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There remains significant uncertainty regarding the duration and scope of newly initiated tariffs and whether the United States will pursue additional trade actions or impose further tariffs, or currently enforced tariffs may be invalidated through legal challenges. Additionally, our U.S. operating entity was named as a defendant in purported consumer class actions relating to alleged tariff-related pricing actions and potential governmental tariff reimbursements.
Read in the filing ↗ Also in 10-Q of Jun 4, 2026, 10-K of Mar 17, 2026
On February 20, 2026, the U.S. Supreme Court invalidated tariffs imposed under the IEEPA. Immediately following this IEEPA decision, the U.S. Administration initiated new tariffs at different rates under alternative legislative powers. The U.S. Administration also confirmed that the IEEPA decision does not impact the removal of the de minimis exemption. We paid $230 million of tariffs under the IEEPA and have commenced submitting refund claims for eligible IEEPA tariffs paid, including associated interest. The ultimate amounts that we may recover remain uncertain. Additionally, our U.S. operating entity was named as a defendant in a purported consumer class action relating to alleged tariff-related pricing actions and potential governmental tariff reimbursements.
Read in the filing ↗ Also in 10-Q of Jun 4, 2026
On April 2, 2025, the United States announced the implementation of a 10% baseline tariff on imports from nearly all countries with higher country-specific tariff rates scheduled to begin April 9, 2025. The implementation of country-specific tariffs was subsequently delayed to allow negotiations. Certain countries, including Vietnam, have announced trade deals with the United States and most negotiated tariff rates are higher than the 10% baseline rate. There has been significant volatility in U.S. tariff and customs policy, and trade negotiations between the United States and other countries are ongoing.
Read in the filing ↗ Also in 10-Q of Dec 11, 2025
On February 20, 2026, the U.S. Supreme Court invalidated tariffs imposed under the IEEPA. The U.S. Administration has initiated new tariffs at different rates under alternative legislative powers. The U.S. Administration also confirmed that the IEEPA decision does not impact the removal of the de minimis exemption, and this was upheld by the U.S. Court of International Trade on August 13, 2026. We paid $230 million of tariffs under the IEEPA and have submitted refund claims for eligible IEEPA tariffs paid, including associated interest. During the second quarter of 2026, we received $134.5 million of IEEPA tariff refunds; however, the ultimate additional amounts that we may be refunded, if any, remain uncertain. Additionally, our U.S. operating entity was named as a defendant in purported consumer class actions relating to alleged tariff-related pricing actions and potential governmental tariff reimbursements.
Read in the filing ↗ Also in 10-Q of Sep 3, 2026, 10-Q of Sep 3, 2026
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. It is possible that further tariffs may be introduced or increased. Such changes could adversely impact our business and could increase the costs of sourcing our products from the PRC as well as other countries, or could require us to source our products from different countries. The Uyghur Forced Labor Prevention Act and other similar legislation may lead to greater supply chain compliance costs and delays to us and to our vendors.
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On March 27, 2026, lululemon usa inc. was named as a defendant in a purported consumer class action (Neuman v. Lululemon USA Inc., No. 2:26-cv-11029) in the United States District Court for the Eastern District of Michigan, asserting equitable claims relating to alleged tariff-related pricing actions and potential governmental tariff reimbursements. The complaint seeks unspecified damages or restitution for the alleged tariff-cost component of prices charged and other relief. The Company intends to defend the matter vigorously.
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On March 27, 2026, lululemon usa inc. was named as a defendant in a purported consumer class action (Neuman, et al. v. Lululemon USA Inc., No. 2:26-cv-11029) in the United States District Court for the Eastern District of Michigan, asserting equitable claims relating to alleged tariff-related pricing actions and potential governmental tariff reimbursements. The complaint seeks unspecified damages or restitution for the alleged tariff-cost component of prices charged and other relief. The Company intends to defend the lawsuit.
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On April 2, 2025, the U.S. Administration announced the implementation of a 10% baseline tariff on imports from nearly all countries with higher country-specific tariff rates scheduled to begin April 9, 2025. Subsequently, certain countries, including Vietnam, announced trade deals with the United States and most negotiated tariff rates are higher than the 10% baseline rate. The U.S. Administration eliminated the de minimis exemption for all countries effective August 29, 2025, with legislation enacted to repeal the statutory exemption entirely by July 1, 2027.
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Operating margin decreased 380 basis points and diluted earnings per share decreased by 9%, mainly due to the impact from increased tariff rates in the United States, and the removal of the de minimis provision. We have taken mitigating actions, including selective price increases and vendor negotiations; however, we do not expect these actions to fully offset these incremental costs, and we believe tariffs and de minimis changes will continue to adversely affect gross margin and income from operations in 2026. See "Import Tariffs" below for additional information.
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Trade restrictions, tariffs, and customs changes could disrupt our supply chain and compress margins.
Read in the filing ↗ Also in 10-Q of Jun 4, 2026, 10-Q of Sep 3, 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. Refer to the Import Tariffs section for more information.
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The increase in gross margin was primarily due to higher product margin driven by an increase of 830 basis points related to IEEPA tariff refunds, partially offset by higher other tariffs. The increase in gross margin was partially offset by higher occupancy, depreciation, and distribution center costs as a percentage of net revenue.
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The decrease in gross margin was primarily due to higher occupancy, depreciation, and distribution center costs as a percentage of net revenue. The decrease in gross margin was partially offset by higher product margin driven by an increase of 420 basis points related to IEEPA tariff refunds, partially offset by higher other tariffs.
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– The tariff refunds (1) of $134.5 million increased operating margin by 560 basis points.
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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 quota, duty, or tariff levels. The results of any audits or related disputes regarding these restrictions or regulations could have an adverse effect on our financial statements for the period or periods for which the applicable final determinations are made. Countries impose, modify, and remove tariffs and other trade restrictions in response to a diverse array of factors, including global and national economic and political conditions, which make it impossible for us to predict future developments regarding tariffs and other trade restrictions. Trade restrictions, including tariffs, changes to de minimis thresholds, quotas, embargoes, safeguards, and customs restrictions, could increase the cost or reduce the supply of products available to us, could increase shipping times, or may require us to modify our supply chain organization or other current business practices, any of which could harm our business, financial condition, and results of operations.
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On February 20, 2026, the U.S. Supreme Court invalidated tariffs imposed under the International Emergency Economic Power Act ("IEEPA"). Immediately following this IEEPA decision, the U.S. Administration initiated new tariffs at different rates under alternative legislative powers. The U.S. Administration also confirmed that the IEEPA decision does not impact the removal of the de minimis exemption. In 2025, we remitted $216 million of tariffs under the IEEPA; however, the IEEPA decision did not address the processes or timing for refund claims, and the ultimate amounts, if any, that we may recover remain uncertain.
Read in the filing ↗ Also in 10-Q of Jun 4, 2026, 10-K of Mar 17, 2026
Changes to tariffs, customs rules, and other trade restrictions could disrupt our supply chain and compress margins.
Read in the filing ↗ Also in 10-Q of Dec 11, 2025
– This includes $134.5 million of tariff refunds (1) which increased gross margin by 560 basis points.
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– This includes $0.86 per share related to tariff refunds and associated interest (1) , net of tax.
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• Gross profit decreased 1% to $1.5 billion, which includes $134.5 million of IEEPA tariff refunds.
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On June 30, 2026, lululemon usa inc. was named as a defendant in a related purported consumer class action (Alsaady, et al. v. Lululemon USA Inc., No. 3:26-cv-05708) in the United States District Court for the Western District of Washington, asserting claims under consumer protection statutes of Washington, Michigan, and New York and equitable claims relating to alleged tariff-related pricing action and potential government tariff reimbursements. Like the first-filed case, the complaint seeks unspecified damages or restitution for the alleged tariff-cost component of prices charged and other relief. The Company intends to defend the lawsuit.
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The guidance does not reflect any potential IEEPA tariff refunds or future repurchases of the Company's shares.
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• Income from operations decreased 13% to $453.7 million, which includes $134.5 million of IEEPA tariff refunds.
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These changes in the tariff landscape, including the de minimis removal, had a significant adverse effect on our business and results of operations. The countries from which we source the majority of our products are now subject to higher tariffs on imports into the United States. Further, the majority of our sales to U.S. e-commerce guests are currently fulfilled from distribution centers in Canada, and historically a significant proportion of these orders qualified for the de minimis exemption. The removal of this exemption increased the cost of fulfilling those orders. The unmitigated impact of increased tariffs and the removal of the de minimis exemption resulted in a reduction to gross profit for 2025 of approximately $275 million. As part of our enterprise efficiency efforts, we continue to take actions in both the near and longer term to help mitigate the cost of increased tariffs.
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The impact of increased tariffs, net of mitigating activities, resulted in a reduction to gross profit for the first two quarters of 2025 of approximately $10 million. We estimate, based on the information available to us today, that increased tariffs, and the removal of the de minimis exemption, will reduce gross profit for 2025 by approximately $240 million, net of mitigation efforts.
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This estimate is our best current view and may change materially as conditions evolve and new information becomes available. It reflects a number of assumptions including (i) the tariff rates and timing of implementation, (ii) the duration and scope of the de minimis exemption removal, (iii) the potential application of transshipment tariff rules, (iv) our ability to execute vendor savings, and (v) customer demand elasticity and pricing response. Actual results may differ materially from this estimate, whether because these assumptions prove inaccurate or because of subsequent changes in tariff policy, trade negotiations, sourcing conditions, consumer demand for our products, or other factors outside our control.
Read in the filing ↗ Also in 10-Q of Dec 11, 2025
As a result of the increased tariffs since April 2025, the cost of inventory in the United States has increased. The United States also eliminated the de minimis duty-free exemption for certain shipments effective May 2, 2025, and an Executive Order extends this elimination globally beginning August 29, 2025, with legislation enacted to repeal the statutory exemption entirely by …
Read in the filing ↗ Also in 10-Q of Sep 4, 2025, 10-Q of Dec 11, 2025
The impact of increased tariffs, net of mitigating activities, resulted in a reduction to income from operations for the first three quarters of 2025 of approximately $60 million. We estimate, based on the information available to us today, that increased tariffs, and the removal of the de minimis exemption, will reduce income from operations for 2025 by approximately $210 million, net of mitigation efforts.
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During 2025, the United States implemented a series of trade-related policies, including removing the de minimis exemption for low-value shipments imported into the United States, and implementing higher tariffs under different statutes, including under the IEEPA. These changes in tariffs, including the de minimis exemption removal, have had a significant adverse effect on our business and results of operations in 2025 and 2026.
Read in the filing ↗ Also in 10-Q of Jun 4, 2026, 10-Q of Sep 3, 2026, 10-Q of Jun 4, 2026
• Gross margin increased 200 basis points to 60.5%, which includes an increase of 560 basis points related to IEEPA tariff refunds.
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• Operating margin decreased 190 basis points to 18.8%, which includes an increase of 560 basis points related to IEEPA tariff refunds.
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- a net decrease of 80 basis points from higher markdowns, tariffs, and other costs, partially offset by higher pricing and lower product costs; and
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There has been significant volatility in U.S. tariff and customs policy recently, with frequent changes in rates, sudden elimination or reinstatement of exemptions, shifts in implementation dates, and reversals of prior actions. In addition, there is uncertainty around how tariff rules will be applied to goods routed through third countries (transshipment) and potential changes to the valuation methodology used to calculate duty, including the first sale declaration program in the United States. Changes in tariff and customs policy and legislation could affect the level of duties imposed and our overall product costs. This volatility makes it more difficult to forecast costs, plan our global supply chain, and provide reliable financial guidance. Policy changes often require rapid operational adjustments that can increase costs and reduce efficiency. Announcements of tariff and custom changes, as well as our disclosures of their potential impacts, have at times contributed to fluctuations in our stock price. We expect such volatility and uncertainty to continue, posing ongoing challenges to our operations, financial planning, and investor communications.
Read in the filing ↗ Also in 10-Q of Sep 4, 2025, 10-Q of Dec 11, 2025, 10-Q of Jun 4, 2026, 10-Q of Sep 3, 2026
Changes to U.S. tariff and customs policy, including the elimination of the de minimis exemption, may materially increase product costs and negatively affect margins.
Read in the filing ↗ Also in 10-Q of Dec 11, 2025
Changes to U.S. tariff and customs policy, including the elimination of the de minimis exemption, have and may further materially increase product costs and negatively affect margins.
Read in the filing ↗ Also in 10-Q of Jun 4, 2026, 10-Q of Sep 3, 2026
The increase in other income (expense), net was primarily due to an increase in interest income driven by $4.1 million in interest associated with IEEPA tariff refunds.
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- a net increase of 20 basis points from lower damages, as well as lower product costs and higher pricing, partially offset by higher markdowns, freight costs, and tariffs; and
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- a net decrease of 290 basis points primarily from higher tariffs as well as markdowns and credit card affiliate programs, partially offset by higher pricing and lower product costs; and
Read in the filing ↗ Also in 10-Q of Dec 11, 2025
• a net decrease of 150 basis points primarily from higher tariffs, as well as markdowns including credit card affiliate programs, partially offset by higher pricing and lower product costs; and
Read in the filing ↗ Also in 10-Q of Sep 3, 2026, 10-Q of Jun 4, 2026
The decrease in gross margin was primarily due to lower product margin driven by higher tariffs and increased markdowns, as well as higher occupancy costs as a percentage of net revenue.
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The guidance for 2025 includes an estimated reduction in gross profit of approximately $240 million, net of currently anticipated mitigation efforts, including vendor savings, and pricing actions, reflecting our current assumptions about higher levels of tariffs on imports into the United States and the removal of the de minimis exemption. Actual results could differ materially from these estimates if tariff rates, sourcing savings, consumer demand, or the timing of regulatory changes vary from our current assumptions, or if our mitigation initiatives are less effective than currently expected.
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These changes in the tariff landscape, including the de minimis removal, have a significant adverse effect on our business and results of operation. The countries from which we source the majority of our products are now subject to higher tariffs on imports into the United States. Further, the majority of our sales to U.S. e-commerce guests are currently fulfilled from distribution centers in Canada, and historically a significant proportion of these orders qualified for the de minimis exemption. The removal of this exemption increases the cost of fulfilling those orders. We are taking steps to mitigate the financial impact which includes vendor negotiations and selective price increases. These actions are not anticipated to fully offset the effect of higher tariffs and the removal of the de minimis exemption, and we anticipate a significant reduction in our gross margin and operating margin.
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The guidance for 2025 includes an estimated reduction in income from operations of approximately $210 million, net of currently anticipated mitigation efforts, including vendor savings, and pricing actions, reflecting our current assumptions about higher levels of tariffs on imports into the United States and the removal of the de minimis exemption. Actual results could differ materially from these estimates if tariff rates, sourcing savings, consumer demand, or the timing of regulatory changes vary from our current assumptions, or if our mitigation initiatives are less effective than currently expected.
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These changes in the tariff landscape, including the de minimis removal, are expected to have a significant adverse effect on our business and results of operation. The countries from which we source the majority of our products are now subject to higher tariffs on imports into the United States. Further, the majority of our sales to U.S. e-commerce guests are currently fulfilled from distribution centers in Canada, and historically a significant proportion of these orders qualified for the de minimis exemption. The removal of this exemption increases the cost of fulfilling those orders. We are taking steps to mitigate the financial impact which includes vendor negotiations and selective price increases. These actions are not anticipated to fully offset the effect of higher tariffs and the removal of the de minimis exemption, and we anticipate a significant reduction in our gross margin and operating margin.
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• Diluted earnings per share were $2.92 compared to $3.10 in the second quarter of 2025, including $0.86 per share related to IEEPA tariff refunds and associated interest, net of tax.
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For 2026, the Company now expects net revenue to be in the range of $10.350 billion to $10.500 billion, representing a decline of 5% to 7%. Diluted earnings per share are now expected to be in the range of $9.48 to $9.73 for the year. This assumes a tax rate of approximately 30%. The 2026 outlook includes $0.86 per share from tariff refunds and associated interest, net of tax recognized in the second quarter of 2026, but does not reflect any further potential tariff refunds.
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The decrease in gross margin was primarily due to lower product margin driven mainly by higher tariffs, as well as higher depreciation, occupancy costs, and distribution center costs as a percentage of net revenue.
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- a net decrease of 240 basis points primarily from higher tariffs, as well as increased markdowns and new credit card affiliate programs. This was partially offset by higher pricing, lower product costs, and lower damages; and
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We experienced revenue and traffic growth in 2024 compared to 2023 in all regions, but have experienced a reduction in our revenue growth rate in the Americas compared to the growth we had in previous years, driven by our operations in the United States. During 2024, Americas comparable sales decreased 1%. We are monitoring government policies in the Americas, including changes in tariffs, and while we do not expect current changes to have a material impact on the cost of our products, tariffs and related uncertainties could impact consumer confidence, traffic, and demand for our products.
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We are dependent on international trade agreements and regulations. The countries in which we produce and sell our products could impose or increase tariffs, duties, or other similar charges that could negatively affect our results of operations, financial position, or cash flows.
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A net increase in interest income contributed to the increase in other income (expense), net. The net increase in interest income was primarily due to $4.1 million in interest associated with IEEPA tariff refunds, partially offset by lower average cash balances and lower interest rates.
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We continue to take actions in both the near and longer term to ensure we are operating as efficiently as possible. These actions help mitigate the cost of increased tariffs and current revenue trends in the Americas. These include enterprise-wide operating efficiency and cost-saving initiatives, selective price increases, and supply chain initiatives.
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(1) During the second quarter of 2026, the Company received International Emergency Economic Powers Act ("IEEPA") tariff refunds of $134.5 million plus associated interest of $4.1 million. These amounts were recognized as a reduction of cost of goods sold and an increase to other income, respectively, and increased diluted earnings per share by $0.86. 1
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The decrease in net income was primarily due to an increase in selling, general and administrative expenses of $54.7 million and a decrease in gross profit of $15.3 million, which included $134.5 million of IEEPA tariff refunds. The decrease in net income was partially offset by a decrease in income tax expense of $24.5 million and an increase in other income (expense), net of $4.0 million.
Read in the filing ↗ Also in 10-Q of Sep 3, 2026
Meghan Frank, Chief Financial Officer, stated: "In the second quarter, we exceeded expectations on EPS, but revenue fell short of our guidance driven predominantly by our U.S. business. We are also navigating industry-wide challenges, including higher tariff rates. In light of these dynamics, we are revising our full year outlook. As we begin the back half of the year, our brand and balance sheet remain strong, and we will continue to exercise financial discipline and strategically invest in our growth potential."
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Our business depends on the efficient, predictable, and cost-effective movement of goods across borders. Governments may impose new tariffs, duties, quotas, customs regulations, or other trade restrictions, or modify the application of existing measures, including reductions in de minimis thresholds, new compliance requirements, or changes in enforcement priorities. These developments can increase product costs, delay shipments, disrupt sourcing, or require changes to our supply chain. If we are unable to offset these impacts through pricing, sourcing adjustments, or other measures, our margins, operational
Read in the filing ↗ Also in 10-Q of Jun 4, 2026, 10-Q of Sep 4, 2025, 10-Q of Dec 11, 2025
Net revenue in the Americas decreased 3%, and comparable sales in the Americas decreased 5%. We experienced lower conversion rates, reduced store traffic, and a decrease in average order value in the Americas. We also experienced a decrease in product margin in the Americas segment of 500 basis points, primarily reflective of the impact of higher tariffs. We have initiated an action plan to drive sustainable net revenue growth in the Americas, structured around three strategic pillars: product creation, product activation, and enterprise enablement. This includes a plan to increase the reliance of full price selling to drive sustainable revenue growth.
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The guidance and outlook forward-looking statements made in this press release are based on management's expectations as of the date of this press release and do not incorporate future unknown impacts, including tariffs and macroeconomic trends. The Company undertakes no duty to update or to continue to provide information with respect to any forward-looking statements or risk factors, whether as a result of new information or future events or circumstances or otherwise. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of risks and uncertainties, including those stated below.
Read in the filing ↗ Also in 8-K of Sep 4, 2025, 8-K of Dec 11, 2025, 8-K of Mar 17, 2026, 8-K of Jun 4, 2026, 8-K of Sep 3, 2026
Disruption of our supply chain capabilities due to trade restrictions, political instability, war (including the conflicts in the Middle East), terrorism, severe weather, natural disasters, public health crises, product recalls, labor supply shortages or stoppages, the financial or operational instability of key suppliers and carriers, changes in diplomatic or trade relationships (including any sanctions, restrictions, tariffs, and other responses such as those related to current geopolitical events), or other reasons could impair our ability to distribute our products. To the extent we are unable to mitigate the likelihood or potential impact of such events, there could be a material adverse effect on our operating and financial results.
Read in the filing ↗ Also in 10-Q of Jun 4, 2026, 10-Q of Sep 3, 2026
(2) Cost of goods sold is made up of product costs and other cost of sales. Product costs include the cost of purchased merchandise, costs incurred to deliver inventory to the Company's distribution centers, shrink and inventory provision expenses, the cost of digital content subscription services, hemming costs and other product alteration costs, and product-related royalties paid to third parties. International Emergency Economic Power Act ("IEEPA") tariff refunds of $ 134.5 million during the second quarter of 2026 are included within product costs in the Americas. Other cost of sales includes occupancy and depreciation expense for company-operated stores, distribution center costs, and product department costs.
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Our performance depends on consumers’ willingness and ability to purchase discretionary products. That willingness can be affected by general economic conditions and uncertainty regarding the overall future environment, tariffs, inflation, changes in interest rates, foreign exchange fluctuations, energy and fuel costs, employment levels, consumer debt, housing market trends, commodity price volatility, and tax policy changes. Geopolitical instability, public health crises, and other macroeconomic events can also weaken consumer confidence. In 2025, we experienced lower store traffic in the Americas, partially reflective of inflationary pressures and economic uncertainty weighing on discretionary spending. Prolonged or worsening macroeconomic volatility could reduce demand, impair our ability to achieve growth targets, and materially impact our net revenue, margins, and cash flows.
Read in the filing ↗ Also in 10-Q of Dec 11, 2025