LULU - Earnings call transcript Q3 2023 | Lululemon Athletica Inc.

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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. [Operator Instructions] The conference is being recorded. will opportunity there ask presentation, the be to an questions. After turn would Investor over now Instructions] I the Relations like Lululemon. President, [Operator Vice to conference Tubin, to for Howard ahead. go Please

Howard Tubin

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

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

are to future. started, of nature on statements to reflecting by based current this forecast remind These will you we we get but even subject take today changes. forward-looking Before that abrupt aspects is to include Lululemon's of certain statements I'd like which assessed information, opportunity our remarks and current and dynamic management's rapid have its which

those have the SEC, Actual most XX-Q. with uncertainties Form implied in with associated or forward-looking disclosed recent our business, filings annual risks Form our results XX-K materially reports by those including in and and may quarterly our from our we contained on report statements differ including these due to on

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

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

given metrics on are call comparable a basis. today's the on dollar addition, sales In constant

XX-Q on available www.lululemon.com. section report The the and our Form are quarterly press accompanying release website, of under Investors

our operating for as our our where find our quarterly site quarter begin Before you'll financial well investors to I'd statistics of to summary infographic. the we visit third as remind call, like the a investor key

addressed. to to at now one I'd to is questions limit the please time give one turn like their Calvin. to scheduled to call so hour, the opportunity others call Today's And over question have a for yourself

Calvin McDonald

that press results, from as Thank to discuss you've our you, quarter to our be we release, be navigate We resilient gear uses, challenging. strong footwear happy and starting today and continue external third as and At which, innovation while at that's Howard. remains environment a I'm offers to seen here us. end point of just well core. solutions our Lululemon, for our is the technical create guests variety as but versatility comfort to apparel, with an that

for connect Lululemon differentiates our Studio. We from sustained with business. is program that educators see is well-being connection meaningfully and a Lululemon membership to this our through contribute combination and ambassadors It the our core. events brand and through with at in our continued stands peers guests connection firmly through across our new and and Lululemon local now offerings of and the that innovation we momentum community

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

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

start mind for will So let's as of of jump I'm all Thanksgiving in. performance sure top I it's with our over you.

as results Thanksgiving season. the weekend performance and start and the our we I'm over holiday pleased with extended

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

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

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

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

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

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

the tracking industry 'XX time, U.S. its revenue U.S. X points period year, over of this most the gained X% any to same NPD in Lululemon quarter according While fiscal of the apparel adult service. by last X.X share market this active to brand the the decreased Group's in market consumer compared in

centers in world. dedication the entire and our our the people in our my These our behalf To I'd gratitude team. centers, in centers store to strength only of stores, results are like the around leadership call support and express distribution on to our of possible due and teams

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

Turning now inventories. and supply our chain to

supply see our to across improvements chain. continue We

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

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

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

we discussed, last which strategic we year, lean As made decision the and this line year, inventory have to levels delivered. the strong we growth were enabled build top too inventories our

remain additional will comfortable both quality the and details, share of Meghan we with and inventory. quantity our

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

a product. spend now few minutes will about speaking I

innovation development fueled know, platform. you Lululemon science As our at by is of field

view the Our team's and innovative. them on guests focus identifying to and through first needs the activities new and of lens other hero are franchises then of we develop our items versatile unmet that

had life. designed how the year, adapt from strategy the of during is encouraged many out training which fourth and technical secured our us this for for to then shoes to we by designed Like create women shoe for technical a men workouts we're differentiates footwear, Strongfeel. response. great styles anchored style, keep some and foot X of Strongfeel them rolled launched bring we examples In our peers initial guest was first, Strongfeel this women. who Quarter the other and

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

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

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

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

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

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

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

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

we early invitations events. offers benefits on launched virtual exchange successfully our everyone in program X-tier items or is highlights to Some and are, new essential North to including product The drops, credit to members, in access America. unique free tier to early sale October, and membership community

and life. extended engaging of The bring fitness the We've evolution fitness members, more and the of our the to offering. even of collective in partnering Mirror premium to a much into classes best digitally by tier some Lululemon with studios our hybrid more both program, real Studio instructors represents

received and Studio exciting to a Lululemon benefits. many To join, Mirror, members new a monthly subscription purchased $XX agreed

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

activations bringing extend together connection. have we community local community that thrilled ambassadors I'm able So again, and to these our once our hold large-scale guests, been to teams

people and on the on launch to physical, bring connect with a China, improving partnerships aimed a events month-long World globe. and guests included with examples in And social to ways life life mental the brought well-being. towards across well-being campaign of digital October and Day take attention their This unique These Health we our the positive in at Mental in our to real inspiring WeChat. communities we focused media wellness, actions hub

globally enduring with regionally ability for Lululemon deeper relevant existing This strength a relationship we to new as Lululemon our of guests. be and and demonstrates foster importantly, strong

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

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

years X international goal. and leaders I'm United markets locations Kingdom was in local recent over recently the firsthand very Australia. our stores my call leaders and experience to are local our and from As optimized for and of of pleased our the members I got how against XXXX This for me to quadrupling you excitement toured a both our executing energy during with and and visits and Australia. our plans teams reinforced XXXX, team to revenue that know, with

experience energized guest these markets the recent store the It's also endless enhanced and of markets leaders strong our elevating in to how capabilities strategically exciting ship see international expand by With across from business, in geographies. we I'm are is aisle in ability rollout these potential continue our to to across The of with regions. both considerable. and Lululemon each

city's from shopping of iconic grow into recent the last will heart our awareness, week given a destination. this market a enable across Europe this in tourist the main brand of in upon momentum In and building on us entry France to is just Champs-Elysees both opened store such location Europe, we districts, popular the in one And store another Spain, Paris. the with

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

Meghan Frank

and both deliver pleased we Thanks, were our which line able bottom our Calvin. in results, top to I'm exceeded QX, momentum that guidance. and continued

holiday to The response strong the weekend, a guest is assortment. and Thanksgiving holiday start traffic our a also season merchandise off extended good positive over with to

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

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

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

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

above a net XX% total to billion, sales stores X-year $X.XX trend For we a our on and XX% in QX, increased increased and fleet of continues levels. had XXXX XX digital. total with Mainland increased Comparable Productivity basis channel, ahead November, of China basis. On CAGR guidance. our in the a open closed increased X-year week X-year in basis, of increase a currently have XX% XX%. XX% on revenue In CAGR last XX% stores And store XX% to XX% we sales although in increase our globally. revenue a

the the addition of across of stores total ended stores We Square by of year, net QX with the footage XXXX. a new driven XX% since versus increased XXX quarter globe. last XX

During we optimizations. XX opened and the stores quarter, completed new co-located X net

digital revenues X-year increased CAGR increase, within the or of basis a XX% channel, by basis, on and America, $XXX CAGR North Within a contributed line X-year basis. And revenue basis. category, grew on both on In our same and increased CAGR XX% increased a total saw XX% X-year increased a top XX% XX% XX% and women's of revenue. men's on XX% revenue international, we million accessories

we channels. guests CAGR business, up that our excited ways over XX%. a in apps in On with model we omni our stores them. to increased is traffic operating traffic traffic also and and our stores, XX%. convenient nearly strength engage most see across in as to e-commerce in to globally XX% X-year In increased X% our e-commerce. strength speaks the traffic nearly digital both continue basis, And sites to of This in I'm

net Gross net of was the third revenue XX.X% QX billion XX.X% $X.XX revenue compared profit of to for or in XXXX. quarter

was driven driven FX last from margin offset basis SG&A. points XXX point within margin, margin, decrease A decrease product last fixed teams centers, gross basis of leverage costs, by benefit primarily point markdowns XX somewhat points in points Our by and product investments expense. year of a exchange low by levels deleverage relative occupancy XX basis distribution within basis gross to which was foreign primarily of XX primarily by provisions freight in XX deleverage and lower driven to by depreciation. offset higher inventory air and relative our year, on by basis partially on offset And somewhat

they line basis expectations. was points, XX below XXXX, China versus regional a margin markdowns and were predominantly relatively in in in growth while our The at flat for of guidance and revenue From gross the was due expectations was our to than to COVID-XX looking When decline standpoint, with driven impacts. regional our quarter, larger strong revenue FX by mix. XX it

Moving to SG&A.

on our in from of was and of also leverage XXXX $XXX amortization. million growth net continuing depreciation continues QX an quarter to to XXXX. opportunities. expenses in the in grounded our expenses on XX.X% and in The by to QX approach strategically channels Our offset SG&A versus other resulted invest be stores in This exchange. and revenue compared SG&A prudently revenue leverage managing were while in XX.X% somewhat corporate foreign net increase our long-term or

XX.X% the primarily effective compared the of year. or for pretax of to fiscal of relative to Canadian The an compensation. margin year million ago. tax million adjusted was XXXX's tax compared withholding to expense income for of last related Operating rate quarter decrease deductions to operating and a XX% increase adjusted $XXX net earnings taxes year accrual in XX.X% revenue or a last stock-based on for was Tax to XX.X% $XX portion a an of quarter earnings is due

quarter technology to store $XXX investments third of for including compared and for the per for multiyear $XXX quarter year. and locations, QX relates diluted center quarter QX compared to million or per share income million new growth, to relocations distribution last our spend in million investments. were in $X.XX the capital the diluted Net business expenditures primarily support renovations project, of $XXX to Capital earnings adjusted XXXX. $X was share

nearly Inventory of equivalents sheet quarter in million We was under of reflects cash This highlights. capacity and unit available a billion, Turning XX% $XXX cash end with X-year our of credit million of line the and growth ended revolving X-year in with and our at to dollar balance facility. XX%. $XXX CAGR the our expectations. $X.X QX

with inventory percentage X to inventory. note core is and us seasonless product rate. to make XX% inventory that unit up fulfill QX. contributing relative position X-year remain in also guest levels, the demand our In-transit I'd well XXXX pleased approximately to our up is to We approximately which of growth continues points

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

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

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

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

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

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

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

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

expect to with levels. XXXX line in We markdowns be

In SG&A rate QX, we leverage to QX XXXX. XX basis relative our to expect to XX points

EPS. to Turning

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

relative $X.XXX to grow XXXX, range now in range year revenue our billion. of expect This be to full business the billion approximately e-commerce we For XXXX. the assumes to to $X.XXX XX% continues

xX" of to target total XX%, higher which growth plan. growth our XX% When CAGR to we forth guidance the looking revenue and implies of than X-year Three new set than revenue, higher in at approximately XX%, up "Power CAGR XXXX of our continues a be X-year of our leading

new up from We company-operated of modestly in prior our guidance XX XX. XXXX, now net expect stores to open

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

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

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

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

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

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

Our of EPS we impact share the gain realized in any guidance future and the excludes repurchases QX. real estate the on sale

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

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

Calvin McDonald

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

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

Operator

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

Adrienne Yih-Tennant

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

talked kind there. strong about You of growth

year. lots you next e-commerce You're stores there stores then-- opening the [indiscernible] between of What breakdown [indiscernible]. seeing what out probably for are is and

Calvin McDonald

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

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

Adrienne Yih-Tennant

of sales Can Okay. percent [indiscernible]? you give the

Calvin McDonald

growth In the share don't terms quarter? sorry, in we of that. Or... No, no,

Operator

Straton The Morgan Stanley. is Alex question with next from

Alexandra Straton

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

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

Calvin McDonald

break and question. I've start momentum dollar shared I'll driving acquisition, to across the and metrics and as across both in well have that very guest traffic, into are channels, guest the QX, balance new parts categories for our our the activities. been of consistent, it the QX as our as healthy Thanks remain X our regions, spend, where

guest with sweating brand versatility our product not innovative and with sits the science how just on uniqueness our momentum solutions, But the of from the brand and to the of through others drivers the approach feel positioning I through our on focused move. the but and of think technical one of primary of our relative of brand really uses fabrics product

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

athletic, brand distinct space retail, really of many that and and within the us others from they're the overall success. within think I gains separate So the share aspects hence, in this the

new on. have our decisions the that as has management and team I around to acquisition the to the pricing seeing the pricing also unnecessary like made to around markdowns Decisions with deliver to we manage our to move happen has pricing, think demand really correcting or sell decision products around a some pricing, as decisions aggressively, guest continue we're promotional decisions allowed we're not into inventory see strong to regular of continue [indiscernible] to and be allowed on side continue early forced we us us marketplace. to not play in course price, the seeing

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

Alexandra Straton

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

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

Meghan Frank

Yes, absolutely.

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

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

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

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

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

Operator

is Roach Goldman The Brooke Sachs. next question with from

Brooke Roach

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

Calvin McDonald

Thanks, Great. Brooke.

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

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

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

Brooke Roach

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

Meghan Frank

Yes.

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

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

next years. DC have FX. also then our the particularly fixed that to impact are positioned related over the And also enable the costs, in margin of gross We had which X business our of to negative we'll timing scale some from pressure investments, really

leverage, of within on sales a to as benefit basis driven And expecting then well bit of we're which points XX a little the SG&A. would the be higher side by side, as SG&A FX on XX

Operator

The Boss next from question with JPMorgan. is Matthew

Matthew Boss

nice Congrats Great. another quarter. on

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

Calvin McDonald

Thanks, Matt.

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

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

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

So we're that's managing our and and approach monitoring through. how

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

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

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

better Her, our in others we for brand again, are unaided still although awareness, And category we below, have space. a

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

improving unaided OTM within see and gains, the that around we're guest mentioned activities market one and core have we then new I to as drive to opportunity on as a one for our us, well. to and acquisition, and before, continue to identified, awareness share market the exciting we needs bring innovating that option still potential innings women's early we've to So the our the through is as for her unmet really continue

opportunities of continue lot have a to drive So that to we share. market

Operator

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

Lorraine Maikis

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

Meghan Frank

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

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

Operator

James. The next from Rick with question Patel Raymond is

Rakesh Patel

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

Meghan Frank

Thanks, Rick.

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

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

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

Operator

from next is Piper question The Sandler. with Zvejnieks Abbie

Abigail Zvejnieks

wondering any Bag. there? commentary. like significantly shifts you're if under know year, you in then was on I seeing were category any but some that had Belt Everywhere maybe inventory categories outerwear, commentary you And last I

Meghan Frank

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

strong. we sale Bag, very for It's as move our across the all great continue assortments Everywhere our growth, #X XXXX of Belt Accessories well. terms into been as it's QX In we to of and then us. obviously, style innovate and a into

Operator

is Kernan John Cowen. with question from next The

John Kernan

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

Meghan Frank

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

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

John Kernan

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

Meghan Frank

Yes.

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

usage is one and So then is CPU. one

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

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

Operator

The Mark Baird. is next from question Altschwager with

Mark Altschwager

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

Calvin McDonald

Great. Thanks question. the for

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

pleased it's a continue us, But we'll with the from pilot results, sorry. been -- monitor. So rollout early, it's new positive. early And and and initiative for we're to

XX% we're the come as which on that break membership to On From channels, for that. is the free of Studio side, tier, ahead Day, path program. we based of into online our running And that aim or down be you the it store, our membership indicated guests up our in it to sign Analyst essential on we have remember if X. into our to I'll guests program, glide

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

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

Operator

Suisse. is question with The Credit from next Michael Binetti

Michael Binetti

gross get And for bit, Meghan, be that quarter great forward rates pressure think pressure if the of us opportunity this roll some I'm a a you could guess looking know that Congrats the that curious the just I for then but more a about little quarter. When flipped seems over how it moving like answered where Obviously, help you a us lately? nice on get I'm it here think one. within I to a you on the next negative I do bit just year. a margin a you unpack margin there. inventory, on fixed line little to housekeeping are to spoke and given few so recapture long is gross can better Does clean gross to guess little bit FX cost should freight, curious with industry margin you on comp. quarters? there start a

Meghan Frank

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

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

gross expansion income benefit line a to really as We'll airfreight of balance view opportunities on driving margin to into growth both to with long-term on a the really we scale see. opportunity that of also basis. terms committed we're year, being In modest long-term do and and operating goals, again, next that bottom but our the that investments focused business, able and support continue in revenue business

side, footprint have DC that in I our say would then volume. upfront DC the particularly some to order and fixed on support in we costs, capabilities And investments long-term

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

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

Michael Binetti

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

Meghan Frank

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

Operator

question The Evercore Partners. is from with next Omar Saad

Omar Saad

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

Calvin McDonald

Omar, as we stated, opportunity. and mix we of we continue priced year of we And separate as increased XX% we've in only on our for and this assortment evaluate to pricing, cost our look chain goods on around to logistics. and and react of short-term impact with we of supply the any aggressively pressure we're product. don't cost any want what there And seeing is create do demand too

inflationary perspective. the we'll we've to seen on perceived to of I And cost adjust in said, has so XXXX of comfortable where in. and decision, And as on and the guidance sell to to we're we priced and decision right we're heavily any year, a product would through more price, we're where going away continue that continue our goods down discounting our that now in not markdown the and on approach, at react regular to up I far seeing pressures giving other. that we quarters priced line able and And performance take how are our has having think this from goods the as mark the been been indicated we're others of what X be with gain so

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

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

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

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

Omar Saad

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

Calvin McDonald

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

So brand. we absolutely a this premium know that is

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

way question. the performing is of we promoted supports environment at that power think pricing the have brand more In a fact, heavily the the in position actually Lululemon. Operator, one we'll I take

Operator

The question next with Sole Jay from is UBS.

Jay Sole

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

Calvin McDonald

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

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

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

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

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

Operator

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

Lululemon Athletica (LULU) 8 Dec 222023 Q3 Earnings call transcript