Good day everyone and welcome to today’s lululemon athletica first quarter 2009 results earnings results conference call. (Operator Instructions) At this time for opening remarks and introductions, I’d like to turn the call over to Jean Fontana of ICR. Please go ahead.

Good morning. Thank you for joining lululemon athletica’s conference call to discuss first quarter fiscal 2009 results. A copy of today’s press release is available in the Investor Relations section of the company’s website at www.lululemon.com or, alternatively, as furnished on Form 8-K with the SEC and available on the Commission’s website at www.sec.gov. Today’s call is being recorded and will be available for replay for 30 days shortly after the call on the Investor Relations section of the company’s website. Hosting today’s call is Christine Day, the company’s President and Chief Executive Officer, and John Currie, the company’s Chief Financial Officer. Before we get started, I would like to remind you of the company’s Safe Harbor language. The statements contained in this conference 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 future 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. Now, I would like to turn the call over to Christine Day, lululemon athletica’s Chief Executive Officer.

Thank you Jean and good morning everyone. Thank you for joining us to discuss our first quarter results. With me today are John Currie, our CFO; and Sheree Waterson, EVP General Merchandise Manager. Following my opening remarks, I will turn the call over to John who will go through the financial details of the quarter. We continue to manage for long-term brand expansion while delivering against our short-term commitments. Given the troubled outlook for the economy at the time we entered 2009, we are pleased to state that we achieved $0.09 of earnings per share for the quarter. We are also pleased with our current pace of our business and with our ability to continue to bring our customers through the doors to make full priced purchases. For the quarter our constant dollar comp declined 8% remaining at the same level as the fourth quarter of 2008 and slightly ahead of our forecast. We successfully launched our ecommerce site ahead of schedule with our mock launch on April 1st, April’s Fool’s Day, and a live launch on April 14th. We achieved an operating margin of 12.1% despite the comp store sales decline through effective comp controls and increased efficiencies. We also saw revenue stabilize and even begin to improve over the quarter and are continuing on that trend. Given our high level of productivity and the strong double-digit same store sales we produced a year ago, we see our Q1 sales trend as a small victory and believe it reflects the resiliency of our brand and validates our position in the marketplace. While encouraged by these results this will not change the way we operate the business this year or cause us to review the cautionary lens through which we are viewing 2009. Looking at real estate we continue to…

Thanks Christine, I’ll begin by reviewing the details of our first quarter 2009 results and then I’ll provide our outlook for the second quarter. As a reminder comparable 2008 figures have been restated to reflect the reclassification of our Japan operations, the discontinued operations which happened in Q2 of last year. So for the first quarter of fiscal 2009 total net revenues were $81.7 million, up from revenue of $77 million in the first quarter of 2008. We opened in our Australia joint venture in April, but no new corporate owned stores were opened during the quarter. The increase in revenue from new stores opened over the past year more then offset the comparable store sales decline of 80% on a constant dollar basis and a weaker Canadian dollar which had the impact of reducing reported revenue by $11.3 million or 12.1%. At the end of Q1 there were 67 stores in our comp store base, 37 of those in Canada and 30 in the United States. Our corporate owned stores represented 89% of total sales or $72.9 million versus 90% of total sales in the first quarter last year or $69.4 million. Franchise and other revenues which includes wholesale, phone sales, showrooms, outlets, warehouse sales, and now ecommerce sales, totaled $8.8 million for the remaining 11% of total revenue for the first quarter. We ended the quarter with 114 total stores versus 85 a year ago, 103 which are corporate owned and 11 which are franchises including the six operating in Australia. Gross profit for the first quarter was $34.9 million or 42.8% of net revenue, as compared to $41.1 million or 53.4% of net revenue for the same period last year. As we anticipated heading into this quarter the majority of the decline was due to the negative…

Thank you John, I just want to point out a couple of other things going forward in promotional activity, last year you remember at the end of June we added a cycle of promotional discount sales to clear the summer goods. Because we’ve had the outlet centers clearing, we’ve seen that timing pulled forward, we will not be executing that level of sale at the end of this quarter due to stronger inventory management and the fact that our clearance strategy is working. And then the [Sawgrass] closure, we cleared the merchandise out of that store at additional discount rather then move or hold the inventory which put a little pressure on the quarter but with the timing of the Woodbury opening in late summer, we feel that we’ve actually addressed in a very healthy way the gross margin and discounting to clear goods during the period. So as I said we will continue to follow through with our plans for 2009 which will include planning the business with an emphasis on strengthening our competitive differentiation, improving cost efficiencies, and prudently allocating capital to provide us with the strongest possible financial position while executing a multi talent growth strategy now that our ecommerce site has been successfully launched. So we’ll now take questions.

(Operator Instructions) Your first question comes from the line of Michelle Tan - Goldman Sachs

I was wondering if you could give us a little more color on the magnitude of impact to gross margin from the pricing initiatives versus the outlet clearance strategy and then just to clarify the fact that you’re seeing more of the discounting evenly throughout the year should that mean something better for gross margin when we get towards the fourth quarter.

To answer the second part of your question first, yes, because what’s happening now is that we are selling more full priced merchandise at our stores, sweeping them to the outlets and having less, we had two end of kind of the quarter clearance periods, one in July, on in January. And we’re not seeing the need to do the July one this year because of the way that we’ve been managing the business through the outlet strategy.

On your first question about the strategic pricing, in the gross margin compression, other then foreign currency, occupancy, and depreciation we’re looking at about 300 basis points of impact. And in the pricing decisions were a half or maybe a little over half of that.

And then also on the gross margin lag from currency, it seemed as we looked last year at the currency impact to gross margin flowed through relatively quickly with the fourth quarter hit that you took from currency, so is there something that’s changing there in terms of how long it takes the product to flow through, how long you’re ordering it before you sell it, or is it just something that I’m just reading in what happened in fourth quarter of last year.

I guess the best way to answer it is number one the currency has moved quickly and it really, the impact is very hard to measure because its, the flow of product coming in compared to the timing of the currency shift, so its very, very difficult to give clarity on exactly the impact. For example in this quarter, in the month of May, the Canadian dollar rose something like 12%, so its very difficult to measure the impact on this quarter, next quarter, depends how much core that we already had that we’re selling through so again nothing has changed. What I’m describing is intuitive because the favorable impact in cost of sales until we sell those goods but it would be difficult to give you more precise clarity on what I’m indicating going forward versus exactly what happened at the end of last year.

And then just the improvement in sales trend, was it disproportionate at all between Canada and the US.

No, I think that’s the thing we feel the best about is that we’ve seen it in both countries and we’ve particularly seen it in the new stores that we’ve opened last year in the non comps as well so we feel really pleased with how the consumer is responding to our product right now.

Your next question comes from the line of Lorraine Hutchinson – Banc of America Lorraine Hutchinson – Banc of America: Just wanted to take a little bit of a longer view and talk about what you think the ideal store-opening pace will be once we start to see the real estate market loosen up and the consumer get better.

I think where we’d like to be is at a pace probably around 15 and then maybe up to 25 and that’s strategically what we’re planning right now. We see a lot of opportunity with hitting the market early with the showroom and stimulating demand for ecommerce. And we’ve seen that really working for us right now even in today’s environment as a much surer way. I think where we want to be strategically is in a demand model for our store where we’re really confident when we put the store in we’ve stimulated the demand. And I think with ecommerce, the showroom, that we actually have [inaudible] as a competitive situation that we would otherwise worry about allowing us to grow each store and place it in the right way. And we’ve preferred to really work off of our real estate strategy rather then just be opportunistic and very confident in the work that we’ve done identifying the 300 stores and that’s actually put us in a really great position to negotiate with the landlords. We had a very successfully [ICSC] on the May convention which John, Angie, and I attended a few weeks ago and feel very confident in now our growth strategy and relationship we have with landlords. And our ability to take the market at our pace. We certainly don’t in the short-term see real estate prices going up. Lorraine Hutchinson – Banc of America: When you got the initial results from the first couple of months of the website were there any surprises about the composition of your customer base, geographically, internationally, what are your early learnings there.

I think the early news for us was that such strong sales out of the US and I think that’s been probably the biggest surprise. We had initially anticipated we’d have a stronger demand in Canada but I think in some parts that was due to the fact that we had more basics on the site and this last few weeks where we’ve had more new products and now 80% of our SKU’s on the website. We’ve seen a surging Canadian demand but its still not kept pace with where we’re seeing the US. The US is our biggest growth market. We really think that that is a great measure of the success in reach of where the brand is. So we feel that that’s been a very positive result. In terms of items that are selling, not as many accessories, and men’s. Its been a little bit lighter. So we think that those are just opportunities awareness but really great sell through on any of the technical products and the core basics, which you know of course are our strongest items. So we feel very good about the initial sales trends and the response that we have and think that we have huge opportunity. We’ll have 90% of the SKUs on by the end of this month going into July and so we expect sales to continue to grow.

Your next question comes from the line of Lizabeth Dunn - Thomas Weisel Partners

I guess some questions regarding the ecommerce business, first can you refresh my memory as to what the costs were for sort of pushing the launch up and then as it relates to the sales trends that you’re seeing within the US for ecomm, are you seeing anything geographically within the country that could be interesting for us in lending credence to your, or telling you where your store opportunities may be going forward.

I’ll answer the second part of that first, what we’re really seeing and we were pleased about and gave us the confidence to go forward with the Phoenix market opening is we’ve had a showroom in Phoenix and for the last year and a half, stimulated a market which has done very well and then what we saw when we launched ecommerce was really strong demand in that market. We saw that it was a real hotspot early on so as you remember, maybe recall the showrooms have a much more limited inventory assortment. So that then gave us the confidence to go ahead with opening the Phoenix market even though from an economic point of view, one of our concerns it was a little bit more hard hit so we weren’t sure if it was the right time to put a store in. So this actually gave us the confidence to go ahead and open that market. There really was not much cost, we had a little bit of timing on some of our people with headcount and then we did make the decision to do the DC comps ourselves, but then that actually gets charged back to the vendor so we actually had invested most of the money in the end of last year so that’s why you also saw our SG&A not really spike or increase. So really we feel that we’re at, we’re not at optimal margin yet probably because we’ve got a lot more sales leverage but we feel its been a very smooth launch, costs were in line with what we expected.

And may I ask one question on the pricing strategy, so I just want to understand you’re lowering prices on some of the accessories and then on the apparel its not really about lowering prices but maybe adding quality and maintaining prices. Is that the correct way to think about this and is this sort of the first quarter and then it will just be sort of a four-quarter impact or how should we think about the timing of this change.

We’ll give you some examples of that but what we saw was we’ve been able to make as we’ve designing the garments, we’ve been able to make some real improvements in the garments but some of the initial buys were then a little bit compressed as we changed some of the sundries and I’ll have Sheree give a little bit more explanation, but we really chose to price at what our future run rate of costs will be in order to maintain pricing rather then take price up, wait until we reduce costs and then take price back down. So really that’s kind of what you’re seeing. We didn’t feel today’s environment was a place that we should be taking prices up. I’ll turn it over to Sheree for a few minutes and talk about some of the details and things that we have been changing.

Thanks Christine, I think you got it basically right. The accessories markdown is associated with our yoga market and that’s basically a one-time hit. The great thing about this strategy is we’re offering an opening price point in our best selling mat and accessories to lower the barrier to entry and to basically get more people into yoga which is our core marketplace. I’m happy to report that its been very effective and that our sales have spiked 3.5 times so as Christine had said, our yoga accessories business is up about 40% which is great news. So that’s that piece. When the market gets tough, the tough get going, and one thing that we know is that product is king so Christine has also said, we are actually investing in our product. Let me give you an example of that, we have our best selling [scuba] lulu hoodie, which is one of our flagship pieces of apparel. We chose to actually upgrade our zippers from a generic zipper to YKK which costs us about $0.80 to do and we thought that that was a terrific investment because over time obviously that adds to the quality of our garment. Also as we were looking at some of the trends in the apparel market, Heather Yarns, etc., are extremely important and so investing in Heather Yarns cost us more to do but we’re happy to do it because it increases demand. So there’s an increase in demand and there’s also an uptick in our quality and I think both are great long-term strategies for our brand power.

Your next question comes from the line of Laura Champine - Cowen And Company

Just a follow-up question on the pricing strategy because obviously when you start trying to capture market share with price that’s can be a very long road, can you talk about whether or not you think you were just over earning with gross margins at 50% or better or if you think you can get back there and also talk about your willingness to potentially compete on price on some of your categories that you do have more share in or that are more important to you. For example the $100 basis yoga pant, is that a defensible price structure.

Absolutely and I think, we chose not to price up based on initial buys that we know that we know that we can through our sourcing strategies reduce the cost back in line within a fairly short period of time. So we’re not choosing to lower our prices and compress our margin, we’re choosing strategically to leave our pricing at similar price points while adding quality and accepting a short-term until we get the supply chain, in some cases for instance we’re changing manufacturers. We’ve placed a quick buy with the great goods that we wanted to [bring] in factories with one buyer for instance on organic but we realized that the best of that manufacturer is in another place we want to place a long-term buy there which takes us a short-term margin to get it to market, but longer-term we know we’ll recover it by the fall. So there’s decisions like that that are effecting that we wouldn’t take pricing up because its really a [back] price and supply chain transition and we just felt that that’s not something that today’s market to be passed onto the consumer on some of those key items that we’re selling. So I want to be very careful, other then the mats and there’s a bigger mat strategy behind even just the decision that we just did so we wanted to make sure that in today’s market where we see the consumer giving up gym memberships, looking for more cost effective ways to exercise, that we basically made a very available price point which for us what we’re seeing the savings we’re giving them translate into other products that they buy whether it’s a tank or another accessory. So its actually even working in the short-term, that the more customers you save the better off we are certainly as a business platform so we feel that’s strategic. That said there’s also an over arching map strategy that we have with a new accessories line that we’ll launch in the fall. And there we’ll have two very best of class mats; one that will be co-branded, one that’s our own. And those will actually be manufactured at the price points that we’re now talking about so from the long-term then our margins will return. But we wanted to offer the yoga mats in today’s economy sooner. So there’s nothing that we’re doing that actually lowers our price point long-term and creates any compression on the margin.

And just so we can get, its tough to get a sense on your long-term gross margin prospects because you’ve been growing in some areas that I think do have this higher occupancy cost, but is that 50% level, is that a good bogey to think about returning to.

We were running at 50% or higher, the other significant factor being the Canadian dollar was at par so again, compared to last year the lower Canadian dollar at $0.80 took about 300 or so basis points out of that margin. So ignoring that variable there’s no reason we shouldn’t be able to get back to the kind of gross margins we were seeing last year.

And in fact and I think when you think about there’s the two parts of gross margin, one is the occupancy and depreciation, any strategy that drives revenue while maintaining the product margin which is our strategy, then increasing the sales in the individual stores ultimately helps gross margin. And that’s really how we look at managing that business strategically.

Your next question comes from the line of Howard Tubin - RBC Capital Markets

Can you comment on maybe some of the performance of some of the newer product lines, like running or swim and how they’re performing versus your expectations.

I’m going to let Sheree talk about our number one running shorts.

Thanks for asking the question, it’s a great entrée to talk about one of our favorite categories which is running. We are performing extremely well in the running category and in fact right now, we’re seeing our bottoms business driven by shorter lengths, shorts being one of the key categories. Within our short category our two running shorts are our two top items and I’m happy to say that we added a longer running short this season and it seems that we have really taken that market by storm. So the reason that we’re excited about the running category is because we feel that it is a key part of our future. It keeps us technical in terms of fabric, it keeps us technical in terms of construction, and there’s a lot of growth here in both the top and the bottoms category. So we’re also seeing some great trending with some of our technical tops, our [inaudible], and our seamless which go along with the bottom success that we’ve had so very, very healthy here.

And I think that that’s two of the items that we’ve had to increase our orders in our quick turn in as well as you just recently saw a drop in the stores, neon tanks which was also a quick turn item following a quick turn strategy to add [pop] and colors to the demands and those we see people buying in three’s and four’s so really another popular item that we’re seeing. As we talked about earlier our strategy on adding more mid priced price points in tops, that has also really worked to stimulate extra sales demands so we really feel with both our overall inventory position driving it down, and the increased sales, and we’ve done a really good job on managing inventory turns and really stimulating the guest to buy. So we feel very good about where we’re heading for the balance of the year.

And maybe just one other question on square footage growth, have you thought about just next year more specifically, do you think we’ll see more new stores opened in 2010 versus your plan for 2009.

Yes, right now the number that we would plan for is 15.

And in terms of the promotional plans for June, July, you said you’d be less promotional in stores, I think you did a warehouse sale end of July last year. Is that planned to go on or there’s no need to do that one this year.

We have not made a decision and we do have a franchisee in Saskatoon that does one in that time period which we don’t control or make that decision, so I can’t speak for what he will be so don’t confuse that one with what one we would do. So we have not made that decision. Based on our low inventory we don’t see the need to clear other then a very nominal level of a site-by-site specific basis if they have some stragglers at the end of summer. So we won’t be doing the July sale and at this point in time we don’t have a lot of pressure so I think we’ll make that decision in the moment, closer to when we see where inventory levels are. Right now we’re in a more of a chasing inventory position so we feel we don’t have to plan for it, but if we feel that there’s older items or in something that we see stragglers on, we might do a smaller one this year.

Your next question comes from the line of Paul Lejuez - Credit Suisse

I was just wondering if you could talk about how the new classes of stores are performing and if you’re seeing any differences in mall versus off mall just given the extent of the promotional environment in the malls and more competition kind of in general.

I wouldn’t say we’ve actually seen any difference between the malls and our street locations. I think historically in the US the streets have been slightly stronger and that trend continues but nothing that has changed. I think in the malls we actually hold up very well and we did not, as many of you probably saw by walking in our stores, discount our spring line or have sales items, or have a sale. So I think we feel very proud of the fact that we did not have to result to promotional strategies to drive sales in the stores. So overall we’re not seeing a shift, we’re seeing all categories of stores grow and particularly the non-comp class of stores, growth has been very encouraging for us.

Your next question comes from the line of Richard Jaffe - Stifel Nicolaus & Company, Inc. Richard Jaffe - Stifel Nicolaus & Company, Inc. : Two questions, one just a follow on on the real estate, with 15 stores, could you give us a sense either regionally how they’ll break out or kind of real estate street locations, or regional malls and then a follow on, on the internet initiative and some thoughts of how that’s playing out, how you’re handling the inventory and assortments on the internet versus stores and the pricing.

Pricing on the internet is the same as you would find in each individual market because we have a pricing toggle based on how you view, where you’re buying, so there’s a US pricing and Canadian pricing online so it would be similar to whatever we have in the marketplace. So there’s no difference in the pricing strategy and our goal is to have about 90% the same SKUs and that could be either 90% of the existing assortment or at [shoulder] season for instance in jackets which we would plan to, our outerwear which we would sell out of in the stores by November, we might carry online through January. So there’ll be some subtle differences either plus or minus on the ecommerce website but on the whole, it will be very similar to our strategy within the stores. In terms of the profile for the stores that we’re seeing, we continue to lean more to street and lifestyle centers where we can control our own hours of operation, do our community work, etc. That said there have been some very key targeted malls that we go to which really we choose very carefully in any regional areas and so there will be a small portion of those in the portfolio going forward. But they’re strategic and not the dominant model that we use. Richard Jaffe - Stifel Nicolaus & Company, Inc. : Roosevelt Field has come up to your expectations, it sounds like you were a little early on opening some of the Manhattan or metropolitan mall stores and it sounds like they’re now moving to a level where you’re much more comfortable, is that accurate.

Yes, I think that we went in just a little too early. I would have preferred to have had a year with several sites open in New York City before we had gone out to the regional mall on that Roosevelt. That said, we are seeing the demand and the consumer responding in the Long Island market on the whole so I think that as brand awareness has grown and I think ecommerce has even helped that, as well as our social media strategy that we do with a lot of Twitter blogs, community events. We have seen all of the non comp stores growing which has been very encouraging.

There are no additional questions at this time; I would like to turn it back over to management for any additional or closing comments.

I think that we’ve probably said enough about the sales that we feel very encouraged by the signs we see in the consumer response to our product, very confident in our product and I think that the business that you’ve seen we’ve been able to really control our expenses and our flow through which is driving the business as well. We’re very proud of the management team and the work that we’ve done for the quarter and feel very well positioned for the balance of the year. Thank you everyone for joining us today.