lululemon athletica, Inc. Q4 FY2024 earnings call

• Quarter four performance exceeded revised guidance; full year 2024 saw revenue growth, improved operating margin, and EPS growth.
• Product innovation: Launched Glow Up, Daydrift, BeCalm, and has a strong product pipeline including new franchises, fabrics, and anniversary celebrations.
• Brand awareness strategies: Local community activations (e.g., Rock 'n' Roll Half Marathon, Glow Up studio opening), ambassador relationships (e.g., PGA golfer Max Homa, Formula One champion Lewis Hamilton), and global brand campaigns (e.g., Live Like You Are Alive).
• U.S. business: Guests responded well to newness, but cautious consumer in dynamic macro environment; modest U.S. revenue growth expected for 2025.
• Square footage growth: Plan to grow square footage by approximately 10% in 2025 with new store openings and optimizations.

In quarter four, total revenue excluding the 53rd week increased 8% or 9% on a constant currency basis. Operating margin increased 40 basis points to 28.9% and earnings per share increased 16%. For full year 2024, total revenue was $10.6 billion and excluding week 53, increased by 8% or 9% in constant currency. Adjusted operating margin increased 50 basis points to 23.7% and adjusted earnings per share increased 15%. By region, excluding the 53rd week: Americas revenue increased 2% or 3% in constant currency with comparable sales flat; China Mainland revenue increased 38% or 39% in constant currency with comparable sales increasing 27%; Rest of World revenue grew by 22% or 26% in constant currency, with comparable sales increasing by 17%. In store channel, total sales increased 13% on a constant dollar basis, excluding the 53rd week, and ended the quarter with 767 stores globally. Digital channel revenue increased 8% and 4% excluding the 53rd week and contributed $1.8 billion of top-line or 50% of total revenue. By category, excluding the 53rd week, men's revenue increased 12% versus last year, while women's increased 6% and accessories and other grew 9%.

• 2025 revenue expected in range of $11.15 billion to $11.3 billion, growth 5%-7% vs 2024, excluding 53rd week growth 7%-8%; FX to have negative 1% impact on revenue growth.
• Expect to open 40-45 net new company-operated stores and complete ~40 optimizations, overall square footage growth ~10%.
• Gross margins expected to decrease ~60 basis points vs 2024, driven by fixed cost deleverage, FX headwinds, and tariffs.
• SG&A expected to have 40-50 basis points deleverage vs 2024, driven by investments and FX.
• Operating margin expected to decrease ~100 basis points vs 2024.
• First quarter 2025 revenue expected in range of $2.335 billion to $2.355 billion, growth 6%-7%; gross margin flat with Q1 2024; SG&A rate deleveraged ~120 basis points; operating margin deleveraged ~120 basis points; EPS $2.53-$2.58.

• Dynamic macro environment leading to cautious consumer and slower traffic.
• Foreign exchange fluctuations impacting revenue and margins.
• Increased tariffs related to China and Mexico affecting gross margins.
• Uncertainty in retail environment affecting sales and margin expectations.

Q: Alex Straton asked about modest U.S. revenue growth expectation for 2025 and cadence.

A: Calvin McDonald said guests responded well to newness, newness back to past levels, guests responding to product launches; Meghan Frank added U.S. on lower end of low-single to mid-single digit growth range for full year, Q1 not materially different from Q4.

Q: Brooke Roach asked about marketing strategy and response to Membership Madness Week.

A: Calvin McDonald said encouraged with results, activations geared to acquire new guests and drive loyalty, many activations with strong engagement like thousands registering for Membership Madness.

Q: Dana Telsey asked about international plans and margin cadence.

A: Calvin McDonald talked about global go-to-market strategy with customized activations, stores playing big part; Meghan Frank said op margin guidance 100 basis points decline, FX and tariff headwinds major factors, Q1 op margin decline 120 basis points, SG&A 120 basis points deleveraged in Q1 and 40-50 basis points for year.

Q: Lorraine Hutchinson asked if first quarter traffic impact is included in full year guidance.

A: Meghan Frank said balance of year outlook reflects similar trends to Q1, Calvin McDonald mentioned current good energy and product response.

Q: Matthew Boss asked about U.S. sales metrics and inventory.

A: Meghan Frank said U.S. sales trends similar to Q4, inventory level and composition good, flat markdowns for Q1 and full year.

Q: Janine Stichter asked about SG&A philosophy.

A: Meghan Frank said SG&A has FX headwind and investment in Power of Three x2 roadmap, depends on business environment for flex.

Q: Aneesha Sherman asked about Americas vs international growth and investment flexibility.

A: Meghan Frank said Americas low-mid single digit growth, international planned, investment flexible dependent on business outlook.

Q: Michael Binetti asked about gross margin difference and guidance conservatism.

A: Meghan Frank said top-line outperformance and category mix difference in 2024 impacted gross margin, guidance reflects current view on mix and revenue outlook.

Q: John Kernan asked about marketing spend and flexibility.

A: Meghan Frank said marketing at ~5% of sales, invested in marketing, could flex up dependent on business trend.

Q: Paul Lejuez asked about traffic slowdown in regions.

A: Meghan Frank said U.S. traffic slowdown, Canada and international not materially different, Lunar New Year timing impact on China international.

Q: Ike Boruchow asked about U.S. gender sales difference and North America trend.

A: Calvin McDonald said women's up 6%, men's up 12%, good results from newness; Meghan Frank said Americas guidance range captures potential uptick but thoughtful planning due to uncertainty.

Q: Jay Sole asked about square footage growth in U.S. and China.

A: Meghan Frank said not breaking out specifics, 40-45 net new openings, 10% square footage growth, majority of international openings in China.