Lululemon Athletica, Inc. (NASDAQ:LULU) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
Adrienne Tennant – Janney Capital Markets: My question is what is the actual, sort of, implied comp. You said that there was a tough start to the beginning of the third quarter. Should we assume this is right in line with that guidance of mid-single-digit and does that guidance imply an acceleration in the comp as the quarter goes on? Then just finally for the fourth quarter, what type of comp and margin is implicit in the annual guidance?
John E. Currie – CFO: Yeah, the Q3 guidance is based on a mid-single digit comp assumption and slight improvement, as I said, product flow is better as we head into the second half of this quarter. So a slight increase, but still within that mid-single digit range. For the fourth quarter, the implied guidance is high single-digits of comps.
Adrienne Tennant – Janney Capital Markets: And the margin, the gross margin?
John E. Currie – CFO: As I said, we’ve kind of alluded the low end of the mid-single digits reached 53%, 54% in that range.
Black Luon Outlook
Dana Telsey – Telsey Advisory Group: Can you give any further update on black Luon and the expected impact for the year on sales and on EPS. Also with the comps complexion that you had this quarter, levers of the comp, traffic conversion, AUR and what you are seeing?
John E. Currie – CFO: Let me start with the Q2 comp make up question. The comp such as it was in Q2 was driven by traffic and conversion being up and average basket being down, which makes sense, we didn’t have the $98 Groove Pants, for example, in the basket where we selling more lower priced items. I’m sorry, what is the rest of the – that part of the question?
Dana Telsey – Telsey Advisory Group: Expected impact of black Luon pants compared to original estimate for the year?
John E. Currie – CFO: Yeah, the overall impact on revenue is $40 million to $45 million. As I recall initially we projected something higher than that. But since we are through it now, it will be in that range.
Dana Telsey – Telsey Advisory Group: And just, Christine, can you give us any color on the competitive environment and what you think?
Christine Day – CEO: I think from reading press headlines every day you would say that there is a vast variety and growing variety of competitors in the marketplace. What we have seen is that as we returned to black Luon, and particularly the new Full-On Luon has been flying off the shelves and we’ve increased some of our orders for that for the back half of the year. So, in our core initiatives, we do believe our customers waited and then seized the opportunity to buy. So, we feel really good about our positioning, long-term based on the high-high quality and introduction of the new Full-On Luon, which will go into all pants in tight bottoms in November. So, we are very excited about what that will bring us from a competitive set as well as we announced, obviously, X-STATIC. So, we feel good about our competitive positioning and differentiation.