Status Update

Dec 10, 2013

Press Release

Good day, ladies and gentlemen, and welcome to the Lululemon Athletica CEO Announcement. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. I would now like to introduce your host for today's conference, Therese Hayes. Please go ahead. Good morning, everybody, and thank you for joining us. A copy of today's press release and other background material on the announcement is available in the Events part of the Investor Relations section of our website at www.lululemon.com and will be furnished on Form 8 ks 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 as a replay for 30 days and also available on the website. Hosting our call today is Michael Casey, Lululemon's Lead Director of the Board Laurent Porven, our next CEO and CFO, John Curry. Following the prepared remarks, there will be time for a few questions. I would now like to turn the call over to Michael Casey. Good morning, everyone. I'm very pleased to be representing Lululemon's Board of Directors today to introduce you to our next CEO, Laurent Podiban. Earlier this morning, we issued a press release announcing the Board's appointment of Laurent, and we are hosting this call to add a little more color to that announcement and to give you a fuller appreciation of what Laurent brings to the position. As many of you know, Christine Day announced her intention to resign in June. We immediately started the process to fill the CEO position with a thorough and comprehensive search. Laurent emerged through that process as the ideal candidate. Laurent brings to Lululemon more than 2 decades of experience in building global brands at premium, technical athletic apparel and lifestyle centric companies. He's a seasoned leader with a remarkable track record of execution and will be a strong cultural fit within our team of passionate and highly skilled individuals. Laurent comes to Lululemon having most recently served as President of TOMS Shoes, where he built a world management team, established supply chains and operations globally, led global expansion and strengthened the company's cultural identity. The company scaled its footprint during Laurent's tenure as evidenced by the L'Orange's tenure as evidenced by the fact that TOMS gave away 10,000,000 pairs of shoes over the past 7 years and now expects to give away another 10,000,000 in just the next 18 months. Laurent also spearheaded expansion in 12 countries in the last 12 months, which demonstrates his ability to grow Boruck brands internationally. Prior to Tom's, Laurent had a 15 year tenure at Burton Snowboards, including CEO from 2,005 to 2010. During his time at Burton, he helped the company grow far beyond its roots of snowboards to become a truly global brand, synonymous with the sport and lifestyle. L'Orange encouraged technical product innovation, product diversification and international expansion. As a result, Burton now offers a complete selection of equipment and technical apparel designed to meet every rider's needs. Laurent also has significant exposure to luxury and premium brands having served at LVMH earlier in his career, where he played a critical role in building and optimizing the supply chain between North America and Europe. And he also spent time in the company's M and A division. During the course of the selection process, the search committee recognized that Laurent has a deep understanding and enthusiasm for all functions in the business, from marketing to product innovation to supply chain and operations management. We also found him to be a very strong leader with a proven ability to collaborate and motivate across an organization. We believe his passion for driving innovation makes him the ideal candidate to inspire the next generation of Lululemon educators, ambassadors and guests. We are excited to have him join us and bring his global brand building skills and expertise to Lululemon. Laurent is expected to officially start in January, at which time he will become a member of our Board. He will succeed Christine Day, who has done an outstanding job building the company and driving financial performance over the past 6 years. She leaves in place a strong vibrant business model as we enter the next phase of growth and expansion. To ensure a seamless transition, Christine will remain in place through the end of the fiscal year and support Laurent during his onboarding process. In addition to Laurent's appointment, today we announced an upcoming change on the Board of Directors. Our Founder and current Chairman of the Board, Chip Wilson, will step down as Chairman prior to the Annual General Meeting in June. At that time, I will transition into the position. I've served on Lululemon's Board since 2007 and I'm currently the Lead Director. I have a long tenure at Starbucks, including CFO for over a decade and I continue to work with Starbucks in an advisory capacity. I also was a member of Board of Directors of the NASDAQ OMX Group for 11 years, serving on the Audit Committee and Executive Committee and as Chairman of the Management Compensation Committee. We believe this the timing of this shift allows ample room for an orderly transition and continued strength of our leadership infrastructure. Chip was central to molding the company and laying the foundation for continued success. And as he transitions out of his role as Chairman, he will retain his seat on the Board. As a founder, Chip's critical role and focus going forward will be to advise and support the culture of the company and to educate on the original intent of the brand, product and operating principles to ensure that the core values, which make Lululemon unique and successful, are maintained as the company grows. In closing, I'd like to stress how excited the Board is to welcome Laurent to the Lululemon family. Working with our strong management team, we have confidence in his ability to lead the global expansion of our brand. The Board and I fully support him as he leads our next phase of growth. I'd now turn the call over to Laurent. Thanks, Michael. Good morning, everyone. Let me start off by saying how excited I am to be joining and leading such an exceptional company. Its heritage of success is built on creating technical and beautiful product, its strong culture and values and authentic consumer and communities. My role will be to make sure that all of these qualities remain in place and One of the things I'm most passionate about and I've taken great pride in over the course of my career is building global brands and Lululemon certainly has all the elements needed to continue its growth in North America and beyond, including a strong reputation for creating technical and beautiful products. And the team that's in place today has already taken very important steps in laying the foundation for global expansion. I have met with most of the senior team and see significant potential growth both domestically and internationally as we leverage this company's outstanding business model. As I transition into the role, I look forward to immersing myself in the culture and working with the board, the management team across all areas of the business and in the stores to make sure we have the very best plan and all the necessary resources to fulfill the company's potential and that we all continue to work as a team to pursue that very goal. I look forward to meeting most of you in the near future. And now I think we have time for a few questions. Thank And our first question comes from Omar Saad from ISI Group. Please go ahead. Thank you. Good morning and congratulations to both Laurent, you and your new role and Mike as well. Thanks for taking my question. I guess, Laurent, I would ask, if you could discuss maybe how some of your experiences from your 3 unique past roles at LVMH and Burton and Tom's, how those are going to maybe influence and shape your long term vision for the Lululemon brand? And Mike, if you have any comments on that from the Board's perspective? Well, thank you. I think I've been incredibly fortunate for the past 20 years to work with global iconic brands or iconic brands being on their way to be global. And maybe to give you a couple of examples, I mean earlier in my career, LVMH gave me significant exposure to premier global brands in a number of product categories. And that's when I moved from Paris and came to North America to really restructure the technology and the supply chain around the management of all the Louis Vuitton stores. Later on at Burton, while we had a European platform, it was very much of an Austrian subsidiary and having spent a lot of time in Europe, we build a very, very strong pan European multicultural group that ended up serving all of Europe. And over a very short period of time, the built in subsidiary in Europe became the most successful and the most profitable subsidiary across the company, maintaining the premium positioning of the brand and the high performance product that we were known to made. And then very recently at TORM, we obviously had an amazing brand and business model to work with. And over the past 12 months, we expanded the brand's reach and the MVMT's reach to over 10 new regions or countries. Thanks. And Mike, if you have any insights into what you saw in Laurent and his background? Well, we were primarily attracted first to his resume of being with quality companies that had premium brands and that had grown on the global scale. But then as we got to know Laurent better, we became even more impressed with his passion for innovation and his demonstrated leadership skills in building strong teams wherever he worked. And we're confident that that's going to be very well received here at Lululemon. The culture, as you all know, is very strong and important at Lululemon, and we think that Laurent will fit into that perfectly. Thanks. Congratulations to you both. Thank you. Thank you. Thank you. And our next question comes from Adrienne Tennant from Janney Capital Markets. Please go ahead. Good morning and let me add my congratulations and welcome aboard Laurent. Thank you. My question is, can you talk about so your background in building and investing in the foundation and the infrastructure in quality, supply chain and operational execution that whole area sort of everything getting the product, the wonderful product to the stores to really keep pace with Lou's global growth? I think that's one of the things that sort of has been an issue in the past call it 12 months. I just was wondering if you could discuss that a little bit. Thank you. Sure. I mean, I think the two experiences that would be the most relevant there would be the experience at Burton and Tom's where the environment when I got involved was very high growth mode and mostly in one region. In both organization, we were able to very quickly build the infrastructure both from a technology and from a supply chain standpoint and from a sourcing and quality standpoint to really support a global business. So whether it's putting a platform in China and in Hong Kong in the context of Tom's to make sure that we've got the right product development, commercialization and quality assurance model or whether it's building a supply chain to fulfill the needs of our giving model at Tom's, which over the past 2 years probably became the most the largest scale gift in kind donor around the world and building that supply chain in developing countries certainly was a challenge that we tackled. And similarly at Burton, building an infrastructure from a technology standpoint through building a great ERP platform, but also bringing that technology all the way down to the floor to make sure that our retailers had access to all of our information and our product availability real time. So I think in a number of experiences I've had to do that across many regions and continents. Wonderful. We're welcome aboard. Thank you. Thank you. And our next question comes from Kimberly Greenberger from Morgan Stanley. Please go ahead. Hi. This is Jay Sole on for Kimberly Greenberger. Congratulations, Laurent. Good morning. Thank you. Good morning. Just two questions. First, can you talk about what are the keys to managing high speed global growth? Obviously, Lululemon has tremendous amount of growth in front of it. What are going to be the keys to make sure that growth happens in the way you expect it to? I mean, I think the key I mean, I haven't had a chance to immerse myself in the business and I really look forward to start doing that in January. But I mean, I think the key is to really continue to provide the resources both financial and human to make sure that we can continue to leverage and capitalize on the current success and bring that success beyond North America. And then maybe if you could just describe, Chris, you've had a lot of great experiences at different places. But would you characterize your strengths that your favorite part of the job is in operations? Is it in product? Is it managing a brand? How would you describe yourself to Wall Street? I would probably describe myself as somebody that has a real passion for all functions across the business and as more of a generalist that has had experience across all the functions in all the regions. So learning is what fuels me and I tend to be very curious. So I really look forward to spending some time with the team here and helping them continue to do what they've done so well. Great. Thanks so much. Good luck. Thank you. Thank you. And our next question comes from Howard Tubman from RBC Capital Markets. Please go ahead. Thanks. So Laurent, my question to you would be, as you look at the business today and everything you know about it, what would be your first priorities once you kind of get onboarded? And do you envision any sort of big picture changes in strategic direction? Or are you kind of happy with the direction the company is moving in today? Again, I mean, I think the first order of business will be to really immerse myself very quickly and learn all facets of the business. I mean, I don't anticipate any major change. I mean, the business model is fantastic. The brand is exceptional. The product is outstanding and beautiful. So it's really a matter of understanding all facets of the business and collaborating with the team and continuing to make it better. That's great. Thanks. Thank you. Thank you. And that is all the time that we have for questions today. I would like to now turn the call back over to management for any closing remarks. Hi. It's John Curry here. Thanks, everyone, for joining us today. And in closing, on behalf of the management team here at Lululemon, I'd just like to say that we're thrilled to welcome Laurent to the company and look forward to a great future under his leadership. As you know, I'll be back on the phone with you bright and early on Thursday to discuss our Q3 earnings results and look forward to talking to you then. Thanks everyone. Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program.