Good day, ladies and gentlemen, and welcome to the lululemon athletica Q4 2011 Results Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to introduce the host for today's conference call, Ms. Teresa [ph]. You may begin.

Okay, thanks. Good morning, everybody. Thanks for joining us on the Fourth Quarter and Fiscal 2011 Conference Call. A copy of today's press release is available in the Investor Relations section of lululemon's website at www.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 as a replay for 30 days in the Investor Relations section of the company's website. 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. We would like to remind everyone, of course, that 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. [Operator Instructions] And with that, I'll turn it over to Christine Day.

Thank you, Teresa [ph]. Good morning, everyone, and thank you for joining us today to discuss our fourth quarter results. By now, you will have seen the headline of our release celebrating the cool revenue milestone, starting with B and ending with 9 zeros. We are proud of achieving this important milestone as a company. But far more important than the number itself are the beliefs, values, culture and people that achieved it and our guests that value our products and our guest experience. Our success now and in the future is based on a culture of high performance and leadership development. We find the right talent, empower our employees, teach personal accountability and judgment and share our business strategy at every level across the business to ensure that we engage our employees and give them a sense of purpose. So when we achieve these kind of results, we know that it is the entire team that we have to thank. The goals we set for 2011 were: to grow same-store sales; add up to 30 high-productivity new stores; evolve our e-Commerce to a hybrid model; balance our inventory to meet demand; build a foundation to support the continued growth; and to deliver innovative product. Our focus on execution delivered strong results for each of these objectives. We added 37 stores and increased comparable store sales by 20% for the year, resulting in a record $2,004 in sales per square foot for all of our retail business. In addition, our new e-Commerce site was launched in April and now represents 11% of total sales. To put this achievement into perspective, in the fourth quarter alone, we did $50 million in e-Commerce sales compared to $57 million for the full year in 2010. As discussed in our last call, to meet guest demand for Q4, we strategically increased our inventory position and bought the right mix of new styles and color. Our strategy paid off and translated into a 26% comp for the quarter on top of a 28% last year. We were also able to provide product to our outlets and return to our traditional warehouse sales and to explore smaller markets in Canada with 5 pop-up stores over the holiday season. Other than our planned scarcity philosophy, we believe we met true demand fourth quarter. Our other key objective for the quarter was to enter 2012 with a strong inventory position to break the cycle of chase. And we are pleased to state that in Q1 2012, have strong sales momentum due to a clean inventory and strong flow of products. We have found the right balance between delivering strong growth and maintaining our focus on innovation and execution. Buying more just to meet a number may deliver short-term results, but also creates brand and operating risks. In Q4, we gained traction as our strategies of investing in people and systems to support our growth. We added depth and breadth in product, IT, store support, and we enhanced our creative, digital and brand teams. We also added business intelligence, HR and IT legacy system investments, building network and operational capability. As previously discussed, these investments will continue throughout 2012. Other key investments include product innovation and supply chain enhancements. We will continue to focus on a tight base of manufacturers to ensure the level of quality, innovation and function that our guest expects. We are always exploring new techniques in garment construction, new fabric technologies and finishings, which is one of the things that we believe that we are best in the world. This requires continued investment and development in partnership with our factories to support these innovations. It is our practice to not take pricing as we seed new innovation. And while these investments may slightly decrease margins, they develop the strength of the brand in the long term. Looking forward, we are excited about the potential we see for growth in the business in 2012 and beyond. Driving store productivity remains our key lever, along with North American store remodels. Technical product innovation will continue to drive both same-store sales and allow us to test things like bike spins and swim lines. We can refine the product, test the guest reaction and build ambassador networks, all key learnings for us as we explore the intersection between these opportunities and yoga, which will always be our core. We continue to leverage our strength of our business model by reinvesting in product innovation to create guest value and differentiation in our product lines and to enhance our leadership position for the long term. We also have a solid North American footprint with 150 lululemon stores with additional opportunity as we are less than halfway to reaching the 350-store potential we see in this market. We currently have 37 showrooms that contribute to increased brand awareness and help drive our very productive new store openings. Additional store growth objectives over the medium-term include driving e-Commerce to 15% of our North American store revenue, seeding International and growing our Men's line and developing and testing product for future potential concept. Throughout 2012, we will seed international markets. We have already announced that we plan to open a showroom in London slated for mid-April and we are in the process of signing a lease for the new Hong Kong showroom. If all goes well, we could open the second Hong Kong showroom at the end of May. E-Commerce, already a significant part of our revenue, is also key for developing brand awareness and creating demand in secondary markets. It is also a powerful tool to help inform our strategy as we expand internationally. We will introduce country-specific pages in Australia in May and the U.K. and Hong Kong are also planned for 2012. We are pleased to announce another key hire for our senior team. Laura Klauberg, previously a top executive with Unilever, will be joining us as SVP, Brand and Community. We are also in the final offer stages with a new head of Global e-Commerce. In addition to these key hires, there will be other additions throughout the organization for succession and growth. In summary, we are very proud of the progress and the results achieved in 2011 and believe we are well positioned to continue that momentum in 2012 and beyond. So now over to John to go through the financial results.

Thanks, Christine. I'll begin by reviewing the details of our fourth quarter of 2011, and then I'll update you on our outlook for the first quarter and the full year of fiscal 2012. Please keep in mind that all comments with regard to share count and per-share amounts in our results and outlook are now on a post-stock split basis, as our shareholders approved a 2-for-1 stock split, which took effect in early July of 2011. So for the fourth quarter, total net revenue rose 51.4% to $371.5 million from $245.4 million in the fourth quarter of 2010. The increase in revenue was driven by comparable store sales growth of 26% on a constant dollar basis. Our average comp store productivity ended the year at $2,004 per square foot. The addition of 29 net new corporate-owned stores in North America, 7 net new corporate-owned stores in Australia and 1 in New Zealand since Q4 of 2010. We also reacquired the 4 remaining franchise stores in the U.S. during the year. Direct-to-consumer sales, which increased by 103.6% or $25.5 million. And offsetting this was a slightly weaker Canadian dollar, which had the effect of decreasing reported revenues by $2.3 million or 0.6%. During the quarter, we opened 2 corporate-owned lululemon stores in the U.S., 4 in Australia, 1 in New Zealand, as well as 2 ivviva stores in Canada. We ended the quarter with 174 total stores versus 137 a year ago. There are 127 stores in our comp base, 42 of those in Canada, including 2 ivviva, 75 in the United States and 10 in Australia. Corporate-owned stores represented 78.7% of total revenue or $292.6 million versus 82.6% or $202.8 million in the fourth quarter of last year. Revenues from our direct-to-consumer channel totaled $50.1 million or 13.5% of total revenue versus $24.6 million or 10% of total revenue in the fourth quarter of last year. Other revenue totaled $28.9 million or 7.8% of revenue for the fourth quarter versus $18 million or 7.4% of revenue in the fourth quarter of 2010. In addition to wholesale, showrooms and outlets, this category also included $4.7 million in revenue generated from 5 temporary pop-up stores operating in Canada during the quarter, as well as $5.4 million from the 2 warehouse sales held in January; one in Chicago and one in Ottawa. The prior-year number included sales to franchise stores, which were subsequently repurchased. We ended the year with 37 showrooms in North America versus 49 a year ago, as well as one in Hong Kong, 4 in Australia and 2 in New Zealand. Gross profit for the fourth quarter was $209 million or 56.3% of net revenue compared to $143.5 million or 58.5% of net revenue in Q4 2010. As anticipated, the factors which contributed to this 220-basis-point decrease in gross margin were a product margin decline of 310 basis points, approximately 230 basis points was attributable to the higher product cost due to inflationary pressures on raw materials and labor and the remainder primarily from a more normalized rate of markdowns due to our improved inventory position; leverage on occupancy, depreciation in product and supply-chain team costs of 50 basis points; and foreign exchange improvement of 40 basis points as the effective Canadian and Australian dollar rate within our product costs was still slightly higher than Q4 2010, as the exchange rate impact typically lags a quarter as it works through our cost of goods sold. SG&A expenses were $93 million or 25% of net revenue compared to $72.2 million or 29.4% of net revenue for the same period last year. The $20.8 million SG&A dollar increase was due to an increase in store labor and operating expenses associated with higher sales volumes, as well as new stores that were added during the year and an increase in store support center costs, which include management incentive-based compensation and stock-based compensation. During the quarter, we increased our investments in training and development, IT operational infrastructure enhancements, IT systems roadmap planning and e-Commerce digital and creative asset development. As a percentage of revenue, our fourth quarter SG&A decreased by 440 basis points due to lower e-Commerce operating costs from the transition of our e-Commerce solution to an in-house platform. In addition, we leveraged on our store and other channel SG&A due to the higher volumes. As a result, operating income for the fourth quarter was $116.1 million or 31.2% of net revenue compared to $71.3 million or 29.1% of net revenue in 2010. Other income, including net interest expense, totaled $0.4 million compared to $0.5 million in the fourth quarter of 2010. Tax expense for the quarter was $42.6 million or a tax rate of 36.5% compared to $16.9 million or a tax rate of 23.5% in the fourth quarter of 2010. The lower rate incurred in Q4 2010 was due to a one-time adjustment to tax expense as a result of a revision to management's plans for repatriation of unremitted earnings of the Canadian operating subsidiary. Net income for the quarter was $73.5 million or $0.51 per diluted share. This compares with net income of $54.8 million or $0.38 per diluted share for the fourth quarter of 2010. Our weighted average diluted shares outstanding for the quarter were 145.3 million versus 144.4 million a year ago. Capital expenditures were $16 million for the quarter related to new store buildouts, existing store renovations and IT capital expenditures. Turning to the highlights for our full fiscal year 2011 performance. Net revenue rose 40.6% to just over $1 billion from $711.7 million in fiscal 2010. Gross profit was $569.3 million or 56.9% of net revenue compared to $394.9 million or 55.5% of net revenue in fiscal 2010. Net income for the year was $184.1 million or $1.27 per diluted share compared to $121.8 million or $0.85 per diluted share for fiscal 2010. Looking at our balance sheet highlights. We ended the year with $409.4 million in cash and cash equivalents, an increase of $93.2 million over fiscal 2010 year end. Inventory at the end of the fourth quarter was $104.1 million or 81.1% higher than at the end of the fourth quarter of 2010. In terms of units, this represents a 53.4% increase over 2010, which given the inventory constrained position we found ourselves at this time last year, leaves us in a very healthy inventory position coming into 2012. This now leads me to our outlook for the first quarter of 2012. This outlook assumes a Canadian dollar at par. We anticipate revenue in the range of $265 million to $270 million. This is based on comparable store sales percentage increase in the low 20s on a constant dollar basis compared to the first quarter of 2011. We plan to open 4 lululemon stores in the U.S., 1 in Australia and 2 ivviva stores in Canada during the first quarter. For Q1, we expect our gross margin to be below 55%. For comparison purposes, remember that in Q1 last year, we incurred a one-time adjustment to product cost to recognize previously unrecorded benefits of certain input tax credits, which improved gross margin by 140 basis points in Q1. We expect gross margin compression in the first quarter to be driven by higher product costs from elevated labor and raw material costs; from normalized levels of markdowns; and from slight duty deleverage as a larger portion of our business is weighted towards the U.S. In addition, as Christine mentioned, additional innovation in fabrics, construction and features in our product line will temporarily reduce margins this year. We expect modest SG&A leverage driven by cost efficiencies from the transition of our e-Commerce platform to the in-house model, even while we will be increasing our reinvestment back into the e-Commerce business to develop the necessary foundation and in-house development capability to achieve the potential growth trajectory in this channel. This is the last quarter where we will see the e-Commerce leverage benefit as we anniversary the e-Commerce transition this April. We're assuming a tax rate of 36.5% and 145.4 million diluted average shares outstanding. This tax rate is up slightly from the 36% that we have previously been anticipating as a result of the strong growth in profitability in our U.S. operations, which are subject to higher tax rates than we experience in Canada. We expect earnings per share in the first quarter to be in the range of $0.28 to $0.29 per share. For the full fiscal year 2012, we're targeting to open up to 37 corporate-owned stores, including our Australia/New Zealand stores and ivviva locations. We expect net revenue to be in the range of $1.3 billion to $1.325 billion, representing greater than 30% growth over 2011. Our fiscal 2012 includes a 53rd business week, which occurs late in the fourth quarter during the nonpeak period of our business. This guidance assumes the impact to be approximately $20 million in revenue. For the year, we expect gross margin right around our stated long-term target of 55%. And with seasonality, we expect to be slightly below 55% in quarters 1 through 3 and above in Q4. We expect to leverage SG&A slightly for the year due to the reasons mentioned earlier. As a result, we expect our overall operating margin to deleverage somewhat from 2011 and our fiscal year earnings per share to be approximately $1.50 to $1.57. This is based on 145.6 million diluted weighted average shares outstanding and it assumes our effective tax rate of 36.5%. We expect capital expenditures to be between $70 million and $75 million for fiscal 2012, reflecting new store buildouts, renovation capital for existing stores, IT and other head office capital. With that, I'll turn it back to Christine.

Thanks, John. I would just like to thank again everyone on the team that produced such outstanding results for the year and set us up so well for 2012. I feel that we're better poised to execute than we ever have been before with the work that we've done on our supply chain, the innovation, our planning and merchandising teams and how they're driving product to the stores, our logistics teams, which have really built a tremendous amount of capacity to get our product to our customers on the e-Commerce side. So I really feel starting 2012, we have more capacity to execute our plan and our future than we've ever had before and we're tremendously excited. So with that, we're going to turn it over to Q&A.

[Operator Instructions] Our first question comes from Adrienne Tennant with Janney Capital Markets.

My question is, John, can you talk about the inventory that's up 81%? How should we think about that in terms of the ability to drive what type of comp? Should we assume that, that type of inventory build should support a low 20% comp on a fairly sustainable basis? And then secondly, if you can talk a little bit about the average cost trends. I assume that they're going to start to abate in Q2 and maybe -- or actually be down year-on-year starting in the back half of the year.

Okay. Well, as I said in my prepared comments, the revenue dollar amount is up 81%, but in terms of units, it's in the 50s. The difference in part because of cost inflation in our product cost, as well as different mix of products, product with higher fit and finish. So relative to last year or looking at going forward, it does definitely support the low 20s comp that I guided to. And we're feeling that as we did coming into Q4, we're in a good, balanced inventory position, not too heavy, not too light.

Okay. And then wouldn't the AUC, would it down year-on-year, probably Q3?

I don't anticipate it will be. I anticipate the product costs will remain fairly level through the year. Again, we're not as cotton-dependent as a lot of retailers who suffered more from the spike last year and therefore, they see relief this year. A lot more of our products are really oil-based. So I don't see that abating in the second half. I see the cost levels at this point probably fairly level through the year.

Our next question comes from Lorraine Hutchinson with BoA Merrill Lynch.

It's Paul Alexander for Lorraine. Could you guys speak a little bit about how you view the opportunity in the U.S. and how you view the list of potential markets up to 300 or over that? And perhaps compare for us what the markets #299 and 300 look like compared to the markets that you're opening now and whether there's much of any difference to speak of between those markets.

I think we feel that the North American market is getting stronger for us every day, and we see more opportunity there every year than we've seen the year before. So I think buildout, we're confident with our store count number. And as far as the markets, I think the things that we're testing right now, is it better to put another store in a dense outer ring of a dense market or is it better to go into the small market? The unit economics are different. But what we've been able to see in some of the smaller markets we've gone into is very strong revenue, lower operating costs for a really strong presence. I think our question about store count isn't maybe unit economics. It's about what's that right level of brand presence and what's that right balance between e-Commerce and what's emerging there and the full potential of that business. So frankly, that's more what we're monitoring is what's the right way to drive the business to reach the guests. And the beauty is both of those channels for us are high-margin businesses. And that's really our focus is to keep the brand strong and not overbuild and create too much fixed cost while creating demand and strong unit economics. And we -- that's what we remain focused on doing.

And just as a follow-up to that, how many of the 300 are expected to be outlets?

None.

Yes. We don't include outlets in our store count.

Yes, those are in other.

Our next question comes from Michelle Tan with Goldman Sachs.

So a couple things. One, just following up on Adrienne's question, John, can you take us through the product cost impact year-over-year as you see it over the course of 2012? And then from a warehouse sale perspective, I would imagine that returning to the warehouse sales had some impact on gross margin in Q4. Can you talk about kind of what the margins look like for warehouse sales versus your overall margin and whether there are other quarters where we should expect warehouse sales to come back as we move through 2012? And then finally, on the product reinvestment side, I think clearly you guys have great product in the store as we've returned to this more normalized inventory sourcing pipeline. Maybe help us think about how much of this kind of upgraded technology is really investing upfront from a margin perspective. And does that continue through 2012? Does it escalate? How do we think about that?

Maybe I can do a little bit on the future and have Sheree add some pieces, then we'll have John maybe do the cost basis, Michelle, if that's okay with you?

Perfect.

Okay. So I think, let's talk about what we're doing in some of our product strategies right now. So the first thing we're doing is we're introducing a lot more pod for both newness and flow. But we're also testing a lot of product in that, in those concepts. And so for smaller runs, which are, by the way, higher-priced and dollar margin items but the percent is lower, so there's some tradeoff that we're doing there. But we get a tremendous amount of learning about what are those future line extensions. So for us, that is worth the tradeoff on the gross margin as we've always talked about. Staying in the leadership position and innovation in our category is one of our number one strategies, which makes the product desirable. So we're always going to trade a little bit of margin for that investment and that newness when we feel it's appropriate. And Sheree's team has done such a great job. We have a lot of things to test that will be flowing through this year. So we're really excited. You saw our community [ph] line dropping earlier this quarter, and it was really well received. We've developed a lot of really beautiful product for that and the learning from that could be taken into all of our other lines. But these are small runs of product. But again, they're higher dollar price points because they're specialty items, a little bit lower margins. So the healthy base of our business is still at a high margin and high margin percentage, so we have seen some cost pressures, which we've talked about before, and John can go into more detail with that. But I'll talk markdowns for a minute. I want to remind everybody that our markdowns aren't sales. So where they come from and as we float more newness in, when we have a broken size run of colors and we have a lot more color and smaller batch of units coming through, we do a first markdown on those broken size runs of color to keep the store fresh and clear. So that's the more normalized markdown that we've talked about; we see that occurring. We did do the warehouse sales to close out 2012 because we don't want to create a dependency on more outlets. We don't anticipate doing any more this year. It's just simply that end of the year. So we'll always look at that and do what we need to do. But right now, we have no plans to do additional. So that's kind of our product strategy. And now I'll let John break it out. Sheree, you want to add anything?

Just that we continue to drive innovation and we're going to double up on our capital that we flow this year because we're so excited about exploring some new technologies in terms of fabrics, styling and construction. And that's all I can add to Christine's commenting.

Okay. And then on the margin side, warehouse sales, the gross margin is probably roughly around a 30% level. So obviously, it has a negative impact on the overall gross margin. And don't forget the outlets in Q4 and through 2012 will also have product, whereas last year, they were -- the shelves were pretty bare because we don't make product specifically for the outlets. Gross margin for the year, I mean, there's lots of up and downs. There's currency, there's duty impact. The 2 big things, and we've talked about them, are inflation on the cost side, which took place mostly in 2011. So if you look at 2012, the first half, we're still anniversary-ing slightly lower inflation impact. And as we look back at last year, I think there was about 150 basis points impact in the first half and 250 in the second half. So if we go with the assumption that costs are level this year, there's still 100 basis points of deleverage in the first half and flat in the second half. The other one being markdowns. You saw some impact of markdowns, which is healthy in Q4. Remember, Q1 through 3 last year, we were so short on product that markdowns were just minimal. So that will continue to be an impact on our gross margin this year. Those are the big pieces.

Our next question comes from Janet Kloppenburg with JJK Research.

Sheree and Christine, if I could just have you talk a little bit more about the increased product flow and also about the margin on the technical product. I do see that you're increasing the innovation and the attributes of the product. And I'm wondering if over time, as you do bigger production runs of this product, if you expect the margins to improve there or if that premium product will always maintain a lower product margin. I was also interested in your comments, Christine, about developing the Men's business further and when we should expect to see, I guess, a higher SKU count there. And Sheree, if you could talk about other new product introductions. I saw -- I'm seeing more of the running skirts and such in stores. So if you could talk a little bit more about innovation and about the profitability of that. And lastly, John, should we expect inventory levels to kind of moderate as we go into third quarter? Or will it be more as we go into fourth quarter?

Okay. So what happens in our innovation cycle is the first introduction on the small run might be lower, but then as we take those products and move them into some of our seasonal and key items and we do larger production runs of them, of course, you get more leverage. But more importantly, what happens with those products is those innovations go into -- elements of those innovations go into other key and then ultimately core items, which is kind of like the Apple philosophy of constantly reinventing your core item. So we take pieces of those and reinvent our core, which keeps our core at a high margin and healthy. So what we're doing is a complete product management cycle and really continuing to invest at every level so that we keep our product differentiated. So this is a very important cycle. We've always talked about this is the reason why we want to keep some margin flexibility because winning for the long term is what creates the value for the brand and keeping our products at premium level. And we don't want to compete on price with average product, right? That's not where we're going, and our whole cycle is designed to do that. Regarding Men's, the sales achieved 14% currently, that's up from 12%. So we've seen strong uptick on Men's, really on what we consider still a fairly premium line but really having refocused on the basics. We've got a great merchant designer that now leads the Men's pods. We are so excited about some of the product that he's got coming out. So I'll let Sheree talk maybe about when she sees the SKU counts increasing for Men's.

Sure. In terms of Men's SKU count broadening and actually the more depth in the key item categories, you'll see that coming around Q4 of this year. In terms of the new product introductions, which you asked about, we are -- well, let me tell you a little bit about some of the innovations. We are really looking at transformable garments being something that we're looking at to drive not only technical innovation but just interesting transformability from sport to street and from sport to sport. Super lightweight fabrics, we continue to get really excited about having the runner feel like they're not wearing anything at all, which is the Holy Grail, of course. We're broadening our Silverescent line into the accessories area, as well as the yoga area and so on. And then we're also exploring some more state-of-the-art anti-chafe technologies, which you'll be seeing coming up. In terms of the sports that we're looking at, we just did a function show for our board, and we were so excited and cannot wait to get some of this for ourselves. So the swim line that we've got coming up later on this quarter is absolutely incredible. It's not only swim but it's also surf components that we added to the line. We're looking at road biking in addition to what you just saw, spin, bar methods and some cold weather gear that you'll be seeing for Q4 of this coming year. So there's a lot going on. There is no shortage of ideas here at lululemon.

No. And I think on the Men's SKUs, those would be increasing in count pretty much coming into the third quarter and then the fall season.

Then Janet, in terms of your question on inventory increase year-over-year, by the time we get to Q4 of this year, you should see the inventory increase in line with sales because we were in a good inventory position in Q4. But prior to that, as you recall, we were under-inventoried. So you should see in Q2 and Q3 inventory increases year-over-year higher than the sales increase. But the most extreme example is this coming into Q1.

Our next question comes from Stacy Pak with Barclays Capital.

Just, I guess, a couple. First, just following up on the Men's business, Christine, I was hoping you could expand a little bit more on who the customer is relative to the Women's customer, what you're finding as you enter that space where there's arguably a lot more competition. Is there a difference in the age of the customer? Is it a more or less profitable business? And I mean, I'm seeing it really take off here on the West Coast. And then for you, John, just looking at the new store productivity, if my numbers are right, given what you said about other sales, it looks like it was not really any better than Q3 when you had some issues. So could you speak to that as well?

Maybe we do -- better do that one first because we had no issues in Q3.

Well, you had later openings, et cetera, and things that were being remodeled, which caused a weakness -- exactly. So if -- maybe my numbers are wrong, but my numbers are showing the same sort of level of new store productivity in Q4. Is there -- is that correct?

I don't see your numbers, but I mean, new stores -- I mean, we're thrilled with the way the new stores have been opening. The new store openings through 2011 as I look at – how's the best way to say it, if I look at the U.S. store base because that's where all the new stores are, on average, the new stores are opening somewhere in the 80% of the overall portfolio range. And we're pretty thrilled with that.

Yes. And I think probably what's bringing your numbers down a little bit, Stacy, is ivviva openings and Australia openings. So just remember, there's more than just lululemon openings in that number now.

Okay. And were there any late openings?

Well, I'm not sure what you mean by late. I can't remember the exact timing, but they...

Okay. Well, did the openings open fairly equally in the quarter? Or were the openings weighted to the end of the quarter, which...

I don't have the dates in front of me. I think they are posted on our website. I hate to punt on it, but you can see the exact dates if you go to the website.

Okay. All right. And then, Christine?

Right, so Men's. Who's the customer for Men's? We see that customer broadening tremendously. I think we used to hit a slightly younger male, which I would say -- when I say that, it's up to 35-year-old and that's the target who we see driving the brand. But we see that broadening very much across a much larger base to both younger and slightly older men. So it's the same fitness enthusiast that we see, lululemon people who work on a regular basis, who appreciate the same high functionality when they work out and crossing over into street appeal. And they really appreciate the anti-stink properties of the nylon and the Silverescent that we have versus polyester, which tends to attract and hold smell. So it's both in functionality and look of the garment is who we're appealing to. And we're really seeing people not be as sensitive to it being a women's brand. They're seeing it as a premium male's choice. So we see one guy wear it to the gym, another guy says, "I think I'll get some of that." They get it, they love it and the cycle begins. So we see more men shopping for themselves in our store every day and coming back repeatedly. And they get a favorite of something and we see them buy in bulk, which is a little different behavior than you see from our female customers. So we definitely see that we've got huge adoption rates from the product once they try it. And we see the consumer band growing and expanding.

Just before we leave, I want to go back to the new store question. Because as I look at the quarter, we only opened 2 lululemon stores in the U.S. in the quarter. So the others, 4 in Australia, one in New Zealand, those are lower productivity stores at this point, as well as 2 ivviva. So if you're getting a lower new store productivity number, it's because it was just the 2 main brands, lululemon stores in the quarter.

The next question comes from Kimberly Greenberger with Morgan Stanley.

I wanted to talk about the international markets. And I'm wondering if you can tell us whether you monitor tourist shopping in your North American stores. And to the extent that you have any insight into the country of origin where you see most shopping by tourist, that would be very interesting if you could share that with us. And beyond London and Hong Kong, are there some international locations that you think are particularly well-suited for either 2012 or the 2013 showrooms?

We haven't made any decisions yet whether or not we'd go to any additional showrooms in other countries. But we do definitely have some markets that we're really trending and watching. And Germany is a very attractive market for us; it allows us to have all of the layering properties that we have, like in the Canadian market, the guest is very athletic there. There's a huge yoga community in Germany so that's one of the key markets. And that halo effect of Germany goes into Switzerland and Amsterdam and the North. But what's easier for us to gauge is where we see international shopping from our e-Commerce site, which right now is based out of the U.S. and those sales come into there. And there are -- we watch the markets and top markets that we see e-Commerce sales coming from. And there are tourist stores, where we do see seasonally people come in. We see that, obviously, in our Hawaiian store. We see that at Whistler. We see that in New York City. And we do pay attention. But it's -- we don't have a tracking system, where do we see that. People coming from, but anecdotally, we do know that we're growing demand in Latin America. We're growing demand particularly from France. Huge demand still in Japan, Hong Kong. And we see it spreading across Asia now. We see a lot of tourists in our Hong Kong showrooms that are coming in from all across Southeast Asia and buying in bulk. So we are very excited to get a store -- a showroom and then ultimately a store opened in that market to begin to see where we're generating that demand, and then we follow it with e-Commerce.

Our next question comes from Omar Saad with ISI Group.

A quick follow-up on Kimberly's question, and then I also wanted to ask something about store sizes. In terms of the international market, what's the transition to -- what's the process or the transition process to go from a showroom to when you start opening actually real stores in the ground? Are there benchmarks you need to see or things you need to see in the marketplace or systems that you need to have in place, operations you need to have in place? And then my second question will be related to the store sizes. You've got all these great opportunities across categories, running and outdoor and Men's and so on and so forth. But I don't know if the store size, at least a lot of the store size today, are big enough to support that broad of a product kind of categorization. How are you thinking about store sizes going forward in the new stores that you're opening or in remodels of existing stores? Any answers to both of those questions would be really helpful.

Great. Omar, I don't want to give away all of our secrets. So I'm probably not going to answer your question to as much as you'd like me to. But I will tell you that we have a very disciplined method of how -- and it's a very integrated market development strategy that looks at a lot of different factors, including our internal readiness with employees. We look at things like showrooms, we look at the e-Commerce sales. And then there's a few other things that we really look at to make sure that we have market readiness and we always look at it as creating desire first, whether it's domestically or internationally. And a key part of that is building our ambassador network. And that's what we're really focused on because it's about building long-term brand loyalty. And the way that a guest is introduced to the brand, regardless of whether it's the first time in a market or not, creates a long-term relationship. And that's what we're after. So internationally, we've been working in these markets for 2 to 3 years. As I've said over time, planting the seeds, building the relationships, attending things like Yoga Journal Conferences. So we create a brand awareness and we're the brand they're waiting for. And we're doing a lot of things behind the scenes here structurally to get ready. Where I don't want to be and where I've seen a lot of growth stories go bad is where you rush into these markets. You don't have the infrastructure ready. You leverage up to your fixed cost. And the next thing you know, you're having to make difficult choices about investing in your core business, whether it's renovations of stores, keeping things fresh, product margins, how you pay your people and ultimately destroy your brand. So we're very disciplined, and we do have a lot of metrics about how we go about entering markets. And the same thing is true of our renovation and renewal strategy. We're working 2, 3 years ahead of time to secure renewals on key stores to plan relocations, and finally, in store size. We feel it's very important to the brand to have what we refer to as a kitchen party or a high-energy feel inside of our stores. And so that means a smaller footprint. We want to use our labor on the floor to educate the guest, not to cover a big footprint. And we have been very adept at flowing product and improving our operations. You just have to look at a few of our Canadian stores. And the volume that we do out of what's basically 3,500, 3,300 square feet and frankly sometimes even 2,500 square feet, gives us great confidence. And we look at those stores and what we figured out for flow and we do have a renewal strategy and you've seen us execute it in Canada, which is why we had so many stores closed in Q3, where we will take an extra 300 square feet. Or maybe sometimes if the store is only 2,500 square feet, we'll take as much as 1,000 square feet. And that allows us to drive continued comps in the Canadian markets, as well as then flow all of the new goods that we have. But we feel very strongly that we don't want, even in a future concept as we develop these pods and these lines, to have stores that are bigger than 4,000, maybe slightly more. But we're doing that work now and planning for that eventual future. But over the next 3 to 5 years in North America, we've got plenty of room to grow our business without doing huge relocations or taking massive [indiscernible] of stores.

Our next question comes from Dana Telsey with Telsey Advisory Group.

Can you talk a little bit about of the buckets of SG&A investment, how you think of the timing of contribution and then the comp drivers? And just lastly, any refreshment to the long-term targets, whether it's operating margin, e-Commerce as a percent of sales, number of stores or gross margin?

Dana, could you refer hat again? So the comp drivers, your first question was...

Comp drivers, buckets of SG&A investment for 2012 and the timing of the contribution from them. When should we see them complete? Or what should be the benefit down the road?

So I think the main thing that we're working on right now is really 2 fronts, and it will be ultimately 3 in the short term. Buckets of SG&A, in systems, the number one is our supply-chain systems. And part of that is also the flow to the stores and localized store planning to have a much better flow of localized products per store. And so it's that bottoms-up planning from the store that allows us to fine-tune planning and allocation and get those right mix of products and differentiate each store a little bit more. So for instance, more colors and prints in Florida and more coats and layering systems in Halifax, right. So that's our model. And so the planning systems to do that to continue to grow comps are critical. And that's what we're working on, as well as capacity and flowback to our manufacturers to really control our cost of goods, who has what manufacturing capacity so that we can increase our chase and our flexibility. So the systems that allow us to do that are the first 2 priorities. We also have to work on our e-Commerce. So you're seeing us right now doing the work on the localized pages. And so the infrastructure for that, the systems, we're opening a new IT center to support that in San Francisco because that allows us to gain the talent. What we've noticed already, because the office lease is signed, we're in the hiring process, we have 10 high-qualified applicants rather than 2 that took -- and taking us 6 months to close some of those IT positions. So that's why you're seeing us gain some traction in the spend that we're doing because we're finally being able to hire the right people to drive our e-Commerce business. So that's also critical growth drivers. So the returns show up in our comps pretty quickly. But we still got a lot of -- once we get those systems up and running, but the investment period and the working period to implement those is 18 to 24 months for even just the first phases. And because flow is so critical to us, you'll see us continue to make investments there. Other investments are in our financial system to be able to take on complexity of additional channels, product lines and geography. And so those are a couple of year investments. As we said earlier in the call, we do view 2012 as a heavy investment. We're also building our bench strength, particularly in the design and the merchandise areas to allow us to again do that localized store strategy. And the comp drivers, we've spoken to some of those already, newness, flow. The big difference we see coming into this year is our ability to smooth out the flow on a weekly delivery of the product, which is giving us a much more consistent comp cadence than we've had in the past. And because we've improved our internal processes, our factories are able to be more responsive in partnership with us, so we're not -- towards the back half of the year, we won't have to carry as much inventory because our flow will be improved. So comp drivers are mainly newness, that innovation that we've talked about and just growing brand awareness and traffic in so many of our North America stores, a tremendous amount of our comp still comes from traffic.

And any update just on the long-term operating margin target?

We were really pleased to calculate Q4 and actually see that our net income margin was 19%, which is pretty close to our -- about 18 months ago, operating margin target of 20%. So I'll let John talk about where he thinks the target...

Again, I've been saying for a long time, since I upped our operating margin target from that 20% that a margin profile of 55% gross margin and 25% operating margin, while we're in a heavy investment and growth stage of the company's evolution, is still valid and there's no change to that.

Our next question comes from Erika Maschmeyer with Robert W. Baird.

Could you talk a little bit about what your comp guidance assumes? Does it assume the first half trends continue through the remainder of your quarter? And a little bit in terms of thinking about the composition of the comp, how -- on comp driver front, I mean, how much of it is kind of innovation and newness versus growing brand awareness and maybe initial consumers buying more of the basic products, your black pants? And how does that look differently, I guess, in sort of Canada versus the U.S. or mature stores versus newer stores?

Let me start with the comp through the quarter, not that we give monthly or weekly guidance. But if you remember last year, we started the year inventory constrained, became more inventory constrained. And March was probably the low point. And then we got somewhat back in stock as April progressed. So our comp guidance and the tempo of it through the quarter is really looking at last year because the big driver this quarter is just availability of inventory and stock.

I think if you just look at the timing for the year, last year, we had great opportunity -- year-over-year, we have great opportunity into Q1 to anniversary that. But now we're going to be up against a 26% comp in Q4. So we definitely expect it to normalize over the back half of the year. And just the complexion of comp, it's still being driven by very little pricing increase. Pricing increase comes from adding higher-value items, especially the seasonal and the new items that we're putting through. But a large part of it is traffic, and then a little bit in mix and ticket. But the biggest driver is still traffic.

Our next question comes from Howard Tubin with RBC Capital Markets.

How should we think about the showroom strategy? Should the showroom number kind of continue to decline modestly as you fill in some of these markets? Or should it hang in there up around 30 or 40 going forward?

We do expect it to be a little bit more in the 30s for a short period of time. And so you'll start to see us do more internationally. And then that would probably drive the number back up, but that probably won't be in 2012. So for 2012, that's the mid-30s as we kind of open, close. We are putting some in some more secondary markets, so you'll see some flurries of a couple-up. But on the whole, it will stay pretty constant to the mid-30s.

Our next question comes from Edward Yruma with KeyBanc Capital.

Can you talk a little bit about some of the investments to supply chain? I know that at periods last year, you've had some constraints, particularly around some of your proprietary materials. Do you have more dedicated manufacturing capacity? And kind of how could you improve some of those flows?

We actually have a team that forecasts fabric now, which is like, as we talked about some of our SG&A investments, that we made investments in a new head of raw materials. We've made investments in the sourcing team, production team. We've brought on some additional factory capacity. So the main part is the partnership with the mills that we work with and working with them with innovation. And we've also frankly held bigger inventories of fabric, which has then allowed us to have more choice and responsiveness.

Our next question comes from Taposh Bari with Jefferies & Company.

I guess, 2 questions. One, on just a -- it seems like a theme developing here is growth is not going to come primarily from stores. E-Commerce is obviously a huge lever for you guys. So can you just give us some more color on how that mix of e-Comm versus brick-and-mortar varies versus some of your developed markets, perhaps Canada, the West Coast versus new markets? Just trying to get a better understanding of how you capture that incremental demand via e-Commerce despite what seems to be a fairly constrained box at around 3,000 square feet?

Yes. I mean, I don't feel constrained by our box. I mean, if our average unit is $2,000 a square foot, we can flow a lot of through that store. So I'm not worried about our upside growth because our number one lever that we've talked about is still driving comps in existing stores. So as our U.S. store base matures, I mean, the comp growth that we produced out of Canada in Q4 was a big driver of the upside. So they're still in the low teens. So we're not, I feel, constrained by our store size to grow. The mix of e-Commerce, we're watching the consumer behaviors of like the 26, the 27-year-olds and watching what they're doing, how are they on mobile devices, et cetera, because we recognize the game is changing. And what's happening in tertiary markets with real estate and where do you have viable centers, so the whole landscape of real estate is changing as consumer behaviors change. And what we want to be is really flexible and well-poised to deal with how that consumer behavior is changing by watching, monitoring it and developing a really solid e-Commerce site. That's why we do 5-year leases, it gives us a lot of flexibility. So our goal is to be well-positioned and flexible and ahead of that game. And we feel that we are.

That's helpful. Christine, I also just wanted to ask you a question about competition. So it seems like everybody wants to get into yoga apparel nowadays. Everybody wants to be lululemon. So looking at apparel as a category historically, low barriers to entry, a very competitive category, you guys obviously continue to prove that principle. So just trying to get your sense on where you see competition. Do you feel like it's increasing? Do you think it's healthy for innovation for your company? And I guess, ultimately, what gives you the confidence that you'll be able to sustain that high 20%-plus-type operating margin environment, given the competitive dynamics that we've seen historically in this category?

I think what you see us doing this quarter is the perfect response to what we see occurring. I mean, I think if we started to settle and develop mediocre product and over-rely on our core or [indiscernible] product and try to gain efficiencies with big bulk buys, we'd allow competitive pressure to occur. And ultimately, we'd be competing on price. So we have clearly stated what our 4 brand pillars are and we make investments in those, which is obviously the community, the technical products, keeping our stores fresh and our people. And I think our guest experience is pretty unparalleled in the retail world, and that is a big part of our success. So it's managing those points of differentiation, continuing to deepen the competitive moats and staying on top of our product. And the 55% gross margin in product is nothing to apologize for across the retail apparel world. So I think we have a great opportunity with the rate of innovation we're doing. And we still have a lot of efficiencies to get in the supply chain. So I'm not worried about continuing to deliver a north of 25% operating margin, even as it's a more competitive environment, as long as we do the things we need to do to keep the guest excited about our product and our guest experience.

Our next question comes from Liz Dunn from Macquarie.

I'm really interested in the acceleration and comp trend that you saw in the fourth quarter and some of the factors behind that. Can you just talk about your learnings with color? And you've already talked about some of the innovation. And I think when we spoke at ICR, we talked a little bit about sort of rationalizing some of the pant SKUs. Can you just talk about some of the learnings from the fourth quarter that translate into continuing that comp trend through 2012?

Really, what we saw, if you remember last year, the cadence was under-inventoried, we chased. But when you're chasing, what you buy is what you can get available capacity factors from your manufacturers and you don't necessarily have choice in fabrics, you don't have -- so we kind of -- we felt – means you were limited guest availability. And we felt that, that slowed the Canadian business, maybe more than we anticipated. And so what we really saw in Q4 was as we really set up and grow great product innovation, great color and assortment, the rebound in the Canadian business for us, going from a mid-single-digit comp to a low double-digit comp, shows that the guests was just hungry for great product. And that's what's also fueling our U.S. business. And we believe that the pods will continue to allow us to do that same thing both in Canada and in the U.S. And we have rationalized some SKUs. And the pant wall and being a little bit tighter about that, but the guest expects us to innovate as well. We are really clear about what core product is, and making sure that we are constantly reinventing that and keeping it fresh for the guests. So we feel really good about the product line assortment. You do see more flow of newness into the stores, but at the same time, real focus on that core business. So I think we've got the balance right, right now. We feel really good about our product assortment. And a good sign is always when everybody in the office rushes up to the store on the product drop delivery days to grab the new stuff. And we see that a lot around the office these days, so we're pretty excited.

Our last question comes from John Kernan with Cowen.

Just to follow up on e-Commerce and ivviva, what -- and the initial reads there. What was the contribution from ivviva to the e-Commerce growth this quarter? And then one quick follow-up on the core lululemon concept. You have warehouses in Baton Rouge, Ann Arbor, Madison, Wisconsin, Knoxville and Charlottesville. What are the initial reads you're getting from that college-age consumer that's obviously outside of kind of the core avatar that you've talked about before?

You mean showrooms versus warehouses?

Showrooms, sorry.

Yes. Okay. I was thinking, "Wow, I don't remember those. Do we have fakes going out in those?" We have had an extremely strong reaction from guests in the Midwest and a really strong product adoption. And frankly, we were a little surprised about that in the beginning. So those showrooms, as John talked about, in Q4, we saw increased showroom sales across all the markets, which contributed to our success. So initial read in all of those markets has been very favorable.

And the question on ivviva e-Commerce, I mean, it's doing fine, but it's not material to the overall number.

Did you mean e-Commerce separate or ivviva e-Commerce?

ivviva e-Commerce.

Okay. Yes. I mean, so very early in the induction. They had -- they exceeded our internal target for the fourth quarter and a strong upswing in the U.S. But we're still in the very early stages of building brand awareness. And for us, keeping it small, growing it at the right rate, really honing it to the customer, getting it right is -- continues just to be our focus there. We have so much opportunity in North America that we want to make sure we're not distracted. We give things time in the new concepts and these tests that we're doing in product, time to perc so we have the levers to pull when we want to pull a stronger growth trajectory. But we're not in a hurry. I want to be really clear about that, too.

And now I turn the conference back to the host for closing comments.

Okay. I want to thank everybody for joining us today, and we're -- as I stated earlier, I'm very excited about 2012 and the opportunity we see in front of us. The infrastructure that we've built, the people that we've added, the depth and breadth of the team, I feel more confident coming into 2012 than I think I have at any point in the company about our team's capacity to deliver. And I'm so excited about our opportunity to drive the women's athletic, technical and beautiful product category, which we believe that we're leading today. Thank you, everyone.

Ladies and gentlemen, that concludes today's presentation. You may now disconnect, and have a wonderful day.