Lululemon Athletica (LULU)
Q4 2012 Results Earnings Call
March 21, 2013 9:00 a.m. ET
Joe Teklits - IR
Christine Day - CEO
John Currie - CFO
Sheree Waterson - Chief Product Officer
Erika Maschmeyer - Robert W. Baird
Adrienne Tennant - Janney Capital Markets
Lorraine Hutchinson - Bank of America
Sharon Zackfia - William Blair
Stan Poser - Sterne Agee
Kimberly Greenberger - Morgan Stanley
Liz Dunn - Macquarie
Camilo Lyon - Canaccord Genuity
Dana Telsey - Telsey Advisory Group
Howard Tubin - RBC Capital Markets
Janet Kloppenburg - JJK Research
Jim Duffy - Stifel Nicolaus
Roxanne Meyer - UBS
Faye Landes - Cowen and Company
Edward Yruma - KeyBanc Capital
Previous Statements by LULU
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Thanks, good morning. Thanks for joining us on our fourth quarter and fiscal 2012 conference call. A copy of today's press release is available in the Investor Relations section of our website at lululemon.com or furnished on Form 8-K with the SEC and available on the commission's website at www.sec.gov.
Shortly after we end this morning, a recording of today's call will be available on our website as a replay for 30 days. Hosting our call today is Christine Day, the company's CEO, and John Currie, the company's CFO. Sheree Waterson, our Chief Product Officer, will also be available during the Q&A portion of the call.
As a reminder, the statements contained on this call which are not historical facts may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results might differ materially from those projected in such statements due to a number of risks and uncertainties, all of which are described in the company's filings with the SEC.
We have about one hour for today’s call, so when we get to the Q&A, please limit yourself to one question at a time to give others the opportunity to also have their questions addressed. With that, I will turn the call over to Christine Day.
Thank you, Joe. Good morning. I’m joining you from Australia today, where it actually just after midnight. Our board meeting was held here this quarter, and we have just finished a few days of meetings with our board and our team here in Australia. Before we talk about our fourth quarter and full year 2012 results, I will give you an update to the announcement made on Monday of this week regarding the sheerness in certain styles of our women’s black Luon bottoms. Following my comments, John will speak to our guidance.
We have not yet determined the specific cause for the sheerness, and are pursuing several hypotheses in parallel with our manufacturing partners to determine the root cause. What is clear to us is that this is not the Luon that we and our guests have come to love. The process for creating Luon is complex and involves a specific set of proprietary ingredients and a multistep production process. Even the slightest changes to the process can create meaningful changes in the fabric.
We had already begun putting more stringent specifications in place on the production of Luon, and we will be redoubling our efforts in this area. We currently have a dedicated team working with our suppliers to identify and resolve the issue. We have recently added strong leadership in quality control, our liaison office, and our commercialization and development teams, and I expect these people and other investments to solidify our quality consistency and delivery capabilities.
Our company is rooted in integrity, and we are ready to make the tough decisions and do the right thing for our guests and our communities. I am confident that we will recover from this setback and be stronger than ever. Our confidence is based on the history of strong performance that the team here as produced, including what we achieved during the past year.
In 2012, we once again had strong revenue growth in all of our markets and profit growth to match. This time last year, we were celebrating hitting the $1 billion sales milestone, and in 2012, we were able to grow by an additional $370 million.
This growth gave us the leverage to invest in international expansion and implementing a broad range of foundational systems to support our further expansion. Our new financial system was implemented at year-end, and we’re looking forward to the improvements that our PLM and advanced product allocation phase I implementations will create for managing the flow of our product.
I would also like to point out that our ecommerce revenue grew by 85.5% in 2012 to $197.3 million or 14.4% of sales. Ecommerce will be a valuable tool as we expand our brand’s presence around the world and it gives us an exciting opportunity to charter new ground in retail with an integrated footprint to meet the future ways in which guests shop.
We achieved these results in a very brand-appropriate way, and did not buy our comps through discounting, which ultimately would have harmed the brand. We maintained a full price strategy up to the holidays, then used our traditional warehouse sales as an effective and low-risk way to clear our inventory. We are already flowing the learnings on price sensitivity and assortment preferences from the holiday season into this year.
It is fitting that I’m joining you from one of our international locations, given our increased focus on growing globally for the coming year. This year, we will expand our foothold in two key markets, London and Hong Kong, while establishing local community connections and introducing our beautiful product to guests in a variety of markets in Europe and Asia through strategic sales, showrooms, and ecommerce.