LULU - Earnings call transcript Q1 2021 | Lululemon Athletica Inc.

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Operator

Thank you for standing by. This is the conference operator. Welcome to the lululemon athletica First Quarter 2021 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Howard Tubin, Vice President, Investor Relations for lululemon athletica. Please go ahead.

Howard Tubin

afternoon. good and you Thank Welcome to call. earnings first quarter conference lululemon’s

results talk McDonald, Joining to our are CFO. me today Frank, about Calvin Meghan CEO and

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

GAAP non-GAAP in is measures. release. financial and and both press A GAAP present Form will our in included measures we quarterly to earnings of call, non-GAAP this report During today’s XX-Q reconciliation on

Form www.lululemon.com. constant dollars. website accompanying release the section under today’s given and are In quarterly XX-Q in on at the available and comparable our Investors productivity metrics press are of sales addition, report on store The call

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

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

Calvin McDonald

you, across Thank you speak seeing hi, quarter about momentum the are I to excited am results Howard business. with and we our and the first everyone.

press we’re start strong the to a and release period with in you XX% our same to the growth X-year off out year. of CAGR, truly the As performance describes, And over particularly our look shows revenue XXXX, last at stands sustained the business. momentum when

would On across our results agility performance, to strength growth, want this drivers it I results, first our them. business, impact of our our first performance number toward quarter reflected geographies, our brick-and-mortar Power the against call, our and of globe. by dedication enables a and in and be rebound e-commerce our all Their without speak resiliency Three impressive will and today’s initiatives. the possible delivering growth and pillars teams progress across commitment categories across not of expansion continued moment our of to to I fueled recognize shopping the Our stores. and in quarter the a in guests take the

also You’ll questions. your performance to our further CFO, Frank, our hear and about with outlook. happy take then Meghan our details from be We’ll QX guidance financial

regions and at across our driven quarter, strength Looking were the by results channels, categories. product

metrics. are Here key a operating few

environment. in basis. life in increase and to to allows we relative up leading Firstly, our CAGR an of billion to a remain us This acceleration of rate X-year XX% reflects model an pandemic, and our our total an a of revenue unique cycle business CAGR early have represents on reinforces that growth $X.X the ever-changing X-year thrive that XX%,

CAGR XX% of basis. our on in XX% our up both revenue across in In increased North X-year international markets, and each addition, regions, a our up America

up see We freight versus a on And pleased capacity delivered XX%, second operating our in comps were the Secondly, last high $X.XX continued top level increase strong, strategically share store also adjusted such ongoing the while the ports our extending of we this thirdly, reduced growth the and XX% quarter. of year. also are number And momentum challenges per within our chain which challenges, $X.XX as in at quarter earnings e-commerce significantly is into managed supply constraints, macro closures, to air XXXX, with at remains we same expectations. of capacity. business ahead

results. to all confident after will continues of challenges going remain manage quarter will and quarter. no continue doubt we In outstanding types am forward, become While lululemon stronger I summary, effectively deliver to them

very our are opportunities the post-pandemic are early significant I world. expand. bit ahead of the first more provide to on for continue are positioned well in us now the we We growth color and and results. will a story, quarter And

omni-guest guests. in firmly contained commitments to We we experience product innovation, expansion. are market of on Power leverage our Science platform technical pillars our three our on track apparel continue our to innovation, athletic of growth our plan, deliver and to product Three to Feel Within through of deliver

and sweet flexibility. thoughts quarter, strength are across saw first technical women’s products I as and product. Our and bottoms. tops well increasing basis. we XX% assortment across revenue women’s our versatile include guests growing share XX% the our now creating saw stylish on responding a a in that In both to to is spot We men’s more X-year with related and CAGR strength innovation, assortment the will comfort few

by such tops was extensions, and tank. Align driven styles Our performance in franchise the as core

returned women’s ability guests are On our we men’s core both to women’s leverage Our our sales guests success and and and positive new from to X as stores male basis and consistently expand X-year our very categories of assortment. momentum growth outpaced Move in reflects on seeing both we businesses, emerged materials. newer The Across Men’s a our to the and our we the raw growth our spectrum introduce innovation as pandemic.

Yoga, product On of and And existing bringing ample us launched we Quigley. The journey call. quarter, with product four on Coffey; Valerio; company. Olympian I Natasha to broad-based our and opportunity Officer, future of ambassadors and And athletes her that Run, to And products. mentor, areas along and we Running of range the of Train making our record and a an leadership inclusive. took with days that new Move. holder, Run, across platform pleased and how included Protest, early in this speaking the our broad in female global more expand forward We’re male as of campaign a Run of XX,XXX ambassadors, such running that am filmmaker run Marathon founder to to a a approach Neuberger, joining featured A meter highlights highlighted and with the Wodak; we Brooklyn-based leader that accessible results messaging Brand Colleen are I is Runner, the it’s our Ultra Mirna of campaign, Chief example Nikki look key Canadian

to our pillar both now businesses. strength we turn upside saw QX, me revenue in and Let driven omni-guest our the e-commerce by across channels the stores and in with

are few existing e-commerce channel like share. The comps and I’d mix Here guests. by highlights to were a healthy a new driven of in our

more about digital our performance. our way. outfitting the are continuing We to improve to a channel, compelling at offer see I solutions and When stories off, better in we’re happy investments education, business in looking very our paying enthusiastic store tell product and also remain

more real and and are stores this We areas globe. stores, we great great more seeing opportunities in cities become building year are to in and around more estate key the committed available

will We locations grabbing as opportunistic in available. continue to be these they become

and us well. position have also year period. meant our as The good pay stores retain teams increased to to momentum we to them We in a This helped quickly store are the allowed has our engage stores now. plans fortunate reopen and us we the to implemented allowed deliver our throughout this dedicated last has traffic kick-start we support employees could our reengage agile in and guests. and experiencing are protection team initiative store-only to this for against This us continue stores that

performance. some on our are Here details

and levels store XXXX. return consistent our levels us XX% our towards with to This our in of productivity exceeded XXXX. to improved productivity to Firstly, goal expectation moves

as a pleased had XXXX. lift a on constraints are MIRROR stores this the fitness quarter. performance continue many on Touching strong in and MIRROR with MIRROR, in of $XXX these to to in strong quarter, be Secondly, in to track remains to the and space. increase mother’s increased in the $XXX traffic to reminder, and continues just starting markets remains the double capacity in at-home as million And even our we day revenue significantly deliver conversion digits. within the opportunities to million

nearly United lululemon middle featured by and continue States. ecosystem, lululemon be MIRROR leverage We month, XX of will this to in in the locations the the

for to XXX way We holidays are year. well shop-in-shops on later the this time in our

are MIRROR stores, dedicated our the of have encouraging. and now sales In early addition, we in each among results educators these specialists

gear will new for about more international international Canada, Switching more our in now MIRROR up features, we share into first we future later several to will and add market have see the live expand We to of the in for classes MIRROR. year the as growth.

few resale reinvested our initiatives. to the profits growth And our hit Pacific be in sets growth first China Pacific he can in North launched online ambitious to call. am trajectory. our In in team initiatives, growth sustainable last helps I regions having our Asia is a growth future new see the near before, our which about for and make and and running in as be and New size our Maestrini our future America said to program. a stores have reinforce our the continue the of Andre and a EMEA, leads to details in as Andre forward proud and achieve multiyear our our look our join We with ground are sustainability very guests, our we solutions. continue results our I results that equal time business us early to our materials end-of-use to products I re-commerce a three across to share of closing, in Like all This goals, us trade-in performance has the with our program continued month, From lululemon pleased to in business. impact in international and for Asia I are of potential the including grows goal EMEA. China, latest to XXX% goals, international where to We

is fans future in and response new and which We In us from who the the and are example the and on can and attract type levers of collection, is these future. confidence In also the in less of of and introduced and expanding water have reduces launched program the us. results we to innovation upcycled have Earth we the guests plants particularly This we’re continued kind materials how water, also guests, thrifting. carbon from Dye demonstrate younger growth to pull many completely is our to California made our of collections uses in waste enables focus encouraging. closing, our an of available Texas, quarter, we and continue

Let me Meghan? Meghan hand our over our and first quarter financials to outlook. now a it review guidance for of

Meghan Frank

Calvin. Thanks,

strong were all basis, year’s results importantly, but approximately Mainland relative being of QX revenue X-year last well. a relative the China, XX% with we growth XXXX across saw with QX X-year as double-digit an Our CAGR. CAGR to quarter, major to regions, On standout COVID-impacted more line top

broad-based We accessories, of excess and X-year across in women’s, on also XX% with men’s growing a categories, strength saw basis. merchandise all

as guidance we proud of updated reflected QX COVID-XX, results will impact ongoing and moving these of a are despite into our in have share the in moment. I strong momentum We

associated our metrics share performance. liquidity our now in that results operating you inventories. I position, me of effects of their balance specifics including costs and I the will $X QX Please of also their of on tax costs in financial MIRROR, QX and effects the exclude and million note discuss acquisition-related cash $X XXXX. include QX our share associated acquisition-related will XXXX, the adjusted but details approximately Let and with million sheet, tax

can to our more information metrics. You refer our GAAP to for earnings and reconciliations release

America XX% our CAGR expectations revenue. an of On to XX% basis, in $XXX our $X.X international channel, above digital For expectations revenue in total XX% total XX%. line E-com increased approximately total on revenues contributed North a $X.X our $X.XX business. of or X-year increased XX% XXX% of a increase increased and growth. top to billion. X-year This net basis, billion increase million revenue above our a included QX, of XX% In CAGR billion,

channel, negative. Traffic sales response mobile conversion. slightly basis, sites guests, to and see both store our and our traffic continue continues to by and X-year We strength e-com and conversion new of increased flat our in a app. In we’ve to to from enhancements been was CAGR benefit positive driven expectations X% the to making above existing guest on

Looking at the XX% the XXXX. QX XX% stores driven XX% versus stores of had last versus improved addition At end QX of to quarter, Square productivity since in our new XXXX, QX XX% increased relative net footage we year, store of of first to the open. XXXX. by of XX

opened net of in we $XXX quarter, XX.X% XX.X% revenue, Gross new first XXXX. for QX in of quarter the X revenue During and the revenue stores. was net XX.X% net of million QX or to profit XXXX compared net

points to Our points markdowns depreciation product team gross basis leverage point airfreight increase XXXX margin increase on relative was XXX with of driven occupancy, related versus XX in of and the XXX despite and expense basis COVID-XX. basis in XXXX decline costs; higher to margin, product by an

foreign exchange. addition, XX in basis In had favorability of points we

tax QX our in or invest to of long-term was income of net QX XXXX, Leverage revenue of but revenue million, operating or to in XXXX, to benefited to to deductions and XXXX. relative and due increase net sales to expenses rate the were expenses XX.X% the QX our quarter in In the XXXX business is growth compared of SG&A tax quarter managing a The of this the discrete related consolidation continues to revenue investments XX.X% revenue Adjusted opportunities. be ago. COVID-related granted operating prudently from relative depreciation compensation. QX rate Adjusted also XXXX XXXX. QX to while million last from with resulted quarter year, tax expense stock-based for XX% pretax $XXX quarter to XXXX and net e-com costs. revenue Moving in in net relative effective revenue of higher or XX.X% QX $XXX adjusted in net earnings year. of result the continuing for tax support XX.X% deleverage compared not our of of in coupled to COVID-impacted approach accelerated SG&A, of our XXXX and to X.X% channel both million an QX QX strategically compared the MIRROR’s $XX.X results XX.X% year was in to our net XX.X% certain XXXX

However, of tax since year. and quarter store Adjusted for share in spend QX impact business COVID, quarter year. QX and first investment, new QX profit for million additional analytics rate or due XXXX. deductions was $X.XX to of had of of $X.XX share, was relates per $XX compared primarily in XXXX million earnings a and channel bigger spend expenditures chain compared meant our tax Capital diluted to to last our supply XXXX digital quarter the growth locations, were our the $XX and the capabilities, capital support in for significantly these million relocations technology the QX on lower $X.XX income discrete this tax to renovations. $XXX to last before impact adjusted that diluted net per

year billion Inventory under billion nearly versus capacity balance $XXX total had our of XX% sheet cash On approximately a CAGR at the increased end and our basis, in $XXX We highlights, we was $X.X grew liquidity. quarter available inventory revolving with of over equivalents ended and $X.X in million facility. the XX%. credit of QX X-year and to million cash Turning last QX.

levels receipts using ports, into at end inventory end an the delayed the of of are XXX,XXX air of XX% to $XXX. remaining as we some at At of $XXX shares the continue due composition with move QX. quarter, we on QX, had current to our to availability we team level our average comfortable repurchase we inventory is QX, the XXXX. of While million the our and approximately strategically see to and increase issues relative share XX% QX At we expect repurchased price we to In authorization. freight,

me for year to and XXXX. outlook the now Let our shift QX full

On including tactical MIRROR. The Our both guests merchandise offering, our well continue to and apparel and Move to respond

matter As ensure for want to they focused with back how and digital guests there also our omni remain we we to we us. on are business our stores, are welcoming our no engage guests capabilities to

ongoing also to environment. navigate multiple plan We the as operational scenarios COVID-XX continue for we

the to $X.XX XX%. expect CAGR in we a QX, X-year range representing of For revenue to $X.X billion, billion XX% of

currently of XX% open. CAGR to stores we approximately basis, approximately XX%. expect approximately we In at our On terms with stores, flat, stores X-year have of a be e-com growing

of from to the higher We XXXX year’s reductions. Relative expect leverage be also points to due back QX penetration. QX XX in as depreciation gross to higher store and a XX quarter XXXX, than margin in gross And new on of our and last benefiting as increase from to openings somewhat was COVID-impacted XXXX. on rent occupancy basis pulling e-com level well margin

due QX XXX deleverage capacity we congestion and continued deleverage higher business to Our guidance results accelerated expect reflects costs remain basis of air for XXXX the in and MIRROR’s freight XXXX. that labor to XXXX; relative in year, XXXX versus poor include including consolidation XXXX; support constraints. due but e-commerce depreciation this In closed. costs, our from and SG&A QX, to investments of to Drivers stores pressure not approximately of points COVID-related

MIRROR expect be Turning ago. in we to This earnings costs. of versus but year quarter operating EPS to in share includes the of $X.XX $X.XX EPS, second and a integration-related per $X.XX to the range excludes results adjusted acquisition from

reported As XXXX. of a EPS $X.XX of in reminder, QX we

strength of for For $XXX continues we to range experienced we high be assumes $XXX now relative business single in XXXX. expect billion. year include e-commerce our to outsized million MIRROR grows the billion and the now This XXXX, $X.XX to to revenue the range full in $X.XX to the in million digits

higher COVID-related growth between range growth to And expect our up XXXX to anniversary XX a our continue online new revenue, international of our well XX and This modest which low our a XX%, to QX is up to net modest revenue of company-operated XX% guidance in expect When prior approximately warehouse for modest X-year gross total Power at QX expand and the and the in our square CAGR to We teens the points XX of includes XXXX, represents of as implies of and contemplated we our guidance XXXX. CAGR XX%, leading the open we in stores compared channel now than the markets the shifts e-comm, of QX. to from we CAGR basis decline expect percentage to looking height For is X-year XX. ahead in to teens. increase in Three plan. in to to increase we saw low XX We margin now year stores XXX in footage expect XXX sale. XX

from digital, deleverage year, MIRROR to but continued consolidation expect XXXX. freight towards deleverage gross Three the include margin the it’s be at building. to negative additional openings full anticipated the and we of impact points which of driven and by initial excess from versus of the expected annually. investments the for is to our impacts MIRROR shift XX outperformance still now and When modest The include year, points new which of remodels year brand expansion SG&A. store full margin in relative looking in our for continues SG&A expansion investment Drivers XX plans to basis basis XX Power to costs, of For of assumes primarily plan, approximately a

fiscal adjusted diluted to effective the year our year earnings of share the now to expect XXXX $X.XX rate We per tax $X.XX. expect be We to in similar our be range to for XXXX.

range. X% from assume in EPS continues to modest X% guidance the dilution Our to MIRROR

$XXX digital The XXXX share in any integration-related impact shops, We capital million reflects excludes Excluding openings million new for corporate well of and XXXX. be to including projects. infrastructure and now and technology our shop expenditures versus it chain, $XXX approximately increase investment supply store the acquisition capabilities, and general renovations, increased expect as MIRROR costs, other to also future as repurchases.

to the want allows us results. lululemon now for Calvin for their agility, that to these back our consistently to remarks. globe teams thank across it And handing closing some strong dedication to enthusiasm Before back and I Calvin, deliver to financial

Calvin McDonald

you, Thank Meghan.

questions, just possible your we be us are are I teams say on results, helping future. behalf raise will of entire our and take expectation us the team year our we your who about to Before that Operator? you for happy what’s the grateful want who we well And lululemon take these to management deliver questions. into this with to helped that,

Operator

[Operator you. with Adrienne comes Instructions] Yih The from Thank go ahead. first Barclays. question Please

Adrienne Yih

are are you do slight first not think breakeven line are the ad for afternoon marketing, future of much we congratulations more marketing, dilution about start coming the and And and investing building prioritizing the think about is top that global Good sort another my now probably philosophically investing in line, way when increased the Calvin, momentum to you are MIRROR, so brand for as you so a the notion? of that, we you you sort the necessarily about And for might have MIRROR think on how great I should about when brand and speak? is spend? in of there there? given first guess the maybe opportunity about to expense It’s asking there and profits any year about, you is the the creation growth for that of and you. a form question become demand we in change how thinking advertising think MIRROR, in when simply, continuing.

Calvin McDonald

embedded Adrienne. as at Overall, that. with our will tell I a lot try many a Run topics is perspective, you, exciting I ways one because to campaign Thanks, this it’s are both in of at ways Canada compartmentalize internationally. brand this I of that increasing question we’re in looking and from we more quarter, there would we highlighted for do both applies are in learning the do for planned all where and a Meghan excited opportunity and are consideration, we about of different huge shared. driving we have well included in we see funnel. both because to ambassadors, market that. the showcasing those gender, our more all influencers But are men community initiatives well awareness And women, the men’s example both as we women in key around and more relationships. and And us and of guidance and awareness year testing of as of in, as marketing initiatives as in the a team U.S., variety Nikki dual an and and we campaign And as Run different forward. consideration are and every are to and that the our that That’s ourselves to going markets a moving is leveraging in lean top lululemon

lot leveraging there lululemon. lululemon there’s stores XX we continue leverage one see drive the the ability Fast in the is in that. will in that the guidance that So and opportunity vehicle investing are guests but and able producing. we to and for see do synergies be brands synergies see a these well, MIRROR the as see we to continue going and another in a to of within We see the acquisition we ambassadors awareness the that. That’s work to community. get drive a and friend. absolutely consideration. to consideration around MIRROR, that’s we guests an in purchase know synergies of We as Similarly, across the brand underway forward, lot to are where help refer to leveraging we million content and has And and synergies are in awareness we

what plans around Meghan little forward. seeing awareness to moving bit the a up brand other both bring we brands the on question pick across just we have investments. about early I in each excited And we will are in your we’re let So and how

Meghan Frank

Hi, Adrienne.

about really and expectations we for we’re with So breakeven, our of in to moving color the then $X.XX so terms performance EPS expanding or were what in initiatives instructors, for expanding exceeded MIRROR MIRROR XXXX – at then up And a number sales by XXX guidance including store million. the We still have and have for that dilution the of investments It’s with MIRROR saw year a our openings our in we to as seasonality Mother’s as lululemon And for in the point as the just for aren’t did given longer excited it early now, within well the over curve very future a in in we’re the fine there, and year, and of breakeven, of strong the terms for Canada definitely X% stores. our performance. our term profitable exciting pleased studios, of see growth just business $XXX it path going X%. ramp it business. that us we XXXX, control. $X.XX, into for experiencing to teed over of a And Day, we revenue on us, range right this pleased business, into but guidance and putting much reiterating

Adrienne Yih

Thank and Great. you so of helpful Super luck. much. best

Meghan Frank

you. Thank

Operator

with Wells The question from Ike next Boruchow Fargo. comes

Unidentified Analyst

versus in That now the the would evaluating with Hi, at the side Yes. you COVID? in you. you am is Kate on the to a Thank further of Thanks just quarter, Ike. guess, I along a TAM recovery, higher accelerating be that CAGR, believe basis what curious a are X-year widening were opportunity helpful. business I much taking level, other this on for that spoke just I a for very pre-pandemic. on much XX% our question. we running you are how perhaps Calvin,

Calvin McDonald

definitely I Kate. – stated Thanks, Great. as performing were and the pandemic. I before, before well have we

the and our community connection sweat, community driven apparel, into we continue the at-home acceleration are in and play And performance versatile living of and healthier all life, strengths. of our sustainable growth. the led trends sweat a during group early by and think ability about we consumer And that’s perform post we’re innings peer confidence to I pandemic. in excited the the to pandemic, of

– by addition, channels, across And and great on creates that. Growth of and across geographies, in TAM across to relates growth .com, that gender, that. we’re impacts for much quarter men This MIRROR, example a is sizable very stores and innings that early about. so stores a our TAMs, women as categories, excited us

and because helping We’re will that P&L drive a the profitable a stand-alone lululemon are brand impact meaningful a to the apparel investing in business. see community equally through They we business, and sales. influence strengthening

is one to ongoing And excited we’re with to. that that general, added sweat, So we’ve I and trends. our then TAM clearly we’re seeing think about addition in

Yoga, positioning continue resonate be Our to activities. and key and around the Train Run,

We have that. we’re for OTM versatility for good business men’s really our know just and as building for a OTM a OTM. business and leaning as we’re And started. we hike see into some as limited are it’s we in have adding. assortment excitement well We and her, getting But her,

to continue some dropped with to that have a plan real We grow out.

know MIRROR bringing sizable you we’re happening in of So to and ongoing are for to adding three that next the then overall I would TAM OTM footwear is trend the the growth in year we’re mix the and activewear. adding guest women’s, what say opportunities

Unidentified Analyst

Great. very much. Thanks

Operator

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

Mark Altschwager

Good question from were making strong for my just on, Maybe on taking here. start just to congrats and to you a on the start-up, the afternoon. just OTM. follow-up guess I Calvin, comments maybe guess travel standpoint, Thanks a guests be would activities. are with lot I particularly and and mean, Move I as to that marketing there relevant On in-person is returning today, assortment, been of to The the seem innovation the

acquisition? well amplify existing bit speak as message, that plan you can for with both guest how guests little to more new a you as about Just

Calvin McDonald

women’s Yes. And to into women. – it down I’ll then product and for sure, and men’s as No, Mark. from sorry, break then

key So with of raw our into our as well as some innovate continue our material men, franchises. to we

we which we’ve in our respond the So well on growth Bowline, continue and and that. to ABC see building very see commuter, added out

and other gets awareness – and brand, do categories. know the into top-of-funnel we migrate the and marketing one our we him and top hooks we sweat them that market OTM big through consideration, is of activity of into more then As that into drive

So will only top continue that working, And we invest momentum. to up is gaining I of think is as flywheel funnel, we pick steam.

On really with OTM, well it, women’s have she side product the And of it it. starts assortment. when we limited for drop responds incredibly And us. we to

our the We’re fit. the bottoms ongoing excited about more expansion into OTM our body casual off of

an that, we and and think those ‘XX sweater tap create as we’re incremental those opportunity I solutions versatile to to our initiatives about about wardrobe. guest existing half have And in for excited We’re really her. opportunities excited our the to in sell into slots we beyond and look absolutely her back

plans assortment, going that keep about and a early have innovating, help really top-of-funnel we it’s with And but to women, further. adding activity good and and to we’re even him, will we’re base expand. with So with fuel start to

Mark Altschwager

Thank your Meghan, to you. for is store the from of pre-pandemic we or levels path return pre-pandemic can even think grow And permanent as it recovery, shift to share the on about relaxed of then is regional this levels channel you some or any the in that expectation trends regions shared, trends had lot a for perhaps you productivity metric different Thank and the are that have just some can the of restrictions you. that in maybe insight embedded longest? productivity

Meghan Frank

Mark. Thanks Sure.

given and productivity we QX. the XX% we’re point see improvement by this at trends just of it, with So we’re to And time we restrictions really put have store a really to the time, pleased we But did still a on in not We we’re this store frame related play COVID in in saw of store as fully improvement in expect capacity our levels encouraged XXXX were to productivity. seeing closures in in throughout base. quarter. versus time. XX% At QX, point uncertainties in at achieve level we moderated ongoing store going do

Mark Altschwager

luck. lot a and Thanks best of

Meghan Frank

Thank you.

Operator

from with The ahead. next JPMorgan. question go comes Boss Matthew Please

Matthew Boss

momentum. again congrats Great, the thanks on and

second guess, is And the so relative we just XXXX? first gross the to front, help So, cadence more the margin us about maybe the gross the that assumptions through you’re on think consider of any you line points half margin, to quarter just on could as year? first margin forecast basis embedding for back maybe in bridge XXX above XXXX. than quarter, I drivers

Meghan Frank

Sure, Matt.

on is XX favorability we again, XXXX, points freight. FX. is XX that expecting year. to have and expansion And QX, revenue this relative of product by of to basis to to growth QX, And had really we and then did terms in And markdown in some driven our relative last margin. our occupancy discussed achievement we When than we and rates. of to basis headwinds XXXX, and on some level really relative points from was to we’ve We QX experience to we XX looking higher XXXX of expectation rate as expense. did concessions sales increase points air of team, freight higher leading of basis basis air points that we’re And delta. are continued points also to QX, for XXX then basis good points rent anniversarying versus then slightly trends then basis are lower XXX. that relative XXX XX leverage in That see XXX So expansion, look initial we we in in and some had XX pressure depreciation XXXX of product

color In terms full year, given of we’ve some XXXX. to the relative

expansion from expectation So prior year, the we’re basis XXX of up basis XXX year, and expecting, to full that points XXX our XXX versus to points. for last is

Matthew Boss

activity? Great. you’re in in the take then for also guess, that follow-up think first quarter? into Or I some of place the and side improvement e-commerce, at as a consumer brick-and-mortar, normal the we preferences as recovery, actually to relative and growth people outsized to maybe to houses are that over seeing maybe May, more any physical return sport leaving just some seeing or relative about on thinking returning changes the by And saw sequential maybe category, that are activity tied Calvin, you the lifestyle their maybe you to

Calvin McDonald

Thanks, Great. Yes. Matt.

do year. back growth was strong its did come momentum active driver It well. in in her, wear out our of doing big continue back across in that And our business, a been very into with the of and active an the continuing. ahead again, nice in And The really work of did to Shorts in are as through drivers starting the that others, then OTM then as tops, taking accelerate to of all ahead to uptick business overall we have the with bottoms one, well. last example strategies responds franchises, part our of Shorts that of very driving was state quarter the encouraged position that incredibly was lot shared, driver, franchise and consistently men’s acceleration toe. it a we was of predominant building good extending I’ve head across not core active as it saw we and it As we still of Align which has our It’s our we QX. shared of feel We our team when of everybody assortment, to see and did. – define our growth. wear being core that incredibly our Feel, our top the what is our see was franchise business and to we’re the early done – Tank and but through very balanced activity. see, performed see in through XXXX a And we Science of with XXXX our of and women’s. that sweat get an the slightly categories. the and all

tops our really much as as very was and geography. business across it well performed shorts, So all and men’s nicely but women’s balanced categories,

Matthew Boss

to luck. great of Best It’s hear.

Calvin McDonald

you. Thank

Operator

go of next Please question The comes America. with ahead. Bank Lorraine Hutchinson from

Lorraine Hutchinson

question. wanted ask on returning wanted I to about He about levels. I store to was And store profitability. the productivity to afternoon. Mark’s good Thanks, follow-up talking XXXX

them why the any the in and there quarter. productivity? wouldn’t surpass back XXXX store as there move progress first toward further Is you XXX% reason perhaps to get margins some made You back

Meghan Frank

store well store as is think levels barriers from with well Hi the so pressure once of still reaching I I degree it’s to a COVID-related expense as COVID-related profitability are there PPE. And as store the Yes, Meghan. any Lorraine, normalized. as dealing we is XXXX productivity don’t labor channel in our expect productivity,

Lorraine Hutchinson

Thank you.

Operator

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

Dana Telsey

international, international if a category on Calvin, bit opportunity is could – international the and about even part size or about that little going you that bit down little of be forward? those occur about costs Good up of currently forward? and could – progress. talked faster adjusting what in costs, congratulations as any the do and and as you moving with what lastly, you mentioned talked winding the now you’re talked expected, you though even the learnings regions COVID do of also and the you. And afternoon seen everyone you’ve sizing Thank with Power nice a Three any see How COVID than for in, it sounds be you impactful growth how expansion. from small, you’ve

Calvin McDonald

expenses. those that international the And business Dana. brand, opportunity the shared results. going of to Obviously, international. Thanks, I’ve think Great. take last I COVID have prevent from internationally. see XX-XX this few I for to then the Meghan and the And America, I we calls, on anything think don’t that’s achieving long-term potential indicate off hand this us the being I’ll numbers North

there. were momentum about growth. solid stores, New EMEA, see the the good even growth In we with market, on market. because in And being in we’re We’re in growth in to in stores growth every seeing potentials .com and and to in quarter, biggest one .com very strong China up pressure see our rest APAC, business momentum Australia, XXX% in strong that. every of excited to Zealand continue or in of continued growth We our continue drive

quadruple was the commitment our business. to So

results maturity excited these next continue invest in growth those we of them. future as the achieving to of the definitely to are and markets We and share see

share markets. our right in of the in terms And early We’re these. we’re in potential

on we we’re future continuing come and leaning call drive on share in growing maintaining for these a And focused plans to and be in will the markets. Andre, growth. able back And then momentum Meghan? and the then, So to really with later

Meghan Frank

Hi, Dana. Great.

to on operating and focused which compared XX.X% business managing that. growth see MIRROR. of terms We Three It of plan, wind sales Power to environment. be our committed operating margins in dependent XX.X%, growth of excess This profit QX included in our at QX for QX in costs, we did COVID beginning So We are really to down. will remain year’s of see to XXXX. really growth on the those

some track growth So the the business Power we that, of of underlying – in lululemon expansion and on side really Three to plan. really in nice that saw, the lululemon

Dana Telsey

Thank you.

Operator

with Lejuez Paul go from Citi. comes question Please next The ahead.

Paul Lejuez

pricing in Hi, next about and what just also quarters about thanks guys. about a and we And Curious several thinking how you’re inflationary you’re think potentially should how over environment? into seeing year? next Thanks. costs, input the AUC

Meghan Frank

Meghan. Paul, Hey it’s

managing experiencing So We as we’re costs, close and any will definitely we we reflected on in sorry, provide anything guidance. any material mitigating is when more our are color. XXXX back certainly XXXX. the and and have seeing – we XXXX, input And of are pressures on impact And into terms not share come in eye market. move we a XXXX

Calvin McDonald

the the And of pressure adding direct comfortable end our pricing with relates this to best range, ‘XX. as constantly to evaluating innovation new strategy on need not it are may Paul, value any ‘XX and into through year, merchants then on accordingly we’re to at working pricing, the we’re pricing potential just implement seeing guests. team we looking we’re coming drive moving for our changes that, to But because the that any supply to the with and our

Paul Lejuez

into to product. Got it. your that quickly you ability given just about talk product, get I’m some supply constraints how chase were you can curious chain just And back just can mentioned?

Meghan Frank

definitely. Yes,

for to a as categories meet keeping in what’s feel eye with ability but supply the positioned team to chase freight the air and meet close to drive was and we the navigated on really inventory year on into navigate really chain, proactive leveraging this throughout guest area have XXXX going do one through growth, strategically well postured certainly we And So demand. demand. and pandemic we we been to where The has both XXXX. guest then

Paul Lejuez

a Thanks guys. Good lot it. Got luck.

Meghan Frank

you. Thank

Operator

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

Kimberly Greenberger

question I Matt different much. to wanted so just you the way. asked, slightly ask Thank but a

are As the you’ve time a to buying, Obviously, just seeing kinds that for a costs. will in costs think we And year, factors here the if in beginning to for deleverage and SG&A if are leverage XXXX, which you this go other XXXX I’m consumers your cited. into cost, of relative COVID in April, a say, store And XXXX? particularly you’re May payroll and am in some the COVID to And should for out, are some let’s wondering starting you’re starting much SG&A. super through is I color, year recur to putting emerge then about I will products helpful, just the guidance trying frame? that realistic you expectation. of think the that’s they understand you on this MIRROR Meghan COVID some question be how looking and given to not recurring sort shift

for maybe you would us out if could helpful? that that be separate So

Calvin McDonald

first go I’ll just on the question. up Kimberly, and pick Hi, first

in seen have a not through wear our meaningful categories shift We the active first quarter.

not The business a silhouettes. balanced But wear a and and of introducing an well done athletic overall, you across very It’s job shorts into the wonderful it with in are team’s in He sweats, uptick color are our And to active geographies. sales been But in tops our has in really be big in franchises across know, category equally piece growth momentum. and these and every have core the almost is responding wear. core. that, trend-driven to As I think strength embedded color. or active she purely fashion-driven.

Meghan Frank

Kimberly. the of Hi, take question. will second I part that

up in And of some to XXXX in the of and really of business, basis we deleverage, of for the rebalancing full XXX is prior MIRROR XXXX, that deleverage terms business. into full sits to of than then the with we’re pullback of consolidation for well side XX on margin. that our behind to points So as is basis acceleration expenses And expectation did driven investments investment expecting e-commerce as which XX SG&A which a year in the of attributed are the year which better XX SG&A, our store occupancy by gross points.

excess We’re the on business of and really in managing bottom-line profit from operating perspective sales growth. focused managing a

to going specifically, the longer excess to in really profit but of operating the COVID committed break term. cost out are not growth that to We over managing remain sales

Kimberly Greenberger

Thank you.

Operator

Saad Evercore. ahead. question comes next go from The Omar with Please

Omar Saad

primary of Is some wanted decision the there? of for Thanks. format you real Are for on to real more the have store that Thanks newer opportunities? my to it follow-up the on taking giving kind a the ask estate, question. openings. And opportunities, What’s then the follow-up accelerate room estate you’re using? a I use has MIRROR. bigger you Is going format I men? store market new to those confidence

Calvin McDonald

Great.

let Okay, Omar, me first. the address

numbers. of market out our would coming are through nothing pandemic and We’ve store early role its its remain plays guest that and performance, off the a business, confident contribution of us equally seen And get and I fleet it above. in combination all very think We in store in driving we’ve brand, position. productivity emerging the that very every and acquisition the connecting the it’s our in in stated of rollout.

as and opportunity So in we do internationally. as U.S. Canada growth the every market, have for including well

newer but that on it X,XXX we’re on – And size or key above as for opportunities not number of conservative we vary as a with an very the it’s X,XXX the are X,XXX range to with it and them. globe annual in result models our markets the and apply a key and X,XXX way. opportunistic sweet but still the store expression, to in we stores, in confident are but depends locations, of allow it sort capturing basis, and does more we location, them the because significantly a of result men our by around we’re in a in being the market, believe is where the getting that, in in And North our range coming cities So that of city opportunities right business. and our spot America,

Omar Saad

it workout it do solution? mack it’s in out to interactive want use is they adding a gym MIRROR? trying such you of home And have with it follow-up is Thanks. it. case? and Who I are to an a Thank color. then or to helpful quick squeeze I’d with and seeing kind people Got their Is people a that’s MIRROR. color there. daddying Is who it – MIRROR just are consistent who buying on some MIRROR, it space existing are home already love on efficient you,

Calvin McDonald

No, it’s say sure. above. it’s all again, the I’d – for And Yes.

device a can guests a a a they a that not that is with versatile out. non-lululemon We’re have that to MIRROR. function seeing versatile as of it sweat. individuals round equally And add gym, fitness distinct caters a MIRROR owning who individuals space may of a to a that something we’re want attach and number to at-home number workout nice have seeing and both stud definitely lululemon to that solutions, but and overlap guests, well in don’t interestingly, have solution And large

to where we a have that’s a is it tap into is as the guest and sweat into we’re fundamental are having a we So the into these how emerging out the But lululemon and using who’s synergies just build in the excited and as awareness of the for they getting it. of pandemic the lululemon out buy which really versatility product. drive that their MIRROR stores buy the And opportunity we started MIRROR now we’re we’re get guest there as as solutions. unlocking synergies, buying able

Omar Saad

Thanks.

Operator

Cowen. Kernan is John The next ahead. your comes question go open. with Kernan, from Please line John

John Kernan

I the it you to guess, which Meghan, potential somewhere bottom be to core to of were at you taking you which sorry big the around dilution, particularly from guidance previous – core where guidance end out if on the midpoint to level talked the upside hey, and a is margin, perspective, – above the the So levels? of which a for for increase about and line. question the maybe operating revenue that. is XXXX. in just as XX% if talk P&L the business, earlier, you’d margins, in the Congrats for long-term thanks business, operating congrats store look margin above the I recovered where high take the top and my about comfortably MIRROR Can was business

Meghan Frank

John. Yes. Thanks,

operating we a the really and growth healthy only expectations with our line towards excess So operating of as mentioned, sales which year, Analyst profit lululemon is are margin Day for you full in headed for in growth. very of

opportunities look really focused long-term and to We’re and on line. managing order behind as in maximize investing our future, top bottom we the for towards growth that the

So in targets, are were Day track we’re growth grounded maintaining commitment, that firmly rates. to which Analyst on we really and those

our beyond appropriate continue that at will we we And XXXX update time. plans So the will on trajectory.

John Kernan

you. Got it. Thank

Operator

that Thank have you call, we That is today. questions have for day. joining time for and all the a nice the

Lululemon Athletica (LULU) 4 Jun 212021 Q1 Earnings call transcript