lululemon athletica inc.

Thank you for standing by. This is the conference operator. Welcome to the Lululemon second quarter 2019 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 ask a question may ask a question by pressing star then 1 on their telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Howard Toobin, Vice President, Investor Relations for Lululemon. Please go ahead, sir.

Thank you, and good afternoon. Welcome to Lululemon's second quarter earnings conference call. Joining me today to talk about our results are Calvin McDonald, CEO, Celeste Burgoyne, EVP Americas and Global Guest Innovation, 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 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. 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 quarterly report on Form 10-Q and in today's earnings press release. The press release and accompanying quarterly report on Form 10-Q are available under the investor section of our website at www.lululemon.com. Before we begin the call, I'd like to remind our investors to visit our investor site, where you'll find a summary of our key financial and operating statistics for the second quarter, as well as our quarterly infographic. 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.

Thanks, Howard. I'd like to welcome everyone to our second quarter earnings call. I'm pleased to take you through our results, which reflect continued strength across all areas of the business. Lululemon had another successful quarter as our teams across the world continue to build upon momentum in our business and execute on our Power of Three vision for growth. On today's call, I'll provide an overview of our quarter two results, including further details on some key initiatives within product innovation and our international business. Next, Celeste Burgoyne, our EVP of the Americas and Global Guest Innovation, will join us to discuss the success within the North American region, early learnings from our Lincoln Park experiential store, and the progress of our membership pilot. Then PJ will provide a detailed financial review as well as our guidance outlook. To wrap up our call, I'll provide a few closing comments, and then we'll be happy to take your questions. Looking at our second quarter results, Momentum in the business remains strong across product categories, channels, and regions. We're now two quarters into our five-year vision, and I'm pleased with the strong execution and passion across the business to continue to deliver on our growth priorities. In quarter two, total revenue grew 22%. Constant dollar comps increased 17% on top of a 19% increase last year, and earnings per share increased 35%. I'm also proud to share how we are living into our vision to be the experiential brand that ignites a community of people living the sweat life through sweat, grow, and connect. In July, we opened our first experiential store in Chicago's Lincoln Park neighborhood, and just a few weeks ago, we hosted our eighth annual Seaweez Half Marathon and Sunset Festival in Vancouver. These are both fantastic examples of how we are bringing innovation to guest engagement and connecting with our community, both inside and outside the four walls of our store. You'll hear more specific details from Celeste shortly on these exciting initiatives. I will now update you on our power of three growth pillars, product innovation, omni guest experience, and market expansion. I'll speak to product and international, and then Celeste will take you through the North America and omni guest experience. As you'll recall, our five-year vision details our path to grow our core business in the low double digits annually, while doubling our men's, doubling our digital, and quadrupling our international businesses between now and the end of 2023. Within our product innovation pillar, guest response to our merchandise offering was particularly strong across the board as we continued to leverage our key core franchises while always delivering new innovation through the science of feel. In women's, comps grew 13% as bottoms remained strong, driven by both pants and shorts. Within the men's business, comps grew 27% with ongoing strength in both tops and bottoms. Like women's, the men's side also saw strength in shorts. Across both men's and women's, we continue to innovate to serve our guests across key activities, yoga, run, OTC, and train. Within train this quarter, we launched our latest collaboration, Stronger as One with Barry's. This dual gender collection was designed specifically for the type of workouts that are popular in Barry's Boot Camp Sweat Classes. with fabrics that offer abrasion resistance, breathability, and moisture wicking. The strong response to the collection provides a compelling proof point of the opportunities as we push further into the trained category in future seasons. Now I'll provide a quick update on self-care. We're thrilled with the initial guest response as performance has exceeded our expectations. Look for several new additions to the line between now and the end of the fiscal year. We're in the early phases of this pilot and see many opportunities to create product with our unique positioning of solving sweaty problems for athletes. Looking ahead across all categories, I'm happy with our near-term product pipeline and the many innovations that our teams have in longer-term development. Through our unique approach to innovation, the science of feel, we've recently relaunched our metal vent collection. This builds upon our successful franchise by offering improved performance attributes. and we're supporting a launch with compelling storytelling to attract new and existing guests to this product line. Our outerwear continues to represent a meaningful opportunity for us, and we're excited to launch waterproof wool in the fall. This fabric innovation will offer guests the warmth and texture they expect from wool while keeping them dry as they spend time outdoors. We'll also be expanding our lab product to 45 stores and online for fall. As we showcased for you at our analyst day, Our lab product reflects our pinnacle aesthetic and appeals to a younger, more urban guest relative to our core. Turning now to international, let me share an update on the progress and success we're seeing in Europe. I spent several days with the team in London a few weeks ago, and we're continuing to see strong trends in this market now that we are more established in the region. In quarter two, total revenue in Europe grew 35%. We're also pleased with the continued success of our global event strategy, and in June, we hosted our annual Sweat Life Festival in London. This amazing event brings together guests, educators, ambassadors, and other members of the local community for a weekend of sweat classes, yoga, personal development, and meditation. In August, we hosted Sweat Life Berlin for the second time, and I'm excited that we are bringing this event to Paris for the first time in early October. We're also pleased with the recent opening of our first mainline store in the Saint-Germain area of Paris and with the rollout of our local market e-commerce sites in France and Germany. Both sites went live during quarter two and we're happy with their performance to date. In our APAC region, the momentum continues to be driven by strength in both our store and online channels. Total revenue in APAC grew 33% in quarter two with particular strength in China where we saw market growth of 68%. We opened two new locations in China and our fourth store in Singapore with our Marina Bay location, where in the early stages of our growth potential and remain on track to open approximately 15 stores in China this year, almost doubling our store count when compared to the end of 2018. And we continue to see strength in our e-commerce business as guests engage with our brand across channels. In China, our e-commerce comps were over 70%. and our new local market sites in Korea and Japan are exceeding initial expectations. I will now turn it over to Celeste to share an update on North America and OmniGuest experience. Celeste?