lululemon athletica (LULU) Risk Factor Changes

Climate change and related pressures may adversely impact our business, supply chain, and financial results.

In addition, we are governed by Section 203 of the Delaware General Corporation Law which, subject to some specified exceptions, prohibits "business combinations" between a Delaware corporation and an "interested stoc…

infringe the intellectual property rights of others.

There is considerable patent and other intellectual property development activity in our market, and litigation, based on allegations of infringement or other violations of intellectual property, is frequent in the fi…

Other actions or proposals could include responses to geopolitical conflict, including between the PRC and other countries, or to our perceived positions on social, political, or cultural issues in the United States o…

Our business could be negatively affected as a result of actions of stockholders, activists, or shifting consumer sentiment.

Many of our customers shop through our e-commerce websites and mobile apps and we use social media in addition to these websites and apps to interact with our customers and to enhance their shopping experience.

Our technology systems, websites, and operations of third parties on whom we rely, may encounter damage, slowdown, or disruption including complete outages caused by a failure to upgrade systems, system failures, malw…

We are subject to a variety of privacy and data protection laws and regulations that change frequently and have requirements that vary across jurisdictions.

Data and security breaches can also occur as a result of non-technical issues including intentional or inadvertent breach, including by misusing AI, by employees or persons with whom we have commercial relationships t…

The retail industry has been the target of recent cyberattacks.

We receive and maintain confidential, proprietary, and personally identifiable information, including for example, credit card information, and information about our customers, our employees, job applicants, and other…

We rely on our distribution facilities for our product distribution.

The fabrics used to make our products include synthetic fabrics whose raw materials include petroleum-based products.

The fluctuating cost of raw materials and the cost of producing our products could increase our cost of goods sold.

We have experienced, and may in the future experience, a significant disruption in the supply of fabrics or raw materials and may be unable to locate alternative suppliers of comparable quality at an acceptable price,…

•Approximately 48% of our fabrics were produced by our top five fabric suppliers, the largest of which produced approximately 20% of fabric used.

•Approximately 47% of our products were manufactured by our top five vendors, the largest of which produced approximately 15% of our products; and

Many of the specialty fabrics used in our products are technically advanced textile products developed and manufactured by third parties and may be available, in the short term, from only one or a limited number of so…

•Approximately 40% of our products were manufactured in Vietnam, 18% in Cambodia, 11% in Sri Lanka, 11% in Indonesia, and 7% in Bangladesh, and the remainder in other regions; and

Disruptions of our supply chain, which is dependent on international suppliers, could have a material adverse effect on our operating and financial results.

Although we use financial instruments to hedge certain foreign currency risks, these measures may not fully offset the negative impact of foreign currency rate movements.

The functional currency of our international subsidiaries is generally the applicable local currency.

The labeling, distribution, importation, marketing, and sale of our products, as well as components of our products, including chemicals, are subject to regulation by various regulatory bodies.

We engage in a number of intercompany transactions across multiple tax jurisdictions.

We are subject to the income tax laws of the United States, Canada, China Mainland, and other international jurisdictions.

Changes in tax laws, transfer pricing, or unanticipated tax liabilities could adversely affect our effective income tax rate and profitability.

Our business is affected by the seasonal trends common to the retail apparel industry.

We lease the majority of our stores and many of our distribution centers, and our inability to secure appropriate real estate or lease terms could impact our operations or ability to deliver our products to the market.

We operate an omni-channel retail model and aim to efficiently and effectively serve our guests in the ways most convenient to them.

The performance of our senior management team and other key employees and contractors may not meet our needs and expectations.

To ensure adequate inventory supply, we forecast inventory needs and place orders with our manufacturers based on estimates of future demand.

The hardware previously sold by our lululemon Studio subsidiary, as well as services currently offered, can be affected by design and manufacturing defects.

We have occasionally received, and may in the future receive, product shipments that fail to comply with our specifications or conform to our quality standards.

Our success depends on our ability to identify and originate product trends as well as to anticipate and react to changing consumer preferences on a timely basis and effectively.

We may fail to acknowledge or react appropriately to the entry or growth of a viable competitor or disruptive force, and could struggle to continue to innovate, differentiate, and sustain the value of our brand.

retailers of athletic apparel, including large, diversified apparel companies with substantial market share, and established companies expanding their production and marketing of technical athletic apparel, as well as…

Our brand and reputation could be adversely affected by negative publicity, if we fail to deliver innovative and high-quality products acceptable to our guests, or if we face or mishandle a product recall, which could…

The lululemon name is integral to our business and our expansion strategies.

Our success depends on our ability to maintain our brand value and reputation.

In addition to the other information contained in this Form 10-K, the following risk factors should be considered in evaluating our business.

In addition, we are governed by Section 203 of the Delaware General Corporation Law which, subject to some specified exceptions, prohibits "business combinations" between a Delaware corporation and an "interested stoc…

We have been, and in the future may be, sued by third parties for alleged infringement of their proprietary rights.

A global or regional health event such as the COVID-19 pandemic could significantly and adversely impact our supply chain if the factories that manufacture our products, the distribution centers where we manage our in…

The occurrence or resurgence of global or regional health events such as the COVID-19 pandemic, and the related governmental, private sector and individual consumer responses, could contribute to a recession, depressi…

The COVID-19 pandemic negatively impacted the global economy, disrupted consumer spending and global supply chains, and created significant volatility and disruption of financial markets.

Our financial condition could be adversely affected by global or regional health events such as the COVID-19 pandemic and related government, private sector, and individual consumer responsive actions.

penalties, divert financial and management resources, and result in significant legal fees.

Current economic and political conditions make tax rules in any jurisdiction, including the United States and Canada, subject to significant change.

In 2025, assuming there are no exchange transactions by our exchangeable shareholders, we will continue to recognize Canadian withholding taxes on the accumulated earnings of our Canadian subsidiaries which are not in…

Since 2022, the net investment in our Canadian subsidiaries, which was not indefinitely reinvested, exceeded the paid-up capital and therefore we recognized Canadian withholding taxes on the portion of our net investm…

Prior to 2022, we had not accrued for Canadian withholding taxes because the accumulated earnings of, or 'net investment' in, our Canadian subsidiaries was either indefinitely reinvested or could be repatriated as a r…

Repatriations from our Canadian subsidiaries are not subject to Canadian withholding taxes if such distributions are made as a return of capital.

changes in tariffs, including sanctions against the PRC, tariffs imposed by the United States and the PRC, and the possibility of additional tariffs or other trade restrictions, could adversely impact our business.

Adverse changes in, or withdrawal from, trade agreements or political relationships between the United States and the PRC, Canada, or other countries where we sell or source our products, could negatively impact our r…

We are dependent on international trade agreements and regulations.

The United States and the countries in which our products are produced or sold have imposed and may impose additional quotas, duties, tariffs, or other restrictions or regulations, or may adversely adjust prevailing q…

We may be unable to source and sell our merchandise profitably or at all if new trade restrictions are imposed or existing restrictions become more burdensome.

Uncertain or challenging global economic and political conditions could impact our performance, including our ability to successfully expand internationally.

Global economic and political conditions could adversely impact our results of operations.

Many of our products may be considered discretionary items for consumers.

An economic recession, depression, downturn, periods of inflation, or economic uncertainty in our key markets may adversely affect consumer discretionary spending and demand for our products.

human capital management, product quality, supply chain management, and workforce inclusion and composition.

Investor and political advocacy groups, certain institutional investors, investment funds, other market participants, stockholders, and customers have focused increasingly on the environmental, social and governance (…

Increased scrutiny from investors and others regarding our environmental, social, governance, or sustainability responsibilities could result in additional costs or risks and adversely impact our reputation, employee…

There is increasing concern that a gradual rise in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere will cause significant changes in weather pa…

Increasing labor costs and other factors associated with the production of our products in South Asia and South East Asia could increase the costs to produce our products.

for silver and our cotton yarn and cotton-based textiles, could have a material adverse effect on our cost of goods sold, results of operations, financial condition, and cash flows.

•Approximately 35% of the fabric used in our products originated from Taiwan, 28% from China Mainland, 11% from South Korea, and the remainder from other regions.

We rely on international suppliers and any significant disruption to our supply chain could impair our ability to procure or distribute our products.

In addition, the increased use of employee-owned devices for communications as well as work-from-home arrangements present additional operational risks to our technology systems, including increased risks of cyber-att…

We also lease the majority of our distribution centers and our inability to secure appropriate real estate or lease terms could impact our ability to deliver our products to the market.

are injured.

In addition, because we hold limited patents and exclusive intellectual property rights in the technology, fabrics or processes underlying our products, our current and future competitors are able to manufacture and s…

We may face reputational, operational, or legal consequences if our ESG practices or disclosures are perceived as insufficient, inconsistent, misleading, or politically misaligned.

We are increasingly subject to scrutiny from institutional investors, advocacy organizations, and other stakeholders regarding our environmental, social, and governance ("ESG") policies, disclosures, and performance.

We face heightened scrutiny and legal risks from competing pressures regarding our ESG practices and disclosures.

We also face increasing scrutiny and conflicting pressure from institutional investors, proxy advisory firms, regulatory agencies, political groups, and other stakeholders.

We are subject to physical and transitional risks related to climate change, as well as increasing pressure from investors, regulators, and advocacy organizations regarding climate-related disclosures and action.

We may be subject to actions or proposals from stockholders, political or consumer activists, or others that may not align with our business strategies or the interests of our other stockholders.

We are dependent on networks, technology systems, and third parties to operate our e-commerce websites, process transactions, respond to guest inquiries, manage inventory, purchase, sell and ship goods, and maintain c…

subject us to potential regulatory enforcement activity, fines, private litigation including class actions, and other costs and might have a materially adverse impact on our reputation, business operations, financial…

We are subject to an evolving cybersecurity, privacy, and AI regulatory environment, and failure to comply with new or existing requirements, including federal cybersecurity incident disclosure obligations, could resu…

expand existing or find new manufacturing or fabric sources, we may encounter delays in production and added costs as a result of the time it takes to train our suppliers and manufacturers in our methods, products, an…

•Approximately 34% of the fabric used in our products originated from Taiwan, 29% from China Mainland, 10% from South Korea, 10% from Vietnam, and the remainder from other regions.

negatively affect employee availability.

The occurrence of global or regional public health crises, such as pandemics or epidemics, and the related governmental and private sector responses, could reduce store traffic and consumer spending, result in tempora…

Our financial condition could be adversely affected by public health crises.

Current economic and political conditions make tax rules in any jurisdiction subject to significant change.

Repatriations from our Canadian subsidiaries may be subject to Canadian withholding taxes depending on the amount of paid-up capital available.

Our business depends on the efficient, predictable, and cost-effective movement of goods across borders.

Trade restrictions, tariffs, and customs changes could disrupt our supply chain and compress margins.

be materially affected, resulting in increased costs and operational disruptions.

We operate and source products across multiple international markets, and our ability to manage a global supply chain depends on stable economic and political conditions.

Global political and economic instability, including geopolitical conflicts and political polarization, could disrupt our operations and increase costs.

Our performance depends on consumers’ willingness and ability to purchase discretionary products.

Macroeconomic volatility, inflationary pressures, and shifts in consumer sentiment may reduce demand for our products.

There has been significant volatility in U.S.

As a result of the increased tariffs since April 2025, the cost of inventory in the United States has increased.

Changes to U.S.