Lululemon Athletica Inc Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

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

Question: Matthew Boss - J. P. Morgan Securities LLC - Analyst : Great. And then Meghan, maybe just a follow up. If you could just speak to your comfort with inventory on hand today exiting the quarter and maybe just touch on markdowns relative to plan in the second quarter or any change for the back half?

Question: Matthew Boss - J. P. Morgan Securities LLC - Analyst : Great color, best of luck.

Question: Alex Straton - Morgan Stanley. & Co. LLC - Analyst : Perfect. Thanks a lot for taking the question. Just on the revised full year guidance and where it's coming out of, it feels like that's mostly concentrated in the fourth quarter. Is that right? Or does your view on the third quarter change as well? And if you could just walk us through the puts and takes for looks almost a $0.50 reduction, that would be very helpful. Thanks a lot.

Question: Alex Straton - Morgan Stanley. & Co. LLC - Analyst : Thanks a lot. Good luck.

Question: Paul Lejuez - Citi - Analyst : Hey guys, thanks. Can you talk about how the quarter progressed as you move through by region? What the exit rates were? Any comments on quarter two to date and are there any pockets of higher inventory? Just curious how you handle the whole Breeze Through where that product go, any financial impact on the back half. Thank you.

Question: Paul Lejuez - Citi - Analyst : Thanks, good luck.

Question: Michael Binetti - Evercore ISI - Analyst : Hey guys, thanks for taking the questions here. I guess maybe one for each. Meghan, can you just walk us through how the mechanics of the P&L work. I know you do a lot of scenario planning that you could keep the EBIT margins for the total company positive or we have a slower near term run rate in the US? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 29, 2024 / 8:30PM, LULU.OQ - Q2 2024 Lululemon Athletica Inc Earnings Call And then Calvin, just on some of the comments made earlier, example, I'm wondering if you could give us an example of how design and merchandising teams are previously not on that equal 40 footing that you think you're on now and how that impacted the strategy in the consumers' eyes. Maybe just some of what prompted you to make some of the changes in the org chart that you did.

Question: Michael Binetti - Evercore ISI - Analyst : Okay, thanks a lot for all the information, appreciate that.

Question: Janine Stichter - BTIG LLC - Analyst : Hi, thanks for taking my questions. A couple of questions on the product innovation for the back half. I guess first on Breeze Through, it seems to us that the consumer really like the fabric, they just weren't in love with the fit. What's the time line for getting that back with some new -- some new fits and silhouette. And then any parameters you can help provide around some of these new launches coming in the back half? It seems like the launch in training, it seems like that would be pretty big, just how to think about that in terms of the size and potential of that?

Question: Janine Stichter - BTIG LLC - Analyst : Thanks for the color and best of luck.

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

Question: Lorraine Hutchinson - BofA Global Research - Analyst : Thank you.

Question: Dana Telsey - Telsey Advisory Group - Analyst : Hi, as you think about your inventory positioning for the back half of the year, how do you break apart the third quarter and the fourth quarter? And with the Breeze Through, which was a small launch that you talked about, Calvin, are there -- is there any markdowns or any resets on the inventory numbers or gross margin impact of taking that down and eliminating it? Thank you.

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

Question: Brooke Roach - Goldman Sachs - Analyst : Great. Thanks so much. I'll pass it on.

Question: Mark Altschwager - Robert W. Baird & Co. Incorporated - Analyst : Good afternoon and thank you for taking my question. Something you could provide a bit more perspective on China. Clearly, there's some still very strong growth rates there, but I think about a 10 point comp slowdown against an easier comparison, how should we think about sustainable comp growth rates there? I think others have talked about some more macro consumer pressure, you're feeling that as well. Any color on what's going on in stores and digital. Maybe just more broadly how you're planning comp growth by region for the remainder of the year. Thank you.

Question: Mark Altschwager - Robert W. Baird & Co. Incorporated - Analyst : Thank you.

Question: Rick Patel - Raymond James Ltd. - Analyst : Thank you. Good afternoon. The question on the performance of core products. You called out a lack of inventory for certain styles and sizes entering the year. Did the same headwinds intensify in the second quarter or did you see new headwinds related to other products? Just some clarity there would be great. And then secondly, you're seeing -- still seeing good growth for accessories, how should we think about the outlook there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 29, 2024 / 8:30PM, LULU.OQ - Q2 2024 Lululemon Athletica Inc Earnings Call

Question: Rick Patel - Raymond James Ltd. - Analyst : Great, thank you.

Question: John Kernan - TD Cowen - Analyst : Good afternoon, thanks for taking the question. Meghan, I think a big beer price into the valuation of the company right now, it's the gross book. The gross margin rate is teething your SG&A rate, may need may need to move higher? How would you address those fears given the competitive environment in category right now.

Question: John Kernan - TD Cowen - Analyst : Understood. And Calvin, maybe a thought for you. Has your core customer in women's changed over the years? It seems like it's a more diverse cohort. Are they more challenging to plan and allocate for in terms of sizing and color and what are you learning? Some of that semantics of new customers we acquired?

Question: John Kernan - TD Cowen - Analyst : Understood. Thank you.