Lululemon Athletica Inc. (NASDAQ:LULU) Q2 2023 Earnings Call Transcript

And that’s consistent across all markets, and we’ve seen a nice response in North America. So, it’s a similar formula, a similar approach to that, really driven, I think, from a North American business has responded well, I think, as we head into the fall and back to campus.

Brian Nagel: That’s very helpful, Calvin. I appreciate that. And then my follow-up question with regard to inventory. So just look at the numbers and given your comments, I mean, you’ve done a phenomenal job of really rationalizing, if you will, inventories. So my question, I mean, given the level of concern that was in the marketplace, say, just a few quarters ago about inventory, both on Lulu and in the channel. As you look at your inventories now, we recognize you always have to manage inventories. But are we really now past that critical point? Is there some type of all clear with regard to your inventory and the cleanliness [ph] of that inventory?

Meghan Frank: Yes. I mean, I would say we’ve made some significant progress. We still have some degree of elevated airfreight in our inventory balance on a cost basis. So, I would say not completely optimized and turns are a little bit slower than history, and our goal over the longer term would to get those inventory turns back to normalized historical rates. So still some opportunity, but I think the team has done a nice job in navigating what was a really dynamic supply chain and positioning inventory so that we were able to capitalize on the demand upside that we saw and experienced.

Operator: The next question comes from Dana Telsey with Telsey Group. Please go ahead.

Dana Telsey: Congratulations on your terrific performance. It’s great to see the progress. As you think about the traffic, which was so impactful, both for stores and for e-commerce. Any discussion regarding the loyalty programs? Is that a driver of this? And where do you stand on the loyalty programs with that enhancement? And then, Calvin, as you’re mentioning new product, I know outerwear is a big thing for last year. How do you see the AUR developing? And are we moving into a higher AUR zone going forward with some of the newness? Thank you.

Calvin McDonald: Thanks, Dana. As you mentioned, the traffic was very strong and pretty much completely in line across both stores and e-comm. So continuing to drive that omni strategy and have the guests connect with us wherever is convenient for them, has been a strategy of ours and continues to resonate and drive our business. And we’re cycling over the success of some categories and items last year that really drove traffic. So, very healthy, strong numbers on top of strong numbers, which is very encouraging as we look at just how the guests, both new and existing are engaging with us. I think membership is a part of that. We’ve had it before membership, but what the membership program obviously is allowing us is more deliberate ways to engage with that guest.

And I mentioned that it’s not going to be a number we consistently share. But I will indicate that the program continues to far exceed our expectations. We launched this less than a year ago. And we now have 12 million of our guests signed up in North America to the Essentials membership program, which is a significant unlock for us, our teams, it allows us to play into our strength of community, relationship, allows us to leverage benefits that are unique to that guest to that member, and allows us to interact with data and communicate with them that is very effective for our digital marketing teams as well as our store teams and look at the history and assist the guests in the way in which we do. So, it is an exciting new program for us that we have a lot of ideas and initiatives planned how we will continue to leverage.

I think it’s a part of it. I wouldn’t point all to it. I think ultimately, it’s the success of the brand, success of our product and product innovation, why the guest comes to Lululemon. And we see that continuing through for the Power of Three x2 period and beyond.