LULU - Earnings call transcript Q4 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. Fourth Quarter and Year-End 2018 Conference Call [Operator Instructions]. I would now like to turn the conference over to Howard Tubin, Vice President, Investor Relations for Lululemon Athletica Inc. ahead. go Please

Howard Tubin

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

today our CFO. Joining McDonald, talk to me about Haselden, and CEO; results COO; PJ Guido, Stuart Calvin are

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

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

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

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

Calvin McDonald

And remains quarter was Howard. welcome, business for another momentum our strong. you, Thank to call. the Lululemon, earnings as successful in It everyone the quarter fourth

results The cap for and further, our the and to course and team on our strongest leveraging is In the I day-in teams want over educators, to express globe significant take XXXX brand years years. with front both going fact, connection ever one any is and the who the off of community of around around in partners And before our leadership these to store moment the coming our opportunities teams our sincere guests in company. gratitude that world. our local us, It a the special create day-out. of focused the

with the Turning to our are we fourth pleased executed organization quarter exceptionally the how well over results season. holiday

and the to us impressive. preparation looking deliver robust the another allowed quarter And planning equally were full Our year, results performance. at

Our of Lululemon enter growth. strength our XXXX demonstrate today we results as phase the the of next

strongly resonate experience Our based our with brand to product activations assortment, retail community continue compelling and guests.

supply in expansion investments strategic bottom and chain digital Our to the top line. impressively our support our delivered both and on business improvements

of North with shareholders. combined results us outside achieve this of growth high a our America allowed significant to All our and level employees for

opportunities building product upon. product, technical newest Looking to deliver our we we on with XXXX, near-term continue upon momentum on that Lululemon will focused are Starting as now many horizon. we is the at innovations pursue built the

in high to innovate opportunities. categories future will yoga. success commute, categories, And warm where in Men's and of our industry have performing one leader and our also of course is expand travel broad our be we In see and driven office continue outerwear that to of and product will we areas considerable natural launched core guests both success, great our we’ll most our while assortment. leverage weather expand many we an largest our of to we continue two & areas solution test expansion opportunity into strength We new category styles including exciting we'll growth, and believe forward. women's, for is a us recently given remain men run. to and test. spring excited offer category men's new extension Free expand guests we self-care boxers a We leverage our for and about brand. strong holds for this We our current Fast new as franchise going into Nulux and response And the for further this

wallet attract create building see to unique to guests, and continue existing experiences guests engaged highly to our acquire with while the guests. new of of them all many achieve for Sweatlife. living goals ways of We our we greater their share help And

be Our to proven to and bottoms category exceedingly into continues strong and our perform women a has men. brand point for both well acquisition

upon we that program past builds campaign our the be excited guests us nicely for our important our brand existing to And and enable continue the run with in activations year, relationships will holds develop by expand brand. this deeper category. to strength of upcoming the loyalty to Our potential

first Our to we was in market. program a members-only success, in are response with huge the thrilled the Edmonton event and this overall

the so When United area test test in a coming are begun the development in we in We’ve speaking our the our in our but to early States coming also ready to the stages potential we the of our guests ahead. membership at quarters. accelerate we'll personalized Denver, just the way, are to more this recently much in with capabilities an expand additional digital and looking months. still in ecosystem, city in We launched

use in our We local France guest for brand search, by opportunities navigation we guests we to enhance have check we engagement. Japan, sites we functionality. sites reach drive Germany. as excited particularly be to also way market the able digital our also expand are Internationally, our year to to storytelling our and our this to launch And continuing the additional have improve experience and improve out can

In more and new opportunities, addition build growth of also experiences will existing strategically as that create the the and expand strategy markets, we seasonal unique continue our our program, in fleet continue formats to store and for stores some test upon store digital co-located we our exciting our success remodel square footage new to store open guests.

Finally, and we our focus and significant is brand outside of opportunity an build will momentum. to area for see we potential upon for China North our continue of America, us. significant recent

this are across success strong the more more seeing see and brand. are people Sweatlife and pleased to our and market engaging with living We

and local of and openings pace activations. store the to our community connect brand accelerate events will continue with new guests We through

upon now In We to in for expansion the increase guest digital strength team. city-by-city represent we addition our leverage new the as channel our our we successful see on new to as come. a also the Key our will of build pathway strategy scale. that excited for as years will look of innovation upon these Europe, in in responsibilities To will of members elements I'm are XX% the markets, business opportunities we as our deliver this segment store the record structure track and a development, on in designed two the strategies, Stuart growth of sharing see areas built weeks such during ahead global our international We and the some recently for just Operating product international many The ago. forward to we our will expanded existing our senior more share next to Amsterdam of continuing where in describe moment. our I strategy Analyst in Day focused organization our just of Haselden, business speed, These include, year serve to Chief beyond. first structure opening month, to category which oversee add leaders, while evolved and in we Officer.

me. community continues we're Whitespace all and Guido, alas America's as Chief serve and leaders, that Waller, going, innovation Head we'll for an Officer also of including PJ senior while several Officer global Lululemon, report our leading guest of to omni-experiences. Sun Choe our and our will our other So together Tom now Financial to organization Product brings drive Chief expanded in-store

role function including partnerships, brand search and a impact we're to and the a brand an events, to addition new for lead social positioning areas, our creating In external support sustainability. around officer and world. begun branding, We've several enhance chief

with us The an team and years. closing, that, are the next further we energized to great with month we XXXX, team ahead I'll milestones in will for the ready our next entered our leadership to plans an growth well It's our to executed look the to provide of next now vision chapter say Day the opportunities insights, In I'm and outline in it York years. of growth performance this forward plans talk extremely in exciting five to and about energized New for has the that five on we And ahead an on and ideal story. Analyst XXXX To Lululemon begin time achieving hand All where schedule. further team our next Stuart. about over several proud plan, momentum outlook our hosting ambitions. XXXX

Stuart Haselden

Thanks, Calvin.

been levels The their congratulate our into achieved traffic, ability just response would we're trends our I'm set in or the today. be as on strong beyond reached traffic reported three chain a our top of systems investments, are expand of for the business over innovation. XXXX by contribute chain, in seen in margin XXXX offer opportunities and years at platforms XX.X%, strong course possible. product bottom infrastructure, performance. world margin growth possible ahead IT also enthusiasm, guest passion Operating XXXX into engagement lean increased see quarter. in increase XXXX enabling teams, and two some well driving gross has and expanded and QX, Costs strong we we a Let XXX the and we remains as results in clearly new of SG&A now planned to our points, for continue and our guest supply our in for by in for the year sets investments partially the XX%. Without financial basis GEC making leverage better in SSE, were XX% and to store expected QX for. increases excited to offset XX% operating continue nearly clear and our continue coupled building quarter. me with been we also than These we holiday story Gross another as We our I'll growth. to this QX. grew last inflection margin us to This well last targets assortment us e-commerce an margin merchandise of schedule. future reporting point omin-capabilities, strategic were made strong on capabilities DC details operating report that position and XX% result. XXXX penetration These investments development reached of in all adjusted line, both business adjusted stronger to all three over this points drive technology years our included by targets around supply as the above a omni-channel teams we've and and In we've and margin proud and all year drove for investments XX.X%. none digital product an margin to commerce and XX basis to capabilities. digital XXXX, that EPS on for our in versus and

XX% high existing as nearly guest by and QX, a guests. and to seeing equally in increases exciting guest strong our experienced respectively. our the XX% In we're email in guests. drive What’s with list continue repeat remains increases acquisitions results increase we engagement XX% addition, transactions our from also new in both In are we

a XX% standout. turn saw strength foundation now built is remains success in our men's offering respectively. and to women's XX% and on continue comped the which We from highlights some ongoing in me be quarter. a QX up and bottoms, Let our both to which Product

outerwear expanded strong guest styles. offering performed weather Our new with for also well our cold demand

the on physical ever annual challenge. over increased generally helps brand year. community retailers. range. the gears runners thought app. We with XXX,XXX online success sale strengths in other month event with full Shifting We year, in as for is us a by with collaboration for hosted increase price to as low that our here had QX, largest This and partnered in pleased particularly a XX% sites versus run our representing members, digital, conversion to on I'm at most the we with it join, third over Strava XXX,XXX single be that and XX-XX the we we run last This also are excited we're to leveraged the Strava clearance used the XX% our in drive January. digit while had in largest with ecosystems traffic is a Soul Cycle

and in opened growth Hong we as full All business during opened Calvin year. XX% we store ecommerce airport increase district and in and China, in and strong our Kong. Europe, to over Asia nearly also the QX brand our continues Berlin, Mitte store Osaka regions. recently opened in first these we In of Amsterdam. strong first location be report QX. in in in XX%. Macau performance saw ever generating also results an Europe in QX, the store particularly extend in new mentioned, we delivering our XXX% awareness over international And an I'm exciting our our in Finally, is as robust, over excited for was opened also of that Market first grew XXX% to

now in now supply you as share our initiatives accelerating We’re excited increase. technology and levels to Normally, Europe our I'd with within brand and chain. see to awareness trends infrastructure, opportunities continue

new outside However, for of my your for the our business. Pacific reasons Day. as with and working as the been for I I'm I that earlier, America. to grow express investors Asia I’ll full years to North the to brand to detailed save operational will and but their my leading have challenge Lululemon forward enthusiasm bring continue going helping I've achieve Analyst lens businesses the these international look of potential them What now the would excitement COO discussion excellence of Calvin is Europe. in to closely And our I for leaders and few in last businesses the and of like our

over hand Let me now it to PJ.

PJ Guido

Thanks, Stuart.

the finished performance. very strong momentum delivering Our continued up financial and we QX in year

that Before investor to and our will you the I was on I year provide financial for details. highlights week additional on note a our for I'd supplement QX XX XXXX posted refer guidance site outlook, also us.

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

nine increase in channel, the year, on During a saw co-located the we In quarter, our and comp traffic digital dollar opened the remodels. stores XX top constant strongest new completed XX% of XX% very we of resulted increase a net which strong last year.

of contributed For XX% of close top $XXX the quarter, million e-com line, reaching revenue. total to

XXX profit an as For that decreased revenue foreign And to the versus and of the gross following; basis point was a e-com product basis revenue quarter. gross in full favorability mentioned, penetration million Gross points margin, the was million by was profit in lower driven year, exchange $XXX.X $XX.X adjusted quarter in XXX overall product costs, net primarily product XX.X% XX%. QX resulting QX the or and net compared last lower The impact XXXX. increased Stuart revenues mix for of adjusted margin markdowns. fourth from year, and in the by XX.X% of I'd rate add increase

giving supply with basis are continue product chain and several margin to gains leverage on chain XX top by the points, last We product points, expense product increased depreciation we pleased investment and of over supply development. basis realize by occupancy the while and the XX years. strength We strong costs in

points foreign We also exchange. saw unfavorable impact XX basis of from

invest and strategies included and openings revenue, compared period our growth XX.X% initiatives royalty continued same QX, net year. expanded current the These and in term down of business million store of or digital to expenses seasonal use testing we growth. as fuel were marketing to brand well investments to drive and care. for guest self long-term revenue In and as acquisition initiatives, that build longer including strength last SG&A Moving in to $XXX.X P&L, XX.X% awareness, net the for

XX.X% translation, earnings XX.X% compared income QX. to a approximately revenue in million revenue net in quarter XX Foreign $XXX of $XXX.X compared an XXXX. was or Operating revaluation of of ago. or an XX.X% XX.X% exchange, of for tax and the Tax was adjusted for QX leveraged both the effective quarter year net rate expense pretax to points basis million of by

we interpreted tax year our finalized part we an enacted $X.X per reform. U.S. guidance, incremental of share tax that prior tax As state returns incurred was ongoing transition related the as tax and to expense or $X.XX million one-time of

a million tax from $XX.X parent. our of our U.S. or million related $XXX Canadian to of incurred $X.XX We cash repatriation also subsidiary the per of expense to share

will compared tax tax adjusted effective primarily rate effective prior XX.X% of Excluding to XX.X% from The year. credits that were in last our that the benefit to benefited previously not a adjusted QX to us. XX%, reduction to relative tax and XXXX certain adjusted for in legislation these effective for relates tax adjusted rate rate our to tax $X.XX. was our guidance contributed in available allow in an the in effective EPS QX recent change charges, change us QX approximately to This to foreign rate by tax decrease

quarter quarter Net our for tax per $X.XX expect for diluted was earnings approximately of share or at per the diluted to to share XXXX. remain approximately million $XXX for $X.XX compared XX%. rate the We fourth XXXX of income

IT and were quarter $XX in Excluding adjusted discrete year. in for XXXX. expenditures The the compared locations primary and capital both approximately last investments. store items versus million quarter relates the increase $XX restructuring to million costs, $X.XX was $X.XX QX in tax to supply approximately and chain QX XXXX EPS of for ivivva fourth adjusted in renovations, EPS Capital new

in in at and $XXX Inventory the quarter in We effective $X.X into the activity. during put earlier Coming shares authorized to way shares ended We of QX. that our to quarter and board cash a our repurchased place $XXX to we'll XXXX. efficient average new with is repurchase repurchasing our continue grew substantially balance end and We be was has cash highlights. repurchase our with authorization price an million excess and activity opportunistic million believe $XXX. the plan. XXXX, of repurchase equivalents. million to This sheet $XXX at $XXX million our share cash shareholders, Turning completed million XX% an return

outlook. Turning our out to

the percentage range to dollar double on $XXX also quarter. comparable For a first compared in low XX new is in the increase QX, of assumes be sales digits to million on This we expect of XXXX. $XXX million. a based the revenues to in basis This the openings constant store quarter

of expect QX margin to year. We gross versus modestly last expand

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

continue We SG&A momentum. line top up for growth fuel flat be invest that to that QX expect we modestly to in in rate as drivers our to business

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

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

range. international a represents We to in footage XX company-operated open the stores in our approximately XXXX. includes in markets expect to stores square to XX This and XX mid-teens XX increase

to occupancy the leverage primarily improvement year driven on costs. margin continued product by margin other modestly, fixed gross expect expand We and for and

year for leverage the SG&A full expect modestly. We to

earnings year in per $X.XX of fiscal range our to share expect diluted XXXX to the We $X.XX. be

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

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

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

And investments expenditures We store The $XXX infrastructure in and the In XXXX. corporate expect store closing, new seeing to in and the a XXXX general $XXX increase call many for program, with to our the be our with projects. versus XXXX, million as at million and New you Analyst Day. York momentum relocation forward business we that, we reflects other let's up capital openings, look for Operator? remain of of the questions. to I approximately year fiscal we're open excited seeing technology ramp renovation enter

Operator

begin We question-and-answer the Instructions]. now will [Operator session

from Our Matthew first Please question ahead. with JPMorgan. go Boss comes

Steve Cohen

return and results Congrats Steve for the strong is on This thanks taking Matt. questions. on for our

XXXX. you for to product, areas that you in think the on you've amazing driver be some would fourth growth continue on do growth versus how But just the XXXX? is on focus then and first here see seen business the we in quarter in other category be question bottoms strength the XXXX, the understanding Then full for First leverage Do quarter product of a in can the significant secondly should on side? so cadence SG&A, think the just year about quarter second guide. the or

Calvin McDonald

path on SG&A. question and as to ability guests. product, core as continue our question will we're the that our see take well to then PJ for your We take I'll on forward wonderful our offering our expand status the a in categories both

number our acquiring fuel drive it's is only continuing not continue help innovate business across to and we in which bottoms men's guests, area also both new are women's. which but an one category and to Our that for

and categories name into and and as few and to our guests, run business OTC, So into a men's performance expand upon well the and other and the encouraged into care categories outerwear that to XXXX, be moving the existing mentioned. we remain across I as continual ability bras with that'd of in our just very of self XXXX new all

very performing well So and as both innovation on newness. categories our XXXX encouraged how with into are as

PJ Guido

That ongoing objective to seeing its invest term and And on in during questions find committed sustainable part start. of in that's so just Steve, good And, We're performance and reflected delivered working. of We've to profitability using year said the there. to been the the and growth to course long guidance. we've for the SG&A leverage is improving results our our year. SG&A pockets

acquisition data digital more integration. XX% saw as new on for earlier, guest marketing our And we the quarter, up quarter. we in invested mentioned during was that focused the Specifically more

new acquire care. of also a a vehicle operate and We also testing to is we to and eventual several done our for expanded a line market which to the potential awareness. lowest full such brand as as build It's events a also rate loyalty store, -- and we've well. stores, way And of continue new guests seasonal also growth test self great higher conversion level and

So if for these strategic seen flat would investments, not or leveraging. SG&A we discretionary have even

Operator

is Our Please Walvis next question ahead. with from Sachs. go Alexandra Goldman

Alexandra Walvis

the your question for biggest on My in is confidence drivers are what guide of that double digit XXXX. comp

color between You to is or I of went that traffic some and any you. to confidence into other the could the or last share thoughts split expected some drivers growth the in on that ticket how there. of response categories can wonder question you Thank ecommerce, anything on are share on growth. you expected stores drive to and if some

PJ Guido

fuel But always Then that I’ll our support break off starts through driver online our also of it where result with we mentioned, our see continue events, seen in we has into both of example email -- X,XXX XXXX, of other and component. as ambassadors. over. our big carrying than a online the with also engagement over traffic traffic programs, that gains big as and as just community with saw the assortment which a then with a physical and any educators, I and in traffic start make. We dialog, is we've great year. store in through e-com our I think mentioned. higher guest there's continuing expect drive has was It that carried and digital that. the network we point product over And the momentum QX performance, to of key we been guests But through traffic driver throughout XXXX. we'll Online enhancements site, to marketing conversion Web in key

and to XXXX, but for online improve traffic store. into also to invest coming in we'll then So continue both fuel

Alexandra Walvis

share you that following the there? you excited Anything then that can about so mentioned were what's of category. And in tests next your more some with self in us, comments you care

PJ Guido

on on to Other than were you. and well that, with additional share self with excited the our test around categories we happy more results some as care, Day Analysts plans as we're our

Operator

with from is Matt question next McClintock ahead. Our Please Barclays. go

Matt McClintock

Following maybe on surprises from that maybe wondering that just range any had you colors of insight wondering get as this to year seasonal opening versus versus experienced the bit I'm could surprises the you down little or outcomes and negative terms year. many -- launched times if you give advance positive in channel? surprises opened you into you more the that a the up X last I amount trying of Thanks. that stores, was you stores. just us

PJ Guido

Well, I new mean, acquisitions is the positive surprise to measure. that able guest we're obviously the

we're really so that. And excited about seeing

in eight gauge seasonal actually again, full surprise are to and positive be XXXX. a market stores other The of those to way great stores converted I line a of mentioned, we converted eight those will or

lot the guest It's a risk a to whole So as those way not your brand, to strategy. we build low positives, and really like new negative of that a are there. build

Matt McClintock

the is apologize. terms of how talk is about marketing, to a from should you there talk this it the on shift there is the a signing that in bit, Thanks. if or marketing, more for maybe budget brand little like you could a people. bigger outside? Investor Could Or now? you topic think finding if that the then that ambassadors profile we wondering of bit higher staying that maybe or of towards maybe Day, But seem I I during And quarter. Foles signed was to or Nick a little would And

PJ Guido

profile indicate but the a into excited excited It's Nick high We're with at the of to not definitely a new very it's I strategy them. signing Enlite but Lululemon, we're for would Ambassador here family have us. athlete,

come not excited to look authentic they in And when sweat and X,XXX about the at together impact representatives we it is The more endorsement is the the the with an continue global and to alignment Analyst our And with so we Enlite ambassador have really we we'll we're plus community and that on athletes expand. expand that brand. excited and think pay excited. Day. look we Ambassador those are an typical we on can do of have community on We is and strong area And we're guests continue partnership an ambassador both values. living We love with partner I can share it that our collectively, fees. our that Nick, of to she life. potential the things, the wonderful think area to that a athletes

Operator

go Ike from Boruchow is question next Please with ahead. Wells Fargo. Our

Ike Boruchow

Just surprises or I this let this can landed Stuart want end us good where Asia at Any international embedded in scaling, PJ. profitability for or margins? bad the you to I expectations don't if Europe, XX and that’s focus guidance your where on the then of on But and next international in in is for know maybe both know on maybe profitability. year? international months you're

Stuart Haselden

And also those total on we're as excited to we're mentioned XXXX third both overall European the quarter. actually say that's offset as open and we But loss the our would half a we're faster drivers I'll still in to from that color we're offer America just will helping quarter what growing in more importance North stores But profitability try growth point sequentially acceleration as is trends Day. we're Asia Europe. we probably in to but the we're as XX%, going from was across half a in be in of seeing comp are awareness strong area the brand be situation that breakeven bottom business those of operating one comp details we're we're Analysts Europe, Asia of to we year up Asia, we Europe than open store believe seeing and And the saw We're in able half to the that think that results. a internationally, Asia our than more momentum Europe, and trends exciting balance is I an business we’ll of strong particular, to in strong that profitability specific line now. reaching in up it call, very fourth and and strong see both this at that little at as our achieve XX% mentioned, in break our that store saw that Europe. we healthy in company. the the more continue the in The we not in saw profitability and excited more we're stores really Australia a trends, well I XX in now XX of than be give a say as reaching where seeing where an we've certainly the and an count reaching out will in really on the in growth. been seen of disproportionate reflects pace we of and now a economies can that acceleration that's Europe, sequential levels Asia going where Australia broadly the and scaled China to us Asia, are in comps

I on headlines mentioned So, more as can I some that's, think now. Analyst but we'll we Day offer share

Ike Boruchow

and lagging Is And am about of just maybe in Asia? margins, precludes takes? that why Europe Asia the is anything structural Stuart, Europe between Europe from there their understanding be I kind puts and you could scaling just talk

Stuart Haselden

The to seen Europe in have in We in we sales we've than Europe. volume have XX in bigger now, have right Asia stores XX Asia. stores tend

of a just really of productivity it's So, store the fleet. function the

also internationally. Importantly, we're aggressively investing business our in digital

websites Germany, it's our really France, our and question dramatically ability the But Europe engage will of Korea, should reaching half in just Japan volume we're improve the to with regions those in of guests which So year, there. or all open, we’re overhead in our to the going to say new to China, digitally. in first leverage going I launch this investments

we're So there and with we're confident we'll the we're get progress seeing. pleased

Operator

Sharon Blair. question Our from William is go next ahead. Please with Zackfia

Sharon Zackfia

still North hoping look U.S. at North seeing does the was in relative North similar if are age? which you're growth comp you suspect of could the how particular the the Asia maybe I to rest in How are. world? about and a America, you relative comps healthy America I trending America And in or talk to Canada

PJ Guido

XX%. it's of So business, mean our to North close bigger obviously, America, the part I

is growing faster but So roughly a rate. much at our XX% XX%, international

So we're start the actually seeing to needle. it move

and U.S. seeing both by Canada, in-store are primarily the good seeing and is We're So the good we comp traffic. comp driven online. and continue, traffic

So the to has really with and America perform. happy North performed way continues

Stuart Haselden

traction would our would overcome as that awareness the will, in international case standpoint, those we're gain our the it's our be I terms expect, a accelerate, seeing markets. international lifespan obstacle a cohort, International they to That's and efforts an brand our if From certainly as store. age in and strong would seeing relative in and North we're younger, our in markets. you of America would you We also the that community of age efforts, trends healthy our the what very stores in Europe, the mentioned. comp international expect But first stores. are building and as higher beginning case rate comp at few But brand comp markets I across we're have in think comps you in their particularly to years of

Operator

next with Telsey Advisory go is ahead. Dana from Our Please Telsey Group. question

Dana Telsey

Can the product just been unpack you. about loyalty same at it? you loyalty it? program, the is has for a the little extra is And learning it looking from and you're tweaked? or package bit Thank the how of on the thoughts product it margins program components XXXX And and of margin, on the it talk

Calvin McDonald

test with happy On very and been so the program, the we've pilot loyalty far.

point know, intent very did response has just We in and you test guests our from the Edmonton our markets in us. and U.S. and We a in tested guest wonderful Edmonton. demand so value the XXX for membership, in Canadian saw the which different price understanding real thinking, and launched the the over few keep in Denver our positive. we there is we've expectations Denver. more select and and in recently a coming tested XXX testing there's is in been value It's is initially markets. both months is tested As our to exceeded We take confirmed Denver up,

encouraged continue program quarters into leading we'll So and the ultimately year. a we're into expanding as we coming to program test to the national in look very and

PJ Guido

Dana. And on gross margin your questions,

see the in coming coming driven scale, and gross We've that. transparency past. And upside of coming by margin. do it's from have from additional guided enhancing modest existing is into Having expansion we network. its vendors. also margin in to vendor cost continued closer we The partnerships in diversification, it's confidence So distribution a from specifically opportunity we with haven't product had our the lot necessarily

expansion again side. continued product see the on do we So

Operator

from Please with ahead. Paul Citi. go Our next is question Lejuez

Paul Lejuez

just Just always e-com curious FXX if do are comps versus to see also either U.S., then Canada partnership, on the in a you're if you thinking thinking something like how how you about International. North opportunities any you stores curious And from perspective, there's second versus or share can other America similar international?

Calvin McDonald

we excited from to can’t up, we've the really But too broad expect about split certainly continue online comp stores that So QX traffic much in we to talk we’re the we're expect know a year comp and well, don't to store, way. is would there's and really our just traffic back yes, I that perspective, both and any continue. that directional The change strokes. about. and seeing either to year business huge we seen all patterns the full online beyond

PJ Guido

the Soul ones the have that these it and with collaborations, some a announcing we'll both planned do coming launching partner, we guests Cycle. months. we've more like sweat our in do collaborations of and And exciting be done we excited on And we to we're yes, when XXXX for continue to

on we demand, the very our certain that attract with view like launching also Geller, wonderful and designers soon about on new aesthetic tending response can to are Robert product view technical as we're men's to that with well where the the a into seeing to bring excited announcement. as we collaborations business. be their addition, In And is particular guests ability great product and anticipate our

So design collaborations our basket them We opportunities, guests. see in partner expanding with new guests aesthetic both on been and have forming and well. and the bringing sweat it's existing

to So do continue that. we'll

Operator

Paul Deutsche Our go next with ahead. question Bank. is Please from Trussell

Gabby Carbone

the afternoon, is this Gabby on quarter. Paul. Good Congratulations Carbone on for

And very for is there. co-located question seeing the you growth? on What discussed versus men's stores. business, these strong a stores largest opportunities seeing What So you when categories formats? to productivity traditional the the more then Thanks. have terms of out we're at build are in opportunities results

Stuart Haselden

Hey, Gabby Stuart. its

So men's in we're really business. the with our excited trend

growing faster we mentioned, of its a women's remarks, couple As offered than nuggets our you prepared in business. the

business, it's within our brand. the had our larger at prior which guys pants than year of to tops to important or new an acquire actually the men's, it's Our men's been way which growing one categories become has largest been the fastest metal in category. as last point, this performance we And the

huge men’s, an in pants. excited in our small success see be. to we're admittedly in indication has story another could So, been the for in to this how trends men's business is big Outerwear outerwear XXXX, us rather which just increase business us

as outerwear, styles commute and as performance performance introduce nice among we're call we'll well between And travel outerwear as new business. to styles our them. technical our well in have office styles, So excited balance in as a what we

to With brand Lululemon for we XX% us appealing an over stores our that’s presentation increases be productivity that to or We location constrained that co-located a part a really So to gender runway are continue that and can we from of our our ultimately grow our can of just which have men's locations women's. more today of penetration environment a mentioned an men's are find our huge a larger nearby, business and channel able very co-located story. productive of lot to we're dual can so is see there's in. that as effective that the big more a in stores, products space as business. And shop standpoint, guys either men’s important to be believe our you have essentially that expand

saw mall where our in of the feet. square to example, from and sales the same we men shop for with essentially up men's in size increases, location inventory. X,XXX XX% X,XXX there expanded seeing the we're our America footage doubled our of We So we square

of important good Now, it store the the that North we men's but every an just American co-located can that's and example of we've and deep part portfolio story footprint seen. expansion is still in But for successful a strategy. is with testing go the broadly our we're not success that how as

Operator

go ahead. Stanley. Kimberly question from Our is next with Greenberger Morgan Please

Kimberly Greenberger

when that on many contributing a in men's wondering, And brand, was in over it is Asia. rate, you to broadly inflection? and dual particularly brand, much. just But factors. growing international. what an international understanding -- you I Europe could think talk in about the there a front on And example, America the started men's? regard wondering learnings sales penetration it be question inflection, I'm year international to Or driving growth brought is are or seeing I'm seems gender other to was women's it's for Are North hitting so higher my North in so. Asia Thanks more as sure you last if Stuart, with the it do sort men's, maybe you brand of as a to out relative America? any that

Stuart Haselden

behind we It's invest in activities we're building acquisition we momentum longer bit But and Europe. is to we've we originally deliberate the the to we over to estate by number a is, in stores, our broadly taken Pope, brand a than success in community lot been the there and led great now standpoint, you comp or Gareth's real reposition, couple there, and if Europe. strong what which GM patient say found the really see has a and of mentioned, will, have as years team Gareth continue of the in us in awareness What And strategy believe we Gareth from I of a work Europe, acceleration last And guest would a I we done it. expected. there in attribute and Europe. our starting traction leadership and

how has and in international and So Europe. brand we'll Gareth men's in well business, as and good have be invest evaluating we're team versus would in as remarkably dual international known, to business that's evaluating the steps Analyst that. an opportunity do then obviously. dual to still introduce not And gender thrilled internationally. trend think talk men's gender markets is more not we've around Asia, different can brand where and that about how I set we taken that as these mix do about We that North we that continue we're something to question Day. like markets, strategies we're we can with say in behind the we and the America. together our a the positioning, a see the stronger we're to of how when opportunity up the at hold just markets show We And

Operator

is Jay Please Our next question from ahead. go UBS. with Sole

Jay Sole

of you this from guidance where about be expect you the terms just about talk Can calendar falls XQ. for you another impacting lifts how like your year? in business Easter what curious Just just the shift in are just April natural might today because

Calvin McDonald

best week the that is because we good part -- that’s you hugely beneficial? part, expect see to having come the better the would of thing, and would we late so extra that and Easter have right, quarter a So, yet

Operator

is question Mark Please Altschwager ahead. Baird. from with go next Our

Mark Altschwager

of omni-channel the speaks of smaller the you’re renovations expansions fully broadening with men's. can missed that XXXX Just the to and talk beyond? back stores the if trend assortment? the some about stores apologize success merchandising, the thinking stores, to strategies in And into about pace think the I talk of Maybe you initiative But it. expanded terms you're expanding that in constraints ensure how opportunity and the the have I and some circling to the from of you're and Thanks. co-located in capturing especially you leading the I in about assortment, with digital

Calvin McDonald

in co-located, the very for XX. around to XXXX results intent in and which maintain is and the is XXXX seen our we've On positive number,

those new disproportionate to a XX We open are incremental to China in planning year the picking with this more of up doors range XX number doors.

which is So overall our express with assortment assortment, footage on square the in amount positive is the mid from pleased are more and how is XXXX. our to that's to range, all locations And the our guest based teens really ability of up in the responding incremental growth mix.

expand mentioned, our looking omni to innovation. In are addition as you've we on

help that experience in to where and that to categories. results and helps for this the pick-up for are store, We're make it is guest over both in that which to aware with we well across period larger have extended results. to our But as be holiday a On it the rolling that doors. BBR that strong to that service program pleased pleased the order either further the we're combined opportunity our clear network our to up to the a doors continues and all the year-over-year of very tested around grow wonderful how But and and very, in the in in to the breadth and move our exists. give as buy-online smaller across going to access We very with omni XXXX, we pickup stores those journey also fleet, it assortment XX be online in assortment guest the to of We're initiatives approaching out our will that doors, store us and contributing continue plan to that does we doors. And and/or add momentum store year. guests by online have and promote with shipped very our holiday home.

Mark Altschwager

curious XX% I how just markets coming versus you to mature XX%? without penetration from term, penetration pathway that new And from much markets? its your a much some about then your maybe guess of think previewing mentioned Analyst the too digital Day, at I digital of international in goal maybe prepared the you of longer higher remarks How think

PJ Guido

our that your our China. direct-to-consumer Day clarifying how see that Analyst view We ratio. question But excited business we statement That China. reference across to We're Mark. at markets. particularly share about overall, to particular our a achieving in XX% Thanks business, was digital we'll for the to very business all and was dotcom linked

Operator

with go ahead. Jamie question is next Our Bernstein. from Please Merriman

Jamie Merriman

was actually question digital. about My

that and margins So know and industry. digital in the are don't I've your frankly I seen elsewhere impressive, extremely them

that up again that as be you So increases, I Thanks. you to further continue, mix frankly see was still make wondering as you would to to margins that investments expect maintain you or at penetration able as scale that are fantastic there business shift level? that need

Stuart Haselden

We say in our particular return -- we operating we our happy what is and see business, which But and our to I accretive margin our are margins. margin. a of as make, very site, media, terms better. with marketing to explain rates much rate lot the of like digital business as why would online the social champions we with within faster, do digital And we opportunities other specifics what better a it digital yet with we investments Web with are you need is can And in low, think look we forward I overall as grow that where feel companies. And are world ecommerce. don't helps very there in enjoy there we're

And so of growth the digital nice a runway revenue upside there is in our business.

that. about excited we're So

Operator

from Rafe Bank Merrill America of go last Our Lynch. question ahead. with is Jadrosich Please

Rafe Jadrosich

pipeline. of more be is then comments your you some And the beginning At innovation there your color to of the on give just Thanks. or there? a some call, bit more fabrics existing into expand categories? you little I expansion category with of mentioned the what's new wanted to opportunities. follow-up just XXXX, you fabrics, will happening for opportunity to any launching Can

Calvin McDonald

innovation grow that performing will across a big well in of in technical we'll Day, our that in I the Analyst of which The continual categories will which approaching that opportunity as market how yoga a run April, that building continue we're existing sharing Analyst apparel, be an both success an that run for But with mentioned we is Day. we’ll Stuart men’s for expand. the Run excited of the in standpoint, the fabric share queue around campaign, us sharing to exciting the to, looking physical and week our key the large us. meeting a with from destination I as for assortment growth to of existing. to see And known be a the will our excited sweat is fabrics share technical women, of both in run be events, more start Equally exciting being we're Day. digital. performance some campaign of we'll to build up next as what that as and is future opportunity both that And and is one as behind to sweat and is one, a of lot see men's we're will and about And at we for on awareness guests. our apparel prior opportunity. Much launching potential success lot women's, our a opportunity at we're well, us. to a tee us on up, the which well for activity Analyst

Operator

to This allocated the concludes time session. would our back remarks. for any for closing now conference presenters to the the turn over question-and-answer like I

Howard Tubin

forward your Day. very Analyst in many Thanks everybody for next at Thanks much. look interest. New of seeing York month we you And our to

Operator

This concludes conference today’s call.

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

Lululemon Athletica (LULU) 27 Mar 192018 Q4 Earnings call transcript