Q2 2024 lululemon athletica Inc Earnings Call

August 29, 2024

The New Year's Eve

and Michael McDonald's.

Operator: The conference operator.

Speaker Change: Thank you for standing by. This is the conference operator. Welcome to the Louisville Lament Athletica Inc. 2nd quarter, 2024, is also conference call.

Operator: Welcome to the Lululemon Athletica Inc. 2nd quarter, 2024 results conference call. As a reminder, all participants are in listen only mode, the conference is being recorded. After the presentation, there will be an opportunity to ask questions, and list who wish to join the question queue may press star then one on their telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Howard Tubin, vice president and vice relations for Lululemon Athletica. Please go ahead. Thank you for good afternoon.

Speaker Change: As a reminder, all participants are in listen only mode, the conference is being recorded.

Speaker Change: After the presentation, there will be an opportunity to ask questions.

Speaker Change: and Liz, who wish to join the question queue, may press star then one on their telephone keypad.

Speaker Change: should you need assistance during the conference call. You may signal an operator by pressing star, then zero.

Howard Tubin: I would now like to turn the conference over to Howard Tubin, vice president and vice relations for Lululemon Athletica. Please go ahead. Thank you for good afternoon.

Howard Tubin: I would now like to turn the conference over to Howard Tubin, Vice President and Vesteralations for Lulemon at Larka. Please go ahead.

Howard Tubin: Welcome to Lululemon's 2nd quarter earnings conference call. Joining me today to talk about our results are Calvin McDonald's CEO and Meghan Frank CFO. Before we get started, I'd like to take this opportunity to remind you that our remarks today will include forward-looking statements, reflecting management's current forecast of certain aspects of Lululemon's future. These statements are based on current information which we have assessed, but by which its nature is dynamic and subject to rapid and even abrupt changes.

Howard Tubin: Thank you and good afternoon. Welcome to Louis LeMann's second quarter earnings conference call. Joining me today is talk about our results, our Calvin McDonald CEO and Meghan Frank, CFO.

Speaker Change: Before we get started, I'd like to take this opportunity to remind you that our remarks today will include forward-looking statements reflecting Management's current forecast of certain aspects of Louisville, Kevin Future.

Speaker Change: These statements are based on current information which we have assessed, but by which its nature is dynamic and subject to rapid and even abrupt changes.

Speaker Change: Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business, including those we have to disclose in our most recent filings with the SEC, including our annual report on Form 10K, and our quarterly reports on Form 10Q.

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

Howard Tubin: During this call, we will present both gap and non-gap financial measures. A reconciliation of gap to non-gap measures is included in our quarterly report on form 10Q and in today's earnings press release. In addition, the comparable sales metrics given on today's call are on a constant dollar basis. The press release and accompanying quarterly reports on form 10Q are available under the Investor section of our website at www.lululemon.com. Before we begin the call, I'd like to remind our investors to visit our investor site where you'll find a summary of our key financial and operating statistics for the second quarter as well as our quarterly infographics.

Speaker Change: During this call, we will present both Gap and Non-Gap financial measures. A reconciliation of Gap to Non-Gap measures is included in our quarterly report on form 10Q and in today's earnings press release. In addition, the comparable sales metrics given on today's call are on a constant dollar basis.

Speaker Change: and a company and quarterly report on form 10 key you are available under the Investor Section of our website at www.loomin.com.

Speaker Change: Before we be in the call, I'd like to remind our investors to visit our investor site where you'll find a summary of our key financial and operating statistics for the second quarter as well as our quarterly infographics.

Howard Tubin: Today's call is scheduled for one hour, so please limit yourself to one question at a time to give others the opportunity to have their questions addressed.

Speaker Change: Today's college schedule for one hour, so please limit yourself to one question at a time to give others the opportunity to have their questions address. And now, I'd like to turn the call over to Calvin.

Calvin McDonald: And now, I'd like to turn the call over to Calvin. Thank you, Howard. I'm glad you could all join us on the call today to discuss our business in quarter two and a revised outlook for the second half of the year. On today's call, I will speak to the strength and our international business. I also will spend time discussing our business in the U.S., including some missed opportunities in women's, our assessment of the root causes, the plans underway to address these in the near term, and the many reasons for our continued optimism regarding our growth potential in the U.S. Next, I will speak to our recent brand campaigns and activations. Megan will review our financials and we will close by taking your questions.

Calvin: Thank you, Howard. I'm glad you could all join us on the call today to discuss our business in quarter two and a revised outlook for the second half of the year.

Calvin: On today's call, I will speak to the strength and our international business.

Calvin: I also will spend time discussing our business in the U.S. including some missed opportunities and women, our assessment of the root causes, the plans underway to address these in the near term, and the many reasons for our continued optimism regarding our growth potential in the U.S.

Calvin: Next, I will speak to our recent brand campaigns and activations. Meghan will review our financials and we will close by taking your questions, so let's get started.

Calvin McDonald: So let's get started. In the second quarter, total revenue increased 7 percent or 8 percent in constant currency. By merchandise category, women's increased 6 percent, men's increased 7 percent, and accessories increased 7 percent. Earnings per share increased 18% driven by strong gross margin which contributed to 110 basis point increase in operating margin. In addition, demonstrating our continued confidence in the business, we repurchased $584 million of stock in quarter two, which brings us to $1.2 billion a year to date.

Meghan: In the second quarter, total revenue increased 7% or 8% in constant currency. By merchandise category, women's increased 6%, men's grew 11% and accessories increased 7%.

Meghan: earnings per share increased 18% driven by strong gross margin which contributed to 110 basis point increase in operating margin.

Meghan: In addition, demonstrating our continued confidence in the business, we repurchased $584 million of stock in quarter two, which brings us to $1.2 billion a year to date.

Speaker Change: That's now discussed our regional performance beginning with our international business.

Calvin McDonald: Let's now discuss our regional performance, beginning with our international business. In quarter two, we continued to see strength in our international markets, as the Lululemon brand resonates with guests around the world. Growing our business outside of North America remains one of our largest opportunities, and we remain on track to quadruple international revenue from 2021 levels by the end of 2026. Momentum remains strong with total international revenue increasing 29% or 31% in constant currency. By region, our results were as follows, China mainland increased 34% or 37% in constant currency, rest of the world grew 24% or 27% in constant currency.

Speaker Change: According to, we continue to see strength in our international markets as a loole lemon-brand resonates with guests around the world. Growing our business outside of North America remains one of our largest opportunities, and we remain on track to quadruple international revenue from 2021 levels by the end of

Speaker Change: Momentum remains strong with total international revenue increasing 29% or 31% in constant currency.

Speaker Change: by region, our results were as follows. China mainland increased 34% for 37% in constant currency, rest of world grew 24% or 27% in constant currency.

Calvin McDonald: In China mainland, our business remained robust in the second quarter as we continued to bring new guests into the brand through our stores and multiple e-commerce platforms. In addition to our innovative product offering and on the operating model, we are requiring guests through our unique mate to field positioning, which comes to life through our commitment to movement and community, all of which supports the Healthy China 2030 initiative. In quarter two, we built upon the success of our Summer Sweat Games series with our largest activation yet.

Speaker Change: In China, mainland, our business remained robust in the second quarter, as we continue to bring new guests into the brand through our stores and multiple e-commerce platforms.

Speaker Change: In addition to our innovative product offering and on the operating model, we are requiring guests through our unique May-to-Feel positioning, which comes to life through our commitment to movement and community, all of which supports the Healthy China 2030 initiative.

Speaker Change: In Quarter Two, we built upon the success of our Summer Sweat Game Series with our largest activation yet.

Calvin McDonald: This year, we expanded the games to more than 70 stores in nearly 40 cities with approximately 10,000 guests signing up to participate. The National Finals were held this past weekend in Beijing. Looking to quarter three, we will build upon last year's success and bring attention to the World Mental Health Day in October with unique activations across several cities in China mainland. In addition, we will expand our activations to other markets this fall, including South Korea, Germany, the UK and the US. This is a great example of how our teams from around the world share ideas and activate global campaigns. Shfting to our rest of world segment, where we continue to perform well in both AMA and APAC. We expanded further in Southeast Asia with the opening of our second store in Thailand and our fourth in Malaysia. And in France, our pair of stores and the Lulemon brand overall benefited from the energy and excitement of the Olympics, which I'll speak to in more detail shortly.

Speaker Change: This year we expanded the games to more than 70 stores in nearly 40 cities, with approximately 10,000 guests signing up to participate. The National Finals were held this past weekend in Beijing.

Speaker Change: Looking to quarter three, we will build upon last year's success and bring attention to the World Mental Health Day in October with unique activations across several cities in China, mainland.

Speaker Change: In addition, we will expand our activations to other markets this fall, including South Korea, Germany, the UK and the US. This is a great example of how our teams from around the world share ideas and activate global campaigns.

Calvin McDonald: This is a great example of how our teams from around the world share ideas and activate global campaigns. Gifting to our rest of world segment, where we continue to perform well in both AMA and APAC. We expanded further in Southeast Asia with the opening of our second store in Thailand and our fourth in Malaysia. And in France, our pair of stores and the Lulemon brand overall benefited from the energy and excitement of the Olympics, which I'll speak to in more detail shortly.

Speaker Change: Chifting to our rest of world segment, where we continue to perform well in both Emmaia and Apac.

Speaker Change: We expanded further in Southeast Asia with the opening of our second store in Thailand and our fourth in Malaysia.

Speaker Change: and in France, our pair stores and the Lou Lemon Brand overall benefited from the energy and excitement of the Olympics, which I'll speak to in more detail shortly.

Calvin McDonald: Turning to our business in the Americas, revenue increased 1% or 2% in constant currency. We continued to perform well in Canada with revenue growth of 8% or 11% in constant currency, while revenue in the US was flat.

Speaker Change: Turning to our business in the Americas, revenue increased 1% or 2% in constant currency.

Speaker Change: We continue to perform well in Canada with revenue growth of 8% or 11% in constant currency while revenue in the US was flat. This is a key area focused for us and I will now dive deeper into our US business.

Calvin McDonald: This is a key area focus for us and I will now dive deeper into our US business. Our brand remains strong in the US market. Traffic was up across both channels and Google search queries remain positive. Guests are looking for our product coming into our stores and visiting our e-commerce sites. Williams. While we continue to see growth in our men's business, we have experienced a slowdown in women's. We have improved our in stocks in smaller sizes through Q2 and our entering Q3 better positioned.

Speaker Change: Our brand remains strong in the U.S. market. Traffic was up across both channels, and Google search queries remain positive. Guess are looking for our product coming into our stores and visiting our e-commerce sites.

Speaker Change: While we continue to see growth in our men's business, we have experienced the slowdown in women's.

Speaker Change: We have improved our Instaques in smaller sizes through Q2 and our entering Q3 better position.

Speaker Change: As we've analyzed our women's business in more detail, we have determined the most significant factor was a product plan that introduced less newness across core and seasonal styles.

Speaker Change: By Nunes, I'm referring to the seasonal updates we bring into the assortment, typically expressed as color, print, patterns and silhouettes. I'm not referring to our pipeline of innovation, which remains full and the details of which I will share with you shortly.

Calvin McDonald: While this reduction was seen across our women's assortment, it had a more pronounced impact in bottoms and in our online channel. The newness that we had performed well, we simply did not have enough to inspire her to purchase.

Speaker Change: As we had learned more, it's become clear to us that this reduced newness, which is below our historical levels, and stems from earlier product decisions, has impacted conversion rates given the fewer new options available to our female guests.

Speaker Change: While this reduction was seen across our women's assortment, it had a more pronounced impact in bottoms and in our online channel. The newness that we had performed well, we simply did not have enough to inspire her to purchase.

Calvin McDonald: As most of you know, we announced changes within our product organization in May of this year. We implemented a new reporting structure in which our global creative director Jonathan Chung reports to me and our chief merchant Liz Bender reports to Nikki Newberger in her expanded role as chief brand and product activation officer. Since this shift, Nikki and I have both spent considerable time with the teams and we are pleased that this new structure puts design and merchandising on equal footing and reestablishes the healthy balance that must exist within a product organization.

Speaker Change: As most of you know, we announced changes within our product organization in May of this year. We implemented a new reporting structure in which our global creative director, Jonathan Chung, reports to me and our chief merchant Liz Binder, reports to Nikki Newberger in her expanded role as chief brand and product activation officer.

Speaker Change: Since this shift, Nikki and I have both spent considerable time with the teens.

Speaker Change: and we are pleased that this new structure puts design and merchandising on equal footing and re-establishes the healthy balance that must exist within a product organization. The teams are working well together and already in action.

Calvin McDonald: The teams are working well together, and already in action. Our near term action plan leverages our capabilities in chase and fast track design to bring more seasonal newness into our women's assortment as quickly as possible. The teams have been chasing into some of our strong performers, including align leggings and colors and prints, our gold zip scuba and soft dream and new silhouettes and seasonal fabrications. Our fast track design capability allows us to bring newness into our assortment quicker while also testing and learning from new silhouettes.

Speaker Change: Our near-term action plan leverages our capabilities in chase and fast track design to bring more seasonal newness into our women's assortment as quickly as possible.

Speaker Change: The teams have been chasing into some of our strong performers, including a line-legging sing colors and prints, our gold zip scuba and soft-stream and new silhouettes and seasonal fabrications.

Speaker Change: Our fast track design capability allows us to bring newness into our sort of and quicker while also testing and learning from new silhouettes. For 2025, we are fast tracking several new styles within performance shorts, tops, and track suits.

Calvin McDonald: For 2025, we are fast tracking several new styles within performance shorts, tops and track suits. We are optimistic that we will begin to see the benefits of these strategies over the upcoming quarters and return to our historical levels of newness no later than spring 2025. Moving forward, I feel confident that the new structure and relationship between design and merchandising will lead to more ongoing conversations and consistent decision making. And I'm excited about the newness and innovation that will be flowing into our upcoming product assortments.

Speaker Change: We are optimistic that we will begin to see the benefits of these strategies over the upcoming quarters and return to our historical levels of newness no later than spring 2025.

Speaker Change: Moving forward, I feel confident that the new structure and relationship between design and merchandising will lead to more ongoing conversations in consistent decision making. And I'm excited about the newness and innovation that will be flowing into our upcoming product assortments.

Calvin McDonald: While we are disappointed with the recent performance in women's, we see many strengths in our US business. Our store portfolio remains highly productive with significant opportunities ahead. Our industry leading sales per foot, the success of our new stores and the positive results from our optimization program all underpin our comfort with our power of three times to target of approximately 5% square footage growth annually in the Americas through 2020. 2006. We are only beginning to leverage the power of our membership program, which allows us to engage more deeply with our guests, drive loyalty, and increase long-term value.

Speaker Change: While we are disappointed with the recent performance in women's, we see many strengths in our U.S. business.

Speaker Change: Our store portfolio remains highly productive with significant opportunities ahead.

Speaker Change: Our industry leading sales for foot, the success of our new stores and the positive results from our optimization program all underpin art comfort with our power 3x2 target of approximately 5% square footage growth annually in the Americas through 2026.

Speaker Change: We are only beginning to leverage the power of our membership program, which allows us to engage more deeply with our guests, drive loyalty and increase long-term value. We now have more than 20 million essential members, and I'll share more in a moment about how we're expanding our offerings.

Speaker Change: And while we have experienced positive increases across our brand funnel metrics in the market, there is still substantial opportunity to drive on aided brand awareness, introducing Lulemon to new gas segments.

Speaker Change: As you can see, there are many reasons we feel optimistic about our U.S. business and its growth potential.

Calvin McDonald: Let's shift now to our recent and upcoming product innovations. Beginning with men, the business remains robust, and we continue to gain market share. In quarter two, we saw strength across the assortment, including zeroed-in, which was launched this past spring, and has quickly become a guest favorite in a top three performance franchise. Our pacebreaker with the positive response to our shorts and our recently launched pant in jacket is performing very well. Our new show Zero Polo, which virtually eliminates the appearance of sweat, also launched this spring, and has resonated well with guests, and will benefit from increased inventory commitments this fall and into next year.

Speaker Change: Let's shift now to our recent and upcoming product innovations.

Speaker Change: Beginning with men, the business remains robust and we continue to gain market share. In quarter two, we saw a strength across the assortment, including zeroed in, which was launched as past spring and has quickly become a guest favorite in a top three performance franchise.

Speaker Change: Our pay-spraaker with the positive response to our shorts and our recently launched pant in jacket is performing very well.

Speaker Change: Our new show Zero Polo, which virtually eliminates the parents of sweat, also launched the spring, and has resonated well with gas, and will benefit from increased inventory commitments this fall and into next year.

Calvin McDonald: And our lounge offering, including Soft Jersey, Study State, and Smooth Spacer, continue to perform well, and we will fuel the momentum with additional styles and deeper inventory buys. In women's, I'm excited with our product roadmap for fall, which includes an expansion of our train offering with the introduction of a new performance fabric innovation in a tight. An expansion of our wonder under franchise offering are iconic lagging in different fabrics, seasonal updates within our line franchise, and an updated version of our charge-field footwear style.

Speaker Change: and our lounge offering, including Soptuary's steady state and smooth spacer, continue to perform well and we will feel the momentum with additional styles and deeper inventory buys.

Speaker Change: In women's, I'm excited with our product roadmap for fall, which includes an expansion of our train offering with the introduction of a new performance fabric innovation in a tight.

Speaker Change: and expansion of our wonder-under franchise offering our iconic lagging in different fabrics, seasonal updates within our line franchise and an updated version of our charge-feel footwear style.

Calvin McDonald: And our accessories business also remains positive on top of last year's strong performance. We have diversified into a compelling assortment of bags, including our new crew and double zip backpacks, and additional styles within the everywhere franchise, including a backpack and cross-body bag, which is fueling continued momentum in the category. One of our goals is to solve for the unmet needs of our guests with new and compelling technical innovations, and this will continue to separate us from other brands.

Speaker Change: and our Accessories Business also remains positive on top of last year's strong performance.

Speaker Change: We have diversified into a compelling assortment of bags, including our new crew and doubles it backpacks, and additional styles within the everywhere franchise, including a backpack and cross-body bag, which is fueling continued momentum in the category.

Speaker Change: One of our goals is to solve for the on-met needs of our guests with new and compelling technical innovations and as we'll continue to separate us from other brands.

Calvin McDonald: With this in mind, I want to touch on breathe through, a new product offering this quarter for guests who participate in hot yoga and other heat-intensive workouts. It was a small buy, reviewed this as a test and learn, and while guests were excited by the fabric, the design didn't meet their expectations. Listening to our guests is central to who we are and how we grow our brand, and we took the right step of pausing on sales and look forward to reintroducing the fabric in the future. This decision had a negligible impact on our performance in this quarter.

Speaker Change: With this in mind, I want to touch on breeze through a new product offering this quarter for gas who participate in hot yoga and other heat intensive workouts. It was a small buy. We viewed this as a test and learn and while guests were excited by the fabric, the design didn't meet their expectations.

Speaker Change: Listening to our guests is central to who we are and how we grow our brand and we took the right step of pausing on sales and look forward to reintroducing the fabric in the future. This decision had a negligible impact on our performance in this quarter.

Calvin McDonald: I'd now like to spend a few minutes speaking about our recent brand campaigns and activations. Increasing brand awareness and consideration remains one of our single biggest opportunities in almost every market in which we operate, so let me highlight a few examples now. As I mentioned earlier, we continue to offer many benefits to members of our free essentials program, in early June, we hosted a members-only weekend at Peloton Studios, New York. This exclusive sold-out event featured live classes, a 5K run, sessions with our Peloton ambassadors and a wrap-up party.

Speaker Change: I'd now like to spend a few minutes speaking about our recent brand campaigns and activations, increasing brand awareness and consideration remains one of our single biggest opportunities in almost every market in which we operate. So let me highlight a few examples now.

Speaker Change: As I mentioned earlier, we continue to offer many benefits to members of our free essentials program.

Speaker Change: In early June, we hosted a members-only weekend at Peloton Studios, New York. This exclusive, sold-out event featured live classes, a 5K run, sessions with our Peloton ambassadors and a wrap-up party.

Calvin McDonald: We also launched partner perks for members. We partnered with 12 brands, including Aura and Berries, that offer our members exclusive perks and benefits, and the early feedback from guests has been very positive. These strategies illustrate just a few of the ways we engage with our guests, beyond a simple purchase transaction, by offering exclusive experiences and benefits and helping them feel the best, all of which drives and deepens loyalty. Our partnership with the Canadian Olympic and Paralympic teams came to life with the games in Paris and continues for the next several days during the Paralympics. As a Canadian, I'm incredibly proud of our athletes, and how our brand showed up during the games. Through our partnership, we outfit athletes for their off-field activities and the Lululemon brand clearly benefit from the podium time the team achieved, and the exposure during the opening and closing ceremonies. We further leveraged our partnership with the pop-up shop in Canada House, and by offering our team Canada collection in our nearby stores in Paris. Across Canada in both stores and e-commerce, and in the US, through our e-commerce channel. This partnership is a great example of how we are elevating the Lululemon brand on the world stage by associating with elite athletes, gaining significant earned media and growing brand awareness globally. Another area focused for us is back to school. Bringing younger guests and particularly men into the brand remains an opportunity as we increase awareness regarding the versatility of our merchandise and the breadth of our offering. Football players, DK Metcalf and Odell Beckham Jr, star in this year's campaign in North America, and it features our loungewear offering for both men and women and our cityverse sneaker. Before I hand it over to Megan to discuss our financials, let me share our high-level thinking on our guidance for the remainder of the year. For quarter three and the full year, excluding the 53rd week, we expect revenue growth of 6% to 7%, relatively in line with quarter two performance. Our full year revenue guidance acknowledges the uncertainty around the shorter holiday shopping season, and the US election in quarter four. Our teams remain focused on the actions I detailed for you.

Speaker Change: We also launched partner perks for members. We partnered with 12 brands, including aura and berries that offer our members exclusive perks and benefits, and your early feedback from gas has been very positive.

Speaker Change: These strategies illustrate just a few of the ways we engage with our guests beyond a simple purchase transaction by offering exclusive experiences and benefits and helping them feel the best, all of which drives and deepens loyalty.

Calvin McDonald: Our partnership with the Canadian Olympic and Paralympic teams came to life with the games in Paris and continues for the next several days during the Paralympics. As a Canadian, I'm incredibly proud of our athletes and how our brand showed up during the games. Through our partnership, we outfit athletes for their off-field activities and the Lululemon brand clearly benefit from the podium time the team achieved and the exposure during the opening and closing ceremonies.

Speaker Change: Our partnership with the Canadian Olympic and Paralympic teams came to life with the games in Paris and continues for the next several days during the Paralympics.

Speaker Change: As a Canadian, I'm incredibly proud of our athletes in Howard Branch showed up during the games.

Speaker Change: Through a partnership, we outfit athletes for their off-field activities and the Lou Lemon Brand clearly benefits from the podium time, the team achieved, and the exposure during the opening, including ceremonies.

Calvin McDonald: We further leveraged our partnership with the pop-up shop in Canada House and by offering our team Canada collection in our nearby stores in Paris across Canada and both stores in e-commerce and in the U.S, through our e-commerce channel. This partnership is a great example of how we are elevating the Lululemon brand on the world stage by associating with elite athletes, gaining significant earned media and growing brand awareness globally.

Speaker Change: We further leveraged our partnership with the pop-up shop in Canada House and by offering our teen Canada collection in our nearby stores in Paris. Across Canada and both stores and e-commerce and in the U.S. through our e-commerce channel.

Speaker Change: This partnership is a great example of how we are elevating the lemon brand on the world stage by associating with the lead athletes, gaining significant earned media and growing brand awareness globally.

Calvin McDonald: Another area focused for us is back to school. Bringing younger guests and particularly men into the brand remains an opportunity as we increase awareness regarding the versatility of our merchandise and the breadth of our offering. Football players, DK Medcalf and Odell Beckham Jr, star in this year's campaign in North America and it features our loungewear offering for both men and women and our cityverse sneaker.

Speaker Change: Another area focused for us is back to school. Bringing younger guests and particularly men into the brand remains an opportunity as we increase awareness regarding the versatility of our merchandise and the breath of our offering.

Speaker Change: Football players DK Medcap and Adele Beckham Jr. star in this year's campaign in North America, and it features our loungewear offering for both men and women and our cityverse sneaker.

Calvin McDonald: Before I hand it over to Megan to discuss our financials, let me share our high-level thinking on our guidance for the remainder of the year. For quarter three and the full year, excluding the 53rd week, we expect revenue growth of 6 to 7 percent relatively in line with quarter two performance. Our full year revenue guidance acknowledges the uncertainty around the shorter holiday shopping season and the U.S, election in quarter four. Our teams remain focused on the actions I detailed for you.

Speaker Change: Before I handed over to Megan to discuss our financials, let me share our high-level thinking on our guidance for the remainder of the year. For quarter three and the full year, excluding the 53rd week, we expect revenue growth of 6 to 7 percent relatively in line with quarter two performance.

Megan: Our full-year revenue guidance acknowledges the uncertainty around the shorter holiday shopping season and the U.S. election in quarter four.

Speaker Change: Our teams remain focused on the actions I detailed for you. We plan for our penetration of newness to improve in the second half of 2024, and we expect to be back to our historical levels of newness as we start 2025.

Calvin McDonald: We plan for our penetration of newness to improve in the second half of 2024, and we expect to be back to our historical levels of newness, as we start 2025. While you can see our focus on the US, other aspects of our business remain strong and we are committed to delivering on our power of 3x2 target of doubling revenue from $6.25 billion in '21 to $12.5 billion in '26. Using our revised guidance for this year, our three-year revenue growth CAGR from '21 to '24 is 19% ahead of the 15% CAGR we laid out in our plan.

Speaker Change: While you can see our focus on the U.S., other aspects of our business remain strong and we are committed to delivering on our power of three times two target of doubling revenue from 6.25 billion in 21 to 12.5 billion in 26.

Speaker Change: Using our revised guidance for this year, our three-year revenue growth cager from 21-24 is 19% ahead of the 15% cager we laid out in our plan.

Calvin McDonald: I'm excited with our new leadership structure driving product direction for '25, and our future pipeline of innovation. I feel optimistic we can accelerate growth in our US, women's business while continuing to deliver strong performance in men and international, Megan, over to you.

Speaker Change: I'm excited with our new leadership structure driving product direction for 25 in our future pipeline of innovation. I feel optimistic we can accelerate growth in our US women's business while continuing to deliver strong performance in men's and international.

Meghan Frank: Megan, over to you. Thanks, Calvin. While revenue and Q2 remain strong in all of our international reaches in Canada, the U.S, business was softer for the reasons Calvin just detailed. Our names per share exceeded our expectations to have been predominantly by strong growth margin. Our accounts were flat versus the prior year and better than expected. And when looking at expenses, we continue to manage the business prudently.

Megan: Megan, over to you.

Megan: Thanks Calvin, while revenue and Q2 remains strong in all of our international reachers in Canada, the U.S. business was softer for the reasons Calvin just detailed. Our next brochure exceeded our expectations, driven predominantly by strong gross margin.

Megan: Markdowns are flat versus the prior year and better than expected and when looking at expenses we continue to manage the business prudently while protecting key investments through long-term.

Meghan Frank: I'll protect and key investments for the long term. Let me now share the details of Q2 performance. For Q2, total net revenue rose 7% to $2.4 billion in constant dollar comparable sales increased 3%. Within our regions, results were as follows. America's revenue increased 1% for 2% in constant currency, comparable sales declined 2%. And in our rest of world segment, revenue grew by 24% for 27% in constant currency with comparable sales increasing by 20%.

Speaker Change: Let me now share the details of QT Performance.

Speaker Change: for Q2 total net revenue rose 7% to 2.4 billion and constant dollar comparable sales increased 3%.

Speaker Change: Within our regions, results were as follows. America's revenue increased 1% for 2% in constant currency, and parable sales declined 2%.

Speaker Change: China mainland revenue increased 34% or 37% in cost and currency with comparable sales increase in 23%. In our rest of world segment revenue grew to 24%. Our 27% in cost and currency with comparable sales increasing by 20%.

Meghan Frank: In our store channel, total sales increased 11% and we ended the quarter with 721 stores globally. Square footage increased 14% versus last year driven by the addition of 49 net new blue lemon stores with Q2 of 2023. During the quarter, we opened 10 net new stores and completed six optimizations. In our digital channel, revenues increased 2% and contributed 900 million of top line, or 38% of total revenue. And by category, men's revenue increased 11% versus last year and women's increased 6% while accessories grew 7%.

Speaker Change: and our store channel total sales increased 11% and we ended the corridor with 721 stores globally.

Speaker Change: Square footage increased 14 per cent versus last year, driven by the addition of 49 net new blue lemon source, his Q2 of 2023.

Speaker Change: During the quarter we opened 10 net news stores and completed six optimizations.

Speaker Change: and our digital channel revenues increased 2% and contributed 900 million of top line, or 38% of total revenue.

Speaker Change: and by category, men's revenue increased 11% versus last year and women's increased 6%. Well, accessories grew 7%.

Meghan Frank: Growth profit for the second quarter was 1.4 billion, or 59.6% of net revenue compared to 58.8% of net revenue in Q2 2023. The growth profit rate in Q2 increased 80 basis points significantly better than our guidance and was driven primarily by the following. 130 basis point increase in product margin driven primarily by favorable IMU from lower product costs mark down to a spot year over year and better than expected. 30 basis points of net to leverage on fixed costs and 20 basis points of unfavorable impact from foreign exchange.

Speaker Change: First process for the second quarter is 1.4 billion, or 59.6% of net revenue compared to 58.8% of net revenue is Q2 2023.

Speaker Change: The gross profit rate in Q2 increased 80 basis points, significantly better than our guidance and was driven primarily by the following.

Speaker Change: A 130-bases point increase in product margin driven primarily by favorable IMU from lower product cost. Mark Townsville flat year over year and better than expected.

Speaker Change: 30 basis points of netty leverage on fixed costs and 20 basis points of unfavorable impact for foreign exchange.

Meghan Frank: I would also note that our pause on the sale of breeze through had a negligible impact on growth margin in the quarter. Relative to our guidance, which was a decline in growth margin of 100 to 110 basis points, the upside was driven predominantly by prudent management of fixed expenses within growth margin, favorable mix and lower than expected mark down. Moving to SGNA, our approach continues to be grounded and prudently managing our expenses, while also continuing to strategically invest in our long term growth opportunities.

Speaker Change: I would also note that our pause on the sale of breeze through had a negligible impact on gross margin in the quarter.

Speaker Change: relative to our guidance, which was a decline in gross margin of 100 to 110 basis points. The outside was driven predominantly by printed management of six expenses within gross margin. Favorite little mix and lower than expected markdowns.

Speaker Change: Hoover Test GNI, our approach continues to be grounded and prudently managing our expenses while also continuing to strategically invest in our long-term growth opportunities.

Meghan Frank: SGNA expenses were approximately 872 million or 36.8% of net revenue compared to 37% of net revenue for the same period last year. Foreign exchange contributed 10 basis points of V leverage. Overall the 20 basis points of leverage in the quarter was below our guidance to 40 to 60 basis points and resulted from the lower than expected top line. Operating income for the quarter was approximately 540 million or 22.8% of net revenue compared to 21.7% of net revenue in Q2 2023.

Speaker Change: As she and ex-spaces were approximately 872 million or 36.8% of net revenue compared to 37% of net revenue for the same period last year.

Speaker Change: for an exchange contributed 10 basis points of the leverage.

Speaker Change: Overall, the 20 basis points of leverage in the quarter was below our guidance of 40 to 60 basis points and resulted from the lower than expected top line.

Speaker Change: operating in comes for the quarter with approximately 540 million or 22.8% of net revenue compared to 21.7% of net revenue in Q2 2023.

Meghan Frank: Tax expense for the quarter was 165.3 million or 29.6% of pre-tax earnings compared to an effective tax rate of 29.28% a year ago. Net income for the quarter was 393 million or $3.15 for diluted share compared to $2.68 for the second quarter of 2023. Capital expenditures were approximately 145 million for the quarter, compared to approximately 146 million in the second quarter last year. Q2 spent relates primarily to investments that support business growth, including our multi-year distribution center project, store capital for new locations, relocations and renovations and technology investments.

Speaker Change: Tax expense for the quarter was 165.3 million, for 29.6% of pretext earnings, compared to an effective tax rate of 29.8% a year ago.

Speaker Change: Met income for the quarter was $393 million, or $3.15 per diluted chair, compared to $2.68 for the second quarter of 2023.

Speaker Change: Capital expenditures were approximately 145 million for the quarter, compared to approximately 146 million in second quarter last year.

Speaker Change: Q2Span relates primarily to investments that support business growth, including our multi-year distribution center project, store capital for new locations, relocations and renovations, and technology investments.

Meghan Frank: Turning to our balance sheet highlights, we ended the quarter with 1.6 billion in cash and cash equivalent. Inventory declined 14% in line with our expectations, with the units declining in the mid-single digit range. We repurchased nearly 1.9 million in shares in Q2 at an average price of $310. Here to date, we repurchased approximately 1.2 billion of stock. Share repurchases remain our preferred method to return cash to shareholders, and currently we have approximately 1 billion remaining on our repurchased program.

Speaker Change: Turning to a balance sheet highlights, we ended the corridor with 1.6 billion in cash and cash equivalent. Inventory to 24% in line with our expectations, with the units declining in the mid-singles range.

Speaker Change: We've repurchased nearly $1.9 million in shares in Q2, with an average price of $310.

Speaker Change: Here today, we've repurchased approximately 1.2 billion of stock.

Speaker Change: Spearly purchases remain our preferred method to return cash to shareholders. And currently, we have approximately 1 billion remaining on our Repurchase Program.

Meghan Frank: Let me now share our detailed guidance that looked for the remainder of the year. At the highest level, we are assuming that revenue trends in the second half of the year remain fairly consistent with Q2, when excluding the 53rd week and the impact of a shorter holiday shopping season in Q4. I would also note that our pause on the sale of briefs through how the negligible impact on our revenue and growth margin guidance for the year.

Speaker Change: Let me now share our detailed guidance that looked for the remainder of the year.

Speaker Change: At the highest level, we were assuming that revenue trends in the second half of the year were made fairly consistent with Q2, but excluding the 53rd week in the impact of a shorter holiday shopping season in Q4.

Speaker Change: I would also note that our pause and sale of breeze through had an negligible impact on our revenue and gross margin guidance for the year.

Meghan Frank: We feel optimistic with the work our teams are doing to improve the newness we offer within our US women's assortment. We continue to acknowledge the uncertainties in the macro environment and plan the business prudently. Starting with a full year of 2024, we now expect revenue to be in the range of 10.375 to 10.475 billion. This range represents growth of 8 to 9% relative to 2023. Excluding the 53rd week that we have in the fourth quarter of 2024, we expect revenue to grow 6 to 7%.

Operator: Welcome to the Lululemon Athletica Inc. 2nd quarter, 2024 results conference call. As a reminder, all participants are in listen only mode, the conference is being recorded. After the presentation, there will be an opportunity to ask questions, and list who wish to join the question queue may press star then one on their telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Howard Tubin, Vice President Investor Relations for Lululemon Athletica. Please go ahead.

Operator: Welcome to the Lululemon Athletica Inc. 2nd quarter, 2024 results conference call. As a reminder, all participants are in listen only mode, the conference is being recorded.

Speaker Change: We feel optimistic with the work our teams are doing to improve the newness we offer within our U.S. women's bring life.

Operator: After the presentation, there will be an opportunity to ask questions, and list who wish to join the question queue may press star then one on their telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Howard Tubin, Vice President Investor Relations for Lululemon Athletica. Please go ahead.

Speaker Change: Starting with the full year 2024, we now expect revenue to be in the range of 10.375 to 10.475 billion.

Speaker Change: This range represents growth as 8 to 9% relative to 2023.

Speaker Change: Excluding the 53rd week that we have in the 4th quarter of 2024, we expect revenue to grow 67%.

Meghan Frank: Also, relating to Q4, we are assuming a negative impact of approximately 3 percentage points resulting from a shorter holiday shopping season relative to last year. We continue to expect to open 35 to 40 net new company operated stores in 2024 and complete approximately 40 co-located optimizations. This will contribute to overall square footage growth in the low double digits. Our new store openings in 2024 will include 5 to 10 stores in the Americas with the rest in our international markets, primarily in China mainland.

Speaker Change: Also, relating to Q4, we are assuming a negative impact of approximately 3 percentage points, resulting from a shorter holiday shopping season relative to last year.

Howard Tubin: Thank you and good afternoon. Welcome to Lululemon's 2nd quarter earnings conference call, joining me today to talk about our results are Calvin McDonald CEO and Meghan Frank CFO. Before we get started, I'd like to take this opportunity to remind you that our remarks today will include forward-looking statements, reflecting management's current forecast of certain aspects of Lululemon's future. These statements are based on current information which we have assessed, but by which it's nature is dynamic and subject to rapid and even abrupt changes. Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business. Including those we have disclosed in our most recent filings with the SEC, including our annual report on form 10-K and our quarterly reports on form 10-Q. Any forward-looking statements that we make on this call are based on assumptions as of today and we expressly describe any obligation or undertaking to update or revise any of these statements as a result of new information or future events. During this call, we will present both gap and non-gap financial measures. A reconciliation of gap to non-gap measures is included in our quarterly report on form 10-Q and in today's earnings press release, in addition, the comparable sales metrics given on today's call are on a constant dollar basis. The press release and accompanying quarterly reports on form 10-Q are available under the Investor section of our website at www.lululemon.com. Before we begin the call, I'd like to remind our investors to visit our investor site, where you'll find a summary of our key financial and operating statistics for the second quarter, as well as our quarterly infographics. Today's call is scheduled for one hour, so please limit yourself to one question at a time, to give others the opportunity to have their questions addressed. And now, I'd like to turn the call over to Calvin.

Speaker Change: We continue to expect to open 35 to 40 net new company operated stores in 2024 and complete approximately 40 co-located organizations.

Speaker Change: This will contribute to a raw square footage growth and a low double digit.

Howard Tubin: These statements are based on current information which we have assessed, but by which it's nature is dynamic and subject to rapid and even abrupt changes. Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business.

Speaker Change: Our new store openings in 2024 will include five to ten stores in America for the rest in our international markets, primarily in China mainland.

Meghan Frank: For the full year, we now expect growth margins to be approximately 20 basis points below our adjusted growth margin in 2023. Do predominantly to de-leverage on fixed costs associated with lower forecasted sales and an increase in freight costs relative to our prior estimate. We continue to expect markdowns to be relatively flat with last year. Starting now at SG&A for the full year, we now expect it to be approximately flat versus 2023.

Howard Tubin: Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business. Including those we have disclosed in our most recent filings with the SEC, including our annual report on form 10-K and our quarterly reports on form 10-Q. Any forward-looking statements that we make on this call are based on assumptions as of today and we expressly describe any obligation or undertaking to update or revise any of these statements as a result of new information or future events. During this call, we will present both gap and non-gap financial measures. A reconciliation of gap to non-gap measures is included in our quarterly report on form 10-Q and in today's earnings press release, in addition, the comparable sales metrics given on today's call are on a constant dollar basis. The press release and accompanying quarterly reports on form 10-Q are available under the Investor section of our website at www.lululemon.com. Before we begin the call, I'd like to remind our investors to visit our investor site, where you'll find a summary of our key financial and operating statistics for the second quarter, as well as our quarterly infographics. Today's call is scheduled for one hour, so please limit yourself to one question at a time, to give others the opportunity to have their questions addressed. And now, I'd like to turn the call over to Calvin.

Howard Tubin: Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business.

Speaker Change: For this full year, we now expect gross margins to be approximately 20 basis points below our adjusted gross margin in 2023.

Howard Tubin: Including those we have disclosed in our most recent filings with the SEC, including our annual report on form 10-K and our quarterly reports on form 10-Q. Any forward-looking statements that we make on this call are based on assumptions as of today and we expressly describe any obligation or undertaking to update or revise any of these statements as a result of new information or future events. During this call, we will present both gap and non-gap financial measures. A reconciliation of gap to non-gap measures is included in our quarterly report on form 10-Q and in today's earnings press release, in addition, the comparable sales metrics given on today's call are on a constant dollar basis. The press release and accompanying quarterly reports on form 10-Q are available under the Investor section of our website at www.lululemon.com. Before we begin the call, I'd like to remind our investors to visit our investor site, where you'll find a summary of our key financial and operating statistics for the second quarter, as well as our quarterly infographics. Today's call is scheduled for one hour, so please limit yourself to one question at a time, to give others the opportunity to have their questions addressed. And now, I'd like to turn the call over to Calvin.

Duke: Duke predominately to deliver John Fick's cost associated with lower forecasted sales and an increase in freight costs relative to a prior estimate.

Duke: will continue to expect Mark Downs to be relatively flat with last year.

Duke: Turning now to FGNA for the full year, we now expect it to be approximately flat versus 2023.

Meghan Frank: We are poorly managing our expenses while continuing to invest strategically into our power of three times two roadmap, including investments in marketing and brand building, is it increasing our awareness and acquiring new guests, investments to support our international growth and market expansion, and continued investment in technology infrastructure and data analytics capabilities. When looking at operating margin for the full year 2024, we now expect a decrease of 10 to 20 basis points versus adjusted operating margin in 2023, which expanded 110 basis points versus 2022.

Speaker Change: They're prudently managing our expenses while continuing to invest strategically into our power of three times to roadmap, including investments in marketing and brand building, as it increasing our awareness and acquiring new guests.

Howard Tubin: A reconciliation of gap to non-gap measures is included in our quarterly report on form 10-Q and in today's earnings press release, in addition, the comparable sales metrics given on today's call are on a constant dollar basis. The press release and accompanying quarterly reports on form 10-Q are available under the Investor section of our website at www.lululemon.com. Before we begin the call, I'd like to remind our investors to visit our investor site, where you'll find a summary of our key financial and operating statistics for the second quarter, as well as our quarterly infographics. Today's call is scheduled for one hour, so please limit yourself to one question at a time, to give others the opportunity to have their questions addressed. And now, I'd like to turn the call over to Calvin.

Speaker Change: Investments to support our international growth and market expansion and continue to invest in a technology infrastructure and data analytics capabilities.

Howard Tubin: The press release and accompanying quarterly reports on form 10-Q are available under the Investor section of our website at www.lululemon.com. Before we begin the call, I'd like to remind our investors to visit our investor site, where you'll find a summary of our key financial and operating statistics for the second quarter, as well as our quarterly infographics. Today's call is scheduled for one hour, so please limit yourself to one question at a time, to give others the opportunity to have their questions addressed. And now, I'd like to turn the call over to Calvin.

Speaker Change: I'm looking at operating margin for the full year 2024. We now expect a decrease of 10 to 20 basis points versus adjusted operating margin in 2023, which expanded 110 basis points versus 2022.

Meghan Frank: For the full year of 2024, we expect our effective tax rate to be approximately 30%. For the fiscal year of 2024, we now expect diluted earnings for share in the range of $13.95 to $14.15, versus adjusted EPS of $12.77 in 2023. Our EPS guidance excludes the impact of any future share repurchases, but does include the impact of our repurchases year to date. Looking at inventory, we expect dollar inventory to increase in the mid teens and Q3, as we begin to anniversary last year's decline.

Speaker Change: For the full year 2024, we expect our effective tax rate to be approximately 30%.

Speaker Change: For the fiscal year 2024, we now expect diluted earnings for share in the range of $13.95 to $14.15.

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

Calvin McDonald: Thank you, Howard. I'm glad you could all join us on the call today to discuss our business in quarter two and a revised outlook for the second half of the year. On today's call, I will speak to the strength and our international business. I also will spend time discussing our business in the U.S., including some missed opportunities in women's, our assessment of the root causes, the plans underway to address these in the near term, and the many reasons for our continued optimism regarding our growth potential in the U.S. Next, I will speak to our recent brand campaigns and activations. Megan will review our financials and we will close by taking your questions, so let's get started.

Calvin McDonald: Thank you, Howard. I'm glad you could all join us on the call today to discuss our business in quarter two, and our revised outlook for the second half of the year. On today's call, I will speak to the strength in our international business, I also will spend time discussing our business in the US. Including some missed opportunities in women's, our assessment of the root causes, the plans underway to address these in the near term, and the many reasons for our continued optimism regarding our growth potential in the US.

Speaker Change: vs. Adjusted EPS of $12.77 in 2023. Our EPS guidance excludes the impact of any future share repurchases, but does include the impact of our repurchases year to date.

Speaker Change: I'm looking at inventory we expect dollar inventory to increase in the mid-teens and Q3 as we begin to anniversary last year's declines.

Meghan Frank: We continue to expect capital expenditures to be approximately 670 to 690 million per 2024. This span relates to investments to support business growth, including a continuation of our multi-year distribution center project, store capital for new locations, relocations and renovations and technology investments. Sifting now to Q3, we expect revenue in the range of 2.34 to 2.365 billion, representing growth of 6 to 7%.

Speaker Change: We continue to expect capital expenditures to be approximately 600-70 to 690 million for 2024. This spend relates to investments to support business growth, including a continuation of our multi-year distribution center project, store capital for new locations, relocations and renovations and technology investments.

Calvin McDonald: Next, I will speak to our recent brand campaigns and activations, Megan will review our financials, and we will close by taking your questions, so let's get started. In the second quarter, total revenue increased 7% or 8% in constant currency, by merchandise category, women's increased 6%, men's grew 11%, and accessories increased 7%. Earnings per share increased 18% driven by strong gross margin which contributed to 110 basis point increase in operating margin. In addition, demonstrating our continued confidence in the business, we repurchased $584 million dollars of stock in quarter two, which brings us to $1.2 billion dollars a year to date.

So let's get started.

In the second quarter, total revenue increased 7 percent or 8 percent in constant currency. By merchandise category, women's increased 6 percent, men's increased 7 percent, and accessories increased 7 percent. Earnings per share increased 18% driven by strong gross margin which contributed to 110 basis point increase in operating margin. In addition, demonstrating our continued confidence in the business, we repurchased $584 million of stock in quarter two, which brings us to $1.2 billion a year to date.

Speaker Change: The thing now to Q3, we expect revenue in the range of 2.34 to 2.365 billion. Representing growth is 6 to 7%.

Meghan Frank: We expect to open a 14 net new company operated stores in Q3. We expect growth margin in Q3 to decrease 50 to 60 basis points relative to Q3 2023. The decrease will be driven predominantly by deleverage on fixed costs, and our ongoing investment in our multi-year distribution center project. We expect product margin to be relatively flat with last year, inclusive of approximately 60 basis points of higher freight costs, we expect markdown to be relatively flat with Q3 2023. In Q3, we expect our SG&A rate to leverage by 40 to 50 basis points relative to Q3 2023, this will be driven predominantly by leverage on top line and ongoing prudent expense management. When looking at operating margins for Q3, we expect the leverage of approximately 10 to 20 basis points. Turning to EPS, we expect earnings per share in the third quarter to be in the range of $2.68 to $2.73, versus adjusted EPS of $2.53 a year ago. We expect our expected tax rate in Q3 to be approximately 30%, and with that, I will turn it back over to Calvin.

Speaker Change: Expect to hope that a 14 net new company operated stores in Q3.

Speaker Change: Expect Rose margin in Q3 to decrease 50 to 60 basis points relative to Q3 2023.

Speaker Change: The decrease will be driven predominantly by the leverage on fixed costs and our ongoing investment and our multi-year distribution center project. We expect product margin to be relatively flat with last year, inclusive of approximately 60 basis points of higher freight costs.

Speaker Change: Expect Mark Downs to be relatively flat with Q3 2020-23.

Meghan Frank: In Q3, we expect our SGNA rate to leverage by 40 to 50 basis points relative to Q3 2023. This will be driven predominantly by leverage on top line and ongoing prudent expense management. When looking at operating margins for Q3, we expect the leverage of approximately 10 to 20 basis points. Turning to EPS, we expect earnings per share in the third quarter to be in the range of $2.68 to $2.73, versus adjusted EPS of $2.53 a year ago. We expect our expected tax rate in Q3 to be approximately 30%.

Speaker Change: A Q3, we expect our SGNA rate to leverage by 40 to 50 basis points relative to Q3, 2020-23. This will be driven predominantly by a leverage on top line and ongoing prudent next month's management.

Speaker Change: I'm looking at operating margins for Q3, we expect the leverage of approximately 10 to 20 basis points.

Speaker Change: PPS, we expect earnings per share on the third quarter to be in the range of $2.68 to $2.73. versus a just to the PPS of $2.53 a year ago.

Speaker Change: The Inspector Effective Tax Rate in Q3 to be approximately 30 percent.

Calvin McDonald: And with that, I will turn it back over to Calvin. Thanks, Megan. Lululemon remains a strong and healthy brand, and we have shown our ability to responsibly manage the business while feeding the many growth opportunities in front of us. We have a strong track record, and we will continue to work to deliver for our shareholders, for our employees, and for our guests. Challenges are a natural part of accelerated growth, and I feel confident about emerging stronger from this period as we innovate for and inspire our guests. In closing, I want to thank our leaders and our people for their passion and dedication to our brand and our business, both during this past quarter and with all that's ahead.

Speaker Change: And with that, I will turn it back over to Calvin.

Calvin: Thanks, Meghan.

Calvin: Louder lemon remains a strong and healthy brand, and we have shown our ability to responsibly manage the business while feasing the many growth opportunities in front of us. We have a strong track record and we will continue to work to deliver for our shareholders for our employees and for our guests.

Calvin: Challenges are a natural part of accelerated growth, and I feel confident about emerging stronger from this period as we innovate for and inspire our guests.

Calvin: In closing, I want to thank our leaders and our people for their passion and dedication to our brand and our business, both during this past quarter and with all that's ahead. Thank you for joining us today. We will now take your questions. Operator.

Calvin McDonald: Thank you for joining us today. We will now take your questions. Operator?

Operator: We will now take your questions. Operator? Thank you.

Operator: We will now begin the question and answer session. Analysts who wish to join the question Q may press star, then one on the telephone keypad. You will hear a tone acknowledging your request. If you're using a speaker phone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two.

Speaker Change: Thank you. We will now begin the question and answer session, analysts who wish to join the question queue, map a star, then one on the telephone keypad. You will hear a tone acknowledging your request. If you're using a speaker phone, please pick up your handset before pressing any keys to withdraw your question. Please press star, then two.

Calvin McDonald: Shifting to our rest of world segment, where we continue to perform well in both AMA and APAC. We expanded further in Southeast Asia with the opening of our second store in Thailand and our fourth in Malaysia. And in France, our pair of stores and the Lulemon brand overall benefited from the energy and excitement of the Olympics, which I'll speak to in more detail shortly. Turning to our business in the Americas, revenue increased 1% or 2% in constant currency, we continued to perform well in Canada, with revenue growth of 8% or 11% in constant currency, while revenue in the US was flat. This is a key area focus for us, and I will now dive deeper into our US business. Our brand remains strong in the US market, traffic was up across both channels and Google search queries remain positive. Guests are looking for our product, coming into our stores, and visiting our e-commerce sites. While we continue to see growth in our men's business, we have experienced a slowdown in women's, we have improved our in stocks in smaller sizes through Q2 and our entering Q3 better positioned. As we've analyzed our women's business in more detail, we have determined the most significant factor was a product plan that introduced less newness across core and seasonal styles. By newness, I'm referring to the seasonal updates we bring into the assortment, typically expressed as color, print, patterns, and silhouettes, I'm not referring to our pipeline of innovation, which remains full and the details of which I will share with you shortly. As we have learned more, it's become clear to us that this reduced newness, which is below our historical levels, and stems from earlier product decisions, has impacted conversion rates, given the fewer new options available to our female guests. While this reduction was seen across our women's assortment, it had a more pronounced impact in bottoms and in our online channel, the newness that we had performed well, we simply did not have enough to inspire her to purchase. As most of you know, we announced changes within our product organization in May of this year, we implemented a new reporting structure in which our global creative director Jonathan Chung reports to me and our chief merchant Liz Bender reports to Nikki Newberger in her expanded role as chief brand and product activation officer. Since this shift, Nikki and I have both spent considerable time with the teams, and we are pleased that this new structure puts design and merchandising on equal footing, and reestablishes the healthy balance that must exist within a product organization.

Matthew Boss: The first question comes from Matthew Boss with JP Morgan. Please go ahead. Great thanks and appreciate all the color, Calvin. Maybe larger picture. What do you see as the revenue gross algorithm in North America? Once the dust settles, and I think you talked about color sizing from near-term execution. And I think you cited all of this as more or less optimal on the women's side by the spring. So maybe what do you see as the right revenue growth algorithm in North America once the dust is settled? And then what guardrails have you put into place to drive greater consistency over time in the region?

Speaker Change: The first question comes from Matthew Boss with JP Morgan, please go ahead.

Matthew Boss: Great thanks and appreciate all the color, Calvin

Speaker Change: Maybe larger picture.

Matthew Boss: What do you see as the revenue grossed algorithm in North America?

Speaker Change: Once the dust settles, and I think you talked about color sizing, some near-term execution. And I think you cited all of this as more or less optimal on the women's side by the spring.

Speaker Change: So, maybe what do you see as the right revenue growth algorithm in North America once the dust is settled? And then what guard rails have you put into place to drive greater consistency over time in the region?

Calvin McDonald: This is a key area focus for us, and I will now dive deeper into our US business. Our brand remains strong in the US market, traffic was up across both channels and Google search queries remain positive. Guests are looking for our product, coming into our stores, and visiting our e-commerce sites. While we continue to see growth in our men's business, we have experienced a slowdown in women's, we have improved our in stocks in smaller sizes through Q2 and our entering Q3 better positioned. As we've analyzed our women's business in more detail, we have determined the most significant factor was a product plan that introduced less newness across core and seasonal styles. By newness, I'm referring to the seasonal updates we bring into the assortment, typically expressed as color, print, patterns, and silhouettes, I'm not referring to our pipeline of innovation, which remains full and the details of which I will share with you shortly. As we have learned more, it's become clear to us that this reduced newness, which is below our historical levels, and stems from earlier product decisions, has impacted conversion rates, given the fewer new options available to our female guests. While this reduction was seen across our women's assortment, it had a more pronounced impact in bottoms and in our online channel, the newness that we had performed well, we simply did not have enough to inspire her to purchase. As most of you know, we announced changes within our product organization in May of this year, we implemented a new reporting structure in which our global creative director Jonathan Chung reports to me and our chief merchant Liz Bender reports to Nikki Newberger in her expanded role as chief brand and product activation officer. Since this shift, Nikki and I have both spent considerable time with the teams, and we are pleased that this new structure puts design and merchandising on equal footing, and reestablishes the healthy balance that must exist within a product organization.

Calvin McDonald: Okay, Matt. So in terms of how we view North America growth over time, we're still committed to our Power 3x2 plan, which had North America low double digit growth. What I would share, it's too soon to put a fine point on 2025, but what I would share is that we'll obviously be up against an easier comparison this year. And we still are excited about the long-term growth opportunity we have in that market, particularly in terms of US, in terms of brand awareness. So we have continued to protect investments that are aimed at building into that long-term opportunity. Yeah, Matt, in terms of the second part, the new product organization definitely sets a new balance between, as I mentioned, design and merchandising, which is going to lead to more creative conversations and outcomes. And I've been in these meetings with the teens and already we're seeing the benefit of the new working relationships. And definitely clarity around the racial of newness tied to our product plans are key part of that conversation. And excited about the roadmap ahead to deliver on those. And the opportunities we see in product in delivering on our guest needs.

Speaker Change: Hey Matt, so in terms of how we view North America growth over time, we're still committed to our power of three times two plan, which had North America low double digit growth.

Speaker Change: What I would share with you soon to put a fine point on 2025, but what I would share is that we will obviously be up against it.

Speaker Change: and EASER comparison this year. And we still are excited about the long-term growth opportunity we have in that market, particularly in terms of U.S., in terms of brand awareness. So we have continued to protect investments that are aimed at building into that long-term opportunity.

Calvin McDonald: So we have continued to protect investments that are aimed at building into that long-term opportunity. Yeah, Matt, in terms of the second part, the new product organization definitely sets a new balance between, as I mentioned, design and merchandising, which is going to lead to more creative conversations and outcomes. And I've been in these meetings with the teens and already we're seeing the benefit of the new working relationships. And definitely clarity around the racial of newness tied to our product plans are key part of that conversation. And excited about the roadmap ahead to deliver on those. And the opportunities we see in product in delivering on our guest needs.

Calvin McDonald: As we've analyzed our women's business in more detail, we have determined the most significant factor was a product plan that introduced less newness across core and seasonal styles. By newness, I'm referring to the seasonal updates we bring into the assortment, typically expressed as color, print, patterns, and silhouettes, I'm not referring to our pipeline of innovation, which remains full and the details of which I will share with you shortly. As we have learned more, it's become clear to us that this reduced newness, which is below our historical levels, and stems from earlier product decisions, has impacted conversion rates, given the fewer new options available to our female guests. While this reduction was seen across our women's assortment, it had a more pronounced impact in bottoms and in our online channel, the newness that we had performed well, we simply did not have enough to inspire her to purchase. As most of you know, we announced changes within our product organization in May of this year, we implemented a new reporting structure in which our global creative director Jonathan Chung reports to me and our chief merchant Liz Bender reports to Nikki Newberger in her expanded role as chief brand and product activation officer. Since this shift, Nikki and I have both spent considerable time with the teams, and we are pleased that this new structure puts design and merchandising on equal footing, and reestablishes the healthy balance that must exist within a product organization.

Matthew Boss: Great, and then maybe just to follow up, if you could just speak to your comfort with inventory on hand today, exiting the quarter, and maybe just touch on markdowns relative to plan in the second quarter, or any change for the back half. Yep. So in terms of inventory, we came in with inventory down 14%. It was in line with expectations. And just a reminder, we're locking some increases the last couple of years in terms of inventory, with turns still, slightly slower than history.

Speaker Change: in terms of the second part.

Speaker Change: The new product org organization definitely sets a new balance between, as I mentioned, design and merchandising, which is going to lead to more creative conversations and outcomes. And I've been in these meetings with the teens and already we're seeing the benefit of the new working relationships.

Calvin McDonald: As we have learned more, it's become clear to us that this reduced newness, which is below our historical levels, and stems from earlier product decisions, has impacted conversion rates, given the fewer new options available to our female guests. While this reduction was seen across our women's assortment, it had a more pronounced impact in bottoms and in our online channel, the newness that we had performed well, we simply did not have enough to inspire her to purchase. As most of you know, we announced changes within our product organization in May of this year, we implemented a new reporting structure in which our global creative director Jonathan Chung reports to me and our chief merchant Liz Bender reports to Nikki Newberger in her expanded role as chief brand and product activation officer. Since this shift, Nikki and I have both spent considerable time with the teams, and we are pleased that this new structure puts design and merchandising on equal footing, and reestablishes the healthy balance that must exist within a product organization.

Speaker Change: and definitely clarity around the racial of newness.

Speaker Change: tied to our product plans, our key part of that conversation and excited about the roadmap ahead to deliver on those and the opportunities we see in product and delivering on our guests needs.

Meghan Frank: And then maybe just to follow up, if you could just speak to your comfort with inventory on hand today, exiting the quarter, and maybe just touch on markdowns relative to plan in the second quarter, or any change for the back half. Yep. So in terms of inventory, we came in with inventory down 14%. It was in line with expectations. And just a reminder, we're locking some increases the last couple of years in terms of inventory, with turns still, slightly slower than history.

Speaker Change: and then maybe just to follow up, if you could just speak to your comfort with inventory on hand today exiting the corridor and maybe just touch on Mark Downs relative to plan in the second quarter or any change for the back half.

Calvin McDonald: As most of you know, we announced changes within our product organization in May of this year, we implemented a new reporting structure in which our global creative director Jonathan Chung reports to me and our chief merchant Liz Bender reports to Nikki Newberger in her expanded role as chief brand and product activation officer. Since this shift, Nikki and I have both spent considerable time with the teams, and we are pleased that this new structure puts design and merchandising on equal footing, and reestablishes the healthy balance that must exist within a product organization. The teams are working well together, and already in action.

Speaker Change: Yep.

Speaker Change: So in terms of inventory, we came in with a inventory down 14 percent. It was in line with expectations and just to remind a werelopping some increases the last couple years in terms of inventory with turns still, you know, slightly slower than history.

Meghan Frank: As we move into the second half of the year, we do expect inventory to be in the mid teens at the end of Q3, and a similar growth rate slightly higher as we end the year. I would say in terms of comfort with inventory, you know, please was where we came in, in line with expectations. The opportunity would be in composition and that mixture that Calvin described in terms of newness, which the team is adjusting now.

Speaker Change: as we move into the second half of the year we do expect inventory to be in the mid-teams at the end of Q3 and a similar growth rate slightly higher as we end the year.

Calvin McDonald: The teams are working well together, and already in action.

Speaker Change: and I would say in terms of comfort with inventory, you know, please as we were we came in and line with expectations. The opportunity would be in composition and that mixture that Calvin described in terms of newness.

Calvin McDonald: Our near term action plan leverages our capabilities in chase and fast track design to bring more seasonal newness into our women's assortment as quickly as possible. The teams have been chasing into some of our strong performers, including align leggings and colors and prints, our gold zip scuba and soft dream and new silhouettes and seasonal fabrications. Our fast track design capability allows us to bring newness into our assortment quicker while also testing and learning from new silhouettes. For 2025, we are fast tracking several new styles within performance shorts, tops and track suits. We are optimistic that we will begin to see the benefits of these strategies over the upcoming quarters and return to our historical levels of newness no later than spring 2025. Moving forward, I feel confident that the new structure and relationship between design and merchandising will lead to more ongoing conversations and consistent decision making. And I'm excited about the newness and innovation that will be flowing into our upcoming product assortments.

Speaker Change: which the team is adjusting now. And then in terms of markdowns, we did come in favorable relative to our expectations in Q2. So we did expect to see markdowns similar, slightly below what we saw in Q1. We were up 50 days to point to your very year in Q1. We expected slightly lower in Q2. We did come in flat year over year.

Meghan Frank: And then in terms of markdowns, we did come in favorable relative to our expectations in Q2. So we did expect to see markdown as similar, slightly below what we saw in Q1. We were up 50 based points year over year in Q1. We expected slightly lower in Q2. We did come in flat year over year. And that was really driven by strong self-reasonal, which is where, you know, we really take markdowns just to clear seasonal good.

Speaker Change: and that was really driven by strong self-reson seasonal, which is where we really take mark down just to clear seasonal goods. When we look at the second half of the year, Q3 Markdowns, I'd expect relatively in line with last year and then Q4 slightly under last year, we're still expecting flat markdowns for the

Meghan Frank: When we look at the second half of the year, Q3 markdowns, I'd expect relatively in line with last year, and then Q4 slightly under last year. And we're still expecting flat markdowns for the third half of the year, here.

Calvin McDonald: We are optimistic that we will begin to see the benefits of these strategies over the upcoming quarters, and return to our historical levels of newness no later than spring 2025. Moving forward, I feel confident that the new structure and relationship between design and merchandising will lead to more ongoing conversations and consistent decision making. And I'm excited about the newness and innovation that will be flowing into our upcoming product assortments, while we are disappointed with the recent performance in women's, we see many strengths in our US business. Our store portfolio remains highly productive with significant opportunities ahead. Our industry leading sales per foot, the success of our new stores and the positive results from our optimization program all underpin our comfort with our power of three times to target of approximately 5% square footage growth annually in the Americas through 2020. 2006. We are only beginning to leverage the power of our membership program, which allows us to engage more deeply with our guests, drive loyalty, and increase long-term value.

Matthew Robert Boss: Great color, best of luck.

Speaker Change: It's a great color, best of luck

Operator: Thank you. The next question comes from Alex Straton with Morgan Stanley. Please go ahead. Perfect, thanks a lot for taking the question. Just on the revised full year guidance and where it's coming out of, it feels like that's mostly concentrated in the fourth quarter. Is that right or did your review on the third quarter change as well? And if you can just walk us through the puts and takes for almost like almost a 50 cent reduction, that would be very helpful.

Alex Straton: The next question comes from Alex Straton with Morgan Stanley. Please go ahead. Perfect, thanks a lot for taking the question. Just on the revised full year guidance and where it's coming out of, it feels like that's mostly concentrated in the fourth quarter. Is that right or did your review on the third quarter change as well? And if you can just walk us through the puts and takes for almost like almost a 50 cent reduction, that would be very helpful.

Speaker Change: Thank you.

Speaker Change: Next question comes from Alex Stutton with Morgan Stanley, please go ahead.

Alex Stutton: Perfect, thanks a lot for taking the question. Just on the revised full-year guidance and in where it's coming out of, it feels like that's mostly concentrated in the fourth order.

Alex Stutton: is that right or did you review on the third quarter changes well and if you just walk us through the puts in takes for looks like almost a 50 cent reduction that would be very helpful. Thanks a lot.

Calvin McDonald: Our store portfolio remains highly productive with significant opportunities ahead. Our industry leading sales per foot, the success of our new stores and the positive results from our optimization program all underpin our comfort with our power of three times to target of approximately 5% square footage growth annually in the Americas through 2026. We are only beginning to leverage the power of our membership program, which allows us to engage more deeply with our guests, drive loyalty, and increase long-term value. We now have more than 20 million essential members, and I'll share more in a moment about how we're expanding our offerings. And while we have experienced positive increases across our brand funnel metrics in the market, there is still substantial opportunity to drive [inaudible] brand awareness, introducing Lululemon to new gas segments. As you can see, there are many reasons we feel optimistic about our US business, and it's growth potential, let's shift now to our recent and upcoming product innovations. Beginning with men, the business remains robust, and we continue to gain market share, in quarter two, we saw strength across the assortment, including zeroed-in, which was launched this past spring, and has quickly become a guest favorite in a top three performance franchise. Our pacebreaker with the positive response to our shorts and our recently launched pant in jacket is performing very well. Our new ShowZero Polo, which virtually eliminates the appearance of sweat, also launched this spring, and has resonated well with guests, and will benefit from increased inventory commitments this fall and into next year. In our lounge offering, including Soft Jersey, Study State, and Smooth Spacer, continue to perform well, and we will fuel the momentum with additional styles and deeper inventory buys. In women's, I'm excited with our product roadmap for fall, which includes an expansion of our train offering with the introduction of a new performance fabric innovation in a tight. An expansion of our wonder under franchise offering are iconic lagging in different fabrics, seasonal updates within our line franchise, and an updated version of our charge-field footwear style. And our accessories business also remains positive on top of last year's strong performance, we have diversified into a compelling assortment of bags, including our new crew and double zip backpacks, and additional styles within the everywhere franchise, including a backpack and cross-body bag, which is fueling continued momentum in the category. One of our goals is to solve for the unmet needs of our guests with new and compelling technical innovations, and this will continue to separate us from other brands.

Alex Straton: Thanks a lot. Thanks Alex. I would say the release, our view on the relationship between Q3 and Q4 has not changed. I would say we are guiding the second half in line essentially with the trend we're seeing in Q2. Q4 is adjusted for the shorter holiday selling period and days between Thanksgiving and Christmas, which we estimate at about a three point impact, as well as the macroeconomic environment and the election in Q4.

Speaker Change: Thanks, Alex. I would say the relationship between two three and two four has not changed.

Speaker Change: I would say we are guiding the second half in line, essentially, with the trend we're singing in Q2. Q4 is adjusted for the shorter holiday-selling period and days between Thanksgiving and Christmas.

Calvin McDonald: We now have more than 20 million essential members, and I'll share more in a moment about how we're expanding our offerings. And while we have experienced positive increases across our brand funnel metrics in the market, there is still substantial opportunity to drive [inaudible] brand awareness, introducing Lululemon to new gas segments. As you can see, there are many reasons we feel optimistic about our US business, and it's growth potential, let's shift now to our recent and upcoming product innovations. Beginning with men, the business remains robust, and we continue to gain market share, in quarter two, we saw strength across the assortment, including zeroed-in, which was launched this past spring, and has quickly become a guest favorite in a top three performance franchise. Our pacebreaker with the positive response to our shorts and our recently launched pant in jacket is performing very well. Our new ShowZero Polo, which virtually eliminates the appearance of sweat, also launched this spring, and has resonated well with guests, and will benefit from increased inventory commitments this fall and into next year. In our lounge offering, including Soft Jersey, Study State, and Smooth Spacer, continue to perform well, and we will fuel the momentum with additional styles and deeper inventory buys. In women's, I'm excited with our product roadmap for fall, which includes an expansion of our train offering with the introduction of a new performance fabric innovation in a tight. An expansion of our wonder under franchise offering are iconic lagging in different fabrics, seasonal updates within our line franchise, and an updated version of our charge-field footwear style. And our accessories business also remains positive on top of last year's strong performance, we have diversified into a compelling assortment of bags, including our new crew and double zip backpacks, and additional styles within the everywhere franchise, including a backpack and cross-body bag, which is fueling continued momentum in the category. One of our goals is to solve for the unmet needs of our guests with new and compelling technical innovations, and this will continue to separate us from other brands.

Speaker Change: and which we estimate at about a three point impact, as well as the macroeconomic environment and the election in Q4. So the relationship of the two quarters is not changed, but we have lower guard outlook on the aggregate water line for the second half.

Alex Straton: So the relationship of the two quarters has not changed, but we have lowered our outlook on the aggregate water line for the second half. Got it. Maybe just one for Calvin is how much do you attribute sort of the revenue shortcoming in the quarter versus your expectation to like your own mistakes versus a macro? There's been a lot of discussion of kind of a weakening consumer. So just curious your thoughts on that. I definitely see this as an opportunity based on decisions that we made that are within our control and being addressed. As I alluded to, it's crossed the globe. It really is focused to our US women's business in a gap in newness that we brought across color print and silhouettes. The newness we had sold very well, guest was coming in, traffic was positive across all channels, and the opportunity was in conversion. So I see that as an opportunity that they were there with intent to spend, and there was a noticeable reduction in those historical levels of newness. So those were the product decisions that we made earlier in new teams in action, and as I alluded to the chase, but definitely I think majority is within our control. Thanks a lot. Thank you.

Calvin: got it. Maybe just one for Calvin is how much do you attribute sort of the revenue shortcoming in the quarter versus your expectation to like your own mistakes versus a macro. There's been a lot of discussion of kind of a weakening consumer. So just curious your thoughts on that.

Calvin McDonald: Beginning with men, the business remains robust, and we continue to gain market share, in quarter two, we saw strength across the assortment, including zeroed-in, which was launched this past spring, and has quickly become a guest favorite in a top three performance franchise. Our pacebreaker with the positive response to our shorts and our recently launched pant in jacket is performing very well. Our new ShowZero Polo, which virtually eliminates the appearance of sweat, also launched this spring, and has resonated well with guests, and will benefit from increased inventory commitments this fall and into next year. In our lounge offering, including Soft Jersey, Study State, and Smooth Spacer, continue to perform well, and we will fuel the momentum with additional styles and deeper inventory buys. In women's, I'm excited with our product roadmap for fall, which includes an expansion of our train offering with the introduction of a new performance fabric innovation in a tight. An expansion of our wonder under franchise offering are iconic lagging in different fabrics, seasonal updates within our line franchise, and an updated version of our charge-field footwear style. And our accessories business also remains positive on top of last year's strong performance, we have diversified into a compelling assortment of bags, including our new crew and double zip backpacks, and additional styles within the everywhere franchise, including a backpack and cross-body bag, which is fueling continued momentum in the category. One of our goals is to solve for the unmet needs of our guests with new and compelling technical innovations, and this will continue to separate us from other brands.

Alex Straton: I definitely see this as an opportunity based on decisions that we made that are within our control and being addressed. As I alluded to, it's crossed the globe. It really is focused to our US women's business in a gap in newness that we brought across color print and silhouettes. The newness we had sold very well, guest was coming in, traffic was positive across all channels, and the opportunity was in conversion. So I see that as an opportunity that they were there with intent to spend, and there was a noticeable reduction in those historical levels of newness. So those were the product decisions that we made earlier in new teams in action, and as I alluded to the chase, but definitely I think majority is within our control. Thanks a lot. Thank you.

Speaker Change: I definitely see this as an opportunity based on decisions that we made that are within our control and being addressed as I alluded to it.

Speaker Change: Cross the globe, it really is focused to our U.S. women's business in a gap in newness that we brought across color-printing silhouettes.

Speaker Change: The newness we had sold very well, guest was coming in, traffic was positive across all channels.

Calvin McDonald: In our lounge offering, including Soft Jersey, Study State, and Smooth Spacer, continue to perform well, and we will fuel the momentum with additional styles and deeper inventory buys. In women's, I'm excited with our product roadmap for fall, which includes an expansion of our train offering with the introduction of a new performance fabric innovation in a tight. An expansion of our wonder under franchise offering are iconic lagging in different fabrics, seasonal updates within our line franchise, and an updated version of our charge-field footwear style. And our accessories business also remains positive on top of last year's strong performance, we have diversified into a compelling assortment of bags, including our new crew and double zip backpacks, and additional styles within the everywhere franchise, including a backpack and cross-body bag, which is fueling continued momentum in the category. One of our goals is to solve for the unmet needs of our guests with new and compelling technical innovations, and this will continue to separate us from other brands.

Speaker Change: and the opportunity was in conversion so I see that as an opportunity that they were there with intent to to to spend and there was a noticeable reduction in those historical levels of newness. So those were the product decisions that we made earlier and new teams in action and as I alluded to the chase but definitely I think majority is within our control.

Speaker Change: Thanks for watching, luck!

Calvin McDonald: The next question comes from Paul as you asked with city. Please go ahead. Hey guys, thanks.

Speaker Change: Thank you.

Speaker Change: The next question comes from Paul, as you asked with City, please go ahead.

Calvin McDonald: And our accessories business also remains positive on top of last year's strong performance, we have diversified into a compelling assortment of bags, including our new crew and double zip backpacks, and additional styles within the everywhere franchise, including a backpack and cross-body bag, which is fueling continued momentum in the category. One of our goals is to solve for the unmet needs of our guests with new and compelling technical innovations, and this will continue to separate us from other brands.

Paul Lejuez: Can you talk about how the quarter progressed as you move through by region, what the exhibits were, any comments on quarter to date, and are there any pockets that are in need for you? Just curious how you handled the whole green through, where does that probably go? Any financial impact on me? Thank you. Thanks, Paul. So in terms of Q2, our May trend relatively in line with what we experienced in Q1, and then a softer business performance in June and July, which July being slightly above June, we haven't given any color by region within that, but I would say, in terms of quarter to date.

Paul: Hey guys, thank you. Talk about how to quarter progress.

Paul: and you move through by region, what the exhibits were any comments on quarter to today.

Paul: and other named pockets of pilot inventory just curious how you handle the whole thing through where's the product out, and financial and tax them and I'm back after.

Paul: Thanks Paul, so in terms of Q2

Speaker Change: are May-Tran relatively in line with what we experienced in Q1 and then a softer business performance in June and July, which we haven't given any color of our region within that, but I would say.

Paul Lejuez: You know, we don't break down quarter to date performance by month, but in a given what we experienced in Q2, the macroeconomic uncertainty in the second half of the year, we feel our guide at six to seven percent is appropriate at this time. And then in terms of inventory, again, comfortable to overall level, breathe through really negligible impact, a small test and learn, and not a material financial impact.

Speaker Change: in terms of quarter-to-date, you know, we don't break down quarter-to-date performance by month, but in a given way, we experienced in Q2, the macroeconomic uncertainty in the second half of the year, we feel our guide at six to seven percent as appropriate this time. And then in terms of inventory, again, comfortable the overall level, brief the really negligible impact, a small test and learn, and not a material financial impact.

Speaker Change: i

Speaker Change: and Bismillah.

Speaker Change: Thank you.

Michael Bonetti: Next question comes from Michael Bonetti with Evercore. Please go ahead. Hey guys, thanks for taking our questions here.

Speaker Change: The next question comes from Michael Bonetti with Evercore. Please go ahead.

Meghan Frank: I guess maybe one for each Megan, can you just walk us through how mechanics with P&L work? I know you do a lot of scenario planning, you could keep the EBIT margins for the total company positive. Oh, we have this slower near-term run rate in the US.

Michael Bonetti: Hey guys, thanks for taking our questions here. I guess.

Michael Bonetti: Maybe one for each Meghan, can you just walk us through how the mechanics with P&L work? I know you do a lot of scenario planning, so you could keep the EBIT margins for the total company positive, all we have this slower near-term run rate in the U.S., and then Calvin, just some of the comments from the earlier example.

Calvin McDonald: And then Calvin, just some of the comments made earlier example, I'm wondering if you could give us an example of how design and merchandising teams are previously not on that equal footing that you think are on now and how that impacted the strategy in the consumer's eyes. Maybe just some of what prompted you to make some of the changes in the org chart that you did. Thanks Michael. So in terms of P&L management, we're obviously closely monitoring business.

Speaker Change: I'm wondering if you could give us an example of how to design and merchandising teams are previously not on that equal footing that you think are on now and how that impacted the strategy in the consumer's eyes. Maybe just some of what prompted you to make some of the changes in the org turntards that you did.

Calvin McDonald: As a Canadian, I'm incredibly proud of our athletes, and how our brand showed up during the games. Through our partnership, we outfit athletes for their off-field activities and the Lululemon brand clearly benefit from the podium time the team achieved, and the exposure during the opening and closing ceremonies. We further leveraged our partnership with the pop-up shop in Canada House, and by offering our team Canada collection in our nearby stores in Paris. Across Canada in both stores and e-commerce, and in the US, through our e-commerce channel. This partnership is a great example of how we are elevating the Lululemon brand on the world stage by associating with elite athletes, gaining significant earned media and growing brand awareness globally. Another area focused for us is back to school. Bringing younger guests and particularly men into the brand remains an opportunity as we increase awareness regarding the versatility of our merchandise and the breadth of our offering. Football players, DK Metcalf and Odell Beckham Jr, star in this year's campaign in North America, and it features our loungewear offering for both men and women and our cityverse sneaker. Before I hand it over to Megan to discuss our financials, let me share our high-level thinking on our guidance for the remainder of the year. For quarter three and the full year, excluding the 53rd week, we expect revenue growth of 6% to 7%, relatively in line with quarter two performance. Our full year revenue guidance acknowledges the uncertainty around the shorter holiday shopping season, and the US election in quarter four. Our teams remain focused on the actions I detailed for you.

Speaker Change: Michael, so in terms of piano management, we're obviously closely monitoring business. We do run multiple scenarios.

Calvin McDonald: We do run multiple scenarios. Our intention is to stay agile based on the way business is unfolding. You know, as we're looking at this year and our revenue outlook, we are continuing to invest behind international performance, you know, key to our long-term strategy in an area of our business is currently performing well. And then as I mentioned, we also do see long-term opportunity. Our outlook has not changed on long-term opportunity in terms of brand awareness globally but also within North America. So we've continued to protect investments in that long-term brand building. At the same time, you know, we're looking for efficiency opportunities across the P&L and discretionary spend buckets as well as, you know, slowing down where that makes sense. In terms of our capabilities, road mapping go forward, all in line with our part three times two plan. So feel like we're well positioned as we navigate this year with the right balance of navigating the short-term while protecting investments in our long-term. And Michael, in terms of your question, as you know, the previous structure, both design and merchandising rolled up to a single, single leader. And that product organization had served us well as a high-growth company. You know, we have a 24% Kager over the last five years from 18 to 23 to 10 billion in revenue. But as we looked forward, we saw it as an opportunity to reset and take a different approach. And what the newer does by having a stronger balance between design and merge, which will lead to more creative conversations and outcomes. And in those conversations in the meetings I have, so where am I seeing the difference in balance? You will see it executed in creation of some product, challenging of the ratio between newness and core in the assortment, and just the relationship between those two teams in terms of what's being created and how we're mixing it into the assortment and then bringing to market. So also with this change, we're seeing a much tighter relationship in the brand, soft marketing organization with merchandising, which is really the whole self-sighted business, being under one leader. Or before it was a hand-off, those conversations are happening much sooner and aligned in terms of where we see the opportunity, aligning it to what we're buying deep into and then creating plans for that demand creation earlier in the process. So I think there's really three benefits that are coming out of it on the brand to merchandising self-sight as well as design and seeing it in terms of just the creation of product in that ratio mix across the assortment path. The guest has been looking for and excited Okay, thanks a lot for all the information. I appreciate it. Thank you.

Speaker Change: our intention is to stay agile based on the way business is unfolding. You know, it's we're looking at this year and our revenue outlook, we're continuing to invest behind international performance, you know, key to our long-term strategy in an area of our business is currently performing well. And then as I mentioned, we also do see long-term opportunity, our outlook has not changed on long-term opportunity in terms of brand awareness globally, but also within North America.

Calvin McDonald: This partnership is a great example of how we are elevating the Lululemon brand on the world stage by associating with elite athletes, gaining significant earned media and growing brand awareness globally. Another area focused for us is back to school. Bringing younger guests and particularly men into the brand remains an opportunity as we increase awareness regarding the versatility of our merchandise and the breadth of our offering. Football players, DK Metcalf and Odell Beckham Jr, star in this year's campaign in North America, and it features our loungewear offering for both men and women and our cityverse sneaker. Before I hand it over to Megan to discuss our financials, let me share our high-level thinking on our guidance for the remainder of the year. For quarter three and the full year, excluding the 53rd week, we expect revenue growth of 6% to 7%, relatively in line with quarter two performance. Our full year revenue guidance acknowledges the uncertainty around the shorter holiday shopping season, and the US election in quarter four. Our teams remain focused on the actions I detailed for you.

Calvin McDonald: So we've continued to protect investments in that long-term brand building. At the same time, you know, we're looking for efficiency opportunities across the P&L and discretionary spend buckets as well as, you know, slowing down where that makes sense. In terms of our capabilities, road mapping go forward, all in line with our part three times two plan. So feel like we're well positioned as we navigate this year with the right balance of navigating the short-term while protecting investments in our long-term.

Speaker Change: and continued to protect investments in that long-term brand building. At the same time, we're looking for efficiency opportunities across the PNL and discretionary spend buckets as well as slowing down where that makes sense in terms of our capabilities, road mapping, go forward, all in line with our part three times two plan. So feel like we're well positioned as we navigate this year with a right balance of navigating the short-term while protecting investments in our locker.

Calvin McDonald: Before I hand it over to Megan to discuss our financials, let me share our high-level thinking on our guidance for the remainder of the year. For quarter three and the full year, excluding the 53rd week, we expect revenue growth of 6% to 7%, relatively in line with quarter two performance. Our full year revenue guidance acknowledges the uncertainty around the shorter holiday shopping season, and the US election in quarter four. Our teams remain focused on the actions I detailed for you.

Speaker Change: and Michael in terms of your question.

Speaker Change: as you know the previous structure both designed and merchandising rolled up to a single leader. In that product organization had served as well as a high-growth company.

Speaker Change: and we have a 24% cagre over the last five years from 18 to 23 to 10 billion.

Speaker Change: in revenue, but as we looked forward, we saw it as an opportunity to reset and take a different approach, and what the New York does by having a strong imbalance between design and merch.

Calvin McDonald: And what the newer does by having a stronger balance between design and merge, which will lead to more creative conversations and outcomes. And in those conversations in the meetings I have, so where am I seeing the difference in balance? You will see it executed in creation of some product, challenging of the ratio between newness and core in the assortment, and just the relationship between those two teams in terms of what's being created and how we're mixing it into the assortment and then bringing to market.

Speaker Change: which will lead to more creative conversations and outcomes and in those conversations in the meetings I have.

Speaker Change: So where am I seeing the difference in balance?

Speaker Change: you will see it executed in creation of some product, challenging of the ratio between newness and core in the assortment.

Speaker Change: and just the relationship between those two teams in terms of what's been created and how we're mixing it into the assortment and then bringing to market. So also with this change, we're seeing a much tighter relationship in the brand, such marketing organization with merchandising.

Calvin McDonald: So also with this change, we're seeing a much tighter relationship in the brand, soft marketing organization with merchandising, which is really the whole self-sighted business, being under one leader. Or before it was a hand-off, those conversations are happening much sooner and aligned in terms of where we see the opportunity, aligning it to what we're buying deep into and then creating plans for that demand creation earlier in the process. So I think there's really three benefits that are coming out of it on the brand to merchandising self-sight as well as design and seeing it in terms of just the creation of product in that ratio mix across the assortment path. The guest has been looking for and excited Okay, thanks a lot for all the information. I appreciate it. Thank you.

Speaker Change: which is really the whole cell-sided of business being under one leader or before it was a hand-off. Those conversations are happening much sooner.

Megan, over to you.

Meghan Frank: Thanks, Calvin. While revenue in Q2 remained strong in all of our international reaches in Canada, the US business was softer for the reasons Calvin just detailed. Our names per share exceeded our expectations to [inaudible] predominantly by strong growth margin, our accounts were flat versus the prior year and better than expected. And when looking at expenses, we continue to manage the business prudently, I'll protect and key investments for the long term, let me now share the details of Q2 performance. For Q2, total net revenue rose 7% to $2.4 billion, in constant dollar comparable sales increased 3%, within our regions, results were as follows. America's revenue increased 1%, or 2% in constant currency, comparable sales declined 2%. China mainland revenue increased 345 or 37% in constant currency, with comparable sales increasing 23%. And in our rest of world segment, revenue grew by 24%, or 27% in constant currency with comparable sales increasing by 20%. In our store channel, total sales increased 11% and we ended the quarter with 721 stores globally, square footage increased 14% versus last year driven by the addition of 49 net new Lululemon stores with Q2 of 2023. During the quarter, we opened 10 net new stores and completed six optimizations. In our digital channel, revenues increased 2% and contributed $900 million of top line, or 38% of total revenue, and by category, men's revenue increased 11% versus last year, and women's increased 6%, while accessories grew 7%. Growth profit for the second quarter was 1.4 billion, or 59.6% of net revenue, compared to 58.8% of net revenue in Q2 2023. The growth profit rate in Q2 increased 80 basis points, significantly better than our guidance, and was driven primarily by the following. A 130 basis point increase in product margin, driven primarily by favorable IMU from lower product costs, mark down to a spot year over year and better than expected, 30 basis points of net to leverage on fixed costs and 20 basis points of unfavorable impact from foreign exchange. I would also note that our pause on the sale of breathe through had a negligible impact on growth margin in the quarter. Relative to our guidance, which was a decline in growth margin of 100 to 110 basis points, the upside was driven predominantly by prudent management of fixed expenses within growth margin, favorable mix and lower than expected mark down. Moving to SG&A, our approach continues to be grounded and prudently managing our expenses, while also continuing to strategically invest in our long term growth opportunities.

Speaker Change: and a line in terms of where we see the opportunity and lining it to what we're buying deep into and creating plans for that demand creation earlier in the process. So I think there's really three benefits that are coming out of it on the brand to merchandising self-hide as well as design and seeing it in terms of just the creation of product in that racial mix across the assortment that the guests.

Speaker Change: has been looking for and excited to burn.

Speaker Change: Okay, thanks a lot for all the information I appreciate you guys.

Meghan Frank: For Q2, total net revenue rose 7% to $2.4 billion, in constant dollar comparable sales increased 3%, within our regions, results were as follows. America's revenue increased 1%, or 2% in constant currency, comparable sales declined 2%. China mainland revenue increased 345 or 37% in constant currency, with comparable sales increasing 23%. And in our rest of world segment, revenue grew by 24%, or 27% in constant currency with comparable sales increasing by 20%. In our store channel, total sales increased 11% and we ended the quarter with 721 stores globally, square footage increased 14% versus last year driven by the addition of 49 net new Lululemon stores with Q2 of 2023. During the quarter, we opened 10 net new stores and completed six optimizations. In our digital channel, revenues increased 2% and contributed $900 million of top line, or 38% of total revenue, and by category, men's revenue increased 11% versus last year, and women's increased 6%, while accessories grew 7%. Growth profit for the second quarter was 1.4 billion, or 59.6% of net revenue, compared to 58.8% of net revenue in Q2 2023. The growth profit rate in Q2 increased 80 basis points, significantly better than our guidance, and was driven primarily by the following. A 130 basis point increase in product margin, driven primarily by favorable IMU from lower product costs, mark down to a spot year over year and better than expected, 30 basis points of net to leverage on fixed costs and 20 basis points of unfavorable impact from foreign exchange. I would also note that our pause on the sale of breathe through had a negligible impact on growth margin in the quarter. Relative to our guidance, which was a decline in growth margin of 100 to 110 basis points, the upside was driven predominantly by prudent management of fixed expenses within growth margin, favorable mix and lower than expected mark down. Moving to SG&A, our approach continues to be grounded and prudently managing our expenses, while also continuing to strategically invest in our long term growth opportunities.

Meghan Frank: For Q2, total net revenue rose 7% to $2.4 billion, in constant dollar comparable sales increased 3%, within our regions, results were as follows.

Janine Stichter: The next question comes from Janine Stichter with BTID. Please go ahead. Hi, thanks for taking my questions.

Speaker Change: Thank you.

Speaker Change: The next question comes from Janine Stichter with BTIG. Please go ahead.

Meghan Frank: America's revenue increased 1%, or 2% in constant currency, comparable sales declined 2%. China mainland revenue increased 345 or 37% in constant currency, with comparable sales increasing 23%. And in our rest of world segment, revenue grew by 24%, or 27% in constant currency with comparable sales increasing by 20%. In our store channel, total sales increased 11% and we ended the quarter with 721 stores globally, square footage increased 14% versus last year driven by the addition of 49 net new Lululemon stores with Q2 of 2023. During the quarter, we opened 10 net new stores and completed six optimizations. In our digital channel, revenues increased 2% and contributed $900 million of top line, or 38% of total revenue, and by category, men's revenue increased 11% versus last year, and women's increased 6%, while accessories grew 7%. Growth profit for the second quarter was 1.4 billion, or 59.6% of net revenue, compared to 58.8% of net revenue in Q2 2023. The growth profit rate in Q2 increased 80 basis points, significantly better than our guidance, and was driven primarily by the following. A 130 basis point increase in product margin, driven primarily by favorable IMU from lower product costs, mark down to a spot year over year and better than expected, 30 basis points of net to leverage on fixed costs and 20 basis points of unfavorable impact from foreign exchange. I would also note that our pause on the sale of breathe through had a negligible impact on growth margin in the quarter. Relative to our guidance, which was a decline in growth margin of 100 to 110 basis points, the upside was driven predominantly by prudent management of fixed expenses within growth margin, favorable mix and lower than expected mark down. Moving to SG&A, our approach continues to be grounded and prudently managing our expenses, while also continuing to strategically invest in our long term growth opportunities.

Calvin McDonald: A couple questions on a product innovation for the back half. I guess first on breeze through, it seems to us that the consumer really liked the fabric. They just weren't in love with the fit. What's the timeline for getting that back with some new fits and still less. And then any parameters you can help provide around some of these new launches coming in the back half. It seems like they launch in training.

Janine Stichter: Hi, thanks for taking my questions. A couple questions on a product innovation for the back half. I guess first I'm briefed through. It seems to us that the consumer really likes the fabric they just weren't in love with the fit. What's the timeline for getting that back with some new, new fit until the last.

Janine Stichter: and then any parameters you can help provide around some of these new launches coming in the back cap. It seems like the launch in training seems like that will be pretty big. Just had to think about that in terms of the size and the potential in the box.

Calvin McDonald: It seems like that will be pretty big. Just how do I think about that in terms of the size and the potential in that? Thanks, Janine. In terms of breeze through in the fabric, you're right. You know, we're really excited about the guest response. Not just in North America, but actually internationally in particular in our APEC market, where this fabric was really designed as I shared for hot yoga, but we see it as versatility and high humid environments for a variety of activities.

Dining: Thanks, Dining. In terms of breather and the fabric, you're right. You know, we're really excited about the guest response.

Meghan Frank: In our digital channel, revenues increased 2% and contributed $900 million of top line, or 38% of total revenue, and by category, men's revenue increased 11% versus last year, and women's increased 6%, while accessories grew 7%. Growth profit for the second quarter was 1.4 billion, or 59.6% of net revenue, compared to 58.8% of net revenue in Q2 2023. The growth profit rate in Q2 increased 80 basis points, significantly better than our guidance, and was driven primarily by the following. A 130 basis point increase in product margin, driven primarily by favorable IMU from lower product costs, mark down to a spot year over year and better than expected, 30 basis points of net to leverage on fixed costs and 20 basis points of unfavorable impact from foreign exchange. I would also note that our pause on the sale of breathe through had a negligible impact on growth margin in the quarter. Relative to our guidance, which was a decline in growth margin of 100 to 110 basis points, the upside was driven predominantly by prudent management of fixed expenses within growth margin, favorable mix and lower than expected mark down. Moving to SG&A, our approach continues to be grounded and prudently managing our expenses, while also continuing to strategically invest in our long term growth opportunities.

Speaker Change: I'm not just in North America but actually internationally in particular in our APEC market.

Speaker Change: where this fabric was really designed as I shared for hot yoga, but we see it as versatility and high.

Speaker Change: Humid environments for variety of activities.

Calvin McDonald: So it is a very unique, exciting new fabric for us. And the teams in work to bring it back in either a style that the guest already knows with the new fabric versus, you know, the the sharper design lines that it was introduced in. So we got the read we wanted in that, you know, the fabric, which is the real innovation behind it, landed and resonated very well. And they're working on being able to bring that back to market. You won't see it in 24 and not calling it for 25, but know that that's a priority of the team, but they're equally looking on all the other innovation and creating as well.

Speaker Change: It is a very unique exciting new fabric for us.

Speaker Change: and the teams in work to bring it back in either a style that the guest already knows with the new fabric versus the sharper design lines that it was introduced in.

Meghan Frank: A 130 basis point increase in product margin, driven primarily by favorable IMU from lower product costs, mark down to a spot year over year and better than expected, 30 basis points of net to leverage on fixed costs and 20 basis points of unfavorable impact from foreign exchange. I would also note that our pause on the sale of breathe through had a negligible impact on growth margin in the quarter. Relative to our guidance, which was a decline in growth margin of 100 to 110 basis points, the upside was driven predominantly by prudent management of fixed expenses within growth margin, favorable mix and lower than expected mark down. Moving to SG&A, our approach continues to be grounded and prudently managing our expenses, while also continuing to strategically invest in our long term growth opportunities.

Speaker Change: So we got the read we wanted in that, you know, the fabric which is the real innovation behind it landed and resonated very well and they're working on being able to bring that back to market. You won't see it in 24.

Speaker Change: and not calling it for 25 but know that that's a prior to the team but they're equally looking on all the other innovation and creating as well. So you alluded to a lot is happening within our train category. We have the wonder under which is a known silhouette.

Meghan Frank: I would also note that our pause on the sale of breathe through had a negligible impact on growth margin in the quarter. Relative to our guidance, which was a decline in growth margin of 100 to 110 basis points, the upside was driven predominantly by prudent management of fixed expenses within growth margin, favorable mix and lower than expected mark down. Moving to SG&A, our approach continues to be grounded and prudently managing our expenses, while also continuing to strategically invest in our long term growth opportunities.

Calvin McDonald: So you alluded to a lot is happening within our train category. We have the wonder under which is a known silhouette style that we're bringing with some new fabrics that we're excited about. We do have a new performance trained lightning coming at the end of the year, which equally is innovative. And we'll get a read on it, but as I shared, you know, we introduced these. We adjust. It is a new innovation in fabric.

Speaker Change: Style that we're bringing with some new fabrics that we're excited about. We do have a new performance trained, like in coming at the end of the year, which equally is innovative.

Meghan Frank: Moving to SG&A, our approach continues to be grounded and prudently managing our expenses, while also continuing to strategically invest in our long term growth opportunities. SG&A expenses were approximately $872 million or 36.8% of net revenue, compared to 37% of net revenue for the same period last year. Foreign exchange contributed 10 basis points of deleverage, overall the 20 basis points of leverage in the quarter was below our guidance to 40 to 60 basis points and resulted from the lower than expected top line. Operating income for the quarter was approximately 540 million or 22.8% of net revenue, compared to 21.7% of net revenue in Q2 2023. Tax expense for the quarter was 165.3 million or 29.6% of pre-tax earnings, compared to an effective tax rate of 29.8% a year ago. Net income for the quarter was $393 million, or $3.15 for diluted share compared to $2.68 for the second quarter of 2023. Capital expenditures were approximately $145 million for the quarter, compared to approximately $146 million in the second quarter last year. Q2 spent relates primarily to investments that support business growth, including our multi-year distribution center project, store capital for new locations, relocations and renovations and technology investments. Turning to our balance sheet highlights, we ended the quarter with $1.6 billion in cash and cash equivalent, inventory declined 14% in line with our expectations, with the units declining in the mid-single digit range. We repurchased nearly 1.9 million in shares in Q2, at an average price of $310 dollars, here to date, we repurchased approximately 1.2 billion of stock. Share repurchases remain our preferred method to return cash to shareholders, and currently we have approximately 1 billion remaining on our repurchased program. Let me now share our detailed guidance outlook for the remainder of the year. At the highest level, we are assuming that revenue trends in the second half of the year remain fairly consistent with Q2, when excluding the 53rd week and the impact of a shorter holiday shopping season in Q4. I would also note that our pause on the sale of breathe through had a negligible impact on our revenue and growth margin guidance for the year. We feel optimistic with the work our teams are doing to improve the newness we offer within our US women's assortment, but we continue to acknowledge the uncertainties in the macro environment and plan the business prudently. Starting with a full year of 2024, we now expect revenue to be in the range of $10.375 to $10.475 billion, this range represents growth of 8% to 9% relative to 2023. Excluding the 53rd week that we have in the fourth quarter of 2024, we expect revenue to grow 6 to 7%.

Speaker Change: and we'll get a read on it, but as I shared.

Speaker Change: We introduced these, we adjust.

Calvin McDonald: We're very excited about it. And we'll get the guests read, but we'll introduce that. And then we have some seasonal updates, which is a big part of the the newness which has been missing in the first half is a newness on our core dials that the guests resonate so much with. And we're seeing a lot of seasonal updates to our number one franchise being aligned. So there's a lot of newness coming in as well as innovation on top of some known silhouettes and franchises that we're excited about. Thanks, the color and best of luck.

Speaker Change: It is a new innovation in fabric. We're very excited about it. And we'll get the guests read, but we'll introduce that. And then we have some seasonal updates, which is a big part of the the newness which has been missing in the first half.

Speaker Change: is a newness on our core styles that the guests resonate so much with and we're seeing a lot of seasonal updates to our number one franchise being aligned.

Meghan Frank: Operating income for the quarter was approximately 540 million or 22.8% of net revenue, compared to 21.7% of net revenue in Q2 2023. Tax expense for the quarter was 165.3 million or 29.6% of pre-tax earnings, compared to an effective tax rate of 29.8% a year ago. Net income for the quarter was $393 million, or $3.15 for diluted share compared to $2.68 for the second quarter of 2023. Capital expenditures were approximately $145 million for the quarter, compared to approximately $146 million in the second quarter last year. Q2 spent relates primarily to investments that support business growth, including our multi-year distribution center project, store capital for new locations, relocations and renovations and technology investments. Turning to our balance sheet highlights, we ended the quarter with $1.6 billion in cash and cash equivalent, inventory declined 14% in line with our expectations, with the units declining in the mid-single digit range. We repurchased nearly 1.9 million in shares in Q2, at an average price of $310 dollars, here to date, we repurchased approximately 1.2 billion of stock. Share repurchases remain our preferred method to return cash to shareholders, and currently we have approximately 1 billion remaining on our repurchased program. Let me now share our detailed guidance outlook for the remainder of the year. At the highest level, we are assuming that revenue trends in the second half of the year remain fairly consistent with Q2, when excluding the 53rd week and the impact of a shorter holiday shopping season in Q4. I would also note that our pause on the sale of breathe through had a negligible impact on our revenue and growth margin guidance for the year. We feel optimistic with the work our teams are doing to improve the newness we offer within our US women's assortment, but we continue to acknowledge the uncertainties in the macro environment and plan the business prudently. Starting with a full year of 2024, we now expect revenue to be in the range of $10.375 to $10.475 billion, this range represents growth of 8% to 9% relative to 2023. Excluding the 53rd week that we have in the fourth quarter of 2024, we expect revenue to grow 6 to 7%.

Meghan Frank: Operating income for the quarter was approximately 540 million or 22.8% of net revenue, compared to 21.7% of net revenue in Q2 2023.

Speaker Change: So there's a lot of newness coming in as well as innovation on top of some known silhouettes and franchises that were excited about.

Meghan Frank: Tax expense for the quarter was 165.3 million or 29.6% of pre-tax earnings, compared to an effective tax rate of 29.8% a year ago. Net income for the quarter was $393 million, or $3.15 for diluted share compared to $2.68 for the second quarter of 2023. Capital expenditures were approximately $145 million for the quarter, compared to approximately $146 million in the second quarter last year. Q2 spent relates primarily to investments that support business growth, including our multi-year distribution center project, store capital for new locations, relocations and renovations and technology investments. Turning to our balance sheet highlights, we ended the quarter with $1.6 billion in cash and cash equivalent, inventory declined 14% in line with our expectations, with the units declining in the mid-single digit range. We repurchased nearly 1.9 million in shares in Q2, at an average price of $310 dollars, here to date, we repurchased approximately 1.2 billion of stock. Share repurchases remain our preferred method to return cash to shareholders, and currently we have approximately 1 billion remaining on our repurchased program. Let me now share our detailed guidance outlook for the remainder of the year. At the highest level, we are assuming that revenue trends in the second half of the year remain fairly consistent with Q2, when excluding the 53rd week and the impact of a shorter holiday shopping season in Q4. I would also note that our pause on the sale of breathe through had a negligible impact on our revenue and growth margin guidance for the year. We feel optimistic with the work our teams are doing to improve the newness we offer within our US women's assortment, but we continue to acknowledge the uncertainties in the macro environment and plan the business prudently. Starting with a full year of 2024, we now expect revenue to be in the range of $10.375 to $10.475 billion, this range represents growth of 8% to 9% relative to 2023. Excluding the 53rd week that we have in the fourth quarter of 2024, we expect revenue to grow 6 to 7%.

Speaker Change: Thanks for the color and best of luck.

Lorraine Hutchinson: The next question comes from Lorraine Hutchinson with Bank of America. Please go ahead. Thanks. Good afternoon.

Speaker Change: The next question comes from Lauren Hutchinson, but thank of America. Please go ahead.

Calvin McDonald: I know you said that it won't be until spring 2025 to get back to the historic levels of newness, but can you ramp that at all in the second half by accelerating orders? And does the guidance include any benefit from accelerating newness in the women's assortment in the coming quarters? In terms of the action plan that we put in place, and the teams that have been working on that, as I alluded to, I think coming out of Q1, we saw some opportunity.

Lauren Hutchinson: Thanks, good afternoon. I know you said that it won't be until spring 2025 to get back to the historic level of newness.

Lauren Hutchinson: and can you ramps that at all in the second half by accelerating orderism and does the guidance include any benefit from accelerating newness in the women's assortment in the coming quarters?

Meghan Frank: Turning to our balance sheet highlights, we ended the quarter with $1.6 billion in cash and cash equivalent, inventory declined 14% in line with our expectations, with the units declining in the mid-single digit range. We repurchased nearly 1.9 million in shares in Q2, at an average price of $310 dollars, here to date, we repurchased approximately 1.2 billion of stock. Share repurchases remain our preferred method to return cash to shareholders, and currently we have approximately 1 billion remaining on our repurchased program. Let me now share our detailed guidance outlook for the remainder of the year. At the highest level, we are assuming that revenue trends in the second half of the year remain fairly consistent with Q2, when excluding the 53rd week and the impact of a shorter holiday shopping season in Q4. I would also note that our pause on the sale of breathe through had a negligible impact on our revenue and growth margin guidance for the year. We feel optimistic with the work our teams are doing to improve the newness we offer within our US women's assortment, but we continue to acknowledge the uncertainties in the macro environment and plan the business prudently. Starting with a full year of 2024, we now expect revenue to be in the range of $10.375 to $10.475 billion, this range represents growth of 8% to 9% relative to 2023. Excluding the 53rd week that we have in the fourth quarter of 2024, we expect revenue to grow 6 to 7%.

Speaker Change: in terms of the action plan that we put in place and the teams that have been working on that.

Speaker Change: As I alluded to, I think coming out of Q1, we saw some opportunity. The learning in Q2 was the...

Calvin McDonald: The learning in Q2 was the missed opportunity in silhouettes, which was new news for us, as we continue to analyze the business. And the teams that have, through that action plan of Chase, has been pulling forward and going into deeper on inventory that had been purchased that we're seeing the guests respond well to, as well as fast tracking some designs. The chasing into will sequentially get stronger, and we will see that improved through Q3 and to Q4.

Speaker Change: missed opportunity in silhouettes, which was new news for us.

Speaker Change: as we continue to analyze the business and the teams have through that action plan of chase.

Speaker Change: has been pulling forward and going into deeper on inventory that had been purchased, that we're seeing the guest respond well too, as well as fast tracking some designs.

Meghan Frank: At the highest level, we are assuming that revenue trends in the second half of the year remain fairly consistent with Q2, when excluding the 53rd week and the impact of a shorter holiday shopping season in Q4. I would also note that our pause on the sale of breathe through had a negligible impact on our revenue and growth margin guidance for the year. We feel optimistic with the work our teams are doing to improve the newness we offer within our US women's assortment, but we continue to acknowledge the uncertainties in the macro environment and plan the business prudently. Starting with a full year of 2024, we now expect revenue to be in the range of $10.375 to $10.475 billion, this range represents growth of 8% to 9% relative to 2023. Excluding the 53rd week that we have in the fourth quarter of 2024, we expect revenue to grow 6 to 7%.

Speaker Change: The chasing into will sequentially get stronger and we will see that improve through Q3 and Q4 as I alluded to I think spring 25 you know we know we'll be at our historical levels of the universe is a mix of assortment.

Calvin McDonald: As I alluded to, I think spring 25, we know we'll be at our historical levels of newness is a mix of assortment, and it will sequentially get better through the back half of this year, and I'll let Meghan speak in terms of the tie to guidance. So in terms of guidance, we did guide the second half in line with Q2, when adjusting for that short or holiday selling period. So I would say we don't have any meaningful impact from newness in the second half of the year.

Lorraine Hutchinson: Thank you.

Speaker Change: and it will sequentially get better through the back cap of this year and I'll let Meghan speak in terms of the tie to guidance.

Meghan: Episode 2 of Guidance, we did guide the second half in line with Q2 when adjusting for that short or holiday selling period. So I would say we don't have any meaningful impact from the newness in the second half of the year.

Meghan Frank: Starting with a full year of 2024, we now expect revenue to be in the range of $10.375 to $10.475 billion, this range represents growth of 8% to 9% relative to 2023. Excluding the 53rd week that we have in the fourth quarter of 2024, we expect revenue to grow 6% to 7%. Also, relating to Q4, we are assuming a negative impact of approximately 3 percentage points, resulting from a shorter holiday shopping season relative to last year. We continue to expect to open 35 to 40 net new company operated stores in 2024, and complete approximately 40 co-located optimizations, this will contribute to overall square footage growth in the low double digits. Our new store openings in 2024 will include 5 to 10 stores in the Americas, with the rest in our international markets, primarily in China mainland. For the full year, we now expect growth margins to be approximately 20 basis points below our adjusted growth margin in 2023, due predominantly to de-leverage on fixed costs associated with lower forecasted sales and an increase in freight costs relative to our prior estimate. We continue to expect markdowns to be relatively flat with last year. Starting now at SG&A for the full year, we now expect it to be approximately flat versus 2023, we are poorly managing our expenses while continuing to invest strategically into our power of 3x2 roadmap. Including investments in marketing and brand building, is it increasing our awareness and acquiring new guests, investments to support our international growth and market expansion, and continued investment in technology infrastructure and data analytics capabilities. When looking at operating margin for the full year 2024, we now expect a decrease of 10 to 20 basis points, versus adjusted operating margin in 2023, which expanded 110 basis points versus 2022. For the full year of 2024, we expect our effective tax rate to be approximately 30%. For the fiscal year of 2024, we now expect diluted earnings per share in the range of $13.95 to $14.15, versus adjusted EPS of $12.77 in 2023. Our EPS guidance excludes the impact of any future share repurchases, but does include the impact of our repurchases year to date. Looking at inventory, we expect dollar inventory to increase in the mid teens in Q3, as we begin to anniversary last year's decline. We continue to expect capital expenditures to be approximately $670 to $690 million for 2024, this spend relates to investments to support business growth, including a continuation of our multi-year distribution center project, store capital for new locations, relocations and renovations and technology investments. Sifting now to Q3, we expect revenue in the range of $2.34 to $2.365 billion, representing growth of 6% to 7%.

Meghan: Thank you.

Meghan: The next question comes from Dana Talsey with Kelsey Group. Please go ahead.

Meghan: i

Dana Telsey: The next question comes from Dana Telsi with Telsi Group. Please go ahead. The next question comes from Dana Telsi with Telsi Group. Please go ahead. Hi, as you think about your inventory positioning for the back half of the year, how do you break apart the third quarter and the fourth quarter, and which debris, which was a small launch that you talked about, Calvin? Is there any markdowns or any recess on the inventory numbers or gross margin impact of taking that down and eliminating it? Thank you. Thanks, Dana.

Speaker Change: Next question comes from Dana Towsy, with Towsy Group, please go ahead.

Dana Towsy: Hi, as you think about your inventory positioning for the back half of the year, how do you break apart the third quarter and the fourth quarter and which debris through which is a small, small launch that you talked about Calvin.

Speaker Change: is there any markdowns or any recess on the inventory numbers or gross margin impact of taking that down and eliminating it. Thank you.

Meghan Frank: Our new store openings in 2024 will include 5 to 10 stores in the Americas, with the rest in our international markets, primarily in China mainland. For the full year, we now expect growth margins to be approximately 20 basis points below our adjusted growth margin in 2023, due predominantly to de-leverage on fixed costs associated with lower forecasted sales and an increase in freight costs relative to our prior estimate. We continue to expect markdowns to be relatively flat with last year. Starting now at SG&A for the full year, we now expect it to be approximately flat versus 2023, we are poorly managing our expenses while continuing to invest strategically into our power of 3x2 roadmap. Including investments in marketing and brand building, is it increasing our awareness and acquiring new guests, investments to support our international growth and market expansion, and continued investment in technology infrastructure and data analytics capabilities. When looking at operating margin for the full year 2024, we now expect a decrease of 10 to 20 basis points, versus adjusted operating margin in 2023, which expanded 110 basis points versus 2022. For the full year of 2024, we expect our effective tax rate to be approximately 30%. For the fiscal year of 2024, we now expect diluted earnings per share in the range of $13.95 to $14.15, versus adjusted EPS of $12.77 in 2023. Our EPS guidance excludes the impact of any future share repurchases, but does include the impact of our repurchases year to date. Looking at inventory, we expect dollar inventory to increase in the mid teens in Q3, as we begin to anniversary last year's decline. We continue to expect capital expenditures to be approximately $670 to $690 million for 2024, this spend relates to investments to support business growth, including a continuation of our multi-year distribution center project, store capital for new locations, relocations and renovations and technology investments. Sifting now to Q3, we expect revenue in the range of $2.34 to $2.365 billion, representing growth of 6% to 7%.

Meghan Frank: So in terms of inventory and Q3, we're expecting a mid-teens increase and Q4 adder or slightly above that level, and feel, you know, well positioned as we move in the second half of the year. As Calvin mentioned, we'll be ramping newness as we move for up a second half period and be back at historical levels by spring 2025. In terms of debris through is a very small test and learn. So, you know, an immaterial negligible impact on both Q2 and then our guidance for the balance of the year. So, you know, nothing notable there.

Speaker Change: Thanks, Dana. So in terms of inventory and Q3, we're expecting a mid-teens increase.

Speaker Change: and Q4 at her slightly above that level. And feel, you know, well-position is the movement's second half of the year. As Calvin mentioned, we'll be ramping newness as we move for up at second half period and be back at historical levels by [inaudible]

Rukruch: The next question comes from Rukruch with Goldman Sachs. Please go ahead. Good afternoon, and thank you for taking our question.

Speaker Change: in terms of briefs through with a very small test and learn. And so, you know, an immaterial negligible impact on both Q2 and then our guidance for the balance of the year. And so, you know, nothing notable there.

Meghan Frank: Including investments in marketing and brand building, is it increasing our awareness and acquiring new guests, investments to support our international growth and market expansion, and continued investment in technology infrastructure and data analytics capabilities. When looking at operating margin for the full year 2024, we now expect a decrease of 10 to 20 basis points, versus adjusted operating margin in 2023, which expanded 110 basis points versus 2022. For the full year of 2024, we expect our effective tax rate to be approximately 30%. For the fiscal year of 2024, we now expect diluted earnings per share in the range of $13.95 to $14.15, versus adjusted EPS of $12.77 in 2023. Our EPS guidance excludes the impact of any future share repurchases, but does include the impact of our repurchases year to date. Looking at inventory, we expect dollar inventory to increase in the mid teens in Q3, as we begin to anniversary last year's decline. We continue to expect capital expenditures to be approximately $670 to $690 million for 2024, this spend relates to investments to support business growth, including a continuation of our multi-year distribution center project, store capital for new locations, relocations and renovations and technology investments. Sifting now to Q3, we expect revenue in the range of $2.34 to $2.365 billion, representing growth of 6% to 7%.

Speaker Change: Next question, comes from Brooke Roach with Goldman Sachs, please go ahead.

Brooke Roach: Good afternoon, and thank you for taking our question.

Calvin McDonald: Calvin, I was hoping you could speak to the trends that you saw in your U.S, women's business by demographic or consumer type. Has the change in conversion that you senior to date over indexed to any one age group or household income? And as you look to increase the level of mueness over the next few quarters, do you see any specific opportunities to adapt your marketing and membership organization to better serve customers by demographics?

Brooke Roach: can speak to the Trump that you saw in your U.S. women's business by demographic or consumer type.

Brooke Roach: has the change in conversion that you've seen here to date over indexed to any one age group or household incomes. And as you look to increase the level of mooness over the next few quarters, do you see any specific opportunities to adapt to your marketing and membership organization to better serve customers by demographic?

Meghan Frank: For the fiscal year of 2024, we now expect diluted earnings per share in the range of $13.95 to $14.15, versus adjusted EPS of $12.77 in 2023. Our EPS guidance excludes the impact of any future share repurchases, but does include the impact of our repurchases year to date. Looking at inventory, we expect dollar inventory to increase in the mid teens in Q3, as we begin to anniversary last year's decline. We continue to expect capital expenditures to be approximately $670 to $690 million for 2024, this spend relates to investments to support business growth, including a continuation of our multi-year distribution center project, store capital for new locations, relocations and renovations and technology investments. Sifting now to Q3, we expect revenue in the range of $2.34 to $2.365 billion, representing growth of 6% to 7%.

Meghan Frank: For the fiscal year of 2024, we now expect diluted earnings per share in the range of $13.95 to $14.15, versus adjusted EPS of $12.77 in 2023.

Calvin McDonald: Zack. Thanks, Brooke. In terms of the guest profile, nothing meaningful in that we continue to grow our new guest base and continue to do it across the age demographics that we have been growing. What we did see in the conversion missed opportunity, a lot was with our existing guests across those age demographics where the guest who knows our brand has come in and was looking for that newness to add to their already owned collection of Lululemon and the gap in newness on color of those core items, on pattern and trim newness to those core items or to some of the new silhouettes that we just added and introduced around to style around those core, those gaps is where we saw that missed opportunity.

Speaker Change: Thanks Brooke. In terms of, uh...

Speaker Change: the guest profile, nothing meaningful in that we continue to grow our new guest base and continue to do it across the...

Meghan Frank: Our EPS guidance excludes the impact of any future share repurchases, but does include the impact of our repurchases year to date. Looking at inventory, we expect dollar inventory to increase in the mid teens in Q3, as we begin to anniversary last year's decline. We continue to expect capital expenditures to be approximately $670 to $690 million for 2024, this spend relates to investments to support business growth, including a continuation of our multi-year distribution center project, store capital for new locations, relocations and renovations and technology investments. Sifting now to Q3, we expect revenue in the range of $2.34 to $2.365 billion, representing growth of 6% to 7%.

Speaker Change: H. Demographics that we have been growing.

Speaker Change: what we did see in the conversion, missed opportunity, a lot was with our existing guests.

Speaker Change: across those H. Demographics where, you know, the guests who knows our brand, who's come in and was looking for that newness to add to their already owned collection of Louisville and the, uh, Captain Nunes.

Speaker Change: on color of those core items, on pattern and trim, uh, newness to those.

Speaker Change: Corridons, or to some of the new silhouettes that we just added introduced around to style around those core. Those gaps is where we saw that missed opportunity. So she's still spending visiting, we just missed the opportunity in that full conversion from what we've seen and directly linked to decisions we made in missed in that newness and opportunity. But still growing on the gas bay, still growing across the stage.

Calvin McDonald: So she's still spending, visiting, we just missed the opportunity in that full conversion from what we've seen and directly linked to decisions we made and missed in that newness and opportunity, but still growing on the guest base, still growing across the age demographic and as I alluded to an opportunity, going forward from a marketing perspective because we still see very good engagement, low unated awareness, we're definitely marketing and continue to go after that. And as the product mix gets stronger in our women's as a percentage of newness, we know that conversion is what we'll be looking at and engaging that guest in terms of their spend.

Speaker Change: Demographic and as I alluded to an opportunity, going forward, you know.

Speaker Change: from a marketing perspective, because we still see very good engagement low-undated awareness. We're definitely marketing and continuing to go after that.

Meghan Frank: In Q3, we expect our SG&A rate to leverage by 40 to 50 basis points relative to Q3 2023, this will be driven predominantly by leverage on top line and ongoing prudent expense management. When looking at operating margins for Q3, we expect the leverage of approximately 10 to 20 basis points. Turning to EPS, we expect earnings per share in the third quarter to be in the range of $2.68 to $2.73, versus adjusted EPS of $2.53 a year ago. We expect our expected tax rate in Q3 to be approximately 30%, and with that, I will turn it back over to Calvin.

Calvin McDonald: But I alluded to the current men's campaign or lounge campaign really, it's for both him and her, we're very pleased with the early results. It starts to really increase in terms of exposure in through September, but early indication, particular in men's where we have those new franchises of soft jerseys, smooth cover, steady state, he's responding very well to it. So we're going to continue to drive top of funnel, drive that unated brand awareness, and we know that the strength of bringing in the newness will be the biggest lever for us, and we'll continue to increase that throughout the back half of this year and into next. Great. Thanks so much.

Speaker Change: and as the product mix gets stronger in our women as a percentage of newness we know that you know conversion is what we'll be looking at and engaging that gas in terms of their spend.

Speaker Change: but I alluded to the current men's campaigner lounge campaign really it's.

Speaker Change: You know, from both him and her were very pleased with the early results.

Rick Patel: I'll pass it on.

Speaker Change: starts to really increase in terms of exposure in through September.

And with that, I will turn it back over to Calvin.

Speaker Change: but early indication, particular men's where we have those new franchises of soft jersey, smooth cover.

Calvin McDonald: Thanks, Megan. Lululemon remains a strong and healthy brand, and we have shown our ability to responsibly manage the business, while seizing the many growth opportunities in front of us. We have a strong track record, and we will continue to work to deliver for our shareholders, for our employees, and for our guests. Challenges are a natural part of accelerated growth, and I feel confident about emerging stronger from this period, as we innovate for and inspire our guests. In closing, I want to thank our leaders and our people for their passion and dedication to our brand and our business, both during this past quarter and with all that's ahead. Thank you for joining us today. We will now take your questions. Operator?

Speaker Change: Studies State, he's responding very well to it. So we're going to continue to drive topless funnel.

Speaker Change: Drive that unrated brand awareness and we know that the strength of bringing in the newness will be the biggest lever for us and we'll continue to increase that throughout the back half of this year and into next.

Calvin McDonald: Challenges are a natural part of accelerated growth, and I feel confident about emerging stronger from this period, as we innovate for and inspire our guests. In closing, I want to thank our leaders and our people for their passion and dedication to our brand and our business, both during this past quarter and with all that's ahead. Thank you for joining us today. We will now take your questions. Operator?

Speaker Change: Great, thanks so much, y'all have a chance.

Calvin McDonald: The next question comes from Mark Alsharagher with Baird. Please go ahead. Good afternoon. Thank you for taking my question. So you could provide a bit more perspective on China. Clearly some so very strong growth rates there, but I think about a 10-point comp slowdown against an easier comparison. How should we think about sustainable comp growth rates there? I think others have talked about some more macro consumer pressure because you're feeling that as well.

Speaker Change: i

Speaker Change: The next question comes from Mark. I'll be right there. Please go ahead.

Mark Downs: Good afternoon. Thank you for taking my question.

Mark Downs: So, if you could provide a bit more perspective on China, clearly some, so very strong growth rates there, but I think about a 10-point comp slow down against an easier comparison.

We will now take your questions. Operator?

Operator: Thank you. We will now begin the question and answer session, analysts who wish to join the question queue, may press star, then one on the telephone keypad, you will hear a tone acknowledging your request. If you're using a speaker phone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. The first question comes from Matthew Boss with JP Morgan. Please go ahead.

Speaker Change: How should we think about the sustainable Compro Threats there? I think others have talked about some more macro consumer pressure, because you're feeling that as well, any color on what's going on in stores and digital. Maybe just more broadly, how you're planning Compro Threat by Regent for the remainder of the year. Thank you.

Calvin McDonald: Any color on what's going on in stores and digital. Maybe just more broadly how you're planning comp growth by region for the remainder of the year. Thank you. Thanks, Mark. So, you know, we did still see very strong growth in China and Q2. So up 37% on a constant currency basis. The variance between Q1 and Q2 growth rates, the biggest factor would have been the shift in Chinese New Year. So we had that in Q1 2024 in 2022.

The first question comes from Matthew Boss with JP Morgan. Please go ahead.

Mark Downs: It's Mark

Matthew Robert Boss: Great, thanks and appreciate all the color, Calvin. Maybe larger picture, what do you see as the revenue gross algorithm in North America once the dust settles? And I think you talked about color sizing near-term execution, and I think you cited all of this as more or less optimal on the women's side by the spring. So maybe what do you see as the right revenue growth algorithm in North America once the dust is settled? And then what guardrails have you put into place to drive greater consistency over time in the region?

Speaker Change: So, you know, we did still see very strong growth in China and Q2, so up 37% on a constant currency basis.

Speaker Change: The variance between Q1 and Q2 growth rates, the biggest factor would have been the shift in Chinese New Year, so we had that in Q1 2024.

Calvin McDonald: It wasn't Q4, so it was non-comparable. So still really healthy growth there across both channels. And you know, we haven't broken out our forward looking guide by region. But I would say still outside growth in international and China being the key driver there. And I'm just glad, you know, we remain excited about the potential for Lulemon in mainland China. While we're keeping an eye on the macro environment in the region, our business remains strong.

Speaker Change: in 2022, it wasn't Q4, so it was non-comfortable. So it's still really healthy growth there across both channels. And we haven't broken out our forward looking guide by region, but I would say still outside growth and international, and trying to be in the key driver there.

Speaker Change: and I'll just add, you know, we remain excited about the potential for the Lumin in mainland China.

Meghan Frank: Okay, Matt. So in terms of how we view North America growth over time, we're still committed to our Power 3x2 plan, which had North America low double digit growth. What I would share, it's too soon to put a fine point on 2025, but what I would share is that we'll obviously be up against an easier comparison this year. And we still are excited about the long-term growth opportunity we have in that market, particularly in terms of US, in terms of brand awareness. So we have continued to protect investments that are aimed at building into that long-term opportunity.

Speaker Change: while we're keeping an eye on the Mac one environment in the region, our business remains strong. And we believe several factors will continue to benefit us, you know, one.

Calvin McDonald: And we believe several factors will continue to benefit us, you know, one. It is still a small size relative to the market with a store base of 132 on the mainland at the end of the quarter. We take a very localized approach to the brand building relationships through local fitness instructors influencers. Some very unique events that are building awareness in the community on the back of our unique positioning grounded in wellness and the positioning of the product.

Speaker Change: It is still a small size relative to the market with a store base of 132.

Calvin McDonald: Yeah, Matt, in terms of the second part, the new product organization definitely sets a new balance between, as I mentioned, design and merchandising, which is going to lead to more creative conversations and outcomes. And I've been in these meetings with the teams, and already we're seeing the benefit of the new working relationships, and definitely clarity around the racial of newness tied to our product plans are key part of that conversation. And excited about the roadmap ahead to deliver on those, and the opportunities we see in product in delivering on our guest needs.

Speaker Change: on the mainland at the end of the quarter.

Speaker Change: We take a very localized approach to the brand building relationships through local fitness instructors, influencers and very unique events that are building awareness in the community on the back of our unique positioning grounded in wellness and the positioning of the product.

Matthew Robert Boss: Great, and then maybe just to follow up, if you could just speak to your comfort with inventory on hand today, exiting the quarter, and maybe just touch on markdowns relative to plan in the second quarter, or any change for the back half.

Calvin McDonald: So we're monitoring it, have not seen any material impact to the business. And I do believe it's because we're very early in our growth there and see a lot of continual success across the tier one tier two into tier three cities where we've been opening, testing and seeing very good response. Thank you.

Speaker Change: We're monitoring it, have not seen any material impact to the business and I do believe it's because we're very early in our growth there and see a lot of continuous success across the Tier 1 Tier 2 and Tier 3 cities where we've been opening testing and seeing very good response.

Speaker Change #100: Thank you.

John Kernan: The next question comes from Rick Patel with Raymond James. Please go ahead. Thank you, good afternoon.

Speaker Change #100: The next question comes from Rick Pekelle with Raymond James, please go ahead.

Meghan Frank: Question on the performance of core products. You called that a lack of inventory for certain styles and sizes entering the year. Did the same headwinds intensify in the second quarter or did you see new headwinds related to other products? Just some clarity there would be great. And then secondly, you're seeing still seeing good growth for accessories. How should we think about the outlook there? Thanks, Rick. In terms of the shift from Q1 to Q2 and the learning, color, print and pattern continues to be an opportunity for us.

Rick Pekelle: Thank you, Good afternoon. Question on the performance of core products.

Meghan Frank: Yep. So in terms of inventory, we came in with inventory down 14%, it was in line with expectations, and just a reminder, we're locking some increases the last couple of years in terms of inventory, with turns still, slightly slower than history. As we move into the second half of the year, we do expect inventory to be in the mid teens, at the end of Q3, and a similar growth rate slightly higher as we end the year. I would say in terms of comfort with inventory, you know, [inaudible] came in, in line with expectations, the opportunity would be in composition and that mixture that Calvin described in terms of newness, which the team is adjusting now. And then in terms of markdowns, we did come in favorable relative to our expectations in Q2, so we did expect to see markdowns similar, slightly below what we saw in Q1, we were up 50 based points year over year in Q1. We expected slightly lower in Q2, we did come in flat year over year. And that was really driven by strong sales grows on seasonal, which is where, you know, we really take markdowns, just to clear seasonal. But when we look at the second half of the year, Q3 markdowns, I'd expect relatively in line with last year, and then Q4 slightly under last year, and we're still expecting flat markdowns for the full year.

Speaker Change #102: You've called that a lack of inventory for certain styles and sizes entering the year.

Rick Pekelle: did the same headwinds intensify in the second quarter, or did you see new headwinds related to other products? Just some clarity there would be great. And then secondly, you're seeing still seeing good growth for accessories, how should we think about the outlook there?

Rick Pekelle: Thanks, Rick, in terms of...

Rick Pekelle: the shift from Q1 to Q2 and learning.

Speaker Change #103: Colour, Prenton Pattern continues to be an opportunity for us, and we think of those through a couple of ways in which we execute it. One is core styles and adding it through updates through Colour Print, silhouettes.

Meghan Frank: And we think of those through a couple of ways in which we execute it. One is core styles and adding it through updates through color print, silhouettes, fabric extensions. That has been a great driver for us to keep our guests engaged and keep adding to the Lululemon products for them as well as seasonal new silhouettes and styles. And I would say the shift from Q1 to Q2 is the gap in that as a percentage historically was greater in Q2 than in Q1 and was really the notable difference between the two quarters.

Speaker Change #103: Fabric Extendions. That has been a great driver for us to keep our guests engaged and keep adding to.

Meghan Frank: And then in terms of markdowns, we did come in favorable relative to our expectations in Q2, so we did expect to see markdowns similar, slightly below what we saw in Q1, we were up 50 based points year over year in Q1. We expected slightly lower in Q2, we did come in flat year over year. And that was really driven by strong sales grows on seasonal, which is where, you know, we really take markdowns, just to clear seasonal. But when we look at the second half of the year, Q3 markdowns, I'd expect relatively in line with last year, and then Q4 slightly under last year, and we're still expecting flat markdowns for the full year.

Speaker Change #103: the Lou Lennon products for them as well as seasonal new silhouettes and styles. And I would say the shift from Q1 to Q2 is...

Speaker Change #103: The Gap in that, as a percentage historically, was greater and cute than in Q1 and was really than the notable difference between the two quarters.

Speaker Change #103: [inaudible]

Speaker Change #103: George.

Meghan Frank: Sorry, Rick. And on accessories, you know, I think we've chatted about this for everywhere belt bag was a very strong driver for us in the last few years. And we've cycled over some of the peaks of that volume, but it continues to be a big driver. And as you mentioned, overall accessories in the quarter grew 7%. And the team continues to introduce new styles, both within the everywhere belt bag franchise, but new styles from our backpack collection to some travel bags to totes, to the cactus leather introduction this week that the guests responded very well to.

Speaker Change #104: sorry, record, and on accessories.

Speaker Change #104: Um...

Speaker Change #105: You know, I think we've chatted about this for everywhere Belpegg was a very strong driver for us in the last few years. And we've cycled over some of the peaks of that volume.

Meghan Frank: Thank you.

The next question comes from Alex Straton with Morgan Stanley. Please go ahead. Perfect, thanks a lot for taking the question. Just on the revised full year guidance and where it's coming out of, it feels like that's mostly concentrated in the fourth quarter. Is that right or did your review on the third quarter change as well? And if you can just walk us through the puts and takes for almost like almost a 50 cent reduction, that would be very helpful.

Operator: The next question comes from Alex Straton with Morgan Stanley. Please go ahead.

Speaker Change #105: but it continues to be a big driver and as you mentioned, overall accessories in the quarter group 7%.

Alex Straton: Perfect, thanks a lot for taking the question. Just on the revised full year guidance and where it's coming out of, it feels like that's mostly concentrated in the fourth quarter. Is that right or did your review on the third quarter change as well? And if you can just walk us through the puts and takes for almost like almost a 50 cent reduction, that would be very helpful. Thanks a lot.

Speaker Change #105: and the team continues to introduce

Speaker Change #105: New Styles, both within the Everwhere Belt Big franchise, but new Styles from our backpack collection, it's just in travel bags to totes.

Speaker Change #105: to the cactus leather introduction this week that the guests responded very well too. So we continue to be very excited about our accessories business.

Meghan Frank: So we continue to be very excited about our accessories business. It's small percentage of our overall mix at 10, but definitely a significant opportunity. We're about 1% a market share. And we see opportunity to continue to grow that meaningfully moving forward. And the team's doing it through creating very innovative products and the guests continue to respond very well to it in North America as well as globally. So excited about the product creation and what's coming. Great, thank you.

Thanks a lot.

Meghan Frank: Thanks Alex. I would say the release, our view on the relationship between Q3 and Q4 has not changed. I would say we are guiding the second half in line, essentially, with the trend we're seeing in Q2. Q4 is adjusted for the shorter holiday selling period and days between Thanksgiving and Christmas, which we estimate at about a three point impact, as well as the macroeconomic environment and the election in Q4. So the relationship of the two quarters has not changed, but we have lowered our outlook on the aggregate water line for the second half. Got it. Maybe just one for Calvin is how much do you attribute sort of the revenue shortcoming in the quarter versus your expectation to like your own mistakes versus a macro? There's been a lot of discussion of kind of a weakening consumer. So just curious your thoughts on that. I definitely see this as an opportunity based on decisions that we made that are within our control and being addressed. As I alluded to, it's crossed the globe. It really is focused to our US women's business in a gap in newness that we brought across color print and silhouettes. The newness we had sold very well, guest was coming in, traffic was positive across all channels, and the opportunity was in conversion. So I see that as an opportunity that they were there with intent to spend, and there was a noticeable reduction in those historical levels of newness. So those were the product decisions that we made earlier in new teams in action, and as I alluded to the chase, but definitely I think majority is within our control. Thanks a lot. Thank you.

Howard Tubin: Operator, we'll take one more question.

Speaker Change #106: Small percentage of our overall mix at 10, but definitely a significant opportunity we're about 1% a market share.

Speaker Change #106: and we see opportunity to continue to grow that meaningfully moving forward and the team's doing it through creating very innovative products and the gas continue to respond very well to it in North America as well as globally. So excited about the product creation and what's coming.

Speaker Change #107: Great, thank you.

Speaker Change #108: Operator, we'll take one more question.

John Kernan: Last question comes from John Kernin with PD Cohen. Please go ahead. Good afternoon. Thanks for taking the question. Megan, I think a big fear of price into the valuation of the company right now is the gross margin rate is peaked in your SG&A rate. Many may need to move higher. How would you address those steers given the competitive environment category right now? Now, so I think we've continued to see strength in both gross margin and S-GNA.

Speaker Change #109: Last question comes from John Kernend with TD Cohen. Please go ahead.

Meghan Frank: Got it. Maybe just one for Calvin, is how much do you attribute sort of the revenue shortcoming in the quarter versus your expectation to like your own mistakes versus a macro? There's been a lot of discussion of kind of a weakening consumer, so just curious your thoughts on that. I definitely see this as an opportunity based on decisions that we made that are within our control and being addressed. As I alluded to, it's crossed the globe. It really is focused to our US women's business in a gap in newness that we brought across color print and silhouettes. The newness we had sold very well, guest was coming in, traffic was positive across all channels, and the opportunity was in conversion. So I see that as an opportunity that they were there with intent to spend, and there was a noticeable reduction in those historical levels of newness. So those were the product decisions that we made earlier in new teams in action, and as I alluded to the chase, but definitely I think majority is within our control. Thanks a lot. Thank you.

Alex Straton: Got it. Maybe just one for Calvin, is how much do you attribute sort of the revenue shortcoming in the quarter versus your expectation to like your own mistakes versus a macro? There's been a lot of discussion of kind of a weakening consumer, so just curious your thoughts on that.

John Kernend: Good afternoon, taxi take the question.

John Kernend: Megan, I think a big fear of fright into the valuation of somebody right now is the gross margin rate is peaked in your S.G.A.A. rate, maybe may need to move higher. How would you address those fears given the competitive environment in category right now?

John Kernan: This year with our revenue growth guide at 8-9%, and then 6-7%, excluding the 53rd week, we're still delivering gross margin relatively in line with 2023, as well as approximately flat S-GNA. Our operating margin is still very strong, you know, 100 basis points above our 2020 results after two years. So, you know, we're really focused on driving into that bottom line, and optimizing the bottom line, we're still committed to our power of three times two plan for modest operating margin expansion over the five year period.

Meghan Frank: I definitely see this as an opportunity, based on decisions that we made that are within our control and being addressed. As I alluded to, it's across the globe, it really is focused to our US women's business in a gap in newness that we brought across color print and silhouettes. The newness we had sold very well, guest was coming in, traffic was positive across all channels, and the opportunity was in conversion. So I see that as an opportunity that they were there, with intent to spend, and there was a noticeable reduction in those historical levels of newness. So those were the product decisions that we made earlier in new teams in action, and as I alluded to the chase, but definitely I think majority is within our control. Thanks a lot. Thank you.

Calvin McDonald: I definitely see this as an opportunity, based on decisions that we made that are within our control and being addressed. As I alluded to, it's across the globe, it really is focused to our US women's business in a gap in newness that we brought across color print and silhouettes. The newness we had sold very well, guest was coming in, traffic was positive across all channels, and the opportunity was in conversion. So I see that as an opportunity that they were there, with intent to spend, and there was a noticeable reduction in those historical levels of newness. So those were the product decisions that we made earlier in new teams in action, and as I alluded to the chase, but definitely I think majority is within our control.

Speaker Change #111: Yeah, so I think, you know, we've continued to see strength in both Gross Margin and S.G.N.A. You know, this year with our revenue, Gross Guide at 8 to 9%.

Speaker Change #112: and then six to seven percent excluding the 53rd week. We're still delivering gross margins relatively in line with 2023.

Speaker Change #112: and as well as approximately flat SGAA or operating margin still very strong.

Speaker Change #112: and 100 basis points above our 2020 results after two years. So we're really focused on driving into that bottom line, and optimizing the bottom line we're still committed to our power of three times two plan for a modest operating margin expansion over the five-year period. I think too soon to put a fine point on the outer years, but certainly has...

John Kernan: I think too soon to put a fine point on the outer years, but certainly have runway in front of us in terms of most importantly revenue, but also looking at gross inefficiencies across our PNL, and we'll continue to keep up with it. Understood, and Calvin, maybe a thought for you, has your core customer in women staying still over the years, it seems like it's a more diverse cohort, are they more challenging to plan and allocate for in terms of sizing and color, and what are you learning, some of the surrounding some of the customers required?

Speaker Change #112: Runway in front of us in terms of most importantly revenue but also looking at close and efficiencies across our P&L, we will continue to keep up to this.

Meghan Frank: Thanks a lot, good luck. Thank you.

Alex Straton: Thanks a lot, good luck.

Meghan Frank: Thank you.

Operator: The next question comes from Paul Lejuez with city. Please go ahead.

Kevin Vivipop: and Kevin Vivipop for you, has your core customer in women staying still over the years? It seems like it's a more diverse cohort, but a more challenging to plan and allocate for in terms of sizing and color and what are you learning? Some of the surrounding some of the new customers required.

Paul Lejuez: Hey guys, thanks. Can you talk about how the quarter progressed as you move through by region? What the exhibits were, any comments on quarter to date, and are there any pockets [inaudible]? Just curious how you handled the whole green through, where does that probably go? Any financial impact on [inaudible]? Thank you.

Can you talk about how the quarter progressed as you move through by region, what the exhibits were, any comments on quarter to date, and are there any pockets that are in need for you? Just curious how you handled the whole green through, where does that probably go? Any financial impact on me? Thank you.

John Kernan: Yep, we continue to acquire across all of our, if you want to slice it through age demographic, I think I mentioned in the past, across different age demographics, we continue to acquire new guests across all of them, alluded to the shift in our sizing profile earlier. I think the team's doing a good job in adjusting to that. We saw improvements through Q2 and really are entering Q3 with a better mix of sizing across our profile.

Speaker Change #114: We continue to acquire across all of our, if you want to slice it through age, demographic.

Speaker Change #114: I think I've mentioned in the past, across different age demographics we continue to acquire new guests across all of them.

Thanks, Paul. So in terms of Q2, our May trend relatively in line with what we experienced in Q1, and then a softer business performance in June and July, which July being slightly above June. We haven't given any color by region within that, but I would say, in terms of quarter to date, you know, we don't break down quarter to date performance by month. But, you know, given what we experienced in Q2, the macroeconomic uncertainty in the second half of the year, we feel our guide at 6% to 7% is appropriate at this time. And then in terms of inventory, again, comfortable to overall level, breathe through really negligible impact, a small test and learn, and not a material financial impact.

Meghan Frank: Thanks, Paul. So in terms of Q2, our May trend relatively in line with what we experienced in Q1, and then a softer business performance in June and July, which July being slightly above June. We haven't given any color by region within that, but I would say, in terms of quarter to date, you know, we don't break down quarter to date performance by month.

Speaker Change #114: alluded to the shift in our sizing profile.

Speaker Change #115: Earlier, I think the team's doing a good job in adjusting to that. We saw improvements through Q2 and really are entering Q3 with a better mix of sizing across.

John Kernan: We're going to continue to adjust, but I wouldn't say there's any macro shift that we're behind on now, and we continue to recruit and acquire guests across that, which means really across the age and the in the size profile. Understood.

Speaker Change #115: our profile, we're going to continue to adjust, but I wouldn't say there's any macro shift that we're behind on now. And we continue to recruit an acquire gas across that, which means really across the age and the size profile.

But, you know, given what we experienced in Q2, the macroeconomic uncertainty in the second half of the year, we feel our guide at 6% to 7% is appropriate at this time. And then in terms of inventory, again, comfortable to overall level, breathe through really negligible impact, a small test and learn, and not a material financial impact. Thanks, good luck. Thank you.

Meghan Frank: But, you know, given what we experienced in Q2, the macroeconomic uncertainty in the second half of the year, we feel our guide at 6% to 7% is appropriate at this time. And then in terms of inventory, again, comfortable to overall level, breathe through really negligible impact, a small test and learn, and not a material financial impact.

Calvin McDonald: Thank you.

Mr.: and Mr. Thank you.

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

Operator: Thank you for joining the call and have a nice day. [inaudible]

Speaker Change #117: That's all the time we have for questions today. Thank you for joining the call and have a nice day.

Thanks, good luck. Thank you.

Paul Lejuez: Thanks, good luck.

Meghan Frank: Thank you.

Operator: Next question comes from Michael Binetti with Evercore. Please go ahead.

Speaker Change #118: and Michael McDonald, Howard Tubin

Michael Binetti: Hey guys, thanks for taking our questions here, I guess maybe one for each. Megan, can you just walk us through how mechanics with P&L work? I know you do a lot of scenario planning, but you could keep the EBIT margins for the total company positive, or we have this slower near-term run rate in the US. And then Calvin, just some of the comments made earlier example, I'm wondering if you could give us an example of how design and merchandising teams are previously not on that equal footing that you think are on now, and how that impacted the strategy in the consumer's eyes. Maybe just some of what prompted you to make some of the changes in the org chart that you did.

And then Calvin, just some of the comments made earlier example, I'm wondering if you could give us an example of how design and merchandising teams are previously not on that equal footing that you think are on now and how that impacted the strategy in the consumer's eyes. Maybe just some of what prompted you to make some of the changes in the org chart that you did.

Michael Binetti: And then Calvin, just some of the comments made earlier example, I'm wondering if you could give us an example of how design and merchandising teams are previously not on that equal footing that you think are on now, and how that impacted the strategy in the consumer's eyes? Maybe just some of what prompted you to make some of the changes in the org chart that you did.

Speaker Change #118: [inaudible]

Meghan Frank: Thanks Michael. So in terms of P&L management, we're obviously closely monitoring business. We do run multiple scenarios. Our intention is to stay agile based on the way business is unfolding. You know, as we're looking at this year and our revenue outlook, we are continuing to invest behind international performance, you know, key to our long-term strategy in an area of our business is currently performing well. And then as I mentioned, we also do see long-term opportunity. Our outlook has not changed on long-term opportunity in terms of brand awareness globally but also within North America. So we've continued to protect investments in that long-term brand building. At the same time, you know, we're looking for efficiency opportunities across the P&L and discretionary spend buckets as well as, you know, slowing down where that makes sense. In terms of our capabilities, road mapping go forward, all in line with our part three times two plan. So feel like we're well positioned as we navigate this year with the right balance of navigating the short-term while protecting investments in our long-term. And Michael, in terms of your question, as you know, the previous structure, both design and merchandising rolled up to a single, single leader. And that product organization had served us well as a high-growth company. You know, we have a 24% Kager over the last five years from 18 to 23 to 10 billion in revenue. But as we looked forward, we saw it as an opportunity to reset and take a different approach. And what the newer does by having a stronger balance between design and merge, which will lead to more creative conversations and outcomes. And in those conversations in the meetings I have, so where am I seeing the difference in balance? You will see it executed in creation of some product, challenging of the ratio between newness and core in the assortment, and just the relationship between those two teams in terms of what's being created and how we're mixing it into the assortment and then bringing to market. So also with this change, we're seeing a much tighter relationship in the brand, soft marketing organization with merchandising, which is really the whole self-sighted business, being under one leader. Or before it was a hand-off, those conversations are happening much sooner and aligned in terms of where we see the opportunity, aligning it to what we're buying deep into and then creating plans for that demand creation earlier in the process. So I think there's really three benefits that are coming out of it on the brand to merchandising self-sight as well as design and seeing it in terms of just the creation of product in that ratio mix across the assortment path. The guest has been looking for and excited Okay, thanks a lot for all the information. I appreciate it. Thank you.

Meghan Frank: Thanks Michael. So in terms of P&L management, we're obviously closely monitoring business, we do run multiple scenarios, our intention is to stay agile, based on the way business is unfolding. You know, as we're looking at this year and our revenue outlook, we are continuing to invest behind international performance, you know, key to our long-term strategy in an area of our business is currently performing well. And then as I mentioned, we also do see long-term opportunity, our outlook has not changed on long-term opportunity in terms of brand awareness, globally but also within North America, so we've continued to protect investments in that long-term brand building. At the same time, you know, we're looking for efficiency opportunities across the P&L and discretionary spend buckets as well as, you know, slowing down where that makes sense. In terms of our capabilities, road mapping and go forward, all in line with our Powe 3x2 plan, so feel like we're well positioned as we navigate this year with the right balance of navigating the short-term while protecting investments in our long-term. And Michael, in terms of your question, as you know, the previous structure, both design and merchandising rolled up to a single, single leader. And that product organization had served us well as a high-growth company. You know, we have a 24% Kager over the last five years from 18 to 23 to 10 billion in revenue. But as we looked forward, we saw it as an opportunity to reset and take a different approach. And what the newer does by having a stronger balance between design and merge, which will lead to more creative conversations and outcomes. And in those conversations in the meetings I have, so where am I seeing the difference in balance? You will see it executed in creation of some product, challenging of the ratio between newness and core in the assortment, and just the relationship between those two teams in terms of what's being created and how we're mixing it into the assortment and then bringing to market. So also with this change, we're seeing a much tighter relationship in the brand, soft marketing organization with merchandising, which is really the whole self-sighted business, being under one leader. Or before it was a hand-off, those conversations are happening much sooner and aligned in terms of where we see the opportunity, aligning it to what we're buying deep into and then creating plans for that demand creation earlier in the process. So I think there's really three benefits that are coming out of it on the brand to merchandising self-sight as well as design and seeing it in terms of just the creation of product in that ratio mix across the assortment path. The guest has been looking for and excited Okay, thanks a lot for all the information. I appreciate it. Thank you.

Meghan Frank: And then as I mentioned, we also do see long-term opportunity, our outlook has not changed on long-term opportunity in terms of brand awareness, globally but also within North America, so we've continued to protect investments in that long-term brand building. At the same time, you know, we're looking for efficiency opportunities across the P&L and discretionary spend buckets as well as, you know, slowing down where that makes sense. In terms of our capabilities, road mapping and go forward, all in line with our Powe 3x2 plan, so feel like we're well positioned as we navigate this year with the right balance of navigating the short-term while protecting investments in our long-term.

Meghan Frank: opportunity in terms of brand awareness globally but also within North America. So we've continued to protect investments in that long-term brand building. At the same time, you know, we're looking for efficiency opportunities across the P&L and discretionary spend buckets as well as, you know, slowing down where that makes sense. In terms of our capabilities, road mapping go forward, all in line with our part three times two plan. So feel like we're well positioned as we navigate this year with the right balance of navigating the short-term while protecting investments in our long-term. And Michael, in terms of your question, as you know, the previous structure, both design and merchandising rolled up to a single, single leader. And that product organization had served us well as a high-growth company. You know, we have a 24% Kager over the last five years from 18 to 23 to 10 billion in revenue. But as we looked forward, we saw it as an opportunity to reset and take a different approach. And what the newer does by having a stronger balance between design and merge, which will lead to more creative conversations and outcomes. And in those conversations in the meetings I have, so where am I seeing the difference in balance? You will see it executed in creation of some product, challenging of the ratio between newness and core in the assortment, and just the relationship between those two teams in terms of what's being created and how we're mixing it into the assortment and then bringing to market. So also with this change, we're seeing a much tighter relationship in the brand, soft marketing organization with merchandising, which is really the whole self-sighted business, being under one leader. Or before it was a hand-off, those conversations are happening much sooner and aligned in terms of where we see the opportunity, aligning it to what we're buying deep into and then creating plans for that demand creation earlier in the process. So I think there's really three benefits that are coming out of it on the brand to merchandising self-sight as well as design and seeing it in terms of just the creation of product in that ratio mix across the assortment path. The guest has been looking for and excited Okay, thanks a lot for all the information. I appreciate it. Thank you.

Meghan Frank: At the same time, you know, we're looking for efficiency opportunities across the P&L and discretionary spend buckets as well as, you know, slowing down where that makes sense. In terms of our capabilities, road mapping and go forward, all in line with our Powe 3x2 plan, so feel like we're well positioned as we navigate this year with the right balance of navigating the short-term while protecting investments in our long-term.

Meghan Frank: And Michael, in terms of your question, as you know, the previous structure, both design and merchandising rolled up to a single, single leader. And that product organization had served us well as a high-growth company, you know, we have a 24% CGR over the last five years from '18 to '23 to 10 billion in revenue, but as we looked forward, we saw it as an opportunity to reset and take a different approach. And what the newer does by having a stronger balance between design and merge, which will lead to more creative conversations and outcomes, and in those conversations in the meaning time have, so where am I seeing the difference in balance? You will see it executed in creation of some product, challenging of the ratio between newness and core in the assortment, and just the relationship between those two teams in terms of what's being created and how we're mixing it into the assortment and then bringing to market. So also with this change, we're seeing a much tighter relationship in the brand, besides marketing organization with merchandising. Which is really the whole sell side of the business, being under one leader, or before it was a hand-off, those conversations are happening much sooner and aligned in terms of where we see the opportunity, aligning it to what we're buying deep into and then creating plans for that demand creation earlier in the process. So I think there's really three benefits that are coming out of it on the brand to merchandising self-sight, as well as design and seeing it in terms of just the creation of product in that ratio mix across the assortment path. The guest has been looking forward and excited to bring it. Okay, thanks a lot for all the information. I appreciate it. Thank you.

Calvin McDonald: And Michael, in terms of your question, as you know, the previous structure, both design and merchandising rolled up to a single, single leader. And that product organization had served us well as a high-growth company, you know, we have a 24% CGR over the last five years from '18 to '23 to 10 billion in revenue, but as we looked forward, we saw it as an opportunity to reset and take a different approach. And what the newer does by having a stronger balance between design and merge, which will lead to more creative conversations and outcomes, and in those conversations in the meaning time have, so where am I seeing the difference in balance?

Speaker Change #119: Music Music

Meghan Frank: You will see it executed in creation of some product, challenging of the ratio between newness and core in the assortment, and just the relationship between those two teams in terms of what's being created and how we're mixing it into the assortment and then bringing to market. So also with this change, we're seeing a much tighter relationship in the brand, besides marketing organization with merchandising. Which is really the whole sell side of the business, being under one leader, or before it was a hand-off, those conversations are happening much sooner and aligned in terms of where we see the opportunity, aligning it to what we're buying deep into and then creating plans for that demand creation earlier in the process. So I think there's really three benefits that are coming out of it on the brand to merchandising self-sight, as well as design and seeing it in terms of just the creation of product in that ratio mix across the assortment path. The guest has been looking forward and excited to bring it.

Meghan Frank: You will see it executed in creation of some product, challenging of the ratio between newness and core in the assortment, and just the relationship between those two teams in terms of what's being created and how we're mixing it into the assortment and then bringing to market. So also with this change, we're seeing a much tighter relationship in the brand, besides marketing organization with merchandising. Which is really the whole sell side of the business, being under one leader, or before it was a hand-off, those conversations are happening much sooner. And aligned in terms of where we see the opportunity, aligning it to what we're buying deep into and then creating plans for that demand creation earlier in the process.

Calvin McDonald: You will see it executed in creation of some product, challenging of the ratio between newness and core in the assortment, and just the relationship between those two teams in terms of what's being created and how we're mixing it into the assortment and then bringing to market. So also with this change, we're seeing a much tighter relationship in the brand, besides marketing organization with merchandising. Which is really the whole sell side of the business, being under one leader, or before it was a hand-off, those conversations are happening much sooner.

Calvin McDonald: And aligned in terms of where we see the opportunity, aligning it to what we're buying deep into and then creating plans for that demand creation earlier in the process. So I think there's really three benefits that are coming out of it on the brand to merchandising self-sight, as well as design and seeing it in terms of just the creation of product in that ratio mix across the assortment path. The guest has been looking forward and excited to bring it.

Meghan Frank: So I think there's really three benefits that are coming out of it on the brand to merchandising self-sight, as well as design and seeing it in terms of just the creation of product in that ratio mix across the assortment path. The guest has been looking forward and excited to bring it.

Meghan Frank: Okay, thanks a lot for all the information. I appreciate it. Thank you.

Michael Binetti: Okay, thanks a lot for all the information. I appreciate it.

Meghan Frank: Thank you.

The next question comes from Janine Stichter with BTID. Please go ahead.

Janine Stichter: Hi, thanks for taking my questions, a couple questions on a product innovation for the back half. I guess first on breathe through, it seems to us that the consumer really liked the fabric, they just weren't in love with the fit. What's the timeline for getting that back with some new fits and [inaudible]. And then any parameters you can help provide around some of these new launches coming in the back half. It seems like they launch in training, it seems like that will be pretty big. Just how do I think about that in terms of the size and the potential in that?

It seems like that will be pretty big. Just how do I think about that in terms of the size and the potential in that?

Calvin McDonald: Thanks, Janine. In terms of breathe through and the fabric, you're right, you know, we're really excited about the guest response, not just in North America, but actually internationally, in particular in our APEC market, where this fabric was really designed as I shared for hot yoga, but we see it as versatility in high humid environments, for a variety of activities. So it is a very unique, exciting new fabric for us, and the team's in work to bring it back in either a style that the guest already knows, with the new fabric versus, you know, the the sharper design lines that it was introduced in. So we got the read we wanted in that, you know, the fabric, which is the real innovation behind it, landed and resonated very well, and they're working on being able to bring that back to market. You won't see it in '24, and not calling it for '25, but know that that's a priority of the team, but they're equally looking on all the other innovation and creating as well. So you alluded to, a lot is happening within our train category, we have the wonder under which is a known silhouette style that we're bringing with some new fabrics that we're excited about. We do have a new performance trained lightning coming at the end of the year, which equally is innovative, and we'll get a read on it. But as I shared, you know, we introduced these, we adjust, it is a new innovation in fabric, we're very excited about it, and we'll get the guests read, but we'll introduce that. And then we have some seasonal updates, which is a big part of the the newness which has been missing in the first half, is a newness on our core dials that the guests resonate so much with, and we're seeing a lot of seasonal updates to our number one franchise being aligned. So there's a lot of newness coming in as well, as innovation on top of some known silhouettes and franchises that we're excited about. Thanks, the color and best of luck.

Calvin McDonald: So we got the read we wanted in that, you know, the fabric, which is the real innovation behind it, landed and resonated very well, and they're working on being able to bring that back to market. You won't see it in '24, and not calling it for '25, but know that that's a priority of the team, but they're equally looking on all the other innovation and creating as well. So you alluded to, a lot is happening within our train category, we have the wonder under which is a known silhouette style that we're bringing with some new fabrics that we're excited about. We do have a new performance trained lightning coming at the end of the year, which equally is innovative, and we'll get a read on it. But as I shared, you know, we introduced these, we adjust, it is a new innovation in fabric, we're very excited about it, and we'll get the guests read, but we'll introduce that. And then we have some seasonal updates, which is a big part of the the newness which has been missing in the first half, is a newness on our core dials that the guests resonate so much with, and we're seeing a lot of seasonal updates to our number one franchise being aligned. So there's a lot of newness coming in as well, as innovation on top of some known silhouettes and franchises that we're excited about.

Calvin McDonald: We do have a new performance trained lightning coming at the end of the year, which equally is innovative, and we'll get a read on it. But as I shared, you know, we introduced these, we adjust, it is a new innovation in fabric, we're very excited about it, and we'll get the guests read, but we'll introduce that. And then we have some seasonal updates, which is a big part of the the newness which has been missing in the first half, is a newness on our core dials that the guests resonate so much with, and we're seeing a lot of seasonal updates to our number one franchise being aligned. So there's a lot of newness coming in as well, as innovation on top of some known silhouettes and franchises that we're excited about.

Calvin McDonald: And then we have some seasonal updates, which is a big part of the the newness which has been missing in the first half, is a newness on our core dials that the guests resonate so much with, and we're seeing a lot of seasonal updates to our number one franchise being aligned. So there's a lot of newness coming in as well, as innovation on top of some known silhouettes and franchises that we're excited about.

Janine Stichter: Thanks for the color, and best of luck.

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

Lorraine Hutchinson: Thanks, Good afternoon. I know you said that it won't be until spring 2025 to get back to the historic levels of newness, but can you ramp that at all in the second half by accelerating orders? And does the guidance include any benefit from accelerating newness in the women's assortment in the coming quarters?

I know you said that it won't be until spring 2025 to get back to the historic levels of newness, but can you ramp that at all in the second half by accelerating orders? And does the guidance include any benefit from accelerating newness in the women's assortment in the coming quarters?

Calvin McDonald: In terms of the action plan that we put in place, and the teams that have been working on that, as I alluded to, I think coming out of Q1, we saw some opportunity. The learning in Q2 was the missed opportunity in silhouettes, which was new news for us, as we continue to analyze the business. And the teams that, through that action plan of chase, has been pulling forward and going into deeper on inventory that had been purchased that we're seeing the guests respond well to, as well as fast tracking some designs. The chasing into will sequentially get stronger, and we will see that improved through Q3 and to Q4. As I alluded to, I think spring '25, we know we'll be at our historical levels of newness is a mix of assortment, and it will sequentially get better through the back half of this year, and I'll let Meghan speak in terms of the tie to guidance. So in terms of guidance, we did guide the second half in line with Q2, when adjusting for that short or holiday selling period. So I would say we don't have any meaningful impact from newness in the second half of the year.

Calvin McDonald: And the teams that, through that action plan of chase, has been pulling forward and going into deeper on inventory that had been purchased that we're seeing the guests respond well to, as well as fast tracking some designs. The chasing into will sequentially get stronger, and we will see that improved through Q3 and to Q4. As I alluded to, I think spring '25, we know we'll be at our historical levels of newness is a mix of assortment, and it will sequentially get better through the back half of this year, and I'll let Meghan speak in terms of the tie to guidance.

Calvin McDonald: So in terms of guidance, we did guide the second half in line with Q2, when adjusting for that short or holiday selling period. So I would say we don't have any meaningful impact from newness in the second half of the year.

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

Hi, as you think about your inventory positioning for the back half of the year, how do you break apart the third quarter and the fourth quarter, and which debris, which was a small launch that you talked about, Calvin? Is there any markdowns or any recess on the inventory numbers or gross margin impact of taking that down and eliminating it? Thank you. Thanks, Dana.

Dana Telsey: Hi, as you think about your inventory positioning for the back half of the year, how do you break apart the third quarter and the fourth quarter? And which debris, which was a small launch that you talked about, Calvin? Is there any markdowns or any recess on the inventory numbers or gross margin impact uptaking that down and eliminating it? Thank you.

Meghan Frank: Thanks, Dana. So in terms of inventory in Q3, we're expecting a mid-teens increase and Q4 adder or slightly above that level, and feel, you know, well positioned as we move in the second half of the year. As Calvin mentioned, we'll be ramping newness as we move for up a second half period and be back at historical levels by spring 2025. In terms of breathe through, it was a very small test and learn, and so, you know, an immaterial negligible impact on both Q2 and then our guidance for the balance of the year. And so, you know, nothing notable there.

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

Brooke Roach: Good afternoon, and thank you for taking our question. Calvin, I was hoping you could speak to the trends that you saw in your US, women's business by demographic or consumer type. Has the change in conversion that you've seen year to date over indexed to any one age group or household income? And as you look to increase the level of newness over the next few quarters, do you see any specific opportunities to adapt your marketing and membership organization to better serve customers by demographics?

Zack.

Thanks, Brooke. In terms of the guest profile, nothing meaningful in that, we continue to grow our new guest base, and continue to do it across the age demographics that we have been growing. What we did see in the conversion missed opportunity, a lot was with our existing guests across those age demographics, where the guest who knows our brand has come in and was looking for that newness to add to their already owned collection of Lululemon. And the gap in newness on color of those core items, on pattern and trim newness to those core items, or to some of the new silhouettes that we just added and introduced around to style around those core, those gaps is where we saw that missed opportunity. So she's still spending, visiting, we just missed the opportunity in that full conversion from what we've seen and directly linked to decisions we made and missed in that newness and opportunity. But still growing on the guest base, still growing across the age demographic, and as I alluded to an opportunity. Going forward, from a marketing perspective, because we still see very good engagement, low unated awareness, we're definitely marketing and continue to go after that. And as the product mix gets stronger in our women's as a percentage of newness, we know that conversion is what we'll be looking at and engaging that guest in terms of their spend. But I alluded to the current men's campaign or launch, campaign really, it's for both him and her, we're very pleased with the early results. It starts to really increase in terms of exposure in through September, but early indication, particular in men's where we have those new franchises of Soft Jerseys, Smooth Cover, Steady State, he's responding very well to it. So we're going to continue to drive top of funnel, drive that unated brand awareness, and we know that the strength of bringing in the newness will be the biggest lever for us, and we'll continue to increase that throughout the back half of this year and into next. Great. Thanks so much. I'll pass it on.

Calvin McDonald: Thanks, Brooke. In terms of the guest profile, nothing meaningful in that, we continue to grow our new guest base, and continue to do it across the age demographics that we have been growing. What we did see in the conversion missed opportunity, a lot was with our existing guests across those age demographics, where the guest who knows our brand has come in and was looking for that newness to add to their already owned collection of Lululemon.

And the gap in newness on color of those core items, on pattern and trim newness to those core items, or to some of the new silhouettes that we just added and introduced around to style around those core, those gaps is where we saw that missed opportunity. So she's still spending, visiting, we just missed the opportunity in that full conversion from what we've seen and directly linked to decisions we made and missed in that newness and opportunity. But still growing on the guest base, still growing across the age demographic, and as I alluded to an opportunity. Going forward, from a marketing perspective, because we still see very good engagement, low unated awareness, we're definitely marketing and continue to go after that. And as the product mix gets stronger in our women's as a percentage of newness, we know that conversion is what we'll be looking at and engaging that guest in terms of their spend. But I alluded to the current men's campaign or launch, campaign really, it's for both him and her, we're very pleased with the early results. It starts to really increase in terms of exposure in through September, but early indication, particular in men's where we have those new franchises of Soft Jerseys, Smooth Cover, Steady State, he's responding very well to it. So we're going to continue to drive top of funnel, drive that unated brand awareness, and we know that the strength of bringing in the newness will be the biggest lever for us, and we'll continue to increase that throughout the back half of this year and into next.

Calvin McDonald: And the gap in newness on color of those core items, on pattern and trim newness to those core items, or to some of the new silhouettes that we just added and introduced around to style around those core, those gaps is where we saw that missed opportunity. So she's still spending, visiting, we just missed the opportunity in that full conversion from what we've seen and directly linked to decisions we made and missed in that newness and opportunity. But still growing on the guest base, still growing across the age demographic, and as I alluded to an opportunity.

Calvin McDonald: Going forward, from a marketing perspective, because we still see very good engagement, low unated awareness, we're definitely marketing and continue to go after that. And as the product mix gets stronger in our women's as a percentage of newness, we know that conversion is what we'll be looking at and engaging that guest in terms of their spend. But I alluded to the current men's campaign or launch, campaign really, it's for both him and her, we're very pleased with the early results. It starts to really increase in terms of exposure in through September, but early indication, particular in men's where we have those new franchises of Soft Jerseys, Smooth Cover, Steady State, he's responding very well to it. So we're going to continue to drive top of funnel, drive that unated brand awareness, and we know that the strength of bringing in the newness will be the biggest lever for us, and we'll continue to increase that throughout the back half of this year and into next.

Calvin McDonald: It starts to really increase in terms of exposure in through September, but early indication, particular in men's where we have those new franchises of Soft Jerseys, Smooth Cover, Steady State, he's responding very well to it. So we're going to continue to drive top of funnel, drive that unated brand awareness, and we know that the strength of bringing in the newness will be the biggest lever for us, and we'll continue to increase that throughout the back half of this year and into next.

Dana Telsey: Great, thanks so much. I'll pass it on.

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

Mark Altschwager: Good afternoon, thank you for taking my question. I was hoping you could provide a bit more perspective on China, clearly there's been some, so very strong growth rates there, but I think about a 10-point comp slowdown against an easier comparison. How should we think about sustainable comp growth rates there? I think others have talked about some more macro consumer pressure, [inaudible] you're feeling that as well. Any color on what's going on in stores and digital? Maybe just more broadly how you're planning comp growth by region for the remainder of the year? Thank you.

Any color on what's going on in stores and digital. Maybe just more broadly how you're planning comp growth by region for the remainder of the year. Thank you.

Meghan Frank: Thanks, Mark. So, you know, we did still see very strong growth in China in Q2, so up 37% on a constant currency basis, and the variance between Q1 and Q2 growth rates, the biggest factor would have been the shift in Chinese New Year, so we had that in Q1 2024 in 2022, it was in Q4, so it was non-comparable. So still really healthy growth there across both channels, and you know, we haven't broken out our forward looking guide by region, but I would say still outside growth in international, and China being the key driver there. And I'm just glad, you know, we remain excited about the potential for Lulemon in mainland China. While we're keeping an eye on the macro environment in the region, our business remains strong. And we believe several factors will continue to benefit us, you know, one. It is still a small size relative to the market with a store base of 132 on the mainland at the end of the quarter. We take a very localized approach to the brand building relationships through local fitness instructors influencers. Some very unique events that are building awareness in the community on the back of our unique positioning grounded in wellness and the positioning of the product. So we're monitoring it, have not seen any material impact to the business. And I do believe it's because we're very early in our growth there and see a lot of continual success across the tier one tier two into tier three cities where we've been opening, testing and seeing very good response. Thank you.

Meghan Frank: And I'll just add, you know, we remain excited about the potential for Lululemon in mainland China. While we're keeping an eye on the macro environment in the region, our business remains strong, and we believe several factors will continue to benefit us. You know, one, it is still a small size relative to the market, with a store base of 132 on the mainland at the end of the quarter. We take a very localized approach to the brand building relationships through local fitness, instructors, influencers, some very unique events that are building awareness in the community on the back of our unique positioning grounded in wellness and the positioning of the product. So we're monitoring it, have not seen any material impact to the business, and I do believe it's because we're very early in our growth there and see a lot of continual success across the tier one tier two into tier three cities where we've been opening, testing and seeing very good response. Thank you.

Calvin McDonald: And I'll just add, you know, we remain excited about the potential for Lululemon in mainland China. While we're keeping an eye on the macro environment in the region, our business remains strong, and we believe several factors will continue to benefit us. You know, one, it is still a small size relative to the market, with a store base of 132 on the mainland at the end of the quarter. We take a very localized approach to the brand building relationships through local fitness, instructors, influencers. Some very unique events that are building awareness in the community on the back of our unique positioning grounded in wellness and the positioning of the product. So we're monitoring it, have not seen any material impact to the business, and I do believe it's because we're very early in our growth there and see a lot of continual success across the tier one tier two into tier three cities where we've been opening, testing and seeing very good response.

Calvin McDonald: Some very unique events that are building awareness in the community on the back of our unique positioning grounded in wellness and the positioning of the product. So we're monitoring it, have not seen any material impact to the business, and I do believe it's because we're very early in our growth there and see a lot of continual success across the tier one tier two into tier three cities where we've been opening, testing and seeing very good response.

Mark Altschwager: Thank you.

Operator: The next question comes from Rick Patel with Raymond James. Please go ahead.

Thank you, good afternoon. Question on the performance of core products. You called that a lack of inventory for certain styles and sizes entering the year. Did the same headwinds intensify in the second quarter or did you see new headwinds related to other products? Just some clarity there would be great. And then secondly, you're seeing still seeing good growth for accessories. How should we think about the outlook there? Thanks, Rick. In terms of the shift from Q1 to Q2 and the learning, color, print and pattern continues to be an opportunity for us.

Rick Patel: Thank you, good afternoon, a question on the performance of core products. You called that a lack of inventory for certain styles and sizes entering the year. Did the same headwinds intensify in the second quarter or did you see new headwinds related to other products? Just some clarity there would be great. And then secondly, you're seeing still seeing good growth for accessories? How should we think about the outlook there?

Thanks, Rick. In terms of the shift from Q1 to Q2 and the learning, on color, print and pattern continues to be an opportunity for us. And we think of those through a couple of ways in which we execute it. One is core styles and adding it through updates through color print, silhouettes, fabric extensions, that has been a great driver for us to keep our guests engaged and keep adding to the Lululemon products for them, as well as seasonal new silhouettes and styles. And I would say the shift from Q1 to Q2 is the gap in that as a percentage historically was greater in Q2 than in Q1, and was really the notable difference between the two quarters. Sorry, Rick. And on accessories, you know, I think we've chatted about this for everywhere belt bag was a very strong driver for us in the last few years. And we've cycled over some of the peaks of that volume, but it continues to be a big driver. And as you mentioned, overall accessories in the quarter grew 7%. And the team continues to introduce new styles, both within the everywhere belt bag franchise, but new styles from our backpack collection to some travel bags to totes, to the cactus leather introduction this week that the guests responded very well to. So we continue to be very excited about our accessories business. It's small percentage of our overall mix at 10, but definitely a significant opportunity. We're about 1% a market share. And we see opportunity to continue to grow that meaningfully moving forward. And the team's doing it through creating very innovative products and the guests continue to respond very well to it in North America as well as globally. So excited about the product creation and what's coming. Great, thank you.

Calvin McDonald: Thanks, Rick. In terms of the shift from Q1 to Q2 and the learning, on color, print and pattern continues to be an opportunity for us. And we think of those through a couple of ways in which we execute it. One is core styles and adding it through updates through color print, silhouettes, fabric extensions, that has been a great driver for us to keep our guests engaged and keep adding to the Lululemon products for them, as well as seasonal new silhouettes and styles. And I would say the shift from Q1 to Q2 is the gap in that as a percentage historically was greater in Q2 than in Q1, and was really the notable difference between the two quarters.

Sorry, Rick. And on accessories, you know, I think we've chatted about this, for everywhere belt bag was a very strong driver for us in the last few years. And we've cycled over some of the peaks of that volume, but it continues to be a big driver, and as you mentioned, overall accessories in the quarter grew 7%. And the team continues to introduce new styles, both within the everywhere belt bag franchise, but new styles from our backpack collection, to some travel bags, to totes, to the cactus leather introduction this week that the guests responded very well to. So we continue to be very excited about our accessories business, it's small percentage of our overall mix at 10, but definitely a significant opportunity. We're about 1% a market share, and we see opportunity to continue to grow that meaningfully moving forward. And the team's doing it through creating very innovative products and the guests continue to respond very well to it, in North America as well as globally. So excited about the product creation and what's coming. Great, thank you.

Calvin McDonald: Sorry, Rick. And on accessories, you know, I think we've chatted about this, for everywhere belt bag was a very strong driver for us in the last few years. And we've cycled over some of the peaks of that volume, but it continues to be a big driver, and as you mentioned, overall accessories in the quarter grew 7%. And the team continues to introduce new styles, both within the everywhere belt bag franchise, but new styles from our backpack collection, to some travel bags, to totes, to the cactus leather introduction this week that the guests responded very well to.

Calvin McDonald: So we continue to be very excited about our accessories business, it's small percentage of our overall mix at 10, but definitely a significant opportunity. We're about 1% a market share, and we see opportunity to continue to grow that meaningfully moving forward. And the team's doing it through creating very innovative products and the guests continue to respond very well to it, in North America as well as globally. So excited about the product creation and what's coming.

Rick Patel: Great, thank you.

Operator: Last question comes from John Kernan with TD Cohen. Please go ahead.

Good afternoon. Thanks for taking the question. Megan, I think a big fear of price into the valuation of the company right now is the gross margin rate is peaked in your SG&A rate. Many may need to move higher. How would you address those steers given the competitive environment category right now? Now, so I think we've continued to see strength in both gross margin and S-GNA.

John Kernan: Good afternoon, thanks for taking the question. Megan, I think a big fear of price into the valuation of the company right now is the gross margin rate it's peak in your SG&A rate, may need to move higher. How would you address those steers given the competitive environment category right now?

So I think we've continued to see strength in both gross margin and SG&A. This year with our revenue growth guide at 8%€-9%, and then 6%-7%, excluding the 53rd week, we're still delivering gross margin relatively in line with 2023, as well as approximately flat SG&A. Our operating margin is still very strong, you know, 100 basis points above our 2020 results after two years. So, you know, we're really focused on driving into that bottom line, and optimizing the bottom line, we're still committed to our Power 3x2 plan for modest operating margin expansion over the five year period. I think too soon to put a fine point on the outer years, but certainly have runway in front of us in terms of, most importantly revenue, but also looking at gross inefficiencies across our P&L, and we'll continue to keep up with it. Understood, and Calvin, maybe a thought for you, has your core customer in women staying still over the years, it seems like it's a more diverse cohort, are they more challenging to plan and allocate for in terms of sizing and color, and what are you learning, some of the surrounding some of the customers required? Yep, we continue to acquire across all of our, if you want to slice it through age demographic, I think I mentioned in the past, across different age demographics, we continue to acquire new guests across all of them, alluded to the shift in our sizing profile earlier. I think the team's doing a good job in adjusting to that. We saw improvements through Q2 and really are entering Q3 with a better mix of sizing across our profile. We're going to continue to adjust, but I wouldn't say there's any macro shift that we're behind on now, and we continue to recruit and acquire guests across that, which means really across the age and the in the size profile. Understood.

Meghan Frank: So I think we've continued to see strength in both gross margin and SG&A. This year with our revenue growth guide at 8%€-9%, and then 6%-7%, excluding the 53rd week, we're still delivering gross margin relatively in line with 2023, as well as approximately flat SG&A. Our operating margin is still very strong, you know, 100 basis points above our 2020 results after two years.

Meghan Frank: So, you know, we're really focused on driving into that bottom line, and optimizing the bottom line, we're still committed to our Power 3x2 plan for modest operating margin expansion over the five year period. I think too soon to put a fine point on the outer years, but certainly have runway in front of us in terms of, most importantly revenue, but also looking at gross inefficiencies across our P&L, and we'll continue to keep up with it.

Understood, and Calvin, maybe a thought for you, has your core customer in women staying still over the years? It seems like it's a more diverse cohort, are they more challenging to plan and allocate for in terms of sizing and color, and what are you learning, some of the surrounding some of the customers required? Yep, we continue to acquire across all of our, if you want to slice it through age demographic, I think I mentioned in the past, across different age demographics, we continue to acquire new guests across all of them, alluded to the shift in our sizing profile earlier. I think the team's doing a good job in adjusting to that. We saw improvements through Q2 and really are entering Q3 with a better mix of sizing across our profile. We're going to continue to adjust, but I wouldn't say there's any macro shift that we're behind on now, and we continue to recruit and acquire guests across that, which means really across the age and the in the size profile. Understood.

John Kernan: Understood, and Calvin, maybe a thought for you, has your core customer in women staying still over the years? It seems like it's a more diverse cohort, are they more challenging to plan and allocate for in terms of sizing and color, and what are you learning, some of the surrounding some of the customers required?

Calvin McDonald: Yep, we continue to acquire across all of our, if you want to slice it through age demographic, I think I mentioned in the past, across different age demographics, we continue to acquire new guests across all of them. Alluded to the shift in our sizing profile earlier, I think the team's doing a good job in adjusting to that, we saw improvements through Q2 and really are entering Q3 with a better mix of sizing across our profile. We're going to continue to adjust, but I wouldn't say there's any macro shift that we're behind on now, and we continue to recruit and acquire guests across that, which means really across the age and the in the size profile. Understood.

John Kernan: Understood, thank you.

Q2 2024 lululemon athletica Inc Earnings Call

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