Aneesha Sherman

Aneesha Sherman questioned the long-term operating margin potential for Michael Kors, specifically whether structural factors prevent a return to historical levels of over 20%, and also asked about Jimmy Choo's long-term margin potential.

Answer

Chairman and CEO John Idol affirmed that Michael Kors could absolutely reach a 20%+ operating margin over time, aiming for sustainable growth as revenues approach $4 billion, leveraging a significantly shrunk cost structure from store closures and employee base rationalization. For Jimmy Choo, he believes it can become an $800 million business, potentially larger with accessories growth, and expects it to return to a double-digit operating margin over the next few years due to higher margins in accessories.

Aneesha Sherman from Bernstein Research questioned the strategic value of Jimmy Choo within the portfolio, how it complements Michael Kors, and whether the company would consider divesting the brand as it did with Versace.

Answer

Chairman & CEO John Idol firmly stated that Jimmy Choo is not for sale and is a core part of Capri's future. He emphasized the brand's strong heritage, vertical integration with owned factories, and significant growth opportunity in accessories. A key new strategy is introducing more accessible luxury price points (e.g., the Curve bag at $595-$995) to broaden its consumer base. The goal is to grow the accessories business to improve the brand's margin profile and return it to double-digit operating margins.

Aneesha Sherman from Bernstein asked about Capri's pricing strategy, questioning when Michael Kors would reach a 'steady state' with its value pricing and how potential tariff-related price increases would be integrated without blurring the brand's position.

Answer

Chairman and CEO John Idol projected that the Michael Kors brand's pricing architecture should be in its desired state by the fall season. He noted that recent price reductions on some items impacted margins but were necessary. Regarding tariffs, Idol stated that any price increases would be approached slowly and cautiously, as the primary goal is to rebuild brand momentum. The final decision on pricing will depend on the actual tariff impact and the success of other mitigation efforts with suppliers. CFO and COO Tom Edwards reiterated that protecting brand momentum is the top priority over immediate pricing actions.

Aneesha Sherman of Bernstein asked about Capri's pricing strategy, specifically when Michael Kors is expected to reach its target price positioning and how potential price increases to mitigate tariff risks would fit into this strategy without blurring the brand's value proposition.

Answer

Chairman & CEO John Idol stated that the Michael Kors brand should be at its desired pricing architecture by the fall season. He noted that while some prices were lowered to align with historical value, the company is also raising certain prices in the outlet channel and reducing promotional activity. Regarding tariffs, Idol and EVP, CFO & COO Thomas Edwards both emphasized that brand momentum is the top priority. Any price increases to offset tariffs would be cautious 'tweaks' and would only be considered after exploring sourcing mitigation and gaining certainty on the final tariff levels.

Aneesha Sherman asked about the phasing of growth across Nike's product verticals beyond Running, where strong acceptance is already evident. She sought to understand if other areas hold similar conviction for rapid growth and inquired about the satisfaction with North America's current wholesale partner mix and the potential for new distribution points.

Answer

President and CEO, Elliott Hill, highlighted the diversification of Nike's portfolio through the Sport Offense, noting strong innovation flow across Nike, Jordan, and Converse. He detailed progress in Running (Vomero Premium, Structure 26/Plus), Global Football (Mercurial, Tiempo, Phantom, 40% higher World Cup order book), Training (24/7 apparel, SKIMS), Basketball (women's and men's lines, GT Future), and Sportswear diversification. EVP and CFO, Matthew Friend, expressed satisfaction with North America's marketplace and partners, noting a balanced order book growth from both new and existing partners, and stated that while new distribution isn't ruled out, it's not essential to sustain current momentum.

Aneesha Sherman questioned if Spring 2026 is the anticipated inflection point for wholesale growth and asked about the expected progression of gross margins through fiscal 2026, given the planned inventory liquidations.

Answer

President and CEO Elliott Hill conveyed growing confidence in the product pipeline but emphasized that the timing of a growth inflection depends on how quickly the marketplace can be cleaned up. CFO Matt Friend projected that Q4 would see the largest financial impact from the 'Win Now' actions, with revenue and margin headwinds moderating thereafter. He confirmed that liquidation pressures will persist into fiscal 2026 but that the company would provide updates every 90 days.

Aneesha Sherman asked if the Spring 2026 season is the expected inflection point for wholesale growth and questioned if gross margins would see a gradual recovery through fiscal 2026 following H1 liquidations.

Answer

CEO Elliott Hill noted gaining confidence in the product pipeline but emphasized that the key variable is the speed of cleaning up and resetting the marketplace to drive sell-through. CFO Matt Friend confirmed that Q4 will see the largest financial impact from the 'Win Now' actions, with headwinds to revenue and margin expected to moderate thereafter. He cautioned that liquidation headwinds will persist into fiscal 2026 for several quarters.

Aneesha Sherman asked about the source of Stitch Fix's market share gains against the broader apparel, accessories, and footwear sector, the changing dynamics of gifting and holiday use cases, and the potential to increase advertising spend to drive top-line growth.

Answer

CEO Matt Baer explained that market share gains come from retailers unable to offer the personalization Stitch Fix provides, with brands reporting outsized growth through their partnership. He noted strong holiday performance driven by a relevant assortment, competitive pricing, new engagement features like themed fixes and Stylist Connect, and the success of family accounts for gifting. CFO David Aufderhaar stated that Q1 advertising was at the high end of the 9%-10% range, emphasizing a methodical approach focused on healthy CAC to LTV ratios, with new client LTV up almost 17% year-over-year.

Aneesha Sherman inquired if the challenging macroeconomic environment presents a share gain opportunity and asked about the potential use of pricing as a lever to mitigate tariff impacts.

Answer

CEO Matt Baer confirmed that Stitch Fix views the current macro environment as an opportunity to gain market share by leveraging its ability to tailor offerings to individual client budgets and the strength of stylist relationships. He emphasized that marketing now highlights value, convenience, and time savings. Baer explicitly stated that the company does not plan to use price increases to offset tariffs in the current fiscal year. CFO David Aufderhaar added that as a multi-brand retailer, they are working with suppliers on country-of-origin diversification to mitigate future cost pressures.

Aneesha Sherman asked about Stitch Fix's customer demographics, particularly household income, and whether the Freestyle channel is essential for expanding the company's total addressable market (TAM) beyond the core Fix model.

Answer

Executive Matt Baer explained that Stitch Fix targets clients based on psychographics (needing convenience and style advice) rather than specific income levels, making the service broadly applicable. He asserted that the value proposition strengthens in a tough consumer environment by solving shopping stress. Baer positioned Freestyle as a critical, complementary channel that increases wallet share with existing clients and is key to expanding the company's overall market penetration.

Aneesha Sherman asked why current EBITDA margins are lower than in 2017-2018 despite a similar client base, and whether the cost structure could return to that level. She also followed up on whether a client referral strategy is driving new acquisition.

Answer

CFO David Aufderhaar responded that the current focus is on balancing cost savings with strategic reinvestments to fuel the company's transformation and return to growth. Regarding client acquisition, he clarified that client reactivation has been a more significant driver of strength than referrals, with reactivation rates growing year-over-year for the past three years.

Aneesha Sherman followed up on the brand strategy, asking if the company is rethinking the good, better, best mix to include more higher-end brands given new customer attraction and growing AUR/basket size. She also asked if the home assortment was pulled back due to weakness and implications for holiday gifting.

Answer

Jim Conroy (CEO) clarified that the brand strategy aims to increase known brands across all price points (good, better, best) for a diverse customer base, not necessarily just higher-end, though potential to stretch higher exists. For home, he stated they have 'absolutely not' pulled back on assortment, noting building momentum and strong positioning for Q4 gifting and toys, despite it being a drag in Q2.

Aneesha Sherman followed up on the brand strategy, asking if the company is rethinking the good, better, best mix to potentially add more higher-end brands, given new customer attraction and growing AUR/basket size. She also asked if the home assortment was pulled back in response to weakness and its implications for holiday gifting.

Answer

CEO Jim Conroy clarified that the home business is building momentum, moving from a drag in Q2 to nicely positive in Q3, and they are well-positioned for holiday gifting and toys. Regarding branded strategy, he stated the goal was to right-size the mix back to known brands at all price points for a diverse customer base, not necessarily just higher-end. He acknowledged potential to "stretch higher" over time but emphasized providing the best branded values across good, better, and best tiers.

Aneesha Sherman of Bernstein sought clarification on the company's pricing strategy, asking if management is being more cautious now than a few months ago. She also asked for the key drivers behind the clear acceleration in the ladies' apparel business.

Answer

CEO James Conroy clarified that the strategy remains consistent: to maintain a price umbrella under mainstream retail and not be the first to raise prices. He attributed the strong performance in ladies' apparel to the buying team's effective execution of the brand strategy, which includes a greater emphasis on young contemporary styles and has led to strength in juniors and denim.

Aneesha Sherman from Bernstein questioned the company's current approach to pricing, asking why they are now more willing to pass on tariff-related costs when they previously chose to absorb costs related to freight and the branded strategy.

Answer

Group President and COO Michael Hartshorn clarified that the branded strategy was a deliberate shift in assortment, not a refusal to raise prices. He stated that unlike category-specific inflation, the current tariffs are expected to cause broad-based inflation across all of retail, allowing Ross to raise prices while still maintaining its significant value proposition versus competitors.

Aneesha Sherman questioned why Ross's pricing approach seems different now—being willing to pass on tariff costs—compared to its past decisions to absorb costs from freight and its branded strategy, and if this risks its value perception.

Answer

Group President and COO Michael Hartshorn differentiated the current situation from past events. He explained that since tariffs are expected to cause broad-based inflation across the entire retail industry, Ross can pass on some costs while still maintaining its significant price and value gap versus department and specialty stores, thus preserving its value perception.

Aneesha Sherman asked about the new CEO's view on store opening strategy, the performance of stores in newer states, and whether the branded strategy is creating a comp inflection.

Answer

Group President and COO Michael Hartshorn affirmed the growth potential with existing store formats and noted stable new store productivity. CEO James Conroy stated the branded strategy is 'starting to pay some nice dividends,' contributing to four positive comp quarters and sequential improvement in ladies' apparel in Q4 after hitting branding targets.

Aneesha Sherman asked about performance differences between the 'good, better, best' tiers of the brand strategy and whether sales in weather-impacted markets recovered by the estimated 1% comp impact.

Answer

Group President & COO Michael Hartshorn confirmed that sell-throughs improved in markets once weather became more seasonable. CEO Barbara Rentler added that product performance is driven by value, not price tier; when the right product is offered at the right value, it turns quickly regardless of whether it's 'good, better, or best'.

Aneesha Sherman asked about the progress on the apparel assortment and whether incentive compensation would still benefit results in the second half given the raised guidance.

Answer

CEO Barbara Rentler clarified that while total apparel is now in line with the chain, the ladies' category still underperforms and remains a key area of focus for improvement. CFO Adam Orvos confirmed that despite the raised guidance, they still expect some benefit from incentive costs in the back half, as they are comparing against a very strong performance in 2023.

Aneesha Sherman questioned the short-term sustainability of Coach's AUR growth, particularly in North America, given tougher comparisons and a challenging consumer sentiment environment. She also asked Scott Roe about other levers available to maintain gross margin guidance if AUR growth were to come in lower than expected.

Answer

Joanne Crevoiserat (CEO, Tapestry) explained that AUR growth is driven by a deep understanding of the consumer, creative innovation, and a disciplined reduction in discounting. Todd Kahn (CEO and Brand President of Coach) added that the 'one Coach' strategy, integrating collection products into outlets, and continued lower discounting will sustain AUR growth. Scott Roe (CFO and COO, Tapestry) emphasized the organization's focus on gross margin, balancing AUR and unit growth, and highlighted supply chain efficiency (AUC) as another key lever to protect margins over time.

Aneesha Sherman of Bernstein delved into short-term AURs, asking about the risk of moderation in North America's AUR growth given tougher comparisons and a challenging consumer sentiment. She also questioned if other levers on margin could be utilized to maintain guidance if AUR growth falls short.

Answer

CEO Joanne Crevoiserat explained that AUR growth is driven by consumer understanding, creativity, reduced discounting, and data-driven inventory management. Coach CEO Todd Kahn added that the 'one Coach' strategy (bringing collection product into outlets) and lower discounting are structural drivers for AUR growth. CFO Scott Roe emphasized the team's focus on gross margin, balancing AUR growth with unit growth, and highlighted other levers like supply chain efficiency and cost opportunities to protect margins.

Aneesha Sherman asked if Tapestry now expects to grow faster than the market, given its optimism on Coach, and questioned the margin impact of expanding into lifestyle categories like footwear.

Answer

CEO Joanne Crevoiserat responded that the company is, in fact, currently growing faster than the handbag category and sees significant runway for continued outperformance. CFO & COO Scott Roe addressed the margin question by stating that while some lifestyle categories may have different gross margin profiles, the expansion is expected to be accretive to operating margin, and the company anticipates maintaining its exceptional overall margins.

Asked for reasons behind the comp growth deceleration in China, whether an acceleration is expected as compares ease, and if China remains the best full-price market.

Answer

The China slowdown was impacted by the timing of Chinese New Year and tough comparisons to outsized growth last year. The company is still pleased with strong double-digit growth and maintains its full-year forecast. China remains the company's market with the lowest markdowns and highest full-price sell-through.

Aneesha Sherman noted the guidance implies a slowdown in international growth versus 2024 and asked for color on specific markets. She also questioned the flexibility of the cost base in a tougher macro environment.

Answer

CFO Meghan Frank provided specific 2025 growth targets: China at 25-30% and Rest of World at approximately 20%. She characterized this as thoughtful planning based on current trends. Regarding costs, she reiterated that while the company has contingency levers, it remains focused on long-term strategic investments while navigating near-term headwinds like FX and tariffs.

Aneesha Sherman of AllianceBernstein asked if the Q1 inventory hedging headwind was larger than expected and inquired about other moving parts in the gross margin. She also sought clarification on whether the Q2 margin guide is net of mitigation efforts.

Answer

CFO John Klinger confirmed the Q1 gross margin variance to last year was essentially the inventory hedge impact, which is a timing issue. He clarified that the Q2 gross margin forecast does include mitigation efforts. CEO Ernie Herrman added that the key difference for Q2 is that goods orders were placed before tariffs were known, preventing negotiation, which is not the case for future quarters.

Aneesha Sherman from Bernstein inquired about mitigation efforts for tariff headwinds, whether price increases are factored into the margin guidance, and the company's ability to pass on costs to consumers.

Answer

Co-CEO Martin Hoffmann stated the outlook assumes current tariffs. He emphasized that On's premium positioning has earned it pricing power, which it will use to separate further from competitors. He announced a selective pricing round in the U.S. starting in July, which will help mitigate tariff impacts and supports the company's gross profit margin guidance.