gross-margin improvement · Filed 29/04/2025
We also experienced a decrease in product margin in the Americas segment of 500 basis points, primarily reflective of the impact of higher tariffs.
First-quarter 2026 Form 10-Q: Americas product-margin decline and primary tariff attribution · Filed 04/06/2026
Pricing shown to you through the Platform may only be good for purchases made through the Platform, and may differ from in-store pricing.
Retail terms, retrieved October 19, 2026; publication date unspecified: Platform versus in-store pricing · Retrieved 19/10/2026
CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) Fiscal Year Ended February 1, 2026 February 2, 2025 January 28, 2024 Cash flows from operating activities Net income $ 1,579,183 $ 1,814,616 $ 1,550,190 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 496,228 446,524 379,384 lululemon Studio obsolescence provision — — 23,709 Impairment of assets and restructuring costs — — 74,501 Stock-based compensation expense 62,203 90,011 93,560 Derecognition of unredeemed gift card liability (37,766) (36,231) (28,547) Settlement of derivatives not designated in a hedging relationship (34,552) (47,763) 32,527 Deferred income taxes (53,379) 57,451 (28,383) Changes in operating assets and liabilities: Accounts receivable (65,755) 1,626 6,580 Inventories (188,710) (156,085) 66,584 Prepaid and receivable income taxes (170,216) (2,031) 1,908 Prepaid expenses and other current assets 47,779 (71,789) 40,587 Other non-current assets (70,351) (73,205) (53,280) Accounts payable 45,856 (57,044) 177,367 Accrued liabilities and other 98,421 193,139 (71,734) Accrued compensation and related expenses (24,737) (112,110) 70,327 Current and non-current income taxes payable (150,496) 157,205 (173,196) Unredeemed gift card liability 41,253 42,410 84,315 Right-of-use lease assets and current and non-current lease liabilities 6,884 23,501 37,535 Other current and non-current liabilities 20,632 2,488 12,230 Net cash provided by operating activities 1,602,477 2,272,713 2,296,164 Cash flows from investing activities Purchase of property and equipment (680,802) (689,232) (651,865) Settlement of net investment hedges 27,205 50,213 (1,609) Acquisition, net of cash acquired — (154,146) — Other investing activities (8,521) (5,009) (658) Net cash used in investing activities (662,118) (798,174) (654,132) Cash flows from financing activities Proceeds from settlement of stock-based compensation 8,377 19,813 42,430 Taxes paid related to net share settlement of stock-based compensation (27,372) (35,410) (32,574) Repurchase of common stock (1,178,349) (1,636,879) (558,652) Other financing activities (11,312) (32) (32) Net cash used in financing activities (1,208,656) (1,652,508) (548,828) Effect of foreign currency exchange rate changes on cash and cash equivalents 91,163 (81,666) (4,100) Increase (decrease) in cash and cash equivalents (177,134) (259,635) 1,089,104 Cash and cash equivalents, beginning of period $ 1,984,336 $ 2,243,971 $ 1,154,867 Cash and cash equivalents, end of period $ 1,807,202 $ 1,984,336 $ 2,243,971 See accompanying notes to the consolidated financial statements 47 Table of Contents lululemon athletica inc.
2025 Form 10-K: consolidated cash-flow statement; fiscal years ended February 1, 2026, February 2, 2025 and January 28, 2024; amounts in thousands · Filed 17/03/2026
The following table summarizes our net cash flows provided by and used in operating, investing, and financing activities for the periods indicated:
First Two Quarters
2026
2025
Year over year change
(In thousands)
Total cash provided by (used in):
Operating activities
$
589,278
$
209,722
$
379,556
Investing activities
(281,802)
(319,960)
38,158
Financing activities
(712,225)
(744,823)
32,598
Effect of foreign currency exchange rate changes on cash and cash equivalents
(12,716)
26,519
(39,235)
Decrease in cash and cash equivalents
$
(417,465)
$
(828,542)
$
411,077
Operating Activities
Net income decreased $161.2 million.
Second-quarter 2026 Form 10-Q: first-two-quarter cash flows for 2026 and 2025; amounts in thousands · Filed 03/09/2026
During the first two quarters of 2026 and 2025, 4.9 million and 2.5 million shares, respectively, were repurchased under the programs at a total cost including commissions and excise taxes of $695.1 million and $715.7 million, respectively.
Second-quarter 2026 Form 10-Q: actual first-half share repurchases, including commissions and excise taxes · Filed 03/09/2026
The increase in cash provided by operating activities was primarily due to an increase in cash flows from changes in operating assets and liabilities of $464.7 million, driven by changes in inventories and the timing of income tax payments, as well as changes in accrued liabilities and accounts receivable, partially offset by the timing of accounts payable and changes in other current assets.
Second-quarter 2026 Form 10-Q: working-capital and tax-timing contribution to operating cash-flow improvement · Filed 03/09/2026
As of August 2, 2026, the Company had no borrowings outstanding under this credit facility other than $6.3 million in outstanding letters of credit and guarantee.
Second-quarter 2026 Form 10-Q: committed credit-facility utilization as of August 2, 2026 · Filed 03/09/2026
2023 Gross Profit Gross Margin Operating Income GAAP results $ 5,609,405,000 58.3 % $ 2,132,676,000 lululemon Studio charges: lululemon Studio obsolescence provision 23,709,000 0.3 23,709,000 Impairment of assets 44,186,000 Restructuring costs 30,315,000 Adjusted results (non-GAAP) $ 5,633,114,000 58.6 % $ 2,230,886,000 2022 Operating Income GAAP results $ 1,328,408,000 lululemon Studio charges: lululemon Studio obsolescence provision 62,928,000 Impairment of goodwill and other assets 407,913,000 Gain on disposal of assets (10,180,000) Adjusted results (non-GAAP) $ 1,789,069,000 93 2021 Operating Income GAAP results $ 1,333,355,000 Transaction and integration costs 2,989,000 Acquisition-related compensation 38,405,000 Adjusted results (non-GAAP) $ 1,374,749,000
2025 proxy, Appendix A: historical lululemon Studio impairments, obsolescence and restructuring charges; GAAP and adjusted reconciliation · Filed 29/04/2025
The annual cash bonus awards for 2024 were determined based on operating income and net revenue, with each metric weighted equally at 50%.
2025 proxy: implemented fiscal 2024 annual-bonus metrics and weights · Filed 29/04/2025
As a result, the actual bonuses paid to the named executive officers for 2024 performance represented 80.9% of their target bonus levels, and are reported in the Non-Equity Incentive Plan Compensation column of the summary compensation table.
2025 proxy: actual bonuses paid for fiscal 2024 performance · Filed 29/04/2025
The committee determined our annual operating income for 2024 was $2,505.7 million, which represented a three-year CAGR of 22.2% and resulted in a payout of 200% of the target PSU awards granted.
2025 proxy: completed 2022–2024 PSU performance and resulting payout · Filed 29/04/2025
11 Table of Contents A summary of the balances of the Company's stock-based compensation plans as of August 2, 2026, and changes during the first two quarters of 2026, is presented below: Stock Options Performance-Based Restricted Stock Units Restricted Shares Restricted Stock Units Number Weighted-Average Exercise Price Number Weighted-Average Grant Date Fair Value Number Weighted-Average Grant Date Fair Value Number Weighted-Average Grant Date Fair Value (In thousands, except per share amounts) Balance as of February 1, 2026 1,269 $ 287.41 220 $ 319.19 6 $ 252.28 561 $ 257.92 Granted 421 163.24 178 184.07 — — 363 159.06 Exercised/released — — 71 358.82 6 252.28 116 328.01 Forfeited/expired 165 235.25 39 262.43 — — 49 218.06 Balance as of August 2, 2026 1,525 $ 258.81 288 $ 233.81 — $ — 759 $ 202.50 Exercisable as of August 2, 2026 552 $ 321.95 The Company's performance-based restricted stock units ("PSUs") awarded to eligible employees during 2026 entitle the grantee to receive a maximum of 2.5 shares of common stock per PSU if the Company achieves specified performance goals and the grantee remains employed during the vesting period.
Second-quarter 2026 Form 10-Q: actual equity-award activity and performance/employment conditions on 2026 PSU awards · Filed 03/09/2026
These provisions include: •the classification of our board of directors into three classes, with one class elected each year; •prohibiting cumulative voting in the election of directors; •the ability of our board of directors to issue preferred stock without stockholder approval; •the ability to remove a director only for cause and only with the vote of the holders of at least 66 2/3% of our voting stock; •a special meeting of stockholders may only be called by our chairman or Chief Executive Officer, or upon a resolution adopted by an affirmative vote of a majority of the board of directors, and not by our stockholders; •prohibiting stockholder action by written consent; and •our stockholders must comply with advance notice procedures in order to nominate candidates for election to our board of directors or to place stockholder proposals on the agenda for consideration at any meeting of our stockholders.
Second-quarter 2026 Form 10-Q: classified board and shareholder-rights restrictions · Filed 03/09/2026
With the appointment of Ms. Poseley, the lululemon Board has expanded to 13 directors, 12 of whom are independent.
Board-appointment release filed October 22, 2026: expanded board composition and independence · Filed 22/10/2026
Stockholder Proposal Regarding the Declassification of the Board:
Votes For
Votes Against
Votes Abstained
Broker Non-Votes
Declassification of the Board of Directors
73,105,842
320,258
160,471
1,354,452
The foregoing proposal was approved.
Annual-meeting results filed June 26, 2026: approved shareholder proposal regarding board declassification · Filed 26/06/2026
The Company has appointed Maggie Gauger as President & Chief Product Officer and Joseph Godsey as Chief Operating Officer, effective October 26, 2026, both of which are newly created roles.
Leadership release filed October 7, 2026: appointments effective October 26, 2026 · Filed 07/10/2026
“lululemon is a rare, extraordinary brand, but we have work to do to build a stronger and more competitive company,” said Heidi O’Neill, Chief Executive Officer of lululemon.
Leadership release filed October 7, 2026: CEO's assessment of competitive improvement required · Filed 07/10/2026
(1)Comparable sales includes comparable company-operated store and e-commerce net revenue.
Second-quarter 2026 earnings release: comparable-sales definition includes comparable company-operated stores and e-commerce · Filed 03/09/2026
Comparable company-operated stores have been open for at least 12 full fiscal months, or open for at least 12 full fiscal months after being significantly expanded.
Second-quarter 2026 earnings release: comparable-store eligibility requires at least 12 full fiscal months · Filed 03/09/2026
