Adrienne Yih-Tennant

Adrienne Yih inquired about Anthropologie's own brand penetration, its future potential, and the global footprint for Anthropologie. She also asked for an update on Urban Outfitters' low single-digit segment margin in Q3 and its path to annual profitability.

Answer

Tricia Smith, CEO of the Anthropologie Group, highlighted that own brand penetration grew by almost 100 basis points year-over-year, with continued plans for outperformance, and discussed successful U.K. store openings. Frank Conforti, Co-President and COO, congratulated the Urban Outfitters team on Q3 profitability, driven by Europe and reduced North American losses, noting the potential for global annual profitability next year.

Adrienne Yih inquired about Anthropologie's own brand penetration, its future growth potential, and the global footprint expansion, particularly in Europe. She also asked about Urban Outfitters' Q3 low single-digit operating profit margin and the outlook for annual profitability.

Answer

Tricia Smith, CEO of the Anthropologie Group, highlighted the significant growth in own brand penetration, driven by design talent and successful new labels like Maeve and Pilcro. She noted successful store openings in the U.K. and plans for continued North American expansion. Frank Conforti, Co-President and COO, congratulated the Urban team on Q3 profitability, driven by Europe and reduced North American losses, suggesting annual profitability for the brand next year is possible.

Adrienne Yih from Barclays PLC asked about the current denim cycle, particularly the emergence of premium denim, and sought clarification on the Q4 tariff impact, including whether the new India tariffs would affect results into the next fiscal year.

Answer

Co-President & COO Frank Conforti confirmed that the financial plan includes the 50% India tariff, with impacts expected in Q4 and carrying over into the first half of the next year. CEO & Chairman Richard Hayne addressed the denim trend, noting that while full-legged bottoms remain dominant, the company sees opportunities across various silhouettes, rises, and colors.

Adrienne Yih-Tennant inquired about the status of implementing smaller, more productive store formats for Urban Outfitters, the rationale for bringing in inventory early, and the impact of shifting from air to boat freight on the company's speed model.

Answer

CFO Melanie Marein-Efron explained that for Q2, the company plans to bring in less fashion-sensitive fall inventory early as a prudent measure against tariff uncertainty and potential supply chain disruptions. Executive Richard Hayne acknowledged that shifting to boat freight adds about 30 days to delivery times but noted they are using advanced technologies to mitigate the impact. Executive Shea Jensen stated that while no major store format adjustments have been made yet, they have flexibility with upcoming lease renewals to downsize or relocate, citing a Houston store as a future example.

Adrienne Yih-Tennant inquired about the ongoing fashion silhouette shift, particularly with wider pants, and asked about the strategic priority for Urban Outfitters between margin recapture and sales recovery.

Answer

CEO Richard Hayne confirmed the continued success of fuller and wider pant shapes. Co-President and COO Francis Conforti clarified that the immediate focus for Urban Outfitters is on improving the quality of earnings through regular-price selling and margin improvement, with top-line sales growth being the next phase of the turnaround.

Adrienne Yih-Tennant inquired about potential price resistance from higher-end consumers, how initial retail prices compare to 2019 levels, and whether increased promotions at Anthropologie suggest a need to adjust pricing strategy.

Answer

CEO Richard Hayne explained that a lower average order value (AOV) is due to a product mix shift, as customers at Anthropologie and Free People are purchasing new, lower-priced lines like 'daily practice' and FP Movement. Tricia Smith, Global CEO of Anthropologie Group, clarified that Anthropologie's average unit retail (AUR) is not significantly higher than in FY'19 because of this mix, and the brand remains focused on driving full-price sales.

Adrienne Yih asked if Foot Locker's turnaround is primarily due to addressing underperforming operations and inventory management, or if it requires significant infrastructure investments. She also inquired about potential banner closures and the nature of the 1,000-1,500 basis point inventory markdowns (write-off/reserve, promo depth, third-party channels).

Answer

Ed Stack, Executive Chairman, confirmed that underperforming operations and a departure from 'retail 101' are key issues. He noted an 11-store test was capital-light, focusing on merchandising and visual presentation. He explained the markdowns are for older, underperforming SKUs, with a plan to sell remaining inventory to a jobber for a fresh start in 2026. Lauren Hobart, President and CEO, added that core DICK'S expertise in merchandising, marketing, and brand relationships is being transferred to Foot Locker.

Adrienne Yih asked if the Foot Locker turnaround is primarily due to historically underperforming operations, closures, and inventory management, or if deeper infrastructure investments and structural changes are needed, and if any Foot Locker banners no longer make sense. She also followed up on the 1,000-1,500 basis points inventory markdowns, asking if it includes write-offs/reserves, the depth of the promotion, or the use of third-party channels.

Answer

Ed Stack, Executive Chairman, confirmed that the turnaround is largely about addressing historically underperforming operations and returning to 'retail 101.' He noted that while capital will be involved for store investments, an 11-store test focused on merchandising and visual presentation was 'capital light' and showed enthusiastic early results. Lauren Hobart, President and CEO, added that DICK'S core expertise in merchandising, marketing, and operations is being transferred. Ed Stack clarified that markdowns are for older, underperforming SKUs, with plans to sell remaining inventory to a jobber for a fresh start in 2026, and these markdowns are on lifestyle product, not key performance products at DICK'S.

Adrienne Yih from Barclays posed a high-level question about a potential shift in the balance of power toward DICK'S within the wholesale channel, given its strength and the upcoming Foot Locker acquisition. She also asked for a breakdown of the Q2 comp drivers, specifically the contribution from price increases, and the outlook for brand price hikes in spring.

Answer

President & CEO Lauren Hobart emphasized the strength of their strategic partnerships with brands rather than a 'shift in power,' noting growth across all business segments. CFO Navdeep Gupta detailed that the 5% comp was driven by a 0.9% increase in transactions and a 4.1% increase in average ticket, which was fueled by innovation, product mix, and more units per transaction. He did not provide a specific outlook for future price increases.

Adrienne Yih asked about the strategy for implementing price increases related to tariffs and inquired about the timing of tariff impacts on the P&L and inventory composition.

Answer

President and CEO Lauren Hobart stated that the company has advanced pricing capabilities to manage tariff impacts while confirming the full-year guidance. Executive VP & CFO Navdeep Gupta noted that the 12% inventory increase was a successful strategic investment and expects inventory growth to moderate as the year progresses, even with anticipated tariff effects.

Adrienne Yih-Tennant inquired about the potential impact of tariffs, including how brand partners might handle pricing, and asked for more detail on the quarterly cadence of preopening expenses.

Answer

CEO Lauren Hobart emphasized the company's strong momentum and confidence in delivering on guidance regardless of tariff outcomes. CFO Navdeep Gupta added that new tariffs are not contemplated in the guidance, noting that the company and its partners have diversified sourcing away from China over several years. He deferred providing a specific quarterly breakdown for preopening expenses.

Adrienne Yih-Tennant asked why DICK'S is successfully executing a full-price, multi-brand retail strategy in a promotional environment and inquired about the company's exposure to potential tariffs.

Answer

President and CEO Lauren Hobart attributed the success to strong execution of long-term strategies, including differentiated product access and serving an athlete demographic that prioritizes health and sports. She noted a broader 'sport moment' in culture is driving demand. CFO Navdeep Gupta added that tariff exposure is negligible for its vertical brands due to a diversified supply chain and that the company will navigate the situation with its national brand partners, referencing its successful 2018-2019 playbook.

Adrienne Yih-Tennant asked for a high-level overview of the key strategies driving DICK'S Sporting Goods' post-COVID success and market share gains, and inquired about the rationale behind the Q2 inventory increase.

Answer

President and CEO Lauren Hobart attributed the company's strong performance to its long-term strategic pillars: differentiated product assortment, an enhanced omnichannel athlete experience through formats like House of Sport, and strong brand engagement. She noted that growth was seen across all income demographics. CFO Navdeep Gupta explained that the 11% inventory increase was a conscious, strategic investment in high-demand, clean inventory with a long sales life to fuel growth into the second half of 2024 and early 2025.

Adrienne Yih asked about the impact of the focus on product and marketing, specifically the appointment of design and creative leadership, on creative thinking within the organization, and how marketing complements product to create a 'flywheel effect'.

Answer

Richard Dickson, President and CEO, credited Zach for significant creative impact, elevating design and product to create cultural moments and attract talent. He described marketing as a complex function driving new narratives, digital dialogue, influencer content, and a TikTok presence. The 'Better in Denim' campaign (8 billion impressions, 500 million views) was cited as a key example of the playbook's effectiveness, leading to more efficient and impactful spend.

Adrienne Yih asked about the impact of the increased focus on product and marketing, specifically how the appointment of design and creative leadership has changed creative thinking, and how marketing complements product to create a 'flywheel effect'.

Answer

Richard Dickson, President and CEO of Gap Inc., highlighted the significant impact of Zach (Chief Creative Officer) in elevating design and product, creating cultural moments, and attracting talent. He emphasized that marketing is a complex function, driving new narratives through digital dialogue, social media, influencer content, and programs like the cross-brand content creator initiative, exemplified by the 'Cat's Eye' campaign's success.

Adrienne Yih asked if dd's DISCOUNTS' performance mirrored Ross Dress for Less, if there was pressure from delayed SNAP benefits in early November, and if tariff impacts are fully offset for Q4 and will be neutral entering 2026. She also followed up on inventory levels.

Answer

Michael Hartshorn (Group President and COO) confirmed dd's performance was very similar to Ross, with consistent business across the quarter and no specific call-outs for November. He reiterated that tariff impact was neutral in Q4 and expected to be neutral moving into 2026. He also clarified that ending inventory was up 15% due to advancing holiday inventory into stores earlier than last year.

Adrienne Yih asked if dd's DISCOUNTS patterned similarly to Ross Dress for Less stores, if there was pressure in early November due to SNAP benefit delays, and about the tariff impact, specifically if the biggest impact was felt in 2025 with a neutral outlook for Q4 and 2026. She also asked about inventory levels heading into spring and any changes to packaway strategy.

Answer

Group President and COO Michael Hartshorn confirmed dd's performance was very similar to Ross, with consistent business throughout the quarter and no specific call-outs for SNAP benefit delays. He reiterated that tariff impact was neutral for Q4 and expected to be neutral moving into 2026. Regarding inventory, he explained that the 15% increase at quarter-end was due to advancing holiday inventory into stores earlier than last year, with inventory in line with sales during the quarter.

Adrienne Yih of Barclays asked where price increases are being observed in the broader retail market, whether the tariff impact is direct or passed through from vendors, and about the timing of tariff impacts considering shipping grace periods.

Answer

CEO James Conroy noted that price inflation is visible at mainstream retailers, especially in home goods containing metal. COO Michael Hartshorn confirmed the tariff impact is felt across all merchandise, both from direct imports and through cost increases from vendors. He also stated that price increases are expected to continue into next year as new tariffs take effect, eventually leading to a new market equilibrium.

Adrienne Yih-Tennant asked about direct sourcing exposure to tariffs, negotiating power, and whether the company is now anniversarying its branded product penetration and seeing higher transaction values as a result.

Answer

Group President and COO Michael Hartshorn stated direct tariff exposure is small and that market disruptions can be beneficial for off-price. EVP and CFO Adam Orvos confirmed they are at an inflection point with the branded mix and saw a slight AUR increase in Q4 from better branded goods.

Adrienne Yih-Tennant asked for quantification of the new brand penetration, the margin differential for these brands, and how the company plans to achieve historical operating margin levels if merchandise margin remains pressured.

Answer

CEO Barbara Rentler stated that brand penetration is not a fixed target and is determined by customer response, making a global quantification difficult. Group President & COO Michael Hartshorn reiterated that the path to higher operating margins relies on the company's historical model of comp growth, new store expansion, and broad-based cost initiatives, not solely on merchandise margin expansion.

Adrienne Yih-Tennant inquired about changes in consumer behavior, the strategy for maintaining value spreads in a promotional environment, and the relationship between the branded strategy, AUR, and merchandise margins.

Answer

Group President and COO Michael Hartshorn noted no significant shift in customer traffic patterns. CEO Barbara Rentler explained their pricing is not based on a fixed spread but on dynamic competitive shopping to be as sharp as possible. CFO Adam Orvos reiterated that the merchandise margin pressure is a direct result of the increased penetration of branded products.

Adrienne Yih asked about the timing and method of exiting non-go-forward categories without brand pressure, and the extent of SKU rationalization in core categories. She also inquired about the aggregate dollar amount contributed by exited categories in 2025 and the wraparound tariff pressure into 2026.

Answer

CEO Daniel Heaf explained that SKU rationalization is driven by consumer feedback on overwhelming in-store propositions, aiming for easier discovery. Exits will begin in Spring (Q1 next year) and ramp up through 2026, with new products and elevated core franchises filling the gaps. CFO Eva Boratto noted that semi-annual sales are used to clear inventory, and the company exited Q3 with clean inventory. She added that tariffs would have a comparable 100 basis point impact in 2026 as in 2025, with more headwind in H1. Daniel clarified that the exited adjacencies are not significant contributors and the focus is on unproductive SKUs.

Adrienne Yih inquired about the operating margin expansion trend, noting a reversal in Q3 due to tariffs, and asked about the exit from back-to-school, consumer resilience, and the philosophical approach to demand elasticity given upcoming mid-single-digit price increases and their potential impact on volume.

Answer

Bracken Darrell, President and CEO, VF Corporation, discussed Timberland's deliberate expansion strategy, prioritizing long-term growth and controlled execution over aggressive short-term expansion, despite strong brand heat. Paul Vogel, EVP and CFO, VF Corporation, explained that Q3 gross margin would be impacted by tariffs without pricing offsets, and future gross margin improvements face tougher comparisons. He noted that pricing would be 'surgical,' involving a combination of vendor collaboration, wholesale partnerships, and targeted price increases, with lower discounting also contributing to better effective pricing.

Adrienne Yih from Barclays questioned the reversal of operating margin expansion in Q3 due to tariffs, asked about back-to-school exit trends and consumer resilience, and sought insight into the philosophical approach to demand elasticity with upcoming surgical, U.S.-focused price increases.

Answer

Bracken Darrell (President and CEO) highlighted Timberland's deliberate, long-term growth strategy despite strong brand heat and under-distribution. Paul Vogel (EVP and CFO) explained Q3 gross margin will reflect tariff impacts without full pricing offset, noting tougher comps. He detailed that pricing will be a targeted combination of vendor, wholesale, and brand-specific actions, primarily in the U.S., with "surgical" increases assuming normal elasticity.

Adrienne Yih inquired about the brand and financial impact of the Vans Warped Tour's return and asked for details on the projected $60-70 million gross profit impact from tariffs, including potential offsets from SG&A savings or pricing actions.

Answer

President & CEO Bracken Darrell highlighted the Warped Tour's success, noting that ticket sales vastly exceeded plans and created a powerful brand moment. EVP & CFO Paul Vogel clarified that the tariff impact is a net figure for the second half of the year, accounting for mitigation efforts, and the company continues to focus on broader gross margin improvements and cost controls.

Adrienne Yih-Tennant asked for clarification on the duration of Vans' sales headwinds and whether comp progress could offset them. She also inquired about end-consumer demand at Vans DTC and the potential pricing required to mitigate tariffs.

Answer

President and CEO Bracken Darrell confirmed Vans' headwinds will persist through H1, lessen in Q3, and annualize in Q4. He acknowledged soft DTC traffic is a key issue being addressed through product and marketing. On tariffs, he stated the company will use a strategic mix of pricing, cost cuts, and sourcing moves to more than offset the impact, viewing it as an opportunity. EVP and CFO Paul Vogel noted the tariff impact would be concentrated in the second half of fiscal '26.

Adrienne Yih-Tennant asked about customer feedback for Vans, the strategy for targeting a broader audience, the timing of demand creation investments, and the company's supply chain sourcing exposure.

Answer

President and CEO Bracken Darrell deferred detailed Vans strategy to the upcoming Investor Day but confirmed they are broadening into action sports and are in a 'deep learning mode' on marketing. EVP and CFO Paul Vogel stated that VFC has 'very minimal exposure' to tariffs from China, Mexico, or Canada and that the company is looking at all areas for supply chain efficiencies.

Adrienne Yih-Tennant inquired about the key drivers behind the company's increased business predictability, particularly for the top line and the Vans brand, and asked about the focus of incremental investments.

Answer

CEO Bracken Darrell highlighted that improved forecasting accuracy, demonstrated by 10 consecutive months of meeting internal plans in the Americas, is driving predictability across revenue and margins. CFO Paul Vogel added that incremental investments are being directed toward product and marketing, funded by savings from the 'Reinvent' program.

Adrienne Yih asked about the current promotional environment in the beauty sector and Ulta's strategy for health and wellness, including how it prioritizes investments in this growing category.

Answer

President and CEO Kecia Steelman explained that the promotional environment is expected to remain rational and that Ulta reduced its promotional impact by optimizing events and eliminating unproductive offers. Regarding wellness, she highlighted its expansion into more stores and the curation of products around self-care, viewing it as a potential billion-dollar business over time.

Adrienne Yih-Tennant asked about growth opportunities in underpenetrated categories, specifically focusing on the emerging trend of health and wellness.

Answer

CEO Kecia Steelman identified wellness as a significant growth opportunity where beauty and wellness are merging. She outlined plans for 2025 that include adding at least 20 new wellness brands and testing expanded in-store presentations in select locations.

Adrienne Yih from Barclays inquired about the timing and potential future impact of recent tariff announcements on the Spring 2026 season. She also asked for perspective on the denim category's current pricing architecture and fashion cycle.

Answer

SVP & CFO Robert Ball noted the current $90M tariff outlook is based on information as of August 25 and that the team is experienced in navigating such disruptions, with mitigation efforts taking time. CEO & Director Fran Horowitz described the current denim cycle as being driven by 'wearing occasion' rather than a single fit, with strong demand for varied styles like bootcut and baggy, which in turn drives sales of complementary tops.

Adrienne Yih commented on the lack of pricing power and promotional environment in the broader apparel sector and asked for TJX's perspective on pricing power by category. She also inquired about the expected timing of tariff impacts on the sector.

Answer

CEO Ernie Herrman agreed that the apparel market has been deflationary and promotional. He reiterated that TJX's model is to follow, not lead, on retail pricing to maintain its value leadership. Regarding tariffs, he believes other retailers will likely implement price increases gradually to avoid customer sticker shock. CFO John Klinger added that vendors also negotiate with factories to share some of the cost pressure.

Adrienne Yih-Tennant of Barclays asked for a comparison to the 2018-2019 tariff period, specifically if vendors tried to pass on costs then. She also explored TJX's flexibility to either maintain its value gap by raising prices or absorb margin hits to drive comps.

Answer

CEO Ernie Herrman recalled that in 2018, TJX was mostly able to negotiate out of tariff impacts but noted the current environment is different due to widespread inflation. Herrman explained that while adjusting retails is a lever, their primary strengths are advantageous buying in a chaotic market and their increasing importance to vendors. He emphasized the "art form" of their pricing, sometimes making items feel "too cheap" to create a "wow factor," driven by buyers who work retail-backwards.

Adrienne Yih-Tennant inquired about the long-term store growth strategy, including location selection between banners and the potential for smaller footprints. She also asked about the business model for the Grupo Axo and Brands for Less ventures.

Answer

CEO Ernie Herrman confirmed that smaller markets and smaller footprint stores are an opportunity and that site selection is handled opportunistically on a case-by-case basis. CFO John Klinger clarified that Brands for Less is an investment, not a joint venture, while the Grupo Axo partnership is a JV. He noted it's early days but they are optimistic about the long-term potential in Mexico.

Adrienne Yih-Tennant posed a strategic question on whether a pressured or healthy economic backdrop is better for TJX, and asked about the outlook for the Home business in a potential rate-cutting cycle.

Answer

CEO Ernie Herrman stated he slightly favors a healthier environment, noting that it doesn't necessarily lead to cleaner inventory long-term. He attributed current HomeGoods strength to strong execution but agreed that a better housing market resulting from lower rates could provide a tailwind for the business next year.

Adrienne Yih questioned what structural differences at Coach enable its current high margins compared to the 2005-2006 era, how pricing is being used to mitigate tariffs, and whether the $800 million share repurchase plan represents a new annual run rate.

Answer

Coach CEO Todd Kahn explained the brand is now more direct-to-consumer, geographically diversified, and data-driven, which supports pricing power and AUR growth. CFO & COO Scott Roe clarified that the $800 million buyback is for the current fiscal year, emphasizing the company's strong cash flow and low leverage, with a longer-term capital allocation update planned for the upcoming Investor Day.

Adrienne Yih-Tennant asked for a definition of the target consumer for Kate Spade under its new strategy and questioned the drivers of Coach's AUR lift over the last five years, specifically the mix between lower markdowns and higher initial prices.

Answer

CEO Joanne Crevoiserat explained that the Kate Spade strategy is focused on sharpening execution to build relevancy with a target younger consumer by streamlining assortments and reducing promotions. For Coach, CEO and Brand President Todd Kahn noted consistent AUR growth for nearly 19 of the last 20 quarters, driven by a compelling value proposition against European luxury and a focus on fewer, deeper iconic product stories, which naturally reduces the need for markdowns.

Adrienne Yih asked what conditions would be necessary for the company to reinstate financial guidance, inquired about the expected trajectory of SG&A spending to support new products, and sought an update on store productivity drivers during non-peak quarters. She also asked about the impact of wholesale timing shifts on Q1 and Q2 and for an update on the forward order book.

Answer

Neil Bowden, CFO, stated that continued uncertainty in the trade environment and its potential impact on the consumer prevents the reinstatement of guidance at this time. Beth Clymer, President & COO, explained the SG&A strategy involves targeted investments in revenue-driving areas (marketing, product, stores) while maintaining leanness elsewhere, highlighting that earlier store labor investments are already boosting productivity and peak readiness. Regarding wholesale, Carrie Baker, President of Brand & Commercial, confirmed the channel has stabilized with cleaner inventory and a strong response to the fall order book from strategic partners.

Adrienne Yih of Barclays questioned what conditions would be necessary for the company to reinstate guidance, the expected shape of SG&A spending, and progress on driving store productivity in non-peak quarters. She also asked about the wholesale channel's order book.

Answer

CFO Neil Bowden cited uncertainty in the trade environment, especially regarding potential US-Canada tariffs, as the reason for not reinstating guidance. President & COO Beth Clymer explained the SG&A strategy involves targeted investments in revenue drivers (marketing, store labor) while maintaining leanness elsewhere, noting that early labor investments are boosting productivity. President of Brand & Commercial Carrie Baker described the wholesale order book as stable and strong after last year's channel reset.

Inquired about the marketing strategy to attract higher-income customers, the status of doctor availability and telehealth utilization, and the financial impact of recent tariff changes.

Answer

The company is shifting its marketing from broad advertising to more targeted digital and social channels, supported by a new CRM platform for personalized messaging. Doctor recruiting and retention are strong, with dark/dim locations remaining stable. The anticipated financial impact from tariffs has been significantly reduced and is now fully incorporated into the raised guidance through mitigation strategies.

Adrienne Yih-Tennant asked about future gross margin drivers, the breakdown of store closures between Eyeglass World and America's Best, and the business impact of the Easter and Spring Break calendar.

Answer

CFO Melissa Rasmussen stated that the 2025 gross margin is expected to be 'pretty consistent' with 2024 on a continuing operations basis. She specified the 2025 closure plan includes 3 America's Best and 9 Fred Meyer stores. She also noted that Spring Break is not a significant seasonality driver for the business compared to year-end and back-to-school periods.

Adrienne Yih-Tennant inquired about the 2,500-store white space opportunity, asking for details on the fill-in strategy and how the company's customer has historically responded to lower interest rate environments. She also asked about 2025 SG&A growth and the status of the consumer trade-down effect.

Answer

CEO Reade Fahs affirmed that the recent closures do not impact the long-term white space opportunity and that a lower interest rate environment should provide relief to the cash-pay customer. He also noted the trade-down effect is not dramatically different. CFO Melissa Rasmussen reiterated that the incentive comp reset will be a headwind for 2025 SG&A.

Adrienne Yih from Barclays inquired about the specifics of the company's price increase strategy, including the scope of products affected. She also asked about the potential for gross margin to return to expansion in the latter half of the fiscal year.

Answer

CEO Stefano Caroti described the price increases as selective and staggered, applied strategically to franchises with strong pricing power. CFO Steven Fasching clarified that gross margin pressure is expected to increase in the second half, as the full impact of tariffs will precede the benefits from price increases, preventing a return to margin expansion in that period.

Adrienne Yih from Barclays asked for details on Deckers' price increase strategy, including the percentage of products affected and whether it applied to new or existing styles, and questioned the gross margin outlook concerning tariff impacts.

Answer

CEO Stefano Caroti described the price increases as selective and staggered across brands and franchises. CFO Steven Fasching added that increases were applied to certain fall and spring products, with room for re-evaluation based on final tariff rules. Fasching clarified that gross margin pressure is expected to be higher in the second half of the fiscal year as tariffs impact costs before price increases can fully offset them.

Adrienne Yih-Tennant of Barclays questioned the HOKA door growth strategy with U.S. national retailers like DICK'S Sporting Goods and Foot Locker. She also asked how the demand creation budget is being allocated between HOKA and UGG.

Answer

CEO Stefano Caroti reiterated that their expansion is selective and productivity-driven, declining to provide specific door counts. CFO Steven Fasching explained that improved gross margins are funding increased marketing spend for both brands, with a focus on creating more localized content for international markets to drive further demand.

Adrienne Yih of Barclays inquired about Nike's high-level marketplace segmentation among key retailers and the strategic role of the new distribution partnership with Amazon.

Answer

President & CEO Elliot Hill explained the strategy is to serve consumers across multiple channels, with Nike Direct as the elevated anchor. He positioned the Amazon partnership as a targeted way to serve a specific consumer and grow the overall marketplace. CFO Matt Friend added that while the Amazon launch in Q1 is not a 'material needle mover' initially, the overall wholesale order book is the key indicator of progress.

Adrienne Yih-Tennant questioned whether NIKE has proven innovation at scale for Fall 2025 to replace liquidated products and asked for clarification on inventory provisions and the implication for fiscal 2026 sales.

Answer

President and CEO Elliott Hill detailed a strong upcoming product portfolio across running, training, and basketball, highlighting new signature shoes and a gender-specific offense as proof of innovation. CFO Matt Friend confirmed that the financial impact of these accelerated reset actions is reflected in the Q3 guidance, which includes a 300-350 basis point gross margin decline. He also stated that the financial headwinds are expected to be even greater in Q4 than in Q3.

Asked for a breakdown of the inventory dollar growth between tariffs and FX, the timing of tariff impacts on the P&L and corresponding price increases, and the driver of lower product costs in Q1.

Answer

The inventory dollar growth is driven by both tariffs and FX, with the impacts being similar in magnitude. The tariff P&L impact will be most pronounced in Q2, with price increases rolling out late in Q2 and into Q3. The lower product cost in Q1 was due to business mix and is not expected to be a significant driver for the full year.

Adrienne Yih of Barclays asked about the Gap brand's strategy for balancing full-price sales from collaborations with promotional activity, and whether price increases were a component of the company's tariff mitigation plans.

Answer

CEO Richard Dickson explained that the Gap brand's reinvigoration, through culturally relevant campaigns and collaborations, is successfully attracting new generations and demonstrating pricing power with strong full-price sell-through. Regarding tariffs, he stated that the company does not anticipate meaningful price increases for consumers at this time, prioritizing the customer value proposition.

Adrienne Yih of Barclays asked about the Gap brand's strategy for balancing full-price sales from collaborations with promotional activities, and questioned whether price increases were a component of the company's tariff mitigation plans.

Answer

CEO Richard Dickson explained that the Gap brand's momentum is driven by successful campaigns and collaborations that attract new generations and demonstrate pricing power through strong full-price sell-through. He also clarified that while the company is managing all inputs, it does not anticipate meaningful price increases for consumers as part of its tariff mitigation strategy at this time.

Speaking for Adrienne Yih, Michael Wu asked how the company would manage price increases between its DTC and wholesale channels, particularly for wholesale orders that have already been placed.

Answer

CEO Andrew Rees explained that while they have changed prices on existing wholesale orders in past emergencies, it is highly unlikely they would do so now. The preferred approach is a coordinated price change across all channels at a future designated time to maintain consistency in the market.

Adrienne Yih-Tennant asked about the 2-3 year growth opportunities for the Crocs brand in North America versus international markets, and about confidence in the HEYDUDE brand's turnaround given its full-year negative sales guidance.

Answer

CEO Andrew Rees explained that the most significant near-term growth for the Crocs brand will come from international markets, where market share is substantially lower than in developed regions. He noted that substantial North American growth requires penetrating new wearing occasions. For HEYDUDE, Rees expressed strong confidence in the long-term potential and turnaround plan, citing positive 'greenshoots' and characterizing the current guidance as prudent.

Adrienne Yih-Tennant of Barclays inquired about the current consumer shopping environment, particularly the shift to event-driven purchasing, and its impact on retail partners and potential holiday pull-forward. She also asked about the timeline for working through HEYDUDE's sell-through challenges.

Answer

CEO Andrew Rees confirmed the consumer has returned to pre-pandemic, need-based shopping patterns, and he believes retail partners are adept at managing this shift. He stated that while Crocs' order books are aligned with sell-out, HEYDUDE has had excess inventory in the channel, and while good progress has been made in working it down, more work remains.

Adrienne Yih of Barclays asked for clarification on the drivers of the Q3 revenue decline guidance, specifically the role of the wholesale pullback and the strategy to manage shelf space. She also questioned the implied significant decline for the Heydude brand and asked for details on the tariff impact on inventory.

Answer

CEO Andrew Rees confirmed the guidance reflects the current wholesale order book and includes proactive, conservative assumptions. He attributed the steep Heydude decline to deliberate actions, including a significant inventory reset with wholesale partners and a pullback in performance marketing. CFO Susan Healy clarified the tariff figures are current as of early August and that a meaningful portion of the inventory value increase is due to capitalized tariff costs.

Adrienne Yih-Tennant of Barclays asked about the feasibility and speed of redirecting all China-based sourcing to non-U.S. markets. She also inquired about the outlook for inventory dynamics in the second half of the year and whether Skechers is seeing any changes in marketplace orders from wholesale partners.

Answer

Executive John Vandemore stated that 'all cards are on the table' for optimizing production globally to achieve the lowest landed cost, but absolutes are being avoided to maintain flexibility. He noted that current inventory levels are primarily impacted by Suez Canal transit times, not business challenges. Regarding orders, he acknowledged some customer nervousness but highlighted a tremendously positive response to the new product assortment, suggesting strong underlying interest.

Adrienne Yih-Tennant of Barclays asked about the drivers of higher demand creation spending, signs of stabilization in China, and the company's mitigation strategies for potential U.S. tariffs.

Answer

John Vandemore (executive) explained the marketing spend is heavier in Q1, partly due to a Super Bowl ad, to reinforce new categories and comfort technologies. On China, he noted it's a macroeconomic issue and the company is actively managing inventory to make way for new products. For tariffs, the strategy involves redirecting production, negotiating with vendors, and considering price adjustments. David Weinberg (executive) added that the company has extensive experience managing tariffs globally and is stepping up marketing in China to reinforce its position.

Adrienne Yih-Tennant from Barclays focused on the potential impact of tariffs, asking about the company's sourcing exposure to China and Vietnam, and whether guidance assumes margin impact or price pass-through. She also inquired about the current denim cycle and promotional levels.

Answer

CEO Jay Schottenstein urged calm, citing past experience with tariff uncertainty. CFO Mike Mathias stated China exposure is in the high teens and planned to be reduced to single digits, with guidance assuming no price pass-through to consumers, relying instead on mitigation with vendor partners. President Jen Foyle noted diversity in denim fits is a positive trend and that the company will remain competitive on promotions while managing lean inventory.

Adrienne Yih-Tennant inquired about the early performance of the Back-to-School season, seeking details on Aerie versus American Eagle and any impacts from silhouette shifts. She also asked about the expected duration of the season and questioned if the SG&A guidance for Q3 represented a change from prior expectations.

Answer

Jen Foyle, President and Executive Creative Director, highlighted strong Back-to-School acceleration, noting momentum in AE Women's denim with new looser silhouettes and robust Aerie performance in soft dressing and OFFLINE, excluding swim. Mike Mathias, CFO, confirmed the SG&A guidance is consistent with previous plans, reflecting successful expense initiatives, and that the company anticipates an elongated Back-to-School season similar to recent years.

Adrienne Yih inquired about the timeline for CEO Hillary Super's full influence on product, progress on shortening production lead times to improve inventory productivity, and the expected sales versus profitability impact of reducing promotions.

Answer

CEO Hillary Super stated her full product imprint would be iterative, with Spring '26 being the first season entirely under her influence. She confirmed progress in shortening lead times for categories like underwear and PINK apparel, aided by a new leadership structure. Regarding promotions, she noted that the company successfully reduced some in Q4, likely trading some top-line sales for healthier margins, and will continue seeking similar opportunities.

Adrienne Yih-Tennant asked about the mix of new versus reactivated customers, particularly Gen-Z, sought clarification on what the 'discount rate' metric includes, and inquired about learnings from the brand's historical approach to bra franchise launches.

Answer

CEO Hillary Super believes Gen-Z customers are mostly new to the brand, drawn in by the fashion show, while reactivated customers are likely millennials. She emphasized a renewed focus on product innovation as a core principle, similar to the brand's heyday, but adapted for today's world. CFO Tim Johnson clarified that the discount rate is an all-inclusive metric covering promotional events, offers like 'buy two, get one,' and the semi-annual sales.

Adrienne Yih-Tennant asked about the Nike relationship, including the level of recent promotional activity, the progress of managing key franchises, and visibility into new product innovation. She also questioned the company's direct exposure to potential tariffs from China, Mexico, and Canada.

Answer

CEO Mary Dillon and CFO Michael Baughn stated that direct tariff exposure is minimal, at a low single-digit percentage of sales. Regarding Nike, Dillon expressed confidence in the partnership, noting a return to allocation growth in Q4. EVP & CCO Frank Bracken added that the Nike business is considered 'reset' and that Foot Locker is supportive of Nike's actions to manage key franchises, expressing excitement for the innovation pipeline in Shox, running, and Max Air.

Adrienne Yih-Tennant inquired about the operational details of the headquarters relocation to St. Petersburg, FL, and asked about the company's inventory purchasing strategy for Spring 2025, specifically regarding its 'open-to-buy'.

Answer

CEO Mary Dillon stated the move builds on an existing presence in St. Petersburg to enhance collaboration. CCO Frank Bracken explained that for 2025, the company will maintain inventory discipline while planning for growth, using opportunistic buys and partner replenishment programs to react to demand.

Adrienne Yih-Tennant asked for a reconciliation of the 4% increase in comp inventory against forward guidance and also requested details on the accounting and dilutive impact of the company's convertible notes.

Answer

CFO Kristin Wolfe explained the comp inventory figure was a point-in-time snapshot influenced by a calendar shift and a back-to-school build; on an adjusted and average basis, inventory was leaner. An executive then detailed the 'if-converted' accounting method for the notes, stating they added 163,000 shares to the diluted count in Q2, which was more than offset by share repurchases.