lululemon athletica inc.

Q1 2026 Earnings Call — June 4, 2026

Dana Telsey (Telsey Group): Hi. Good afternoon, everyone, and thank you for the update. As you think about the product assortment, the brand, how much of the weakness in the top line is coming from maybe the shift to more fashion versus what Lulu is doing? And how do you think of the new items that you've introduced? What percentage of the assortment of there is it? And how do you see adjustments given the learnings you have from the initial entries that you've had? And just lastly, on the margins, the go-forward look of what margins should stabilize at, is clearance accelerating in the back half, or are you looking for it to decelerate? Thank you.

Management: I would say overall in terms of our performance relative to the market, which I think was your first question, we're seeing relative stability in the trend of the athletic space. What we really experienced was a drop off primarily in traffic into a lesser degree conversion over the last six to seven weeks. Our analysis indicated it came from two key areas. The first being spikes in negative commentary around the brand from a number of factors, really at the end of Q1 and entering Q2. I mentioned that's now subsided, but we do believe it impacted our traffic and top line to a degree. In addition, while we've seen some of our product launches perform to expectations, we did see some recent product launches which performed under expectations. So we're really focused on what we can do to action that. In terms of go forward margins and how much is driven by clearance, we are expecting gross margin 90 basis points under last year. Our prior expectation was 130. Within that, we're expecting a modest flat to modest improvement in markdowns for the full year.

So we're having a bigger impact in spring-summer clearance in Q2 with an expectation of markdowns up 50 basis points and then some recovery as we move into the second half. Can you remind me, you had a question on percent of assortment. How much of the percent of assortment is new versus how much is core styles? And is the weakness in performance more related to core or the new? Is there a way to assess it? Thank you.

Analyst: Yep, yep. So as we set out this year, our aim was to increase our penetration of newness from 23 last year to 35% over the course of this year. Right now we sit at about 30%. It will fluctuate as we move throughout 26. I would say we've seen some of that newness perform to expectation and some be a little short. Our recent performance is impacting all areas of our business from a product perspective. Thank you.

Rick Patel (Raymond James): Thank you. Good afternoon. Question on new products not meeting expectations. Can you share if you see this as a risk for international markets? I'm curious if overseas customers are more drawn to core franchises and there are less sense of the newness or if this is something that you would expect headwinds from a little further down the road to just some color on how new products are resonating with international consumers would be great.

Management: We see that the portfolio that we have in international markets with more recent is more diversified in the composition of the sales. Yes, you're right by bringing the core franchise to life with different colors, different iterations, is still a growth driver in international that plays stronger in those markets than our original North American market. So both we play on the strengths of our well-known global franchises and we have this diversified newness portfolio in those markets operating to a bigger extent.

Analyst: Great. And then just to follow up on the question on markdowns, can you help us understand the assumptions for the back half, which imply an improvement in markdowns? Is that just a function of easier comparisons, or are you assuming demand improves in the back half?

Management: In terms of the second half, I would say Q3 will be a sequential improvement to Q2, and then we expect markdowns in Q4 to be under last year, given that was our high water level from a markdown perspective. So I'd say sequentially better as we improve throughout the year and again for the full year, flat to modest improvement. So Q2 will be our high water mark this year. Thanks very much.

Lorraine Hutchinson (Bank of America): Thank you. Good afternoon. I was hoping to dig into the China business a little bit more. Can you talk about what happened there, if it was different than the experience in the U.S., and also the factors that give you confidence that it will improve as the year goes on?

Management: When we look back at the last six to seven week period, which is really where we've seen the shift in the trend, we did experience an impact in China from some of the negative commentary that was out in the market, most pronounced at the end of April and early May. We have seen that business improve to a degree. We are still holding our guide for the year at 20%. I would say that's fairly reflective of what we see as the underlying trend of the business and in line with the expectation we have for the second half.

Management: As the brand noise has begun to dissipate, we continue to engage with guests in new and unique ways, including our yoga festival on the Great Wall just last week. Looking forward, we'll be hosting our sixth annual Summer Sweat Games this summer, highlighting our latest run and train products. So we are confident that we are strong partners premium positioning in the market, the guests are going to really engage with the brand and we'll be back to our underlying trend of business in line with this annual guidance that remains a growth of approximately the 20%.

Matthew Boss (JP Morgan): Great, thanks. So, Megan, could you speak to the progression of revenues in the Americas through the first quarter and elaborate on demand trends that you've seen in May, maybe relative to the outlook for low double-digit decline in the second quarter, and just opportunities you see for sequential improvement in the back half?

Management: In the Americas, we did see a negative 4% trend in Q1 overall, which was ahead of our expectations for low mid-single digit. I would say February and March were our strongest months. The shift we've seen in trend has really been over the last six to seven week period. So we saw trends softened at the end of April and then into May. I would say our expectation for North America in Q2, a decline of low double digits. We described the number of actions we're taking in the business in terms of investment into brand to shift the narrative there and drive brand heat, as well as some of the product activations we're pursuing, including chasing an incremental 20% relative to last year, still managing inventory well in line with our trend.

Analyst: Great. And then maybe just a follow-up, Megan. So with newness, I think you said restored to 30%, and obviously relative to your comments on some of the below-plan reception to recent product launches, maybe just to circle back on the magnitude of decline that you're seeing in the Americas. Is it product design, category demand, macro, a little bit of all? Maybe if there was a way to bridge or try to bifurcate the buckets as to the magnitude of the decline that you're seeing in the Americas, that would be helpful.

Management: I would say, and this is based on our early analysis of this trend that's been about six to seven weeks. We have been evaluating and looking at the macro. Obviously, there's some macro noise. But we are, as I mentioned earlier, seeing some stability in our category right now. We're seeing ourselves drop below where we were performing in early Q1. Really seeing that predominantly through traffic and then to a lesser degree conversion and really pointing to those two aspects that I noted in terms of negative commentary around the brand and really a spike there towards the end of April. Also from a product perspective, saw really favorable results and tracking well relative to our expectations in February and March. We saw that spike in late April and then weren't as thrilled with our product performance with our recent launch. Good response, I would say, to the away from body yoga styles, but didn't have the halo to the balance of the assortment that we expected.

Michael Benetti (Evercore): Thanks for taking our questions here, and thanks for all the detail, Megan. Could I just ask a little bit different way on the second half? Could you maybe just help us understand what's contemplated in there relative to 90 days ago so we understand? I know you were really clear on how you're adjusting to Q. I'm just curious, the update a little bit in the second half. And then maybe just on the skew reductions, the skew reductions in North America that you were talking about doing some testing, if you're seeing anything in terms of better conversion or sales productivity in the areas where you have started to look at that work, and where do you feel like you're most over-skewed?

Management: In terms of second half trends, they're fairly consistent, I would say, with the underlying trend of our business right now. So it's a slight improvement relative to Q2 guide, but that's really reflective in some aspects of the impacts we saw in late Q1, early Q2 subsiding to a small degree and that trend carrying forward. We have not included, as I mentioned, any meaningful impact from any of the initiatives that we have underway. So, again, just to the extent that they perform to what we would expect, we could see some upside to the range.

Management: On the stores, we decided to have a less dense presentation of our product, featuring this 15% fewer SKUs. That allows us to better highlight the new styles and innovation. It also brings a sharper focus on merchandising by performance on one side and lifestyle on the other for a better, easier to navigate store layout. We drastically reduce any markdown activity in the stores to contribute to a more premium shopping experience for the guests. We are really encouraged and we think that over time is going to build up and gain more traction.

Management: In the first quarter, we saw a high single digit increase in reg price globally, and we did see a meaningful sequential improvement in the U.S., which points to some of the success of our strategy, particularly from SKU reduction also and removing some of the markdowns from store.

Brooke Roach (Goldman Sachs): Good afternoon, and thank you for taking our question. Megan, Andre, I'd love your thoughts on the product design language and the learnings that you've realized from some of the new style launches that haven't resonated to your expectations. What changes should we be expecting in the way that you inform the way that you design and the new products that are coming to market on a go-forward basis? And then just an additional question on traffic. Does the shift in traffic that you've seen in recent weeks over-index to any specific consumer demographic cohort or guest type?

Management: I would say certainly some learnings in terms of both design and then also importantly how we activate products and what resonates in terms of guest messaging. I would say, you know, we saw good guest response from some of the products that we launched around the new look of yoga away from body, but didn't see the halo that we had hoped for and had in our plans. I do think color is an aspect of that. Some of these things also will take a little bit more time in terms of continuing to get them in front of guests, making sure they're seeing the newness and building into them over time.

Management: In terms of how we activate just front and center in stores and online, that continues to be a focus for us as well. No, we really did see a broad-based traffic reduction, which was really all demographics.

Jay Sol (UBS): Great. Thank you so much. I'm just wondering if you can elaborate on the social media issues that you talked about. What did they stem from? How long did they last? Why did they end? Is there any lingering impact? If you could help us with that, that'd be great. Thank you.

Management: There were a number of factors impacting the negative commentary around the brand, both I would say media and social. A couple to mention would be, you know, obviously we had the proxy contest during that period, as well as we had some questions around the composition of some of our products in mid-April. As I mentioned, these stories have died down and subsided, but we have not yet seen a return to our pre-disruption trends. We're closely monitoring and feel it's prudent to update our range in terms of what we're seeing today in the trend of the business.

Analyst: Was it mostly in the U.S. and China, both, or other regions?

Management: I would say it was across regions, and predominantly I would say China was impacted as well as the U.S.

Brian Nagle (Oppenheimer): Good afternoon. So my first question, you talked a lot about the recent products that may have not performed as well as you expected them to. So as you look at these products, do you have abilities or are there levers to pull to maybe course correct on these products? And then, you know, given the performance of some of these products lately, has that encouraged you or caused you to change any type of launches you expected for the balance of the year?

Management: Certainly taking our learnings forward, I would say in terms of what worked and mentioned a few of these, but our run assortment was strong in Q1. Day drift has been a great style for us to find, including new silhouettes. I mentioned in terms of new look of yoga didn't respond in Halo as we had expected. In terms of what's coming, we're still really excited about our product pipeline. We do have new lounge fabrics in the second half of the year. We'll have a hot weather assortment launching across run, tennis, and golf. We are reordering 20% more on an annual basis relative to last year. That's pretty significant in terms of the penetration of our business that we're chasing into and certainly prioritizing the styles that are working well. A couple examples there, the groove pant has been a style that's been a great seller and we're reordering there. Define continues to have a lot of energy around it, including the new silhouettes. I would say, again, we aren't embedding anything meaningful from these strategies into our guide for the second half. So to the extent that they perform to how we would typically expect them to, we could see some upside.

Analyst: That's helpful. And then my second question, so Megan, you mentioned, I think in your prepared comments, you've met with Heidi. Heidi clearly has not yet joined the company, but she will join here in the not-too-distant future. Here's a question I want to ask you. From an organizational standpoint, now having the leader named, although not at the company, does that change what you're doing at the company now, at least knowing who the CEO is going to be?

Management: We remain focused on our action plan. We're looking to have the same goals around restoring the full price health of the business. We're pivoting based on current trends, but really trying to set the business up so that Heidi steps in, hits the ground running, and builds on top of the actions that are already underway.

Janine Stichter (BTIG): Hi, thanks for taking my questions. First on marketing, I think you said you're planning for an increase versus your previous plan this year. Maybe quantify that and help us understand where that spend is going, how you're thinking about marketing in general. And then on the unit growth, moving to the lower end of the guide, any thoughts on how you think about the return on new stores and what might cause you to go below that number at any point in the future.

Management: Yes, we've increased our marketing investment. We are now taking it to approximately 10% to 15% above last year. So it's in the range of 6% to 6.5% of sales versus last year at 5.6%. In terms of where the dollars are going, we're certainly going after activations, building on some exciting recent events, including the Great Wall Yoga Experience. We've got Seaweez coming up, which is our Vancouver half marathon. We'll have a pinnacle yoga event in New York City to kick off our summer series. Another example would be the U.S. Open Activation. We'll have some collaborations coming up, continue to build on grassroots community activations, including run and yoga events locally. We're going to have some new experiences for press and partners, notably a pop-up in New York City showcasing new product. You can look for also a new content series on our social channels with some elite athletes. Those are just a few examples of what's to come.

Management: In terms of unit growth, we did have a few stores push into 27. We continue to perform well on our new store openings. Just a reminder, we've got 10 to 15 openings in North America. Eight of those are Mexico, so it's just a small handful of stores in the North American market. We still see return on capital of one year for our new stores and then two to three years for our optimizations. We continue to keep a really close eye on that, and we'll continue to refine our plans for 27, but still looking to make sure we've got the right experience for our guests in each market.

Mark (Baird): Thank you for taking my question. Good afternoon. On China, you talked about Chinese New Year shift adding to the Q1 growth rate. You also noted momentum slowed late in the quarter on the negative commentary before it subsided. So what's the clean underlying comp trend in China today? And as you hold the roughly 20% growth for the year, with the majority of the international store openings going there, how much of that growth is comp versus new units? And then on the margin side, it looks like China is nicely accretive to the margin. Now, just any updates there on how you're thinking about it?

Management: In terms of China, we were tracking above our guide for Q1 prior to the disruption. We did come in at 30%, 23% on a constant currency basis and did have eight points within that 30% related to the New Year shift. We're guiding Q2 in the mid to high teens. What we're viewing as the underlying trend of the business is generally in line with our full year guide at 20%, which is where we really have the second half positioned as well. From a comp perspective, we haven't broken out the full year comp, but we did have a 13% comp in Q2 relative to the 30% total top line. Yes, I would say in terms of operating margins, still some healthy expansion in the China market and continue to invest behind that business to drive the long-term trajectory.

Analyst: Great. And then a follow-up on the product development timeline. What's the gating factor to get to the 12 to 14 months that you talked about? And when does the faster speed to market translate to better comps? And then any gross margin trade-off to think about as you compress the calendar? Does that reduce sourcing flexibility? Just higher costs as you move the product? Anything to think about there?

Management: In terms of go-to-market or making good progress, there are certainly some technology unlocks that we can have over time. Those take time to implement as well as rollout. We're focused on moving as quickly as we can to that faster timeframe, and we're really excited about that. In terms of faster speed to market, those will build over time. We continue to make progress with every delivery or every new season in terms of our speed to market. In terms of costs, there's always tradeoffs in terms of speed with air freight, but I wouldn't equate any higher product costs with our overall go-to-market timeline.

Anisha Sherman (Bernstein): Thank you so much. So you talked a lot about markdowns. I want to ask about full price sales. Andre, you said that was the primary focus. Can you update us on the timing of when you expect full price sales to turn positive, given some of the challenges on new launches? And then a quick clarification, Megan, I think you said in response to one of the other questions, high single digit increase in REG price Q1. Is that average selling price for the non-markdown full price sales in Q1?

Management: I was talking about REG price, which is the same in my mind as full price in Q1. So that full price increase is high single digits for the full quarter globally. The U.S. was slightly negative, but was a meaningful sequential improvement from what we saw in Q4. In Q2, we're expecting full price sales overall to decrease in the mid-single digits, given the top-line trend and some of the seasonal clearance activities that we'll pursue to make sure we stay on top of inventory. When we look at the full year, our expectation is flat to slightly better in terms of full price, and I would expect it will progress throughout the year.

Analyst: Okay. Thank you.

Management: Thank you. That's all the time we have for questions today. Thank you for joining the call and have a nice day.

Q4 2025 Earnings Call — March 17, 2026

Brooke Roach (Goldman Sachs): Good afternoon, and thank you for taking our question. When do you think the product assortment will be appropriate to deliver a return to inflection in North America growth, and how are you thinking about the headwind from the removal of markdowns throughout the year and the introduction of that new full-price selling product throughout the year? Thank you.

Management: Thanks, Brooke. So as we mentioned, we are focused on re-accelerating the full price health of our business. In Q1, we will see a meaningful inflection relative to Q4. We expect in Q2 that we will be approximately flat in full price trend in North America and then flipping positive in the second half of the year. So that's how the year progresses. In terms of markdowns, we are lowering that penetration. So as we mentioned, we were up 130 basis points in Q4 and up 60 in the year in 2025. For 2026, we're expecting a modest improvement in markdowns for the full year, predominantly driven through the second half. And we are expecting just a modest increase in Q1.

And just to clarify, are you seeing any improvement in your base business as you've put these new products into the assortment 1Q to date, or is the improvement largely driven by the new product launches?

Management: Nope, we're definitely seeing improvement to date. So we've seen a meaningful inflection in terms of full price coming out of Q4 and into Q1. It will take us some time to inflect, and we think it will be sequential throughout the year, flipping positive, as I mentioned, in the second half. But seeing some really great green shoots, mentioned some of these in terms of some new innovations. We launched unrestricted power, ThermoZen and ShowZero, which will be commercialized later this year. We also had an exciting run capsule that launched earlier this month. So we're building on that strength as we move throughout the quarter. It's still early, but definitely seeing some positive indicators. Also would point to we did see employee sales pick up as well over the last few weeks as we introduced new product. Great. Thanks so much. I'll pass it on.

Lauren Hutchinson (Bank of America): Thank you. Good afternoon. As you work to inflect the North America sales trajectory to positive, are you doing any reassessing of your marketing, either dollars spent or types of marketing outreach to try to really bring in a new customer and reignite your existing, or is it more status quo with the activation and grassroots styles?

Management: Thanks, Lorraine. I'd share, you know, I do think we're looking at our marketing strategy. So really focusing on engaging the guest, ensuring that newness is front and center and visible. I think you'll see us shift more into utilizing brand appropriate influencers and ambassadors as we move throughout the year. We are really focused on our activations and engaging with our guests through those means. So I would say, you know, you saw some evidence of that in Q1 in terms of us being very active in, you know, I would say our activity activations. So with the BNP Paribus open in Indian Wells, with tennis, Milan Olympics. So really excited about the assortment that we showcased there. And then also Studio Yacht in L.A. We also had a Chinese New Year activation this year. This quarter.

Adrian Yee (Barclays): Great. Thank you very much. A couple of questions. Andre, on the 35% newness, can you talk about kind of whether that is obviously styles, which you mentioned, or color choice and SKUs, and what products are you sunsetting to make room for the newness? And then along those same lines, how does the reporting structure of who makes final decisions for quantity make, you know, what to chase, et cetera, within the merchandising organization? I know Elizabeth Binder reports into you, but just trying to figure out how this, the system is working in terms of that. And then my final question is how much of the CapEx is AI tech driven, like the tech stack to support AI and how do you plan to use that, incorporate that into the business? Thank you so much.

Management: Thanks, Andrea. So we are moving our newness penetration from 23% in 2025 to 35% in 26. That is, I would say, new product never seen by the guests is how I'd frame that. So it's not just new colorways on existing products. It's truly new product. So I would say in terms of sun setting, we do have some skew reduction as part of just being more pointed in our assortment and making that newness also more visible in our store and e-commerce expressions. So that is a process we're going through as we sort the line. Jonathan Chung, who's our creative director, as well as Liz Binder, our chief merchant, both report in to me. And we've been leaning in together, you know, as we make these shifts. And then in terms of CapEx, we do have some investments in the AI space. You know, shoring up our data and baseline so that we can move off of that. Really, I would say our AI initiatives are focused on guest-facing, also enhancing our go-to-market calendar and supporting that speed aspect that we've discussed. So I would say it's an exciting and important part of how we're going after that enterprise enablement strategy.

Laurent Veselescu (BNP Paribas): Oh, good afternoon. Thank you very much for taking my question. Megan, it was very helpful in terms of understanding the newness of 35%. For the audience, the North American full price realization, can you maybe just unpack a little bit better in terms of like, I think you mentioned 1Q is better than 4Q, but in terms of percentages, where is it now versus a couple of years ago and where do you want that to go back for 2026? Thank you very much.

Management: Yep. Thanks, Laurent. Yeah, so if we look at 2025, we did have a higher markdown penetration than we would have liked. So it's illustrated by 130 basis point increase in markdowns in Q4 and then 60 basis points for the year. We haven't broken out the penetrations in 2026, but I would share we expect to see a meaningful improvement in Q1. We're already starting to see that. But we are shifting from the lowest water line in Q4. So we did have 130 basis points higher markdowns. So that points to having the most pressure on full price. So the sequential improvement is meaningful, but it will still under index relative to our total top line. We do anticipate it'll flip flat, around flat in the second quarter, and then the second half of the year would flip positive. We're really helping to enable this go through the newness, curation, as well as SKU reduction, and then the way we've positioned inventory for the year. So we have positioned units flat to slightly down. So really looking to read the trends on newness and chase where that's possible. As we've mentioned before, we have developed some capabilities, enhanced capabilities in terms of our product team's ability to chase into what's working. So we believe this sets us up well for returning to healthy full price sales penetration for the year and building off of that for the long term and in 26 as the opportunity presents itself.

Laurent Veselescu (BNP Paribas): Very helpful. And then I think you mentioned that square footage should grow low double digits. Just curious, whenever we find out about the new CEO and if that individual wants to take a fresh look at that commitment, can you maybe just unpack that a little bit more for the audience? How much of that is committed to for 2026? And then just this quick question here on marketing, I think in your 10K, it's 5.7% of sales. Where should that go for 2026? Thank you very much.

Management: Yeah, on your question, Laurent, about stores, you know, we are taking a disciplined approach to capital spending and looking at our real estate project on a case-by-case basis. We continue to see good returns from new store openings and store expansions as these strategies contribute really to improve the shopping experience. So for 2025, to give you a number, NSOs are returning at above 100% ROI across both North America and international markets. So representing a payback period of less than a year. So we'll feel confident with that. And also the strategy of optimization of existing doors in key influential cities to bigger format with proven quality traffic is sounded. You know, the productivity of our top larger stores is higher than the average of our fleet that is one of the best in the industry with sales per square foot over 1,400. So, globally, to be precise, in 26, our plan calls for approximately 40 to 45 net new openings, which yields square footage growth to the low double digits. So with NAM approximately 15 openings and international in between 25 to 30 openings, with the majority in mainland China.

And for the marketing spending, yeah, and I just add Laurent from a store perspective it's really a store-by-store look that the team is doing, being really mindful of where we're opening making sure it's relevant for the guest and you know and we've got the right positioning in each market. And you know, as Andre just mentioned, it's 15 stores in North America, the majority of which would be in Mexico. So, you know, we have just a small handful of new store openings and you know, we are watching them closely, we would be largely committed through 26 to our square footage expansion plans, but the team feels really confident in them. I'd say from a marketing perspective, our guidance assumes we're relatively flat from a rate of sales perspective in terms of marketing spend. I think what you'll see is we're shifting the composition of that spend a bit more towards these impactful guest activations we discussed, as well as utilizing brand-appropriate influencers and ambassadors as we move throughout this year. So I would say a little bit of a shift in strategy on the spend, same waterline, and we'll continue to monitor to the extent that it's working for us. We'll continue to push into it.

Matthew Boggs (J.P. Morgan): Great, thanks. So, Megan, could you maybe speak to the bridge from 4% underlying revenue growth in the fourth quarter to the 1% to 3% in the first quarter and 2% to 4% for the year? Meaning, maybe just if you could elaborate on the balance between the improvement in full price selling that you're citing relative to what's offsetting or constraining revenue growth as we think about the course of the year.

Management: Yep, absolutely. So Q4, we're up 6%, excluding the fifth through third week. We did guide to 1% to 3% for Q1 and then 2% to 4% for the full year. I would say it's really the ramp of full price. So we had, I would say, the lowest waterline, as I mentioned, in Q4 with markdown overpenetrating. We had 130 basis points of pressure in the markdown line in Q4. So we are improving that in Q1, but it will be still negative in Q1, flipping flat in Q2, accelerating in the second half of the year as we continue to build into it and then lap, I would say, the markdown performance that we had in the second half of 26.

Management: Great. And then, Megan, just on the more than 200 basis points of operating margin contraction this year, how much of the decline do you see tied to more transitory items? And what do you see as the revenue growth necessary to see operating margins return to expansion multi-year?

Management: Yep. So we guided to 250 basis points decline. I would say the majority of that when you step back from it is add backs of incentive comp and labor that we reduced in 25. And then also the proxy contest expenses. That's the majority of it as you step back. Obviously, we've got some headwinds and tariffs, but we're largely offsetting the year over year within the year. I do see this as the low water line that we'll continue to build upon as we transition into 27. So really looking at getting back to that healthy full price baseline. We're obviously having a little pressure on the fixed components of our P&L based on that revenue waterline of 2% to 4%. We haven't put a fine point on the leverage aspect. I think it will depend on the trajectory of the business, and then there are some decisions that we can make in terms of investment levels. So we'll definitely share more on that, but definitely expect it to improve from here. Great. Best of luck.

Paul Legere (Citi Research): Hey, thanks, guys. Lots of focus on the North America full price improvement, but I'm curious if we should read that as you guys being happy with full price selling in the rest of the world and China, maybe to talk about how those regions air from a full price penetration perspective to the Americas. And also maybe match that with what sort of level of newness do you see in those regions? Have the percentages also gone down, and are they also supposed to go back up in 2025, or has it been more constant there?

Management: I would say we have not seen the headwind we've seen in North America in our international regions in terms of full price, so still happy with the levels we're seeing there. That said, we do believe that the steps we're taking in our action plan in terms of product creation and activation will benefit all regions. But I would say we're still pleased with the trends there. I'll pass it to André just to add some more color on what we're seeing in the regions.

Management: Yeah, absolutely. I think that the model that has been developed to grow and expand in international is working because it generates full attention on the full price. And let me call out the different layers which is first a brand first approach we are building the premium position of lululemon in active wear market in those key regions second a diversified portfolio of product across the different activities where we want to lead in then this obsession of full price and minimal discounting and markdown, and also an elevated presentation in our stores and the guest experience across not only the key doors, but also our online experience. And we are staying true to our community grassroots approach. We also keep standout events that generate organic traffic, like the Summer Sweat Games, for example, in China. And that's why we are importing as a playbook to do studio yet that Megan you mentioned or our participation in the open of Indian Wells or new categories that we want to expand. So yeah, I said everything we are working on developing new styles and newness at the global level will also benefit all our markets to keep driving the focus and engaging the guests on full price realization. Thank you. Good luck.

Michael Benetti (Evercore): Hey, guys. Thanks for all the help here today. Could you speak a little bit to the Canada slower sales outlook in first quarter? Is that something you're seeing today, Megan? Maybe just a few thoughts there. That market's been trending better than the U.S. for a little bit. I'm just curious what you're seeing in that market. And then maybe you could just help us, you know, shortening the timeline on design from go-to-market. I think you diagnosed that as a pretty long timeframe, 18 months plus. It's been a big focus for you. You could just give us an update on, you know, what you're seeing there and some of the early progress or opportunities to shorten the lead times and what you think maybe that could go to as you look to, you know, kind of speed up the go-to-market process here.

Management: Yep. Thanks, Michael. So in terms of Canada, we're expecting, we are, inflecting full price across the North America region, the Canadian consumer has been a little bit more sensitive to markdown. So we're seeing a little bit more of a pronounced impact there, I'd say. So that's what's driving that differential. But expect still the same opportunities in terms of assortment shift and focus on gas with our activations and think we'll reset to a better waterline.

And then in terms of the go-to-market calendar, um, so we are going from about 18 to 24 months. We're expecting we could go to closer to 12 to 14 months over time. I'm really focused on, uh, tools, uh, process and systems and leaning into automation, including in the AI space. Um, you know, to lean into that calendar. Um, you know, we did mention that we have a new head of technology. He's got an AI focus. We're excited about him joining the team and the things that we can unlock in that space. Um, and there's, I would say a lot of energy in the business around this reduction and simplification of our process.

Michael Benetti (Evercore): Okay. Maybe if I could ask one follow-up. I think as I look back at last year, if I look at the first quarter, you mentioned that traffic was a little weaker than you'd like in the quarter and the high-value guest was weak as well. You kind of gave us that breakout. Are you seeing better traction with the high-value guests as you start to flow the newness in and you start to get some confidence in the full-price selling as you at least start to improve sequentially from the fourth quarter here?

Management: Yeah, I'd say it's early in the quarter. You know, I'd like a little more time just to understand what's going on with the high-value guest. But I would say we're seeing, as I mentioned, great green shoots on some of the new product launches, and I would expect that extends to that guest as well. So we'll share more on what we're seeing as it progresses.

Dana Telsey (Telsey Group): Hi. Good afternoon, everyone, and nice to see the progress. As you think about the performance apparel market and just the activewear market, did you grow share this quarter? Did it stay the same? What did you see in the growth of the premium athletic and the performance apparel? And then with the early results, positive results to the new assortments coming in, is it bottoms? Is it tops? And what are you learning from that as you develop new products for the next timeline for the balance of the year? Thank you.

Management: Thanks, Dana. In terms of market share, so we maintained share in the total apparel market and we lost about less than a point in activewear. So that's where we stand on that. You know, as Andrea mentioned, we maintained our position as the number one women's activewear brand in the U.S. In terms of what's trending for category tops and bottoms, we're seeing, I would say, some nice performance across both. You know, the unrestricted power innovation I mentioned we did in women's tight and men's short, as well as the top, seeing some nice performance there. ThermoZen also was an outerwear innovation that we're excited about as well. We did also see some great performance out of a couple bottoms that Andre mentioned, so EZ5 and the Groove WideLeg. And then we had a run capsule, which I would say encompassed both tops and bottoms. So I would say it's both. And that had a lot of, I would say, energy around it in terms of fun and excitement in that run capsule. I think, you know, the team's really energized on building on the learnings in terms of what's working, continuing to chase into as well as looking at how it informs our creative direction for upcoming seasons.

Management: Operator, we'll take one more question.

Ike (Wells Fargo): Hi there. Megan, can you just comment on the inventory ending in 4Q? How comfortable are you with that? I know the markdowns are still expected to be up a little bit, but maybe just some more anecdotes there. And then what's your expectation for inventory as you move into 2Q and kind of the rest of the year?

Management: Great. Yes, I would say we're pleased with both the level and composition headed out of Q4. We guided to unit increase in the high single digits, and we came in up six, so cleaner than we expected. We did focus on cleaning out seasonal inventory and feel we're headed into 26 with an assortment that's more reflective of our go-forward strategy. In terms of how we're managing inventory in 26, I would say throughout the year, we'd expect to see units approximately flat to slightly down. That would hold true for the NQ1 as well. So that is part of how we're supporting driving that full price inflection in our business and the return to a healthier baseline in terms of penetration.

Management: Thank you. That's all the time we have for questions today. Thank you for joining the call and have a nice day.