Thank you for standing by. This is the conference operator. Welcome to the lululemon athletica inc. Second Quarter 2018 Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Howard Tubin, Vice President, Investor Relations for lululemon athletica inc. Please go ahead.

Thank you, and good afternoon. Welcome to lululemon's second quarter earnings conference call. Joining me today to talk about our results are Glenn Murphy, Chairman of the Board; Calvin McDonald, our new CEO; Stuart Haselden, COO; PJ Guido, CFO; Celeste Burgoyne, EVP of America, is also with us and will be available during the Q&A portion of the call. Before we get started, I'd like to take this opportunity to remind you that our remarks today will include forward-looking statements, reflecting management's current forecasts of certain aspects of lululemon's future. These statements are based on current information, which we have assessed but, which by its nature, is dynamic and subject to rapid and even abrupt changes. Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business, including those we have disclosed in our most recent filings with the SEC, including our Annual Report on Form 10-K and our quarterly reports on Form 10-Q. Any forward-looking statements that we make on this call are based on assumptions as of today, and we expressly disclaim any obligation or undertaking to update or revise any of these statements as a result of new information or future events. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our quarterly report on Form 10-Q and in today's earnings press release. The press release and accompanying quarterly report on Form 10-Q are available under the Investors Section of our website, www.lululemon.com. Before we begin the call, I'd like to remind our investors to visit our investor site where you'll find a summary of our key financial operating statistics for the second quarter as well as our quarterly infographic. Today's call is scheduled for 1 hour. [Operator Instructions] And now, I would like to turn the call over to Glenn.

Thank you, Howard, and good afternoon, everybody. We had a very strong second quarter and because of that, I thought I'd just make a couple of brief remarks at the beginning, and then pass the call on to a number of speakers you're going to hear from today, including our new CEO, Calvin McDonald. Obviously, I want to acknowledge the performance. The second quarter of this fiscal year was very strong. And it was very strong across all facets of the business whether that's across different product categories, our channels of contact with our guests and across all our markets. That was just a very impressive second quarter result for lululemon. And because of that, I want to thank people who made the contribution and made this happen. And that's our management team, that's our educators, that's all other employees, whether distribution center, call centers, in our offices, who work together to produce these results. In particular, I do want to single out Celeste, Stuart and Sun, who stepped in and basically stepped up 6 months ago, and their leadership to the people I've identified earlier across our entire company. Their leadership, their focus really played an incredible role in the results that you're going to hear about later on. So I want to thank them on behalf of the Board of Directors. And now I want to welcome Calvin McDonald. This is Calvin's first call with investors and analysts, first of many. He is really in an enviable position because the business is performing well, and he will agree and so will everybody else here from today, there's always more we can do. There's always more opportunities for our business. But because we're in a strong position today, Calvin can take his time. He can do a lot of listening. He can meet with people. He can understand our strategy and our processes and our operations and what makes the company tick. So that's a nice position to be in. And he has full confidence of the board. We did a very exhaustive search, and we really believe he clearly is the right CEO for the future for the company and will take us from strength to strength. So with that said, I want to welcome to the second quarter analyst call and investor call, Calvin McDonald, the new CEO of lululemon. Calvin?

Thank you, Glenn, for the introduction and for the support you have provided me as I jumped into my new role. I'm very excited to speak with you from Vancouver as a member of the lululemon team. As this is only my second week on the job, I'll keep my comments brief. First and foremost, I'd like to congratulate the team on the tremendous results we've just posted for quarter 2 and the strong momentum we're now seeing into quarter 3. I'm very excited to now be part of helping to create the next chapter of growth at lululemon as we continue to build on this success. Stuart and PJ will take you through the details of our quarter 2 results and forward guidance. But first, let me offer some color on what attracted me to lululemon and my initial impressions after 10 days on the job. Being the CEO of lululemon is my dream job. I've chosen to focus my career on retail and brand building because I love to work with people, create product and innovate. I'm also an athlete. The opportunity to combine my professional passions with my personal ambitions is what makes this opportunity so exciting. Firstly, the people of lululemon are an especially inspirational group, which has been very clear to me over the past 2 weeks. The unique culture with its focus on leadership, personal development and driving results is at the root of our success. It's both humbling and energizing to join such a talented group, and I look forward to working with the leadership team to help take us to the next level. Secondly, the product at lululemon is exceptional. I've been an avid guest for years and a fan of the product. I believe the quality, fabric, fit and technical innovation…

Thanks, Calvin. Let me also welcome you to lululemon. We're really excited to have you join the team and look forward to working with you on our next phase of growth. Our second quarter results mark another important step in the journey toward our 2020 goals as well as the continuation of the top line inflection that began last year and we now see extending into Q3, which is reflected in our sales outlook for the quarter. In fact, we're now tracking to meet or even exceed a $4 billion revenue goal with men's and e-commerce effectively ahead of schedule. Our product assortments and supply chain work continue to exceed expectations, contributing to our gross margin that is now firmly reaching the mid-50s range. This result, combined with our solid SG&A management, has produced a trailing 12-month EBIT margin of nearly 21%, delivering on our goal of a low 20s operating profit. And it's important for our investors to understand that we still see opportunity for margin expansion as we further invest in these already successful initiatives, including expanding our e-commerce business, segmenting our supply chain, reducing lead times and expanding our distribution network. We believe our margins can continue to expand into the future. Turning to the headlines for Q2. We saw a broad-based acceleration in our business across an array of categories, channels and geographies. We had said on the Q1 call that our great results in that period were not simply a case of lapping weak prior year comparisons, and our Q2 results continued the story, reflecting the success of our ongoing structural investments. Combined comps for the quarter increased 19% on top of a 7% increase last year. This top line growth, along with significant improvements in gross margin and SG&A, delivered an 82% increase in…

Thanks, Stuart. Our brand-building efforts, guest engagement and innovative product offering continued to translate into very strong financial performance. Before I offer some highlights of that performance, I will refer you to the financial supplement posted on our investor site for additional details. For Q2, total net revenue rose 25% to $724 million, driven by great execution across all parts of the business. In our store channel, we delivered a 10% comp store increase on top of the 2% increase in Q2 of last year. Lululemon-branded stores square footage increased 13% versus last year, driven by the addition of 42 net new lululemon stores since Q2 of 2017. During the quarter, we opened 4 net new lululemon stores. In our digital channel, we saw strong traffic and higher conversion that resulted in a 47% comp increase. For the quarter, e-comm contributed $167 million of top line or 23% of total revenue. I will note that the impact of foreign exchange increased revenues by $2.8 million for the quarter. Gross profit for the second quarter was $396 million or 54.8% of net revenue compared to an adjusted 51.6% of net revenue in Q2 2017. The gross profit rate in Q2 increased 320 basis points versus adjusted gross margin last year. This exceeded our expectations for the quarter and was driven primarily by the following: a 260-basis-point increase in overall product margin resulting from lower product cost, favorability in product mix and lower markdowns versus last year. We are particularly pleased that this increase comes on top of a 260-basis-point improvement in product margin last year. In addition, we realized 70 basis points of leverage on occupancy and depreciation, a result of the strong top line results. We also saw a 20-basis-point favorable impact related to foreign exchange in the quarter. This…

[Operator Instructions] The first question comes from Kimberly Greenberger of Morgan Stanley.

You've all delivered a really stunning level of acceleration in your comp performance, and it's not like 2017 or 2016 comps were terrible by any measure. But the acceleration is just so striking this year, and I'm wondering if you can sort of unpack it a little bit for us and help us understand what has really changed in the business that has driven this really accelerated level of growth. Anything that you could sort of -- any color you could add, I think, would be helpful.

Kimberly, it's Stuart. So let me speak to your question. So it really is a story around traffic in our stores. And with our e-commerce business, it's a story of traffic and conversion. And the underlying drivers of those traffic results are important to note. We mentioned on the call that we've seen 5 quarters of accelerating traffic trends in our stores, and that's not slowing down as we now enter the third quarter. And we've spoken about this to a degree on prior calls. We did launch or implement new guest engagement strategies, really last year. In particular, in the third quarter of last year, we implemented new technology at POS that enabled our store teams to more effectively engage with our guests and capture e-mail and capture information, making them a part of our guests file and enabling us then to enroll them in digital communications, digital marketing that we just didn't have before. At the same time, we have raised our game. We're more sophisticated with how we are in fact engaging in digital marketing. We're leveraging new CRM capabilities. We're taking the initial steps in data analytics to be able to leverage personalization strategies into how we're engaging with our guests. That is driving traffic both to our stores and to our website. And then on the e-commerce side, I'm sure you'll recall the recovery efforts that we went -- that we followed -- or we pursued, rather, last year, which culminated in the relaunch of our website at the end of the third quarter. The improvements to the website have been really the drivers of the improvements in conversion that we've seen. That story extends into 2018. And it will likely extend into 2019. So we focused on checkout, search, personalization on the website as the areas where we can continue to drive those converging gains. And as you look at the second quarter, if you exclude the online warehouse sale from last year, [ the comp ] in our e-commerce was really driven equally by traffic and conversion. So those are the strategies that we have developed and implemented in the recent period that has delivered this acceleration in our traffic trends. And so we're excited to see a number of ways to extend those to make them bigger, to amplify them, to take them forward and we feel like we're really just getting started.

The next question comes from Sharon Zackfia of William Blair.

I wanted to talk a little bit about the supply side of the equation. So I think, Stuart, at our conference, you had talked about the new distribution center that I think is going to be in Toronto as well as the Haiti manufacturing facility from a third party. So can you kind of help us understand or frame how much faster to market you can be with some of these new resources? And particularly, as you get into Christmas where you're so high volume, if that will have any impact by that time frame?

Sure. There really are 2 separate issues, Sharon. And the first one, with regard to the DC, the new DC that we're opening up out in Toronto, will really help us improve the service commitments and the service experience of our guests in Eastern Canada. It will create additional strategic flexibility for us to evaluate more broadly across North America, how we leverage our distribution footprint. And that's something that we continue to explore. We can speak with more specificity in future calls. So we're excited about that, and that will yield a benefit in our gross margin and we'll likely be able to again speak with more specificity there into the future. As we look at the sourcing strategy and how we're leveraging nearshore capabilities, and you mentioned Haiti, and that's among a number of elements of that strategy that we are pursuing. We're very excited to be able to begin exploring and implementing a meaningful portion of our supplier base in geographies that will help us shrink and shorten our supply shipping times. So that's a result that we're just now beginning to see some of the benefits of. I would see that as a multi-year strategy that we haven't yet quantified exactly how much in terms of the time advantage it will create for us. But suffice it to say, we're very excited about it. At this point in the western hemisphere, meaning the Americas and Caribbean, we source about 9% of our total production. And so we're excited to see that grow into the future.

The next question comes from Matthew Boss of JPMorgan.

I guess, Stuart, your trailing 12-month gross margin is now in the mid-50s, which will be the higher end of the initial 2020 plan. The 21% EBIT margin would be at the lower end of the low to mid-20s that you originally laid out. I guess help us to think about the operating margin opportunity as we think about the next 2 years? Maybe just split between what you see on the gross margin front versus SG&A leverage opportunity.

Sure, Matt. We're really thrilled with the results that we've been able to generate in gross margin. It has exceeded our expectations. And we do see it as the new margin architecture that we'll take forward. We see additional benefits, as we said on the call, in a number of areas within our sourcing strategies, our distribution strategies and then just leveraging the fixed cost elements of our gross margin from sales increases. So what I would say is there's modest improvements that we see being able to capture in both gross margin and SG&A over the next couple of years, which would accrue to modest improvements in the run rate of our EBIT margin. And I think we're excited about our strategies and the potential of the business beyond 2020, and that's something that we're looking forward to speaking with our investors in more detail at year end as we will be able to share an updated view of our long-term plans. But at this point, comfortable with modest improvements continuing for the next couple of years.

Great. And then just a follow-up on the e-commerce. So e-commerce accelerated pretty materially on a stacked basis. I guess as we think about that $4 billion 2020 plan and beyond, I guess, any change in the size or mix of e-commerce, what's the best way to think about the size and mix of e-commerce in that 20 billion, 24 billion maybe versus how it was originally laid? And just the other piece would be the profitability delta among channels. How best to think about that?

I think from an e-com standpoint, right now, we see continued acceleration or a continued outpacing of our store business with our e-commerce business, if you will. We continue to expect to see e-commerce grow faster than our store business. The composition of that is -- will be largely the same across both channels in terms of the mix of product categories. And we also expect to see benefits from the mix or the EBIT margin line as the e-commerce business continues to grow bigger. It is a more profitable business, and we'll have a mix benefit there. And again, I think we'll be able to reset our view on the long term at year end when we give that update on the long-term vision.

The next question comes from Brian Tunick of RBC Capital Markets.

Curious, I guess, about the implied fourth quarter gross margins. I think only up, I don't know, 20 basis points. Is that a function of either tougher supply chain compares or a mix of business maybe away from the bottoms to more outwear? Maybe just talk a little about as we look ahead to what's implied in the fourth quarter gross margins? And then just curious on the international side. As you mix in more digital versus bricks-and-mortar, how are you thinking about the time it would take for the international business to be less dilutive? Is there a revenue target or sales or number of stores? Anything to help us think about when that could be more similar to the domestic profitability?

Brian, it's PJ. So on your question about Q4 gross margin, yes, I think what we've been seeing is higher [indiscernible] given our women's pants business has really been on fire. We are not planning for it to be as robust as it has been if it does continue. We have the inventory to meet demand and we have the flex in the business but that's one thing. And then the other thing you mentioned, it is a tougher compare to last year, the gross margin and yes, we -- I think the combination of those 2 things hopefully that helps you kind of plug your model. I'll ask Stuart to answer the question about international.

Yes, Brian. We remain really excited about international, and we're seeing strong growth in Asia in particular. We expect as that business grows, it will improve or it is improving from a bottom line profitability standpoint. You'll recall that we had mentioned that Asia will be soundly profitable, generating strong profits this year so that in combination with the profits from Australia, the international business overall, inclusive of Europe, is profitable this year. And so that will only continue to accelerate as we capture scale economies in Asia. We're also very encouraged by the Europe business and the double-digit comps that we are seeing there, and maybe I'll invite Celeste to offer some comments.

Yes. In Asia to start with, we ended the quarter with a 50% combined comp. Really seeing strong momentum in both stores and digital, which is good to see and make us feel good about the momentum we also have going into Q3. In China, we launched our WeChat store, which we're really happy with the initial results and we have an aggressive plan for how digital will lead us into the future in China specifically. A really big highlight from a community perspective, we have Unroll China, which happens beginning this Saturday and going through the month of September. For Unroll China, we'll take yoga across China with stops in 13 key cities, including Shanghai, Nanjing and other key Tier 1 and Tier 2 cities. So again, really excited about the momentum we saw in Q2, and really continuing to double down in both stores and digital to shift into the momentum that we know is possible for us in Asia in particular. And in Europe, again, it's strong Q2. A couple of highlights. I mean, that business really also supported through a very strong core London business, which has been our focus in the quarter. We had Sweatlife Festival happening, which brought together 4,000 people for a day of development sweat and community. So really happy with those results. And Regent Street, just for an example, actually finished the quarter with a comp of over 50%. So really excited about, yes, what we're seeing in terms of the momentum in those markets. And we have a lot of plans in terms of really doubling down and continuing that growth.

The next question comes from Mark Altschwager of Baird.

I wanted to ask a question of Calvin, if possible. Sephora really has been a leader in personalization and merging the physical and digital shopping experience. So I was hoping you could speak to your view of Lulu's opportunity on those fronts and really what the vision -- your vision for what Lulu could look like in 2 to 3 years' time and whether you think an acceleration in digital investments is needed to get there? And along those lines, I think it was mentioned of some strategies that are being invested in right now to test I guess some things for next year, if you could maybe speak to the top couple that we could look forward to.

Great. Thanks, Mark. Well, why don't I start off. I'll hand the last part of the question over to Stuart, but I'll start off with sharing some of the similarities that I think exist between lululemon and the Sephora business. And the first one is the culture and values of both organizations. Lululemon is made up of an incredible strong talented group of individuals that are highly engaged, and that's across the entire organization. And retail is a people business. And when you have that level of engagement from stores to Store Support Centre, our ability to bring this brand to life and continue to build and develop it as a lovemark is very unique in retail and it's something that both organizations share. There's this notion or spirit of a disruptive innovator and I mentioned that, that's core to the DNA. And at lululemon, it is really throughout the entire organization. If you go back 20 years from how we came to be and that disruption and what was innovated to today, it lives throughout the organization and it's something that is within how we do things and it allows us to just approach problems differently and to think differently and it's a very strong similarity. Third, I'd say, both organizations put the guest at the center of all decisions of how we think about solving problems, how we think about growing and developing and innovating. And I think that's key to the success of a business today, that barriers and silos don't truly exist in the organizations. It's all about what's right for the guest regardless of the point of view or the areas of the business that, that leader may be leading, how they come forward is critical. And finally, and it builds to, I think, the…

Thanks, Calvin. And you guys heard PJ mention in the prepared remarks, we're making -- we explained a number of investments that we are executing in important areas of the business, data analytics, product, guest engagement that account for about half of the deleverage that we described. I'd say there's about another quarter of the deleverage that's related to more opportunistic tests that we have pursued in light of the strong business momentum that we have. And that's in areas that includes additional digital marketing investments, new elements of our seasonal store strategy, new store conversion [ thrusts ] and an interesting holiday delivery test. So all those are things that we're excited to have the opportunity to pursue. And the balance of the deleverage is really related to FX gains that we're now lapping. What I would say is if you exclude those elements, we would certainly be offering leverage on the low teens guidance that we offered. And so it's really an opportunistic place that we're in to be able to pursue the investments given the strength of our profitability gains.

The next question comes from Dana Telsey of Telsey Advisory Group.

Quick question, Calvin. The accomplishments that you've had in previous positions and I've studied and watched them, the things you've done with the loyalty program. How do you think of what you've had from previous positions to help Sephora -- to help lululemon whether it's the loyalty programs? What you see out there as some of the opportunities? And then, Stuart, as you talk about some of the new experiential influences that the business could have, how you see that in terms of the real estate landscape?

Thanks, Dana. I've had a lot of conversations already with the leadership team and the teams across the organization. I would tell you, there is a ton of work that has been -- taken place and a lot of enthusiasm around many of the areas that you've identified as opportunities of strength and opportunities to do even more than we're doing today. And for me, what I've enjoyed and it's been 2 weeks, and I'm intending to take the opportunity over the next 100 days to continue to be curious and continue to work and ask the questions and to listen. But what I've really gotten excited about is the -- those similarities again between the businesses. And as I share my experiences, my general view is experiences at this point are to be shared and opinions are to be formed. And I'm really sharing the experiences and having incredible conversations with energetic talented teams that see a lot of the same similarities to continue to build that guest experience through the work happening around experiential, to think about how to further enhance the love that our guests have for our brands through loyalty. And loyalty is just the affection they have for the brand and there's a variety of ways in which we can do that. And digitally, how to continue the great work that the team has done, and how we look and think about augmenting and adding to the relationship we have with them and strengthen it even further. So what I would tell you is there's a lot of work that has been happening and people are working towards. And I'm excited about how a lot of the experiences in the work that I did at Sephora is very relevant here, and excited to work with this team over the coming period to continue those conversations form sort of the next plan of growth of which we'll share at a later point in time.

Dana, Stuart. I'm going to actually pass your question to Celeste on our experiential retail strategies.

Dana, so we've begun to see some exciting potential for expanding our offerings to our guests. We really started with focusing on Queen Street and Flatiron, and we're seeing exciting potential through these locations. It does show its opportunity for us to expand these ideas more broadly across our business in the future. And to Stuart's point, we have some tests happening in Q3 and Q4, which will definitely allow us to learn more about what's possible for us as we look into the future. And then outside of Queen Street and Flatiron, we're really pleased with what we are seeing in the co-located expansions from last year as well as the new ones we've opened this year. In Q2, we opened up 7 co-located stores, and they are averaging over 40% growth and close to 70% growth in men's in particular since open. This gives us confidence as we look to open an additional 18 this year and more into next as well. And it really allows us to engage with our guests in a bigger, more powerful and more engaging way. So again, kind of one example of how we are testing into experiential, and we're really focused on leveraging the different store formats that we have innovatively used in communities across North America. That, on top of the community work our stores do and the connection to the local ambassadors, really allows us to see a great future of going deeper into the experiential world. That again, excited to learn more and share more as we go through that journey.

The next question comes from Paul Lejuez of Citigroup.

Stuart, can you talk about the pipeline for store openings in 2019? What's already locked and loaded in terms of the mix between U.S. versus Europe versus Asia? And then, Calvin, I'm curious. I'm sure you come into the organization with some ideas of what's the next level looks like. I'm curious where you think lulu might actually be punching below its weight as you think about the next level?

Paul, it's Stuart. So store opening drive for 2019, what I'd say is you should think about our real estate expansion from a square footage growth standpoint. And the reason I say that is for the reasons that Celeste just highlighted with the importance of our co-located strategy this year and into next year. You're going to see low double-digit increases in square footage for us. You're going to continue to see a healthy number of new store openings in North America although those are diminishing versus prior years. You're going to see an increasing number of new store openings in Asia in particular and international broadly. So you'll see the balance of new store openings shift from North America to international. And you'll see a healthy mix of co-located projects and new store projects. So -- and with that, I'll turn it to Calvin for your second question.

Yes. I mean, I will -- I'll share just a couple of observations that I would've had as a guest. So my experience within Sephora and what that business had built as we doubled it over the time that I was there and scaled it, to my experience as a guest. And then I'll end with my first 10 days inside the organization because the views are very different. I think there is, including the results that support this. There is a lot of good that's happening in this business and the guests are responding in a very positive way, which is driving the results. We all would agree, and when I was looking outside in, that we have a real big opportunity internationally, in particular in Asia. And it's one that the team feels is a growth potential, a disproportionate growth for this business and brand. Experiential, how our stores are more experiential than they are today. The loyalty ecosystem, how the guest loves the brand today, but how can we build upon that in an even more innovative way. And community, which is something that quite frankly, lululemon created 20 years ago and it's such a powerful strength to the organization. And how do we do more? What I would tell you is my 2 weeks in joining in the conversations, these aren't insights I bring that were ahas to this organization. They were well aware of their strengths and the opportunities. And this leadership team has been working towards developing and innovating behind these pillars. What I'm excited about is how my experiences in the 5 years at Sephora and the journey that we went through as we doubled the business, as we invested and doubled down and led in some of these areas that I can work with them and the great work that they've already started and begun to author that next chapter. So I think everybody on the management team is super excited about the results and the plans and where the brand in the business can continue to innovate and go. Equally, I am and these are areas that my experience at Sephora will allow sort of thought partnership with this team as we continue to create moving forward. And that I'm super excited about.

The next question comes from Matthew McClintock of Barclays.

I want to talk about women's pants because a 30% comp is truly outstanding, and that's on top of several years of really strong results in that business. And you're prudently not expecting that growth or that strength to continue, but you probably didn't expect the strength that you've seen over the last 3 years, so I was wondering how your thoughts on the TAM of your women's business has evolved from this kind of strength. And two, how you think about share of closet with this kind of strength occurring?

Matt, it's Stuart. So you're right, the performance in women's pants has exceeded our expectations. And it's pretty remarkable that the fabric, the new Lulu fabric for our #1 style, the lined pants that we just introduced 3 years ago, has eclipsed Luon and the wunder under that the company was really built on in many ways. So what it speaks to and what -- the insight that we take from that, the profound insight we take from that, is that innovation matters. And that where we innovate in fabric, in function, in technical performance, it opens avenues for growth that in many ways, are boundless. So we don't really know how big that market is. And it would be somewhat shortsighted for us to try put a limit on it at this point given we've been wrong with our plans certainly this year. And the overall success of that fabric and that pant. And you know what? We think we can make it better and we're already in that work and there are new versions of that fabric that we will be introducing next year into the sequential years. So that's one of the things that gets us excited about not only our women's business, but our business overall. So I'm not sure that exactly answers your question. But -- and I would say broadly speaking, you heard us mention the "on the fly" franchise that we're introducing, which is helping us take that technical functionality into our "office, travel, commute" offerings. And so much the same way that the ABC pant for our guys has given them a great versatile multiuse product that they can take on the plane, they can take from the gym and from the studio. We believe that on the fly will offer the same thing for our female guests. And so super excited with the innovation, and I would be remiss if I didn't also offer one additional comment to Kimberly's original question around what's been driving the overall growth trajectory of the business. Our product assortment has gotten remarkably better. So Sun and the work that the design team and the merchant teams have been leading is absolutely a part of the equation in addition to the other things that I mentioned. So we're thrilled at the improvements in color, in texture, in print that Sun and the team have been delivering. There's so many exciting new product introductions we're going to see in the second half of the year. Outerwear begins to land in stores and online now. We're really thrilled with how that's checking. And there's a number of others that we're really excited for.

This concludes time allocated for questions on today's call. I'll now turn the call back over to Howard Tubin for any closing remarks.

Thanks, everyone, for joining us. We appreciate your time, and we look forward to speaking with you in about 3 months when we report our third quarter results. Thanks.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.