Q4 2025 lululemon athletica Inc Earnings Call

March 17, 2026

Speaker #2: After the presentation, there will be an opportunity to ask questions. Analysts who wish to join the question queue may press star, then one on the telephone keypad.

Speaker #2: Should you need assistance during the conference call, you may reach an operator by pressing star then zero. I would now like to turn the conference over to Howard Tubin, Vice President, Investor Relations for lululemon athletica.

Speaker #2: Please go ahead. Thank you, and good afternoon. Welcome to lululemon's fourth quarter earnings conference call. Joining me today are Meghan Frank, interim co-CEO and CFO; and Andre Mastrini, interim co-CEO, President, and Chief Commercial Officer.

Howard Tubin: Thank you and good afternoon. Welcome to lululemon's Q4 Earnings Conference Call. Joining me today are Meghan Frank, Interim Co-CEO and CFO, and André Maestrini, Interim Co-CEO, President, and Chief Commercial Officer. Before we get started, I'd like to take this opportunity to remind you that our remarks today will include forward-looking statements reflecting management's current forecast of certain aspects of lululemon's future. These statements are based on current information which we have assessed, but by which its nature is dynamic and subject to rapid and even abrupt changes. 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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: 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. 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 annual report on Form 10-K and in today's earnings press release. In addition, the comparable sales metrics given on today's call are on a constant dollar basis. The press release and accompanying annual report on Form 10-K are available under the investor section of our website at www.lululemon.com. On today's call, Meghan will share an update on the action plan we laid out for you on our last earnings call. André will discuss our regional performance.

Speaker #2: 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 annual report on Form 10-K and in today's earnings press release.

Speaker #2: In addition, the comparable sales metrics given on today's call are on a constant dollar basis. The press release and accompanying annual report on Form 10-K are available under the Investor section of our website at www.lululemon.com.

Speaker #2: On today's call, Meghan will share an update on the action plan we laid out for you on our last earnings call. Andre will discuss our regional performance, Meghan will return to review our financials and guidance outlook, and then the team will be happy to take your questions.

Howard Tubin: Meaghan will return to review our financials and guidance outlook, and then the team will be happy to take your questions. Before I turn the call over to Meaghan, I'd like to remind investors to visit our investor site, where you'll find a summary of our key financial and operating statistics for Q4, as well as our quarterly infographic. Also, please note that the purpose of today's call is to discuss lululemon's 2025 financial results and 2026 outlook, and we ask that you keep your questions focused on our performance.

Speaker #2: Before I turn the call over to Meghan, I'd like to remind investors to visit our investor site where you'll find a summary of our key financial and operating statistics for the fourth quarter as well as our quarterly infographic.

Speaker #2: Also, please note that the purpose of today's call is to discuss lululemon's 2025 financial results and 2026 outlook, and we ask that you keep your questions focused on our performance.

Speaker #3: Thanks, Howard. I'm glad to be here today to discuss our Q4 results, our outlook for 2026, and how we are executing our action plan to strengthen our brand, re-accelerate growth, and create value for shareholders.

Meghan Frank: Thanks, Howard. I'm glad to be here today to discuss our Q4 results, our outlook for 2026, and how we are executing our action plan to strengthen our brand, re-accelerate growth, and create value for shareholders. André and I are working side by side with the senior leaders across our organization to drive our strategies forward to improve the US business while also maintaining our international momentum, and are making progress to deliver the performance we know is possible in all our regions. We have a healthy and loyal customer base that remains engaged and looking to us for great product and experiences.

Speaker #3: Andre and I are working side by side with the senior leaders across our organization to drive our strategies forward to improve the U.S. business while also maintaining our to deliver the performance we know is possible in all our regions.

Speaker #3: We have a healthy and loyal customer base that remains engaged and looking to us for great product and experiences. We have strong teams who are motivated and excited to bring our new innovations and product assortments to our guests.

Meghan Frank: We have strong teams who are motivated and excited to bring our new innovations and product assortments to our guests, and we are working across the company to refine and advance our initiatives across product creation, product activation, and enterprise enablement, which André and I will speak more about during our call today. We recognize there is more work to be done, and we have been course correcting on a number of fronts, but we are encouraged by the guest response to our recent new product drops and activations. I'm grateful to our teams across the entire organization who remain committed to delivering products and experiences our guests love. Together, we are taking the right steps that will allow us to realize the full potential of lululemon.

Speaker #3: And we are working across the company to refine and advance our initiatives across product creation, product activation, and enterprise enablement, which Andre and I will speak more about during our call today.

Speaker #3: We recognize there is more work to be done, and we have been course-correcting on a number of fronts. But we are encouraged by the guest response to our recent new product drops and activations.

Speaker #3: I'm grateful to our teams across the entire organization who remain committed to delivering products and experiences our guests love. Together, we are taking the right steps that will allow us to realize the full potential of lululemon.

Speaker #3: Before I speak to our action plan, I would like to call attention to today's announcement welcoming Chip Berg to our board of directors. As you likely know, Chip Berg is the former longtime president and CEO of the iconic brand Levi Strauss.

Meghan Frank: Before I speak to our action plan, I would like to call attention to today's announcement welcoming Chip Bergh to our board of directors. As you likely know, Chip Bergh is the former longtime President and CEO of the iconic brand Levi Strauss. He's a seasoned public company executive who brings deep retail and brand expertise, and he has extensive experience guiding successful transformations and driving value creation at global category defining companies. His appointment as a director comes after a comprehensive search by the board and is part of the board's thoughtful, ongoing refreshment process that has brought five new directors to the board over the last five years. I'd also like to acknowledge David Mussafer, one of our longtime directors, who has informed the board that he won't be standing for re-election. We are grateful for David's many contributions to lululemon over the years.

Speaker #3: He's a seasoned public company executive who brings deep retail and brand expertise, and he has extensive experience guiding successful transformations and driving value creation at global category-defining companies.

Speaker #3: His appointment as a director comes after a comprehensive search by the Board and is part of the Board's thoughtful, ongoing refreshment process that has brought five new directors to the Board over the last five years.

Speaker #3: I'd also like to acknowledge David Mustafer, one of our longtime directors, who was informed the board that he won't be standing for reelection. We are grateful for David's many contributions to lululemon over the years.

Speaker #3: And with respect to the CEO search, I can share that our board is running a robust search process, and they've been meeting with highly qualified candidates.

Meghan Frank: With respect to the CEO search, I can share that our board is running a robust search process, and they've been meeting with highly qualified candidates. The process is moving forward, and we will provide an update on this topic at the appropriate time. I'll now dive into three components of our action plan, product creation, product activation, and enterprise enablement. During Q4, Andre and I dove deeper into each pillar of our plan and have been working with the teams across the organization to ensure we enter 2026 moving with focus and speed. We've been course correcting where needed to restore and protect our brand health over time.

Speaker #3: The process is moving forward, and we will provide an update on this topic at the appropriate time. I'll now dive into three components of our action plan.

Speaker #3: Product creation, product activation, and enterprise enablement. During the fourth quarter, Andre and I dove deeper into each pillar of our plan and have been working with teams across the organization to ensure we enter 2026 moving with focus and speed.

Speaker #3: We've been course-correcting where needed to restore and protect our brand health over time. A top priority for the management team, as we enter the year, is returning to full-price sales growth in North America.

Meghan Frank: A top priority for the management team as we enter the year is returning to full price sales growth in North America through a series of steps that include the inflection of product newness and reducing the level of markdowns, SKU reduction, and rebalancing the inventory levels. This approach will reinforce our premium positioning that has long set lululemon apart from others, while also protecting operating margin. Let's click down into product creation. Our priorities here are raising the bar on product design, delivering a consistent pulse of innovation, improving our speed to market, and ensuring a relentless focus on product quality. Hopefully, you've been in our stores and visited our e-commerce sites and have seen some of our new innovations. I will take a moment to highlight a few of these for you, including Unrestricted Power, our newest iteration of ShowZero, and Thermozone.

Speaker #3: Through a series of steps that include the inflection of product newness and reducing the level of markdowns, SKU reduction, and the rebalancing of inventory levels.

Speaker #3: This approach will reinforce our premium positioning that has long set lululemon apart from others. While also protecting operating margin. So let's click down into product creation.

Speaker #3: Our priorities here are raising the bar on product design, delivering a consistent pulse of innovation, improving our speed to market, and ensuring a relentless focus on product quality.

Speaker #3: Hopefully, you’ve been in our stores and visited our e-commerce sites and have seen some of our new innovations. I will take a moment to highlight a few of these for you.

Speaker #3: Including Unrestricted Power, our newest iteration of Show Zero, and Thermo Zen. Unrestricted Power is a new train collection for women and men. It is constructed from PowerLoo, our newest technical fabric innovation, which uses our highest filament yarn count and offers a remarkably soft feel, while also providing incredible stretch and support.

Meghan Frank: Unrestricted Power is a new training collection for women and men. It is constructed from PowerLu, our newest technical fabric innovation, which uses our highest filament yarn count and offers a remarkably soft feel while also providing incredible stretch and support. Guests have responded positively since the launch, and we look forward to an exciting future for this new franchise. Next, we recently announced an updated version of our ShowZero no-show sweat technology meant for high sweat activities. This newest iteration of ShowZero was developed in collaboration with professional tennis player and lululemon ambassador Frances Tiafoe and debuted at the BNP Paribas Open at Indian Wells earlier this month. The latest technology conceals sweat while also remaining incredibly lightweight and breathable. We plan to introduce new ShowZero products to guests later this year as we continue to scale the platform across activities and categories.

Speaker #3: Guests have responded positively since the launch, and we look forward to an exciting future for this new franchise. Next, we recently announced an updated version of our Show Zero, No Show Sweat technology.

Speaker #3: Meant for high-sweat activities, this newest iteration of Show Zero was developed in collaboration with professional tennis player and lululemon ambassador, Francis Tiafoe, and debuted at the BNP Paribas Open at Indian Wells earlier this month.

Speaker #3: The latest technology conceals sweat, while also remaining incredibly lightweight and breathable. We plan to introduce new Show Zero products to guests later this year, as we continue to scale the platform across activities and categories.

Speaker #3: And I also want to mention Thermo Zen, our newest collection of insulated jackets and vests. These products offer warmth, water and wind resistance, and superior softness, and are a great example of how we are leveraging our considerable expertise in developing technical apparel across our lifestyle and casual offerings.

Meghan Frank: I also wanna mention Thermozone, our newest collection of insulated jackets and vests. These products offer warmth, water, and wind resistance with superior softness and are a great example of how we are leveraging our considerable expertise in developing technical apparel across our lifestyle and casual offerings. These are just some of the innovations that our team has been developing, and we are encouraged by the response from guests to these offerings. When looking at our overall product assortment, you'll see it continue to evolve based on the strategic vision of our creative team. A few specific examples of what you can expect going forward include updates on some of our key lounge and lifestyle franchises, fewer logos, a more focused and coordinated color palette, and a more edited assortment of our smaller accessories. This enables us to present a more refined, uniquely lululemon product assortment.

Speaker #3: These are just some of the innovations that our team has been developing. And we are encouraged by the response from guests to these offerings.

Speaker #3: When looking at our overall product assortment, you'll see it continue to evolve based on the strategic vision of our creative team. A few specific examples of what you can expect going forward include updates on some of our key lounge and lifestyle franchises, fewer logos, a more focused and coordinated color palette, and a more edited assortment of our smaller accessories.

Speaker #3: This enables us to present a more refined, uniquely lululemon product assortment. As we introduce new and evolved product, we also recognize the importance of taking steps to further enhance and protect our product quality.

Meghan Frank: As we introduce new and evolved product, we also recognize the importance of taking steps to further enhance and protect our product quality. I've been spending time with our supply chain team to ensure that as we shorten our go-to-market timeline, we do not sacrifice on quality. Maintaining the highest possible quality standards remains paramount for me and all of us at lululemon. Shifting in product activation. It is incredibly important that we ramp up our efforts to further engage existing guests, bring new guests into the brand, and ensure all guests are made aware of our latest styles and innovations. Let me highlight two of our most recent activations for you, which occurred in Q1. The first is Studio Yet. This was a three-week pop-up high-performance training space in Los Angeles, where we offered a variety of fitness classes taught by world-renowned trainers and coaches.

Speaker #3: I've been spending time with our supply chain team to ensure that as we shorten our go-to-market timeline, we do not sacrifice on quality. Maintaining the highest possible quality standards remains paramount for me and all of us at lululemon.

Speaker #3: Shifting in product activation. It is incredibly important that we ramp up our efforts to further engage existing guests, bring new guests into the brand, and ensure all guests are made aware of our latest styles and innovations.

Speaker #3: Let me highlight two of our most recent activations for you, which occurred in the first quarter. The first is Studio Yet. This was a three-week pop-up, high-performance training space in Los Angeles, where we offered a variety of fitness classes taught by world-renowned trainers and coaches.

Speaker #3: The studio was a physical manifestation of our global Yet campaign, which focused on the relationship between going after big goals and the daily work needed to achieve them.

Meghan Frank: The studio was a physical manifestation of our global Yet campaign, which focused on the relationship between going after big goals and the daily work needed to achieve them. Guest response to Studio Yet was fantastic. With all classes selling out, significant media pickup across mainstream and social channels. It, along with the community events we hosted in conjunction with the LA Marathon, provided a halo effect and sales lift to our stores in the Los Angeles area. I'll also highlight the success over the past few weeks of our sponsorship of the BNP Paribas Open tennis tournament in Southern California, one of the most popular tournaments for players and fans.

Speaker #3: Guest response to Studio Yet was fantastic. With all classes selling out, significant media pickup across mainstream and social channels, and it along with the community events we hosted in conjunction with the LA Marathon, provided a halo effect and sales lift to our stores in the Los Angeles area.

Speaker #3: And I'll also highlight the success over the past few weeks of our sponsorship of the BNP Paribas Open tennis tournament in Southern California, one of the most popular tournaments for players and fans.

Speaker #3: This is the first year of our three-year sponsorship, and the long lines and response to our pop-up store were approximately two-thirds of the visitors were new to lululemon, shows the significant potential for lululemon within the tennis community.

Meghan Frank: This is the first year of our three-year sponsorship, and the long lines in response to our pop-up store, where approximately two-thirds of the visitors were new to lululemon, shows the significant potential for lululemon within the tennis community. These events demonstrate that when we engage with our guests through our unique activations, we see a tangible response, and this continues to reinforce the opportunity for lululemon going forward. When looking at our approach to integrated marketing, our plans continue to include more product-focused campaigns across social channels, which will leverage lululemon ambassadors and other influencers to help ensure our guests are aware of new styles, innovations, and updates we're bringing into our assortment. Next, I'll turn to enterprise enablement, which includes our efforts to create efficiencies and manage costs across the company.

Speaker #3: These events demonstrate that when we engage with our guests through our unique activations, we see a tangible response. And this continues to reinforce the opportunity for lululemon going forward.

Speaker #3: When looking at our approach to integrated marketing, our plans continue to include more product-focused campaigns across social channels, which will leverage lululemon ambassadors and other influencers to help ensure our guests are aware of new styles innovations and updates we're bringing into our assortments.

Speaker #3: Next, I'll turn to enterprise enablement, which includes our efforts to create efficiencies and manage costs across the company. While we have always been prudent with regard to expenses, we have been particularly vigilant over the last two years as sales trends in the US have faced headwinds and tariff policy has added pressure.

Meghan Frank: While we have always been prudent with regard to expenses, we have been particularly vigilant over the last two years as sales trends in the US have faced headwinds and tariff policy has added pressure. We are continuing with this vigilance into 2026, and we are targeting meaningful savings as we simplify our operations and focus on scaling more effectively while continuing to invest in key growth initiatives. Key work streams are increasing efficiencies across inventory management, supply chain, and non-merchandise procurement, and reducing complexity while capitalizing on automation and AI opportunities. We know we must improve our performance in North America while continuing our momentum internationally. We have already taken decisive actions to position the business for sustainable growth. Looking forward, we have clear priorities and are moving with focus, speed, and determination as we implement the strategies across our action plan.

Speaker #3: We are continuing with this vigilance into 2026. And we are targeting meaningful savings as we simplify our operations and focus on scaling more effectively while continuing to invest in key growth initiatives.

Speaker #3: Key work streams are increasing efficiencies across inventory management, supply chain, and non-merchandise procurement, and reducing complexity while capitalizing on automation and AI opportunities. We know we must improve our performance in North America while continuing our momentum internationally.

Speaker #3: We have already taken decisive actions to position the business for sustainable growth. Looking forward, we have clear priorities and are moving with focus, speed, and determination.

Speaker #3: As we implement the strategies across our action plan, you can really feel the energy across the organization about the path forward. And the team is excited about the opportunity ahead of us.

Meghan Frank: You can really feel the energy across the organization about the path forward, and the team is excited about the opportunity ahead of us. I'll now turn the call over to André.

Speaker #3: I'll now turn the call over to Andre.

Speaker #2: Thank you, Meghan. Like Meghan, I'm pleased to be here with you all. In my role overseeing our selling challenge across all regions, I have the opportunity to spend considerable time in our stores meeting with our leaders and educators and hearing from our guests.

André Maestrini: Thank you, Meaghan. Like Meaghan, I'm pleased to be here with you all. In my role overseeing our selling channels across all regions, I have the opportunity to spend considerable time in our stores, meeting with our leaders and educators, and hearing from our guests. I'm excited to share the highlights from our markets across the globe. Touching first on North America, we are actively making the changes needed to increase newness, enhance the guest experience in stores and online, and improve our performance. We are building from a position of strength as we remain the number one brand for women's activewear in the US. New guest acquisition, retention, engagement, and key brand relevance metrics will all remain solid in 2025. Let me speak to three of the strategies we are implementing to unlock growth in the region.

Speaker #2: So, I'm excited to share the highlights from our markets across the globe. Touching first on North America: we are actively making the changes needed to increase newness, enhance the guest experience in stores and online, and improve our performance.

Speaker #2: We are building from a position of strength as we remain the number one brand for women's activewear in the U.S. New guest acquisition, retention, engagement, and key brand relevance metrics all remain solid in 2025.

Speaker #2: So let me speak to three of the strategies we are implementing to unlock growth in the region. First, as Meghan mentioned, we are focused on the growth of our full-price business.

André Maestrini: First, as Meghan mentioned, we are focused on the growth of our full price business. Looking at 2026, a primary goal in North America is returning the business to healthier levels of full price sales after seeing a higher markdown penetration in 2025. We are already seeing better full price sell-through in Q1 relative to Q4, and we are targeting further improvement as we move through the year, driven by increased product newness, innovation, and operating discipline. Second, we're enhancing the guest experience, both in store and online. We recognize the importance of our store and e-commerce sites as guest touchpoints, and we are evolving the experience to better reflect the premium positioning of lululemon brand. In stores, our localization and curation enhancements continue.

Speaker #2: Looking ahead to 2026, a primary goal in North America is returning the business to healthier levels of full-price sales, after seeing a higher markdown penetration in 2025.

Speaker #2: We are already seeing better full-price sales through in Q1 relative to Q4. And we are targeting further improvement as we move through the year, driven by increased product newness, innovation, and operating discipline.

Speaker #2: Second, we're enhancing the guest experience—both in-store and online. We recognize the importance of our store and e-commerce sites as guest touchpoints, and we are evolving the experience to better reflect the premium positioning of the lululemon brand.

Speaker #2: In stores, our localization and curation enhancements continue. Our new design playbook features an elevated presentation with less density of product to better showcase our new styles and innovations.

André Maestrini: Our new designs playbook features an elevated presentation with less density of product to better showcase our new styles and innovations and to make the stores easier for guests to navigate and shop. We are also sharpening our focus on activity-based merchandising by offering clear destinations for our core activities, including run, train, and yoga, Pilates within the store. These destinations allow for better storytelling and improve the shopping experience for guests. Our new store in Soho reflects these enhancements, and we've been very happy with the guest response to these changes there and at other key locations. We will be rolling out these updates to additional doors in North America throughout 2026. Online, building on the new redesign of the site, we will continue to improve the guest journey with enhancements coming to our product display pages, checkout, and overall storytelling.

Speaker #2: And to make the stores easier for guests to navigate and shop, we're also sharpening our focus on activity-based merchandising by offering clear destinations for our core activities, including run, train, and yoga pilates within the store.

Speaker #2: These destinations allow for better storytelling and improve the shopping experience for guests. Our new store in Seoul reflects these enhancements, and we've been very happy with the guest response to these changes there and at other key locations.

Speaker #2: We will be rolling out these updates to additional doors in North America through 2026. And online, building on the new redesign of the site, we will continue to improve the guest journey with enhancements coming to our product display pages, checkout, and overall storytelling.

Speaker #2: And third, we are increasing new style penetration across our assortment. Meghan already spoke to our product creation pillar, so we'll just add that in North America, with our new spring merchandise that is already hitting our stores and website, we have increased our new style penetration to approximately 35%.

André Maestrini: Third, we are increasing new style penetration across our assortment. Meghan already spoke to our product creation pillar, so we'll just add that in North America, with our new spring merchandise that is already hitting our stores and website, we have increased our new style penetration to approximately 35%. We know that our guests are looking for new styles and product from us, and when we deliver them effectively, we see strong response. In addition to what Meghan mentioned, other examples of successful new styles include EasyFive and the Groove Wide-Leg. Let me shift to our international business where momentum remains strong. In China mainland, our guests responding well to our product assortment in Q4, with outerwear and lounge being standout categories. The strength in outerwear was driven by Wunder Puff, which we feature in a localized brand campaign.

Speaker #2: We know that our guests are looking for new styles and products from us. And when we deliver them effectively, we see strong response. In addition to what Meghan mentioned, other examples of successful new styles include Easy Five and the Groove White Leg.

Speaker #2: Let me shift to our international business where momentum remains strong. In China mainland, our guests responding well to our product assortment in Q4. Without aware, and lounge being standout categories.

Speaker #2: The strength in outerwear was driven by Wonderpuff, which we feature in a localized brand campaign. More recently, we celebrated Chinese New Year with a campaign featuring world-renowned cellist Yo-Yo Ma and offered guests a capsule collection comprised of some of our most iconic styles.

André Maestrini: More recently, we celebrated Chinese New Year with a campaign featuring world-renowned cellist Yo-Yo Ma, and offer guests the capsule collection comprised of some of our most iconic styles. This is an excellent example of how we continue to capitalize on locally relevant events to engage with guests in unique ways. In our rest of the world segment now, let me highlight South Korea, one of our fastest-growing markets. Our localized approach to guest engagement, including targeted celebrity endorsement, continues to resonate well, particularly among our younger guests. I would also highlight the strong response to our new store in Gangnam. This location showcases the newest expression of our brand, similar to what we introduced in Soho. It includes new design elements and detailing, and acts as a hub for guests within the local community.

Speaker #2: This is an excellent example of how we continue to capitalize on locally relevant events to engage with guests in unique ways. In our rest-of-the-world segment now, let me highlight South Korea, one of our fastest-growing markets.

Speaker #2: Our localized approach to guest engagement, including targeted celebrity endorsement, continues to resonate well, particularly among our younger guests. I would also highlight the strong response to our new store in Gangnam.

Speaker #2: This location showcases the newest expression of our brand, similar to what we introduced in Soho. It includes new design elements and detailing, and acts as a hub for guests within the local community.

Speaker #2: In Milan, we saw the lululemon brand on the global stage at the Olympics. As our partnership with the Canadian Olympic and Paralympic Committees continues, these games were our third as the official outfitter of Team Canada.

André Maestrini: In Milan, we saw the lululemon brand on the global stage at the Olympics as our partnership with the Canadian Olympic Committee and Canadian Paralympic Committee continue. These games were our third as the official outfitter of Team Canada, a natural fit for our brand, and help us acquire new guests by working with and outfitting elite athletes who perform at the highest level in their respective sports. To complete my around the world summary, I'll mention that with our franchise partner, the 100th lululemon store opened in EMEA in Warsaw, Poland earlier this month. This is an exciting milestone for the EMEA team and continues to demonstrate the long runway for growth within this region. The majority of stores in our international markets are company-operated, but we strategically leverage our franchise model where it makes sense.

Speaker #2: A natural fit for our brand and help us acquire new guests by working with and outfitting elite athletes who perform at the highest level in their respective sports.

Speaker #2: To complete my around-the-world summary, I'll mention that with our franchise partner, the 100th lululemon store opened in EMEA in Warsaw, Poland, earlier this month.

Speaker #2: This is an exciting milestone for the EMEA team and continues to demonstrate the long runway for growth within this region. The majority of stores in our international markets are company-operated, but we strategically leverage our franchise model where it makes sense. Poland is a franchise market for us.

André Maestrini: Poland is a franchise market for us, and in 2026, our plans call for new franchise markets in Greece, Austria, Hungary, Romania, as well as India. Before I turn the call back to Meaghan, I want to express my confidence in the opportunity for lululemon in every market around the world, and I want to thank our team across our stores, distribution centers, and corporate offices for your ongoing engagement with our guests and the tremendous enthusiasm you have for our brand. Meaghan, back to you.

Speaker #2: And in 2026, our plans call for new franchise markets in Greece, Austria, Hungary, Romania, as well as India. Before I turn the call back to Meghan, I want to express my confidence in the opportunity for lululemon in every market around the world.

Speaker #2: And I want to thank our team across our stores, distribution centers, and corporate offices for your ongoing engagement with our guests and the tremendous enthusiasm you have for our brand.

Speaker #2: Meghan, back to you.

Speaker #1: Thanks, Andre. I'll now turn to our Q4 financial review and guidance outlook. For Q4, total net revenue rose 1% to $3.6 billion. Excluding the 53rd week in Q4 of 2024, net revenue rose 6% or 4% on a constant currency increased 2%.

Meghan Frank: Thanks, André. I'll now turn to our Q4 financial review and guidance outlook. For Q4, total net revenue rose 1% to $3.6 billion. Excluding the 53rd week in Q4 of 2024, net revenue rose 6% or 4% on a constant currency basis, and comparable sales increased 2%. Within our regions and channels, excluding the 53rd week and in constant currency, results were as follows: North America revenue is flat, with comparable sales down 2%. By country, revenue increased 3% in Canada and was down 1% in the US. In China mainland, revenue increased 28%, with comparable sales increasing 26%. Results were stronger than anticipated despite two discrete calendar shifts, which negatively impacted Q4, including earlier 11.11 events on our third-party e-commerce platforms and a shift of Chinese New Year into Q1.

Speaker #1: Within our regions and channels, excluding the 53rd week and in constant currency, results were as follows. North America revenue is flat with comparable sales down 2%.

Speaker #1: By country, revenue increased 3% in Canada and was down 1% in the US. In China Mainland, revenue increased 28%, with comparable sales increasing 26%.

Speaker #1: Results were stronger than anticipated, despite two discrete calendar shifts which negatively impacted Q4, including earlier 11/11 events on our third-party e-commerce platforms, and the shift of Chinese New Year into Q1.

Speaker #1: Guests responded well to our product assortment, with particular strength in outerwear and lounge. And in the rest of the world, revenue grew by 12%, and comparable sales increased by 5%.

Meghan Frank: Guests responded well to our product assortment with particular strength in outerwear and lounge. In the rest of world, revenue grew by 12% and comparable sales increased by 5%. In our store channel, sales were down 1%. We entered the quarter with a total of 811 stores globally. Square footage increased 11% versus last year, driven by the addition of 44 net new lululemon stores since Q4 of 2024. During the quarter, we opened 15 net new stores and completed 7 optimizations. In our digital channel, revenues increased 9% and contributed $1.9 billion of top line. By category, men's revenue increased 3% versus last year, women's increased 7%, and accessories and others grew 4%.

Speaker #1: In our store channel, sales were down 1%. We entered the quarter with a total of $811 stores globally. Square footage increased 11% versus last year driven by the addition of 44 net new lululemon stores since Q4 of 2024.

Speaker #1: During the quarter, we opened 15 net new stores and completed seven optimizations. In our digital channel, revenues increased 9% and contributed $1.9 billion of top line.

Speaker #1: And by category, men's revenue increased 3% versus last year; women's increased 7%; and accessories and others grew 4%. Gross profit for the fourth quarter was $2 billion.

Meghan Frank: Gross profit for Q4 was $2 billion, or 54.9% of net revenue compared to 60.4% in Q4 2024. Our gross margin decreased 550 basis points relative to last year and was driven primarily by the following. A 560 basis points decline in overall product margin, driven predominantly by tariff impact and higher markdowns. Tariffs had a gross negative impact of 520 basis points in the quarter, offset by 110 basis points related to our enterprise efficiency initiative, while markdowns increased by 130 basis points. Deleveraged on fixed costs was 30 basis points, and foreign exchange had 40 basis points of favorable impact. Relative to our guidance for gross margin decline of approximately 580 basis points, the upside was driven primarily by a lower tariff impact and regional mix.

Speaker #1: For 54.9% of net revenue compared to 60.4% in Q4 2024. Our gross margin decreased 550 basis points relative to last year and was driven primarily by the following: a $560 basis point decline in overall product margin, driven predominantly by tariff impact and higher markdowns.

Speaker #1: Tariffs had a gross negative impact of 520 basis points in the quarter, offset by 110 basis points related to our enterprise efficiency initiatives. Meanwhile, markdowns increased by 130 basis points.

Speaker #1: D-leverage on fixed costs was 30 basis points, and foreign exchange had a 40 basis point favorable impact. Relative to our guidance for gross margin decline of approximately 580 basis points, the upside was driven primarily by a lower tariff impact.

Speaker #1: And regional mix. 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.

Meghan Frank: 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. SG&A expenses were approximately $1.2 billion or 32.5% of net revenue, compared to 31.5% of net revenue for the same period last year. The SG&A increase of 100 basis points was in line with our guidance and relates primarily to the negative impact of foreign exchange, fixed cost deleverage, and ongoing investments to build brand awareness. These were partially offset by our ongoing initiatives to prudently manage costs across the enterprise. Operating income for the quarter was approximately $812 million, or 22.3% of net revenue, compared to 28.9% of net revenue in Q4 2024.

Speaker #1: SG&A expenses were approximately $1.2 billion, or 32.5% of net revenue, compared to 31.5% of net revenue for the same period last year. The SG&A increase of 100 basis points was in line with our guidance and relates primarily to the negative impact of foreign exchange, fixed cost de-leverage, and ongoing investments to build brand awareness.

Speaker #1: These were partially offset by our ongoing initiatives to prudently manage costs across the enterprise. Operating income for the quarter was approximately $812 million, or 22.3% of net revenue, compared to 28.9% of net revenue in Q4 2024.

Speaker #1: Tax expense for the quarter was $226 million, or 27.8% of pre-tax earnings, compared to an effective tax rate of 29.2% a year ago. The decrease in the effective tax rate relates primarily to a discrete tax benefit realized in the quarter and foreign exchange.

Meghan Frank: Tax expense for the quarter was $226 million, or 27.8% of pre-tax earnings, compared to an effective tax rate of 29.2% a year ago. The decrease in the effective tax rate relates primarily to a discrete tax benefit realized in the quarter and foreign exchange. The lower tax rate relative to our guidance contributed $0.15 to EPS. Net income for the quarter is $587 million, or $5.01 per diluted share, compared to earnings per diluted share of $6.14 for Q4 2024. Capital expenditures were approximately $183 million for the quarter, compared to approximately $235 million in Q4 last year.

Speaker #1: The lower tax rate relative to our guidance contributed $0.15 to EPS. Net income for the quarter was $587 million, or $5.01 per diluted share, compared to earnings per diluted share of $6.14 for the fourth quarter of 2024.

Speaker #1: Capital expenditures were approximately $183 million for the quarter, compared to approximately $235 million in the fourth quarter last year. Q4 spend relates primarily to investments to support business growth, including our investments in distribution centers, store capital for new locations, relocations and renovations, and technology investments.

Meghan Frank: Q4 spend relates primarily to investments that support business growth, including our investments in distribution centers, store capital for new locations, relocations, and renovations, and technology investments. Turning to our balance sheet highlights. We ended the quarter with $1.8 billion in cash and cash equivalents and nearly $600 million of available capacity under our revolving credit facility. Inventory at the end of Q4 is $1.7 billion, an increase of 18% on a dollar basis. On a unit basis, inventory increased approximately 6%, below our guidance for an increase in the high single digits. The difference between dollar inventory growth and unit inventory growth relates predominantly to higher tariff rates relative to last year, and foreign exchange. We're pleased with the composition of our inventories as we enter the spring season, as it is more reflective of our go-forward vision for the brand.

Speaker #1: Turning to our balance sheet highlights. We ended the quarter with $1.8 billion in cash and cash equivalents, and nearly $600 million of available capacity under our revolving credit facility.

Speaker #1: Inventory at the end of Q4 was $1.7 billion. An increase of 18% on a dollar basis. On a unit basis, inventory increased approximately 6%, below our guidance for an increase in the high single digits.

Speaker #1: The difference between dollar inventory growth and unit inventory growth relates predominantly to higher tariff rates relative to last year and foreign exchange. We were pleased with the composition of our inventory as we entered the spring season, as it is more reflective of our go-forward vision for the brand.

Speaker #1: During the quarter, we repurchased approximately 1.4 million shares at an average price of $188. For the full year, we repurchased $1.2 billion of stock.

Meghan Frank: During the quarter, we repurchased approximately 1.4 million shares at an average price of $188. For the full year, we've repurchased $1.2 billion of stock. Let me now shift to our guidance outlook for 2026. As I mentioned, we are executing against our action plan, with particular emphasis on driving healthier full price sales in North America. We're already seeing green shoots related to our new product launches and our recent brand activations. I want to also acknowledge that an improvement in overall trends in North America will likely progress over the course of the year and into 2027 as we return to a healthier baseline of full price sales. Let me also mention tariffs. For reference, in 2025, gross tariff costs were $275 million.

Speaker #1: Let me now shift to our guidance outlook for 2026. As I mentioned, we are executing against our action plan, with particular emphasis on driving healthier full-price sales in North America.

Speaker #1: We are already seeing green shoots related to our new product launches and our recent brand activations. But I want to also acknowledge that an improvement in overall trends in North America will likely progress over the course of the year and into 2027.

Speaker #1: As we return to a healthier baseline of full-price sales. Let me also mention tariffs. For reference, in 2025, gross tariff costs were $275 million.

Speaker #1: We were able to offset approximately $62 million of this expense through our mitigation strategies, which was better than our initial expectations. Looking to 2026, we anticipate a gross tariff impact of approximately $380 million, with offsets from our enterprise efficiency initiatives of approximately $160 million within gross margin.

Meghan Frank: We were able to offset approximately $62 million of this expense through our mitigation strategies, which was better than our initial expectations. Looking to 2026, we anticipate gross tariff impact of approximately $380 million, with offsets from our enterprise efficiency initiatives of approximately $160 million within gross margin. Turning to our full year 2026 guidance outlook. We expect revenue to be in the range of $11.35 to 11.5 billion, representing growth of 2% to 4% relative to 2025. By region, we expect revenue in North America to be down 1% to 3%, with the US down 1% to 3%. Baked into our total revenue guidance for North America is an improvement in full price sales.

Speaker #1: Turning to our full year 2026 guidance outlook, we expect revenue to be in the range of $11.35 to $11.5 billion, representing growth of 2 to 4 percent relative to 2025.

Speaker #1: By region, we expect revenue in North America to be down 1 to 3 percent, with the US down 1 to 3 percent. Baked into our total revenue guidance for North America is an improvement in full-price sales.

Speaker #1: We are already seeing better full-price selling relative to Q4, and we'd expect positive year-over-year growth in full price to begin in Q2 and continue into the second half driven by the rollout of new styles and innovations and core updates over the course of the year.

Meghan Frank: We are already seeing better full price selling relative to Q4, and we'd expect positive year-over-year growth in full price to begin in Q2 and continue into the second half, driven by the rollout of new styles, innovations, and core updates over the course of the year. We expect revenue in China mainland to be up approximately 20%, which takes into account our outperformance in 2025. Trends remain strong in Q1, and we're expecting a revenue increase of 25 to 30%, which includes a modest lift from the shift of Chinese New Year into the quarter. In rest of world, we expect revenue to increase in the mid-teens. Globally, we expect to open approximately 40 to 45 net new company-operated stores in 2026 and complete approximately 35 optimizations. This will contribute to overall square footage growth in the low double digits.

Speaker #1: We expect revenue in China mainland to be up approximately 20%. Which takes into account our outperformance in 2025. Trends remain strong in Q1, and we're expecting a revenue increase of 25 to 30 percent, which includes a modest lift from the shift of Chinese New Year into the quarter.

Speaker #1: And in rest of worlds, we expect revenue to increase in the mid-teens. Globally, we expect to open approximately 40 to 45 net new company-operated stores in 2026 and complete approximately 35 optimizations.

Speaker #1: This will contribute to overall square footage growth in the low double digits. Our new store openings in 2026 will include approximately 15 stores in North America, including 8 in Mexico, and 25 to 30 in our international markets, with a majority of these planned for China.

Meghan Frank: Our new store openings in 2026 will include approximately 15 stores in North America, including 8 in Mexico and 25 to 30 in our international markets, with the majority of these planned for China. While we are taking a disciplined approach to capital spending, we continue to see good returns from new store openings and store expansions as these strategies contribute to an improved shopping experience for existing guests, new guest acquisition, building brand awareness, and community engagement. For the full year, we expect gross margin to decrease approximately 120 basis points relative to last year, driven predominantly by deleverage on fixed costs and ongoing investment in new store openings, optimizations, and our distribution center network.

Speaker #1: While we are taking a disciplined approach to capital spending, we continue to see good returns from new store openings and store expansions, as these strategies contribute to an improved shopping experience for existing guests, new guest acquisition, building brand awareness, and community engagement.

Speaker #1: For the full year, we expect gross margin to decrease approximately 120 basis points relative to last year, driven predominantly by de-leverage on fixed costs and ongoing investment in new store openings, optimizations, and our distribution center network.

Speaker #1: We expect markdowns for the full year to improve modestly, and tariffs to have a gross impact of 90 basis points, of which we expect to be able to offset almost all of it.

Meghan Frank: We expect markdowns for the full year to improve modestly and tariffs to have a gross impact of 90 basis points, of which we expect to be able to offset almost all of it. Turning now to SG&A for the full year. While we intend to realize significant savings related to the enterprise enablement pillar of our action plan, we expect deleverage of approximately 130 basis points versus 2025 as we continue to strategically invest in our business to support future growth. These investments include market expansion, improving the guest experience by enhancing our omni capabilities, and growing brand awareness.

Speaker #1: Turning now to SG&A for the full year. While we intend to realize significant savings related to the enterprise enablement pillar of our action plan, we expect de-leverage of approximately 130 basis points versus 2025, as we continue to strategically invest in our business to support future growth.

Speaker #1: These investments include market expansion, improving the guest experience by enhancing our omni-capabilities, and growing brand awareness. We are absorbing additional costs relative to last year as we layer back in certain expenses including incentive comp, store labor hours, and we have one-time costs associated with the expected proxy contest this year.

Meghan Frank: We are observing additional costs relative to last year as we layer back on certain expenses, including incentive comp, store labor hours, and we have one-time costs associated with the expected proxy contest this year. When looking at operating margin for the full year 2026, we expect it to decrease by approximately 250 basis points versus last year. For the full year 2026, we expect our effective tax rate to be approximately 30%, an increase from the 2025 effective tax rate of 29.5%. For the fiscal year 2026, we expect diluted earnings per share in the range of $12.10 to $12.30 versus EPS of $13.26 in 2025. Our EPS guidance excludes the impact of any future share repurchases.

Speaker #1: When looking at operating margin for the full year 2026, we expect it to decrease by approximately 250 basis points versus last year. For the full year 2026, we expect our effective tax rate to be approximately 30%.

Speaker #1: An increase from the 2025 effective tax rate of 29.5%. For the fiscal year 2026, we expect diluted earnings per share in the range of $12.10 to $12.30.

Speaker #1: Versus EPS of $13.26 in 2025. Our EPS guidance excludes the impact of any future share repurchases. When looking at inventory, we expect dollar growth to be in the mid- to high-single-digit range through 2026.

Meghan Frank: When looking at inventory, we expect dollar growth to be in the mid- to high single-digit range through 2026, with units flat to down slightly. With leaner inventories and improved chase capabilities, we are in a better position to read and react to guest demand and fuel momentum and stronger performing styles. We continue to have $1.2 billion remaining on our share repurchase program, which we will continue to utilize. Share repurchases remain our preferred method of returning cash to shareholders, and our repurchase levels in 2026 will likely be similar to those in 2025. Finally, for the full year, we expect capital expenditures to be approximately $725 to 745 million. The spend reflects investments to support business growth, including capital for new locations, relocations, and renovations, DC and technology investments.

Speaker #1: With units flat to down slightly, with leaner inventories and improved Chase capabilities, we are in a better position to read and react to guest demand and fuel momentum in stronger performing styles.

Speaker #1: We continue to have $1.2 billion remaining on our share repurchase program, which we will continue to utilize. Share repurchases remain our preferred method of returning cash to shareholders, and our repurchase levels in 2026 will likely be similar to those in 2025.

Speaker #1: Finally, for the full year, we expect capital expenditures to be approximately $725 to $745 million. The spend reflects investments to support business growth including capital for new locations, relocations and renovations, DC and technology investments.

Speaker #1: Our range of $725 to $745 million is approximately 6% of revenue. Shifting now to Q1, we expect revenue in the range of $2.4 to $2.43 billion.

Meghan Frank: A range of $725 to 745 million is approximately 6% of revenue. Shifting now to Q1. We expect revenue in the range of $2.4 to 2.43 billion, representing year-over-year growth of 1% to 3%. We expect to open approximately 6 net new company-operated stores and complete 6 optimizations. By region, we expect North America to decline in the mid-single digits, with the US also in that range and Canada tracking slightly lower. We expect China Mainland to increase 25% to 30% and Rest of World to increase in the mid-teens. When looking at North America, as I mentioned, we are seeing good response to our new product launches and activations and are experiencing better full price selling, but expect the inflection in total revenue to actualize over the course of the year.

Speaker #1: Representing one-year growth of 1% to 3%. We expect to open approximately six net new company-operated stores and complete six optimizations. By region, we expect North America to decline in the mid-single digits, with the U.S. also in that range, and Canada tracking slightly lower.

Speaker #1: We expect China mainland to increase 25 to 30 percent and rest of world to increase in the mid-teens. When looking at North America as I mentioned, we are seeing good response to our new product launches and activations, and our experiencing better full-price selling.

Speaker #1: But expect the inflection in total revenue to actualize over the course of the year. We expect gross margin in Q1 to decrease by approximately 380 basis points relative to Q1 of 2025.

Meghan Frank: We expect gross margin in Q1 to decrease by approximately 380 basis points relative to Q1 of 2025. This decrease will be driven predominantly by higher tariff costs, ongoing investments in store openings, and optimizations in our distribution network. We expect increased tariffs to have a gross negative impact of approximately 290 basis points, with offsets of approximately 110 basis points. We expect markdowns to be up approximately 30 basis points versus last year. While full price selling has improved meaningfully relative to Q4, we expect markdowns to begin to decrease versus prior year beginning in the second half. In Q1, we expect our SG&A rate to deleverage by 330 basis points relative to Q1 2025.

Speaker #1: This decrease will be driven predominantly by higher tariff costs, ongoing investments in store openings, and optimizations, and our distribution network. We expect increased tariffs to have a gross negative impact of approximately 290 basis points with offsets of approximately 110 basis points.

Speaker #1: We expect markdowns to be up approximately 30 basis points versus last year. While full-price selling has improved Of meaningfully relative to Q4 . We expect markdowns to begin to decrease versus prior year beginning in the second half .

Speaker #1: In Q1 , we expect our rate to deleverage by 330 basis points relative to Q1 2025 . This increase will be driven in part by timing related to brand activations , including the BNP Paribas Open .

Meghan Frank: This increase will be driven in part by timing related to brand activation, including the BNP Paribas Open, the Milano Cortina 2026, and Studio Yet, as we have more events planned in the first half of the year versus the second half. In addition, there are discrete costs related to our proxy contest and expenses that we reduced last year but are layering back into this year related to store labor hours and incentive compensation, and we will continue to invest strategically in our growth initiatives and IT infrastructure. When looking at operating margin for Q1, we expect it to be 710 basis points lower than 2025 for the reasons I just mentioned.

Speaker #1: The Milan Olympics and studio . Yet , as we have more events planned in the first half of the year versus the second half , in addition , there are discrete costs related to our proxy contest and expenses that we reduced last year but are layering back into this year related to store labor hours and incentive compensation , and we will continue to invest strategically in our growth initiatives .

Speaker #1: And IT infrastructure . When looking at operating margin for Q1 , we expect it to be 710 basis points lower than 2025 for the reasons I just mentioned Turning to EPS , we expect earnings per share in the first quarter to be in the range of $1.63 to $1.68 , versus EPS of $2.60 a year ago We expect our effective tax rate to in Q1 to be approximately 31.5% .

Meghan Frank: Turning to EPS, we expect earnings per share in Q1 to be in the range of $1.63 to 1.68 versus EPS of $2.60 a year ago. We expect our effective tax rate in Q1 to be approximately 31.5%. I wanna close today by saying that since André and I have stepped into our interim co-CEO roles, we've focused on engaging with our leaders and employees about the opportunities in front of us as we have worked to refine and implement initiatives that are part of our action plan. First and foremost, we are restoring the full price health of our brand, and we are already seeing improvement in Q1.

Speaker #1: I want to close today by saying that since Andre and I have stepped into our interim co-CEO roles, we've focused on engaging with our leaders and employees about the opportunities in front of us as we have worked to refine and implement initiatives that are part of our action plan.

Speaker #1: First and foremost . We are restoring the full price health of our brand , and we are already seeing improvement in Q1 . Other actions include testing a new design playbook and stores rolling out enhancements to our e-commerce sites , and working with the product teams to ensure that our design and merchandising choices emphasize athletic and technical apparel .

Meghan Frank: Other actions include testing a new design playbook in stores, rolling out enhancements to our e-commerce site, and working with the product teams to ensure that our design and merchandising choices emphasize athletic and technical apparel, with lifestyle playing an important but supporting role. There is a renewed energy and enthusiasm across the business, in particular where employees are seeing the product that is being introduced to guests and is in our pipeline. In fact, we've seen an increase in employee purchases as we introduce new innovations and product, which is an optimistic indicator that we're on the right path. André and I are encouraged by the progress we're seeing across the business, and we're inspired by the passion and commitment of our leaders and teams across the world. All this reinforces our confidence in what's ahead for us.

Speaker #1: With lifestyle playing an important but supporting role . There is a renewed energy and enthusiasm across the business . In particular , where employees are seeing the product that is being introduced to guests and is in our pipeline In fact , we've seen an increase in employee purchases as we introduced new innovations and product , which is an optimistic indicator that we're on the right path Andre and I are encouraged by the progress we're seeing across the business , and we're inspired by the passion and commitment of our leaders and teams across the world .

Speaker #1: All of this reinforces our confidence in what's ahead for us . We recognize that we'll take some time to see the benefits of these actions , but we are confident that these are the right moves to powerfully drive our brand forward in the near or mid and long term .

Meghan Frank: We recognize that it will take some time to see the benefits of these actions, but we are confident that these are the right moves to powerfully drive our brand forward in the near, mid, and long term. We will now take your questions.

Speaker #1: We will now take your questions.

Speaker #2: Thank you. We will now begin the question and answer session. Analysts who wish to join the question queue may press star then one on the telephone keypad.

Operator 2: Thank you. We will now begin the question and answer session. Analysts who wish to join the question queue may press star then one on the telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. The first question comes from Brooke Roach with Goldman Sachs. Please go ahead.

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

Speaker #2: You will hear a tone acknowledging your request . If you're using a speakerphone , please pick up your handset before pressing any keys .

Speaker #2: To withdraw your question , please press star then two . The first question comes from Brooke Roach with Goldman Sachs . Please go ahead .

Speaker #3: Good afternoon , and thank you for taking our question When do you think the product assortment will be appropriate to deliver a return to an inflection in North America , growth .

Brooke Roach: Good afternoon, and thank you for taking our question. When do you think the product assortment will be appropriate to deliver a return to an inflection in North America growth? How are you thinking about the headwind from the removal of markdowns throughout the year and the introduction of that new full price selling product throughout the year? Thank you.

Speaker #3: And how are you thinking about the headwind from the removal of markdowns throughout the year? And the introduction of that new full-price selling product throughout the year?

Speaker #3: Thank you

Meghan Frank: Thanks, Brooke. As we mentioned, we are focused on re-accelerating the full price health of our business. In Q1, we will see a meaningful inflection relative to Q4. We expect in Q2 that we will be approximately flat in full price trend in North America, and then flipping positive in the second half of the year. That's how the year progresses. In terms of markdowns, we are lowering that penetration. As we mentioned, we were up 130 basis points in Q4 and up 60 in the year in 2025. For 2026, we're expecting a modest improvement in markdowns, and for the full year, predominantly driven through the second half. We are expecting just a modest increase in Q1.

Speaker #1: Thanks , Brooke So as we mentioned , we are focused on accelerating the full price health of our business . So in Q1 , in Q1 , we will see a meaningful inflection relative to Q4 .

Speaker #1: We expect in Q2 that will be approximately flat in full price . Trend in North America . And then flipping positive in the second half of the year .

Speaker #1: So that's how the year progresses in terms of markdowns , we are lowering that penetration . So as we mentioned , we were up 130 basis points in Q4 and up 60 in the year .

Speaker #1: In 2025, for 2026, we're expecting a modest improvement in markdowns for the full year, predominantly driven through the second half.

Speaker #1: And we are expecting just a modest increase in Q1.

Brooke Roach: Just to clarify, are you seeing any improvement in your base business as you've put these new products into the assortment Q1 to date, or is the improvement largely driven by the new product launches?

Speaker #3: And just to clarify , are you seeing any improvement in your base business as you've put those new products into the into the assortment ?

Speaker #3: One Q to date , or is the improvement largely driven by the new product launches ?

Meghan Frank: Nope. We're definitely seeing improvement to date. We've seen a meaningful inflection in terms of full price coming out of Q4 and into Q1. You know, it will take us some time to inflect, and we think it will be sequential throughout the year, flipping positive, as I mentioned, in the second half. Seeing some really great green shoots, mentioned some of these in terms of some new innovations. We launched Unrestricted Power, ThermoZen, and ShowZero, which will be commercialized later this year. We also had an exciting run capsule that launched earlier this month, so we're building on that strength as we move throughout the quarter. It's still early, definitely seeing some positive indicators.

Speaker #1: Nope . We're definitely seeing improvement to date . So we've seen a meaningful inflection in terms of full price coming out of Q4 and into Q1 .

Speaker #1: You know , it will take us some time to inflect , and we think it will be sequential throughout the year . Flipping positive , as I mentioned in the second half , but seeing some really great green shoots mentioned some of these in terms of some new innovations , we launched unrestricted power , thermo Zen and Show Zero , which will be commercialized later this year .

Speaker #1: We also had an exciting Run Capsule that launched earlier this month. So we're building on that strength as we move throughout the quarter.

Speaker #1: It's still early, but definitely seeing some positive indicators also I would point to. We did see employee sales pick up as well over the last few weeks as we introduce new product.

Meghan Frank: Also would point to, we did see employee sales pick up, as well, over the last few weeks as we introduced new product.

Brooke Roach: Great. Thanks so much. I'll pass it on.

Speaker #3: Great . Thanks so much . I'll pass it on

Meghan Frank: Thanks, Brooke.

Speaker #1: Thanks , Brooke

Operator 2: The next question comes from Lorraine Hutchinson with Bank of America. Please go ahead.

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

Speaker #2: The next question comes from Lorraine Hutchinson with Bank of America . Please go ahead .

Lorraine Hutchinson: Thank you. Good afternoon. As you work to inflect the North America sales trajectory to positive, are you doing any reassessing of your marketing, either dollars spent or types of marketing outreach to try to really bring in a new customer and reignite your existing, or is it more status quo with the activation and grassroots styles?

Speaker #4: Thank you. Good afternoon. As you work to inflect the North America sales trajectory to positive, are you doing any reassessing of your marketing?

Speaker #4: Either dollar spent or types of marketing outreach to try to really bring in a new customer and reignite your existing . Or is it more status quo with the activation and grassroots styles

Meghan Frank: Thanks, Lorraine. I'd share, you know, I do think we're looking at our marketing strategy, really focusing on engaging the guest, ensuring that newness is front and center and visible. I think you'll see us shift more into utilizing brand appropriate influencers and ambassadors as we move throughout the year. We are really focused on our activations and engaging with our guests through those means. I would say, you know, you saw some evidence of that in Q1 in terms of us being very active, in, you know, I would say our activity activations, with the BNP Paribas Open, and Indian Wells with tennis, Milan Olympics. Really excited about the assortment that we showcase there and then also Studio Yet in LA.

Speaker #1: Thanks , Lorraine . I'd share . You know , I do think we're looking at our marketing strategy . So really focusing on engaging the guest , ensuring that newness is front and center and visible .

Speaker #1: I think you'll see us shift more into utilizing brand appropriate influencers and ambassadors as we move throughout the year . We are really focused on our activations and engaging with our guests through those means .

Speaker #1: So I would say , you know , we saw some evidence of that in Q1 in terms of us being very active in , you know , I would say our activity activations .

Speaker #1: So with the BNP Paribas Open in Indian Wells, with tennis, Milan Olympics—so we're really excited about the assortment that we showcased there.

Speaker #1: And then also studio yet in LA , we also had a Chinese New Year activation . This year . This quarter .

Meghan Frank: We also had a Chinese New Year activation this year, this quarter.

Lorraine Hutchinson: Thank you.

Speaker #4: Thank you

Operator 2: The next question comes from Adrienne Yih with Barclays. Please go ahead.

Operator: The next question comes from Adrienne Yih with Barclays. Please go ahead.

Speaker #2: The next question comes from Adrian Yee with Barclays . Please go ahead .

Adrienne Yih: Great. Thank you very much. A couple of questions. André, on the 35% newness, can you talk about kind of whether that is obviously styles which you mentioned or color choice and SKUs, and what products are you sunsetting to make room for the newness? Along those same lines, how does the reporting structure of who makes final decisions for quantity make, you know, what to chase, et cetera, within the merchandising organization? I know Elizabeth Binder reports into you, but just trying to figure out how this, the system is working in terms of that. My final question is how much of the CapEx is AI tech driven, like the tech stack to support AI, and how do you plan to use that, incorporate that into the business? Thank you so much.

Speaker #5: Great . Thank you very much . A couple of questions , Andre , on the 35% newness . Can you talk about kind of whether that is obviously a styles which you mentioned or color choice and SKUs and what products are you sunsetting to make room for the newness ?

Speaker #5: And then along those same lines, how does the reporting structure of who makes final decisions for quantity make you, you know, what to chase, etc.

Speaker #5: within the merchandising organization ? I know Elizabeth Binder reports into you , but just trying to figure out how this the system is working in terms of that .

Speaker #5: And then my final question is, how much of the CapEx is AI tech driven? Like the tech stack to support AI, and how do you plan to use that, incorporate that into the business?

Speaker #5: Thank you so much

Meghan Frank: Thanks, Adrienne. We are moving our newness penetration from 23% in 2025 to 35% in 2026. That is, I would say, new product never seen by the guests, is how I'd frame that. It's not just new color waves on existing products, it's truly new product. I would say in terms of sunsetting, we do have some SKU reduction as part of just being more pointed in our assortment, and making that newness also more visible in our store and e-commerce expressions. That is a process we're going through as we assort the line. Jonathan Cheung, who's our creative director, as well as Nikki Neuburger, our chief merchant, both report into me.

Speaker #1: Thanks , Andrea . So we are moving our newness , penetration from 23% in 2025 to 35% in 26 . And that is , I would say , new product never seen by the guests is how I'd frame that .

Speaker #1: So it's not just new colorways on existing products , it's truly new product . So I , I would , I would say in terms of sunsetting , we do have some skew reduction as part of just being more pointed in our assortment and making that newness also more visible in our , in our store and e-commerce expression .

Speaker #1: So that is a process we're going through as we assort the line . Jonathan Chung , who's our creative director , as well as Liz Binder , our chief merchant , both reporting to me .

Meghan Frank: We've been leaning in together, you know, as we make these shifts. In terms of CapEx, we do have some investments in the AI space, you know, shoring up our data and baseline so that we can move off of that. Really, I would say our AI initiatives are focused on guest facing, also enhancing our go-to-market calendar and supporting that speed aspect that we've discussed. I would say it's an exciting and important part of how we're going after that enterprise enablement strategy.

Speaker #1: And we've been leaning in together , you know , as we make these shifts . And then in terms of CapEx , we do have some investments in the AI space .

Speaker #1: You know , shoring up our data and baseline so that we can move off of that . Really , I would say our AI initiatives are focused on guest facing also enhancing our go to market calendar and supporting that speed aspect that we've discussed .

Speaker #1: So I would say it's an exciting and important part of how we're going after that enterprise enablement strategy .

Adrienne Yih: Great. Thank you very much. Very helpful. Best of luck.

Speaker #5: Great. Thank you very much. Very helpful. That's a lot.

Meghan Frank: Thanks.

Speaker #6: Thanks .

Operator 2: The next question comes from Laurent Vasilescu with BNP Paribas. Please go ahead.

Operator: The next question comes from Laurent Vasilescu with BNP Paribas. Please go ahead.

Speaker #2: The next question comes from Laurent Vasilescu with BNP Paribas . Please go ahead .

Laurent Vasilescu: Oh, good afternoon. Thank you very much for taking my question. Meghan, it was very helpful in terms of understanding the newness of 35%. For the audience, the North American full price realization, can you maybe just unpack a little bit better in terms of like, I think you mentioned 1-2 is better than 4-2, but in terms of percentages, where is it now versus couple years ago, and where do you want that to go back for 2026? Thank you very much.

Speaker #7: Oh, good afternoon. Thank you very much for taking my question, Meghan. It was very helpful in terms of understanding the newness from 35%.

Speaker #7: But for the audience , the North American full price realization , can you maybe just unpack that a little bit better in terms of like , I think you mentioned one Q is better than four .

Speaker #7: Q , but in terms of percentages , where where is it now versus a couple of years ago ? And where do you want that to go back for 2026 ?

Speaker #7: Thank you very much .

Meghan Frank: Yep. Thanks, Laurent. If we look at 2025, we did have a higher markdown penetration than we would have liked. It's, you know, illustrated by a 130 basis points increase in markdowns in Q4, and then 60 basis points for the year. We haven't broken out the penetrations in 2026, but I would share we expect to see a meaningful improvement in Q1. We're already starting to see that, but we are shifting from the lowest waterline in Q4. We did have 130 basis points higher markdowns. That points to having the most pressure on full price. It's the sequential improvement is meaningful, but it will still underindex relative to our total top line.

Speaker #6: Yep . Thanks , Laurent . Yeah .

Speaker #1: So if we look at 2025 , we did have a higher markdown penetration than we would have liked . So it's , you know , illustrated by 130 basis point increase in markdowns in Q4 .

Speaker #1: And then 60 basis points for the year . And we haven't broken out the penetrations in 26 , but I would share we expect to see a meaningful improvement in Q1 .

Speaker #1: We're already starting to see that, but we are shifting from the lowest water line in Q4. So we did have 130 basis points higher markdowns.

Speaker #1: So that points to having the most pressure on full price. So the sequential improvement is meaningful, but it will still under-index relative to our total top line.

Meghan Frank: We do anticipate it'll flip flat, around flat in Q2, and then the second half of the year would flip positive. We're really helping to enable this both through the newness curation, as well as SKU reduction, and then the way we've positioned inventory for the year. We have positioned units flat to slightly down. Really looking to read the trends on newness, and chase where that's possible. As we've mentioned before, we have developed some capabilities, enhanced capabilities in terms of our product team's ability to chase into what's working. We believe this sets us up well for returning to healthy full price sales penetration for the year and building off of that for the long term and in 2026 as the opportunity presents itself.

Speaker #1: We do anticipate it'll flip flat, around flat, in the second quarter. And then the second half of the year would flip positive.

Speaker #1: And we're really helping to enable this both through the newness curation as well as skew reduction . And then the way we've positioned inventory for the year .

Speaker #1: So we have positioned units flat to slightly down . So really looking to read the trends on newness and chase where that's possible .

Speaker #1: As we've mentioned before , we have developed some capabilities , enhanced capabilities in terms of our product team's ability to chase into what's working .

Speaker #1: So, we believe this sets us up well for returning to healthy, full-price sales penetration for the year and building off of that for the long term.

Speaker #1: And in '26, as the opportunity presents itself,

Laurent Vasilescu: Very helpful. I think you mentioned that square footage should grow low double digits. Just curious, you know, if whenever we find out about the new CEO and if that individual wants to take a fresh look at that commitment, can you maybe just unpack that a little bit more for the audience? How much of that is committed to for 2026? Just a quick question here on marketing. I think in your 10-K, it's 5.7% of sales. Where should that go for 2026? Thank you very much.

Speaker #7: Very helpful . And then I think you mentioned that square footage should grow low double digits . Just curious , you know , if whenever we find out about the new CEO and if that individual wants to take a fresh look at that , that that commitment , can you maybe just unpack that a little bit more for the audience ?

Speaker #7: How much of that is committed to for 2026 ? And then just a quick question here on marketing , I think in your 10-K , it's 5.7% of sales .

Speaker #7: Where should that go for 2026? Thank you very much.

André Maestrini: Yeah, on your question, Laurent, about stores. You know, we are taking a disciplined approach to capital spending and looking at our real estate project on a case-by-case basis. We continue to see good returns from new store openings and store expansions as these strategies contribute really to improve the shopping experience. For 2025, to give you a number, NSOs are returning at above 100% ROI across both North America and the international markets, representing a payback period of less than a year. We'll feel confident with that. Also the strategy of optimization of existing doors in key influential cities to bigger format with proven quality traffic is sound. You know, the productivity of our top larger stores is higher than the average of our fleet.

Speaker #8: Dylan , your question about stores , you know , we are taking a disciplined approach to capital spending and looking at our real estate projects on a case by case basis .

Speaker #8: We continue to see good returns from new store openings and store expansions, as this strategy contributes to improving the shopping experience. So for 2025, to give you a number, NSOs are returning at above 100% ROI across both North America and international markets.

Speaker #8: So representing a payback period of less than a year . So we'll feel confident with that . And also the strategy of optimization of existing doors in key influential cities to bigger format with proven quality traffic is sounded , you know , the productivity of our top larger stores is higher than the average of our fleet .

André Maestrini: That is one of the best in the industry with sales per sq ft over $1,400. Globally, to be precise, in 2026, our plan calls for approximately 40 to 45 net new openings, which yields square footage growth to the low double digits. With approximately 15 openings and international between 25 and 30 openings with the majority in mainland China. For the marketing spending?

Speaker #8: That is one of the best in the industry with sales per square foot over 1400 . So globally , up to be precise , in 26 , our plan calls for approximately 40 to 45 net new openings , which yields square footage growth to the low double digits .

Speaker #8: So with NAM, approximately 15 openings, and international, in between 25 to 30 openings, with the majority in mainland China. And for the marketing spending...

Meghan Frank: Yeah. I'd just add, Laurent, from a store perspective, it's really a store-by-store look that the team is doing, being really mindful of where we're opening, making sure it's relevant for the guest, you know, and we've got the right positioning in each market. You know, as André just mentioned, it's 15 stores in North America, the majority of which would be in Mexico. You know, we have just a small handful of new store openings and, you know, we are watching them closely. We would be largely committed through 2026 to our square footage expansion plans, but the team feels really confident in them. I'd say from a marketing perspective, our guidance assumes we're relatively flat from a rate of sales perspective in terms of marketing spend.

Speaker #1: Yeah . And I just add , Laurent from a store perspective , it's really a store by store look that the team is doing , being really mindful of where we're opening , making sure it's relevant for the guest , you know , and we've got the right positioning in each market .

Speaker #1: And , you know , as Andre just mentioned , it's 15 stores in North America . The majority of which would be in Mexico .

Speaker #1: So , you know , we have just a small handful of new store openings . And , you know , we are watching them closely .

Speaker #1: We would be largely committed through 26 to our square footage expansion plans . But the team feels really confident in them . I'd say from a marketing perspective , we are our guidance assumes we're relatively flat from a rate of sales perspective in terms of marketing spend .

Meghan Frank: I think what you'll see is we're shifting the composition of that spend a bit more towards these impactful guest activations we discussed, as well as utilizing brand appropriate influencers and ambassadors as we move throughout this year. I would say a little bit of a shift in strategy on the spend, same waterline, and we'll continue to monitor to the extent that you know it's working for us, we'll continue to push into it. Thanks.

Speaker #1: I think what you'll see is we're shifting the composition of that , spend a bit more towards these impactful guest activations . We discussed , as well as utilizing brand appropriate influencers and ambassadors as we move throughout this year .

Speaker #1: So I would say a little bit of a shift in strategy on the spend . Same water line , and we'll continue to monitor and to the extent that , you know , it's working for us , we'll continue to push into it .

Speaker #1: Thanks .

André Maestrini: Thank you.

Speaker #9: Thank you

Operator 2: The next question comes from Matthew Boss with J.P. Morgan. Please go ahead.

Operator: The next question comes from Matthew Boss with J.P. Morgan. Please go ahead.

Speaker #2: The next question comes from Matthew Boss with J.P. Please go ahead.

Matthew Boss: Great, thanks. Meghan, could you maybe speak to the bridge from 4% underlying revenue growth in Q4 to the 1% to 3% in Q1 and 2% to 4% for the year? Meaning maybe just if you could elaborate on the balance between the improvement in full price selling that you're citing relative to what's offsetting or constraining revenue growth as we think about the course of the year.

Speaker #10: Great . Thanks . So , Megan , could you maybe speak to the bridge from 4% underlying revenue growth in the fourth quarter to the 1 to 3% in the first quarter and 2 to 4 for the year , meaning maybe just if you could elaborate on the balance between the improvement in full price selling that you're citing relative to what's what's offsetting or constraining revenue growth .

Speaker #10: As we think about the course of the year?

Meghan Frank: Yep, absolutely. Q4, we're up 6%, excluding the 53rd week. We did guide to 1 to 3% for Q1 and then 2 to 4% for the full year. I would say it's really the ramp of full price. We had, I would say, the lowest waterline, as I mentioned in Q4, with markdown over penetrating. We had 130 basis points of pressure, you know, in the markdown line in Q4. We are improving that in Q1, but it will be still negative in Q1, flipping flat in Q2, and then accelerating in the second half of the year as we continue to build into it and then lap, I would say, the markdown performance that we had in the second half of 2026.

Speaker #1: Yep , absolutely So Q4 , we're up 6% excluding the 53rd week . We did guide to 1 to 3% for Q1 . And then 2 to 4% for the full year .

Speaker #1: I would say it's really the ramp of full price . So we had , I would say the lowest water line , as I mentioned in Q4 with markdown over penetrating , we had 130 basis points of pressure You know , in the markdown line in Q4 .

Speaker #1: So we are improving that in Q1 , but it will be still still negative in Q1 . Flipping flat in Q2 , and then accelerating in the second half of the year as we continue to build into it .

Speaker #1: And then lap, I would say the markdown performance that we had in the second half of '26.

Matthew Boss: Great. Then Meghan, just on the more than 200 basis points of operating margin contraction this year, how much of the decline do you see tied to more transitory items? What do you see as the revenue growth necessary to see operating margins return to expansion multi-year?

Speaker #10: Great . And then Megan , just just on the more than 200 basis points of operating margin contraction this year , how much of the decline do you see tied to more transitory items ?

Speaker #10: And what do you see as the revenue growth necessary to see operating margins return to expansion ? Multi-Year

Meghan Frank: Yeah. So we guided to 250 basis points decline. I would say the majority of that when you step back from it is add backs of incentive comp and labor that we reduced in 2025, and then also the proxy contest expenses. That's the majority of it as you step back. Obviously, we've got some headwinds and tariffs, but we're largely offsetting the year-over-year within the year. I do see this as the low waterline that we'll continue to build upon as we transition into 2027. So really looking at getting back to that healthy full price baseline. We're obviously having a little pressure on the fixed components of our PNL based on that revenue waterline of 2% to 4%.

Speaker #1: Yep . So we guided to 250 basis points decline . I would say the majority of that , when you step back from it , is add backs of incentive comp and labor that we reduced in 25 .

Speaker #1: And then also the proxy contest expenses . That's the majority of it . As you step back , obviously we've got some headwinds and tariffs , but we're largely offsetting the year over year within the year .

Speaker #1: I do see this as the as the low water line that we'll continue to build upon as we transition into 27 . So really looking at getting back to that healthy full price baseline , we're obviously having a little pressure on the fixed components of our PNL based on that revenue water line of 2 to 4% , we haven't put a fine point on the leverage aspect .

Meghan Frank: We haven't put a fine point on the leverage, aspect. You know, I think it'll depend on the trajectory of the business, and then there are some decisions that we can make in terms of investment levels. We'll definitely share more on that, but definitely expect it to improve from here.

Speaker #1: You know , I think it will depend on the trajectory of the business . And then there are some decisions that we can make in terms of investment levels .

Speaker #1: So, we'll definitely share more on that. But definitely expect it to improve from here.

Matthew Boss: Great. Best of luck.

Speaker #10: Great . Best of luck

Meghan Frank: Thank you.

Operator 2: The next question comes from Paul Lejuez with Citi Research. Please go ahead.

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

Speaker #1: Thank you .

Speaker #2: The next question comes from Paul Lazarus with Citi Research . Please go ahead . Hey , thanks guys . Lots of focus on the North America full price improvement .

Paul Lejuez: Hey, thanks, guys. Lots of focus on the North America full price improvement, but I'm curious if we should read that as you guys being happy with full price selling in the rest of the world and China. Maybe can you talk about how those regions compare, from a full price penetration perspective to the Americas. Also maybe match that with what sort of level of newness do you see in those regions? Have the percentages also gone down, and are they also supposed to go back up, in 2025, or has it been more constant there? Thanks.

Speaker #2: But I'm curious if we should read that as you guys being happy with full selling in the rest of the world and China. Maybe you could talk about how those regions are from the full price penetration perspective compared to the Americas, and also maybe match that with what sort of level of newness you see in those regions?

Speaker #2: Have the percentages also gone down ? And are they also supposed to go back up in 25th , or has it been more constant ?

Speaker #2: There ? Thanks

Meghan Frank: Thanks, Paul. I would say we have not seen the headwind we've seen in North America in our international regions in terms of full price. Still happy with the levels we're seeing there. That said, we do believe that the steps we're taking in our action plan in terms of product creation and activation will benefit all regions. I would say we're still pleased with the trends there. I'll pass it to André just to add some more color on what we're seeing in the regions.

Speaker #1: Thanks , Paul . I would say we have not seen the headwind we've seen in North America in our international regions in terms of full price .

Speaker #1: So, still happy with the levels we're seeing there. That said, we do believe that the steps we're taking in our action plan in terms of product creation and activation will benefit all regions.

Speaker #1: But I would say we're still pleased with the trends there. I'll pass it to Andre just to add some more color on what we're seeing in the regions.

André Maestrini: Yeah, absolutely. I think that the model that has been developed to grow and expand in international is working because it generates full attention on the full price. Let me call out the different layers, which is first, a brand first approach. We are building the premium position of lululemon in active wear market in those key regions. Second, a diversified portfolio of product across the different activities where we want to lead in. Then this obsession of full price and minimal discounting and markdown, and also an elevated presentation in our stores and the guest experience across not only the key doors, but also our online experience. We are staying true to our community grassroots approach.

Speaker #8: Yeah , absolutely . I think that the the model that has been developed to grow and expand in international is working because it generates full attention on the on the full price .

Speaker #8: And let me call out the different layers, which is first a brand-first approach. We are building the premium position of Lululemon in the activewear market in those key regions.

Speaker #8: Second , a diversified portfolio of product across the different activities where we want to lead in . Then this obsession of full price and minimal discounting and markdown , and also an elevated presentation in our stores and the guest experience across not only the key doors , but also our online experience .

Speaker #8: And we are staying true to our community , grassroots approach . We also keep standout events that generate organic traffic , like the summer sweat Games , for example , in China .

André Maestrini: We also keep standout events that generate organic traffic, like the Summer Sweat Games, for example, in China. That's why we are implementing as a playbook to do Studio Yet that Meaghan, you mentioned, or our participation in the BNP Paribas Open in Indian Wells on new categories that we want to expand. Yeah, as said, everything we are working on developing new styles and newness at the global level will also benefit all our markets to keep driving the focus and engaging the guest on full price realization.

Speaker #8: And that's why we are importing as a playbook to to do studio . Yet that meant , Megan , you mentioned or our participation in the in the open of Indian Wells or new categories that we want to , to expand .

Speaker #8: So yeah, I said everything. We are working on developing new styles and newness at the global level. We'll also benefit all our markets to keep driving the focus and engaging the guests on full-price realization.

Paul Lejuez: Thank you. Good luck.

Speaker #2: Thank you . Good luck

Meghan Frank: Thank you.

Speaker #1: Thank .

Speaker #11: You .

Operator 2: The next question comes from Michael Binetti with Evercore. Please go ahead.

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

Speaker #2: The next question comes from Michael Binetti with Evercore. Please go ahead.

Michael Binetti: Hey, guys. Thanks for all the help here today. Could you speak a little bit to the Canada slower sales outlook in Q1? Is that something you're seeing today, Meghan? Maybe just a few thoughts there. That market's been trending better than the US for a little bit. I'm just curious what you're seeing in that market. Maybe you could just help us, you know, you shortening the timeline on design from go to market. I think you diagnosed that as a pretty long timeframe, 18 months plus. It's been a big focus for you.

Speaker #12: Hey guys, thanks for all the help here today. Could you speak a little bit to the Canada slower sales outlook in the first quarter?

Speaker #12: Is that is that something you're seeing today ? Megan . Maybe just a few thoughts there . That market's been trending better than the US for a little bit .

Speaker #12: I'm just curious what your what you're seeing in that market . And then maybe you could just help us , you know , shortening the timeline on design from go to market .

Speaker #12: I think you diagnosed that as a pretty long time frame , 18 months plus . It's been a big focus for you . You could just give us an update on , you know , what you're seeing there .

Michael Binetti: Could you just give us an update on, you know, what you're seeing there and some of the early progress or opportunities to shorten the lead times, and what you think maybe that could go to as you look to, you know, kinda speed up the go to market process here?

Speaker #12: And some of the early progress or opportunities to shorten the lead times, and what you think maybe that could go to as you look to kind of speed up the go-to-market process here?

Meghan Frank: Yep. Thanks, Michael. In terms of Canada, we are inflecting full price across the North America region. The Canadian consumer has been a little bit more sensitive to markdown, so we're seeing a little bit more of a pronounced impact there, I'd say. So that's what's driving that differential. Expect it's still the same opportunities in terms of assortment shift and focus on guests with our activations, and think we'll reset to a better waterline. In terms of the go-to-market calendar, we are going from about 18 to 24 months. We're expecting we could go to closer to 12 to 14 months over time.

Speaker #1: Yep . Thanks , Michael . So in terms of Canada , we're expecting we are expecting full price across the North America region .

Speaker #1: The Canadian consumer has been a little bit more sensitive to markdowns. So we're seeing a little bit more of a pronounced impact there.

Speaker #1: I'd say . So that's what's driving that differential . But expect still the same opportunities in terms of a shift and focus on guest with our activations .

Speaker #1: And I think we'll reset to a better water line . And then in terms of the go to market calendar . So we are going from about 18 to 24 months .

Speaker #1: We're expecting we could go to closer to 12 to 14 months over time . Really focused on tools , process and systems and leaning into automation , including in the AI space , you know , to , to lean into that calendar .

Meghan Frank: Really focused on tools, process and systems and leaning into automation, including in the AI space. You know, to lean into that calendar. You know, we did mention that we have a new head of technology who's got an AI focus. We're excited about him joining the team and the things that we can unlock in that space. And there's, I would say, a lot of energy in the business around this reduction and simplification of our process.

Speaker #1: You know, we did mention that we have a new head of technology who's got an AI focus. We're excited about him joining the team and the things that we can unlock in that space.

Speaker #1: And I would say a lot of energy in the business around this reduction and simplification of our process.

Michael Binetti: Okay. Maybe if I could ask one follow-up. I think as I look back at last year, if I look at the Q1, you mentioned that traffic was a little weaker than you'd liked in the quarter, and the high value guest was weak as well. You kinda gave us that breakout. Are you seeing better traction with the high value guests as you start to flow the newness in and you start to get some confidence in the full price selling as you at least start to improve sequentially from the Q4 here?

Speaker #12: Okay . And maybe if I could ask one follow up , I think as I look back at last year , if I look at the first quarter , you mentioned that traffic was a little weaker than you'd liked in the quarter and the high value guest was weak at was weak as well .

Speaker #12: You kind of gave us that breakout . Is that are you seeing better traction with the high value guests ? Did you start to flow the newness in and you start to get some confidence in the full price selling as you at least start to improve sequentially from the fourth quarter here ?

Meghan Frank: Yeah, I'd say it's early in the quarter. You know, I'd like a little more time just to understand what's going on with the high value guest. But I would say we're seeing, as I mentioned, great green shoots on some of the new product launches, and I would expect that extends to that guest as well. We'll share more on what we're seeing as it progresses.

Speaker #1: Yeah , I'd say it's early in the quarter . You know , I'd like a little more time just to understand what's going on with the high value guest .

Speaker #1: But I would say we're seeing, as I mentioned, great green shoots on some of the new product launches. And I would expect that extends to that guest as well.

Speaker #1: So we'll share more on what we're seeing as it progresses .

Michael Binetti: Okay, thanks a lot. Have a good one.

Speaker #12: Okay, thanks a lot. Have a good one.

Operator 2: The next question comes from Dana Telsey with Telsey Advisory Group. Please go ahead.

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

Speaker #2: The next question comes from Dana Telsey with the Telsey Advisory Group. Please go ahead.

Dana Telsey: Hi. Good afternoon, everyone, and nice to see the progress. As you think about the performance apparel market and just the activewear market, did you grow share this quarter? Did it stay the same? What did you see in the growth of premium athletic and in performance apparel? With the early positive results to the new assortments coming in, is it bottoms, is it tops? What are you learning from that as you develop new products, but for the next timeline for the balance of the year? Thank you.

Speaker #13: Hi . Good afternoon everyone and nice to see the progress as you think about the performance apparel market and just the activewear market , did you grow ?

Speaker #13: Share this quarter ? Did it stay the same ? What did you see in the growth of the premium ? Premium , athletic and in performance apparel .

Speaker #13: And then with the early results, positive results to the new assortments coming in—is it bottoms as well as tops? And what are you learning from that as you develop new products for the next timeline, for the balance of the year?

Speaker #13: Thank you

Meghan Frank: Thanks, Dana. In terms of market share, we maintained share in the total apparel market, and we lost about less than a point in activewear. That's where we stand on that. You know, as André mentioned, we maintained our position as the number one women's activewear brand in the US. In terms of what's trending for category tops and bottoms, we're seeing, I would say, some nice performance across both. You know, the Unrestricted Power innovation I mentioned, we did in women's tights and men's shorts, as well as a top. Seeing some nice performance there. ThermoZen also was an outerwear innovation that we're excited about as well.

Speaker #1: Thanks , Dana . In terms of market share , so we maintained share in the total apparel market and we lost about less than a point in activewear .

Speaker #1: So, that's where we stand on that. You know, as Andre mentioned, we maintained our position as the number one women's activewear brand in the US in terms of what's trending for category tops and bottoms.

Speaker #1: We're seeing , I would say , some nice performance across both , you know , the unrestricted power innovation . I mentioned . We did in women's tight , a men's short as well as a top , seeing some nice performance there .

Speaker #1: Thermo Zen also was an outerwear innovation that we're excited about as well. We did also see some great performance out of a couple of bottoms that Andre mentioned.

Meghan Frank: We did also see some great performance out of a couple bottoms that André mentioned, so EasyFive and the Groove Wide-Leg. We had a run capsule, which I would say encompassed both tops and bottoms. I would say it's both. That had a lot of, I would say, energy around it in terms of fun and excitement in that run capsule. I think, you know, the team's really energized on building on the learnings in terms of what's working, continuing to chase into, as well as looking at how it informs our creative direction for upcoming seasons.

Speaker #1: So Easy, Five, and the Groove Wide-Leg. And then we had a Run capsule, which I would say encompassed both tops and bottoms.

Speaker #1: So I would say it's both. And that had a lot of, I would say, energy around it in terms of fun and excitement.

Speaker #1: In that run capsule . I think , you know , the teams really energized on building on the learnings in terms of what's working , continuing to chase into , as well as looking at how it informs our creative direction for upcoming seasons

Michael Binetti: Operator, we'll take one more question.

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

Speaker #14: Operator, we'll take one more question.

Operator 2: The last question comes from Ike Boruchow with Wells Fargo. Please go ahead.

Operator: The last question comes from Ike Boruchow with Wells Fargo. Please go ahead.

Speaker #2: The last question comes from Ike with Wells Fargo. Please go ahead.

Ike Boruchow: Hey there. Meghan, can you just comment on the inventory ending in Q4? How comfortable are you with that? I know the markdowns are still expected to be up a little bit, but maybe just some more anecdotes there. What's your expectation for inventory as you move into Q2 and then kinda the rest of the year?

Speaker #15: Hey there . Megan , can you just comment on the inventory ending in four ? Q how comfortable are you with that ? I know the markdowns are still expected to be up a little bit , but maybe just some more anecdotes there .

Speaker #15: And then, what's your expectation for inventory as you move into Q2 and the rest of the year?

Meghan Frank: Great. Yes, I would say we're pleased with both the level and composition headed out of Q4. We guided to unit increase in the high single digits, and we came in up 6. Cleaner than we expected. We did focus on cleaning out seasonal inventory and feel we're headed into 2026 with an assortment that's more reflective of our go-forward strategy. In terms of how we're managing inventory in 2026, I would say, throughout the year, we'd expect to see units approximately flat to slightly down. That would hold true for the end of Q1 as well. That is part of how we're supporting driving that full price inflection in our business, and the return to a healthier baseline in terms of penetration.

Speaker #1: Great . Yes . I would say we're pleased with both the level and composition headed out of Q4 . We guided to unit increase in the high single digits , and we came in up six .

Speaker #1: So, cleaner than we expected. We did focus on cleaning out seasonal inventory, and feel we're headed into '26 with an assortment that's more reflective of our go-forward strategy in terms of how we're managing inventory.

Speaker #1: In '26, I would say throughout the year, we'd expect to see units approximately flat to slightly down. That would hold true for the end of Q1 as well.

Speaker #1: So that is part of how we're supporting driving that full price inflection in our business. And the return to a healthier baseline in terms of penetration.

Ike Boruchow: Thank you.

Speaker #15: Thank you

Operator 2: That's all the time we have for questions today. Thank you for joining the call, and have a nice day.

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

Q4 2025 lululemon athletica Inc Earnings Call

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