LULU - Earnings call transcript Q1 2019 | Lululemon Athletica Inc.

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Lululemon Athletica Inc First Quarter 2019 Conference Call.

As a reminder, all participants are in a listen-only mode and the conference is being recorded. [Operator Instructions]

to Investor conference Inc. Relations like Tubin, to now President, Vice for would turn over the Howard I Lululemon Athletica go ahead, Please sir.

Howard Tubin

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

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

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

obligation forward-looking undertaking revise that statements Any future events. a this as any of update make call to today, result statements and on new any disclaim expressly of on information or based or we are we these of assumptions as or

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

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

to have limit questions a one time to opportunity question their give addressed. others please the at yourself So to

to over turn Calvin. the And call now, I'd

Calvin McDonald

you, our to quarter first call. and Thank Howard earnings welcome everyone

Analyst I'd in how York. like begin, recent Day meeting to hosting our we say New As first much enjoyed

about in successful are product, five strengths to have we driven excited plan. had business in another delivering by of incredibly And We look our the many channel and us. opportunities forward on Lululemon our quarter year we growth growth front geography. across

innovative and world around today. engagement are proud financial us report we assortments Our merchandize you our with the guests results enable to the

including On today's start call, sharing and how are highlights some I'll into product omni leaning our one from pillars. of growth experience by key innovation our quarter we guest

to ask to China in of us the update areas periodically call leadership I'll Haselden Stuart an on our on international an update provide and member business. markets. a join senior and of join provide forward, will strategic Going the Today, key opportunities other key

to International were Steward's as of EVP addition As expanded include as our this to responsibilities you in earlier year, Operating his Officer. role know, serving Chief

update, will to review, will provide Guido then financial well wrap few and I'll global the take as our be Following PJ outlook. as guidance comments happy questions. a your closing a detailed

look first quarter a results. our have Let's at

strong XX% by last detailed continued to forward and move The are QX, teams Three which grew Across our per the Day executing plan increase see Growth at year dollar year XX% top achieve growth revenue momentum total Power constant pleased We high XX%. XX%, plan. on the company, share In five earnings increased we to increased extremely levels. our of at us are comps as in serving to very force driving is business. a Analyst of

we and continues strong. businesses the well market North Europe well are our American men's Our store And to both strategic making core guest responded as we're well brand Supporting to our women's business. as They the digital were growth, our channels engaged infrastructure assortments. and with across in as our in across leveraging resonate us investments both our and APAC.

supply segment the further over paying years and chain efficiencies contributing success. several focus create to to Our last off, is our intangibly our to

As in enables in product and deliver opened Eastern to schedule an Canada May newest center more effectively distribution on us in example, Toronto efficiently our

plans guest you live As of the like now to vision. a long-term start discussed we during targets about XXXX three and innovation, and know, power growth provided and into is I'd Analysts market we're beginning strong the annual. financial pillars, growth expansion. I'm pleased nature, in are Day we the are speak such specifically omni to five-year experience to and product our off

business, time. details men's double our double our path As international to and vision business you business our our digital our quadruple recall, five-year this during

business provide remains pillar, XX% category This planned with to over now and double strengths at core at business in innovation growth our from driven we years with one these product grow be for leggings women's one, in me continue some bottoms. looking per the in is quarter to quarter one over performance in year. our we our our see styles. women's comps highlights jogger strongest low annual up When particular men's digits Let robust five both to expect XX% In by the of while next drivers.

Within the led both XX% ABC styles. and short our with three men's strength business, tops was bottoms. ongoing by and The core grew comps in franchisee business

science movement. are address responding of three Paced new designed boxers well touch, all feel, to to Breaker and Guests short, temperature T.H.E of the elements Surge. our and

I'm into and for Looking women. to bring excited innovation our both intend forward, we men the assortment with

to our for support we Just with in two launch highlights coming the offering further to high for men, the Tech improved bra to upcoming new preview styles we plan a months. and some technical women Vent Metal expand and of plan collection

is across driver women's. component The into continues innovation new final to categories our and our to of The be core categories. men's main test plan product both

and space our next self-care, and However, stores waters of to One online XX roll we've of innovation areas will out to where we which example test this white can identified bring several guests. week. the is we

our X% on had now across channels omni experience, top Shifting with comps increase increasing X% of we year. guests' to our last store strong results

Our traffic both is represents the in Increased a that about We're more last experience of XX% in-store respectively. our excited be one a brand increases Sweatlife. the community people and our two comps digital business grew years. with of online the doubling to vision of quarter business XX% ignites the living which than and X% over of driving

Lincoln who offering and Next and will through as our meditation store the foot captures multiple brand first areas see are you'll embody month, square a a for community truly open when we it experiential Sweatlife food healthy This store in as XX,XXX juice studios, Chicago. we a space, gatherings. Park

provide and with connect explore in our and learn as of us exciting new This a distinct opportunities to environment we guests will range additional ways.

city continue in program in We our to our test Austin, and to Texas. we expanded also third membership pilot May

We results each to scale and the are look in program. have the by very tests new brought city we as our learnings innovations encouraged and

our buy guest capability our further we only online, color in XX% expanded in pickup in for to at orders pick the one business, ready up and of now Looking offerings from with quarter and XX digital stores for hour. store expanded men XXX online both size We our women. one

full three. rollout remain track quarter by of end We for the on a

complete our the significantly mobile improved store. educators guests purchases so our also anywhere from capabilities We can point-of-sale in

great experiences, the key across across and great to business representation is Run stores, exceptional position for activate activate guest an unique to and strategy our us we strengths omni our of a is will product deliver guest our leveraging community Our how experience. entire events. and

technical run of to ,we We our for collection Dark. our highlighted and global franchise campaign fast addition strength men. the Charlie strong bra ambassador, free the In global light run featuring our apparel first and out rolled run our oriented with

focused global rallying and a Strava. challenge with community marathons clubs running to run day join we by on presence during our our Our to Los and Boston, participate a the London last local Xk the just quarter celebrated week activations their included run at or Angeles

see going an expand you'll with Edmonton In Toronto events several the more future Run runs in category forward. guests. is years. plan we've XXk important And share we in our for as our with to potential. we wallet and coming add and see to last opportunities significant sponsor a of the done And current us weeks,

Shifting gears now to markets. our

and performance Stuart North to in markets. Let in international our some our America over it core growth turn highlights me discuss regarding then share to region of

our First, largest remain region significant. our North America, in opportunities

formats, and new innovative existing brand engage activations assortment, guests. unique inspiring merchandise and agile store event with ways to Our ample offerings provide

open In quarter We as strong. one, America in in XX grew six open US to the and XX% North the region this remain revenue XX XXXX. to track momentum on remained in Canada and stores in

to and had team range. was month, results some opportunity Our our the him guest of North spending across increased growth new let see incredible the in high firsthand. guests. in digit stats and our our growth I China single continued I'll guest strong opportunities to acquisition remain to share and grew in quarter stores this existing in and Last America the visit Traffic with internationally. Stuart? insights Stuart the and robust

Stuart Haselden

markets, new XX% cities to nearly stores to track exciting growth seeing all two remain May, entered in China on And momentum in our Calvin. and across year. our XX store Xiamen. Chongqing, team was three Xi'an In Thanks are track and In particular XX China this nearly weeks year. in And with with on growth we our to market strong in open QX, this delivered we impressive openings China. spend is China while I team of to able international post

saw April. We Brand invest our our our great results and of in the paying QX presence in increase to of Tmall with over Tmall on investments these success our in to as are relaunch Event XXX% we continue in also site e-com complement include And with here .cn revenues capabilities QX. digital Day super also off These the China our WeChat.

invited attention and connect us The the channels. Shanghai social was for with media XXX event for to way this And garnered both existing it a guests. great to part from meditation sweat a also the join significant As Intercontinental sessions, Wonderland on classes and and we of us event, function new guests at show.

for Other KR to strong increasing our with websites dot All for the of starts. Asia-Pacific seeing revenues both are a of which highlights the XX%. include region in and performance this contributed of launch overall QX dot region JP strong approximately

Europe. business community to Europe. helped us traffic now deliver results our XX% Turning growth efforts across gaining accelerate. pleased our momentum robust increases. building in QX to by comps channels double-digit see We and across These strong as ongoing driven brand all market We're over posted

which We in was energy now creating team results grand It experiencing. the March. attend and in is a in able store that see firsthand to exciting reflected at is are also great was we Amsterdam which I opened the Europe to new opening the strong our

to my track accounts remains gratitude of that possible. the world. growth offer increasing remain international to to we their total any I'll this with our Overall, like of company Europe. only to growth. our stores XX great on And portion strong work across open X to now teams pass I'd an year it finally, new around And and this It's for is PJ. And our

PJ Guido

Thanks Stuart.

Before highlights details. additional supplement guidance QX I provide our Investor our refer outlook, I you for will on posted on the financial site to and

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

XX stores. During we quarter, opened the new

a comp dollar In very constant year. our posted digital we increase of strong on XX% in increase channel, last top XX%

for nearly was revenue. exchange the in net For $XX.X compared that of And million quarter $XXX QX, the in approximately of quarter. I'd to first impact the of quarter, XX.X% net reaching revenue $XXX.X revenue of XX% the million foreign add top-line XXXX. decreased million XX.X% profit or by E-COM of Gross contributed total revenue

profit year product versus product in markdowns. gross costs, resulting XXX mix the QX and was by overall primarily lower favorability last basis basis in points driven increased The from point and and increase margin rate following. margin A XX product gross lower

development This the basis over team with of expense strength chain, margin we basis and the of several in top pleased an years. supply costs to are product and a increase point the by on XX strong occupancy driven points. was and depreciation We XX and continue investment ongoing increase offset partially by last product gains product in increase realize in supplied

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

long-term net initiatives growth. down awareness revenue $XXX were loyalty and This priorities, million care. compared use and same net current period QX, or of business we in to in of XX.X% self Moving continued the P&L, fuel that the the expenses to includes strength year. brand In to XX% SG&A and revenue invest for the strategic last digital

and for QX, Operating basis or million Foreign by quarter XX QX. exchange XX.X% of compared XX.X% approximately of income points revenue in XXXX. $XXX to the net net was in both revaluation translation revenue leverage

quarter the effective tax our Tax tax an rate XX.X% the earnings to of expense ago. The effective of for year or in our a impact tax was XXXX $X.XX. higher EPS our XX.X% XX%. $XX.X We pretax reflects deductions rate These million guidance to relative related to by compensation. approximately benefited decrease compared for approximately in QX of rate to stock-based tax still expect be deductions

for IT capital approximately income and for in and last to the chain expenditures for locations, Capital the of the The million $X.XX to investment. XXXX. earnings relates or share and store primarily million diluted diluted quarter compared increase supply relocations the of approximately Net first million quarter $X.XX was renovations to $XX.X new year. quarter per compared $XX first were for share per $XX quarter

lease Turning to of million the balance impact million was million the asset liabilities $XXX XX% statement or in highlights. standard accounting related sheet. and pursuant This XXX, new We note that to the lease totaling our added new balance flows. I'd and accounting cash related million ended sheet we at $XXX of Inventory to lease no $XXX income QX. also with $XXX equivalents. cash standard ASC quarter has our our on a grew and cash end

approximately new with to million million We of is million. cash repurchasing an million our plan Coming XXXX, repurchase repurchase cost remains. $XXX quarter shareholders be shares shares our authorized of opportunistic Board of to repurchased share way which excess We efficient that the a X authorization will believe into $XXX.X a continue at effective and our during to $XXX return activity. and

Turning to outlook. now our

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

modestly last margin gross to up expect year. versus We QX to flat be of

Our airfreight in potential increases. due costs to in region tariff the and the guidance port order to from avoid also congestion reflects a impact product tariffs anticipated new Asia additional modest to pending

the The EPS negative XXXX. margin of costs $X.XX impact XX for the I $X.XX of gross are to approximately half majority QX. these full year roughly should imposed. approximately impact be this back basis of note of of the in XX come would that to points Most to on the and the year incurred impact would will $X.XX within with in be tariffs regardless whether $X.XX new

tariff to at key shipping in hedge committing related as lanes to are the We approach ocean against the disruption higher airfreight increases. dates we usage

guests delivery our ensure will product This on time. for of new

we to top-line in to leverage We on continue we year. expect opportunity this leverage our QX back the and to SG&A larger half the in as be modest year of rate invest for flat to that SG&A continue growth business fuel in the We drivers the see momentum. expect

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

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

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

for driven margin improvement. year margin continued primarily the to gross expect by We modestly, expand product

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

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

million on average margin guidance the takes of account is earlier. gross I based for EPS additional outstanding that $X.XX year. the to diluted $X.XX This Our range weighted shares related XXX into and airfreight tariffs approximately to mentioned within cost

Canadian XXXX. assume We We effective as well tax for XX% as dollar in adjusted to QX. expect XXXX, $X.XX to be the at US the approximately our dollar rate

We for expenditures capital year million to the XXXX. million approximately $XXX continue fiscal $XXX expect be to to

relocation our the And strategic other now closing, teams are we're our ramp back our seeing remain a projects. renovation plans. reflects openings, as momentum investments in the business power infrastructure of XXXX up new we versus In increased store remarks. with new and of store executing for This corporate technology and to Calvin program, closing excited three some

Calvin McDonald

PJ. Thanks

plans. for XXXX While it's We're recent the no past existing doubt each to apparel year by the been in confidence that which With start inspired are both our there space, long-term Lululemon. the innovation, a instilling is reported upon in new great softening brand are and is momentum way market some the is in there building the we new to to and responding growth us. our off and of guests,

is many people us guests Our of ahead. community with to vision growth live ignite resonating for the a to Sweatlife provides strongly and opportunities

We world creating I'd the faced day. possible. sustained of remain near our guests thank with strengths for laser rise focused bring work for spirit makes passion challenges opportunities dedication every to to they on to term ensure to them others. our the around Lululemon level like to the teams Their and above our by performance our and us and brand energy being continues leveraging

happy take And questions. be your Operator? with we'll to that,

Operator

Instructions] [Operator

sir. The comes Boss first Matthew question of from Please ahead, JPMorgan. go

MatthewBoss

seen half and lateral you great on elaborate that first by momentum on apparel any business? from category? I that softness recent impact congrats the just current Thanks rank seeing back in guys. you've maybe you're another guess how you the opportunities the And quarter, you maybe could If mentioned.

CalvinMcDonald

sure, Matt. Yes,

which guidance year. plus of business on the our the QX, top is of XX% momentum seeing reflected last comp very low the happy double-digit, terms we of which a is remain in we're In with in

growth quarter. business very has and and equally growth all continued In XX% are is boxers showing all that and train that very categories strong out see in our new solid and continue being and strong win across more business the particular joggers. And our of the build and men's be momentum innovation feed driven we learn -- to we believe to strong very levers we to power bottoms business the key continues be runs. we're what by the into with as as women's to launching with the continue So shared and yoga, we and will terms core very of into three. newness up leggings trading going and we coming of want bottom to test across business product, categories Tops, And categories. the

So we and launches momentum feel it. to that the is good dropping we about product the guest the as are feel way they the very and see the reacting product

Operator

comes from go question next Please Fargo. of sir. The ahead, Wells Ike Boruchow

IkeBoruchow

Hey.

Let .cn I to maybe you can going I'm got I this to question very my it's me the you've roll China compelling congrats. Stuart, add throw time, over this guess on with out. guess stuff Stuart, talk you digital the nuances in mind. about in be we and Thanks. may any Tmall site see keep relative your the versus China profitability should how the there's If two? business mix between .cn of

StuartHaselden

Sure, Ike.

So heavily North China business than from the America. for more a certainly digital that considered we have vision is standpoint

XX% Tmall that structure part prior that the dominance Chinese all say to make China structure the also I marketplace China some have can that we've WeChat that with environment is when the As think and of business And structure of possible. of we the in we're market. of is the being and they I in important said that see in that the aware conversations, our industry online creating and and in

that site .cn in we participate mix is the to and very for those of steps very making site digital in to that where of share make and our brand the premium we're take details launch We now that but But the proportion or digital brand. you taking dots we important investments site for see overall be developed, introduced with time. we We're business we cognizant the positioning our I the they that own and an being how important of that. is .cn but relaunch in a Tmall and cn emerging and first develop. our the our to WeChat as have continuing possible of of larger important part an a us, say we mentioned So we'll quarter ensure business see site should part the of

of of store China the will across And We're suggesting lot signals generally traction. our footprint traction great broadly seeing and brand just the is drive brand awareness. expansion that that a are gaining

support will --that all and traffic and will business that truck channels. fuel across So our

I are of how our things point digital business to think part just the of I'd thinking about So terms there. we're in those

IkeBoruchow

on opportunity? time And elaborate margin structure the could you versus just .cn over the of Tmall

StuartHaselden

That is terms an but in we business there that with bottom-line an attractive for advantage incremental we America of cost to is for stores. digital on still store it's Overall, versus stores directionally the that a is from than is see see what versus still in Yes, platform digital the sure. the incur higher our there operate consistent said, contribution in Tmall that margin we margin what contribution business. North

Operator

question from Please Markets. Fitzsimons next ahead. of comes RBC Capital The go Kate

KateFitzsimons

guys. XXXX I Congratulations on margin. strong my be gross guess outlook the the hi, on would Yes, question results.

flying XX, rent, chain the items about how in should occupancy these supply items. port these in the of product as other cost merchandize and you. well? and congestion, from as but goods mention PJ, the we did Just headwind the ahead some such non XX we you think Thank of merchandise factor

PJGuido

is this Kate, PJ. Hey, Yes.

some and the greater pressures the Would are lower and does see remaining in driver DC so to markdown supply We pressures So you a forward gross those That pickup scale investment. what's chain, segmenting biggest efficiency the margin cost. did driving going said distribution mix. related so there product across network. have remain opportunities are and

Toronto. start-up stores in our carry there higher So co-located costs international we was There open are rent. some -

from the a that depreciation, pressure see we'll little for bit and but of So quarter was occupancy minimal. relatively

continue to right. to develop And we're then forward, going product, going

So bras, with outerwear. the categories new

continue to assortment. product are to out build our we spending So money

but modest a expansion to see of will I those just from be as mentioned. we've bit will pressure we little net-net items guided there again So

Operator

from question next The comes of go Wolfe Yih Research. Adrienne Please ahead.

AdrienneYih

quarter. afternoon. can Congratulations, just PJ on if the clarify Geller wondering XX% forward to made far any list great lab strategy? predicated is sourcing you And give your was out Robert an the then comments collections. to those can and you or at for point? Good the update learning go I thus And Calvin, give us tariff XX% of three the this on four? us on on were you. China of list increase directly amount from And this you Thank the

CalvinMcDonald

category Great. I'll in kick to an Robert and results opportunity very we off favorably some On newness Geller of of very we've Robert forward. learnings to the with are either when of general the from Asia-pacific and a in an is and exciting a our markets, both this particular, unique the international just our comment one to going in lab. the showed pleased buy key of opportunity With up this into which guests think new very in aesthetic. strong these on for collaboration the we're really many responding particular was or Geller, Geller Robert similar in collabs perspective done, collaborations

the which this great with to our marketing increase as awareness which the through our us guests the is a and and continue broaden a brand which were into but then it brand, our share the as learning wallet equally to continue in for an new opportunity highly leads responded we social the to look is to in very to current engaged and we recruiting for The guest the raise guests for which loyal spenders. final with high of and marketing product ways new heavily impact well buzz significant was behind of in acquiring ways look create -- exciting is leverage collaboration

collaboration we're the some the lab, our shared fall. learnings. roll well overall to key shops which from in out In we there. and lot we'll of ideas shopping lab the planning continue of performed expand will feed And with earlier So very a into those

PJGuido

a on just few I'll then and second tariffs, point about things. out the Great question

goods for that the to important mention so our goods it's small part direct so think subject the China that tariffs I would US exposure with to Tranche first, To transport finished -- be currently to tariff. our the Three balance, to of and under total that. exported the X% X% relatively So additional for your answer finished is are tariff. of subject our of question, would be X% only China The

of exposure important around direct expense from port product to our indirect the protect those have. July right and this We're we prudent and is deliver for late So associated coming the the really that's part timeframe think starting the congestion guests and timeframe in better new impact. anticipating to we mid The goods. that with it's sales

really So the that larger airfreight I mentioned.

Operator

The next ahead, Please with Lejuez Citigroup. from question go Paul who comes is Paul.

PaulLejuez

And there's your markets, you come that lift what in winners? Thanks. you SKUs from of Hey, in is existing mature that curious thanks seeing if number percent of market? SKUs and second some XQ percentage from to you product you're new your that? open quantify about that guys. e-com way less could I'm what curious way. philosophy as If coming over your quantify if versus what And it any be and time was what should new stores a I'm to your sales try business do that in about

StuartHaselden

Hey, Paul. first that. It's in is Stuart. our your with international What our in question I'll America developed region speak to we North see in experience on less consistent our markets.

our -- we markets we traction. business new business, we awareness is might use to we stores. And a we the as also factors business, we our look rate is new accelerate where and understand see in open gaining potential open where where trade how into demand web guide business stores we That open, e-com for e-com As as stores. an to area and trade the around our areas indicator stores, open brand digital new candidates that and but our our

really has driving proven both growing we store, markets. consistent the across awareness traffic effect of that international in channels. footprint, the see the fleet a And positive synergistic So in experience our store in the footprint of

CalvinMcDonald

growth sales your coming second of And core is Paul our of part the products. relative question, to our the majority from

bend Our We very responding percentage a color responds and weekly drops think and that guests to a palettes but We don't innovation driving core either of our basis, business. the we tail shared in guest very powerful which that's I a franchises franchise is a the innovate do drive. a QX introduce we or which core well them continue QX, share the on strong wonderful metal take is sort on coming franchises of new sales, on favorably number of to behind are of to. very end makeup innovate but as will monitor overall that We those. introduce to continue

test and areas our and areas which and that growth yoga, coming an our for learn The teams into OTC categories new train focus And design we product mentioned as to we run, the the into merchants into. we from as expand is is core.

Operator

next The ISI. question Evercore ahead. Saad Please with who's from go Omar

OmarSaad

thanks of third round you taking think really launch. you're question. It's program that? accruing are kind putting iteration. in to learning recent data it of of do wanted at it's what Hey, -- decision-making. from I level that more level? up What the How When me roll even my market the Now having broadly/ for most ask some data you data, incredible to to the from without about customer the behind pretty results expect the the I out local loyalty are you're the

could big more of be? Thanks. to hear a that intrigued So lever and how

StuartHaselden

our Thanks, Omar. to tweak the point to now so make you we and in to the product we gust in the later price the how raise did the market programs in tests guests as respond. to we from We price Edmonton each and Austin that slightly make see available Denver available would price that the we point the out guests Great. we're point testing the roll know to

time. in We later tweak and at well guests events with are the market, from the in more each the And playing we to to going joining plan favorable markets. very which the expectations a learn have have into in results membership. the roll more do to benefit announce above And and we'll are from in our to primary point and been continue

But is is see potential a the driving into expected. seeing we to what engagement on new what But that be and we in the with having a through which very year this exciting, for guest back that the program platform which of we in of system. is markets revenue acquisition, brand, the guest which stream business the about XXXX which in more the drive we're loyalty super and achieve expanding drive is excited we are engagement to membership which can in into and also way

Operator

sir. with question The from comes go ahead, Kernan next Please John who's Cowen.

JohnKernan

my taking back to you online, pick up wanted Thank buy I afternoon. in the go question. to Good store.

What scaling driver it's end quarter. of your a XX from third XXX much think it incremental rollout think to you can learnings I do said of of this the you stores are demand the by this it's be? how full and I and think from

CalvinMcDonald

put of And us is equally guests orders I up demand service placed out, stores XXX think rolling internally for our for are the to to up the be just the the XX% happy think it which us metric And ready operational there accelerates, the up from internal by engagement important of that we're as a operationally learn that to running in and lot we'll I all pick hour, QX I so will we're ready -- when sort to and them. that is plan we're happens readiness so which because within one you're for holiday. results, talks of as with rolled end think standing the and and great have stores right, we to an are

out market website it really start lot differently experience it. roll and more a within making it known to more to stores position the and the we're As checkout we able to

strategy is it's indication a encouraging. early our necessity leveraging omni and is think We of of our which growth. So one pillars

traffic really but encouraged and be continue incremental and top-line. drive by So we're fourth store, it and learn, to we full when way a the across this rollout it's on wonderful will think know aggressively know I'm drive pickup and need fleet the that it in we it we're our to a would into do in I it website and I in an the to full quarter our contribute really guest the option think checkout marketing to

JohnKernan

a you're on is something or obviously that Lincoln and test like the Chicago, then think this it topic, larger is greater? just store is opening considering Got Park in scaling type that you experiential store even this scale

CalvinMcDonald

Well, vision bring that as And an store. you experiences of and experiential into a brand Park outside be four walls and we the is experiences basis. those we do our effectively know, a allow it's of to across community to definitely a very do test. We, just the will is deliver Lincoln today. we can know both the those lot within store consistent inside to fleet us What the on the

So today stores within it up seasonal format. we that figure out is that. from we small a learn to our we This And fleet have from large test our to how flexible and will guests. from our a we'll believe going our deliver market of there. could to become a portfolio just learn into But mix another and we we're within go experience it's test how our go then and to

Operator

Lyon next from comes go Genuity. Please ahead. The Canaccord with Camilo question who's

CamiloLyon

these manifest was great well creating starting Good of bigger of giving female how of about call your to to with you've invested in for your seems years. their respect could what leading a you. is us bottoms afternoon, strength serve a a the Thank like in that way your talk out be share to you interesting comments talked is here. It Can everyone. mention consumer Really all such the from you that that around expanding larger the that about category aperture business, women's the to think was offering closet? customer moat I the category you're perspective But of you. in and about the continuing you joggers. the job Calvin,

CalvinMcDonald

and would in sure. of business for seeing, active is both of to men's our speak across as you in What addition women's, No guests. Yes. guests terms new well as reactivated our current I tell women's but we're guests a to the number specifically I'll

tactics guest the one continues number and up brand. achieving initiatives we're leggings proving and as driver the of dial acquisition into well to many bottoms digital that at those effective proving well are guests as we campaigns, new our reactivate both that, to marketing very So and be of email joggers incredibly our are performing

in you've something equally which as then grow we're is mentioned that exciting. And wallet to on focused share that

doing existing through we So we're across the to share will run lens have don't out of we have three science around train pillars. growth look are bringing unique to incremental that offering that our what case assortment much choice well but opportunity expect product an of of fields. categories building to bottoms assortment wallet core those this OTC, and with as a deliver drive today, but and really as is to which him we very the When because balanced we filling in truly the guests it our opportunities yoga, we her and in in our we know have in her of she sweats where in

have with into we sweat that So you do to share categories as And her a for opportunity lot we of moving just depth wallet. expect already continue expanding to forward of to that see and the grow of a mentioned wardrobe by today. or relationship

CamiloLyon

and into question Great, behavior guests the into that between differences new the the the and you. bringing store my following your brand. relates existing thank purchasing guests you're to And

or in -- taking any cohorts? there a or month curve two is in what and I amount of provide mature of have be this guest you terms or you. spending higher have is person up that those So guests new that determining more can over spend average helpful what time between that would consumer opportunity of look color like x it trend think that the the

CalvinMcDonald

What into as that email the trade our our our up our migrate new as ability very categories well different active, they're as We into share way have our guest acquisition. increasing or growth keeping a within CRM on guest engaged the as loyalty those But to to Yes. tell effective average proving retention share new is spend equally incredible continues strong, I guests file building can well the you in then capability, of are which across And we're focus don't guests. sort directionally numbers our be categories very high or very deeper be value we retail. the in guests and we're to wallet. of which as

success engaged. retention assortment expand some the of them share area. are about us is focus highly very is really getting that proving to can increase a big OTC good as Difficulty] big the engagement growth seeing to and and able that a train numbers initiative is So to Their very as high the from and continue yoga, to and something with run we category and drive for excited where categories we [Technical area engage We're CRM it. and in we're they're retention look to whole really be wallet that

Operator

go question comes ahead. Stanley. Kimberly The is from Greenberger next Morgan who with Please

KimberlyGreenberger

with the Great. could production see department you're that PJ, cargo is this wanted we is other ocean now tight port congestion. the right hearing port so on to production much. is department or your of Thank Is port that wondering I just I just these to from you what risks I'm your follow second the deliveries you've sounds be it signals in congestion. there your delivery. inventory suggests capacity like with delays quarter? up potential from to around and third seeing And any potential all but particular, you of regard don't third regards protected late would of deliveries early on your risk either that at your congestion confirm quarter to early have order quarter late want it that

sure wasn't offer but I guidance then And second on color it missed so the any did SG&A? I much. if Thanks you quarter

PJGuido

Yes. Thanks, Kimberly.

one those pick I'll So time. at a

you're to exactly So airfreight, with the right. regards

doing that's our we're a hedge. it, are fall it's deliveries. protecting We why And

consolidating it to eliminating out summers which we've of the by not but mean getting So companies but we're risk. and eliminating in there as They it to utilizing but it, related that's of we're we're the get issue seen this that's due dealing up a ahead a caught shipments trying cargo. carriers trans most separate always broader is tariffs is with is congestion that airfreight refer issue with I carriers an to as to more issue well. also there's before but

year. the leverage question for so committed on We focused to congestion. SG&A are modest remain on hopefully So your we that. On answers port SG&A, that

that. we're strong in invest to we we're long-term growth. result and And performance As a before, seeing mentioned from using current

quarter, new our self of the invest our vehicles, American about experience. talked and Calvin awareness, acquisition brand growth North leaned And building into driving drive this care marketing, we During in on analytics that continue data conversion. loyalty, focused then testing digital we guest guest to online we're And expanding focus. as to

for strategy we're see last calling the ramped back in half quarters have -- start and We'll on for our see the QX making we and leverage investments investment. quarters the So to But SG&A. business. biggest for benefit up and we've in still QX, to we flat add like feel right the still that's we're for of the bigger and seen QX those now few our SG&A the to opportunities

Operator

The with comes Please next go ahead, Brian who's Brian. Oppenheimer. from Nagel question

BrianNagel

pace that a rate Yes. [Indiscernible] over past Congrats you of a solidly little positive on trajectory rate at increase margin And My if should modest expansion. about think how very what's get to the I very your gross facilitate that quarters there margin can gross QX -- that of or want occurred more forward? the is so. look of question still better going few if we here year-over-year, nice we more but modest line has say of quarter. clearly with the sort to moderated understand in

StuartHaselden

Stuart. it's Brian, Hey,

take gross step we've modest outlined that to I it's terms were few programs supply to delivered Day the that our are few guidance And think specifically recently, years. XXXX build had delivered then the within so next the at that Analyst able part to deliver improvement last margin a and into that to in speak and been of in more improvement more Let able and the the PJ over years. our long-term your larger we to XXXX. -- more the over chain that of me drivers question that forward function our XXXX improvement XXXX And

price that really increases. things There four driving that. are from are Scale, volume breaks

our segments of Second is of lower strategy. as we supply cost of chain sourcing drive more the assortment able into to our our segmentation thing are

mentioned. a production fourth broader thing we're of to of greater is negotiations thing across standards our the drive also specific third able part PJ costing the efficiencies as The is degree distribution And transparency and that assortment.

the see years four over improvements. They will those next some drivers opportunities several into the of significant significant our improvement. very naturally we moderate we still reflected the gross our are future They things lapping margin So in are but -- guidance.

BrianNagel

appreciate was slip could helpful, a I If I That very in then. maybe quick it. up follow

type whether Calvin that you the we see Lulu weakness be the I look even soft at regards comments month-to-month, category. are with geographically of stress in results day, did very, but business to think any consumer the or you the question of your out to prepared I across some you closer the you or not it within lines mention results I have think apparel country the is to sales, strong as occur which week-to-week, could clearly numbers in Just very these as all on some signs made behind reference there looking at that in and

CalvinMcDonald

as significant we holiday-to-holiday. e-commerce I season-to-season a did engaged doing guest at some the in we're business leverage I our shared shared and highly analytics over able And and at we we tests bottoms marketing. is balance be in event our as the look with activity typically swings brand being tops, the our activations was and as digital or think week-toXweek improved of product don't or membership of both women's, we've mean in or our a categories responding XX% good when store to data traffic plus and of see we X% men's and guest. healthy both across metric that not QX our

I were the as we traffic as guests big very consistent our with both QX business product driving existing piece and of new a range. in well with would pleased momentum through So across balanced guests that

Operator

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

DanaTelsey

afternoon, everyone the Good and terrific results. congratulations on

other comp the any merchandize you. there? the margin look the last compare components at the Thank you beyond As quarter and seeing? there on of did is they how more what you're the color the progress traffic comp and And are how

PJGuido

it's PJ. Dana, Hey,

North shown traffic in American investment our Again significant traffic percent drivers, to online improvement regard ongoing to The conversion due XX%. it So comp has there. with update is stores predominantly online over story. a

So there. we're result a seeing

and stable -- order they have we have average a As UPT, relatively AUR far as basket effectively or size. value

So it's story. traffic predominantly a

End of Q&A

Operator

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

Howard Tubin

We in Thanks our with for everyone. the Thanks. we second look months speaking joining and results. time report we about us appreciate forward to quarter three you when

Operator

conference today's concludes This call.

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

Howard Tubin	Vice President, Investor Relations
Calvin McDonald	Chief Executive Officer and Director
Stuart Haselden	Chief Operating officer and VP of International
PJ Guido	Chief Financial Officer
Matthew Boss	JPMorgan
Ike Boruchow	Wells Fargo
Kate Fitzsimons	RBC Capital Markets
Adrienne Yih	Wolfe Research
Paul Lejuez	Citi
Omar Saad	Evercore ISI.
John Kernan	Cowen and Company
Camilo Lyon	Canaccord Genuity
Kimberly Greenberger	Morgan Stanley
Brian Nagel	Oppenheimer
Dana Telsey	Telsey Advisory Group.

Lululemon Athletica (LULU) 12 Jun 192019 Q1 Earnings call transcript