lululemon athletica inc.

Thank you for standing by. This is the conference operator. Welcome to the Lululemon Athletica first quarter 2021 earnings 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 then one on their telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Howard Toobin, Vice President, Investor Relations for Lululemon Athletica. Please go ahead.

Thank you and good afternoon. Welcome to Lululemon's first quarter earnings conference call. Joining me today to talk about our results are Calvin McDonald, CEO, and Megan Frank, 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 quarterly report on Form 10-Q and in today's earnings press release. In addition, the comparable sales and store productivity metrics given on today's call are in constant dollars. 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 at where you'll find a summary of our key financial and operating statistics for the first 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 Cal.

Thank you, Howard, and hi, everyone. I'm excited to speak with you about our first quarter results and the momentum we're seeing across the business. As the press release describes, we're off to a particularly strong start to 2021, with revenue growth of 88% over the same period last year. And when you look at our two-year CAGR, our performance truly stands out and shows the sustained momentum in the business. Our first quarter results reflected our strength across all drivers of growth, fueled by the continued expansion in our e-commerce business, our performance across categories and geographies, and a rebound in the number of guests shopping in our brick and mortar stores. I want to take a moment to recognize the resiliency and agility of our teams across the globe Their commitments and dedication enables this impressive performance, and it would not be possible without them. On today's call, I will speak to our first quarter results, our power of three growth pillars, and the progress toward delivering against our impact initiatives. You'll also hear from Megan Frank, our CFO, with further details about our Q1 financial performance and our guidance outlook. We'll then be happy to take your questions. Looking at the quarter, Our results were driven by strength across channels, regions, and product categories. Here are a few key operating metrics. Firstly, our total revenue of $1.2 billion reflects an increase of 25% on a two-year CAGR basis. This growth rate represents an acceleration relative to our three-year CAGR of 19% leading up to the pandemic and reinforces that we remain early in our lifecycle and have a unique business model that allows us to thrive in an ever-changing environment. In addition, our revenue increased across each of our regions, up 23% in North America and up 41% in our international markets, both on a two-year CAGR basis. Secondly, growth within our e-commerce business remains strong, with comps up 50%, which is on top of the 70% increase in the same quarter last year. And thirdly, Adjusted earnings per share were $1.16 versus 74 cents in 2019, significantly ahead of our expectations. And we are also pleased to see our momentum extending into the second quarter. We delivered at this high level while we also strategically managed a number of ongoing macro operating challenges, such as continued store closures, capacity constraints, supply chain challenges at the ports, and reduced air freight capacity. While challenges of all types will no doubt remain going forward, I'm confident we will continue to manage them effectively and deliver outstanding results. In summary, Lululemon continues to become stronger quarter after quarter. We are very early in our growth story, and we are well positioned for the post-pandemic world. And the opportunities ahead of us are significant and continue to expand. I will now provide a bit more color on the first quarter results. We are firmly on track to deliver on our commitments contained in our power of three growth plan through our three pillars of product innovation, Omni guest experience and market expansion. Within product innovation, we continue to leverage our science of field platform to deliver technical athletic apparel to our guests. Our sweet spot is creating versatile and stylish products that include technical innovation, comfort, and flexibility. In the first quarter, we saw strength across our assortment with women's revenue increasing 23% and men's growing 27% on a two-year CAGR basis. I will now share a few more thoughts related to our product. We saw strength in women's across the assortment as guests are responding well to both tops and bottoms. Our performance in tops was driven by core styles and franchise extensions, such as the aligned tank. Our male guests return to our stores as we emerge from the pandemic. Men's growth outpaced women's growth on both a one and two year basis. And we are seeing very positive momentum in our on the move assortment. Across both the women's and men's businesses, our sales success reflects our ability to consistently introduce new innovation to our guests as we expand core and newer categories and leverage our spectrum of raw materials. We're in the early days of our product journey with ample opportunity to expand across our four key product areas of yoga, run, train, and on the move. And speaking of run, this quarter we launched a global run campaign that highlights how we are making running more accessible and inclusive. And we took a broad-based approach that included messaging that featured male and female athletes in a broad range of products. A platform that highlighted existing ambassadors along with new ambassadors, such as ultramarathon runner Myrna Valerio, Brooklyn-based filmmaker and founder of Running to Protest Coffee, Canadian 10,000-meter record holder Natasha Wodak, and Olympian leader and mentor Colleen Quigley. I'm pleased with the results of our REN campaign, and it's an example of the leadership Nikki Neuberger, our Chief REN Officer, is bringing to the company, and I look forward to her joining us on a future call. Let me now turn to our Omni guest pillar and the strength we saw across channels in Q1 with the upside in revenue driven by both our stores and e-commerce businesses. Here are a few highlights I'd like to share. The healthy comps in our e-commerce channel were driven by a mix of new and existing guests. We're also happy to see the investments in our digital business paying off, and we're continuing to improve product education, offer better outfitting solutions, and tell stories in a more compelling way. When looking at our store channel, I remain very enthusiastic about our performance. We are committed to stores and we are building more stores this year and seeing more and more great real estate opportunities become available in great areas in key cities around the globe. We will continue to be opportunistic in grabbing these locations as they become available. We are also fortunate to have our store teams in a good position as well. The pay protection initiative we implemented last year for employees has allowed us to retain and engage them throughout this period. This meant we could reopen stores quickly, and this agile and dedicated team has allowed us to continue to support the increased traffic momentum in the stores that we are experiencing now. This helped us deliver against our plans to kickstart our stores and reengage our store-only guests. Here are some details on our performance. Firstly, store productivity improved to 88% of our levels in 2019. This exceeded our expectation and moves us towards our goal to return to productivity levels consistent with 2019. Secondly, even as traffic to our stores increased significantly in the quarter, conversion remains strong and continues to increase in the double digits. And as a reminder, these capacity constraints are just starting to lift in many markets in this quarter. Touching on Mirror, we continue to be pleased with the performance of Mirror and the opportunities within the at-home fitness space. Mirror had a strong Mother's Day and remains on track to deliver $250 to $275 million in revenue in 2021. We continue to leverage the Lululemon ecosystem, and by the middle of this month, Mirror will be featured in nearly 90 Lululemon locations in the United States. We're well on our way to 200 shop and shops in time for the holidays later this year. In addition, we now have dedicated mirror specialists among our educators in each of these stores, and the early sales results are encouraging. We will have more to share about MIRROR later in the year as we gear up for new features, add more live classes, and expand into Canada, the first international market of several we will see in the future for MIRROR. Switching now to our international growth, we continue to be very pleased with our results and our growth potential across our three regions of China, Asia Pacific, and EMEA. Andre Mastrini has hit the ground running as he leads our international team and sets ambitious growth goals. And I look forward to having Andre join us in the future for a call. From our new stores in China to continued growth in Asia Pacific to our online performance in EMEA, the results continue to reinforce that we are early in the growth trajectory. And as I have said before, I can see a time in the near future where our international business grows in size to be equal to our North America business. In closing, I am proud to share a few details about our latest impact initiatives, which helps us to achieve our multi-year goals, including our goal to make 100% of our products with sustainable materials and end-of-use solutions. We launched Lululemon Like New last month, our first re-commerce program. This is a trade-in and resale program for our guests, and all of the profits are reinvested in our sustainability initiatives. We have launched in California and Texas, and the response is encouraging. This kind of program reduces carbon, water, and waste and also enables us to attract new guests, particularly younger guests who are fans of thrifting. In the quarter, we also introduced our earth dye collection, which is made completely from materials upcycled from plants and uses less water and is an example of the type of collections we're expanding in the future. In closing, these results and our continued focus on innovation demonstrate our confidence in the future and how we can continue to pull the many levers of growth we have available to us. Let me now hand it over to Megan for a review of our first quarter financials and our guidance outlook. Megan?