Textiles, Apparel & Luxury Goods
Lululemon delivered 4.3% revenue growth to $2.5B in Q1 FY2026, led by China Mainland and Rest of World, but higher tariffs, markdowns, and operating expenses drove a 38.0% decline in net income to $195.0M and compressed operating margin to 11.2%. Source: 10-Q Item 2 MD&A, pp.18-23.
Key risk: U.S. tariffs, customs policy changes, and uncertain refund recoveries
The company states that the removal of the de minimis exemption and higher U.S. tariffs have had a significant adverse effect on its business and results. Frequent changes in tariff rates, exemptions, implementation dates, and customs rules could raise product costs, impair supply-chain planning, and further pressure margins; recovery of the $230.0M of IEEPA tariffs paid is uncertain.
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