lululemon athletica inc.

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 quarter. 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 would like to turn the call over to Cal.

Thank you, Howard. It's good to speak with all of you again to provide an update on our first quarter. how we are adapting to and navigating the unique challenges presented by COVID-19, and the trends we're currently seeing in the business. I'm pleased to be joined today by Sun Che, our Chief Product Officer, who will share some product highlights. You'll also hear from Megan Frank, our SVP of Financial Planning and Analysis. Megan is one of our seasoned veterans within the finance organization who has stepped into an expanded leadership role while our CFO search is underway. I'm excited to be working closely with Megan and appreciate the support she's providing to the organization. Also joining us for the Q&A portion of the call is Alex Grieve, our VP and controller. Given recent events, I'd like to begin by sharing some thoughts on the tragic deaths of George Floyd, Breonna Taylor, Ahmaud Arbery, and far too many others. and the global outrage over longstanding issues of racial injustice and systemic discrimination. Black Lives Matter. Lululemon unequivocally denounces the unacceptable racial violence and oppression that directly impacts the black community. We are listening and learning and taking action. As a company, we are committed to increasing our investment in education, behavior change, and diverse representation within our organization. and calling on our global community to drive positive change into the future. I look forward to sharing more details and our progress on these commitments going forward. Let me turn now to our overall business performance in quarter one. Total revenue decreased 17%. Due to the significant number of stores closed during the quarter, we are not reporting same store sales. Our e-commerce business was particularly strong in quarter one, accelerating as the quarter proceeded. E-commerce comps increased 70%, which is on top of 35% increase last year. This represented a meaningful acceleration relative to our quarter four e-commerce comps of 41%. Gross margin declined 260 basis points as deleverage on occupancy and other non-product costs offset an increase in product margins and earnings per share were $0.22 versus $0.74 last year. And our financial position remained strong as we ended the quarter with $1.2 billion in total liquidity. I'd also like to provide some insights into our market share gains. While we typically do not share market share data under these circumstances, the data helps calibrate our performance and reinforces the strength of our brand. In the athletic apparel space, a category that is performing better than other apparel categories, we saw one of our largest quarterly gains in market share in recent years, according to NPD data. Given the challenges presented by COVID-19, our Q1 results unfolded in three phases, with each one exhibiting unique performance characteristics. We also had key learnings across the quarter. Let me now speak to our business performance within each phase. During phase one, the pre-COVID time period, we were very pleased with the momentum Lululemon carried into the quarter. Building off of our strong quarter four performance, our business accelerated through early March with total comps increasing over 20%. We saw strength in all of our regions except Asia, which was already experiencing the effects of the virus by this time. In mid-March, we entered phase two as COVID-19 began to spread across the globe. We moved quickly to protect our people and guests by closing the majority of our stores. While guests in North America and Europe were just beginning to deal with COVID-19, guests in China were beginning to move into the recovery phase. Our total comps in China were positive in March, with strength in our e-commerce business offsetting continued declines in our stores. During this period, as our store started closing globally, our e-commerce growth began to accelerate. In late March and April, we moved into the early recovery phase. A new normal emerged, and we were encouraged to see how quickly our guests were embracing both working and sweating from home. We saw a significant acceleration in sales trends that resulted in 125% e-commerce comp for the month of April. with this momentum continuing into the second quarter. During this phase, our overall business in China accelerated further as guests began to feel more comfortable returning to the stores. Our total comps in China increased in the low teens in April and have further improved into quarter two. While this period of time remains uncharted territory, I'd like to share some of our key learnings that are guiding our view of our business, both in the near and long term. We believe this context is valuable given we are not providing detailed financial guidance. In a moment, Megan will share some directional color for you on Q2 and the full year. Let me start by highlighting the strength of our management team. Our full leadership team came together. Our efforts demonstrated our strengths of being globally coordinated and regionally empowered. We stood up a global COVID-19 response team comprised of cross-functional leaders to ensure our actions were informed and appropriate based on conditions on the ground in each market. As a leadership team, we have never been more aligned globally. The current environment has advanced cooperation across our regions, and we're using the learnings from China to guide our actions in other regions that are now in the recovery phase. Let me shift gears now and speak to the broader Lululemon community and our stakeholder relationships. Our collective, including our employees, ambassadors, guests, vendors and landlords, has always come first. We acted swiftly during the quarter to support our collective in this crisis by closing the majority of our stores, committing to pay protection for all our employees, launching our We Stand Together Fund to assist our employees who were directly impacted by COVID-19, launching our Ambassador Relief Fund, and continuing to pay our rent and pay for committed merchandise orders. We believe that by supporting our collective and helping them navigate the day-to-day realities of this period, we will build even stronger relationships and increase the already strong loyalty and trust in Lululemon. These decisions are right for our people and for our brand. While there is a near-term impact on our P&L, these investments will serve us well over the long term. I'd also like to highlight the strength and resiliency of our supply chain and distribution network. As our e-commerce business spiked throughout the quarter, we were able to harness the power of our agile distribution network to ensure guests continued to receive a high level of service. We recently implemented intelligent sourcing capabilities that use machine learning and artificial intelligence to route e-commerce orders through our distribution network in the most efficient way. The benefits include increased delivery speed to guests, minimizing costs, and efficiently utilizing inventory pools to help reduce markdowns. In terms of inventory management, we acted quickly so that we align future deliveries with our new view of demand. We benefit from an inventory with a relatively high percentage of core product, about 40% overall, that has a shelf life beyond the current season and with limited markdown risk. And while we did see some of our factories in affected regions temporarily shut down, our diversified vendor base has served us well in navigating the day-to-day. Overall, these actions resulted in ensuring we had inventory to fulfill guest demand as our e-commerce business continued to accelerate, built capacity to ensure guests continue to receive the strong service levels as volume increased, and we are positioned well from an inventory standpoint for the second half of the year and maintain an ability to react to multiple demand scenarios. When looking more closely at our e-commerce business, guests continue to respond to the newness we introduced into our assortments. We leveraged our science-to-field innovation platform to bring innovation to the market and Sun will share additional details with you in a moment. We have been investing in our sites and our mobile app for the last several quarters to enhance the guest experience. These investments have improved functionality, including checkout, navigation, search browse, and the speed of our sites. And I'm thrilled to see how well these strategic investments are paying off. In recent weeks, we've seen order volumes equivalent to what we experienced during the holiday season in December. As I stated earlier, our e-commerce comps increased 70% in quarter one and 125% in April. I'm excited that we were able to create more online growth globally despite the challenges of COVID-19. While our stores were closed in Europe and APEC, the work and investments we have made in our regional sites took center stage and brought to the forefront the considerable potential for our brand across each market and the role e-commerce can play to grow our business. Europe delivered a stellar 170% e-commerce comp in quarter one. And in Australia, e-commerce comps increased nearly 150%. Our brand is clearly resonating in our international markets, and we continue to believe we can quadruple this business from 2018 levels by 2023. For the e-commerce business overall, our strength was broad-based, driven by both core product and new innovations. From a guest perspective, a healthy combination of existing guests, new guests, and store-only guests beginning to transact with us online drove performance. These trends are very encouraging and should drive our growth into the future as we continue to manage these relationships moving forward. As we have managed the business through the COVID-19 phases and entered the recovery phase, we have not taken our eye off the future. We have accelerated our innovation in key areas and have prioritized investments in our key growth initiatives. In the early days of the pandemic, we launched our community carries on portal on our e-commerce sites globally. This hub allows our guests, both existing and new, to live the sweat life through a number of virtual channels. More recently, we launched our digital educator service. This program allows guests to chat with educators via video to help them discover new products, answer their questions on fit, or help them find a gift. This program speaks to the power of our Omni educators and the engagement they can have with our guests, whether in store or online. We've clearly seen our guests interact with us in new ways via our digital offerings. We expect these behaviors and routines will continue as we move forward. We also believe that at home, virtual workouts will be an additive component of sweat regiments well into the future, even as studios reopen and return to normal operations. And we intend to continue to be there for our guests for all their sweaty pursuits, both inside or outside their homes. Let me update you now on where we stand with the store openings and our outlook on the future. As of today, we have reopened approximately 300 store locations across North America, Europe, Asia, New Zealand, and Australia. We will reopen the remainder of our stores when it is safe to do so in each community. While we're excited with the early results in our reopened stores and the acceleration we've seen in our e-commerce business, we recognize that many unknowns continue to exist in the external environment. We are moving forward with new store openings and strategic locations such as Greater China and continuing to invest in our future, but we are also being financially prudent as we move forward. We operate under the principle that we will not take an action in the near term that will hurt our business or our brand in the long term. We have removed $130 million from our originally budgeted SG&A spend for the year and have identified additional opportunities should the ramp we're currently anticipating revenue fail to materialize. I'd now like to turn it over to Sun who will share some product highlights. Sun?

Thanks, Calvin. First, I'd like to voice my support of Calvin's opening comments on the global movement to eradicate racial injustice and discrimination. I am a person of color and an immigrant who, through hard work and lucky breaks, have been able to overcome racial barriers that tragically still exist today. I am proud to be part of Lululemon and to be part of the team committed to driving meaningful and enduring change. Thank you, and with that, I am happy to be here to share our product results. We continue to leverage our Science of Fuel product platform to solve guests' unmet needs and fuel our future growth. We brought new innovations into our assortment in Q1, and I'm excited with what we have on tap for the coming months and quarters. Despite COVID-related store closures, we saw strong demand across key areas of the business driven by the following. One, continued innovation with new launches in the train category. Two, the new normal of working and sweating from home. And three, our ongoing ability to leverage our core franchises. Let me share a few highlights on each. From an innovation standpoint, early in Q1, we relaunched our proprietary Everlux fabric in two new styles, Wonder Train and Invigorate. These styles are designed for train, and our guest response was strong to both. In fact, we saw virtually no cannibalization within our key pant styles, and our women's pant business was one of our best performing categories in the quarter. Midway through the quarter, as our guests began adjusting to working and sweating from home, we saw a significant increase in demand for our yoga products, including our Align Bottoms, Yoga Mats, and Blocks. We are also seeing our guests gravitate to our Train products. In women's, we saw strong demand for Wonder Train and Invigorate Bottoms, as I previously mentioned. And for men, we saw strength in our Surge Pant and Jogger, as well as our License to Train Pant and Jogger. Even prior to COVID, we identified significant opportunity to grow our trained business for men, much like we have for women, by introducing additional styles of performance pants. We will continue to leverage this opportunity going forward. Finally, when looking at our core franchises, we expanded both our Align and Swiftly collections in Q1. In Align, we expanded into tops with the Align tank. This is particularly exciting because it is the first time we've expanded an existing Bottoms franchise into Topps, and the style has been a huge success for us so far. We see this tank being a key growth driver in our Topps business and see further runway for us to leverage some of our other pant franchises in similar ways. We also relaunched our Swiftly franchise with Swiftly 2.0. The technology behind the Swiftly makes it ideal for use in running and training, and our recent updates include shorter lengths, enhanced fit characteristics, and improved shape retention. Guest response to our enhanced versions of our Swiftly franchise has been strong, and we are excited to build upon the success in our tops business. Looking forward, I'm thrilled with what we have on the horizon to expand our share of closet with our on-the-move category for women. I don't want to give too much away, but later this summer, we'll be launching three new pant styles meant for out-of-studio use. but which leverage our expertise in fit, technical fabric, and construction that we are famous for in our performance leggings. It is clear to me that the desire to wear technical apparel, which also offers comfort, is here to stay. We do not believe that guests will be willing to forego either one of these attributes, even as they return to their normal lives over the coming months. We at Lululemon are extremely well positioned here based on the expertise we've developed over many years driven by the science of feel. The entire body of work underpinning this platform relates to how guests want to feel while wearing clothes, and we've always used this as our foundational principle supporting our innovation. We will continue to leverage this expertise to drive our growth going forward. With that, I'd like to thank our entire product organization for their ingenuity and dedication during this virtual and uncertain time. We remain confident in our innovation pipeline, and I am buoyed by the team's steadfast passion for beautifully solving our guests' unmet needs and how they are creatively responding to the ever-changing climate. And now, over to Megan to take you through our financials. Megan?