lululemon athletica inc.

Thank you for standing by. This is the conference operator. Welcome to the Lulemon Athletica Inc. second quarter 2026 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 the telephone keypad. Should you need assistance during the conference call, you may reach an operator by pressing star then zero. I would now like to turn the conference over to Howard Tubin, Vice President Investor Relations for Lululemon Athletica. Please go ahead.

Thank you and good afternoon. Welcome to Lululemon's second quarter earnings conference call. Joining me today are Meghan Frank, Interim Co-CEO and CFO, and Andre Maestrini, Interim Co-CEO, President and Chief Commercial Officer. 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 our earnings press release. In addition, The comparable sales metrics given on today's call are on a constant dollar basis. The press release and accompanying quarterly report of Form 10-Q are available under the investor section of our website at www.lululemon.com. On today's call, Meghan and Andre will begin by discussing recent business developments across our regions and the plans and strategies we're implementing to drive improved performance. Meghan will then discuss our detailed Q2 financials, the impact Recent trends are anticipated to have on our performance for the remainder of the year and our revised guidance outlook. And then the team will be happy to take your questions. Before I turn the call over to Meghan, I'd like to remind 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. Meghan, over to you.

Thanks, Howard. Welcome, everyone, and thank you for joining us. I want to start the call by taking you through our Q2 results. what we're seeing in the business today and how this is informing our decision to lower our guidance for the full year. Then Andre and I will spend most of our time discussing North America and China mainland. What's happened since our last earnings call and the actions we were taking across these markets to improve the trajectory of the business. As you recall, we began the year with an action plan focused on three pillars, product creation, product activation, and enterprise enablement. A key objective of our plan is to strengthen our full price sales trajectory and position the company for long-term growth. In Q1, we saw some encouraging signs indicating we were moving in the right direction to strengthen performance in North America while continuing to expand our global growth engine. As we moved into Q2, we faced negative commentary in the media and social channels, which impacted traffic and softer than planned response to some new product launches, which contributed to a moderating sales trend. As you've seen from our press release, Q2 revenue came in below our expectations, with the shortfall driven predominantly by China mainland, where revenue grew 4%. North America finished down 8% for Q2, slightly ahead of our guidance. As we moved into Q3, while we are seeing good guest reaction to our activations and some of our newer styles, the overall response to our product launches remains inconsistent. And we've continued to see pressure on the brand in both of our largest markets. Based on our assessment of these current trends, we have updated our guidance for the remainder of the year. At the enterprise level, we have several key actions underway to improve our performance. Andre and I will get into the regional detail in a moment. Our product teams are chasing into strong performers, including our groove and defined styles more aggressively than in the past, and working with vendors to strategically manage future inventory flows. On brand, we are moving forward with our increased marketing investments in the back half of the year. We're seeing strong community engagement with our recent campaigns and activations. And while we haven't yet seen an impact on the top line trajectory, we are encouraged by the response. And on expenses, we've been continuing to drive efficiency across the organization. Given current trends, we've heightened that focus in the back half of the year while protecting investments in product and brand. We're excited our incoming CEO, Heidi O'Neill, joins us next week. We expect she will take a deep dive into the business, evaluating our strategy and current action plan. And we look forward to the fresh perspective she will bring to define the path forward for Lululemon's next chapter. In the near term, our teams remain focused on execution. As we look to the future, we remain confident in the underlying strength of Lululemon's brand, the connection we have to our highly engaged community of guests and ambassadors, and the equity we have built. We believe our greatest opportunity is to build on this foundation through continued investment in product innovation, reinforcing our premium positioning, and the long-term brand health. At the same time, our strong financial position allows us to invest in near-term actions that support full-price sales and top-line improvement, while remaining focused on the significant growth opportunities ahead. I'll now share an update on our action plan and then hand it over to Andre to discuss regional performance. The markets we operate in are competitive, which makes it imperative for us to focus on unique and innovative ways to inspire our guests. As you know, we've been working on this through our action plan with a focus on product and brand. We anticipated our plan would take some time to gain traction as we bring in new innovations, elevate our store and digital experience, and increase and redirect our marketing spend. But we expected a better response than we are seeing as we enter the second half of the year. So let me share some details starting with product. As we've stated on prior calls, a top priority for the management team is returning to full price sales growth as we focus on restoring and protecting our brand health for the long term. Despite the headwinds we are experiencing, we are moving forward with our actions in this area, which will include bringing updates to our core franchises, introducing new styles, overall SKU reductions, and tightly managing inventory levels. In addition, we are leaning into our chase capabilities. As we discussed on prior calls, faster chase times allow us to read and react to guest demand and get back into certain strong performing styles more quickly. We're chasing approximately 20% more volume this year relative to last year. In Q2, while we're seeing green shoots in product, particularly within some of our newer away from body bottoms for women, we're also seeing an inconsistent performance in our assortment overall. This included a greater than expected slowdown in some of our core categories, particularly leggings. In women's tops, guests are responding well to scuba and steady state, now offered in our super loft fabric, and our defined franchise continues to perform well. In men's, we are seeing strength in metal vent tech tees and our golf tops, supported by the storytelling campaigns we've developed around some of our elite ambassadors, including Lewis Hamilton and Min Woo Lee. We're also pleased with the halo effect our design for golf tops are having on our ABC bottoms. as they pair well together and provide guests with a versatile and technical solution on the golf course. Let me now spend a moment on our women's bottoms business where performance has been mixed. Leggings trends so far this year have been below our expectations with sales declining approximately 20% in Q2. While we have been planning into lower legging sales and we are seeing good traction in several of our away from body styles, we are not yet able to fully offset these declines. Leggings remain an important category for us, where we remain the market leader. The wellness trend is strong, we continue to be a leader in technical fabric development, and guests continue to purchase our leggings for their exercise and training needs, particularly yoga and Pilates. We remain committed to the category, but there are shifts occurring, with guests looking for away-from-body silhouettes. We're happy with the performance of several new away-from-body styles we've recently introduced, including the Groove Wide Leg, the Align Fold-Over Jogger, the Breesley, and our updated dance studio pant. All are trending well and we expect momentum to build in the back half of the year and into 2027. As we look at the second half of the year, in addition to Away From Body Bottoms, we'll continue to focus on new and updated styles across our activities. You'll see updates across RUN with new cold weather innovations in outerwear featuring Wonder Puff and our Featherweight Down franchise and a new version of our popular Big Cozy to highlight just a few. I also wanted to mention accessories, where we experienced a 13% decline in Q2. While backpacks are strong, we are seeing overall softness in bags. In addition, we are strategically editing the overall accessories assortment to better align with our go-forward vision for the brand. Moving now to product activations and marketing. We are working to strengthen brand relevance, desirability, and demand by engaging more directly with guests through social channels and differentiated community experiences. while using those platforms to tell richer stories about our brand, products, and innovation. We held several successful events in Q2 and into Q3, and engagement levels are encouraging. Let me highlight two. In June, we celebrated our foundation in yoga with the launch of our summer series. We partnered with leading yoga Pilates and sculpt instructors to bring free classes to tens of thousands of guests across 70 cities in the US and Canada. More recently, in August, we brought back our Seaweeds Half Marathon and Festival for the first time since 2019. The reaction from guests, the local community, and across social media was outstanding. Nearly 10,000 runners from 24 countries ran the half marathon, and approximately 14,000 attendees joined us for an evening of movement and music headlined by DJ John Summit. This event brought incredible energy to our hometown market of Vancouver, and through our virtual seaweeds challenge on Strava, we extended participation well beyond race weekend with more than 85,000 participants from 120 countries around the world. Based on the strong response, we already made the decision to bring back seaweeds again next summer. Guest engagement in events like this demonstrate the passion for our brand and the strength of our connections with the communities we serve. We are increasing our marketing investment in the back half of the year to drive improved brand heat guest acquisition, traffic, and overall top-line performance. We are investing more heavily in mid-funnel creator and social content to build relevance, engagement, and product consideration. One recent example is our YouTube series featuring some of our elite athletes. We remain confident these investments will help to reignite our sales trends over time as we continue to elevate our product and marketing execution. Let me now speak to our enterprise enablement and cost management initiatives. We've been reducing our expense base and working across the enterprise to operate as efficiently as possible. Given current top line trends and our expectations for the back half, we're taking an even more aggressive stance on expense management. Our ongoing initiatives continue. Efficiencies across our supply chain and non-merchandise procurement and implementation of new technologies including AI powered systems and automation. On discretionary spending, we are driving new efficiencies across travel, professional fees, store labor hours, and headcount growth moderation. On real estate, we continue to scrutinize every deal across all new store openings and optimizations. We're now planning approximately 35 net new store openings this year, down from our guidance of approximately 40 last quarter. And our plans call for a significant reduction in pop-up stores from 65 at the end of last year to approximately 40 by the end of 2026. We're being intentional with our cost management strategies and looking to drive enduring efficiencies beyond this year. We won't take steps that will negatively impact the brand or our long-term growth potential, but we recognize that current top-line trends necessitate a smaller expense profile and we are acting accordingly. We know there is much more work to be done. Our management team leaders and employees are focused on serving our guests and executing initiatives to drive an inflection in our business. Now let me turn it over to Andre to discuss regional performance in more detail. Andre?