Q1 2025 lululemon athletica Inc Earnings Call

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Operator: Thank you for standing by. This is the conference operator. Welcome to the Lululemon Athletica, Inc. First Quarter 2025 Financial Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. Analysts who wish to join the question queue should 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.

Thank you for standing by this is the conference operator, welcome to the Lululemon Athletica, Inc. First quarter 2025 financial results Conference call.

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

After the presentation there'll be an opportunity to ask questions.

That's who wish to join the question queue should press Star then one on the telephone keypad.

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, Industrial Relations for Lululemon. Please go ahead. Thank you and good afternoon. Welcome to Lululemon's first quarter earnings conference call. Joining me today to talk about our results are Calvin McDonald, CEO, and Meghan Frank, CFO.

Howard: I would now like to turn the conference over to Howard <unk>, Vice President Investor Relations for Lululemon. Please go ahead.

Speaker Change: Thank you and good afternoon, welcome to legal Lemons first 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 it.

Howard Tubin: 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 which by its nature is dynamic and subject to rapid and even abrupt 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 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.

Women's future.

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

Howard: 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.

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

Any forward looking statements that we make on this call are based on assumptions as of today, and we expressly disclaim 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 GAAP and non-GAAP financial measures. The reconciliation of GAAP to non-GAAP 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 constant dollar basis.

Howard: During this call we will present, both GAAP and non-GAAP financial measures.

A reconciliation of GAAP to non-GAAP measures is included in our quarterly report on Form 10-Q and in today's earnings press release. In addition, the comparable sales metric is given on today's call are in constant dollar basis. The press release and accompanying quarterly report on Form 10-Q are available under the investors section of our website at Www Dot loop.

Howard Tubin: The press release and accompanying quarterly report on Firm 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 first quarter as well as our quarterly infographics.

Lemon dot com before.

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 first quarter as well as our quarterly infographic.

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.

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 would like to turn the call over to Calvin.

Howard Tubin: And now, I would like to turn the call over to Calvin.

Calvin McDonald: Thank you, Howard.

Calvin: Thank you Howard it's good to be here with you today to discuss our first quarter results as you've seen from our press release, our revenue growth for the quarter came in at the high end of our guidance range I'm pleased with this performance, which was relatively consistent with quarter four.

Calvin McDonald: It's good to be here with you today to discuss our first quarter results. As you've seen from our press release, our revenue growth for the quarter came in at the high end of our guidance range. I'm pleased with this performance, which was relatively consistent with quarter four. I'd also note that our revenue in the United States grew 2%, which is an improvement in the trend we've seen over the last several quarters. Based on our quarter one revenue performance and what we're seeing thus far in quarter two, we are maintaining our revenue guidance for the full year.

Calvin: I'd also note that our revenue United States grew 2%, which is an improvement in the trend we've seen over the last several quarters based on our quarter, one revenue performance and what we're seeing thus far in quarter. Two we are maintaining our revenue guidance for the full year. As we look ahead, we will continue to leverage our financial strength and our position in the <unk>.

Calvin McDonald: As we look ahead, we will continue to leverage our financial strength and our position in the marketplace to play offense, remain agile, and successfully manage the environment around us.

Place to play offense remain agile and successfully manage the environment around us.

Calvin McDonald: I'll begin by sharing the details of our quarter one performance, including high-level financial metrics and key highlights regarding our regional performance, product innovation, and our brand campaigns and activation. Next, I'll provide insights into the planning and strategies we're deploying related to the increase in tariffs. Meghan will speak to the specific financial implications and I'll share some insights into the opportunities we have across the business. I'll then share my thoughts on Quarter 2 and the remainder of the year. Meghan will review our financials and our updated guidance, and we will conclude by taking your questions. So let's get started.

Speaker Change: I'll begin by sharing the details of our quarter, one performance, including high level financial metrics and key highlights regarding our regional performance product innovation and our brand campaigns and Activations next I will provide insights into the planning and strategies, we're deploying related to the increase in tariffs Megan will speak to the spa.

<unk> financial implications and I'll share some insights into the opportunities we have across the business. I'll then share my thoughts on quarter, two and the remainder of the year, Megan who will review our financials and our updated guidance and we'll conclude by taking your questions. So let's get started.

Calvin McDonald: In Quarter 1, total revenue increased 7% or 8% on a constant currency basis. Gross margin increased 60 basis points to 58.3%, and earnings per share were $2.60, ahead of our expectations. In addition, in quarter one, we continued repurchasing shares and bought back another $430 million of stock. Our ongoing repurchases demonstrate the strength of our balance sheet and our continued confidence in the long-term prospects for Lululemon. Looking at our regional performance, we continue to see strength across markets driven by our high performance, high style merchandise and the compelling ways we engage with our guests through brand activations and community events.

Megan: In quarter, one total revenue increased 7% or 8% on a constant currency basis gross margin increased 60 basis points to 58, 3% and earnings per share were $2.60 ahead of our expectations. In addition in quarter. One we continued repurchasing shares and.

Speaker Change: Bought back another $430 million of stock our ongoing repurchases demonstrate the strength of our balance sheet and our continued confidence in the long term prospects for Lulu lemon.

Speaker Change: Looking at our regional performance, we continue to see strength across markets driven by our high performance high style merchandise and the compelling ways, we engage with our guests through brand Activations and community events.

Calvin McDonald: In North America, momentum continued in Canada, where sales grew 9% in constant currency, and in the United States, revenue growth improved to 2%. We're making progress on our assortment, and we've seen good response to many of our new innovations. But my sense is that in the US, consumers remain cautious right now, and they are being very intentional about their buying decisions. Even with this, we gain market share across both men's and women's in the premium athletic wear markets in the United States. In China Mainland, revenue increased 22% in constant currency. As you are aware, Chinese New Year shifted from quarter one of this year to Q4 of last year.

Speaker Change: North America momentum continued in Canada.

Speaker Change: Where sales grew 9% in constant currency and in the United States revenue growth improved to 2%, we're making progress on our assortment and we've seen good response to many of our new innovations, but my sense is that in the U S. Consumers remain cautious right now and they are being very intentional about their buying decisions even with.

Speaker Change: This we gained market share across both men's and women's in the premium athletic wear market in United States.

In China mainland revenue increased 22% in constant currency as you are aware Chinese new year shifted from quarter. One of this year to Q4 of last year, while we estimate that this calendar shift had a negative impact of about four percentage points on Q1 revenue growth. We remain pleased with the underlying momentum in this very.

Calvin McDonald: While we estimate that this calendar shift had a negative impact of about four percentage points on Q1 revenue growth, we remain pleased with the underlying momentum in this very important growth mark. And in the rest of world, revenue increased 17% in constant currency as we continue to see a strong acceptance of our brand by guests across the APAC and EMEA regions. We are executing against our strategy to maximize our existing markets, expand to newer markets, while also seeding others for future growth. I'm excited by the recent store openings in two of our franchise markets, Denmark and Turkey, which are off to a strong start.

Speaker Change: Important growth market.

Speaker Change: And then the rest of world revenue increased 17% in constant currency as we continued to see a strong acceptance of our brand by guests across the APAC and EMEA regions, we are executing against our strategy to maximize our existing markets expanded newer markets, while also seeding others for future growth.

Speaker Change: I'm excited by the recent store openings in two of our franchise markets, Denmark, and Turkey, which are off to a strong start and we remain on track to enter Italy as a new company operated market in Belgium, and the Czech Republic under a franchise model later this year.

Calvin McDonald: And we remain on track to enter Italy as a new company operated market and Belgium and the Czech Republic under a franchise model later this year. When looking at the full year, our view on revenue is unchanged, and we continue to expect 7% to 8% growth. By region, we continue to anticipate revenue in North America to increase in the low to mid-single-digit range, China mainland to grow in the 25% to 30% range, and revenue in the rest-of-world segment to increase about 20%. Key to our success within all our markets is our product, which offers unique and innovative solves for guests across both athletic and lifestyle product categories.

Speaker Change: When looking at the full year, our view on revenue is unchanged and we continue to expect 7% to 8% growth.

Speaker Change: By region, we continue to anticipate revenue in North America to increase in the low to mid single digit range, China mainland to grow in the 25% to 30% range and revenue in the rest of world segment to increase about 20%.

Speaker Change: Key to our success within all of our markets as our product, which offers unique and innovative solves for gas across both athletic and lifestyle product categories throughout quarter. One guests responded well to the newness we introduced into our assortment for women are defined franchise continues to perform well across our markets globally.

Calvin McDonald: Throughout Quarter 1, guests responded well to the newness we introduced into our assortment. For women, our defined franchise continues to perform well across our markets globally, and we are pleased with the response to our recent launches, including Day Drift, Shake It Out, and Be Calm. For men, we're seeing strength in several of our key franchises, including Zeroed In, Smooth Spacer, and Show Zero. In May, to celebrate the 10-year anniversary of our Aligned franchise, we launched Aligned No Line, which offers the same fit and feel as the iconic legging, but without a front seam. We're pleased with the guest response, both online and in the 80 doors where it was offered.

Speaker Change: And we are pleased with the response to our recent launches, including day drift shake it out and be calm for men, we're seeing strength in several of our key franchises, including zero did smooth spacer and shows zero.

Speaker Change: It may to celebrate the 10 year anniversary of our aligned franchise, we launched the line no line, which offers the same fit and feel as the iconic lagging but without a fred's team. We're pleased with the guest response, both online and in the 80 doors, where it was offered we plan to build on this momentum for the fall when we roll it to all stores.

Calvin McDonald: We plan to build on this momentum for the fall when we roll it to all stores. I'm excited with the innovations we've rolled out this year and will continue to bring to market going forward. We have significant opportunity to expand all five of our key activities, yoga, run, train, golf, and tennis, and become the top of mind destination for guests who enjoy these activities. Recent examples include our new fast and free running short for men, and for women, we launched additional styles which leverage the research and development our teams conducted last year for our further ultra marathon event.

Speaker Change: I'm excited with the innovations we've rolled out this year and will continue to bring to market going forward.

Speaker Change: We have significant opportunity to expand all five of our key activities Yoga run train golf and tennis and become the top of mind destination for guests who enjoy these activities.

Speaker Change: Recent examples include our new fast and free running short for men and for women, we launched additional styles, which leverage the research and development. Our teams conducted last year for our further ultra marathon of that.

Calvin McDonald: Switching now to our brand activations, our teams continue to develop unique and compelling brand campaigns and community events that engage our guests, increase brand awareness, and support our product launches. Let me highlight a recent example. To support the launch and to celebrate Align's anniversary, we created our Summer of Align campaign. This fully integrated campaign included traditional and social media, exclusive experiences and events, and featured several influencers and ambassadors. We hosted events around the world, including our Lululemon roller rink activation at the Bottle Rock Festival in Napa Valley, and our largest ever yoga experience in China, attended by 5,000 people in Beijing.

Speaker Change: Switching now to our brand Activations, our teams continue to develop unique and compelling brand campaigns and community events that engage our guests increased brand awareness and support our product launches. Let me highlight a recent example.

Speaker Change: To support the launch and to celebrate aligns anniversary, we created our summer of align campaign. This fully integrated campaign included traditional and social media exclusive experiences and events and featured several influencers and ambassadors, we hosted events around the world, including our Lulu Lemon roller rink activation at the <unk>.

Speaker Change: Total rock festival in Napa Valley, and our largest ever yoga experience in China attended by 5000 people in Beijing. This.

Calvin McDonald: This campaign and the other events we activated in quarter one is a great example of how we remain focused on our grassroots approach to guest engagement, while at the same time, leveraging traditional media assets and our roster of ambassadors to support product launches and build our brand. In fact, our unaided brand awareness in the United States grew from the mid thirties in quarter four to forty percent in quarter one.

Speaker Change: This campaign and the other events reactivated in quarter. One is a great example of how we remain focused on our grassroots approach to guest engagement while at the same time, leveraging traditional media assets and our roster of ambassadors to support product launches and build our brand in fact, our unaided brand awareness in United States.

Speaker Change: <unk> grew from the mid thirties in quarter, 4% to 40% in quarter one.

Calvin McDonald: I would now like to talk for a moment about the current environment related to tariffs. Meghan will speak to our assumptions and the implications of potentially higher rates during her guidance discussion, but I first want to spend a few minutes sharing our approach. The current tariff paradigm has brought uncertainty into the retail environment as consumers try to assess the impact they will have on daily life. As businesses evaluate these impacts as well, I believe we are better positioned than most to navigate the near term, while also maintaining our focus on investing in our growth potential over the long term.

Speaker Change: I would now like to talk for a moment about the current environment related to tariffs Megan will speak to our assumptions and the implications of potentially higher rates during her guidance discussion, but I first want to spend a few minutes sharing our approach.

Speaker Change: The current tariff paradigm has brought uncertainty into the retail environment as consumers try to assess the impact they will have on daily life.

Speaker Change: As businesses evaluate these impacts as well I believe we are better positioned than most to navigate the near term while also maintaining our focus on investing in our growth potential over the long term. We are operating from a position of strength. Our brand remains strong our guest engagement is high and we offer a compelling valley.

Calvin McDonald: We are operating from a position of strength, our brand remains strong, our guest engagement is high, and we offer a compelling value proposition, and we are a highly profitable business. Let me share a few details. We have an industry-leading operating margin. This allows us to continue investing across our strategic roadmap to enable long-term growth while managing any increased costs associated with tariffs. Our balance sheet is strong, with $1.3 billion in cash and no debt, which provides us significant financial flexibility. We are making progress with our newness, have a robust pipeline of innovation, and our guests are responding well to many of the new solutions we are bringing into our assortment.

Speaker Change: New proposition and we are a highly profitable business, let me share a few details we have an industry leading operating margin. This allows us to continue investing across our strategic roadmap to enable long term growth, while managing any increased costs associated with tariffs our balance sheet is strong with one point.

Speaker Change: $3 billion in cash and no debt, which provides us significant financial flexibility, we are making progress with our newness have a robust pipeline of innovation and our guests are responding well to many of the new solutions, we are bringing into our assortment and our premium positioning and the performance athletic apparel category.

Calvin McDonald: And our premium positioning in the performance athletic apparel category yields different elasticity for our products relative to fashion-oriented brands. We believe our guests will continue to live an active and healthy lifestyle and turn to us for the technical apparel we are known for. Shifting now to how we have been navigating this situation. Over the past few months, our teams have been looking across the enterprise for how we can offset increased tariff rates. Our work streams include prudently managing expenses, identifying efficiencies within our supply chain, and evaluating our position in the marketplace related to price. During COVID, we developed a strong muscle across our teams to be agile, pull levers across the business within a rapidly changing external environment, and simultaneously plan for multiple scenarios.

Speaker Change: Yields different elasticity for our products relative to fashion oriented brands. We believe our gas will continue to live an active and healthy lifestyle and turned to us for the technical apparel, we are known for.

Speaker Change: Shifting now to how we had been navigating this situation over the past few months our teams have been looking across the enterprise for how we can offset increased tariff rates. Our work streams include prudently managing expenses identifying efficiencies within our supply chain and evaluating our position in the marketplace related.

Speaker Change: To pricing.

Speaker Change: During Covid, we developed a strong muscle across our teams to be agile pull levers across the business within a rapidly changing external environment and simultaneously planned for multiple scenarios. We are applying the same approach now as we maintain a disciplined focus on expenses look across our supply chain lead.

Calvin McDonald: We are applying the same approach now as we maintain a disciplined focus on expenses, look across our supply chain, leverage our dual sourcing capabilities, and engage in costing discussions with our vendors, and reviewing pricing scenarios to ensure we sit where we want in the market, are pricing appropriately for the innovation in our assortment, and maximize any opportunity to gain market share. We have always been and will continue to be very intentional with our pricing decisions. These actions will be targeted and will reflect the work we've done on style elasticity. We remain nimble in our approach and feel we are well positioned during this period with many levers to pull.

Speaker Change: Bridge, our dual sourcing capabilities and engaging costing discussions with our vendors and reviewing pricing scenarios to ensure we sit where we want in the market.

Speaker Change: Our pricing appropriately for the innovation in our assortment and maximize any opportunities to gain market share. We have always been and will continue to be very intentional with their pricing decisions. These actions will be targeted and will reflect the work we've done on style elasticity.

Speaker Change: We remain nimble in our approach and feel we are well positioned during this period with many levers to pull.

Calvin McDonald: Before handing it over to Meghan to discuss our financials, I wanted to share my perspective on quarter two and the remainder of the year. It's been approximately a year since we've made the changes in our product organization, and I'm pleased with our evolved structure, the way the teams are working together, and the efficiencies we're seeing across our processes. We still have work to do to create new products that have the potential to grow into core franchises and further optimize our merchandise mix. However, we are moving in the right direction and looking at the remainder of 2025, our teams are focused on strengthening our product pipeline and bringing more innovation into our core assortment, while also introducing new styles with the potential to become key franchises and core items in the future, expanding deeper and bringing new technical solves into our five key activities, while further developing our lifestyle assortment, engaging more deeply with our guests through community activations, brand campaigns and leveraging our membership program and expanding our highly productive square footage profile through new store openings and optimization.

Speaker Change: Before handing it over to Meghan to discuss our financials I wanted to share my perspective on quarter, two and the remainder of the year.

Speaker Change: <unk> been approximately a year since we've made the changes in our product organization and I'm pleased with our evolved structure. The way. The teams are working together and the efficiencies we're seeing across our processes.

Speaker Change: We still have work to do to create new products that have the potential to grow into core franchises and further optimize our merchandize mix how's.

Speaker Change: However, we are moving in the right direction and looking at the remainder of 'twenty twenty-five. Our teams are focused on strengthening our product pipeline and bringing more innovation into our core assortment. While also introducing new styles with the potential to become key franchises and core items in the future expanding deeper and bringing new technical.

Speaker Change: <unk> solves into our five key activities, while further developing our lifestyle assortment engaging more deeply with our guests through community Activations brand campaigns and leveraging our membership program and expanding our highly productive square footage profile through new store openings and optimizations.

Calvin McDonald: As I hand it over to Meghan, I want to also say that while we recognize that quarter two has some pressures related to our planned business investments and additional expenses related to tariffs, we feel good about the full year and our ability to maintain our revenue guidance for 2025. There is considerable opportunity ahead for Lululemon, and we're intent on successfully navigating the near term while we plan for and invest in the long term.

Speaker Change: As I hand, it over to Megan I want to also say that while we recognize that quarter. Two is some pressures related to our planned business investments and additional expenses related to tariffs we feel good about the full year and our ability to maintain our revenue guidance for 2020 five.

Speaker Change: There is considerable opportunity ahead for Lulu Lemon and we're intent on successfully navigating the near term, while we planned for and invest in the long term.

Meghan Frank: With that, I'll now hand it over to Meghan. Thanks, Calvin. I'm happy we delivered Q1 results that exceeded our expectations. Guests are responding well to our product newness and innovations, and as a result, we are maintaining our revenue guidance for the full year. Given the uncertainties in the macro environment, our approach to planning remains balanced on managing the dynamics of the current era while also maintaining our focus in the long term. We are managing expenses prudently while also continuing to invest to drive long-term growth and set ourselves up for future success. This includes new store openings and optimizations, new market entries, growing brand awareness, and ensuring we have adequate capacity across our supply chain.

Speaker Change: With that I'll now hand, it over to Megan.

Megan: Thanks, Kelvin I'm happy we delivered Q1 results that exceeded our expectations guests are responding well to our product newness and innovations and as a result, we are maintaining our revenue guidance for the full year.

Megan: Given the uncertainties in the macro environment, our approach to planning remains balanced I'm managing the dynamics of the current year, while also maintaining our focus on the long term.

Megan: We are managing expenses prudently, while also continuing to invest to drive long term growth and set ourselves up for future success.

Megan: This includes new store openings and optimizations, new market entries growing brand awareness and ensuring we have adequate capacity across our supply chain.

Meghan Frank: I'll share our detailed guidance with you in a moment, but let's first take a look at our Q1 results in detail. For Q1, total net revenue rose 7% or 8% in constant currency to $2.4 billion. Comparable sales increased 1%. Within our regions, results were as follows. America's revenue increased 3% or 4% in constant currency, with comparable sales down 1%. By country, revenue increased 4% or 9% in constant currency in Canada, and increased 2% in the US. China Mainland revenue increased 21% or 22% in constant currency, with comparable sales increasing 8%. And in the rest of the world, revenue grew by 16% or 17% in constant currency, with comparable sales increasing by 7%.

Megan: I'll share a detailed guidance with you in a moment, but let's first take a look at our Q1 results in detail.

Megan: For Q1, total net revenue rose, 7% or 8% in constant currency to 2.4 billion cans.

Megan: Apparel sales increased 1%.

Megan: Within our regions results were as follows Americas revenue increased 3% or 4% in constant currency with comparable sales down 1%.

Megan: By country revenue increased 4% or 9% in constant currency in Canada and increased 2% in the U S.

Megan: China mainland revenue increased 21% or 22% in constant currency with comparable sales increasing 8%.

Megan: And in the rest of World revenue grew by 16% or 17% in constant currency with comparable sales increasing by 7%.

Meghan Frank: In our store channel, total sales increased 8% and we ended the quarter with 770 stores globally. Square footage increased 14% versus last year, driven by the addition of 59 net new Lululemon stores since Q1 2024. During the quarter, we opened three net new stores and completed four optimizations. In our digital channel, revenue increased 6% and contributed $961 million of top line, or 41% of total revenue. And by category, men's revenue increased 8% versus last year, while women's increased 7%, and accessories and other grew 8%. Gross profit for the first quarter was $1.4 billion, or 58.3% of net revenue, compared to gross margin of 57.7% in Q1 2024.

Megan: In our store channel total sales increased 8% and we ended the quarter with 770 stores globally.

Megan: Square footage increased 14% versus last year, driven by the addition of 59 net new Lululemon stores since Q1, 'twenty 'twenty four.

Megan: During the quarter, we opened three net new stores and completed four optimizations.

Megan: In our digital channel revenue increased 6% and contributed $961 million of top line or 41% of total revenue.

Megan: By category men's revenue increased 8% versus last year, while women's increased 7% and accessories and other grew 8%.

Megan: Gross profit for the first quarter was 1.4 billion or 58, 3% of net revenue compared to gross margin of 57, 7% in Q1 'twenty 'twenty four.

Meghan Frank: The gross profit rate in Q1 was ahead of our guidance and increased 60 basis points driven primarily by the following. A 130 basis point increase in product margin driven predominantly by lower product costs, improved damages, and improved markdowns offset somewhat by a higher air 20 basis points negative impact from foreign exchange and 50 basis points of net de-leverage on fixed costs. Relative to our guidance, which was for gross margin approximately flat with last year, the upside was driven predominantly by lower product costs, leverage on fixed costs, and slightly better markdown. Moving to SG&A, our approach continues to be grounded in prudently managing our expenses while also continuing to strategically invest in our long-term growth opportunities.

Megan: The gross profit rate in Q1 was ahead of our guidance and increased 60 basis points driven primarily by the following.

Megan: 130 basis point increase in product margin, driven predominantly by lower product costs improve damages and improved markdowns offset somewhat by higher airfreight.

Megan: 20 basis points negative impact from foreign exchange and 50 basis points of that deleverage on fixed costs.

Megan: Relative to our guidance, which was for gross margin approximately flat with last year.

Megan: The upside was driven predominantly by lower product costs leverage on fixed costs and slightly better markdowns.

Megan: Moving to SG&A our.

Megan: Our approach continues to be granted and prudently managing our expenses, while also continuing to strategically invest in our long term growth opportunities.

Meghan Frank: SG&A expenses were $943 million, or 39.8% of net revenue, compared to 38.1% of net revenue for the same period last year. SG&A was above our guidance of 120 basis points of D-leverage, due predominantly to the negative impact from an FX revaluation. Operating income for the corridor was $439 million, or 18.5% of net revenue, compared to operating margin of 19.6% in Q1 2024. Tax expense for the quarter was $136 million, or 30.2% of pre-tax earnings, compared to an effective tax rate of 29.5% a year ago. Net income for the quarter was $315 million or $2.60 per diluted share compared to EPS of $2.54 for the first quarter of 2024.

Megan: SG&A expenses were $943 million or 39, 8% of net revenue compared to 38, 1% of net revenue for the same period last year.

Megan: SG&A was above our guidance of 120 basis points of deleverage due predominantly to the negative impact from an FX revaluation loss.

Megan: Operating income for the quarter was 439 million or 18, 5% of net revenue compared to operating margin of 19, 6% in Q1 'twenty 'twenty four.

Megan: Tax expense for the quarter was 136 million or 32% of pretax earnings compared to an effective tax rate of 29, 5% a year ago.

Megan: Net income for the quarter was $315 million or $2.60 per diluted share compared to EPS of $2.54 for the first quarter of 'twenty 'twenty four.

Meghan Frank: Catholic expenditures were $152 million for the quarter compared to $131 million for the first quarter last year. Q1 Spend 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.

Megan: Capital expenditures were $152 million for the quarter compared to 131 million for the first quarter last year.

Megan: He went span relates primarily to investments to support business growth, including our multiyear 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 approximately $1.3 billion in cash and cash equivalents. Dollar inventory, which was impacted by higher AUC related to tariffs and foreign exchange, increased 23%. When looking at units, inventory increased 16%. We repurchased 1.36 million shares in Q1 at an average price of $316. Share repurchases remain our preferred method to return cash to shareholders, and we currently have approximately $1.1 billion remaining on our repurchase program.

Megan: Turning to our balance sheet highlights we ended the quarter with approximately 1.3 billion in cash and cash equivalents.

Megan: Inventory, which was impacted by higher AUC related to tariffs and foreign exchange increased 23%.

Megan: When looking at units inventory increased 16%.

Megan: We repurchased 1.36 million shares in Q1 at an average price of $316.

Megan: Share repurchases remain our preferred method to return cash to shareholders and we currently have approximately $1 1 billion remaining on our repurchase program.

Meghan Frank: Let me now share our updated guidance outlook for the full year 2025. We continue to expect revenue in the range of $11.15 to $11.3 billion. This range represents growth of 5 to 7% relative to 2024. Excluding the 53rd week that we had in the fourth quarter of last year, we expect revenue to grow seven to eight percent. We continue to expect 40 to 45 net new company-operated stores in 2025 and to complete approximately 40 optimizations. We expect overall square footage growth in the low double digits. Our new store openings in 2025 will include approximately 10 to 15 stores in the Americas with the rest of our openings planned in our international markets, the majority of which will be in China.

Megan: Let me now share our updated guidance outlook for the full year 2025.

Megan: We continue to expect revenue in the range of 11.15 to 11.3 billion. This.

Megan: This range represents growth of 5% to 7% relative to 2024.

Megan: Excluding the 50 <unk> week that we had in the fourth quarter of last year, we expect revenue to grow 7% to 8%.

Megan: We continue to expect 40 to 45 net new company operated stores in 2025 and to complete approximately 40 optimizations.

Megan: We expect overall square footage growth in the low double digits.

Megan: Our new store openings and 2025 will include approximately 10 to 15 stores in the Americas, but the rest of our openings planned in our international markets, the majority of which will be in China.

Meghan Frank: For the full year, we now expect gross margin to decrease approximately 110 basis points versus 2024. Relative to our prior guidance for a 60-basis point decrease, we expect the additional 50-basis points of D leverage to be driven predominantly by increased tariffs, offset somewhat by our enterprise-wide efforts to mitigate these costs, and slightly higher markets. When looking specifically at tariffs, the assumptions we've made regarding rates include 30% incremental tariffs on China and an incremental 10% on the remaining countries we're resourced. From a mitigation standpoint, as Calvin said, we've looked across the enterprise and have identified several levers which will help offset much of the impact of these higher rates.

Megan: For the full year, we now expect gross margin to decrease approximately 110 basis points versus 2024.

Megan: Relative to our prior guidance for a 60 basis point decrease we expect the additional 50 basis points of deleverage to be driven predominantly by increased tariffs offset somewhat by our enterprise wide efforts to mitigate these costs and slightly higher markdowns.

Megan: When looking specifically at tariffs the assumptions we've made regarding rates include 30% incremental tariffs on China, and an incremental 10% on the remaining countries, where we source.

Megan: From a mitigation standpoint, as Calvin said, we've looked across the enterprise and have identified several levers, which will help offset much of the impact of these higher rates.

Meghan Frank: Based on our implementation strategies, we expect our mitigation efforts to be most impactful in the second half of the year. Turning to SG&A for the full year, we expect e-leverage of approximately 50 basis points versus 2024, relatively in line with our prior guidance, driven by FX headwinds and ongoing investments into our prior 3x2 roadmap, including investments in marketing and brand building aimed at increasing our awareness and acquiring new guests. Investments to support our international growth and market expansion, and continued investment in technology. When looking at operating margin for the full year 2025, we now expect a decrease of approximately 160 basis points versus 2024.

Megan: Based on our implementation strategies, we expect our mitigation efforts to be most impactful in the second half of the year.

Speaker Change: Turning to SG&A for the full year.

Megan: Spec deleverage of approximately 50 basis points versus 'twenty 'twenty four.

Megan: Relatively in line with our prior guidance driven by FX headwinds and ongoing investments into our power of three times to roadmap, including investments in marketing and brand building aimed at increasing our awareness and acquiring new gas.

Megan: Investments to support our international growth and market expansion and continued investment in technology.

Megan: Looking at operating margin for the full year 2025, we now expect a decrease of approximately 160 basis points versus 2024.

Meghan Frank: For the full year 2025, we continue to expect our effective tax rate to be approximately 30%. For the fiscal year 2025, we now expect diluted earnings per share in the range of $14.58 to $14.78. versus EPS of $14.64 in 2024. Our EPS guidance excludes the impact of any future share repurchases but does include the impact of a repurchase this year to date. We expect capital expenditures to be approximately $740 to $760 million in 2025. 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.

Megan: For the full year 'twenty 'twenty five we continue to expect our effective tax rate to be approximately 30%.

Megan: For the fiscal year 2025, we now expect diluted earnings per share in the range of $14.58 to $14.78 versus EPS of $14.64 in 'twenty 'twenty four.

Megan: Our EPS guidance excludes the impact of any future share repurchases, but does include the impact of our repurchases year to date.

Megan: We expect capital expenditures to be approximately $740 million to $760 million in 2025.

Megan: Spend relates to investments to support business growth, including a continuation of a multiyear distribution Center project.

Megan: Store capital for new locations, relocations, and renovations and technology investments.

Meghan Frank: Shifting now to Q2, we expect revenue in the range of $2.535 to $2.56 billion, representing growth of 7 to 8 percent. We expect to open 14 net new company-operated stores in Q2 and complete nine optimizations. We expect gross margin in Q2 to decline approximately 200 basis points relative to Q2 2024. driven predominantly by increased occupancy and depreciation, higher tariff rates, modestly higher markdowns in foreign exchange. Q2, we expect our SG&A rate to deleverage by 170 to 190 basis points relative to Q2 2024. This will be driven predominantly by increased foundational investments in related depreciation and strategic investments, including those to build brand awareness.

Megan: Shifting now to Q2, we expect revenue in the range of 2.535 to 2.56 billion.

Megan: Representing growth of 7% to 8%.

Megan: Spec to opened 14 net new company operated stores in Q2 and complete nine optimizations.

Megan: We expect gross margin in Q2 to decline approximately 200 basis points relative to Q2 'twenty 'twenty four.

Megan: Driven predominantly by increased occupancy and depreciation higher tariff rates modestly higher markdowns and foreign exchange.

Megan: Q2, we expect our SG&A rate Deleveraged by 170 to 190 basis points relative to Q2 'twenty 'twenty four.

Megan: This will be driven predominantly by increased foundational investments in related depreciation and strategic investments, including those to build brand awareness.

Meghan Frank: In addition, as I mentioned last quarter, we are layering back in certain expenses, including store labor hours, which are having a more pronounced impact on Q2 relative to the remainder of the year. When looking at operating margin for Q2, we expect a year-over-year decrease of approximately 380 basis points.

Megan: In addition, as I mentioned last quarter, we were layering back in certain expenses, including store labor hours, which are having a more pronounced impact on Q2 relative to the remainder of the year.

Megan: When looking at operating margin for Q2, we expect a year over year decrease of approximately 380 basis points.

Meghan Frank: I wanted to add some additional context on our operating margin guidance. Q2 last year. Margin improved by 110 basis points. which was our strongest performance of the year. This year, as I mentioned, we are also being impacted by external factors, namely tariffs, where our mitigation efforts are more pronounced in the back half, and foreign exchange. In addition, we are continuing to invest in our strategic roadmap to set ourselves up for ongoing success. While these items are having an outsized impact on Q2, when looking at the full year, the decrease in operating margin is significantly less.

Megan: Wanted to add some additional context on our operating margin guidance.

Megan: Q2 last year margin improved by 110 basis points, which was our strongest performance of the year.

Megan: This year as I mentioned, we are also being impacted by external factors, namely tariffs for our mitigation efforts are more pronounced in the back half and foreign exchange.

Megan: In addition, we were continuing to invest in our strategic roadmap to set ourselves up for ongoing success.

Megan: While these items are having an outsized impact in Q2 and looking at the full year. The decrease in operating margin is significantly less.

Meghan Frank: Turning to EPS, we expect earnings per share in the second quarter to be in the range of $2.85 to $2.90. versus EPS of $3.15 a year ago. We expect our effective tax rate in Q2 to be approximately 30%. When looking at inventory, we expect units to increase in the low double digits in Q2 with dollar inventories up in the low 20s, due in large part to the impact of higher tariff rates and foreign exchange. We expect a similar dynamic in inventory growth for the remainder of the year. In Q2, the low double-digit unit growth reflects our investments in newness and innovation.

Megan: Turning to EPS, we expect earnings per share in the second quarter to be in the range of $2 85 to $2 90 versus EPS of $3.15 a year ago.

Megan: Expect our effective tax rate in Q2 to be approximately 30%.

Megan: When looking at inventory, we expect units to increase in the low double digits in Q2 with dollar inventories up in the low twenties due in large part to the impact of higher tariff rates and foreign exchange.

Megan: Expect a similar dynamic in inventory growth for the remainder of the year.

Megan: In Q2, the low double digit unit growth reflects our investments in newness and innovation. In addition, we are comping, a 6% decline in units in the prior year.

Meghan Frank: In addition, we are comping a 6% decline in units in the prior year. We're pleased with both the level and composition of our inventory, which positions us well.

Megan: We were pleased with both the level and composition of our inventory, which positions us well.

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

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

Calvin McDonald: Thank you, Meghan. I feel we are well positioned to navigate the current period. We intend to leverage our strong financial position and competitive advantages to play offense while making deliberate decisions and continuing to invest in our growth opportunities.

Calvin McDonald: Thank you Megan I feel we are well positioned to navigate the current period, we intend to leverage our strong financial position and competitive advantages to play offense, while making deliberate decisions and continuing to invest in our growth opportunities in closing I want to thank our talented leaders and teams who make these results.

Calvin McDonald: In closing, I want to thank our talented leaders and teams who make these results possible and demonstrate their agility and passion each day. We'll now take your questions.

Calvin McDonald: <unk> and demonstrate their agility and passion each day, we will now take your questions operator.

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

Megan: Thank you we will now begin the question and answer session.

Speaker Change: Analysts who wish to join the question queue May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request if you're using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.

Donna Telsey: Our first question is from Donna Telsey with Telsey Group. Please go ahead. Hi, good afternoon, everyone.

Dana Telsey: So my first question is from Dana Telsey with Tesla Group. Please go ahead.

Dana Telsey: Hi, Good afternoon, everyone. As you think about the guidance for the balance of the year and the pressure on Q2 before you have some mitigation efforts in the back half of the year can you expand on those mitigation efforts and what you're thinking about whether it's probably some places diversifying sourcing how should we think about it and then when.

Calvin McDonald: As you think about the guidance for the balance of the year and the pressure on Q2 before you have some mitigation efforts in the back half of the year, can you expand on those mitigation efforts and what you're thinking about, whether it's price increases, diversifying sourcing, how should we think about it? And then when you think about just the U.S. business, any category trends that you saw with the newness that you offered and any early indications on the no line align, which frankly I've seen good sell-throughs. Thank you. Thanks, Dana. I think given the dynamic of the year in terms of Q2 relative to the full year, it's important to anchor in the full year where we guided to a decline of 160 basis points versus our prior guide of 100, which is really related to the net impact of tariffs, as well as the slight increase in markdowns.

Megan: You think about just the U S business category.

Megan: That you saw with the newness that you offered and.

Megan: Any early indications on the no line a line, it's frankly I've seen I've seen them. Good Celsius. Thank you.

Speaker Change: Thanks, Dana I think given the dynamic of the year and in terms of Q2 are relative to the full year, it's important to anchor and a full year, where we guided to a decline of 160 basis points versus our prior guide of 100 and.

Megan: Which is really related to the net impact of tariffs as well as a slight impact slight increase in markdowns. When we think about on the tariff impact to mitigation actions I'd highlight one would be pricing and we are planning to take strategic price increases looking item by item across our assortment as we typically.

Meghan Frank: When we think about the tariff impact, two mitigation actions I'd highlight. One would be pricing. We are planning to take strategic price increases, looking item by item across our assortment as we typically do, and it will be price increases on a small portion of our assortment, and they will be modest in nature. And then on the sourcing side, we are also pursuing some efficiency actions there, some of which will impact the second half of this year, and then we are also focused on that into 2026 as well.

Megan: We do and it will be price increases on a small portion of our assortment and they will be a modest in nature and then on the sourcing side. We are also pursuing some efficiency actions there some of which will impact the second half of this year and then we are also focused on that into 'twenty I'm sick.

Calvin McDonald: And I'll pass it over to Calvin on the product side.

Megan: As well and I'll pass it over to Calvin on the product side, yeah. Thanks, Dana in terms of category trends on newness, what's very encouraging is that it's balanced.

Calvin McDonald: Yeah, thanks, Dana. In terms of category trends on newness, what's very encouraging is that it's balanced. It's balanced across our activity in lifestyle, new item introductions, as well as new and updates to our current.

Calvin McDonald: It's balanced across or activity in lifestyle, a new item introductions as well as new and updates to our current so to just walk through a few of these on the lifestyle side of our business as you've seen and introduced a at the beginning of Q1 and sold out pretty much.

Calvin McDonald: So to just walk through a few of these. On the lifestyle side of our business, as you've seen and introduced at the beginning of Q1 and sold out pretty much in all doors, was our Daydrift trouser, which, you know, updated style, and she responded incredibly well to that. And we will be back in stock fully with some expanded silhouettes for September. So we're very encouraged and believe we have a future core success on our hands. Be Calm, another new core, future core introduction that she responded very well to, both had great rating and reviews.

Megan: In all doors are was our day drift up a trouser, which you know used performance fabrics with a unique updated style and she responded incredibly well to that and we will be back in stock fully with some expanded silhouettes for September.

Megan: So we're very encouraged and believe we have a future core success on our hands be calm another new core future core introduction that she responded very well to both had great rating reviews on the activity side of our business, we balanced between new as well as updates on the new side grow up.

Calvin McDonald: On the activity side of our business, we balance between new as well as updates. On the new side, Glow Up was well-received, good reviews, continues to gain momentum. And again, introduced with a limited set of colors, and we continue to build and expand into that. And again, I feel we have a very unique legging, creating a unique sensation and unmet need for train and seeing good success. And then on updates to our existing core, Align No Line is a great example of that. Great and early results, but very encouraging, as you alluded to. And we only had it distributed to 80 doors.

Megan: Was well received good reviews continues to gain momentum and again introduced with a limited a set of colors and we continue to to build and expand into that and again until we have a very unique a lagging creating a unique sensation and unmet need that for train.

Megan: And seeing good success and then on updates to our existing core line. No lines are Great example of that and early Ah Yeah results, but very encouraging as you alluded to and we only had it distributed to 80 doors. So again, we are chasing and we will be in full our store distribution by.

Calvin McDonald: So again, we are chasing and will be in full store distribution by September. You'll see it get stronger and distributed more throughout the quarter.

Megan: September you'll see it to get stronger and distributed more through out the the quarter, but this is one in which across all of these and when I referenced the response to newness is encouraging and these being some of the the strong hits both from a newness and in.

Calvin McDonald: But this is one in which across all of these. And when I referenced the response to newness is encouraging, and these being some of the strong hits, both from a newness and innovation standpoint, definitely we saw a sellout and are chasing and excited about what that means for the back half. But balanced across activity, lifestyle, new as well as updates. So we know the newness is resonating and working well, and the team's busy chasing into these what appear to be future hits for us. Thank you.

Megan: Aviation standpoint, you know definitely we saw a sellout and are chasing in and excited about what that means for the back half, but balanced across activity lifestyle, new as well as updates. So we know the newness is resonating and working well and the team's busy chasing into the these what appeared to be future hits for us.

Megan: Yeah.

Megan: Thank you.

Megan: Yeah.

Janine Stichter: The next question is from Janine Stichter with Jeffreys. Please go ahead. Hi, thanks for taking my question. I was hoping you could dig in a little bit more to the comp drivers, the top-line drivers. I think last quarter you had talked about traffic falling off, but seeing some improvements in transaction size, solid performance and conversion. I'm wondering if you're still seeing the same thing and then maybe any update on the progression of the quarter, what you saw in April into May. Thank you.

Speaker Change: The next question is from Janine Stichter with Jefferies. Please go ahead.

Janine Stichter: Hi, Thanks for taking my question I was hoping you could they get all of it more of the comp drivers has attracted the topline drivers I think last quarter, you had talked about traffic falling off that being kind of improvements and transaction size and soft performance in conversion I'm wondering if you're still seeing the same thing and then maybe any update on the progression of the quarter what you saw in.

Janine Stichter: In April.

Speaker Change: Thank you.

Meghan Frank: Hi, Janine. So, in terms of comp drivers, as we talked about on the last call, we did see a decline in store traffic, particularly in the U.S. as we moved from Q4 into Q1. We did see that moderate somewhat, but we did still, for the first quarter, see a lower traffic trend in stores relative to Q4. Conversion trends remained relatively consistent, a little bit of a decline year over year, and then also we did see an uptick in terms of average dollars per transaction in the first quarter. And then in terms of how it's progressing, April into May, you know, we don't share specifics on Q2, but I would say nothing materially different.

Janine Stichter: Janine and so in terms of comp drivers as we talked about on the last call. We did see a decline in store traffic.

Speaker Change: Particularly in the U S. As we moved from Q4 into Q1, we did see that moderate somewhat but we did still still for the first quarter see a lower traffic trend in stores relative to Q4.

Speaker Change: Conversion trends remained relatively consistent a little bit of a decline year over year. And then also are we did see an uptick in terms of average dollars per transaction in the fourth and the first quarter.

Speaker Change: And then in terms of how it's progressing April into May and you know, we don't share specifics on Q2, but I would say nothing materially different.

Janine Stichter: Great. Thanks so much. Thank you.

Speaker Change: Great. Thanks, so much.

Speaker Change: Thank you.

Brian Nagel: The next question is from Brian Nagel with Oppenheimer. Please go ahead. Now, good afternoon.

Speaker Change: The next question is from Brian Nagel with Oppenheimer. Please go ahead.

Brian Nagel: Good afternoon.

Brian Nagel: So a couple of questions and I'm going to merge them together, both tied around kind of tariffs and your strategy for tariffs. I guess the first question, if I'm hearing you correctly, I mean, you know, as you're looking at these tariffs, it sounds like you're going to take the biggest hits on margins. So the question I have is, you know, why not at least initially or do more with price?

Brian Nagel: So a couple of questions and one of them kind of merged them together are.

Speaker Change: Both tied around kind of tariffs and your strategy for tariffs I guess the first question. If I'm hearing you correctly I mean, you know as you look at these tariffs it sounds like you're going to take the biggest hits on margin. So the question I have is you why not at.

Speaker Change: At least initially.

Speaker Change: Do more work with with price.

Meghan Frank: And then secondly, is we look at the guidance now and sort of see the bigger disconnect between top and bottom line. Is that all, is that mostly tariffs or I think you did mention some other investments spent in there, thanks. Thanks, Brian. So in terms of top line versus bottom line, so for the full year, we maintained our revenue guide, so $11.15 to $11.3 billion. We did lower our op margin for the full year from 100 basis points decline year over year to 160. That's all driven by the net impact of tariffs. So the tariff impact, then with some offsets, as I mentioned, in pricing and supply chain, and then a slight increase also in markdowns.

Speaker Change: And then secondly, as we look at the guidance now and sort of say the bigger disconnect between top and bottom line is that all is that mostly pure absorbed I think you did mentioned some other investment spending in there.

Speaker Change: <unk>.

Speaker Change: Thanks, Brian and so in terms of our top line versus bottom line. So for the full year. We maintained our revenue guide so 11.15 to $11 3 billion and we did lower our op margin for the full year from 100 basis points decline year over year to 160, and that's all driven by the net impact.

Speaker Change: The tariffs so the tariff impact and then with some offsets as I mentioned in pricing and supply chain and then a slight increase I'll send markdowns. There there are not any meaningful changes in terms of our expense posture, we're maintaining our focus on the long term and as I mentioned, we do have some mitigation actions and on <unk>.

Meghan Frank: There are not any meaningful changes in terms of our expense posture.

Meghan Frank: We're maintaining our focus on the long term. And as I mentioned, we do have some mitigation actions on tariffs that will also come into play as we get into 26. In terms of price, as Calvin mentioned, we're really looking at this as operating from a position of strength, being strategic in our pricing, looking at our elasticities and where we have opportunity. And we'll continue to take a look at that as the year progresses, but feeling comfortable with our positioning at the state. Okay, thank you.

Calvin McDonald: Tariffs that will also come into play as we get into 'twenty six I'm in terms of price as Kelvin mentioned, we are really looking at this is operating from a position of strength being strategic in our pricing and looking at her elasticities and where we have opportunity and we'll continue to take a look at that as the year progresses, but.

Speaker Change: And feeling comfortable with our positioning at this date.

Speaker Change: Okay. Thank you.

Matthew Boss: The next question is from Matthew Boss with J.P. Morgan. Please go ahead. Great, thanks.

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

Matthew Boss: Great. Thanks, So Kelvin maybe could you elaborate on the progression of comps that you saw over the course of the first quarter.

Calvin McDonald: So, Calvin, maybe could you elaborate on the progression of comps that you saw over the course of the first quarter? And on the start to the second quarter that you cited, I guess if we think about it relative to first quarter performance in the Americas and in China, does the 7 to 8 percent revenue guidance for the quarter, does that embed a moderation in June and July trends relative to what you've seen in May, just given the uncertainty and the dynamic backdrop? Okay, Matt. So, in terms of how the corridor progressed, no material changes in terms of trend month-to-month in Q1.

Matthew Boss: And on the start to the second quarter that you cited I guess, if we if we think about it relative to first quarter performance in the Americas and in China does the 7% to 8% revenue guidance for the quarter does that embed a moderation in in June and July trends relative to what you've seen in may just given the uncertainty in.

Matthew Boss: And the dynamic backdrop.

Matthew Boss: It came out and so in terms of how the quarter progressed no material changes in terms of trend month to month in Q1, and as we look to Q2, we don't kind of specifics in Q2, but when I can share is I would say similar trends in the U S relative to Q1 and as you know.

Calvin McDonald: As we look to Q2, we don't guide to specifics in Q2, but what I can share is, I would say, similar trends in the U.S. relative to Q1. As you know, China was impacted by the timing of Chinese New Year in Q1, which was about a four-point delta. So, I would say our expectation and current trends would be in line with our annual color we offered on China performance, which would be in the 25 to 30 percent range.

Matthew Boss: China was impacted by the timing of Chinese new year in Q1.

Matthew Boss: Which was about a four point delta So I would say our expectation in current trends would be in line with our annual color. We offered on China performance, which should be in the 25% to 30% range.

Meghan Frank: Great. And then maybe, Meghan, just a follow-up as it relates to second-quarter guidance in the full year. I guess, could you elaborate on the slight increase in markdowns now contemplated in the full-year outlook, and maybe just how you see the progression in the second quarter versus back-end? Yep. In terms of markdowns, so we did actually see a decline in markdowns in the first quarter, so we haven't seen an uptick in markdowns in our results to date. We were down 10 basis points in Q1. But given consumer confidence and macroeconomic concerns as we move into the second half of the year, we feel it's prudent to tick up our forecast slightly on the markdown line.

Speaker Change: Great and then maybe Megan just a follow up as it relates to second quarter guidance and the full year I guess could you elaborate on on the slight increase in Mark Downs now contemplated in the full year outlook and maybe just how you see the progression in the second quarter versus back half.

Matthew Boss: Yeah and in terms of markdowns. So we did actually see a decline in markdowns in the first quarter. So we haven't seen an uptick in markdowns in our results to date, we were down 10 basis points in Q1 are they given consumer confidence in macro economic concerns as we move into the second half of the year, we feel it's prudent.

Matthew Boss: To tick up our forecast slightly on the markdown line, we would be in the range of 10 to 20 basis points above last year, so not meaningfully higher.

Meghan Frank: We would be in the range of 10 to 20 basis points above last year, so not meaningfully higher than our last year line, which was relatively, I would say, in line with history. But you're saying first quarter and so far into the second quarter that you haven't, you haven't seen the need to take the markdowns. It's just an assumption that you've baked in given the backdrop. Yeah, I would say on our actuals in Q1, we saw a downward trend, 10 basis points, and our markdown positioning in Q2 would be embedded in our guide on That's great color.

Matthew Boss: And then our last year water line, which was relatively I would say in line with history.

Speaker Change: But you are saying first quarter and so far into the second quarter that you you haven't you haven't seen the need to take the markdowns. It. It's just an assumption that you baked in given the backdrop.

Speaker Change: Yeah, I would say on our actuals in Q1, we saw it at a downward trend 10 basis points in our.

Speaker Change: Our markdown and positioning and in Q2, it would be embedded in our guidance.

Speaker Change: Okay, that's great color. Thank you.

Meghan Frank: Thank you.

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

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

Brooke Roach: Good afternoon, and thank you for taking our question Calvin given some of the success of some of the new launches that you've seen year to date can you elaborate on your latest thoughts about returning the U S business to sustainable comp growth and whether or not that differs at all in your Canada versus U S. As you contemplate North America reported comps. Thank you.

Calvin McDonald: Calvin, given some of the success of some of the new launches that you've seen year to date, can you elaborate on your latest thoughts about returning the US business to sustainable comp growth and whether or not that differs at all in your Canada versus US as you contemplate North America reported comps? Thank you. Thanks, Brooke. When I, when I look at what we control, in terms of our mix of newness, and how that's performing, especially the new intended core, and the way the guests is responding to that, definitely positive and feel good about those reactions to it.

Brooke Roach: Thanks Brook.

Brooke Roach: When I when I look at what we control.

Brooke Roach: In terms of our mix of newness and how that's performing especially the new intended core and the way the guesses responding to that definitely positive and feel good about our those reactions to it and the team knows and is working on what they can continue to.

Calvin McDonald: And the team knows and is working on what they can continue to to add and innovate to that. When I look at our performance versus the market, our performance, we gain market share in the premium active where we had strong performance gains, our peers in this segment of the market where we compete, and the macro consumer is different. We continue to see a more cautious, discerning consumer. We're definitely not happy where the growth is in the US, but relative to the market, and our performance versus others, pleased that we're putting on share, pleased with the reaction to the newness, and with the mix of newness that's coming, as we continue to get back into stock on the new core that she's reacting to and making those adjustments, and the newness that we have planned.

Brooke Roach: <unk> to add and innovate to that when I look at our performance versus the market or performance. We gained market share in the premium activewear, we had strong performance gains our peers in this segment of the market where we compete.

Brooke Roach: And the macro consumers different we continue to see a more cautious discerning consumer.

Brooke Roach: We're definitely not happy where the growth is in the U S, but relative to the.

Brooke Roach: The market and our performance versus others are pleased that we're putting on share are pleased with the reaction to the newness and with the mix of newness that's coming.

Brooke Roach: As we continue to get back into stock on the new core that she is reacting to and making those adjustments.

Brooke Roach: And the newness that we have planned.

Calvin McDonald: And I think a bit of the Delta between the Canadian and the US market consumer we see is we're not seeing the same discerning consumer in Canada as we are seeing in the US in terms of traffic, as well as some other metrics that we monitor. So we continue to monitor that. But the newness in both markets are responding very well. And the team's very focused on what the guest is reacting to and, and bringing that to to the consumer into the market in the back half. Great, thanks so much.

Brooke Roach: And I think a bit of the delta between the Canadian and the U S market and the consumer we see is we're not seeing the same discerning consumer in Canada. As we are seeing in the U S in terms of traffic.

Brooke Roach: Traffic as well as some other metrics that we monitor so we continue to monitor that but the newness in both markets are responding very well and the team is very focused on what the guest is reacting to an and bringing that to a to the consumer to the market in the back half.

Speaker Change: Great. Thanks, so much I'll pass it on.

Brooke Roach: I'll pass it on.

Ike Boruchow: The next question is from Ike Boruchow with Wells Fargo. Please go ahead. Hey, thanks for taking my question. Two questions. I think first for Calvin, so I appreciate on the product side the commentary on what's working both in lifestyle and performance. But at the end of the day, the comps are up one, so clearly there's got to be some things that are not working. Could you just maybe help us, what exactly are the parts that are lagging that you're hoping to improve? And then Meghan, maybe just back to Matt's question, part of the guidance revision down is markdown, but it sounds like you're saying that you're not seeing any markdown yet, but you're planning it.

Speaker Change: The next question is from Ike <unk> with Wells Fargo. Please go ahead.

Speaker Change: Hey, Thanks for taking my question.

Speaker Change: Two questions I think first for Calvin So appreciate on the product side it would be.

Speaker Change: On the commentary on what's working.

Speaker Change: Both whom lifestyle and performance, but you know at the end of the comps were up one so clearly there's got to be some things that are not working could you just maybe help us what exactly are the other parts of the lagging what you're hoping to improve and then we can maybe just back to matts question.

Speaker Change: Part of the guidance revision down.

Speaker Change: Mark down, but it sounds like Youre, saying, youre, not seeing any markdown, yet, but you're planning it so.

Meghan Frank: So I guess maybe I'm just a little confused. Is it because of the inventory bill that you're expecting markdown to accelerate? I guess I'm just confused why you're taking a more cautious approach on that. What's the leading indicator that's making you think that if you're not seeing it yet?

Speaker Change: I guess, maybe I'm just a little confused is it because of the inventory build that you're expecting markdown to accelerated I guess I'm just confused why you're taking.

Speaker Change: Taking a more cautious approach on that like what's the leading indicator that we can think that if you're not seeing New York.

Calvin McDonald: Thanks. Thanks, Ike. In terms of the balance of the mix, I would say the overall traffic numbers are having an impact on the general mix of the assortment in the U.S. From a new guest perspective, we grew our new guests from, and I think Meghan mentioned this, from an AOV, UPT, both positive. From a market share across all categories, we saw growth in our premium segment. I think where there continues to be opportunity is with our core seasonal colors. We're seeing the guests shift to the truly new styles, as I mentioned, the glow up, the align no line, the day drift, the be calm and have opportunities.

Speaker Change: Yeah.

Speaker Change: Things like in terms of the balance of the mix I would say the.

Speaker Change: Overall, our traffic numbers are having an impact on the general mix of the assortment in the U S from a from a new guest perspective.

Speaker Change: We grew our new guests are from a and I think Megan mentioned this from an a O V. U P. T are both positive from a market share.

Speaker Change: Across all categories, we saw growth in our premium segment.

Speaker Change: I think where there continues to be opportunity is with our core and seasonal colors were seeing the guests shift to the truly new Ah styles as I mentioned, the glow up the aligned no line the day drift to be calm and and have opportunities, but overall it really is the <unk>.

Calvin McDonald: But overall, it really is the macro discerning consumer that we're seeing through traffic in the store, the behavior, how they're shopping and reacting, I think is definitely showing good indication. And as I alluded to, the growth in market share is indicating we are gaining and winning relative to the marketplace and how the consumer is spending. And I would add, Ike, similar on the markdown front.

Speaker Change: Macro this discerning consumer that we're seeing through traffic in the store the behavior, how they're shopping and reacting AR I think is definitely showing good indication and as I alluded to the growth in market shares, indicating we are gaining and winning relative to the marketplace and how the consumer is spending.

Speaker Change: And I would add I similar on the markdown front. So the traffic trends I would say would be the leading indicator on why we've taken that positioning in terms of consumer confidence and macro uncertainty in the second half as well.

Ike Boruchow: So the traffic trends, I would say, would be the leading indicator on why we've taken that positioning in terms of consumer confidence and macro uncertainty in the second half as well. Okay, thank you.

Speaker Change: Okay. Thank you.

Paul Lejuez: The next question is from Paul Lejuez with Citi. Please go ahead. Hey, thanks, guys. Can you maybe give a little bit more detail about inventory by geography? And if there are any specific regions that you're seeing, potentially, more margin pressure, markdown pressure? Where is that coming from? Is that just the US or is it more global? And is there anything on the competitive landscape front that you see across your different global markets that make you think that things might heat up from a promotional perspective? Thanks.

Speaker Change: The next question is from Paul Lewis with Citi. Please go ahead.

Speaker Change: Hey, Thanks, guys.

Speaker Change: Maybe give a little bit more detail about inventory by geography, and if there are any specific regions that you're seeing.

Speaker Change: Potentially more margin pressure markdown pressure, where where is that coming from the just the U S or is it more global than was there anything in the competitive landscape that you see across your different global markets.

Speaker Change: It makes you think things might heat up from a promotional perspective. Thanks.

Speaker Change: And thanks, Paul So in terms of inventory I'd say again, we haven't seen.

Meghan Frank: Thanks, Paul. So, in terms of inventory, I'd say, again, you know, we haven't seen markdown pressure to date, down 10 basis points year over year in Q1, but when we think about traffic trends and headwinds, they would be predominantly in the U.S., so I'd say, you know, that's where I'd probably put a place a little bit more of the risk as we move into the second half of the year in terms of what we've layered in, in terms of markdown. And from a competitive perspective, there's nothing we're seeing globally on a price promotional play other than in the U.S.

Speaker Change: Markdown pressure to date down 10 basis points year over year in Q1 odd, but when we think about traffic trends and headwinds they would be predominantly you asked so I'd say.

Speaker Change: You know, that's where I'd probably put in place a little bit more of the risk as we move into the second half of the year in terms of what we've layered in in terms of markdowns and from a competitive perspective Theres nothing were seeing.

Speaker Change: Globally.

Speaker Change: On a price promotional play other than in the U S, where I would say we continue to monitor that closely because we do see ongoing promotional activity across the market across the competitors as we've seen the discerning consumer the more cautious we know that to lever others poll.

Meghan Frank: where I would say we continue to monitor that closely because we do see ongoing promotional activity across the market, across the competitors, as we've seen the certain consumer, the more cautious, we know that to lever others' pull, and we continue to monitor it and, quite frankly, anticipating a bit of a spike in the back half if the macro headwinds continue. But, you know, we are a full price, you know, business and will lead with innovation, and our core assortment will continue to play that, but we are seeing and do anticipate probably a dynamic competitive market.

Speaker Change: And we continue to monitor it and quite frankly, anticipating a bit of a spike in the back half Ah if if the macro headwinds continue but you know we our full price.

Speaker Change: Business and we'll lead with innovation.

Speaker Change: And and our core assortment will continue to play that but we are seeing and do anticipate probably a dynamic competitive market.

Speaker Change: In the U S got it.

Speaker Change: Right and just a follow up there you just the purchases at all you just considering where your inventories are in the tariff situation, maybe taking price up a little bit have you also taken your purchases purchase assumptions down the back half.

Calvin McDonald: in the U.S. I would say we're always adjusting purchases and reflecting the current environment. We do benefit from about 40% of our purchases in core product, and so that's an area we flex as we move forward. So I would say we always are doing that. We've done that to some degree. We'll continue to keep a close eye on inventory levels and sales trends.

Speaker Change: I would say, we're always adjusting purchases and reflecting the current environment, we do benefit from about 40% of her purchases and core product and so that's an area. We flex as we move forward. So I would say and we always are doing that and we've done that to some degree and we will continue to keep a close eye on inventory levels and sales.

Speaker Change: Rents.

Paul Lejuez: Thank you. Good luck.

Speaker Change: Thank you good luck.

Speaker Change: Uh huh.

Alex Straton: The next question is from Alex Straton with Morgan Stanley. Please go ahead. Great, thanks so much. Maybe for either of you, where do newness levels stand in total? Like, are they back where you want them to be? And then if that's not inflecting America's comp to positive, are you exploring maybe other potential drivers for what to do to get it there? And maybe related for Meghan on that one, is a positive comp for America possible this year? Or with your view on the macro, is that something that is more kicked out? Thanks, Alex. In terms of the composition of our merchandise mix, we are back at our newness percentages, historical newness percentages of the sum.

Speaker Change: The next question is from Alex <unk> with Morgan Stanley. Please go ahead.

Speaker Change: Great. Thanks, so much.

Speaker Change: Maybe for either of you where do newness level stand in total like are they back where you want them to be and then if that's not inflect in Americas comp to a positive are you exploring maybe other potential drivers for what to do to get it there and maybe related for Megan on that one is a positive comp.

Speaker Change: For America as possible this year or what's your view on the macro is that something that is more kicked out.

Speaker Change: Thanks, Alex.

Speaker Change: In terms of the composition of our merchandize mix we.

Speaker Change: Our back at our newness percentages historical newness percentages.

Speaker Change: All of the sub I think the way the guest is reacting and responding within that newness. She is reacting very positively to the new core or intended core silhouette styles that she has not seen before alluded to you know sort of go up the hill I know line the dangerous to become to name.

Calvin McDonald: I think the way the guest is reacting and responding within that newness, she is reacting very positively to the new core or intended core silhouette styles that she has not seen before alluded to, you know, sort of glow up the align no line the day drift to be calm to name just a few. And there's a number of those those as a percentage of our newness mix, we are increasing in the back half so that we're reacting to what the guest is responding to. And as a result, we are shifting some of the seasonal colors, patterns and graphics in the remaining core to maintain that sort of ratio that we're seeing.

Speaker Change: Just a few and there's a number of those those as a percentage of our newness mix, we are increasing in the back half. So that we're reacting to what the guest is responding to a and as a result, we are you know shifting some of the seasonal colors and patterns and graphics.

Speaker Change: In the remaining core to maintain that sort of ratio that we're seeing but as I look to the back half the percentage of newness remained strong above historical as we lean into a little bit of these areas, where the guest has really responded well and we weren't at full store distribution.

Calvin McDonald: But as I look to the back half, the percentage of newness remains strong above historical as we lean into a little bit of these areas where the guest has really responded well. And we weren't at full store distribution. We sold out of many of these styles and silhouettes and have very strong rating reviews on them. So I'm pleased with the newness mix and the work the team has done. And what we have seen is the consumer respond very well to to the completely new styles that she hasn't seen before. And that's sort of the mix that you will see us continue to to do heading into the back half of this year.

Speaker Change: We sold out of many of these styles and silhouettes and have very strong rating reviews all of them. So I'm pleased with the newness a mix in the work the team has done and what we have seen is the consumer respond very well to our to the the completely new styles that she hasn't seen before in that sort of.

Speaker Change: The mix that you will see us continue to to do heading into the back half of this year.

Meghan Frank: And Alex, I'd add, we're not guiding specifically to comps for the year, but our view on the full year revenue for the Americas hasn't changed, so low single digit to mid single digit, and feel we're well positioned to capitalize if the consumer environment improves as well. So that's what we're offering today. Thanks a lot. Good luck.

Alex: And Alex I'd add we're not guiding specifically to comps for the year.

Alex: But our view on our full year revenue for the Americas hasn't changed so low single digit to mid single digit and feel we're well positioned to capitalize if the consumer environment improves as well.

Speaker Change: And so that's what we're offering today.

Speaker Change: Thanks, a lot.

Alex Straton: Thank you.

Speaker Change: Thank you.

Jay Sole: The next question is from Jay Sole with UBS, please go ahead. Great. Thank you so much. My question is about China. You know, given the comp in China, you've opened a lot of stores, you know, how much more store growth opportunity do you see in China before you start worrying about cannibalizing, you know, your existing surveys given the level of comp, you know, right here? Like, can you tell us how many stores you have now, what you expect by the end of the year, and then maybe kind of what you're thinking about as a store growth rate going forward?

Speaker Change: Next question is from Jay sole with UBS. Please go ahead.

Speaker Change: Great. Thank you so much my questions about China, you know keeping the comp in China.

Speaker Change: It means a lot of stores.

Speaker Change: How how much more sort of opportunity do you see in China before you start worrying about cannibalizing your existing store base given the level of comp you know right here like can you tell us how many stores you have now what you expect by the end of the year and then maybe kind of what Youre thinking about is the store growth rate going forward. Thank you.

Calvin McDonald: Thank you.

Calvin McDonald: Yeah, so in terms of China, I would say still feel we're early in our journey there. So we've got 154 stores today. We had a goal of approximately 200 in our current Power 3x2 plan and saw growth beyond that. I'm really pleased with the performance on new stores. And I'd also mention we are early in terms of our co-located strategy. So where we have stores with high traffic, high sales per square foot and see an opportunity to expand the size of stores to have a more holistic assortment across men's, women's accessories, capitalize on that traffic.

Speaker Change: Yeah. So in terms of China, I would say still feel we're early on in our journey there and so we've got 154 stores today, we had a goal of approximately 200 and our current power three times to plan and saw growth beyond that I'm really pleased with the performance on new stores.

Speaker Change: And I'd also mention we are early in terms of our co located strategies, where we have stores with high traffic high sales per square foot and see an opportunity to.

Speaker Change: To expand the size of that of stores to have a more holistic assortment across men's women's accessories capitalize on that traffic and you know we're we're underway on that in that strategy in North America to a larger degree and it's largely still in front of us in terms of China.

Calvin McDonald: You know, we're underway in that strategy in North America to a larger degree, and it's largely still in front of us in terms of China. Got it. And can you talk about what the traffic trends were in China? And have you talked about what the traffic trends were in the U.S.? We don't break out specifically on traffic trends, but I would say still seeing strong double-digit growth in terms of the China market and nothing notable there.

Speaker Change: Yeah.

Speaker Change: Got it and can you talk about what the traffic trends were in China, and you talked about with the traffic trends were in the U S.

Speaker Change: And we have we don't break out specifically on traffic trends, but I would say you know still seeing strong double digit growth in terms of the China market and nothing notable there.

Jay Sole: Thank you so much.

Speaker Change: Got it thank you so much.

Adrienne Yoon: The next question is from Adrienne Yoon with Barclays. Please go ahead. Great. Thank you very much.

Adrienne: The next question is from Adrienne <unk> with Barclays. Please go ahead.

Adrienne: Great. Thank you very much my question is on the inventory the inventory does have some tariff impact and FX of the delta from units to dollars at about 7% how much of that is tariffs and how much of that would be the FX and then secondarily I guess, it's a follow on are you expecting that tariff.

Meghan Frank: My question is on the inventory. The inventory does have some tariff impact and FX of the delta from units to dollars at about 7%. How much of that is tariff and how much of that would be the FX? And then secondarily, I guess it's a follow-on. Are you expecting that tariff inventory to sort of hit the P&L sort of late June and July? And is that when we should expect the commensurate price impact? Thank you.

Adrienne: Sorry to sort of hit the P&L. So late June and July and is that when we should expect a commensurate price impact. Thank you.

Meghan Frank: Hey, Adrienne. So, in terms of the impact on dollar inventory, so it is predominantly driven by higher AUCs related to tariffs and then FX, I would say. We haven't broken out the details, but, you know, not too far off from each other in terms of relativity. And then in terms of the impact on tariffs, we do have, as I mentioned, a more pronounced impact in Q2 in terms of the P&L. So, 60 basis points in Q2 because the mitigation actions come in the second half. For the second half of the year, or sorry, for the full year, the FX, or sorry, the tariff headwind is 40 basis points with the mitigation actions coming into play towards the second half of the year.

Speaker Change: Hadrian and so in terms of the impact on our dollar inventory. So it is predominantly driven by higher AUC is related to tariffs and then FX I would say we haven't broken out the details, but you know not too far off from each other in terms of relativity.

Speaker Change: And then in terms of the impact on tariffs, we do have as I mentioned, a more pronounced impact in Q2 in terms of the P&L. The 60 basis points in Q2, and because of the mitigation actions come in the second half for the second half of the year or sorry for the full year. The Opex I'm sorry, the tariff headwind is 40 basis.

Speaker Change: And with the mitigation actions coming into play towards the second half of the year and I would say in terms of pricing and those actions will start rolling out towards the second half of this quarter and into Q3.

Meghan Frank: I would say in terms of pricing, those actions will start rolling out towards the second half of this quarter and into Q3. Okay, great.

Speaker Change: Okay, Great and then my other question is on the lower product costs, what is driving that was it freight or cost engineering and do you assume that that will neutralize hopefully go into the back half of the year.

Meghan Frank: And then my other question is on the lower product costs, what is driving that? Was it freight or cost engineering? And do you assume that that will neutralize as we go into the back half of the year? Thanks. Yeah, so in terms of product costs, it would be predominantly driven by mix of business relative to expectations. So I would say right now what's reflected in our guide reflects our forecast in terms of mix of business in the second half of the year. And I wouldn't call out product costs as a variance driver for the full year at this point in time.

Speaker Change: Yeah. So yeah. So in terms of product costs and it would be predominantly driven by mix of business and relative to expectations. So I'm I would say right now what's reflected in our guide reflects our forecast in terms of the mix of business in the second half of the year and I I wouldn't call out product costs as they are and is it.

Speaker Change: Variance driver for the full year at this point in time.

Meghan Frank: Okay, great. Thanks so much. Best of luck.

Speaker Change: Okay, great. Thanks, so much smokable.

Speaker Change: Yeah.

Lorraine Hutchinson: The next question is from Lorraine Hutchinson with Bank of America. Please go ahead. Thank you. Good afternoon.

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

Lorraine Hutchinson: Thank you good afternoon, I wanted to focus on SG&A for a minute.

Meghan Frank: I wanted to focus on SG&A for a minute. It looks quite high in the second quarter. Is there anything changing in your view of the investment needed to drive growth? Or is this just timing versus planned investments in the second half? Thanks, Lorraine. Yeah, so in terms of Q2, so there are a few factors that are impacting Q2. So I think important to zoom out to the full year. So for the full year, we did guide revenue in line with last time, so 11.15 to 11.3. And the operating margin relative to last time is about up 60 basis points driven by just tariffs and markdown changes.

Speaker Change: Quite high in the second quarter is there anything changing in your view of the investment needed to drive growth or is this just timing versus planned investments in the second half.

Speaker Change: Thanks, Lorraine and yeah. So in terms of Q2, so there.

Speaker Change: There are a few factors that are impacting Q2, so I think important to zoom out to the full year or so for the full year. We did guide revenue in line with last time, So 11.15 to 11.3 and and the operating margin relative to last time.

Speaker Change: It's about 60 basis points, driven by just tariffs and a markdown changes. So when you look at Q2, specifically first I'd note that we did expand our operating margin last year by 110 basis points. It was higher than our full year expansion, which was 50 and so therefore, we had assumed some pressure in our operate.

Meghan Frank: So when you look at Q2 specifically, first, I'd note that we did expand our operating margin last year by 110 basis points. It was higher than our full year expansion, which was 50. So therefore, we had assumed some pressure in our operating margin as we planned the year. And then if you look specifically at the year over year SG&A, that would be driven by increased foundational investments and depreciation, strategic investments. And then those add backs that we discussed last quarter in terms of expenses, for example, store labor that we added back from a normalized perspective.

Speaker Change: Margin as we planned the year and then if you look specifically at the year over year SG&A that would be driven by increased foundational investments and depreciation strategic investments and then those add backs that we discussed last quarter in terms of expenses for example store labor and then we add it back from a normally.

Speaker Change: This perspective.

Meghan Frank: So, relative to the full year, 170 to 190 basis points deleverage in Q2 and 50 basis points for the full year. Thank you.

Speaker Change: And so relative to the full year 170 to 190 basis points deleverage in Q2.

Speaker Change: And 50 basis points for the full year.

Speaker Change: Thank you.

Aneesha Sherman: The next question is from Aneesha Sherman with Bernstein. Please go ahead. Thank you.

Speaker Change: The next question is from Nisha Sherman with Bernstein. Please go ahead.

Speaker Change: Thank you I wanted to go back to China, Megan you talked about your store growth there, but I'm wondering if you can share some color around the comp growth and there's been a pretty sizable deceleration year over year.

Aneesha Sherman: I want to go back to China. Meghan, you talked about your store growth there, but I'm wondering if you can share some color around the comp growth. There's been a pretty sizable deceleration year over year. Can you share some color around what that's being driven by? Is it a macro slowdown or something else? And I know there were some tough compares last Q1. As those compares ease in China as well as in the rest of the world, do you expect to see an acceleration in the comp in the next couple quarters? Thank you. Yep. So in terms of China, we did see a slowdown both in trend and comp.

Speaker Change: Can you share some color around what's that's being driven by is it a macro slowdown or something else and I know there were some tough comparison last Q1 as those compares ease in China as well as in rest of World do you expect to see an acceleration in the comp in the next couple of quarters. Thank you.

Speaker Change: Yeah, and so in terms of China, we did see a slowdown both in trend and comp we did have a four point impact.

Meghan Frank: We did have a four-point impact from timing of Chinese New Year. We did also have an outsized performance, I would say, in terms of non-comp, new store openings, as well as the smaller portion that we do of co-located strategy there. We had an outperformance in terms of revenue growth last year. So we've been looking at Q4 to Q1. We were at 39% growth in Q4, so well above expectations. So I would say, still pleased with China trends, still strong double-digit growth, and do still have the same expectation for the full year of 25% to 30% growth rate for China.

Speaker Change: From timing of Chinese new year, and we did also have an outsized performance I would say in terms of non comp new store openings as well as a smaller portion that we do a co located strategy. There we had an outperformance in terms of revenue growth last year. So even if we're looking at Q4 to Q1, we were at 39% growth in Q4, so well above expectations.

Speaker Change: So I would say still pleased with China trends still strong double digit growth and do you still have the same expectation for the full year of 25% to 30% growth rate for China.

Calvin McDonald: And if I can just follow up, is China still your best full-price market globally?

Speaker Change: And if I can just follow up is China still your best full priced market globally.

Calvin McDonald: It's still our lowest markdown, yes, so highest full price. Thanks.

Speaker Change: It's still our lowest markdown, yes, so highest full price.

Speaker Change: Thank you.

John Kernan: The next question is from John Kernan. Oh, pardon me.

Speaker Change: The next question is from John Kernan.

Speaker Change: Oh pardon me.

John Kernan: All right, we'll just take one more question. Thanks. Thank you. The final question is from John Kernan with TD Collin. Please go ahead. All right. Thanks for squeezing me in Howard.

Speaker Change: I will just take one more question. Thanks.

Speaker Change: Thank you.

Speaker Change: Final question is from John Kernan with T V. Colin Please go ahead.

Alright, Thanks for squeezing me in Howard.

Calvin McDonald: Just to stay on China and rest of the world, obviously you just talked about it in relation to Aneesha's question, but there was a sizable de-sell in the two-year stack. I don't know if that's the best way to look at it, but do you think you're becoming more susceptible to a macro environment in China now that you're pushing, you know, by the end of the year, you'll be pushing $1.7 billion in revenue. And, you know, what are you seeing in the rest of the world? There was a de-sell there as well. Thank you. Thanks, John.

John Kernan: Just to stay on China and rest of World. Obviously, you just you just talked about it in relation to our nieces question, but there was a sizable T cell and the two year stack.

John Kernan: That's the best way to look at it but do you think are becoming more susceptible to a macro environment in China. Now that you are pushing one by the end of the year pushing $1 7 billion in revenue.

John Kernan: And you know what are you seeing in rest of world. There was there was a deceleration there as well thank you.

Speaker Change: Thanks, John in terms of our view of our international opportunities nothing has changed.

Calvin McDonald: In terms of our view of our international opportunities, nothing has changed. When I look at our performance in the quarter and our guide for the year across mainland China, our rest of world, and we look at our EMEA and APAC markets, they continue to perform incredibly strong, a double-digit momentum. We're early relative to market share, early relative to unaided brand awareness, continue to see very healthy new guest acquisition and matriculation with our existing guests. and the way the guest is responding to both our newness as well as our long lineup of core items. So nothing has changed from our vantage point.

Speaker Change: When I look at our performance in the quarter and our guide for the year across mainland China or rest of world and we look at our EMEA and APAC markets. They continued to perform incredibly strong double digit momentum, we're early relative to our market share.

Speaker Change: Early relative to unaided brand.

Speaker Change: Brand awareness continued to see very healthy new guest acquisition and matriculation with our existing guests.

Speaker Change: And the way the guest is responding to our both our newness as well as our our long a lineup of core items. So nothing has changed from our vantage point I think is as Megan indicated.

Calvin McDonald: I think as Meghan indicated, in some of the markets, we had outsized growth last year, but you know, very, very healthy, strong numbers in relative to peer sets and with our market share gains, very excited and see a long runway of growth and opportunity. As I've alluded before, we ended last year at 25% of our business being international and have opportunity, we think, for a 50-50 ratio into the future. So definitely, Lululemon's a global brand, underdeveloped in these markets and seeing great momentum, a very strong growth and anticipate that to continue.

Speaker Change: And some of the markets, we had outsized growth last year, but a very very healthy strong numbers and relative to peer sets and with our market share gains very excited and see a long runway of growth and opportunity as I've alluded before we ended last year at 25% of our business being international.

Speaker Change: And how the opportunity we think for 50 50 ratio into the future. So.

Speaker Change: Definitely lemons are global brands are underdeveloped in these markets and seeing great momentum very strong growth and anticipate that to continue.

Meghan Frank: Meghan, did you give the markdown impact embedded in the gross margin guidance on a basis point level? did for the full year 10 to 20 basis points up to last year. Got it. Thank you.

Speaker Change: Megan did you give the markdown impact embedded in the gross margin guidance on a basis point level.

Megan: It did for the full year 10 to 20 basis points up to last year.

Speaker Change: Got it thank you.

Speaker Change: Yep.

Speaker Change: Yeah.

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

Speaker Change: That's all the time, we have quick questions today. Thank you for joining wed have a nice day.

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Speaker Change: Okay.