- Earnings call transcript Q3 2022

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Operator

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

Third Quarter 2022 Conference Call.

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

Howard Tubin

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

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

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

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

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

investors one our Today's as their so others to quarter the one key for of to for have at we the site to I'd our hour, scheduled quarterly a addressed. operating you'll Calvin. find to infographic. summary over financial call our please like third as turn call, I'd yourself investor questions well now, question our call a is to give time where And visit begin opportunity to statistics limit remind the to Before like the

Calvin McDonald

with offerings starting well-being a Howard. to our discuss you, We point through the third today I'm innovation core. release, results, connection that and Lululemon seen we press our differentiates is our here as us. navigate with see be to we you've an At that educators our guests Thank is connect environment to peers connection membership happy gear core. continued at challenging. be across from to Lululemon, that stands and innovation external events momentum uses, solutions and program to variety that's at a new and Studio. resilient and now just our ambassadors for but which, and a quarter Lululemon in local It this and continue sustained comfort while as end create the our business. combination our offers as apparel, our meaningfully and contributes remains of strong brand from technical We is through firmly with Lululemon of well our and footwear through community guests for versatility that the

of in see our and we categories. recent I'll three quarter across Then the next highlight weekend thanksgiving over trends in of start the geography, the business Over and experienced at you to terms to the the what our the few season. continue channel business minutes, holiday I'll seeing balanced merchandise we've on for speak we're strength discuss

with the finally, product model unique our then I'll benefits several connection and speak and environment of our speak to on direct-to-consumer Next, pipeline. And you I'll enabled the our update community. the I'll of and our chain to ways supply we inventories,

results holiday jump in. season. mind the I'm our over for as we will with with I of weekend all top start our and extended it's I'm performance you. let's pleased of over Thanksgiving as So and performance sure the start Thanksgiving

past have our Orlando, across and the several We two traveled with in including Phoenix, each several and every to from America cities, York leaders in store. senior our engagement New weeks, level tremendous Over stores visited team I Tampa, a saw Toronto. market North members, of guests

our history results In terms fact, day in traffic driven across ever the our guests and North product world, we biggest the was and well responding revenue around with America in offer the assortment. in our Black Friday both to innovation of by

markets seeking and product and connection Lululemon that find across else. that anywhere community are offer performance that geographies can't brands a strong versatile like consumers shows Our innovative, they

external that term. high-volume am being confident remains in weeks beginning recognize how long front near That of still encouraged several I with with holiday in the also the brand our We environment the I'm said, challenging season of in and is positioned us. and our

will speak quarter some highlights. through the in Meghan will but you financial I moments, with our go few share performance in the I'll to three. Now a of details

across and follows: strong gains up while CAGR share and China accessories XX% Stores share Our year earnings XX% all grew with Revenue in across strength grew women's by XX%, market a grew e-commerce revenue men's And at a increased up continue. XX% three-year as XX%, growth per balanced several basis. merchandise nearly growing increased last versus North XX%. our Adjusted region, and and experienced XX%. we Mainland drivers increased basis. on XX% on and international XX% XX%, remains categories America CAGR three-year

compared and quarter and gained of by centers the in results any gratitude brand market share last points leadership call year, our possible X% support of active To the time, These the of Lululemon most our market fiscal NPD Group's this to three around stores, U.S. our in distribution only over period this according on store centers teams I'd adult the of express behalf U.S. While team. apparel X.X tracking our to its to due entire world. industry strength same decreased are consumer people in the our my the 'XX to centers, service. the the dedication and revenue in in in like

guests You all connect enable quarter plan which another, financial of to every we with continue after and the quarter. growth execute day, deliver our against results support our one

inventories. supply now and chain to Turning our

continue to supply across our improvements We see chain.

Our factories have now returned pre-pandemic to of production levels efficiency.

in to Canada. Power our will a growth This great is ongoing foundational help center delivery projects Three xX of recently ocean improve plan. addition, from we infrastructure share fuel times our DC continuing our that last XX support Vancouver located to example experienced to Tilbury we strategic investment near In in are quarter. also demand that Western days excited I'm of opened distribution the

a In inventory quarter CAGR units on a metrics up inventory, one-year in our three expectations. ended terms of we and with XX% with on basis up basis, both three-year line dollar XX%

As the we line made strategic strong which discussed, share year, and and this we comfortable our remain details, inventory quality both and inventory. growth will top to we our the quantity with were we additional build enabled Meghan inventories have levels lean last decision too year, the delivered. of

will XX% risk. point inventory we limited well product. quarter enter the our core And speaking quarter inventory now to will We throughout a that total we also four, be on positioned for styles, continue markdown about one-year minutes high I'd to leverage which a as account represent three of note spend are dollar seasonal and carry season. stock for the in basis. our few I our holiday approximately

development know, you Lululemon As fueled Feel by at Science our innovation is of platform.

innovative. to Strongfeel. and fourth Our technical women. encouraged other team's how by activities through initial develop bring for designed a three great Quarter training is new our Like then many anchored during create differentiates and needs this was of shoes designed our then other and we're the foot who style that we keep out which the for and styles lens we rolled the of adapt and them we the to of for of them focus life. workouts view to guest footwear, on items technical hero the first first peers this identifying unmet secured strategy and some women our In Strongfeel examples us versatile shoe had guests Strongfeel launched from response. year, men are franchises

their us, portion anticipate the being into be That said, This category, this the the we're York. adjustments. small excited we by over footwear recognized learn I've potential category build Achievement mentioned the in during to for pace New at Annual an last potential represents Launch and make Awards us to As it with XXth before, opportunity in years. Year pleased allows is the presented about we Award we a growth News and five as were next of test-and-learn a of the appropriate week Footwear and

styles We offerings. across teams our out and It's accessories. into women's Wonder have to this build and franchises. puff single started men's of great how to our outerwear now within with franchise Turning expanded XX continue jacket range to a see women's,

our well that show results guests extremely breadth of Our options. to respond the

last meet to While positioned in guest in were are for particularly expect wonder inventory, we well demand. terms outerwear, and with year, we holiday of the season constrained pops

then and the opportunity a examples, style for look we beginning offerings. represents Lululemon few this popular a Align, as and is with distinctive them And and Scuba of expanding just development As all forward, singular franchise unique with style multiple beginning. into Define a

to our into the future. will franchise grow business introduce, We expand and continue

DXC another competitive and one our me key to Let now model. shift speak gears of Lululemon's advantages,

across and a our connect three, brought World world Mental a time Our and in transaction. notable with us hold new since both quarter membership gives XX-K In of to first digital in for activation began launched program, began, time purchase physical China. around to we races to Health our real focus the number ability directly pandemic with the a Day and local ways channels engage beyond to guests we the

engaging received purchased benefits fitness benefits. we evolution some Some of to Mirror including our Essentials Studio digitally highlights program, new join, drops, members, premium items virtual the and new a the on and program to partnering Lululemon a both is studios North a membership and product the instructors are in Mirror The members real to exchange best more invitations access tier agreed $XX early or everyone Studio -- into and exciting of by to members, much even in We've our offers extended subscription launched hybrid more tier sale Lululemon represents bring to events. offering. to The many two-tier America. with monthly fitness unique life. classes to credit October, collective To of and in early community our free successfully

XX-K engage guests through our paused the We we Houston We in response. excited and these way in during the Another by sponsored with experiences two races pandemic. is runs. and we're Atlanta

community Lululemon month-long and on wellness, ambassadors life well-being guests a teams existing our their hold local our media and our WeChat. in well-being. These that with brought events I'm activations hub we attention connection. importantly, and globally Health we across October to This physical, guests, enduring aimed ways once again, to have partnerships a able and China, launch people communities the to and we life and mental Mental World at So focused thrilled as real positive And relevant to actions with inspiring with these digital in been globe. foster of of we new take bringing the included extend together improving large-scale demonstrates campaign the towards our guests. in Day to strong be unique on social This our community for examples deeper relationship regionally connect ability strength bring Lululemon to a

and to traffic Lulemon. ultimately All engagement this drives of awareness, our results websites in consideration stores with higher brand and purchase increases

wanted Before to speak our further to Meghan, I handing business. about it international over

awareness, Australia. As local of how to from recent during with XXXX was and local our our and and see optimized five these to to visits is entry leaders international the experience strong ship will our Europe this enhanced call just energy this that popular stores last these grow leaders over building across I'm both got elevating store we upon With reinforced in our our XXXX, in with pleased me the and locations also expand recent location iconic to in in tourist on enable momentum Europe, to the and plans across we store the a for in with goal. markets our continue members by of toured the teams districts, shopping how such with Spain, business, strategically energized my market destination. week Kingdom ability our team in each experience potential and of from for the I'm heart across opened The revenue city's And and and France United of in geographies. endless aisle quadrupling our Lululemon you firsthand main are one markets given regions. to against executing Paris, know, of years store capabilities brand us both from to It's leaders a of is recent the considerable. in both international markets rollout very a This guest Champs-Élysées another are I in recently into and exciting the excitement Australia.

geographies, balanced off xX of to Meghan. of I'll sharing Three While international you start, represents key now plan. our that, more With our over growth earnings are Power calls. it We're piece with across a forward and I to look turn to prospects growth on future great a

Meghan Frank

good is the holiday continued positive both with bottom pleased over in to guest top holiday to Thanksgiving merchandise our results, off start and our exceeded and to guidance. that season a response which The weekend, I'm and extended deliver Calvin. traffic momentum line Thanks, able QX, were also strong assortment. we our a

much addition, year in a to this meet demand. In position better we're inventory guest

However, we have large and guests. I with acknowledge us, and remain want to our engaging also several on volume ahead connecting that focused our teams weeks of

on of of related the the with Mirror. when QX discuss me QX metrics for I also acquisition operating and inventory cash sheet, XXXX, specifics the including details expense position. Please XXXX our QX performance. balance our that financial for adjusted $X.XX our to Let share note now the results XXXX exclude of QX comparing will

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

globally. although continues store a in quarter versus increased levels. XXXX of the total billion, the in guidance. CAGR XX% sales fleet our XXXX. XX% Comparable ahead revenue a net On had and stores footage increased driven the of increase increase a of with trend new three-year Square three-year China of total For In of a with $X.XX increased revenue on across QX, XX% year, And increased XX% our stores since XX% one-year Productivity week last XX% a in Mainland channel, We on QX closed XX% to a basis, of XX% our increased CAGR digital. basis. in basis sales total stores XX%. we we net to open have above XX November, XX by the currently stores XXX addition ended globe. last and

omni we to third apps On XX% in to engage of seven most up In we a basis. we within speaks XX% the globally $X.XX international, on XXXX. channel, quarter North a XX.X% CAGR men's co-located XX and of grew continue three-year and stores, billion compared our we In XX% strength three-year and saw sites that strength the new in contributed opened XX.X% operating of three-year profit stores model with on million of During increase, XX% increased for basis, have to increased both same total Within the increased by is top in and see quarter, traffic e-commerce traffic digital and nearly XX% X% net across and also we increased CAGR increased basis. or a our increased basis. three-year traffic stores channels. completed basis This line digital the And revenue optimizations. revenues Women's I'm convenient CAGR traffic net XX% revenue. of XX%. or our revenue a over business, e-commerce. and $XXX XX% in America, them. in our excited XX% QX And CAGR accessories our to a revenue net nearly Gross XX%. as category, on revenue guests to was both on

of primarily XX XX while by of costs, basis And revenue and XX driven inventory somewhat our points, to by XX standpoint, it of and by centers, basis was in driven primarily was relative basis than fixed deleverage a offset points on revenue year, for point decrease The with year growth When were in within XXX SG&A. to mix. provisions levels XX exchange predominantly to and somewhat by of teams markdowns looking expectations. freight point A within XX foreign XXXX, benefit basis in China decrease investments they to relatively points lower a driven last regional low which last from occupancy on guidance by line leverage offset expense. margin, margin our quarter, markdowns basis decline at product expectations flat and gross margin, gross impacts. partially by by offset regional higher strong was deleverage our versus gross was points relative primarily margin Our below FX was distribution product driven basis and air in larger FX From depreciation. in COVID-XX our due the

Moving to SG&A.

expenditures related or last was $X year XX.X% in adjusted expenses approach quarter opportunities. an net on corporate the XXXX from our spend in on XX.X% million Canadian withholding operating to versus to share $XX Net of leverage and revenue capital $XXX stock-based in technology million continues channels compared depreciation of effective to Our ago. offset compared diluted million quarter primarily to increase and of portion investments. to fiscal SG&A for store million for distribution prudently our Operating compared for $XXX XX.X% and income including of in year on XX.X% our $X.XX The XXXX. in while net somewhat managing or SG&A per adjusted year. multiyear for to also to income per an deductions to expense Capital in XX.X% QX were be decrease leverage and for QX primarily growth QX revenue to in tax a business amortization. earnings in and support exchange. pretax invest $XXX growth, was XXXX's grounded XX% million the taxes quarter stores XXXX. resulted revenue relates renovations earnings or to relocations share quarter the a third The other strategically of diluted by in or relative year. This increase investments of accrual long-term were million of of the for compared due foreign expenses rate the last $XXX an $XXX tax Tax QX new earnings our a of quarter locations, compensation. margin the quarter compared continuing last project, net center and adjusted to was to is was

also Turning We quarter to million was cash our million available relative remain under our inventory and of guest XX% three-year the approximately sheet reflects equivalents position $X.X highlights. In-transit credit Inventory up balance the to cash at and XX%. well of of us line note core which I'd one-year $XXX with growth continues the rate. $XXX to product of contributing expectations. is demand inventory. up CAGR three-year our pleased levels, QX. to is inventory make that unit our facility. to dollar percentage and with a ended with end three growth and QX points XXXX fulfill in unit capacity in billion, approximately in our nearly seasonless of XX% revolving We This

begin increase approximately the a XX% end growth QX year. on expect XX% last at unit expect dollar be a of end the On approximately basis, inventory and QX. we one-year growth to basis, rate we to forward, CAGR three-year the Looking at relative to to moderate of

approximately average $X During repurchase the approximately $XXX. At remaining end of million billion our of the on we price XX,XXX program. had approximately authorized at QX, an quarter, recently shares $XXX we repurchased

outlook. shift start We're season. holiday now the our pleased me guidance Let with of to the

of we X/X quarter ahead environment remains and the However, us. the have of approximately dynamic, still

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

open QX. expect new approximately to XX company-operated We net stores in

of in margin QX QX gross basis to XXXX. XX increase expect XX We to relative points to

related which by pressure FX We be by in margin, continued chain expenses improvement partially offset will supply to year-over-year airfreight expect investments. an to timing expense product and lower driven of our the see

our expect points with XX In relative markdowns levels. to QX, rate be XXXX. XX we basis to expect to We QX SG&A in leverage line XXXX to

EPS. to Turning

adjusted the be ago. per fourth $X.XX EPS to of a $X.XX earnings in of share expect to quarter versus We year the in range $X.XX adjusted

billion. year XX% revenue, XXXX, business at the of revenue revenue xX full CAGR $X.XXX XXXX. in stores higher $X.XXX our three-year to relative up CAGR expect Three growth XXXX which growth to of up target net expect of total plan. our be from now we e-commerce Power the continues For range a three-year to XX% in XX%, This our continues we looking range billion prior to the approximately forth now than than our guidance When approximately be set to new assumes to We implies XX. higher to of modestly in company-operated of of XXXX leading our XX%, open XX new and guidance grow

international new total. XX represents store the low XXXX openings markets a square and in include to range stores XX Our XX% will our in increase in in footage

For relative margin to versus forecast our year, of increased reduction foreign normalized we network. more The level we DC exchange. A predominantly XXX year last XXXX. gross full markdowns and experienced to year by is driven investment levels in relative the basis and last the XXX between to low decrease points

points the sales. adjusted year versus leverage full year. versus XXXX XXX operating we by approximately increased last to full it XXX driven We for Turning to year. expect And the basis margin SG&A XXXX, forecast flat looking to be predominantly at of for when

XX.X%. For the to to full year be XXXX, rate tax our XX% we effective expect

tax expect effective we be QX, to our XX.X%. approximately For rate

XXXX. year in For the versus XXXX, in earnings EPS $X.XX $X.XX $X.XX to adjusted adjusted per of fiscal share diluted we range expect of the

now openings We our digital any versus investment increased $XXX store Our XXXX new to be impact capital now excludes chain, to sale footage The supply also expectation our including growth. the project million the projects, growth of volume approximately estate realized EPS renovations XX. real distribution the $XXX in corporate million year for share we relative are future to repurchases And expenditures and XXXX. up capabilities, as expect well gain support in capabilities guidance reflects and and QX. we ramping on our multiyear and general increase to square as of open other our last stores our future infrastructure versus intend prior XX and our to increase to technology

of range And in of X% our X% to over approximately current Three for $XXX to of line X%. closing of that, and million remarks. is Our you. I'll with turn with Thank target it million revenue Power $XXX some xX back Calvin

Calvin McDonald

Thank you, want strong Meghan. start closing, I Three pleased In business growth momentum just our are the how strategy. to reiterate continued and the xX to in see we to our Power of

As look XXXX, to we successfully both comes plans us am look enable to near- your quarter our four way. I in continuing goals our navigate and on Operator? our that taking now. questions long-term confident and I into will forward whatever while to deliver to

Operator

Instructions] Please Our Yih go Adrienne Barclays. is with [Operator from question first ahead.

Adrienne Yih

I I done. bit may on congratulations, say focus And a wanted to China. Calvin, very little well

You talked about kind of strong growth there.

the probably broad year. between at a to think percent business you for are and it what What next total breakdown obviously, year, opening this stores this they're point? seeing and I throughout and it committed then of is what is for You're the the kind stores -- e-commerce

Calvin McDonald

to we question. categories what job Hi, We don't for Adrienne, recently, in but to improving, ongoing for the strong. very we our the is between a but just in and very where both closures, But They're quarter both growth channel us the momentum saw through and that. remains dot-com hours team across indicated, the channels in managing market both the wonderful the comparable brand doing grow two. strongly the it even COVID able ratio challenges have we in reduced about and as their with quarter. growth to year it. continued you to of responding very brand saw we're operating as is those the with excited through And store the the good both And share thanks across be how guest seeing contributed to continue channel. We're this to and to very drive two potential the genders store

business our playing play part performance. So will in the and big international excited we that remain the very quadrupling about China with role Mainland potential of very, a that

Adrienne Yih

Okay. any Can you percent the by sales get of chance?

Calvin McDonald

in growth In the terms of or... quarter

Adrienne Yih

Yes.

Calvin McDonald

we No, share no, sorry, that. don't

Operator

Alex Stanley. go The is Please from ahead. next with question Morgan Straton

Alex Straton

to delivering and other I of with the guys week. even this on earlier season mentioned And great performance. compared to at Great. you our a been specialty we've heard holiday like quarter. another course, start early just conference retailers what really It wanted this sounds across on impressive what result have congrats earnings you

So kind here. What you trend to guys bucking quarter-to-date really you so the attribute are Lulu's of would far? outperformance

Calvin McDonald

the regions, have Thanks the two consistent, the parts our as with product of uniqueness our traffic, focused our very it and that the brand and uses versatility new just of sweating one balance relative the to on the question. of feel QX guest approach QX, I'll of to but in both categories start and brand through guest the with brand I've activities. how where solutions, guest move. of fabrics technical break healthy driving sits through momentum acquisition, really on across for spend, well as not the into are from positioning the been across drivers others channels, as science metrics our shared innovative of dollar our momentum remain and primary and of But think I product and our the our our

DXC Our connected we physical were those quarter and launch that connections model connection have we membership. guest of in and community the some on back to the turn to with of able that three, and

decision to Decisions retail, I has decisions happen also space we're think around to aggressively be So guest the the this some marketplace. the continue brand markdowns to balance and play have pricing team regular our I we in of think deliver pricing decisions correcting aspects course the of early to pricing. not within the products allowed overall they're into continue with share the new acquisition hence, and sell manage the unnecessary us really side our the forced around separate athletic, success. in others seeing on. see promotional to decisions as like continue we're within or made to many pricing, that from and air price the demand really management and inventory not us of us To seeing gains allowed strong a has on we to around distinct that move as

So great products, brand regular in of price is and off market. still position overall selling, uniqueness of driven the the the

Alex Straton

similar That's super guys final to down work you peers, think have able for Can also may one to more you against just wanted XX% Lulu's on basis. Maybe a I many touch XX% outlook the about maybe up to XX%. just you color. be taken juxtaposing talk some then XX% on on to last seen the me. fourth Similarly, a little I are great inventory. why inventory we've from to of levels the bit quarter year-over-year from inventory, quarter? one And

think for So me wrong, higher bit you can talk but I'm little Correct about last guys just that if us. dynamic than a I time.

Meghan Frank

Yes, absolutely.

So We expectations. end our inventory last with of were QX inventory was year. in under line

able capture of So unit year. been by end which on as the positioned in guest with driven the CAGR, Calvin three-year We've XX% demand to that quarter transit. at be to mentioned, focused is three we strategically inventory this really points

vendor chain improving environment readiness are We continuing to and improving. experience supply

we reality. new So color XX% the to gave reflected is team year-end. that that in adjusting the That is for

end vendor a bit little improving year the inventory said, we chain readiness. at that of for quarter XX%, of XX% than supply we to environment higher by gave the last as So driven and end

Operator

go from Sachs. is Goldman with ahead. question next Brook Roach The Please

Brooke Roach

a and strong one- path on managing for Maybe versus the if growth next much thank this little the you that, be very think glide strong of may resonance years can about business you're wondering was product the three-year target you our North America. in course pipeline has XX% think really that that that think and into talk Calvin, improve that you about at between been bit could within you your consistent the particularly growth more normalizing about long-term you particularly you few And the across taking to so reflect of question. next performing and how I year? year. the over innovation afternoon as CAGRs longer-term and Lululemon Good the where could now target?

Calvin McDonald

Brooke. Thanks, Great.

of great into and A year that Lulu continue activities, hit Ribbed definitely Lulu fabrication new like incredibly franchises. available the and guest a example at of with very to both franchise, of our of was some new innovation is year first and franchises year us. there's QX of yoga this equally, Align an of of that the and of launch XXXX, that run, fabrications and That's the QX and innovations, the dropped we golf our forward drop well. continue hike, innovation proven the of extensions of franchise identified activities half proven of terms as to, core will the play responding strongest to are a across items successful have or like activities, continue new fabrics, Align. and will in the for saw train, our to exciting the it's So we've that responding I we and both look as tennis, some when pipeline, both product exciting end in is this very QX, footwear, across one own play the QX, that. has And to our categories formula guests here our well now the And well proven in number

brand guidance acquisition. first to how mentioned, guests guest of the the of to quarters innovative which the after opportunities the number which franchise Power And in our the well newness a and Three this creating launches, are above to strong xX So, we're items are as you we continuing we the is plan, of bring excited very building of the I'm another is category and new innovative completely through reacting year about And new excited as three of extensions see responding as to market. trending ones. year, across growth on have 'XX

We haven't with next our changed look performance as our year. on forward we of the outlook Three commitment date Power and very and pleased xX, to obviously, into but the

Brooke Roach

us FX And be and XXXX. Meghan. one investment of chain margin the remind approximate that can how if And gross could supply with will XQ? the those squeeze pressures I in is sizing into the just airfreight for help us Meghan, going more of in persisting much you into

Meghan Frank

Yes.

in similar So margin as did do operating expect QX, in look terms FX. will of that as QX pressure at overall we we we have

QX, for levels normalized of year our our When which net in We expanding XX So freight, mix color of be partially gave QX. overall last see in pressure with in by expecting range similar the versus margin. gross we and had for it basis product We're seeing XX XX will of at then we with basis line lower a year-over-year offset driven points something We're we also in XXXX XX to markdowns a basis QX. margin business. operating points. to XX look point our guidance by benefit margin air on

then And are pressure little also the to had be as side, then next negative to XX particularly of costs, DC on SG&A. a timing impact FX. really basis which We related investments, from higher And fixed bit which points enable benefit business as of the would by the in to expecting five of years. positioned scale side have FX also sales our leverage, we're the that gross we'll the margin our SG&A over a of driven XX on within some well

Operator

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

Matthew Boss

Congrats on another Great. quarter. nice

start you've Calvin, any And the the CAGR start stores then across to of cadence And growth encouraging comments could the fair relative the see cited, embedded X/X shopping to on in provide market it your remaining maybe start? on given quarter, the seeing, quarter you're for moderation do on just gains XQ, categories? on the elaborate the the that just you digital? opportunities say that of share material the is remaining of largest you to versus maybe share then the of you fourth just So where color

Calvin McDonald

Thanks, Matt.

of in we're there's pleased quarter. the online traffic strong quarter on our strong quarter continuation across So last the us very of start still QX, and both terms a we're with in of numbers ahead. of and traffic well was the lot for what the And stores this into piece seeing, the channel as as

Thanksgiving critical of had some our are strong shared, a very priced we weeks regular So as and merchandise we ahead. shopping results weekend and there saw good

focused in just teams ready the accordingly holiday managing season. So we as for the get remain

men's shared of our brand hike. and opportunity both Day key managing we've women's him. grow got terms it. part When across market combination that awareness market monitoring the in that's unaided identified our right, share, categories and first oh, our I our We of And we're the tennis, and through. our a golf So at share, activities and of look forward how with approach continual run, to in in and train, opportunity it's question, yoga, Analyst

an but below the improvement in well have our other category seen what that, it's in brands and is We potential space.

space. below, as impact others to, of and having know as being getting core we continue of we more of assortment just awareness have awareness, on. we really to in business, potential activities focused growth considering unaided the of a XX% the our our addition build drive around in behind men's consideration, an again, still So those for we Lululemon in category have terms in we some the the quarter we with we started to the on in brand brand better continue unmet but needs aware her, pleased and are that that out it's And of although

continue expand us opportunity women's of have So we and relationship an to to market exciting is opportunity. drive that wallet And share OTM for still share.

So to our share that activities guest improving awareness innovating as one within we've and identified. to through unaided market drive new core continue acquisition, gains, our

well, still option and that around to for market share. unmet mentioned drive see is really lot of continue needs that a to women's for early OTM the innings then exciting have I the before, the one have opportunities we're market opportunity we we a as to and bring the us, on we her to so potential As to and continue

Operator

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

Lorraine Hutchinson

still few follow-ups the basis markdowns margin. have promotional And ask given on gross you the on you Just quarter to wanted the full a XX Do fourth be environment? air all freight to view expect changed your a year? more benefit to point at more for

Meghan Frank

expecting so the slightly be are Lorraine, for airfreight better we to year. full

basis it's QX. been QX, markdowns we've both from then said XX that That last had more We our cadence. healthy and mentioned, as in is negative expectation remains we still, in us we as XXXX. up level we And did to terms QX And changes that no XXXX in expecting And QX. compare view markdowns, time, come be being see FX full plans So for to price normalized to very for points Calvin as in and by impact a in markdown for that sell-throughs levels. line and with offset of XX. a and

Operator

question ahead. is Raymond next Rick Patel The James. Please from with go

Rick Patel

given where curious versus as the profitability your globally about also strategic Can by think strong you just you I'm you and tracking you're that's demand help opportunity region? the next out most that to see us making look year. how investments

Meghan Frank

Rick. Thanks,

Europe both across we profitability regions. and So are North year. profitable America that were last international our We pleased hit

stages our opportunity see North We're across the longer earlier over America to both international obviously continue in business. We and in international term.

more the expect with opportunities scale, we as see there to we'd regions. both across scale So but expansion

Operator

Piper Sandler. Please Abbie The question ahead. from with is Zvejnieks next go

Abbie Zvejnieks

I was maybe and well in as like significantly well? were shifts on some you're any wondering if but you seeing under then I outerwear, as you had belt year, any commentary inventory category last there categories that know commentary. bag

Meghan Frank

our terms last and were all and pretty women's we across Yes. seeing enter categories, business, balanced it We position year, more pockets where double-digit in the did we're men's a I are under call inventory positive notably, we've in as of would say range. strong have in we growth performance of inventory believe I accessories outerwear seen we where QX.

cell. bag, obviously, it's style the great been of strong, very terms everywhere number one Accessories our growth, In belt us. a it's for

QX well. into and across We as of continue XXXX as all we then innovate our into to assortments move

Operator

with The is Please John Cowen. next Kernan question go from ahead.

John Kernan

costs the year on supply on all into that sheet, as but Or are sourcing a source margin? to might Thanks of there offsets gross of as pressure higher year? next that some balance goods on the we units year also earlier sold there do be of commentary level of into next -- go environment. on and -- from we chain anything margin from you at this look guess lingering tricky the Congrats we for gross cost cost a when is the navigating I the the inventory. in

Meghan Frank

we're Yes. seeing environment. the say level obviously supply would I as Thanks, some into pleased improvement with the in chain move John. we QX, we're inventory

a portion our our a margin for committed the In margin is so share on benefits putting core, We're large back March the terms throughout have inventory XX%, of not call. over moderate remain We expansion us. have longer we'll do outlook And we fine point that of more airfreight, next seen that details year on on and year. come about that operating to our modest but term.

John Kernan

cost Got coming a the this container quick excuse of as year, it. already I me, guess year more some follow-up. just down, down. come costs obviously, airfreight, of or being benefit chain next supply a Would

year. supply costs chain this have Our benefited

Meghan Frank

Yes.

chain -- two there's I pieces So, of the cost. supply

is So one usage then one and CPU. is

on out We days had historical are say on seeing I'd quarter. back seeing are average is not last seeing some XX they're called the we CPU modestly, them lead positive improve. But movement We improve to times where still levels We're front. there.

as that we into view as year. an next move we So continue to opportunity

Operator

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

Mark Altschwager

seeing revenue product. curious Studio and for what share terms broader Mirror for guest anything new curious the light you if like can turned expectations in What of spend maybe Studio year regarding the rollout next. have your who of are Lululemon been have the used those and in initiative? And else the the launch I'm shed you from similarly, early some Great. takeaways on this for

Calvin McDonald

Great. the question. for Thanks

the states opportunity brand one, performance are the get trade-in sharing twofold really trade-in, stores the like currently in and current their then different in on acquisition spending with cards. guests, based side, the gift point. price different a we're we values but And it's at come a to and XX where new variety specific enter resale our seeing of they to new, and So the and results in with not with XXX live details, an approximately on where pleased on guest is we're

monitoring are to seeing We response a and positive that.

essential of -- tier, it's positive. for And I'll early, membership side, So it's rollout with free new From the results, studio been membership it monitor. we're down sorry, and us, pleased on pilot XX% continue the path in a as from running our Analyst or come which guests that. program, But and remember the break we'll up into aim store, initiative into sign two. the to to early is channels, ahead that we of Day, on program. on guests And indicated that for if glide online you it our we're to based our we be to have our

with as guests. with us into to community well, program membership Mirror excited -- continuing to So offer guest and allow of how new point. a the connection it's we're the to we fits very the and with engage continue essential very pleased happy in going we're of with the our platform very the an this with that response, the rebranding within that within And Studio test to learn fits positive our us sign-ups at through benefits to base behind allows and a way. variety introduction, but exciting innovate community And

months, few a encouraged with the only early it's results seeing. but So we're

Operator

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

Michael Binetti

I'm to unpack could great a guess Meghan, a is to like better more inventory. industry a a get margin next you for if year. looking you on to where think you the And gross curious know but little the help it just the us bit bit, I lately? seems it I little one. rates then just answered quarter. here clean When guess moving are pressure gross housekeeping on can get do FX margin start I Congrats given

and line of gross on spoke for bit a few roll Does this nice a think long So how to quarters? over the flipped there. margin comp. quarter a there curious some you that negative within should Obviously, a recapture about cost little on forward fixed freight, that I'm that opportunity you us be with pressure

Meghan Frank

terms QX QX. is would Thanks. say Great. than outlook I our is not similar FX, in to of more that

time next horizon. on put to opportunity hard as would over view an think I longer-term it a year, point fine but I the

able on the focused bottom in long-term margin really we're our year, line basis. into that to In goals, scale see. say airfreight being as order to income and opportunities balance have that support of do growth but committed We'll DC and also I opportunity costs, we upfront and the particularly driving volume. view then we gross benefit that DC both long-term on operating in in business investments terms a and expansion the on And modest that some a long-term would side, continue to again, of to footprint our next support fixed capabilities business, investments really revenue with

move multiyear as leverage see road and some term we the through see near start five-year map. we'll over So to It our is plan. that then a pressure in time

there as move that. we'll So through offer some we continue color to

Michael Binetti

the the considering quarter, between I -- you much stores embedded I sneak the comp fourth for is, in some a channels. of bit you traffic the Maybe just channel If busy it's gave how the two on fourth just weeks how and the could in you're think particularly next few and one stores based over metrics how on get quarter up on here. thinking where us about your e-comm, little

Meghan Frank

embed QX. Yes, the offer color we year on overall. What for was which results didn't then XX% channels break QX. down And the expectations sales e-commerce did both for QX XX% for at some and our growth, did growth would we we approximately to give XX%

Operator

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

Omar Saad

be, what once market knows need the you seems retail dive I use Maybe the know had tool on to lever margin. really pricing solid strength even they see wanted economy -- And -- pricing, gross outlook as about pretty were the too to will COGS as going it inflationary talk but talk business use the first or the this guys deeper capability also -- Maybe like a consumer environment there? question and as in brand of I needed? you spending when actually. the my impacting and but what opens maybe your on expectations haven't in appetite pricing the COVID who been FX the freight, form once closures for kind to have brand's on environment, and the then inflation, about ask and your aggressive been China. there? are all once haven't It be up that will despite and

Calvin McDonald

other. we the and the as seen we're decision, priced adjust with product. any stated, and assortment inflationary this line as are supply we through we're indicated and evaluate XX% in we'll mark any up we decision only of aggressively to that pricing, year And and of and short-term been would perspective. down where look of think cost seeing has having there perceived be is now the we're for right we've our And said, what we've others where XXXX I and approach, to on to Omar, more opportunity. increased as to and continue discounting giving year, in continue we mix of far to so three not of seeing goods we we has on what pressure in and And around to with And this to guidance gain of our of take that separate in. the cost priced create away demand that react react the don't I we're price, on And on want performance as quarters sell how on comfortable priced so markdown our any logistics. to impact at pressures our the do able and chain goods we heavily continue goods going we're from cost product regular been a our

but this China, very it, monitor out as year, fuel I think, approach similar and have our year. we continue And decisions, to take we look helped continue to to remain a to we -- pricing I on our next So momentum we'll excited.

the stores Mainland quarter Our nine new China. store openings, in we in opened

to performance don't We XX have very the exceed market. performance to is we markets where beat constraints now In continues -- online in store performance and related have Their expectations. strong. COVID,

it our the excited growth X Three market committed growth through of about of to know and quadrupling role very our market, strategy. that in play remain the we will So a strong international Power

Omar Saad

Calvin. you, Thank

the Just just terms of of don't the environment. pricing transitional on the has some it's there given don't inflation characterization? pricing fair of nature but the Is that think in chase see power, need going to so you given some pricing, of clarify, a to the Lululemon the you not that brand

Calvin McDonald

new indicate this It's mentioned the the relative marketplace. we've throughout we've but moved also accordingly XX% year, and of priced fair looked we we see opportunity to characteristic, that innovation our when a I'd where at pricing assortment it on, in

that know absolutely premium So brand. we is a this

market accordingly priced and exciting we that have to regular power. able We're being new with product. that innovation cautious introduce the the into in And and pricing We our launch the price support to able seeing, nature is power a promotional that accordingly. is managing to to But pricing the the we we'll technology innovation continue pricing the are the believe the and that we're reflection regular of sort manage absolutely, we're of of at it's is. so drive of demand not brand what

at pricing In fact, actually power performing I supports think in the is Lululemon. a the the that promoted heavily brand have position way of environment the we

Howard Tubin

one question. Operator, take we'll more

Operator

question Jay Certainly, from go UBS. Please is Sole with the next ahead.

Jay Sole

assortment colors business could Blissfeel little talk about the if versus the you one the Strongfeel of wondering you to get bit from style or do versus year? think about more into Have expand just And when you've the Chargefeel. you looking seen next SKUs seen as footwear versus I'm Calvin, other? consumer you mean, the a better? seen Great. what you adopt I have are sort you

Calvin McDonald

Thanks, pleased the with to-date. Jay. results We're

certain guests within you As we're each design being seeing or seeing guest for of our him or or her guests Restfeel last the both other and either her dual-gender into for off three Blissfeel We're Chargefeel on purchase footwear have first multiple offering SKUs being a It's four we well. foot. Restfeel. our Strongfeel our female built new and specific enter and have a performed and combination. styles, into indicated,

take our the Wave but forward, Power about that. of to and from plan on very a As with as doesn't from positioning, and we a growth she's we Three to colors. we for ability to I'm build xX continuing exciting the it's well started look we us. -- an role Day, category learn unique excited And and ability have pace, very it innovative we'll the shared Color play And big in Analyst learn indicated, colors side, test to the responding and we that we'll been

a lot positionings she's think is of Waves, Color and one but black of responded it very strong, core and of unique white unique our that's I well the to. colors the are

to more. results, learn us about it's the early test So and and continue and for excited we'll share

Operator

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

Lululemon Athletica (LULU) 9 Dec 222022 Q3 Earnings call transcript