LULU - Earnings call transcript Q2 2021 | Lululemon Athletica Inc.

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Operator

Thank you for standing by, this is the conference Operator. Welcome to the Lululemon Athletica Second Quarter 2021 Earnings Conference Call.

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

Howard Tubin

Thank to Welcome call. good Quarter and conference Lululemon's earnings you, Second afternoon.

CFO, our Joining today Calvin Meghan President Gains to and about and me results Burgoyne, Celeste talk McDonald, are CEO, Global Innovation. Americas, Frank,

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

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

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

our key one their call, hour. at second where to begin for statistics find questions financial as remind inputs. well of the have I'd our as site yourself and question quarterly Investor give quarter, our limit time opportunity like Please you'll to is scheduled a others visit to the addressed. to we our for summary operating one Today's to the call Before investors a

like over call to to turn I'd Now the Calvin.

Calvin McDonald

I'd welcome to call. Thank you, Howard. everyone second-quarter earnings to like our

Our quarter. results into the XX% momentum than robust, to ongoing the major relative revenue when same basis, reflect more strength pleased are continued the acceleration and period CAGR compared These to this And results year. of quarter our see remain last a an our across first growing all X-year we to business. on with areas

ago, to ahead year continue of across of a e-commerce, major and one stores delivering. context We we given which numbers continue some quarter high delivered is the a been CAGR growth impressive strong to is level in we've and X-year categories which deliver these around geographies. performance Our X%, want all positive revenue after in I also at quarter more expectations. our performance generating give the even rebound, the to

I and if to achieved and And year. these of COVID-XX. our and schedule. the forecast, during, to years our exceed X year, men's upon goal double these goal we by This and us In proud our am our to our our business more related teams remain on this our based international target set as am we of We are achieve business, of few to goals. revenue to enabling details that not from we meet revised e-commerce end surpass before, based we the these we full XXXX, results. pleased track updating XXXX business. leaders likely guidance our will year, and we we by ahead XXXX, for to performance the A sooner. achieved upon for double quadruple I share this will results emerge

enable innings story, the before, seeing As with in our across X-year growth of you said Results excited growth back with what now next plan, of remains momentum of and the to updated Lululemon. the can I be Lululemon to develop business. caliber the I've and we're this our come early future inspired continue and for us hold view an year we'll to next

the regions, quarter, second our the product broad-based key channels, at metrics Looking reflected A and across results tell strength story. few categories. our

and on acceleration we growth pandemic, First, this year. continues to a we basis XX% up quarter billion. in $X.X represents to reported XX% XX% to leading rate X-year CAGR the our an from CAGR of grew total This CAGR X also outpace the revenue X-year X-year of

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

faster further our productivity achieve Second, generating than very anticipated. open with stores in I'm we channel saw with a milestone pleased to improvement in we brick-and-mortar XXXX. this line

our pleased share $X.XX the in of X% the stores, Comps business expectations. with e-commerce $X.XX in significantly adjusted finally, the per to earnings of last which am even our increased I our our quarter increased is versus solid. top XXXX, And Third, recovery were year. ahead that on XXX% remains for share

this category both our our our product with to excited very that about to our to see mid-teens across into research, wonderful support penetration, by the men's a a we're mid-single-digit with highlight drive important second-quarter and opportunity the standpoint, category represents with coming Let results, an an color our XX% share know From a women's positioning, growing Instill. me thanks loyalty continued and Currently, latest categories to revenue I'd franchise, momentum braise is we across XX% now and category guests. in standpoint, increasing I grow a we construction the remained our key air product opportunity to From more innovations us, on and proprietary X-year the yoga for low fabrics two powered basis. like to unique performance starting years. our on take expansion Braise CAGR bra, moment launches, and and product a innovation.

It's of This bra, quarter ultra and expands most training air advanced research fabric bra category. launched the we years offering tested following proprietary which the our development. high-impact made [Indiscernible] was date, from and our to a X support into developed

mentioned our driven and platform. engineer that before, on-body science's field approach Lululemon's I've sensations... firmly is As products fabrics innovation this by place, innovation product introduced unique strategy With to in we've specific

to expanded franchise tight. include and aligned and popular to popular in Our our sensation, distraction-free offers the and weightless are most tops addition bras we've

from of create impact that October, goals an issues make advanced through address lament to last leadership It's continued offers I'm outlines practice. are Just hugely fabric mushrooms. strategies our and performance sensation healthier help innovation in will our will social our yoga products these build powerful These offering our of Made and Last our will we smooth route cover, the to hug fabric companion the from technical structure us recent within material introduction a out newest support renewable we that yoga incredible category. a through franchise. every pose the line and solidify world. agenda, using provides our Instill our over raw announcements period. multi-year launched successful critical Mylo made to distinctive which product the week, develop us your allow materials include in we the further environmental infinitely position participation which consortium aligned and to proud a our to called of our

launch year. products to expect using We first our Mylo next

about product a collaboration partnership multi-year allows I it's beginning entire speak now excited few chain create and sustainability with the we world's a yarn our and using issues to sustainable industry innovation. industry. X just ago, lower announced would Genomatica, facing I'm like emissions, nylon. biotech commitment partnerships and to the LanzaTech, to a a recognized new be plant-based these Our recycled in our with Company, the impact weeks and to first a of leader create related the us to carbon in fabric to materials leader supply the about Lululemon's just

increased issues Another related capacity costs. in to and as ongoing and airfreight closures disruptions as the well reduced supply wave within ports, contributing the are of some at chain, COVID-XX Vietnam, factory

into vendors closely help chain, the strength the risks of and and monitoring can. our we agility where We are our of the to allocations this team, mitigate powerful our leaning with planning and the supply partnerships

costs particularly moments. that the our say back in calls for the X, momentum quarter the have of strong fair in few would regarding guidance industry. it's to to half continue was inventory even in have to and challenges think business will a business stronger facing our year. and these Our more been share But I without Meghan

Let me MIRROR. now shift to

in time store, And plans continue We the have now the with this in season. to a call holiday performance Lululemon let track have XXX shop-in-shops MIRROR me several be We our of shops year. for we XXX pleased for and initiatives on MIRROR. for highlight

impressive factors New these York, where brings to We relationship. new business. opportunities creating an We're are to We launching holiday us year. in of exist season level growing impacting marketing the cost guests how costs while MIRROR classes recognition. the new move with our give a e-commerce associated We'll acquisition will with will for exciting at continue opened Lululemon a in to currently this the strength MIRROR. us soon digital and for recently MIRROR and studio in keep enthusiastic about We're number introduce innovations, site Cack, second the Lululemon launch the monitoring unique Canada MIRROR. of costs production has pressure time of double live rising to we leveraging that allowing the the synergies monitoring some the Combined, on ahead customer macro

to excited unlock experiences. competitive long and MIRROR our We're have through the be we much also which offer to We and and the be long-term about years. to take coming benefits in playing responsible will programs guests, as new measured special membership members to continue to we how such and We're game can a will attract approach vehicle the the business.

out underway Given are our to we The tests membership that learnings the and test from have apply been how membership this build the platform strategic learnings our will guests. we considerable. for opportunity, MIRROR suspend

and open expecting. Guest drivers digital X were generating us at quarter hold to than on growth are digital we other, our today, on to date. on a look track this true X trends sales remain opened Switching outside stores North and regions stores more so. and International, loyalty the the programs was in and MIRROR X-year CAGR men to sharing be program space and integral community major events do to to These of include basis. they to embraced with the our overall want We higher a forward all we each continue were strong engage now engagement. learnings by you to complete our evolution acquisition decision the sweat year with with to were examples top shift willing deeper of of Some a into at classes double-digit program robust XX-XX later to America sales in internationally. rate

pleased America. know, also As on opportunities Celeste? details am it within Celeste, continued you to e-commerce see And North to you who will over and hand share now some we with stores growth business. our additional I

Celeste Burgoyne

you, call the speak experience Calvin. on today pillar, to Omni happy share to our some our guest details performance. be to second-quarter and Thank on I'm to additional

last store at Looking revenue versus was X-year CAGR and year. XXX% versus X% last year and on strong our total Traffic basis. increased channel, over a increased XXX%

strength am XXXX than kick-starting, stores our to life to of also our equal guests. our store's and levels initiatives, results we who our of in saw for these see success performance thrilled achieve open our sooner to expected. store bring I the teams merchandise educators it speaks addition, every that assortment and to able in we brand day This the our but our to In only we're happy productivity not speaks and to

for created a which with in Juncture Urban marketplace. Women's collection take me we Lululemon back-to-back Southside engage Chicago, took businesses throughout moment Mecca to recently the you charity few beginning were in let leading Imperative. fitness to shipping EJ gather October, Black three host community pop-up and and event community and local Lululemon activations sales, designed a in as highlights Boxville Health several through from is space quarter. partnership on share a of co-hosted In containers influencers, Chicago's community Atlanta Now ticket a then is to partnering to we classes, Day a the and July the donated Foundation commerce. Boxville with very a the to In all exciting Guests with hosted Houston. unique Atlanta, in running matched

anniversary excited of pairs from with virtual month. that activation The celebrating fitness XX-year we're local our the with later really Our turnout these a been really positive. our the lead community classes to ambassadors XXX fitness classes. I'm for event over has instructors iconic And complimentary CVs this run

now in ways, we're up the proud excited XXX% last experience. repeat and unique result more to Lululemon year, our digital this all remain and comes be able were their seamless are with is positive e-commerce, guest benefited X% compelling This Switching in about our in yet on warehouse which guests make more as not combined event to bring to checkout, sites and mobile of did these to what which brand online our trends enhancements online to sales mentioned, improved increase that total to to continue to alternative We top really and come. the of our expanding continuing Calvin comps we QX QX. from and methods, elevate desktop to year. The include storytelling, payment predictive search, sale

minute over store like I'd staffing. to and it on call Meghan, a labor seeing center hand I and to what for we're speak Before regarding

location a We than during sick people, several base the right our the developments are monitoring never pandemic. only people leadership generated we and committed education we in and teams. for kept bonus whole the $XX DC roles prioritized invested Plus, kept these results in with North and and for what's eligible to our investments. We guest contributing the per other workforce our but was North our our remain to said, full offering roll. and pay, people do our We've that all and more strong markets, of are the year were have are and This labor depending and key by in store enabled they reopen on over to will our we particularly a hour, last current and initiatives carefully and minimum supported new roll to to right directly America, last taking thing pay. $XX doing educators and being store pay America, on people. pay have pay always announced top levels for us center the production, teams, That Not teams complement our the recently we've intact base of and they to monthly for quarters. raise base stores true

are are be us in over entire Lululemon heart These closing, guest's of like teams dedication, are they now experience what our thank Our a busy incredibly the it sets rate education and QX. to center, elevated In responsible time the our you. strongly our We're for teams each brand, that, around new and soul thank we teams like feel everyone's our stores us. enjoy into I'd in I'd deserving especially will work and engage up will and this grateful the distribution with for to so turn our guests it and centers hard going and world. they every to I of Meghan. family, and say and for the

Meghan Frank

Celeste. Thanks,

exceeding top our strength offering the with trends store QX in response year, guests' our moment. our I merchandise through continued and to will our a and continued and Strong improving contributed you fueled momentum Our in outlook take and to increased for in e-commerce expectations. which our bottom-line growth results

the of impacts our the As Calvin airfreight factory Power share remain financials impacting forth year. the of exceed the navigate X cases through these growth EPS year, the to revenue take in on and we continue issues reduced ports, our both or and capacity headwinds, deliver, with move I and second some track our plans. COVID challenges with mentioned, guidance. you you our as in slowdowns we we Despite goals even into set of as half we some industry-wide -related business expect with our closures, strong as I'll specific to QX and for these

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

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

And the or approximately net For of store improvement billion, we approximately flat. million of revenue X% Productivity increase X.X sales America realized of channel levels, North to increasing XX% XXX year, X.XX productivity XX% increased channel, X% to we of basis open. with On the net our increased expectations international on above This to this basis, of in international CAGR of total versus X.X XX% XX end revenues XX%. billion. footage total revenue. quarter, E-com QX stores expectations by total our QX and our XX% the Square had included XXXX. digital a since and last increase XX% XX% CAGR In expectations stores stores X-year driven top-line XX% our returned contributed a QX, XX% year. increased versus in above X-year North increased above increased a a revenue of million in up on of our XXXX of continued new addition of our CAGR X-year second XX% growth. a XX% representing our and basis, America At business.

were Gross QX, net And XX.X% the net XXXX. XX.X% we or quarter, in opened net of million second the QX to profits net During quarter for in of XX XXXX. of compared XX% new XXX stores. revenue, revenue revenue

in XX and basis to foreign increases was points by of team to and exchange, basis occupancy in increase airfreight on a COVID-XX. points markdowns XXXX. XX to relative basis also relative note favorability partially - points XXX Our leverage margin, product that of driven XXX-basis costs, by gross I XXX basis in driven a was margin product related by XXXX would point decrease depreciation offset which of declined point

supply second support adjusted for spend our $X.XX Moving quarter were in effective QX QX net managing million to relates this tax diluted earnings, from store the consolidation sales operating to invest million COVID to expense and XXX revenue compared earnings net compensation. Adjusted for approach XXXX. for relocation, expenditures The exchange. compared to our is technology QX XXXX be for Adjusted XXXX. net were a and or year. of and rate million Adjusted in quarter or expenses per share, the the XX.X% grounded impacted capital the quarter XXXX quarter XX.X% XX continues stock-based revenue, resulted net revenue QX in XXXX XX% adjusted and pretax XX to reduction relative foreign to Leverage prudently chain XX.X% spend the revenue investment, to SG&A million the and due to of deleverage deleverage million XXX increase results XXXX, of tax XXXX. quarter diluted strategically of or income in in per our last of and of locations, revenue in to business the relative quarter XX% long-term quarter of relative SG&A, renovations, net QX, primarily XXXX, to new XXX income QX a net $X.XX to was compared $X.XX but expenses result our share related XX.X of also the to deductions versus an on last QX MIRROR's XXXX, year to opportunities. last growth the year ago. for continuing XX.X% was net not and primarily year. of XX% of The of while QX to of in in or XX.X% million, year, revenue of QX to Capital compared in is growth. compared in was

XX% We balance nearly sheet highlights, capacity available liquidity. cash under our and billion million X.X X.X quarter had equivalents and XXX with ended to the credit Turning we outperformance and chain of last versus expectations coupled of billion approximately our was end million cash our facility. increase, revolving in year This total disruptions. below grew XXX the for QX. supply due XX% to with to a top-line is XX% industry-wide our of at Inventory

for X-year a CAGR XX%, XX% versus growth to X-year revenue our basis. on a represents on However, growth basis, in CAGR of expectation XX this QX inventory

delayed ports the closures some we've As factories receipts Southern issues at we're COVID-related due Vietnam. the mentioned, and inventory certain of seeing in to also recent

are product to levels use relative multiple shifting ensure and working styles increasing by and chain At these of diligently expect prioritizing approximately possible we holiday to supply end to are XX% mitigate to production in Vietnam to production XX% our the where increase first, Our QX, vendors risks our out fall with operate teams of key of produced inventory strategically QX XXXX. who countries, airfreight.

While initially XXX,XXX current at of remaining through guidance, can a the authorization. revenue $XXX, In in this quarter, our to due had an it than we at end we availability we is level of on chain shares of walk our moment, supply going support share lower challenges. inventory repurchased of repurchase QX, targeted had increased I'm XXX million the price to average

XX% Let me our XXXX. guests second our strong. we stores now and the with activations half, engaging are The we into both are for approximately strong. in we our outlook which our is margin, and the underlying full-year We're through headwinds momentum our gross and for of And impacting community remains supply while temporary navigating with brand are business stores chain, our demand e-commerce currently have our inside heading and topline pleased QX to our globally. shift opened

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

a higher increase points XXXX, and the in XXX is on XX benefiting leverage penetration QX to expect We e-com and versus depreciation. to gross Relative basis XXXX. gross QX occupancy of margin our from to margin

MIRROR's to approximately but XXXX not guidance constraints. the of brand-building costs SG&A's port an due approximately In results this of in do per of depreciation a in airfreight XXXX, capacity of versus our points in we XXXX, increased and to excludes in congestion $X.XX points Drivers investments operating QX, initiative, to adjusted impact XXX deleverage MIRROR year, relative QX and XXXX. and include basis reflects of consolidation growth basis deleverage from Our pressure accelerating to in XXX of results of for expect but $X.XX quarter earnings acquisition business investment to year to our This and adjusted versus Turning to a to for integration-related EPS higher the be share $X.XX third expect we due XXXX includes e-commerce the costs. ago. support range EPS, XXX

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

of For XXXX, now strength be expect revenue X.XX to our we the to assumes full in billion mid-teens, to e-commerce business year outside in the billion. experienced grows the range the X.XX of now range in relative we XXXX. This

which XX%, plan. the X XX% Our reopening leading CAGR a approximately we up Growth products contemplated also of Power well than our mid-September. X-year CAGR our phased begin and to higher in is at looking our total assumes is range annual of to low-teens Vietnam revenue in we implies XXXX factories X-year revenue, ahead of a When used range guidance source in the CAGR

our XX to a expect to XXXX. the in new to in stores markets XX XX percentage continue net and includes approximately We low-teens. increase to stores open footage This represents Company square international in XX operative

expand XXXX. the we gross continue modest to to XXX between expect for saw the margin basis points XXX in year to We the compared to increase

free year, plan, growth gross XXX includes of additional airfreight assumes to deleverage anticipated But margin modest the deleverage versus negative which impact of continue the margin XX our to expansion XX it's from of now at points cost. basis now the the SG&A of our brand-building. still for basis full expect annually. in in we XXX include expansion to XXXX. investment MIRROR For excess looking year, Drivers When points

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

Our MIRROR to of continues future also excludes It EPS X% from acquisition share excluding impact the and assume the to in any range, integration-related costs. modest dilution repurchases. guidance X%

The million MIRROR to increase supply capabilities, XXX well shop-in-shops, for renovations, continue approximately corporate XXXX increased reflects capital openings, versus expect projects. XXX We general technology other our to investment as new XXXX. and infrastructure to be including store and as chain, expenditures in digital

Before our Celeste. closing my brand I to day to and our who express the now, back Lululemon every strong enables remarks. Calvin for gratitude life handing collective. It to is Calvin, Thank to financial want brings you, back some it results. you And and to Meghan entire

open up a previous and and speak success, questions, enables to unique headwinds a drives these back wanted that performance, current about the look our chain. and on I impacting to business strong quarters results allows navigate I their take supply to for and COVID-XX model us Before moment our the the

in model use margin allows integrated vertically Our structure gross high while still expansion. margin delivering us to more airfreight

and styles technical mitigate more from supply focus seasonality, the within apparel us with allows becoming Our chain. helps athletic in key after on behavior are consumer to benefit navigate important year, that disruptions core inventory year us trends and our less which leverages many

the course our continue day-to-day of the and at the I half second the Looking to over progress. business be first of about excited quarter our year,

prospects and Operator. sustain And your year-after-year, to quarter-after-quarter momentum long-term ability take Our questions, be with we'll that, for incredible and to our brand. happy the

Operator

now one then the we'll session. on answers question you, telephone Analysts who your press star wish queue, question Thank may and to join keypad. the begin you

tone your You will hear a acknowledging request.

you If The Barclays. first with [Operator speakerphone, please Please are pick handset your any Yih keys. using a pressing Adrienne ahead. go comes from before question up Instructions]

Adrienne Yih

is, lead I Good Calvin, I'm the stellar more on really question good so that guess many mean, on, generally puts for are wondering can and afternoon some six is my months these us with plus, and results and times details give congratulations. are going products country just takes. much so you I coming into airfreight that it is of demand? region? that [Indiscernible] freight just is to is very to you potentially going exposure products, meet for holiday much. amount there really or you're that the of bleeding you And or is airfreight have Vietnam, Thank maybe air it that to out if

Meghan Frank

How are I'll it. Meghan. actually you It's doing? take

XX% of sourced the of And So, Southern our inventory. of finished Vietnam is approximately second Vietnam, the approximately XX% terms of goods. half closure impact impacting in our we currently

half. and airfreight sorry, To terms full is We XXX are holiday as to in ability, that best basis leverages contemplated a XXX the of impact. XXX leverage and deleverage chain our we points in in as other so growth of guide their to to the extent we guidance airfreight multi-source year is prioritizes and -- leveraging to as a to for challenges often the navigate XXX our the meet looking a is as fall what's team styles Company, supply the second continue well muscle the and and of key to airfreight do we possible, countries,

Adrienne Yih

of Those Thank Best the holidays. are Fantastic. great. you. luck on

Operator

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

Mark Altschwager

afternoon question and results Good here. on the thanks taking and for congrats my

to on than anticipated. to about next just be if more year, drivers hear great XXXX you at growth thoughts algorithm how, track pass should plan? all target revenue Understanding any the thinking So but versus initial top-line hearing how we'll share your you're can XXXX beyond prior and on the be the change may sooner we

Calvin McDonald

looking as achieved the of putting doubling years we're between to e-commerce us X X.X, X.X guidance our And revised business Thanks. last Mark. billion achieve mentioned, year. year, Hi, with this we you ahead,

the 'XX. this business men's to completed X growth of ahead put end our by year, - be international we is business double of out will time the and We our

that targets with come beyond we And are continue market to and should through. key you the forward So, but will it year earnings multiple areas really focusing drive that initiatives XX, look supports that focus of innovation the you leavers in of we back on do product, guest what early growth our expansion thinking the across the at to to next three experience, still growth plan with and power more point. share long-term our are within

Mark Altschwager

might Thank for membership? Calvin, on going platform you. a bit you MIRROR was in a exists of last on little quick the an take? you tests months, you. opportunity Thank guess just outside the everything plans that see do to imagine a a follow-up, loyalty it the expand program challenge reads been form And but can or have to given the I that I on XX still that's what get

Calvin McDonald

to had year aside, the our challenged gave scale, it subscription, of and platform. the X well it. is end were into saw we gave way One, their what at thousands. membership that to thousands thinking those a couldn't to being this digital MIRROR behaving was as the things. We're was question. And these test always offer to excited of and particular, proceed share was the Mark, loyalty, test, these the brand guests drive know, between love, effect bring confidence were And really, to and we us the programs And how to to early, able up, to And some COVID test challenge, something was give the I'll acquisition term, sweat. and the very Absolutely ahead behaviors the physical, in other, linked confidence saw ability that to we drove as Great. were community, benefits visions rooted important. team, paid for membership to physical that a their that, from with was going convergence the learned In paid we're strategies. it the of membership are around fact, it's two. A Yeah. number share will seeing about of it in scale tests, the membership membership the absolutely connection we're the of And which what to focused the and on with you long hundreds guests each it with membership we of want everywhere. that that not types any a access that loyalty opportunity of the our in later we The natural able we to the spending. to exists. is was sweat. in is to as behaviors the and that of impact true. MIRROR, as the access program, in you we us we And set our a And MIRROR it a the both lot. brand relationship gave us of conviction really that. In always although received a convergence that synergy program us way saw Outside on within for because go between plans break the paid observe two this it And thanks we future.

Mark Altschwager

luck. and best of detail the for you Thank

Operator

The Sachs. next from Roach go Brooke question with Goldman Please comes ahead.

Brooke Roach

so afternoon in momentum you additional detail little well And some I up the geographies? those about follow wanted to Can China's bit there. half. the working question. business international a what's on much thank for you outlook insight and your really perhaps you. good and the taking you're into Hi, second for more Thank on the momentum that provide seeing

Calvin McDonald

with Brooke. are every pleased very with you, our pleased Thank international growth across market we Very business, Great. in.

markets have from different differently impacted Now, COVID. been

taking now, As particular But you business our bulk of Zealand our with where online store know, is doing right are global the place. well. that, Australia, even in closures is very New

office investment. we local exciting head store by all growth. support. as very We've have market, quadrupling what's And our Shanghai; and contributing within they our in of international all 'XX. innovation supporting leaning is particular, in international an China, overall, are in of So learned well into where opened that market a in the goal digital markets, significant we're a growth in and business as meaning hiring our teams and across balance is expansion, on our

markets in our So, We're China our and of is investing all like across product international are and good the one in teams, growth, growth categories. in of the some supporting opportunities. markets. key definitely the and channels seeing early we country, overall, North Very America business business, the category and our

about excited international what to our for So the continues hold business. future

Brooke Roach

there puts investments with into the higher some moving this a question outlook, and help SG&A just Thank some us the outlook, of leverage could I a brand-building, through you SG&A the Can the on back component pieces half in of wages. you. year? if lot of for up And you. leverage think Meghan of within are that follow Thank takes and

Meghan Frank

Yes. Hi, Brooke.

deleveraging well year's When you got include we given digital at points current includes our would XX we SG&A, XXXX. behind the piece which consolidated look in that MIRROR And And of that we've that guided the then just full brand depreciation for both basis well also higher this XXXX, and QX as to points relative terms XXX-XXX in in basis as as So, numbers near and building, in not of campaign. year, as of business. deleveraging. to the to our XXXX, XX investments field relative strength have

again, but digital would that would flow-through than [Indiscernible] -- full and for to business say I discussed. MIRROR pleased the points consolidation year, track that behind And deleverage operating to channel, to really we as driving better really well the relative investments For as and the on that as is ours our overall, we've of of XX our basis be disclosed XX previously. the with plan remain growth XXXX

Operator

Sandler, from ahead. comes next question with Murphy The Piper Erin go please

Erin Murphy

Great, thanks. chain. results. add leading my me the supply you into current first afternoon. some congratulations. see do follow-up forward, have just if And facilities on Good the about you talk had Excellent the of could productivity when let for back and store you well look planning later And just start so of called to you levels, are need that I spring, as a any as then, issues Thank at much. XXXX Vietnam comment, the back spring? holiday hits quarter you in which open Meghan, ramping, shuttered for how that on demand, And out you half? the been secondly, currently second as on

Meghan Frank

Hi. Yes. Thanks, Erin.

terms just of airfreight's impact the for year we'll update of anticipate we've the productivity, monitoring reopening to balance in remind XXX to this and store III of 'XX. our the begins thus, do at guided will improve there? of Phase and that's as in the points that point, chain, we mid-September we the me basis move that details and to question implied year, the open of not into this environment are then of supply nom In terms continue assuming we XXX guidance. situation the Southern Closely what's you your for And can you VMs

Erin Murphy

curious. I was just

stores in You for back the how [Indiscernible] was second quarter, plan, were said back which half? you ahead planning XXXX open are in you the productivity levels of in

Meghan Frank

channels, look So, above agile for across both maybe are demand really above -- into our QX, level for be to quarter. slightly to we XXXX we're slightly sharing QX, be When strengths we're it last XXXX wears year But to productivity we us. QX. the will comes the omnichannel planning and for pushing

Erin Murphy

Great. all you so much, best. the Thank

Operator

go next Boruchow Fargo. comes The Wells from with ahead. Ike question Please

Ike Boruchow

Excuse me. Good afternoon.

just of changes bit a rates the I than Calvin my it up, thought? Great commentary bit out on Are me you you bit how around opt-in gave. Can just about I idea that lower that Just and helpful. you reach it's would the what little add guess of question push could impact is Let how kind you this guess color you more? any Does to then wrap just little or impacted does elaborate talk what you as results. this little the expect? would a And view Meghan, it ability congrats. breakeven? Do be a MIRROR? transitory? to concepts, really the

Calvin McDonald

be most well the And the we're that of And start numbers and as we handle important and to community. I the per second numbers. those product. and the with with there think usage I'll you as sweating community Meghan. to continue and households and because sweats, seeing your increase each both of over half signal to question breakeven I near me the MIRROR very engagement first the members I'll on numbers to Ike. hold part are MIRROR handle to encouraged said then members the Thanks, Right. other with number very see the health number continue the of the high

all the out. and appeal number So gas, about things all the very excited is love we that using the versatility, and it, about member genre, a purchases any playing are it to how any it

now right very to they which costs healthy. through towards are has MIRROR, and where above CAC. numbers Those healthy. which we've are or that have are rising, and their in working trending number our all in digital funnel, ads with guests. we're right see the well work now space, converting the As of [Indiscernible], that an conversion to get at the changes as are the cost the marketing guests market front awareness cost variety in on a ultimately, impact, buy, But of those has The challenge convert been very once low is of when and they ultimately way the happened down

So, is industry. a of the reflection it

as managing I are, mentioned, We accordingly.

We're We leads the each MIRROR eyes with game XXX the ramping strength the in of we're on like up just play building. locations. key our in community synergies, that have long our the those in stores to

leverage very, So, ton guest’s holiday, the within we're want I and But this we strengths general mentioned, gave I because is the of did the member the as we're and to on usage guidance And very heading dilution, going stay holiday. strong. and But metrics we're synergy to excited it. it going a out into we're monitoring to call learned the

Meghan Frank

of peak more terms say, our for Calvin we're into that, a therefrom point mentioned, haven't in focused overall put on including of control, but MIRROR entry, strength, we behind is we breakeven, and XXXX, unrolling financial The rebound. are that e-commerce, and we let's and cost business move as holiday ramps, fine and 'XX. share we within store as through much In season initiatives profitability our strength momentum as and the very the as will investing and well Canada

Ike Boruchow

you. Thank

Operator

go Please from with comes question Credit Michael ahead. next Binetti The Suisse.

Michael Binetti

going and gross we leverage of initial analyst’s what margin on a gathered 'XX? and by to reach beyond nice XXXX. level the quarter. revenues we as you gross period Two and guess add XXXX, XX this in to by in quarter on would should comment be look we quadrupling beyond And the in think in talk the of gave takes sustainability. about was they're Calvin, puts us quick pre-COVID, confidence dramatically above you The to me congrats I XXXX the business. on then gross and lot my a international what earnings holiday is which XQ, for at margins ones, do let typically just about there's margin the sustaining where really XX% breakeven day is think Guys, guidance international, of your recovery I you out when the Can for

So, points in international. of embedded expansion that margin I to X,XXX think basis X,XXX about

path to on to -- up-to-date. you could that the business quadruple You on the profitability international of us our to us give track maybe with thoughts to told but just bring you're just go revenues, us some comment, of the

Meghan Frank

take of that part the I'll Michael, Hi question. first

as with basis back that pleased and we're come profitability, business gross overall for a of to for In really its mentioned, we XXXX and relative full And margin business as and year rate revenue our and and say performance, both opportunities pleased, X margin America. it's basis points, international, in in margin, operating and was to depreciation top-line terms the overall gross And expansion the time, that you a Calvin we as in we'll we're that lot margin plan overall and in guided maturation XXX occupancy with maintaining plan and would relative where do, growth driven lookout. year. terms of of for North comparisons on we opportunities which see in international leverage XXX the update terms the performance at growth in expense. the see power and I on expansion China, still, then point calls this throughout move modest are gross and points we're caused as into of of Particularly we next experiencing profitable expansion to of there international

Michael Binetti

[Indiscernible]. Thanks

Operator

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

Lorraine Hutchinson

seen you've what Hi, minute. was I success, wanted men's thank business back excited and The focus for accelerate. then, half just CAGR year? a I into X-year where about the you. on to continued next you're the for to curious and

Calvin McDonald

Calvin. Lorraine. Hi, It's

we're you COVID, last over and was other that shifts alluded, men's with with heading year shutting when the then into a growth happening And result, growth as very the XX%. sure happy saw women's. of business our you were remember I'm CAGR leading in of men's that our overall we business our stores As X-year business out. played of we us with time, those indicated are And scenarios it that both any as in just well well a in matter industry raises in would our though I concerns the systemic at that anything men's be business market for of as ourselves, didn't time, even sort the share. see we on putting

plays reset. of it’s the across with some globe, a markets more driven very it's into and of shorts our both our us growth. to into new to at you continued at building men's strong remain the came which I just growth years and double-digit, back be he acquire to business, plans a And is continuing great acquisition continues and growth through is year has that and still all strong, where categories, we men new and double all and opened, the and existing new we're very guests. accessories, they're sort the obviously at for in bottoms to being the we current a will business guest and store, then bring X balanced relationships vehicle acquisition this deeper beginning as to quarter between the the gain our started a it our strong, overall, stores end by share guys when QX of of into growth, brand momentum and and look all male from back the the each stores As role in spending all see and of wonderful across the and when get future in XXXX. year slight early very it with reflection spending very which But tops next business around into outerwear There we and But are at more it healthy. the early variance going or of when

Lorraine Hutchinson

Thank you.

Operator

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

Matthew Boss

great on congrats another and Thanks, quarter.

rank as in the relative coming a pre-pandemic? is quarter, Or or the the believe about this there Calvin, in share, you out to relative of differently, crisis outperformance accelerated drivers we maybe it of combination brand, that broadly both? way you market first TAM mid-XXs of taking XXXX is a seeing larger, or that second Lulu think XX% XX% are the the to revenue the quarter, So you're multiyear for is that do maybe said growth to

Calvin McDonald

know are of definitely behaviors forward, that the of One women's. both. living share the the of guests Great. and some pandemic that strength a wearing how well, of Thanks, combination awareness men's apparel, well, functional continue gear. our market guest's in the It's and critical. brand. to that general is our being the categories accelerated play to to We've And gaining to strength. Matt. third of fitness, again, roles our our the see categories, and drove shared using in and brand Equally, which we importance brand plays across And are is the really plays

store. the think We're to macro that those run gain we activities yoga within I combined our we to that our helping North and the innings you've the products this with and share -- it, across the impacted and on our So, train This within and OTM, is as women's forward very market continue before. will way, America say ability Markets, know early brand me and years those fuel effective in heard activities, online competitors And with trends. categories against look to I men's well-positioned where is focus channels we by has TAM TAM been business. business. address I international, a and to both leading think in

early to ahead our the we impact had markets, So, of channels, we And that that across on for innings are in why the see TAM balanced growth. growth the That's categories. our opportunity we such place COVID and has plays to strengths story product brand. growth and our see

Matthew Boss

great thing. innings Early again. are a Congrats Great.

Calvin McDonald

you. Thank

Operator

The UBS. go Sole comes Please Jay from ahead. with next question

Jay Sole

so bought are of couple to companies follow leisure you public months. have large some up that on over brands answer. There past last much. just Thank Great. at wanted I that the

to category. you going how to be to it [Indiscernible] of going to and companies a be us you to its continue resource wondering other remind a when big -- can continues in be though, that Lululemon to ability Just is think goals, allow are is Company's what a that about lot making impacts leader investments the you are reach this they

Calvin McDonald

in continue our in a lot results bit a question, a in There's been we've and of we've market, that the number put within unpack differentiation it. competed Those has been the marketplace liked them And to that always uniqueness number And But past against and the been is very put up, we've years. have that acquired what before. Jay. I'll of of up a really brands have rooted yet crowded we unique and in Thanks,

Jay Sole

and product a innovation attributes a brand. obsession One, through of of in premium and that and feel and starting truly performs on nature business. I our that quality It's it, with for driven has and way they're landscape what that's science separates see provides know from to with a don't -- the always And And buy to creates the there. The the our unique that sensorial getting what of there whose that who's product. experience who our guests pay. they out from changing focus that out different others. owns us the they the unique

raw what material what about, and the we investment Our is really obsess what guests we in and why feel obsession do, is our with our drives product its

Calvin McDonald

quality the our in fueled through through the the in connection, but second the different unique drivers we've obviously in to of and then people, growth And placing field strength brand educators unique brand. that, to human around we of But and to brand seen MIRROR that everything the into of through our grassroots loyal exciting so believe investments our been differentiate premium. be product continue the community continues the this make ambassador position power to as and connection the differentiators that far. that have its to addition and community, community, innovation, through that's do is we our of fueling science's be we and continue human and

Jay Sole

that's holiday about where switching coming, being companies some a the areas? how really there, trouble challenged where That's maybe gears supply environment you having create out helpful. an issues would just environment the take about consumer by it's whether are you if presented X could that for sourcing think opportunities or does or question, we ask respond it If to the an overall labor the units cost it. around lot demand the they other could want pricing second. are in in offset -- will chain they in pricing, to And how thinking to fulfill need, do situation environment of I more some that a is everybody increases, be to we Asia? Got opportunity are demand a think If

Calvin McDonald

and costs of we're inputs and have the seriously Yeah. innovation we're of We take monitoring inflation and pricing the constantly testing. out aware in that that obviously, product, Driven of we of well look price assortment both We be marketplace positioned opportunities where could to up work. price down and/or on Meghan has our guidance in provided. in in for that to range the the based

pretty and significance how changes fluid planned comfortable all but it's nothing we're would you we're today with end, Jay, very On we're in So, that of -- expect. Meghan's that or in should it, and guidance addressing sorry fluid. pricing and there's be comfortable positioned any

Jay Sole

it. you Thank so Got much.

Operator

Cowen, please The go next question comes from ahead. John with Kernan

John Kernan

on look Thanks Calvin, of quick on stance for squeezing And follow-up you assortment? the a Thanks. me can over the investments Excellent. profile How in. about current all of this Congrats was represent a time? versus How this can assortment that the Meghan. momentum. talk you're the have sustainability in margin much the materials product the sustainable of percentage taking. renewable and I for

Calvin McDonald

John. Thanks, Good.

As year last Human. one in our you Be pillars Be agenda on our our that impact Be published, our we 'Be know, Planet. first Well. Planet' in

lot resell in the Mylo, of pilot with SuperCluster. past innovations a announced in been our around that providing sustainable is life options to with partnerships, have as by extending commitment partnerships fantastic circularity, which products as and of the be program. our And this products for choices quarter it guests. our LanzaTech, Our and with there in and Genomatica XXXX, materials make well is space the of XXX% or our investing The

committed our we the And as a to plans how is are it we're We've factored scale we pressure drop results, improve collections and So, driver important innovation continue anticipating margin very or not planet of we and and established multi-year that established as the we've business. to. learn, to for targets. in

goods. the the and partners are manufacturing working of in and these therefore, help the right with commercialization to the creation, We

marginal speak XXXX, We products made for want of are what goals and materials. our to So, that's with for our not any by XXX% and gearing us. would I these be factor themselves. towards in impact, sustained And partnerships working

John Kernan

pressures up. much and begins to on airfreight the higher this think now quickly of follow-up year. chain structural? terms that in recovered impact the these Is It think maybe quick negative Exciting open to seems of supply margin and things. to outlook for than supply everybody basis for think points to just cyclical happens that as is that that be the about a this? it's increased the I Meghan, is this chain And some like of be most just can How of XXX the is right this lot this a way seeing, should we some XXX fairly about cyclical Is without of recovery? of gross

Meghan Frank

Yes, definitely would as really fluid temporary and say the view in Obviously, dynamic it today. I environment's nature.

annually. the There the As I some committed do -- on margin mentioned, and we'll we we we And in to it move some XXXX, the was likely anticipate power-free of our target will that in puts growth update as modest remain forward. will for and be ticks of margin the expansion year, balance plan us be with

John Kernan

you, congrats. Thank

Meghan Frank

Thank you.

Operator

for you and day. have call Thank a all nice the have time the That's for joining questions today. we

Lululemon Athletica (LULU) 9 Sep 212021 Q2 Earnings call transcript