Capex fell 16.1% in lululemon's latest six-month period, to $277.1 million. Operating cash flow rose 181%, to $589.3 million, even as the business sold less and earned less from each dollar that reached the operating line.
Revenue fell 4.3% from the comparable six months, to $2.4 billion. Gross profit slipped just 1.0%, and gross margin actually rose two percentage points to 60.5%. The pressure arrived below gross profit: operating income fell 13.4% to $453.7 million, cutting operating margin to 18.8%.
That split is the useful read on the filing. Product-level profitability held up better than the company’s operating leverage, while cash generation coincided with lower capital spending. Inventory was nearly flat, down 0.6%, but still grew faster than revenue on a relative basis, increasing inventory intensity.
Currency also makes the sales decline less clean to interpret. Lululemon said exchange-rate changes added $69.6 million to revenue in the first two quarters of 2026 compared with the same period a year earlier. In other words, the reported top line received a foreign-exchange lift while still shrinking.
Management’s filing describes the currency movement this way:
"The net fair value of our outstanding forward currency contracts increased as of August 2, 2026 compared to February 1, 2026 primarily due to foreign currency exchange rate movement on the derivative financial instruments."
lululemon, 10-Q, September 3, 2026
That is an accounting mark on the company’s hedges, not a cash cost by itself. The operating point is simpler: exchange rates affected both the reported revenue comparison and the value of the contracts used to manage that exposure.
The cash improvement has its own qualification. Lululemon spent less on capital projects, and its free-cash-flow margin improved 8.8 percentage points, but the filing does not assign the entire operating-cash increase to one disclosed cause. The balance sheet also does not show inventory clearing materially, so the cash result is not the same thing as a broad acceleration in sales.
The company’s annual record shows how unusual the current margin split is. Revenue reached $11.1 billion in the year ended February 1, 2026, but operating margin had already fallen to 19.9% from 23.7% the year before. The latest six-month results extend that operating-margin pressure, even with gross margin moving higher.
Share count complicates the earnings comparison in the other direction. Diluted shares fell 5.6% to 112.9 million, while stock compensation rose 136.6% to $50.3 million. Net income still fell 11.2% to $329.2 million, and diluted EPS declined 5.8% to $2.92.
At the latest close, lululemon had a $14.3 billion market capitalization and traded at 9.1 times earnings. That low multiple sits alongside a business with declining six-month revenue, stronger cash conversion, and operating margins that have not followed gross margins higher. The number that would clarify the tension is the next report’s explanation of whether operating expenses, rather than merchandise economics, continue to account for the gap.
The question lululemon has not answered is whether the cash lift can persist without a return to revenue growth and operating leverage.
Source: lululemon’s 10-Q filed September 3, 2026, for the six months ended August 2, 2026.