lululemon athletica inc. — 2023 Q4

Thanks, Alex. In terms of what we're seeing, as I mentioned, all international markets, including Canada, are continuing their strong momentum into Q1. And in the U.S. is where we're really navigating the dynamic retail environment with the consumer. That is a little soft coming into the year.

Great. And Alex, I'd just add, on the Q1 guide relative to current trends, we don't speak to inter-quarter trends. But as Calvin shared, we were off to a soft start in the U.S., with all other regions performing strongly, and did guide to the 9% to 10% growth, which we feel is appropriate given what we're seeing in terms of trends.

I was hoping you could provide a state of the union on the men's business. Growth stabilized after decelerating a bit last year. Where do you see the largest opportunity is to defend and grow share in the men's business?

Great. Thanks, Lorraine. As I mentioned, I'm very excited about the product pipeline for men's this year. Last year, our men's business did increase, as you indicated, in the Q4, which was great to see that momentum back into our men's business.

Zeroed In, which is a new train franchise; and the Pace Breaker, which is our most versatile hero short item, bringing that into a track bottom and top to round out the needs for him.

Thanks, Brooke. I'll take the first half. We remain excited about the potential for lululemon in China. In Q4, our revenue increased 78% in Mainland China. Part of that was driven by the COVID-related store closures we experienced in quarter '22. But in the full year, our business grew 67%.

And then, Brooke, I'd add, though we don't break out regional outlooks, in terms of China, we believe that growth rate will be significantly above our guide of 10% to 11% for the full year, excluding the 53rd week. So coming off of a 78% growth in Q4 and feel well positioned as we move into '24.

Yes. Thanks, Mark. So inventory, we came in negative 9% on a dollar basis and plus 1 on a unit basis. We feel pleased with the level and currency composition of our inventory overall. Calvin did talk about a few pockets in the U.S. where we feel like we've got an opportunity to accelerate what's working in terms of inventory, but we still feel well positioned from an overall perspective.

Matt, I think the beginning of your question cut off. Do you mind just repeating it?

Yes. Thanks, Matt. Definitely still view across all markets being early innings in our growth story. When we look at Americas, as I mentioned, Canada is continuing its strong momentum into quarter 1. And within the U.S., we're navigating what we see as a dynamic retail environment and a consumer that's a little bit softer.

And Matt, I'd just add, we shared a long-term target of low double-digit CAGR for North America. We're tracking ahead of that to date in our plan. I feel comfortable with that long-term target. And then from a sales per square foot perspective, the U.S. is the highest in terms of sales per square foot by store. So -- and was -- continue to grow when we went through 2023. So we still feel like stores are an important part of that strategy.

Yes. So we guided for the year to 10 basis points operating margin expansion. We were up against a 110 basis point expansion in 2023. So really pleased with the leverage we saw in 2023.

Dana, from a marketing campaign perspective, as we've signaled, we continue to lean in to a variety of activations as a means to get at that unaided brand awareness. Building on the successes that we saw last year, we continue to test and learn. We did an Align campaign beginning of last year, very pleased with the results, followed up with an ABC campaign for him in the fall. Very pleased with that activation.

And Dana, I'd just add, in terms of marketing investment, our marketing as a percent of sales for 2023 was 4.5. And we're expecting to be in the range of 4.5 to 5 in 2024 and looking forward at this point in time.

Yes. Thanks, John. I'll break that down into how I view it, which is really 2 components. One is what's fueling the momentum in the business? And obviously, what are the unique strengths or the moat of the brand and how unique are we when we look and compare ourselves to others?

Yes. So we had shared, when we set out this Power of Three x2 plan, that we expected e-comm to grow slightly ahead of our CAGR of 15% sales CAGR, and store is slightly below. I would say, over the long-term time period, that view hasn't changed.

e-comm total growth, 17%, stores 21%; e-comm comped at 17%, and stores at 9%. So continue to see opportunity across both channels and leveraging that on the ecosystem.

This is Kelly on for Paul. Just wanted to follow up on the slowdown that you're seeing in the U.S. currently. Is one category or gender driving the slowdown? Or is it more broad-based?

Kelly, I would say, the slowdown we're experiencing in the U.S. is fairly broad-based. As Calvin mentioned, we have identified some opportunities that we can go after and product specifically on color and on women sizing, so on the 0 to 4 size range.

And just to clarify, is that being driven by what you would expect to be an improvement in the U.S. relative to what you're seeing in 1Q?

Yes. We'd expect some marginal improvement.

Yes. I would say it's a modest acceleration Q2 through Q4 and really points to some of the investments we're making on the marketing side in terms of new guest acquisition as well as some of the product opportunities that Calvin pointed to would be drivers of that.

Yes. I'll just add some of the products. As we obviously mentioned that we're chasing color and size. And we expect that, that will continue to improve starting in Q2 through. In fact, we're seeing -- and as color hits now, the guests respond incredibly well to it.

Thanks, Ike. So we aren't providing forward-looking comps, but we would share that we see North America below the guided growth range and then international significantly above.