lululemon athletica inc.

Thank you for standing by. This is the conference operator. Welcome to the Lululemon Athletica, Inc. fourth quarter and year end 2018 conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. Analysts who wish to join the question queue may press star 1 on their telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star zero. I would now like to turn the conference over to Howard Toobin, Vice President, Investor Relations for Lululemon Athletica, Inc. Please go ahead.

Thank you and good afternoon. Welcome to Lululemon's fourth quarter earnings conference call. Joining me today to talk about our results are Calvin McDonald, CEO, Stuart Hazelden, COO, and PJ Guido, CFO. Before we get started, I'd like to take this opportunity to remind you that our remarks today will include forward-looking statements reflecting management's current forecast of certain aspects of Lululemon's future. These statements are based on current information, which we have assessed, but which by 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. 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. The press release and accompanying report on Form 10-K are available under the Investors section of our website, www.lululemon.com. Before we begin the call, I'd like to remind our investors to visit our Investor site, where you'll find a summary of our key financial operating statistics for the fourth quarter, as well as our quarterly infographics. Today's call is scheduled for one hour, so please limit yourself to one question at a time to give others the opportunity to have their questions addressed. And now I'd like to turn the call over to Calvin.

Thank you, Howard, and welcome, everyone, to the fourth quarter earnings call. It was another successful quarter for Lululemon as the momentum in our business remains strong. In fact, these results cap off one of the strongest years ever for the company. The leadership team is focused on leveraging the significant opportunities in front of us both over the course of 2019 and in the coming years. And before going any further, I want to take a moment to express our sincere gratitude to our teams around the world. It is our educators, our store teams, and our local brand and community partners around the globe who create that special connection with our guests day in and day out. Turning to our fourth quarter results, we are pleased with how the organization executed exceptionally well over the holiday season. Our preparation and planning allowed us to deliver another quarter of robust performance, and looking at the full year, the results were equally impressive. Our 2018 results demonstrate the strength of Lululemon today as we enter the next phase of our growth. Our compelling product assortment, retail experience, and community-based brand activations continue to resonate strongly with our guests. Our strategic investments in the business to support our digital expansion and supply chain improvements delivered impressively on both our top and bottom line. All of this combined with our significant growth outside North America allowed us to achieve a high level of results for our employees and shareholders. Looking now at 2019, we are focused on building upon our momentum as we pursue many opportunities on the near-term horizon. Starting with product, we will continue to deliver the newest technical product innovations that Lululemon is built upon. We will leverage our strength and success in our core categories while we also continue to expand and test into new areas where we see category expansion opportunities. In women's, we will expand many high-performing product categories that have driven considerable success, including office travel commute, outerwear, and our bra assortment. And, of course, we'll continue to innovate and be an industry leader in yoga. Men's is one of our largest and most exciting areas of future growth. both for our current and new guests going forward. We recently launched two styles of boxers, and this spring we'll expand our fast and free franchise into men's as we further leverage NULUX to offer men a new solution for warm weather runs. And we remain excited about self-care, given the strong guest response to our tests. We believe this category holds great opportunity for us and is a natural extension for our brand. We continue to attract and acquire new guests. while building greater share of wallet with our highly engaged existing guests. And we see many ways to create unique experiences for all of our guests to help them achieve their goals of living the sweat life. Our bottoms category continues to perform exceedingly well and has proven to be a strong acquisition point into our brand for both women and men. Our upcoming run campaign builds nicely upon the strength of our brand activations in the past year and will enable us to develop deeper relationships with existing guests to expand this important category. And we continue to be excited by the potential that our loyalty program holds for our brand. Our first members-only event in Edmonton was a huge success, and we are thrilled with the overall response to the program in this market. We also recently launched the membership test in Denver, and we'll expand the test to an additional city in the United States in the coming months. When looking at our digital ecosystem – We are still in the early stages of our development with so much potential ahead. We've just begun speaking to our guests in a more personalized way, but we are ready to accelerate our capabilities in this area in the coming quarters. We also have additional opportunities to improve the experience our guests have by continuing to enhance our search, navigation, and checkout functionality. And we can also improve the way we use our sites for brand storytelling to drive guest engagement. Internationally, we are particularly excited to be able to expand our digital reach this year as we launch local market sites in Japan, France, and Germany. In addition to our digital growth opportunities, we will continue to strategically expand our store fleet in square footage as we open more stores in new and existing markets, continue the co-located remodel program, build upon the success of our seasonal store strategy, and also test some exciting new store formats that create unique experiences for our guests. Finally, we see significant potential for our brand outside of North America, and we will continue to build upon our recent momentum. China is an area of focus and significant opportunity for us. We are seeing strong success across this market and are pleased to see more and more people living the sweat life and engaging with our brand. We will accelerate the pace of new store openings and continue to connect with our guests through local community events and brand activations. We will also build upon the strength in our digital channel as we see a pathway for this segment to represent 50% of our business in the years to come. In Europe, we will leverage the city-by-city expansion strategy as we add new markets, such as opening our first store in Amsterdam two weeks ago. We look forward to sharing more of our international strategy during our analyst day next month, which I will describe in just a moment. These are just some of the many areas where we see growth opportunities in the year ahead and beyond. To deliver on these strategies, I'm excited to share that we recently expanded the responsibilities for members of our senior team. The evolved structure builds upon the successful track record of our existing leaders and creates an organization designed for speed, product, and category development, while focused on guest innovation and global scale. Key elements of our new structure include Stuart Hazleton will now oversee our international business in addition to continuing to serve as our Chief Operating Officer. Celeste Burgoyne will now drive global guest innovation for Lululemon while also leading an expanded Americas organization that brings together all of our in-store community and omni experiences. Sun Che continues to serve as our Chief Product Officer. and several other senior leaders, including Tom Waller, our head of white space, and P.J. Guido, our chief financial officer, will report to me. In addition, we're creating a new role and function to support and enhance our brand positioning around the world. We've begun an external search for a chief brand officer to lead several areas, including branding, events, partnerships, social impact, and sustainability. All of us on the leadership team are energized about our performance in 2018 and the opportunities ahead, and our outlook for the next five years. The team has executed extremely well on our 2020 plan, achieving several milestones ahead of schedule. It's now an ideal time to outline our vision and growth plans for the next five years. To provide further insights, we look forward to hosting an analyst day in New York next month where we will talk further about our plans and ambitions. In closing, I'm proud to say that we entered 2019 with great momentum and an energized team ready to begin this exciting next chapter in the Lululemon growth story. And with that, I'll hand it over to Stuart.