LULU - Earnings call transcript Q2 2018 | Lululemon Athletica Inc.

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Lululemon Athletica Inc.

Second Quarter 2018 Conference Call.

As a reminder all participants are in listen-only mode and the conference is being recorded. will opportunity there ask presentation, the be to an questions. After Athletica to I President, conference Lululemon would Instructions] turn Investor now for Vice [Operator Tubin, like the Howard over Relations Inc. to go Please ahead.

Howard Tubin

afternoon. you Welcome Thank good to second conference quarter Lululemon's call. earnings and

to Guido, today results our the EVP also Americas CFO; the Celeste about Chairman CEO; Stuart with are our is will during Calvin Burgoyne, Q&A McDonald, talk the new Murphy, be us Haselden, of call. me Joining Glenn Board; of COO; available and PJ portion of

a on Form that of with make filings undertaking our disclaim as any recent today, new have of Any in our to we Before its by this any of disclosed we forward-looking that today business, nature, XX-K annual to on Lululemon's abrupt due contained events. assumptions on forward-looking obligation information which, reports future get statements, but to started, I'd those is update are result and this statements on and and call in based information, statements these aspects include certain opportunity statements including our risks to materially these like most or of or as and quarterly assessed take These will have forecasts you Actual to on associated or based future. including we we forward-looking Form the remind current changes. our of expressly from or subject reflecting even management's statements report the are we SEC, with uncertainties remarks may rapid our results XX-Q. differ those by revise dynamic implied and which current

on Investors of financial reconciliation on and will The XX-Q under quarterly non-GAAP the GAAP Form are press release. Form and GAAP our measures. report release and section in included During this www.lululemon.com. to present our today's in XX-Q press both quarterly available call, earnings A we measures is accompanying of website, non-GAAP report

begin you'll the quarter I'd as infograph. to Today's call, quarterly one for key remind site to as like a where our of find statistics we our is investors for Investors hour. scheduled second our operating Before summary the well visit our call financial

yourself to to others their And time now, questions please a Glenn. like to the to limit give question the one call at have So, I'd to turn opportunity over addressed.

Glenn Murphy

just and afternoon, Obviously, I very good Howard, at brief strong of We to because remarks of CEO, call on couple acknowledge then you, today, a a the beginning speakers And the our Thank number I’d of from you’re second Calvin pass had the make everybody. that, to to I new going McDonald. quarter. a thought and including performance. want hear

our of facets business, this very it’s categories, across guests and different the all and our entire to in all educators, and who and markets. fiscal made impressive offices the produce particular, stepped really our to call product later channels these the that’s quarter results distribution our was to focus employees Stuart, together on. that do I management And team, thank this it leadership, and to people, Company, leadership across I played their in who identified about stepped across their And year across of quarter It results. ago. second our centers that, you’re whether hear Lululemon. their Sun, other of work incredible was the role center, very an want The all In made out I've earlier contact going in was months six strong basically single happen. strong, up that’s for Celeste of whether that’s just very who people our with And because to contribution second result want our and a

And and more company always people, now, we’re and more strong agree But, He so processes to we enviable take opportunities he and here analysts, can He’s Directors. thank them there’s in and today, because will because and makes to always understand is he welcome do, for There’s first today. want with operations, McDonald. business. position, This Calvin I many. So, I can business our behalf And listening, really of can Calvin’s everybody his can the our lot our a position investors a tick. will meet well. Board our time. else want of do what can strategy the first Calvin in with of performing on an the call of is he

a he a did right that’s And confidence of the he strength. we is CEO clearly Company for to And the nice for be future take in. from believe very exhaustive search. We full the the will has us and to strength So, position Board. really

to and So, call call, new analysts with I that to investor said, CEO want Calvin? McDonald, second quarter welcome the Lululemon. of Calvin the

Calvin McDonald

into for jumped team. I new I’m support Vancouver provided excited have from and member Lululemon a speak the you Glenn, the me, you, of the very Thank you introduction my with to as role. for as

week As keep the this second I’ll my on job, is only brief. my comments

job. quarter on take career with guidance. part foremost, be on after and my Lululemon our on create passions is of to me this team opportunity to retail forward exciting. because on impressions results to build helping is we XX on the I my some three. PJ personal focus building, the my makes to with Stuart color and I’d let I’ve CEO growth we’ve like offer me and the also tremendous to innovate. two professional through an love next Being But posted the this two quarter I’m to work momentum at will so first, now of ambitions to chapter what I’m and very Lululemon quarter just results details what people, brand we’re continue you and my to and now First product The chosen opportunity combine dream create seeing the strong and my athlete. success. excited of attracted for days the congratulate as into the job. Lululemon of initial

It’s help and are has forward our the is the me an leadership, join results group, inspirational with weeks. especially over energizing of clear at been and Lululemon to of the look us both such working the Firstly, past to unique success. personal I to to the on humbling two focus which root next a development group, the its leadership The very driving talented team and to with level. culture take people

with component innovation both exceptional. And our loyalty connected exciting geographies, competitors. of develop new how we really When opportunities a our Lululemon. believe and very we future look and attributes combined I expand extending and building to we have capabilities where of the in product our ecosystem of the on far It's is and I’ve Secondly, in these to continue been help Lululemon people, is where of forward across at my our to and the Lululemon the digital unique stand and our first the we this elements, them talent keep team, here differentiate areas. guest all channels how can develop iconic have an on the above into the avid very DNA. further fan product. is our is fabric, for something fit see innovation brand via technical and The services. to years at are given to guest an us think our thrilled guests I a opportunity unique offering innovation core product and at The passion, will product these them brand. take permission combination about create finally, to are I'm that and quality, to and exciting.

the I'll possible. every initial and Before Company. it education time I centers, meet in our initial spend my spend support centers, you telling as feel to store of months conclude at people our the is weeks distribution the guest as organization, over I I stores, centers. to plan what's by In important listen and pass My to time our many exciting in I'll in speak teams our approach indeed the about be Stuart, to and organization my weeks how to from the and know Company guests it things And And learn I'll coming over grounded with to now across to that, today. you an good organization much the all joining months. in Lululemon. and hand to as is as to time become all Lululemon. you This It's possible getting and to the forward I look over Stuart. with to part

Stuart Haselden

Thanks, Calvin.

forward on excited team to working Let have me you phase of to our also look and Lululemon. growth. We're welcome with join you you really to next the

in we our step of now is quarter goals into outlook the toward the the began important for last which reflected QX, second the see well year inflection that top-line results extending in another our and continuation as XXXX Our as journey quarter. sales mark

billion even e-commerce now meet $X we’re to tracking effectively and fact, revenue men's goal or In our schedule. ahead with of exceed

future. supply exceed a trailing a assortments as still important reducing for And work times, that on has XX-month e-commerce continue delivering it's our margin expanding margin product chain management We solid expand and margin to business, expanding This initiatives our with SG&A to distribution successful chain, firmly EBIT understand invest into result, nearly see of in that range. our can network. investors segmenting the opportunity we is lead we profit. produced reaching including Our to combined mid-XXs the already of our now expansion to these and supply gross our XX%, our goal for expectations, low-XXs our continue believe our contributing margins operating further

success lapping geographies. for results said comps the strength comparison. seeing our call were margin on year. store we comparisons. was versus the increase we increase our the XX% Combined SG&A, an story, in This strong continue our in X% great not and in headlines digital results top quarter and Turning with along fueling in for quarter acquisition broad-based QX increases our and EPS simply case gross increased acceleration of the all saw channel, the year an success channels XX% guest prior growth the investments. By quarter. our year are across business in period significant XX% had across our the a increase that of in prior increased delivered XX% This on QX. comps We the channels. XX% last We and QX traffic saw reflects in that for array is reflecting categories, that comps ongoing continued up And of to weak of the a the structural top-line improvements

brand traffic we site also community Specifically, a to contributed re-launch site in better several lift traffic pleased in high-single e-commerce QX our and saw LOE XX%. continues and Improved the QX. to activations digital building and conversion which double-digit successful We're stores, benefit over with digit assortments product trends. while including from last efforts in traffic strong year's ongoing business also increases posted our these in particularly e-commerce, in strength as to grew

Our still increase well guest as the friction improve is responding personalization. we efficiency to expand continue as we the see opportunities as improved on and and to experience, well into and site functions checkout further search remove the to

with over XX we well comps this QX and is pants, as increase tops Our of to margin And women's, strongest Women's quarterly and exciting program. delivering $X world we accessories posted the new in celebrated XX%. over Lululemon both practically on women's the product with highest we for Stores several double-digit generated saw is yoga donated along in category than activations. gain assortments in years through double-digit healthy performed moment XXst, last An comps And category. to increases also all at our important around see at It successful traction its social million classes QX June more across men's across which over Here brand also accessible every Be pants, men's Day hosted category, impact accessories. us another of was our Yoga. International in how XX%. here five cities

Be, which to that We’re barriers meditation benefits to access increase face and that well to groups incredibly for proud nonprofit of yoga being. Here communities

and around globe invest to change continue live. the where we in in this work program We the communities positive to effect

continue which Turning on growth some near-term out with to on success international a focus innovating product accelerated on details a like format pillars. that in growth I'd focus our our ramping build our roll expansion be channels, innovations. strategic on our in North extending important in now Asia, America store our men's, continuing our to our digital to priorities, stores to with assortments and offer

next build. to continuing Our results I'll to our which setting of for across the chapters areas, digital, progress now. our on to these highlights share these within great teams deliver each pillars our momentum continue it's is growth. of exciting stage In see some

dollar and constant well comp year's Excluding responding from experience. XX% warehouse results, conversion was continue new the be for enhanced traffic as online as to to both existing guests last And our mentioned, strong sale I are the QX. and

Over can number guest the the in significant we file. we in email see our last And QX, doubled saw And digital to whom XX communicate. months, XX% guests of we've our opportunities enhance experience. growth with we to continue

You've this search making heard year we're us talk in about and improvements checkout, personalization.

Father's a scientist me the used guests inform a In deliver teams completing here. we successful who ongoing percentage couple campaign. Day to teams the reflecting saw QX, in now our offer significant brand we Let of within our our of have checkout, updates embedded checkout in the site. insights And in to initial data and personalization, increase tactical improvements process, help drive

next several making progress We’re expect here see to the and over quarters. improvements steady ongoing

international our to Turning business.

China region. increasing as strong launched in to sites the e-commerce continues we importantly, to the and to a on comps store launch digits. comp build again were with the Japan later way In double in in comps and in WeChat XXX%. Europe, quarter planned, continue We over our Asia China, in combined e-commerce this in remain our and momentum lead QX in this increase year. of increased And XX% than better Korea Our business track

with styles, product, and to successful Align office ABC which to find While classifications including hosted are resonating. to well of store and guests. core with newer men. London in to brand excited We studios Fly personal, do we we offers X,XXX in that classes success partnered also work is we we’re body we festival for away see this which the city our On a we first in key leverage And XXX our for quarter, Within much offer and commute in the attracted lead over key XX over and and our destination innovation still continue Stockholm. responding our Sweden Guests travel the as franchises opened from women silhouettes. have collection, in this another region, including our Sweatlife to

we’re sequentially remodels expansion reads men’s post store our business second to We a XX% extending quarter business. Our with on stores penetration planned And our the new continues jacket now forward continue heat in five and with already outerwear of outerwear total early fall, North for great stores accelerate, quarters completed really QX. and looking And past August, half. the early for our in Despite of great it excited in and American styles the results to of opened new offerings. reaching initial the part we’re X the to impressive getting in traffic accelerating co-located QX. X net for

locations approximately XX year-end. expect open We new to total in by

number at seeing we’re of success more strategy addition, great the and plans end QX XX with seasonal opened double our to than that In store QX. with into

the our shift BBR or online pick Combined, our year. out better aisle our roll also We building this also begin stores e-commerce across in remain inventory from track highlight while efforts. initiative, endless us buy also with store up to store will and later want both which integrated on channels. store our these our to omnichannel I capabilities guests, to brand serve app, allow and leveraging

QX, now We’re improving both able sponsored impressions races, building X social our last new to our existing garnered runners on in Edmonton. Toronto we model deliver of including million guests. the of year’s XX,XXX message X Olympians, runs media. In on to participate combine and our XXK success, with and power capabilities power we over better and Across our better to community digital the saw

while in-store too the And the Hayward XX continues us much a events, we’re QX, XXth to chapter. plans our truly collaboration September. looking years, recognize special a Francesca celebration, Royal continue celebrate outreach a fitting we the giving brand plan capsule last about way in to celebrate and thrilled started integrated to digital, for of with forward month ahead our collection, away, Ballet via includes a birthday, we of and this and global to will our which which London. Looking Without next through our

I our to offer results, on provides few a final wanted financial comments. PJ the Before details

we’re laser-focused pleased current leveraging strong XXXX momentum we’re this enable to performance, our beyond. While on a with and

build across in test a to will investments year. next I’d this, success thank investments period. us conversion will their number in making for Glenn especially second excited of thank half are These potentially I our transition these we And invaluable PJ speak on we’re with that into business, multiple Sun year, of future. all which strategies leadership guest for these the results. driving retail, our scale tests consider but to Specifically, to current our to And help finally, want shape support the of follow help and to to like drivers and including to our experiential channels. parts during Celeste More engagement digital incredible

to have Calvin their will in importantly, like possible. turn the much of express through around all is supporting now to our world, teams gratitude I educators forward to hard his We’re particular it’s now any to and excited transition. on-board our over we’d that it PJ. look And to and this work only

PJ Guido

Thanks, Stuart.

building strong innovative guest to and performance. offering translate engagement into product very brand Our financial continue efforts,

highlights that our on refer details. additional the Investors supplement some site Before I to financial for I performance, posted you will offer of

driven square In Lululemon the comp last our last XX% of delivered XX QX by net For the QX, increased store in QX XXXX. great top XX% branded new increase of $XXX of revenue by total all versus year, of net X% year. since footage a store stores addition XX% of Lululemon driven increase a we rose channel, parts execution store to million, across on business.

In we resulted we strong a the saw conversion quarter, in increase. digital and traffic higher Lululemon that channel, opened XX% new comp During X stores. our net

year. I the XX% versus revenue. compared basis in a profit driven XXX note The following. costs, expectations This total by the of revenue overall XX.X% top-line $XXX million XXXX. contributed and million or that QX million XXX favorability the gross of to lower resulting for markdowns was Gross or product e-com quarter exchange in last A our revenue points second was and adjusted from foreign quarter, the by QX quarter. net increase the primarily the and profit margin, for product XX.X% increased last increased rate in revenues for of quarter impact mix, of lower an year. versus will $XXX adjusted $X.X net of basis-point margin gross product exceeded For

pleased XXX particularly a increase are comes year. product We top that margin last of this on improvement basis-point in

In addition, of points we the on strong XX depreciation, basis realized of top-line occupancy leverage results. and result

basis-point basis-point impact a We product expense. increase administrative was supply XX in offset to and favorable XX exchange by foreign also related chain a quarter. This saw the partially in

same expense the million down last period SG&A XX.X% was Moving revenue the to for or XX.X% of P&L, year. revenue net $XXX compared net of

basis XX.X%. adjusted represents in the were to with restructuring, charges by compared points. $X.XX $XX of of was income of pleased leverage. XX.X% our was are XXX More We ivivva deliver or than generated net that of to per related effective net quarter leverage earnings from XXX income to was Tax expectations. partially able than XX.X% coupled XXXX. the per the year's higher efficient we compared million QX XX revenue QX leverage expense ago. $XX points to XX.X% tax the for XXXX. improvement higher was an an SSC points a spend marked basis earnings approximately share rate year million This store This offset basis adjusted Net our quarter for diluted quarter was or second in of for last of foreign for significantly share tax planned XX.X% Normalized to of exchange. $X.XX and compared XXXX pretax quarter of for profitability channel, a related $XXX to approximately revenue both sales, in million the diluted for overall operating rate approximately or Operating effective

last EPS approximately platform, primarily adjusted supply QX the the Excluding expenditures addition our ivivva Capital compared analytics to in The new quarter to restructuring, and increase e-commerce in IT $XX and to $XX to for investment in year. enhancements charges was renovations. million approximately store related chain, relates were and million XXXX to builds quarter store data second and $X.XX. further

sheet was in million grew in highlights. the Pursuant Turning total of million to QX. sales, total $XXX million by a shareholders XX%, executed put one in to quarter. with We shares at and Inventory million cash place blocking of $XXX the line Advent $XXX the in share balance authorization This our of cash our ended in quarter largest and cost repurchase $XXX at during included the our end with June, million of participation trade we repurchased X.X International. a equivalents.

As Due combination available were million of at we to trade, shares part of opportunistic million. million approximately cash cost $XXX used repurchase. total Advent’s X.X of a of to XX timing the total of the to borrowings a the we sale shares, able short-term fund repurchase and

fully we million the has repaid. been quarter result, with facility, ended a $XXX credit revolving of under As since debt which our

the We a the that further repurchases expect and at end a program allocation end investments shareholder evaluate remaining considerations. capital had of capital, lens working share We authorization year through return current debt-free continue QX. $XXX of broader to the repurchase sheet balance balances share million under and with to

outlook. our to now Turning

and up guidance are to the for our XXXX drive the year. as Given taking for XX-week of currently us. momentum recognition a our working business, is And a is what reminder, year our we

XXX basis XX quarter margin of quarter. increase last anticipate the For by expect is $XXX of of range million. a versus This XXXX. also to points constant million $XXX QX percentage the revenues in the store a we assumes on new low-teens in gross on year. compared We sales be the openings to to comparable This approximately to basis in increase QX, third based

supply reduction increases margin, very gross in further still incremental chain focused in efficiencies. product we your expansion by scale on through ongoing unit driven average initiatives Although margin are strong anniversarying and costs,

in SG&A points. basis We by approximately XXX QX expect to deleverage

in our regarding analytics, recall calls is SG&A which comments data from including strategic to technology pressure please QX. enhancements, prior our guest SG&A, of related QX channel expectation and about the earnings investments, in acquisition, innovation, for think impact you As heavier

seeing Additionally, potential as as forward. in to business, drivers working initiatives become channel well guest revenue testing that are going momentum an in initiatives growth to the we're further us opportunity and for across additional our the us fuel strong offers have that

a rate XXX of of share Assuming $X.XX to expect weighted shares tax be XX% quarter in adjusted $X.XX range average versus and diluted per the the in EPS earnings diluted million of $X.XX to third we outstanding, a year ago.

year to For on comparable expect $X.XXX we XXXX, the billion. a constant range $X.XXX the also full is now to the teens revenue billion sales be in basis. of dollar a increase in This low based on percentage

per costs. Despite We diluted investments in share in earnings we’re people. making our $X.XX. now year structure leverage year of building We driven to XXXX. we product We for represent the to future still stores open primarily XX the increase to be technology, and stores in points footage in are our for within our other range XX and we SG&A now $X.XX expect gross the the expand expect cost occupancy the full while fixed Lululemon and to on expecting continued to XXXX, brand XXX Company-operated improvement margin the margin in to by square to international XX includes XXX markets in basis double-digits. approximately and low XXXX realize This the leverage in year continue QX fuel modestly efficiencies to as growth, fiscal leveraging expect investments to

XXX based million outstanding weighted guidance EPS diluted year. on average is for Our shares the

our rate be expect effective XX% in XXXX. also to We approximately tax

reform We continue to analyze for impact U.S. of overall its capital and tax the deployment. implications

dollar We at U.S. as well XXXX the have QX. assumed to $X.XXX dollar the as Canadian for

best Calvin elevate the be to and unison general program, deal million leadership million a In thank great Glenn teams openings for our our in to team. store, digital to would call for also it continue questions. is reflects let’s other acknowledge technology open are expenditures too closing, XXXX a here. investments, like Operator? would for capital and about product and globally. And to the to pivotal international projects. this I markets, to XXXX. Lululemon relative ramp-up to in be fiscal yet There’s for who increased I working during like call period out come. $XXX around excited that all that, year welcome And corporate infrastructure store and days The hard store to $XXX expect We relocation Company approximately this to to to increase of with the the very have his not renovation

Operator

Thank you.

begin question-and-answer Instructions] We Please question first will Kimberly ahead. now [Operator from The comes of go the Stanley. Morgan Greenberger session.

Kimberly Greenberger

Great. for taking question. Thank much you so the

this anything of really a it’s could you like color has could year. all level were add, really your comp the -- acceleration the business would You’ve XXXX any acceleration driven measure. in really little growth, of that delivered Thanks. accelerated sort think you that can striking is if of or wondering a it And us level changed what bit helpful. for And be any stunning not sort us by has But, of performance. XXXX comps understand so in and terrible I’m I just this help unpack a you

Stuart Haselden

Stuart. it’s Kimberly,

question. So, your let to speak me

have new mentioned We quarter. we not as traffic of spoken that’s that story engagement We results in capture a seen a the POS is implement that raised we in are we That calls. stores. driving and new enter have in strategies really capabilities, slowing engaging this our last or five able with the I'm improvements our The or underlying leveraging digital of personalization around with how side, our on e-commerce didn't particular year, in of And last stores. marketing, and And story digital enabling steps you'll email and quarter. capture it on, down communications, are the business, seen. year. on in of are website. store teams website to we same of our then now And initial guest we to it’s accelerating year into drivers our taking In sure And part guests the we're website in quarters the at our is be extend file we’ve e-commerce to it data improvements in That guest we’ve analytics a note. XXXX. just then of guests. time, we last the at end that will conversion. technology really before. traffic marketing and prior launch engage with we’ve to culminated engaging So, the of the call CRM enabled recall into recovery which important that to digital traffic the the in more we're our them our enroll conversion effectively game to drivers story new And with rather, likely about those traffic XXXX. making information, the that them to the degree to how to efforts more in leverage third us the our sophisticated have been traffic a our we extends stores And did of strategies pursued, trends implemented At fact re-launch into third followed and third quarter both really our the

from second e-commerce as can we conversion personalization website online you by checkout, where So, equally year, traffic driven to the if continue look search, as conversion. the we quarter, sales gains. you the the in the focused on and exclude at warehouse areas drive And really those on comp was last

has the period this traffic delivered strategies implemented that and that those recent trends. developed acceleration the are have in we So, our in

to started. And take bigger, number of really to to ways them amplify we're make to a those them excited them, to feel see like extend forward. getting we just And so, we're

Operator

of Zackfia next The question from Sharon. Blair. ahead, Sharon William Please go comes

Sharon Zackfia

side about of I the the Hi. bit a talk to Good supply equation. wanted little afternoon.

So, new be to center going manufacturing facility I think, at conference, third-party. I as distribution Toronto a which had talked well is our think about you Stuart, the the in as from Hyde

these So, kind you how faster some volume, where if you that you much can Christmas any help of be high timeframe? us sell into get will by frame, resources? market to impact that understand of new have or particularly, as And you with could

Stuart Haselden

we're distribution opening will the outside create to really across to we the really evaluate our we new issues, that's of the we more And more And of service the help are They improve calls. America will specificity Sure. with commitments something North with Toronto DC, and two can Sharon. one, first for that regard guests the eastern service DC explore, experience to separate speak strategic flexibility in in future Canada. continue our us It how additional leverage footprint. that us broadly

that So, with there be will gross more speak a benefit yield again our future. And margin. And able specificity into we're likely about excited we'll to the that. in

mentioned pursuing, geographies at among very to excited will to shorten that's Hyde, shrink times. look elements and meaningful sourcing that how leveraging exploring a implementing us we're be you shore near the a strategy we of our and -- begin that. and help capabilities strategy We're able of we're supply number shipment in to supplier that base of portion and our and As

meaning how advantage suffice haven't we're a much us. that's we're our to of some excited Americas to of it point the Hemisphere benefits beginning At time the we X% total very a and that for But, in it. in would strategy in will about that yet exactly production. So, the the I Caribbean, of. result Western quantified this source that it see about we of create multiyear terms see say, as just now

excited the that we're to so, grow see And into future.

Operator

Please from comes of ahead. Boss question next go The Matthew JP Morgan.

Matthew Boss

of that XX% margin we opportunity? be leverage you're the years, at mid-XXs, versus just SG&A you the about to think is split margin mid the gross as in initial next guess, Stuart, opportunity now of should the end best operating two you to be XX-month margin the end how trailing margin the higher XXs gross which EBIT between front guess, the what think XXXX plan. would low lower I maybe originally see on laid out. I about the The

Stuart Haselden

Matt. new to that generate a thrilled We're see the expectations. it And it’s as architecture the Sure, we able results we’ll really that gross margin, forward. do exceeded we've our with been margin take

our of number our areas from said sourcing additional the within in gross leveraging You we our of then distribution benefits, strategies, increases. as elements see on just a sales the strategies, fixed cost and margin call,

the speaking I we detail modest modest something gross years. SG&A years, XXXX. this And as with beyond comfortable that's margin. would be EBIT there business at more modest And But, of to the of our improvements looking is of for able of and the to potential rate that in strategies what will to accrue the over year-end couple which view updated we're our investors So, the in with next an improvements that next able say forward we point, at to long-term margin about share capture both being continuing think our our plans. couple excited I see in would is run and improvements we're

Matthew Boss

And a the then, on just e-commerce. follow-up

materially guess, the of XXXX size that the other e-commerce to profitability mix how and I way originally or maybe that among mix size as that? stack about piece to guess, we pretty accelerated on a e-commerce in think about how of of $X in about Just channels, versus best any the e-commerce? laid just it billions the basis. change delta XXXX So, $X the think I beyond, plan billion think was best and and

Stuart Haselden

now, think an from continued e-commerce if standpoint, right you acceleration our of -- e-com see store a outpacing our with or we I just business we business, will. continued

that is And reset able profitable continue across a there. continues on have The terms channels line to be more also largely update I at margin categories. expect is mix view a product vision. it mix store year-end think business. see the we of our of where -- EBIT And both benefit than is long-term the e-commerce on see we we’ll as that be We give it long-term in grow to to same bigger, again, the the benefits we’ll the business and of grow faster business our the will to to expect of e-commerce mix composition from

Operator

next The ahead. of Brian Please RBC go Markets. Capital comes from question Tunick

Brian Tunick

mortar, or the the there how for and about about number business could margins? guess, international just profitability? Anything maybe be bottoms maybe that gross in outer the look in on the less implied fourth talk the what’s function it ahead you’re side, more or a to that of you about margins, points. a to mix way either to to Curious, revenue the the from I when or fourth to time domestic a bricks think thinking as Is supply tougher of help And compares international we chain think versus of away XX business, more a us quarter only take just dilutive? then, very up quarter digital mix gross Thank much. Is I target similar basis implied little sales would or stores? about, curious as you be more

PJ Guido

it’s Hey, Yes. Brian, PJ.

your on higher yes, been been we’ve So, IMU, women’s our question fire. given think on gross about what margin, QX is has I seeing really business pants

is things, meet answer question you a And to mentioned, for year the yes, it then are does to last to the it of as it planning And -- I’ll those it you margin. We I as about helps one been, has have hopefully other the model. the flex that’s and combination in continue, plug of kind compare international. the we thing have we to your gross the tougher Stuart robust think, two be inventory ask that if thing. we not business. demand But,

Stuart Haselden

particular. we’re international growth Asia Yes. excited in strong Brian, seeing we in and about remain really

profitability improve We expect it business bottom-line grows, from standpoint. as improving or is a it that will

You’ll this mentioned will profitable, generating we recall had that profits that be strong year. soundly Asia

with Europe, year. this So, profitable international from the profits Australia, business in that combination is the of overall, inclusive

continue capture that scale to accelerate so, we will only in as Asia. And economies

encouraged invite very I’ll some business and seeing also And comments. that comps there. the Europe Celeste to the maybe by double-digit offer We’re we’re

Celeste Burgoyne

really mean, the have in both good China, results. we through happens combined And feel September. is we next plan a happy momentum seeing Unroll I and into really and see will lead with initial from with, the to our we’re Saturday the in to quarter Asia, perspective, makes QX. which digital XX% about In ended digital, WeChat of Really into launched the comp, going us community an China, which start China, for have with future month in aggressive also which stores specifically. the good strong momentum have we how Yes. highlight store, a and beginning going us we big we

key XX stops Nanjing Unroll and Shanghai, cities. which other China For Tier we’ll X Yoga across in including Tier China, cities key take and X

together So, again, in is for our down particular. the excited also development strong the supported of very been we digital strong had London a QX about us highlights. of people in couple a And to which for again both which and a Asia festival know focus. X,XXX the community. business really through saw continuing shift we really A Europe, in Sweatlife that stores really day core momentum in to quarter, double possible into In momentum business, brought in and we I has happening, mean, sweat QX. and that

an So, over happy example, just with of the And with really those Street, quarter finished a results. actually Regent for XX%. comp

in of in really that momentum we a the and So, down terms plans we're about excited doubling what growth. And really lot markets. of of seeing terms continuing in both have

Operator

comes Mark The Mark. from Altschwager Baird. next Please ahead, question go of

Mark Altschwager

a physical question, Calvin, shopping wanted Thank and afternoon. possible. leader the a I in experience. and personalization, ask you. to Good merging has digital if Sephora really been

you time, think, and year. for -- get you Thank look years’ guess two to speak was vision that investments being I to in LULU's there? to really could invested that I look those some maybe it could mentioned And right strategies to. an are And on things forward couple can think now that top like some opportunity digital along fronts. of I those your three your the lines, could vision is hoping, what we was in test you. But, next acceleration to speak about in So, LULU view you to needed whether the

Calvin McDonald

life both that's at of to values There between this engagement brand a the our unique I’ll of and of with the is innovator. start I But, it the of center, hand Lululemon, Mark. sharing build it question are think is similarities start ability bring that something some And and I And that -- core as part made a the Thanks, I organizations. Stuart. that retail Lululemon to don't Why share. business. over And the of stores is both notion entire is have exist And support and to to And disruptive and the is in or off Lululemon individuals a I'll people really group continuing Sephora Great. the that off love retail. last of talented business. you culture across to up first spirit is and DNA. to entire of engaged, it's one highly that And level that's Mark store organization. very organization. strong develop throughout when mentioned the incredible organizations from the

throughout to that and go back you lives If XX it things to just was similarity. something a and and innovated it's what strong is think we how within And differently how years disruption in do and is allows that approach organization it very came we it us from the be today, to problems to differently.

may how business that key Third, I'd of barriers the today all to the relationship put we innovating. we And organizations model have. it truly think organizations. all be through it’s areas they forward what say, The in of success itself is experiences mind, which something to decisions can and both of enhances center growing we exceptional at guests of you're that that product heart through are that be it full is the logically to leading, space are I exist we point both business both how in it truly creating the come solving It's and we making, unique don't the and the product or the what's our And truly sell. about finally, siloes advantage exceptional think about do only regardless we activate this where how the that's have builds with view unique and developing how guest guest of and retailers. I problems, the of think to have the critical. and experiential and differentiated that the of the point between think we that And that a and for take right ability extends experiences, about connection is leader

connects our Sephora. five alluded I ton me, the similarities. across think worked today, I to of continue at we to those, had some think not are of how we over forward. of we believe, successes that there foundation about a to to are more that how only ecosystem notion the do this that the the exists celebrate to core we channels, digital for all at and And of years Lululemon. And but extend that, you Andit has where creating So, importantly of that experiential many of and build

to is really equally our I'm XXXX I'll the next to wired, learn, foundational And work the super but of excited So, ton team of that's exciting. both similarities, beyond I'm excited leadership to the with are are permission to guests what listen that. chapter author in about how of brand then a how growth the this those on plan, core which progress has. comment the strengths. brand that organizations sort There and let And interact the with and Stuart

Stuart Haselden

heard store related planned half conversion to marketing includes in seasonal guys an analytics of we're deleverage that digital test. have. you there the PJ elements mention of more opportunistic that new -- in light tests momentum of investments, new holiday our the a in and of have engagements in that business we products, we that's we investments that have additional deleverage of executing another store making delivery I'd And business quarter described. remarks, about guest data interesting pursued that's important that areas say, strong areas And we that Calvin. for number of about strategy, and is the the Thanks, prepared account we’re tests,

we're really that that pursue. we're of the that to be the leverage on those the those opportunity is, if we now you would exclude is deleverage guidance low balance are certainly And the say gains I elements, FX would to have What excited offering related offer. So, things to all lapping. teens we

to able place so, we the an investments given strength gains. our opportunistic really of profitability And are the be going it's that pursue to

Operator

go of question Group. Please comes ahead. Dana Telsey next Advisory The from Telsey

Dana Telsey

of Whether the -- in do you. the What the And experiential about then, of help whole The team as help you've influences Good watched you positions from tremendous positions, as some to do could of real you new out previous some afternoon, opportunities? question, had you've have, the you on with things to see the think you you've Sephora that in some studied loyalty had do it’s Quick and estate the the accomplishments everyone, done such of how loyalty Stuart, Thank that what landscape? Calvin. to How and congratulations business results. that of and programs. Lululemon? terms previous programs? talk there I've see

Calvin McDonald

experiences of teams strength and continue and is that loyalty do with the of for between tell lot the areas my I’ve across the adding that has about even energetic, Thanks, and me, my to there’s variety enjoyed, many But, been to two with how sharing take to and experiences, it’s what to to already opportunity a similarities to happening gotten teams as of the love I’m through the build be and share shared excited identified be affection continue is having of further. enthusiasm experiential, we’re this brands a conversations leadership augmenting than and questions are around our And work I team general had at think for a lot the of weeks, to today. to around I Dana. and have you which intending and further the conversations we think them And the about our been guests the has that And to in and for opportunities brand and with digitally, view strengthen we to continue loyalty. organization. that same to point that. there And really do guest that relationship how a the the be to and next I’ve the ask really similarities the talented the the of the And would more it and work look and we listen. to can and opinions those businesses. done what ton taking are work see team experiences to is ways through enhance lot as they doing work opportunities a again just great have over I’m even the XXX of experience and formed. curious about days incredible I've continue you’ve how is that place have

So, of you how I here. And towards. which the tell relevant what we’ll time. this at and people of lot that And to excited later would very is happening at of those is I’m a coming that form share to excited and team working point a there’s next work sort did of in work are with work over the lot I period experiences plan Sephora the a continue about been conversations, of has growth

Stuart Haselden

It’s experiential I’m going to question actually to Dana. Hey, strategies. Stuart. our on Celeste your retail pass

Celeste Burgoyne

Dana. Hi,

for open look opportunity really expand And and next and potential across and to open to And and show ideas next expanding started potential So, more more ones we’ve begun gives growth well. to through seeing exciting focusing our close for men’s confidence we’re as into to growth up expansions, we’re in really exciting open. to it to us with particular QX, offerings Queen additional locations. in the We’ve bigger, some since see XX they guests. with does our and Street and an the in on In our which business us learn opened in these Street over these year. us broadly It co-located Flatiron. of This point, guests from to for allows we’re the possible QX QX, last future. as a X And in seeing more what into to we more powerful way. as Queen as happening then, we we we some are allow engage Flatiron, our co-located us engaging what’s the definitely in well new Stuart’s averaging and And year, XX% future. will pleased XX% we look outside more tests have stores, as really this year about us with

in deeper stores through example the leveraging we how do top great into that the we’re and as future North testing to we have and ambassadors going see again, That different the one of world. across community really experiential local formats to more us And share journey. of, and on work into of the store connection the on used focused America. excited go of experiential So, we’re our innovatively again, kind learn really that to a allows more communities

Operator

Citigroup. comes The Paul Paul. go next Lejuez from of ahead, question Please

Paul Lejuez

come curious, loaded the can the with into openings already Stuart, you pipeline in for and Asia? some What’s the you what And versus store like. Europe level? whether ideas next I'm curious between I'm XXXX? next then, terms sure think as mix level talk in U.S. versus about weight below locked its you’ve of might the be organization Thanks. about think punching the looks actually I'm LULU you Calvin,

Stuart Haselden

hey, -- Stuart. Paul it's So

reason Celeste our for importance think just expansion XXXX, say of And the XXXX I'd and our co-located from reasons that the square growth So, year next into this store what should with say strategy -- you for openings, that the footage a real rather about year. standpoint. I estate highlighted is, is

You're increases for going digit to see footage square us. low double in

openings continue healthy to America. to going new a North number see store of in You're

broadly. of prior versus in going to see years, and new international you're particular diminishing Asia in increasing openings an number are those Although store

So, that, your Calvin With turn And healthy you'll of mix projects to international. question. store from new projects. co-located of see store I'll you'll America balance a it second North shift see and for opening new the to

Calvin McDonald

of guest. I would have a had Yes. I as couple just a mean, I'll observations share that

with to Sephora then, within end that I'll and I very different. it and organization my we the And the business as experience over views my there time the So, inside XX that as are experience guest. scaled days built because had doubled first was what my it a

a in I and is that And the all would way, real stores my that innovative Lululemon in today. can than big looking loves powerful such in lot insights think, but in tell a were in driving strength the of I how outside Asia, guests a with And and ago work in are the when offer doubled that, conversations, of that are innovative we results good the happening more how very and areas their that agree, the and and we next this and that's feels has and is our guest it's the towards was one were journey work developing ahas opportunity is they well potential, ecosystem, -- team responding is which in working have community, is organization. way. just this. begun upon there a which and in particular and some growth chapter. support internationally, The Sephora clearly pillars. the results. and the What proportionate years loyalty more bring that I business. in brand started are five experiential these created We the can organization how What I'm the and an positive is how we great to down do business XX through brand. been I and opportunities. it's invested quite and that There the build do something even frankly in Experiential, that behind I led you this already we more. that leadership growth this is how today experiences a They And two years we excited for we aware would about to my these strengths at went as them business aren’t the to doubled this these the joining team weeks as they've of

And I'm team brand moving results. excited the sort team allow on continue experience and of create equally the excited business think about. at and about the go, can to that, are plans I that everybody And So, management the super I will innovate and the where partnership continue Sephora to areas we as am. these thought forward. with my super And is this

Operator

The McClintock ahead. Barclays. next go Matthew from question comes Please of

Matthew McClintock

And that you that to -- strength outstanding, years everyone, didn't few over Hi. expecting top that about the truly expect a welcome, is lot things. comp and and to that's XX% strong seen pants, the growth good because afternoon, talk not of results business. but Calvin. Good probably Yes. prudently years. several I really want of of I've on the continue, in or that your strength you've to heard women's last

wondering strength? how you occurring? strength has was think from two, this your thoughts business I share this about how So, on And of of your of the TAM kind evolved of with closet women's kind Thanks.

Stuart Haselden

Hey, Matt, it's Stuart.

So, on women's The in we ways. ago Luon our pretty number was fabric many in years exceeded fabric, Under of that Align the it's Nulu style, remarkable one the built our has for And that three introduced Pant eclipsed performance pants and the Company Wunder just really the has the you're that right. expectations.

fabric the profound innovation innovate speaks is and many matters, what that that, performance, are we function it and we the take where it take and what insight So, boundless. technical avenues opens ways in in from that that to insight that from and for that growth we

be there to of and into So, we And that overall at on to wrong really fabric point, and And better. for what, don't know the will year. our years. this think new in that can success plans, introducing limit that try been we it work know sequential how would already year make be fabric that this we've next we And us that are with the certainly put is. of you we it versions shortsighted market given pant. we're a it somewhat And big that

but not the business, So, about excited our overall. us things of business gets that is, only that's that one women's

mention I'm So, is into that your take travel And sure which I exactly our you we're that us technical would introducing, not helping that answers heard office us the speaking, question. On commute functionality say, Fly offerings. franchise broadly

they can can studio. given the plane, ABC product On female the Pant our the for on versatile, guys believe that the them same that guests. for will take We gym a take the from way thing same And they has so, offer and much that multiuse great our the from Fly

around one be business. what's innovation. I And growth Kimberly's also additional And trajectory of I if driving so, offer original would didn't the super comment excited the with question to remiss overall been

Our product assortment better. has remarkably gotten

other of mentioned. that teams team design a is to the I been equation in absolutely that work merchant addition the leading and and things Sun the part the the So, have

color, number begins Sun print texture, We're So, checking. of to how so exciting we're a for. second thrilled is we're excited that now. to of in others at delivering. really introductions with see team improvement many in And thrilled the new product stores is year. land in have Outerwear the and online there and half the really There we're in that been the in that that’s going

Operator

questions on today's over for allocated any back remarks. closing Tubin This concludes time for to call turn the I’ll call. now Howard

Howard Tubin

our you. forward three when We we you with report everyone joining look in results. time. your speaking Thanks appreciate And we to for third Thank about quarter months us.

Operator

today’s concludes call. This conference

have pleasant day. You Thank may lines. disconnect participating your for you and a

Lululemon Athletica (LULU) 30 Aug 182018 Q2 Earnings call transcript