Blake Anderson

Blake Anderson from Jefferies asked for a deeper dive into the growth drivers for the Luxury NET-A-PORTER & MR PORTER segment in Q2, specifically inquiring about the contributions from new customers, new merchandise, and the balance between average order value (AOV) and units. He also sought expectations for this segment's growth in the second half. Additionally, Anderson questioned the potential drivers for achieving the operating cash flow target earlier than planned and the anticipated shape of improvement over the next two years.

Answer

CEO Michael Kliger explained that NET-A-PORTER and MR PORTER's growth is driven by top spenders and double-digit AOV increases, with two-thirds from higher-priced items and one-third from more units, alongside reduced promotions. He anticipates improved traction in Q3 and Q4 with new fall/winter collections. CFO Martin Beer detailed the operating cash flow, reporting a -EUR 30 million burn in H1 and projecting a full-year burn below -EUR 150 million due to H2 severance payouts. He reaffirmed the fully funded transformation plan, targeting operational cash break-even in two years, with fiscal year 2027 still negative but showing decreasing burn.

Blake Anderson asked for details on the drivers behind the stronger-than-expected 6% constant currency growth in the luxury YNAP segment, specifically inquiring about the contributions from new customers, new merchandise, and the balance between average order value (AOV) and units. He also asked for expectations regarding this business's growth in the second half. His follow-up question focused on the operating cash flow target timeline, seeking insights into potential drivers for earlier achievement and the expected shape of improvement over the next two years.

Answer

CEO Michael Kliger explained that the luxury YNAP growth mirrored Mytheresa's pattern, driven by top spenders and double-digit AOV increases (two-thirds from more expensive items, one-third from more units). He noted that reduced promotions and discounts also contributed. He expects better traction in Q3/Q4 with the Fall/Winter season, benefiting from increased buying and new team curation. CFO Martin Beer stated that the H1 cash burn was -EUR 30 million, with the full FY26 cash burn expected to be well below -EUR 150 million, as H2 will include significant severance and transformational payouts. He reiterated the expectation to reach operational cash break-even in two years, emphasizing that the transformation plan is fully funded and the company operates debt-free with a strong balance sheet.

Blake Anderson inquired about any changes to the company's guidance beyond the OUTNET sale, seeking clarification on quarterly segment performance and the implication of a mid to high single-digit GMV growth for Mytheresa.

Answer

CEO Michael Kliger confirmed the reconfirmation of guidance for Mytheresa and NET-A-PORTER/MR PORTER, with adjustments solely for THE OUTNET's expected EUR 212 million net sales for the full year. He noted a narrowed range for both top and bottom lines. For Mytheresa, the mid to high single-digit guidance is consistent with expectations given the overall soft market, without specific call-outs for a slowdown.

Blake Anderson with Jefferies inquired about the strongest signs indicating the acquisition plan is on track seven months post-closing, and if any areas have presented surprises. He also asked for confirmation on guidance changes, specifically if they were solely due to THE OUTNET sale, and sought further color on Mytheresa's implied slowdown given its mid to high single-digit GMV growth guidance.

Answer

CEO Michael Kliger highlighted positive quality KPIs such as improved margins, average order value (AOV), and spend per top customer as strong indicators of progress. He noted expectations for positive growth at NET-A-PORTER and MR PORTER in calendar year 2026, the successful integration of new leadership teams, the strategic divestment of THE OUTNET assets, and early reductions in SG&A. Kliger confirmed that the guidance adjustments were primarily due to reclassifying THE OUTNET as discontinued operations, representing approximately EUR 212 million in expected full-year net sales, and that the Mytheresa guidance of mid to high single-digit GMV growth is consistent with expectations in a soft market.

Blake Anderson, an Equity Research Associate at Jefferies, inquired about the key factors that would lead LuxExperience to hit the lower versus higher end of its adjusted EBITDA margin guidance for fiscal year 2026. He also requested insights into the expected quarterly cadence and any quarter-to-date trends.

Answer

LuxExperience CEO Michael Kliger explained that the quarterly cadence would follow typical seasonality, with Q2 and Q4 being stronger. He stated that the wide spread in adjusted EBITDA margin guidance reflects a conservative and prudent approach given the ongoing restructuring of two segments and persistent market uncertainties, with the lower end driven by a more conservative view of overall market development.

Blake Anderson (Jefferies) asked for clarification on the key factors influencing LuxExperience's ability to achieve the lower versus higher end of its adjusted EBITDA margin guidance, and inquired about the expected quarterly cadence and any quarter-to-date trends.

Answer

CEO Michael Kliger explained that the quarterly cadence would continue to follow business seasonality, with Q2 and Q4 typically stronger. He stated that the wide spread in adjusted EBITDA margin guidance reflects a conservative and prudent approach given the ongoing restructuring of two segments and persistent market uncertainties, with the lower end driven by a more conservative outlook on overall market development.

Blake Anderson with Jefferies inquired about the key factors that would lead LuxExperience to hit the lower versus the higher end of its adjusted EBITDA margin guidance for fiscal year 2026. He also asked for insights into any quarter-to-date trends and the expected quarterly cadence or shaping of the year.

Answer

CEO Michael Kliger explained that the quarterly cadence would continue to be driven by seasonality, with Q2 and Q4 typically stronger. He stated that the wide spread in the adjusted EBITDA margin guidance reflects a conservatively prudent approach given the ongoing restructuring of two segments and the overall market uncertainties. The lower end of the guidance would be influenced by a more conservative view of market developments.

Blake Anderson questioned why continued AUR growth in Q4 wouldn't fully offset margin contraction, particularly from tariffs and cost inflation, and asked about the strategy for mitigating tariffs in the first half of fiscal 2027.

Answer

Justin Picicci, CFO, explained that Q4 is expected to be the most impacted quarter for gross margin pressure due to peak reciprocal tariffs, timing shifts of receipts, and its nature as a smaller, transitional quarter. He noted that cotton benefits moderate, and the company is up against a strong Q4 baseline from last year. Beyond FY26, he expects gross margin expansion and tariff mitigation through country of origin shifts, optimization, and merchandising actions, particularly in FY27.

Blake Anderson questioned why continued AUR growth wouldn't offset Q4 margin contraction, which is mainly attributed to tariffs and cost inflation, and asked about the strategy for mitigating tariffs in the first half of fiscal 2027.

Answer

Justin Picicci (CFO) explained that Q4 is expected to be the most impacted quarter for gross margin pressure due to peak tariffs, timing shifts of accelerated receipts, and its nature as a smaller, transitional quarter, alongside moderating cotton benefits and a strong prior-year baseline. For fiscal 2027, he anticipates gross margin expansion and tariff mitigation through country of origin shifts, optimization, and merchandising actions.

Blake Anderson of Jefferies & Company Inc. asked about key SG&A investment areas for the remainder of the year and whether the guidance implies deleverage in the second half. He also inquired about the revenue growth level needed to achieve SG&A leverage.

Answer

CFO Justin Picicci reiterated a philosophy of balanced reinvestment, with key areas being marketing, key city ecosystems, new stores, and digital. He noted that while the cautious second-half outlook is a pressure point on leverage, the company has a proven 'productivity muscle' and can flex variable costs if necessary, highlighting the ability to balance profitability with strategic investment.

Blake Anderson asked about the behavior of the aspirational customer in Q3 and expectations for Q4 across Macy's and Bloomingdale's banners. He also questioned how SG&A savings from the store closure strategy would balance against reinvestment needs in the next year.

Answer

Chairman and CEO Tony Spring explained that the 'aspirational customer' segment, more prominent in Q4, necessitates a broad range of assortments and promotions. He emphasized a prudent approach to guidance due to this segment's 'choiceful' behavior but expressed confidence in the company's strategy, marketing, and inventory. COO and CFO Tom Edwards detailed that Q3 SG&A leveraged by 90 basis points due to top-line growth, store closures, and cost discipline, with similar trends expected for Q4. He confirmed ongoing store optimization and a balanced approach to flowing through savings versus reinvesting for top-line growth.

Blake Anderson asked about the aspirational customer's behavior in Q3 and expectations for Q4, differentiating between Macy's and Bloomingdale's banners. He also questioned the store closure strategy for next year, focusing on SG&A savings versus reinvestment needs.

Answer

Chairman and CEO Tony Spring explained that the aspirational customer's choiceful behavior informs the Q4 guidance, which acts as a guardrail. He expressed confidence in Macy's positioning for the quarter. COO and CFO Tom Edwards confirmed SG&A leverage in Q3 due to top-line growth and cost discipline, with similar expectations for Q4. He stated that store optimization will continue, with savings balanced against necessary business investments.

Blake Anderson asked for a comparison of the current level of consumer uncertainty and caution to three months prior, especially in light of pending tariff increases and ongoing price adjustments.

Answer

Tony Spring, Chairman and CEO, reiterated the view of a 'choiceful but resilient' consumer, noting the Q2 beat and continued momentum into the fall season. He emphasized maintaining prudent guidance to fully assess the impact of tariffs and highlighted the healthier performance among higher-income customer tiers, particularly at Macy's and Bloomingdale's.

Blake Anderson of Jefferies & Company Inc. inquired about Macy's full-year sales guidance, asking for the company's confidence level and the expected cadence between Q2 and the second half, given the Q1 outperformance. He also asked for more details on the strategic pricing decisions being made to offset tariff impacts.

Answer

Chairman & CEO Tony Spring responded that the company reaffirmed its annual guide, viewing it as cautiously optimistic and appropriately reflecting the current uncertainty. He noted stronger performance in March/April and into May. Regarding pricing, Spring explained it's a work in progress, emphasizing the company's optionality across its multi-brand, multi-category model to negotiate with partners and avoid items that are not priced fairly, ensuring they can hold price points where necessary.

Blake Anderson of Jefferies, on for Ashley Helgans, questioned the performance drivers (AUR vs. traffic) in 'First 50' stores and asked about the profile of new customers these locations might be attracting.

Answer

CEO Antony Spring stated that the biggest performance drivers have been AUR growth and average order value growth, with existing customers spending more and visiting more frequently. He noted that while some new customers are appearing, most new customer acquisition still occurs through the digital channel. COO & CFO Adrian Mitchell reinforced this, pointing to improved NPS scores and accelerated performance in test categories as proof points of the strategy's success and replicability.

Blake Anderson, on for Ashley Helgans, asked about the consumer assumptions embedded in the second-half sales guide and requested the Q3 comp guidance. He also asked about the full-year gross margin impact from the shift to cost accounting.

Answer

COO and CFO Adrian Mitchell clarified that the sales guidance for H2 reflects uncertainty in discretionary spending but also incorporates expected outperformance from 'First 50' locations and digital enhancements. He stated that the impact of the cost accounting transition is not material on an annual basis, advising analysts to focus on the full-year outlook. For Q3, he guided for a gross margin rate of approximately 40.3% to 40.5%.

Blake Anderson of Jefferies & Company Inc. asked about Macy's confidence in its full-year sales guidance given consumer pressures and the cadence for the rest of the year. He also asked for more detail on strategic pricing decisions intended to offset tariff impacts.

Answer

Chairman & CEO Tony Spring expressed cautious optimism, stating the guide reflects current uncertainty but that performance improved through Q1 and into May. He noted the company is well-positioned with inventory and marketing. On pricing, Spring emphasized a surgical, multi-faceted approach involving negotiations with partners, holding key price points, and leveraging Macy's multi-brand portfolio, rather than implementing broad price increases.

Blake Anderson asked how Kohl's is prioritizing growth between its existing loyal customers and new customer acquisition. He also inquired about recent conversations with national brand partners and the strategy for adding new brands.

Answer

CFO Jill Timm clarified that while new customer growth is strong, the primary focus is on re-engaging the core loyal customer by correcting 'self-inflicted' issues, such as reintroducing jewelry and petites and re-emphasizing proprietary brands. Interim CEO Michael Bender added that the current priority is rebalancing the assortment toward proprietary labels, which customers are asking for, rather than adding many new national brands.

Asked about trends with the aspirational customer, the marketing spend outlook for H2, and the slight decline in top customers versus the increase in AOV.

Answer

Aspirational customer demand is starting to improve, but top customers remain the key growth driver. The slight decline in the top customer base is a result of lower, more performance-focused marketing spend a year ago. The company is now increasing upper-funnel marketing investment to drive future customer growth, expecting the marketing cost ratio to return to normal levels of around 12-12.5% in H2.

Questioned the company's guidance philosophy regarding seasonal EBITDA weakness, the potential for outperforming the EBITDA margin guidance given strong Q1 gross margin, and the preparatory work being done for the tech integration related to the YNAP acquisition.

Answer

The company confirmed that Q1 and Q3 are seasonally weaker for EBITDA margin, but Q1 showed significant year-over-year improvement and is in line with the full-year guidance of 3-5%. They are sticking to the guidance and not changing strategy ahead of the YNAP deal. Regarding the tech integration, preparatory work on Mytheresa's own tech stack can begin based on due diligence, but direct collaboration with YNAP must wait for regulatory approval.

Asked about the key factors that would determine performance at the low versus high end of the sales guidance range, and for more commentary on the performance of the aspirational customer segment.

Answer

The company stated that the guidance range is primarily dependent on macroeconomic and political factors rather than specific company initiatives. They noted that the aspirational customer segment is recovering slowly and remains weak, with a full recovery not expected for another 3-4 seasons. Growth is being driven by top customers, while the overall customer count is flat.

Asked for commentary on traffic trends at each banner and whether the new Rack stores are attracting a different type of customer or seeing different shopping behaviors compared to existing stores.

Answer

Executives reported that traffic was up across both banners with conversion about flat. The new Rack stores attract a similar customer profile to existing stores, one who is drawn to the unique offering of brands associated with Nordstrom. They noted that the Rack customer is more convenience-driven and shops locally, which is why new store openings are a key growth driver.

Asked about the performance and inventory position of the designer category, as well as details on initiatives to drive growth at the Nordstrom banner, such as assortment and price point adjustments.

Answer

The designer category remains challenging, and inventory is being managed cautiously. Growth at the Nordstrom banner is being driven by a focus on customer service, in-store events, a balanced merchandise assortment, and digital enhancements including the new Marketplace.

Asked about the drivers of Rack's performance (value vs. newness), new customer growth, and trends in full-price sales.

Answer

The company stated that for the Rack customer, value and newness are linked through great brands; the brand recognition establishes the value. New customer acquisition is strong, meeting or exceeding expectations with new store openings. While not quantifying full-price sales, they emphasized that margin health is driven by a focus on regular price sell-through, which has been strong.

Inquired about the 2024 sales guidance breakdown by banner, expectations for AUR versus transactions, the drivers of the EBIT margin guidance, and what is needed for future margin expansion.

Answer

The company expects growth from the Rack and digital channels, with Nordstrom stores remaining flattish. AUR is hard to predict but helped drive sales in 2023 despite soft traffic. The 2024 EBIT margin will see some gross margin improvement offset by SG&A investments in new Rack stores and labor inflation.

Blake Anderson of Jefferies inquired about the company's willingness to increase marketing spend to stimulate growth, the most exciting second-half marketing initiatives, and key learnings from reducing promotions amid a challenged consumer environment.

Answer

CFO Siddharth Thacker and CEO Jennifer Hyman both responded. Thacker noted a critical evaluation of paid channels to improve efficiency and reinvest savings into brand initiatives. Hyman elaborated on the strategic shift from bottom-of-funnel to full-funnel marketing, including in-real-life events and ambassador programs, to drive organic traffic and reactivate brand love. Regarding promotions, Thacker explained the move to single-month offers and discontinuing less effective promotions, which impacted Q2 subscriber counts but improved business health. Hyman added that the Reserve business's strong growth without new promotions validates their focus on customer experience and value.