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<p type = "text" content = "Lululemon Athletica Inc& nbsp;(NASDAQ: LULU)
Q1 & nbsp; 2019 Import Phone
June 12, 2019, 4:30 pm EST"data-reactid =" 32 ">Lululemon Athletica Inc (NASDAQ: LULU)
Q1 2019 Performance Report
June 12, 2019, 4:30 pm EST

Wait, thanks. It is the meeting operator. Welcome to lululemon athletica inc. Q1 2019 conference call. In other words, all participants are in Listen mode and meetings are being recorded. At the end of the presentation, you will have the opportunity to ask questions. (User's Guide)

I would like to leave the meeting to Howard Tubin, vice president of investor relations at Lululemon athletica inc. Please go ahead.

Thank you, good afternoon. Welcome to lululemon's first quarter earnings call. To join me today to talk about our results, Calvin McDonald, CEO; Stuart Haselden, COO and EVP, International; PJ Guido, CFO.

Before we begin, I would like to take this opportunity to remind you that today our remarks will include forward-looking statements reflecting the management's current view on the future of lululemon. This statement is based on the latest information we have assessed, but it is accompanied by a sudden and even drastic change in its nature. Actual results may differ materially from those contained or implied by these forward-looking statements due to risks and uncertainties associated with our business, including our recent filings with the SEC, including our annual report on Form 10-K . Please refer to the quarterly report for Form 10-Q. The forward-looking statements in this currency are based on today's assumptions and we expressly disclaim any obligation or obligation to update or revise any of these statements as a result of new information or future events.

These currencies present both GAAP and non-GAAP financial measures. Adjustments to GAAP and non-GAAP measures are included in the quarterly reports on Form 10-Q and in today's revenue press releases. Quarterly reports on press releases and Form 10-Q can be found in the Investors section of the website www.lululemon.com.

Remind investors to visit investor sites and see key financial performance statistics for the first quarter and quarterly infographic before the call begins. Because today's phone calls take an hour, give them a chance to ask others by limiting them to one question at a time.

And now, I will call Colvin.

We appreciate Howard and welcome all first quarter earnings announcements. As soon as we started, I would like to talk about how much I enjoyed the recent analyst day meeting in New York. We are very excited about the growth opportunities ahead of us. We look forward to realizing our five year growth plan.

lululemon has had another successful quarter that has seen many strengths in our business across products, channels and geography. Our innovative product class and commitment to our customers around the world tell you today the financial results we are proud of.

In today's call, we will begin by dividing some of our key highlights in the first quarter, including how we live in the pillars of product innovation and the Omnya guest experience. In the future, I will call on senior executives on a regular basis to provide updates on key strategic areas of the business.

Today Stuart Haselden will be with us to provide the latest information on our opportunities in China and other major international markets. As you know, earlier this year, Stewart's responsibilities expanded to serve as an international EVP in addition to acting as Chief Operating Officer (COO). PJ Guido will provide detailed financial reviews and guidelines following the global update. Please leave a few comments and we will ask you a question.

Let's look at the results for the first quarter. We are very pleased to see continued strong momentum in our business. The power of the three growth plans detailed in Analyst Day is the driving force behind our five-year growth plan. Throughout the company, the team runs at a very high level. Gross profit for the first quarter increased 20%, and earnings per share increased 35% to $ 1, 16% more than last year's 19% increase.

The guests responded well to both men's and women's products. Both stores and digital businesses remain strong, and we continue to be channeled with us as brands continue to gain momentum in Europe and APAC as well as in key North American markets.

We are leveraging strategic infrastructure investments across our business to support growth. Our efforts over the past few years to create efficiencies and further refine our supply chain have contributed infinitely to success. For example, Toronto's new distribution center was launched on schedule in May, enabling more efficient delivery of products in the eastern part of Canada.

As you know, the growth plans discussed in Analyst Day are inherently long-term, and the financial goals we provide are annual. I am delighted with the start of 2019, and we have started to live in a five – year vision.

Now, I would like to talk about the three pillars of growth, product innovation, almighty guest experience and market expansion. Remember, our five-year vision will double your male business, double your digital business, and detail your way to quadruple our international business during this time. Now we will provide a highlight of the first quarter for these drivers.

Looking at our product innovation pillars, in the next five years, the core female business segment is projected to grow at a double-digit annual growth rate, and men grow 20 percent annually. In the first quarter, we saw the continued strong performance of women's companies, especially those of women. This category has grown more than 19% due to leggings and jogging styles. Compressors in men's business grew 26% in both the first and second half, with continued growth. The business was dominated by the ABC franchise and three key shorts styles. Short, face breaker and surge.

Guests are responding well to new boxers designed to solve all three elements of the science of feeling. Touch, temperature and movement.

In the future we are excited about innovations that will bring our assortment for both men and women. We plan to release a new and improved Metal Vent Tech collection to preview some of the upcoming men's highlights. We are also planning to further expand our technology bra products for women over the next few months with two high support styles.

The final component of a product innovation plan is testing in a new category. The main driver continues to be a key category for both men and women. But we have tested the water and identified a number of blank areas that can bring innovation to our customers. One example is self-management, with 50 stores and online availability next week.

Switch to Omni Guest Experience. Compared to last year's increase of 6%, store competitions increased by 8%, resulting in strong performance throughout the channel. Our digital business has more than doubled in business over the last two years. Due to increased traffic in the first quarter, Google ads are up 8% and 41%, both in stores and online.

We are excited about our vision of a brand experience that sparked a community of sweaty people. When you open Lincoln Park in Chicago next month, you will see a real experience shop for the first time. This 20,000 square foot store captures the people we brand when embodying the life of a sweat through space for several studios, meditation spaces, healthy juices and food offerings, and community gatherings. This distinct environment offers a variety of new and exciting ways to connect with your guests and provide them with additional opportunities to explore and learn.

We have also continued to test our membership program and expanded to become the third pilot city in Austin, Texas, in May. We are very excited about the results of each city and through program testing we have brought new learning and innovation.

Now, as we look at digital business, we've expanded our online exclusive sizes and colors for both men and women. We expanded our online purchases to 35 stores and 150 stores in the first quarter, and 80% of our orders are ready to be picked up by the customer within an hour. We are going to be fully public by the end of the third quarter. We can also significantly improve mobile point-of-sale (POS) capabilities, enabling educators to purchase customers from anywhere in the store. Our strengths and ingenuity are to leverage stores, communities and events to promote great products through our Omniguy guest experience.

Run is an important strategy for us and demonstrates how to activate in the entire business to provide an exceptional guest experience. In addition to our strong and light brassiere franchise, we introduced a fast, run-based collection for men. We highlighted the strengths of technology outfits through our Global Run campaign, featuring Charlie Dark, a global global launcher campaign.

Performance-based activities during the quarter included activities in Boston, Los Angeles and the London Marathon. Last week we participated in local running clubs, or participated in the 5K challenge to Strava, I greeted you.

In the next few weeks, we will be sponsoring 10K services in Toronto and Edmonton. We plan to add more events in the future. Run is an important category with significant potential and has the opportunity to expand wallet sharing with current and future customers.

We are moving gear to the market. After sharing some key points about the performance of key North American regions, we will move to Stuart to discuss growth in international markets. First, our opportunity in North America, the largest region, is still important. Our innovative product assortment, agile store format, inspiring brand activation and unique events offer ample relationship with existing and new customers.

Revenue in North America grew 18%, as momentum in the region remained strong in the first quarter. We have opened six stores in the US and Canada and will be running stores between the ages of 15 and 20 in 2019. Guest statistics are solid as new guests are increasingly gained and spending on existing guests grows. Traffic to stores in North America has been strong and one digit has increased.

Last month Stuart and I had a chance to visit our team in China and see the amazing growth opportunities directly. I will make him share our insights and some of the results of this quarter internationally. Stewart?

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) -sm Mt (0.8em)Stuart HasselnInternational Operations Director and Chief Operating Officer (COO)"data-reactid =" 76 ">Stuart HasselnInternational Operations Director and Chief Operating Officer (COO)

Thank you, Calvin. In May I was able to spend almost two weeks with the Chinese team. China is expected to show impressive growth this year, especially as we are showing exciting momentum in all international markets. In the first quarter, the Chinese team showed market growth of about 70%, entered three new towns with strong stores in Shaanxi, Xi'an and Chongqing, and this year it will open 10-15 stores in China.

We are also continuing to invest in digital capabilities by reopening the .cn site in Q1 to complement our position on Tmall and WeChat. And these investments have been successful because we saw more than 100% increase in Chinese e-com sales in the first quarter. The results also include the great success of the Super Brand Day event with April Tmall. As part of this event, we invited 400 people from InterContinental Shanghai Wonderland to attend a functional show with a sweat of meditation classes. The event attracted considerable attention from the media and social channels and was a great way to connect with both new and existing customers.

All of this contributed to strong performance in the Asia Pacific region, with overall sales in the first quarter increasing by about 40%. Other highlights include the launch of .jp and .kr websites.

We are now heading for Europe. Thanks to steady traffic growth, we posted a strong two-digit ad on all channels. These results have allowed us to achieve market growth rates of more than 40% in the first quarter across Europe. We are pleased that our business has gained momentum as our community and brand building efforts have accelerated. We also opened a wonderful new store in Amsterdam at the grand opening which can be attended in March. It is interesting to see directly the energy that our team is making in Europe. This is reflected in the strong results we are experiencing now. And we are going to open 5-10 new stores throughout Europe this year.

Overall, our international growth is still strong and the proportion of overall company growth is increasing.

Finally, I would like to thank the teams from all over the world. It is a great achievement that all this is possible.

And now, I would send it to PJ.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) -sm Mt (0.8em)Patrick (PJ) GuidoChief Financial Officer"data-reactid =" 84 ">Patrick (PJ) GuidoChief Financial Officer

Thank you, Stuart. Before providing important information about Q1 and its guidelines, please refer to the financial supplement posted on the investor site. Total revenues for the first quarter increased 20 percent to $ 782 million, with strong enforcement throughout the business. On our store channel, we saw an 8% increase in compound sales over the 6% increase in the first quarter last year.

Square footage increased 15% from last year. 44 new Louulmons stores have been added since the first quarter of 2018. 15 new stores were opened during the quarter. The digital channel recorded a very steady 60% growth rate last year and a 35% steady dollar growth. In the quarter, e-com provided a top line of approximately $ 210 million to achieve approximately 27% of total revenue. He added that there was a $ 12.5 million decrease in sales in the quarter due to the impact of foreign exchange transactions.

Gross profit for the first quarter was $ 421.7 million, up from 53.1% of net sales, compared with 53.1% of net sales in the first quarter of 2018. Total gross margin in the first quarter increased 80 basis points from last year's gross profit, and product margins increased by 190 basis points due to lower product costs, product mix preferences and lower prices. We are satisfied with the strength of the product margins we have realized with strong profits over the past few years. This increase was partially offset by a 60bp increase in product and supply chain costs due to continued investment in product development and supply chains and an increase in occupancy and depreciation costs of 20 basis points. We also had a negative impact of 30 basis points due to foreign exchange transactions.

P & L's SG & A expenses amounted to $ 293 million, representing 37.4% of net revenue and 37% of net sales for the same period last year. In Q1, we invested in strategic priorities, brand awareness and initiatives that continue to leverage business strengths to drive current and long-term growth. This includes digital, loyalty and self-management.

Foreign exchange revaluation and translation utilized 30 basis points in the first quarter.

Operating profit for the quarter was $ 127 million, representing 16.5% of net revenues compared to 16.1% of net revenues in the first quarter of 2018.

Tax expense for the quarter was $ 34.6 million, accounting for 26.4% of pretax profit, compared with 29.9% in the prior year. The reduction in the effective tax rate compared to our guidelines reflects the impact of the tax credit increase associated with share-based compensation. This deduction gave about $ 0.02 in the first quarter's EPS. We still expect the tax rate in 2019 to be about 28%.

Net income for the quarter was $ 9.66 million, or $ 0.74 per diluted share, and diluted earnings per share were $ 0.55 in the first quarter of 2018.

Capital expenditures in the first quarter of last year were about $ 46 million, but this quarter capital expenditure was about $ 68 million. The increase is primarily related to relocation, relocation and repairs, and store capital for IT and supply chain investments.

Balance sheet highlights. We had $ 576 million in cash and cash equivalents. Inventory was $ 443 million, up 19% at the end of the first quarter. I also added $ 627 million of lease related assets and $ 675 million of lease related liabilities to the balance sheet under the new lease accounting standard ASC 842. This new accounting standard does not affect the income statement or cash flow.

We purchased one million shares at a cost of $ 163.5 million during the quarter. In 2019, the Board approved a $ 500 million stock repurchase plan, of which approximately $ 337 million was approved. We believe that share repurchases are a way to efficiently and effectively return excess cash to shareholders, and we will maintain our opportunistic attitude through repurchase activities.

Now is our stones on prospect. Q2 revenue is between $ 825 million and $ 835 million. This is based on double digit growth in revenue compared to the second quarter of 2018. It also assumes that five new stores were established in the quarter. Gross profit is expected to rise modestly from the second quarter of last year.

Our guidance reflects the potential new tariffs and the gradual impact from additional costs on Asian air cargo to avoid expected port congestion in Asia due to pending tariff increases. The negative impact of this cost is about 20-25bp in total margins and the total EPS for 2019 is about $ 0.04 to $ 0.05. Most impacts will appear in Q3 in the second half of this year. I should mention that regardless of whether or not a new tariff is imposed, this impact would result in about $ 0.02 to $ 0.03. As we approach major schedules related to tariff hikes, we are working to increase the use of air fares for hedging on maritime transport carriers. This allows customers to deliver new products immediately.

We expect the SG & A expenses to be flat in 2Q as we continue to invest in business growth engines that generate momentum for top line growth. We are seeing greater opportunities to use SG & A in the holiday season, and we look forward to a modest leverage year-round.

Assuming a tax rate of 28% and a weighted average share price of approximately 113 million diluted earnings per share, the diluted earnings per share for the second quarter will be $ 0.86 to $ 0.88, compared with $ 0.71 a year ago.

Total revenue for 2019 is expected to range from $ 373 billion to $ 377 billion. This is based on a two-digit increase in revenue versus lower dollar-denominated dollars. We expect to open about 40 to 50 company operated stores in 2019. This includes 25 to 30 stores in international markets and an increase in mid-teens per square foot.

Gross profit is expected to increase slightly mainly due to improved gross margin. We anticipate that SG & A expenses will be utilized modestly throughout the year. We expect diluted earnings per share for fiscal year 2019 to be $ 4.51 to $ 4.58. EPS guidance is based on the weighted average number of shares outstanding of US $ 131 million during the year. This range takes into account the additional costs of approximately $ 0.04 to $ 0.05 within the gross margins associated with the tariffs of the previously mentioned airfare.

We expect our adjusted effective tax rate to be about 28% in 2019. We assumed Canadian dollars to be $ 0.75 in 2019 and Q2 to Canadian dollars. We expect capital expenditures to continue in fiscal year 2019 from approximately $ 265 million to $ 275 million. The increase in 2018 to 2018 reflects an increase in store renovation and migration programs, new store openings, technology investments and other corporate infrastructure projects.

Finally, as our team implements the new three strategic plans, we are excited about the momentum we see in our business.

And now let Calvin speak the closing words.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) -sm Mt (0.8em)Calvin McDonaldCEO"data-reactid =" 105 ">Calvin McDonaldCEO

Thanks, PJ. It has been reported recently that there is some softening in the garment space, but there is no doubt that 2019 will be a great starting point for us. We are building confidence in our long-term growth plan based on the driving force of the past year. Whenever there are new markets and innovations, we are inspired by the way that all of our existing customers and brand new customers respond to lululemon.

Our vision to spark a community of sweaty people resonates strongly with our guests and offers us many growth opportunities in the years to come. We are focused on leveraging our strengths to create opportunities for lululemon to continue to overcome the short-term challenges others are facing.

I would like to thank the global team for the passion and spirit that I work with every day. We have been able to achieve continued levels of success by dedicating to our customers and supplying them with energy.

And we will be willing to accept your questions with it. Operator?

Questions & Answers:

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) -sm Mt (0.8em)Operator"data-reactid =" 111 ">Operator

thank you. Now we will start a Q & A session. (Operator guidance) The first question is the question of JP Morgan's Matthew Boss. Please go ahead.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) -sm Mt (0.8em)Matthew BossJP Morgan – Analyst"data-reactid =" 113 ">Matthew BossJP Morgan – Analyst

Thanks, congratulations on another cool quarter. Perhaps – perhaps, at first, would you elaborate on the current momentum you are seeing in the business? What effect did you see from the recent side clothing softness you mentioned? And you can put back half of the opportunities by category.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) -sm Mt (0.8em)Calvin McDonaldCEO"data-reactid =" 115 ">Calvin McDonaldCEO

Yes. Of course, Matt. In terms of Q2, we are very satisfied with the momentum in business. This is reflected in our guidance for double digits lower than last year's 19%. So this business continues to be trading very strongly into the quarter. And that growth is coming across all levers of the power of the three. In our products, our male business increased by 33% and continued to be strong in all categories. Top, square and bottom business. And our women's business is showing very solid growth, especially underwear, through leggings and jogging. And we believe that the momentum will continue when we continue to learn and build on new categories, with more innovations and tests as our core, starting with what we are going to start. The main categories to win in yoga, train and running. So it's a great feeling for a product launch that is driving the way customers react to the product when they see it.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) -sm Mt (0.8em)Matthew BossJP Morgan – Analyst"data-reactid =" 117 ">Matthew BossJP Morgan – Analyst

Great. Congratulations on your continuous drive.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) -sm Mt (0.8em)Calvin McDonaldCEO"data-reactid =" 119 ">Calvin McDonaldCEO

Thanks, Matt.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) -sm Mt (0.8em)Operator"data-reactid =" 121 ">Operator

The next question is by Ike Boruchow of Wells Fargo. Please go ahead.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) -sm Mt (0.8em)Ike BoruchiWells Fargo Securities – Analyst"data-reactid =" 123 ">Ike BoruchiWells Fargo Securities – Analyst

Hey, I'll celebrate. I'll ask Stuart a question. It is a very attractive thing to get from China with a .cn rollout. In my opinion, over time, Stuart, would you please tell me how you see a mix of digital business in China? .cn site vs Tmall? And what if there is a nuance to keep in mind the relative profitability between the two? thank.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) -sm Mt (0.8em)Stuart HasselnInternational Operations Director and Chief Operating Officer (COO)"data-reactid =" 125 ">Stuart HasselnInternational Operations Director and Chief Operating Officer (COO)

Sure. Therefore, the business vision for China is much more important from a digital point of view than North America. As mentioned in the previous conversation, we can see that China's online business is 50% online, and the structure of the Chinese industry is also important for creating a viable environment. And when I say rescue, I think we have a market structure that we know with WeChat and Tmall, and that they have dominance in the Chinese market. So we know how to get involved in it, but how to introduce and develop the brand and what steps have been taken to ensure premium positioning for the brand.

We can see that Tmall continues to be an important part of the overall digital business mix. We saw our own .cn site and our WeChat site appear and take on more digital business in time. We are investing now as much as possible. We will share the details with you as you progress. However, once the .cn site is started or restarted, the .cn site mentioned in the first quarter is an important part of it, and brand awareness will increase due to the expansion of store floor space in general. We are getting a great response from all over China through our many signals that our brand is getting traction. As a result, you can support and drive traffic and business across all channels. So I pointed out how they think about the digital part of our business.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) -sm Mt (0.8em)Ike BoruchiWells Fargo Securities – Analyst"data-reactid =" 128 ">Ike BoruchiWells Fargo Securities – Analyst

Could you explain the margin structure of .cn versus Tmall in detail over time?

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) -sm Mt (0.8em)Stuart HasselnInternational Operations Director and Chief Operating Officer (COO)"data-reactid =" 130 ">스튜어트 하셀 른덴국제 운영 이사 겸 최고 운영 책임자 (COO)

확실합니다. 전반적으로 디지털 대 상점의 이점은 디지털 비즈니스에 대한 최저 이익 기여도 측면에서 북미에서 볼 수있는 것과 방향성이 일치하는 점입니다. 즉, Tmall 플랫폼에서 운영하는 데 드는 비용이 점진적으로 증가하고 있지만 점포 비즈니스에서 볼 수있는 것보다 여전히 높은 매력적인 기여 여유가 있습니다.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) -sm Mt (0.8em)아이크 보루 치Wells Fargo Securities – 애널리스트"data-reactid ="132 ">아이크 보루 치Wells Fargo Securities – 애널리스트

알았다. 매우 도움이됩니다. 축하해.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) -sm Mt (0.8em)운영자"data-reactid ="134 ">운영자

다음 질문은 RBC Capital Markets의 Kate Fitzsimons에서 비롯됩니다. 진행하시기 바랍니다.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) -sm Mt (0.8em)케이트 피츠 시몬스RBC 자본 시장 – 애널리스트"data-reactid ="136 ">케이트 피츠 시몬스RBC 자본 시장 – 애널리스트

예. 안녕, 얘들 아. 강력한 결과를 축하드립니다. 내 질문은 매출 총 이익에 대한 2019 년 전망 일 것이다. 우리는 이러한 비 상품 품목을 어떻게 고려해야합니까? PJ, 당신은 20, 30 베이시스 포인트 역풍에 대해 언급했는데 항구 혼잡에 앞서 상품에서 날아가는 것이 었습니다. 그러나 우리는 임대료, 숙박비, 제품 및 공급망 비용과 같은 다른 상품 품목에 대해서도 생각합니까? thank you.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) -sm Mt (0.8em)패트릭 (PJ) 귀도최고 재무 책임자 (CFO)"data-reactid ="138 ">패트릭 (PJ) 귀도최고 재무 책임자 (CFO)

예. 안녕, 케이트, 이쪽은 PJ 야. 따라서 앞으로 가장 큰 요인은 제품 비용을 낮추는 것임을 보여주는 총 마진입니다. 우리는 마크 다운과 픽업을 픽업했습니다. 남아있는 기회를 발견하고 공급망을 세분화하면 유통망 전반에 걸쳐 효율성이 높아집니다. 그렇기 때문에 일부 압력이 있으며 이러한 압력은 DC 투자와 관련되어 있습니다. 토론토를 개설하면서 창업 비용이 들었습니다. 공동 거주지와 국제 상점에서는 높은 임대료를 제공합니다. 따라서 우리는 점유와 감가 상각에 대한 약간의 압박감을 느낄 것입니다. 그러나이 분기에 대한 압박은 비교적 적습니다. And then, going forward, we&#39;re going to continue to develop product, right, so new categories, bras, outerwear, so we are spending money to continue to build out our product assortment. So, again, net-net, we&#39;ll see modest expansion as we&#39;ve guided to, but there will be a little bit of pressure from those items I just mentioned.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Kate FitzsimonsRBC Capital Markets — Analyst" data-reactid="140">Kate FitzsimonsRBC Capital Markets — Analyst

Great, guys. Best of luck.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="운영자" data-reactid="142">운영자

The next question comes from Adrienne Yih of Wolfe Research. Please go ahead.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Adrienne Yih TennantWolfe Research — Analyst" data-reactid="144">Adrienne Yih TennantWolfe Research — Analyst

Good afternoon. Congratulations. Great quarter. Calvin, I was wondering if you can give us an update on the Robert Geller and Lab collections? And any learning thus far for your go-forward strategy? And then PJ, just to clarify, the comments you made on the tariffs, were those the increase from 10% to 25% on List Three or is this predicated on the List Four? And can you give us the amount of sourcing directly out of China at this point? thank you.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Calvin McDonaldChief Executive Officer" data-reactid="146">Calvin McDonaldChief Executive Officer

큰. I&#39;ll take off and just comment on both Robert Geller and Lab. On Robert Geller, we&#39;re very pleased with the results of the collaboration. And similar to many of the collaborations we&#39;ve done, our guests are responding very favorably, in general, to this newness and an opportunity to either buy into a new category or unique ecstatic. With Robert Geller in particular, some of the key learnings was, this one shot up very strong from an international perspective, in particular in our Asia-Pacific markets, which is really exciting when we think of the opportunity for these clubs going forward.

The marketing buzz through social was significant behind this collaboration, which is exciting as we look for ways to continue to leverage our marketing and create an impact in acquiring new guests and raise the awareness of the brand, which then leads to the final learning, which is, it responded very well with recruiting new guests into the brand, but equally our current guests were heavily engaged in the product, which is a great opportunity for us as we look for ways to continue to broaden and increase the share of wallet with our highly loyal and high spenders. So, overall, the collaboration performed very well with lot of key learnings.

In the Lab, those ideas will feed into our Lab of which we shared earlier, we&#39;re planning some shop-in-shops in the fall and we&#39;ll continue to expand the rollout from there.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Adrienne Yih TennantWolfe Research — Analyst" data-reactid="150">Adrienne Yih TennantWolfe Research — Analyst

큰.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Patrick (PJ) GuidoChief Financial Officer" data-reactid="152">Patrick (PJ) GuidoChief Financial Officer

And then on the second question about tariffs, I&#39;ll point out just a few things. So, first, I think it&#39;s important to mention that our direct exposure to China is relatively small with 6% of our total finished goods exported from China to the US and so for tariffs. To answer your questions, so currently under the Tranche Three tariffs, only 1% of our finished goods are subject to that. The balance, the additional 5%, would be subject — that would be part of the Tranche Four tariffs. So that&#39;s the direct impact. So the better part of the expense is really coming from this indirect exposure we have. We&#39;re anticipating port congestion right around the time frame starting in that mid- to late-July timeframe and we think it&#39;s prudent and important to deliver new products for our guests and protect the sales associated with those goods, so really the larger airfreight that I mentioned.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Kate FitzsimonsRBC Capital Markets — Analyst" data-reactid="154">Kate FitzsimonsRBC Capital Markets — Analyst

Extremely helpful. thank you. Best of luck.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="운영자" data-reactid="156">운영자

The next question comes from Paul Lejuez, who is with Citigroup. Please go ahead, Paul.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Paul LejuezCitigroup Inc — Analyst" data-reactid="158">Paul LejuezCitigroup Inc — Analyst

Hey. Thanks, guys. Curious as you open stores in some of your mass mature markets, if you&#39;re seeing a lift to your e-com business in that market and if there&#39;s any way to quantify that? And then, second, what percent of your product sales come from new SKUs? And what was that number in 1Q if you do try to quantify in that way, and I&#39;m curious about what is your philosophy about what that percentage should be over time coming from the new SKUs versus existing vendors? 감사.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Stuart HaseldenChief Operating Officer and Executive Vice President, International" data-reactid="160">Stuart HaseldenChief Operating Officer and Executive Vice President, International

Hey, Paul, it&#39;s Stuart. I&#39;ll speak to your first question on our less developed markets. What we see in our international regions is consistent with our experience in North America in that. And as we open new stores, we see our web business, our e-com business accelerate in and around the trade area, where we opened those stores. The — and we also use our digital business, our e-com business as a guide to understand where we might open — look to open new stores, where our demand and brand awareness is gaining traction, that is an indicator that factors into how we rate markets and trade areas as potential candidates for new stores. So that experience has proven consistent in our international markets and we really see a positive synergistic effect of the footprint, the growing footprint of the store fleet in driving awareness in traffic across both channels.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Calvin McDonaldChief Executive Officer" data-reactid="162">Calvin McDonaldChief Executive Officer

And, Paul, relative to the second part of your question, the majority of our sales growth is coming from our core products, our core franchises that we either continue to innovate on or introduce new color pallets, which the guests are responding very favorably to. We do introduce a number of drops on a weekly basis. The guest responds very well to those. We monitor, but don&#39;t share sort of the makeup as a percentage of sales. But, overall, core is driving our business. We&#39;ll take franchises and innovate behind them, and I think we&#39;ve shared Metal Vent that&#39;s coming in Q3, tail-end of Q2, which is a wonderful innovation on a very powerful strong franchise that will continue to drive. And as we test and learn into new categories, as we expand into yoga, train and run in OTC, which are the areas that we mentioned are our focus areas for the merchants and our product team to design into, but the growth is coming from the core.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Paul LejuezCitigroup Inc — Analyst" data-reactid="164">Paul LejuezCitigroup Inc — Analyst

Thanks, guys. Best of luck.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="운영자" data-reactid="166">운영자

The next question comes from Omar Saad, who is with Evercore ISI. Please go ahead.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Omar SaadEvercore ISI Group — Analyst" data-reactid="168">Omar SaadEvercore ISI Group — Analyst

Hey, thanks for taking my question. I wanted to ask about the most recent round of the loyalty launch. What you&#39;re learning from that? Now, I think it&#39;s in the third iteration, when do you expect to roll it out more broadly? How are — what kind of data are you accruing from the program at the local market level? It&#39;s pretty incredible to me the results you&#39;re putting up without even really having that data, customer level data behind some of the decision-making, so I&#39;m intrigued to hear more on how big of a lever that can be? 감사.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Calvin McDonaldChief Executive Officer" data-reactid="170">Calvin McDonaldChief Executive Officer

Great, thanks. Thanks, Omar. We did roll out. So we&#39;re now testing in Edmonton, in Denver, in Austin, and each market we tweak the program slightly from the product that we make available to the guests to the price point. As you know, we raised the price point in our later test to see how the guest would respond. We&#39;re playing with the events, which are the primary benefit from joining into the membership. And in each market the results have been well above our expectations going in very favorable from the guest and we continue to tweak and learn and do plan to roll into more markets and we&#39;ll have more to announce at a later point in time. But 2020 is the year in which we see expanding into more markets and we are very excited about the potential of this membership in the platform to drive new guest acquisition, which is what we&#39;re seeing with the program which is super exciting driving guest loyalty and engagement into the brand, which is what we expected, but also on the back of having to be a revenue stream for the business in a way in which we can achieve and drive that engagement through that system.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Omar SaadEvercore ISI Group — Analyst" data-reactid="172">Omar SaadEvercore ISI Group — Analyst

감사. 잘 했어.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="운영자" data-reactid="174">운영자

The next question comes from John Kernan, who&#39;s with Cowen. Please go ahead, sir.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="John KernanCowen and Company — Analyst" data-reactid="176">John KernanCowen and Company — Analyst

Good afternoon, and thanks for taking my question. I wanted to go back to the buy online, pick-up in store, I think it&#39;s scaling from 35 to 150 stores and it&#39;s a full rollout, I think you said by the end of the third quarter. What are your learnings from this? And how much of an incremental driver of demand you think this can be?

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Calvin McDonaldChief Executive Officer" data-reactid="178">Calvin McDonaldChief Executive Officer

I think — so, you&#39;re right. We rolled up to 150 stores and our plan is to have all stores up and running by end of Q3, which will put us in great standing for the holiday. And I think we&#39;ll learn a lot when that happens. As we&#39;re rolling out, we&#39;re happy with the results. Equally, internally, operationally 80% of the orders that are placed are ready for pickup within one hour, which I think is an important internal metric for us, because it just sort of talks to the operational readiness and engagements, so that as the demand from the guests accelerates, we&#39;re ready to be there to service them.

As we roll out to more stores, we&#39;re able to position it differently within the website experience in the checkout, making it a lot more known and really start to market it. So early indication is encouraging. We think it&#39;s a necessity in leveraging our omni-strategy, which is one of our pillars of growth. So we know we need to do it. And I think this fourth quarter, when we&#39;re in full rollout and we&#39;re marketing it aggressively on our website and in the checkout that guests really now it&#39;s an option across the full fleet, we&#39;ll really learn, but I&#39;m encouraged by it and I think it would be a wonderful way to continue to drive our traffic into the store, drive that incremental pickup and contribute to the top line.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="John KernanCowen and Company — Analyst" data-reactid="181">John KernanCowen and Company — Analyst

Got it. And then just on that topic, obviously the Lincoln Park store opening in Chicago, is this a test or is this like larger scale experiential type store or something you think that you are considering scaling even greater?

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Calvin McDonaldChief Executive Officer" data-reactid="183">Calvin McDonaldChief Executive Officer

It was definitely a test. We — as you know, our vision is to be an experiential brand and we know we can deliver those experiences both within the store and outside of the store, and we do that very effectively across the fleet today. What Lincoln Park will allow us to do is to bring a lot of those experiences inside the four walls into the community on a consistent basis. So it is a test and we will learn from that and then figure out how within our flexible fleet that we have today from seasonal stores to small up to our large format this, we believe, could become just another mix within our portfolio of how we go into a market and deliver our experience to our guests. But it&#39;s a test we&#39;re going to learn and we&#39;ll go from there.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="John KernanCowen and Company — Analyst" data-reactid="185">John KernanCowen and Company — Analyst

Got it. Thank you, and congrats on all the momentum.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Calvin McDonaldChief Executive Officer" data-reactid="187">Calvin McDonaldChief Executive Officer

thank you.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="운영자" data-reactid="189">운영자

The next question comes from Camilo Lyon, who&#39;s with Canaccord Genuity. Please go ahead.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Camilo LyonCanaccord Genuity — Analyst" data-reactid="191">Camilo LyonCanaccord Genuity — Analyst

thank you. Good afternoon, everyone. Really good job here. Calvin, I think in your comments about the strength of the women&#39;s business, you talked about the bottoms category continuing to be a leading category for you. But what was interesting to us was the mention in the call that of joggers. Can you talk about how your female consumer is expanding their aperture with respect to your offering such that you&#39;re getting a larger share of closet? It seems like that is starting to manifest in the way that could serve you well from a perspective of creating a bigger moat around the customer that you&#39;ve invested in all these years?

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Calvin McDonaldChief Executive Officer" data-reactid="193">Calvin McDonaldChief Executive Officer

Yes. No — for sure. What I would tell you in terms of the experience of our business both across men&#39;s and women&#39;s, but I&#39;ll speak specifically to women&#39;s is the number of new guests we&#39;re seeing as well as our reactivated guests in addition to a current active guest. So bottoms continues to be the number one driver of new guest acquisition and both leggings and joggers are performing incredibly well at achieving that, as well as we dial-up our digital marketing initiatives in our email campaigns, we&#39;re proving that many of those tactics are proving very effective to reactivate guests into the brand and then, as you&#39;ve mentioned, to grow that share of wallet, which is equally something that we&#39;re focused on and exciting.

So bottoms really is a very balanced growth across those three pillars. When we look to building out our core and filling in the assortment opportunities we have around yoga, train and run, as well as OTC, we expect that much of that will drive the share of wallet with our existing guests, because what we&#39;re doing is truly bringing incremental assortment in choice to her and him, but in this case, to her, in the categories in which she sweats today, where we don&#39;t have product offering, but we know we have an opportunity to deliver it through our unique lens of science of feel. So, moving forward, we expect to continue to grow that share of wallet and, as you mentioned, depth of wardrobe and see a lot of opportunity to do that by just expanding into the sweat categories we already have a relationship for or with her today.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Camilo LyonCanaccord Genuity — Analyst" data-reactid="196">Camilo LyonCanaccord Genuity — Analyst

큰. Again my follow-up question relates to the differences between your existing guests&#39; purchasing behavior and the new guests that you&#39;re bringing into the store and into the brand. So is there any color you can provide in terms of this — the average spend between those two cohorts? I think that would be helpful in determining what the opportunity is of taking that new guests up that spend curve and have that person or that guest look like a more mature, higher spending consumer over X amount of time or months or what have you?

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Calvin McDonaldChief Executive Officer" data-reactid="198">Calvin McDonaldChief Executive Officer

Yes, we don&#39;t share sort of the average spend across our different guests. What I can tell you is, directionally that our email file growth continues to be very strong as well as our new guest acquisition and as we&#39;re building our CRM capability, our ability to then migrate or trade up those guests into new categories or deeper into the categories there in is proving to be a very effective way in which we&#39;re keeping the guests very engaged and active, as well as increasing their share of wallet. But equally focused on our high value guests, which we have incredible loyalty retention numbers within retail, so they&#39;re highly engaged, the retention numbers are very high in getting them to continue to engage in the category and drive growth is proving very (technical difficulty) it&#39;s a big area of focus for us and something that we&#39;re really excited about as we look to yoga, train, run and OTC as categories where we can expand the assortment with that engagement and retention to be able to increase the share of wallet. That whole CRM initiative is a big area and we&#39;re seeing some really good success from it.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Camilo LyonCanaccord Genuity — Analyst" data-reactid="200">Camilo LyonCanaccord Genuity — Analyst

Thanks so much. All the best in the next quarter.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="운영자" data-reactid="202">운영자

The next question comes from Kimberly Greenberger, who is with Morgan Stanley. Please go ahead.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Kimberly GreenbergerMorgan Stanley — Analyst" data-reactid="204">Kimberly GreenbergerMorgan Stanley — Analyst

큰. 정말 고맙습니다. PJ, I wanted to just follow up on the potential port congestion. I&#39;m wondering what you&#39;re hearing from your production department around the risk of port congestion. Is it that ocean cargo capacity is tight right now? Are there other signals that your production department is seeing that suggests we could see this port congestion either late second quarter, early third quarter? And on — with regard to your deliveries in particular, it sounds like you&#39;ve protected all of your deliveries from these potential delays, but I just want to confirm that you don&#39;t have any inventory on border that would be at risk of late delivery? And then I wasn&#39;t sure if I missed it, but did you offer any color or guidance on the second quarter SG&A? 정말 고맙습니다.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Patrick (PJ) GuidoChief Financial Officer" data-reactid="206">Patrick (PJ) GuidoChief Financial Officer

Yes. Thanks, Kimberly. So I&#39;ll take those one at a time. So with regards to the airfreight, you&#39;re exactly right, we are protecting our fall deliveries and that&#39;s why we&#39;re doing it, it&#39;s a hedge. So, we&#39;re eliminating the risk. I mean, there is always some risk, but we are eliminating most of it by utilizing airframe and not getting caught up in the congestion, which is — we&#39;ve seen this before due to tariffs, companies trying to get out ahead of it, but there is also a broader issue with carriers consolidating cargo, they refer to it as transshipments, but that&#39;s a separate issue that&#39;s related more to carriers, but that is an issue we&#39;re dealing with as well. So, hopefully, that answers your question on port congestion.

On SG&A, so we are committed to modest SG&A leverage for the year. We remain focused on that. As we mentioned before, we&#39;re using strong performance to invest in current and long-term growth and we&#39;re seeing a result from that. During this quarter, we leaned into digital marketing focused on building brand awareness, driving the guest acquisition. As Calvin talked about, we&#39;re expanding our testing of new growth vehicles, loyalty, self-care about this. And then we continue to invest in our North American online guest experience and data and analytics to drive conversion.

So the last few quarters have seen — we&#39;ve ramped up our investment, we&#39;ll start to see the benefit of those in the back half and for Q2 we&#39;re calling for flat on SG&A, and we see the bigger opportunities in our biggest quarters, Q3 and Q4, to add leverage to SG&A. But, for now, we&#39;re still making investments and we still feel like that&#39;s the right strategy for the business.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Kimberly GreenbergerMorgan Stanley — Analyst" data-reactid="210">Kimberly GreenbergerMorgan Stanley — Analyst

That&#39;s great. 정말 고맙습니다.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="운영자" data-reactid="212">운영자

The next question comes from Brian Nagel, who is with Oppenheimer. Please go ahead, Brian.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Brian NagelOppenheimer &amp; Co. — Analyst" data-reactid="214">Brian NagelOppenheimer & Co. — Analyst

확실한. (technical difficulty) there next quarter. I want to (technical difficulty) if you look at the gross margin trajectory, here in Q1, clearly still very solidly positive year-on-year, but the rate of year-on-year increase has moderated a bit over the past few quarters or so. So my question here is, if we can understand better what&#39;s occurred to sort of say facilitate that more modest rate — more modest pace of gross margin expansion and how should we think about that line going forward?

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Stuart HaseldenChief Operating Officer and Executive Vice President, International" data-reactid="216">Stuart HaseldenChief Operating Officer and Executive Vice President, International

Hey, Brian, it&#39;s Stuart. Let me speak to that in terms of the drivers within our supply chain that are — that have delivered the improvement over the last few years and then I think more specifically to your question more recently. So we were able to build the programs, have delivered the larger, more step function improvement in 2016 and 2017, and we&#39;ve been able to take that forward into 2018 and 2019 and it&#39;s a part of our long-term guidance that PJ outlined at our Analyst Day to deliver modest gross margin improvement over the next few years. There&#39;s really four things that are driving that. Scale, price breaks from volume increases. Second thing is segmentation of our supply chain, as we are able to drive more of our assortment into the lower cost segments of our sourcing strategy. The third thing is transparency as we&#39;re able to drive greater degree of specific production standards and costing negotiations across a broader part of our assortment. And the fourth thing is the distribution efficiencies that PJ also mentioned. So those four things are the drivers of our gross margin improvement. They — we&#39;re lapping some very significant improvements. They will naturally moderate into the future, but we still see significant opportunities over the next several years reflected in our guidance.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Brian NagelOppenheimer &amp; Co. — Analyst" data-reactid="218">Brian NagelOppenheimer & Co. — Analyst

That&#39;s very helpful. I appreciate it. If I could slip maybe a quick follow-up then just with regard to sales, Calvin, I think you mentioned in your prepared comments you just made reference to some of the soft lines or apparel-type weakness out there and clearly that did not occur in the (technical difficulty) results (technical difficulty). The question I have is, (technical difficulty) closer to the business, whether it&#39;d be geographically across the country or even month-to-month we tweak, did you see any signs at all behind these very, very strong numbers of some stress in that consumer within the category?

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Calvin McDonaldChief Executive Officer" data-reactid="220">Calvin McDonaldChief Executive Officer

I think when we look at Q1 and as we&#39;ve shared, the balance across our product categories, both men&#39;s and women&#39;s, both bottoms and tops, our brand activations be at some of the test with membership or the event activity that we are doing, being able to leverage our improved data analytics and digital marketing, I mean our guest was responding and as we shared store traffic of plus 8% and over 40% in e-commerce is a good healthy metric of a highly engaged guest and we did not — as we don&#39;t typically see in our business, significant swings, week-to-week or season-to-season or holiday-to-holiday. So I would — through Q1, we were very pleased with the momentum consistent with traffic driving a big piece of that business in both new guests as well as existing guests and balanced across our product range.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Brian NagelOppenheimer &amp; Co. — Analyst" data-reactid="222">Brian NagelOppenheimer & Co. — Analyst

Very good. thank you.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Calvin McDonaldChief Executive Officer" data-reactid="224">Calvin McDonaldChief Executive Officer

Operator, we&#39;ll take one more question.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="운영자" data-reactid="226">운영자

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

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Dana TelseyTelsey Advisory Group — Analyst" data-reactid="228">Dana TelseyTelsey Advisory Group — Analyst

Good afternoon, everyone, and congratulations on the terrific results. As you look at the comp, beyond the traffic, how are the other components of comp and how did they compare to last quarter? What are you seeing? And is there any more color on the merchandise margin and the progress there? thank you.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Patrick (PJ) GuidoChief Financial Officer" data-reactid="230">Patrick (PJ) GuidoChief Financial Officer

So — hey, Dana, it&#39;s PJ.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Dana TelseyTelsey Advisory Group — Analyst" data-reactid="232">Dana TelseyTelsey Advisory Group — Analyst

Hi

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Patrick (PJ) GuidoChief Financial Officer" data-reactid="234">Patrick (PJ) GuidoChief Financial Officer

So, with regard to the comp drivers, it is predominantly a traffic story. Again the traffic in stores up 8%, online over 40%. North American conversion online has shown significant improvement due to our ongoing investment there. So we&#39;re seeing a result there. As far as AUR and UPT, they have effectively — we have a relatively stable average order value or basket size, so it&#39;s predominantly a traffic story.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Dana TelseyTelsey Advisory Group — Analyst" data-reactid="236">Dana TelseyTelsey Advisory Group — Analyst

Got it. thank you.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="운영자" data-reactid="238">운영자

This concludes time allocated for questions on today&#39;s call. I&#39;ll now turn the conference back over to Howard Tubin for any closing remarks.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Howard TubinVice President, Investor Relations" data-reactid="240">Howard TubinVice President, Investor Relations

Thanks for joining us, everyone. We appreciate the time, and we look forward to speaking with you in about three months when we report at our second quarter results. 감사.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="운영자" data-reactid="242">운영자

This concludes today&#39;s conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Duration: 57 minutes" data-reactid="244">Duration: 57 minutes

Call participants:

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Howard TubinVice President, Investor Relations" data-reactid="246">Howard TubinVice President, Investor Relations

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Calvin McDonaldChief Executive Officer" data-reactid="247">Calvin McDonaldChief Executive Officer

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Stuart HaseldenChief Operating Officer and Executive Vice President, International" data-reactid="248">Stuart HaseldenChief Operating Officer and Executive Vice President, International

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Patrick (PJ) GuidoChief Financial Officer" data-reactid="249">Patrick (PJ) GuidoChief Financial Officer

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Matthew BossJP Morgan — Analyst" data-reactid="250">Matthew BossJP Morgan — Analyst

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Ike BoruchowWells Fargo Securities — Analyst" data-reactid="251">Ike BoruchowWells Fargo Securities — Analyst

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company&#39;s SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability." data-reactid="291">This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company&#39;s SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Motley Fool Transcribers has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Lululemon Athletica. The Motley Fool has a disclosure policy." data-reactid="292">Motley Fool Transcribers has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Lululemon Athletica. The Motley Fool has a disclosure policy.


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