Brooke Roach

Brooke Roach of Goldman Sachs sought deeper insight into Levi Strauss & Co.'s growth assumptions for the Americas business in 2026, specifically addressing the impact of U.S. wholesale rationalization and identifying opportunities for upside in the region.

Answer

Harmit Singh, EVP and Chief Financial and Growth Officer, Levi Strauss & Co., noted the U.S. grew 4% in 2025, with DTC as a standout. He clarified that Q4 U.S. wholesale was flat due to lapping a strong digital customer and DC capacity constraints, which, if adjusted, would show low to mid-single-digit growth. For 2026, the U.S. is expected to grow low to mid-single digits, with global wholesale flat to slightly up due to rationalization of non-strategic U.S. accounts, emphasizing wholesale remains a key channel for brand amplification and broader assortment.

Brooke Roach sought deeper insight into Levi Strauss & Co.'s growth assumptions for the Americas business in 2026, considering DTC momentum, pricing, units, U.S. Wholesale rationalization, and opportunities for upside.

Answer

Harmit Singh, EVP and Chief Financial and Growth Officer, clarified that U.S. grew 4% in 2025, with DTC up 6%. Q4 U.S. wholesale was flat due to lapping a strong digital customer sale and DC capacity constraints. For 2026, Americas is expected to grow low- to mid-single digits, with global wholesale flat to slightly up due to rationalization of non-strategic U.S. accounts, emphasizing wholesale as a key channel benefiting from broader assortment.

Brooke Roach of Goldman Sachs Group asked for a deeper dive into the momentum in the Europe business, questioning if there were one-time drivers beyond the distribution center normalization and what the medium-term growth rate for the region could be.

Answer

EVP & CFO Harmit Singh advised looking at Europe on a year-to-date basis, where wholesale is up 7% and overall growth is in the high single digits, suggesting a mid-to-high single-digit run rate is appropriate. He noted the region is still below its prior peak revenue. President & CEO Michelle Gass, referencing a recent visit, expressed high confidence in the region, citing a phenomenal leadership team, strong DTC execution, and high brand relevance as sustainable growth drivers.

Brooke Roach asked about the company's playbook for a worsening macro environment, specifically concerning its cost structure's flexibility and the potential for further SG&A leverage to offset cost pressures.

Answer

CFO Harmit Singh referenced the COVID period as a proxy, where the cost structure was about 65-70% fixed. He explained that while they are evaluating all cost initiatives, they would be cautious about cutting investments like marketing that are driving brand momentum. He also highlighted the strong, diversified international business as a potential offset to any softness in the U.S.

Brooke Roach requested a regional breakdown of the organic growth opportunity for the upcoming year and asked for guidance on the quarterly cadence of margin expansion, particularly for gross margin and SG&A.

Answer

President and CEO Michelle Gass outlined regional growth expectations as low-to-mid-single digits for the Americas and mid-single digits for both Europe and Asia. CFO Harmit Singh added that full-year gross margin expansion of 100 basis points will be front-loaded, with higher expansion in the first half (150-200 bps) and moderating in the second half, driven by lower product costs, structural mix shifts to DTC, and a focus on full-price sales.

Brooke Roach of Goldman Sachs asked for a quantification of the drivers behind the Q3 gross margin outperformance and for an outlook on the key factors influencing gross margin going forward, such as cost recapture, pricing, and freight.

Answer

CFO Harmit Singh detailed that the 440 basis point year-over-year gross margin increase was driven by 270 bps from lower product costs, 190 bps from favorable channel mix, and 50 bps from higher full-price sales, partially offset by 60 bps of headwinds from FX and airfreight. He stated that the outperformance versus guidance was due to stronger-than-expected channel mix and full-price selling, and he anticipates similar drivers in Q4.

Brooke Roach inquired about the sequential acceleration of The North Face in the Americas this quarter, its repeatability, current inventory levels, and any one-time tailwinds that might have benefited the holiday season trend.

Answer

CEO Bracken Darrell attributed the strength in The North Face Americas to being an underdeveloped market with significant upside, noting broad-based growth across footwear, e-commerce, and elevated products. He sees this strength as repeatable. CFO Paul Vogel added that inventory dollars are slightly up to support sales, but inventory days are down across the board.

Brooke Roach with Goldman Sachs inquired about the sequential acceleration of The North Face in the Americas during Q3 fiscal 2026, asking about its repeatability, current inventory levels, and any one-time tailwinds that might have contributed to the strong holiday season performance.

Answer

CEO Bracken Darrell attributed The North Face's strong Americas performance to being historically underdeveloped in the region, seeing broad-based growth across categories, and noted no extraordinary one-time factors. EVP and CFO Paul Vogel stated that inventory dollars were slightly up to support sales, but inventory days were down across the board.

Brooke Roach of Goldman Sachs followed up on promotional recapture, asking about the current stage of the journey, holiday pricing and promotion plans, and the medium-term opportunity, particularly within the Americas business.

Answer

Bracken Darrell (President and CEO) stated the company is on track with promotional improvement but will be aggressive if necessary in the Americas, aiming for a sustainably lower promotional environment. Paul Vogel (EVP and CFO) added that promotional benefits will continue, with tariff-related pricing actions primarily starting in Q4. He noted Q3 gross margin will reflect tariff impacts, not promotional changes.

Brooke Roach asked about the current sentiment among wholesale partners in North America, specifically whether they are showing hesitancy in taking on inventory for the holiday season given the uncertain macroeconomic backdrop.

Answer

President & CEO Bracken Darrell acknowledged a general sense of conservatism and inventory caution among wholesalers globally due to tariff uncertainty. However, he expressed confidence that VFC's ongoing investments in product innovation and marketing will strengthen its position and help offset these potential headwinds.

Brooke Roach inquired about the one-time strategic reset actions at the Vans brand, asking for a timeline on when these actions would be complete and whether additional reset initiatives are being considered.

Answer

President and CEO Bracken Darrell explained that the impacts from four key actions—China channel reduction, own-store closures, value-door closures, and reduced distressed sales—will continue through Q1 and Q2, fade in Q3, and be fully annualized by Q4. He did not indicate further actions were being contemplated at this time.

Brooke Roach inquired about the sources of outperformance on SG&A savings and how the company is thinking about balancing the flow-through of savings to the bottom line versus reinvesting in the brands.

Answer

EVP and CFO Paul Vogel attributed the SG&A outperformance to 'really great execution' on the 'Reinvent' cost-saving initiatives. He confirmed the initial $300 million in savings will be at a full run rate by year-end, and the company is in the early stages of realizing the next $500-$600 million in operating income benefits, which will be allocated across the P&L.

Brooke Roach requested a deeper analysis of the factors influencing gross margin, including the expected benefits from cleaner inventory, increased full-price selling, and lower product costs.

Answer

CFO Paul Vogel confirmed that gross margin is expected to increase in both Q3 and Q4, aided by favorable comparisons to the prior year's inventory actions. He indicated that a more detailed breakdown of these drivers would be provided at the upcoming Investor Day.

Brooke Roach inquired about the performance of Lululemon's largest franchises in both performance and lounge/social categories, whether a reset is needed for new product innovation to shine, and proof points for the new design language expected in 2026.

Answer

CEO Calvin McDonald stated that the team's focus is balanced across activity areas (run, train, yoga, golf, tennis) and lifestyle. He noted continued growth in performance activity categories with ongoing innovation. In lifestyle, social categories are growing with newness like Daydrift and updates to men's bottom business and the ABC silhouette for women. While lounge franchises faced headwinds, updates to Scuba with new materials and silhouettes have shown good response. He highlighted in-store visual merchandising tests in LA and Miami, which curate stores to emphasize newness and are showing good results, alongside the new web design enhancing visibility for new products.

Brooke Roach questioned the magnitude of the downtrending casual franchises within the 40% casual business segment. She also asked about the timeline for new innovation from the Spring 2026 pipeline to scale sufficiently to offset the pressure from these underperforming lounge and social platforms.

Answer

CEO Calvin McDonald indicated that the shift from 23% to 35% new styles by Spring 2026 would over-index in social and lounge categories, alongside successful new introductions like Daydrift and BeCalm. He expressed confidence that this mix would provide sufficient choice to offset pressure from core franchises, with agility improvements allowing quicker reactions to guest demand.

Brooke Roach inquired about the effectiveness of the current marketing strategy, particularly regarding customer acquisition in the U.S., and asked for quantification of the tariff impact included in the 2025 guidance.

Answer

CEO Calvin McDonald expressed encouragement with recent community-based marketing activations, citing strong engagement and their positive impact on both customer acquisition and retention. CFO Meghan Frank specified that the guidance includes an approximate 20 basis point headwind from tariffs on imports from China and Mexico, and that mitigation strategies would include cost structure reviews and potential pricing actions.

Asked about learnings from increased marketing spend, the future marketing spend as a percentage of sales, and the results of strategies to re-engage lapsed U.S. customers.

Answer

Marketing investments are yielding positive returns, successfully increasing brand awareness to 36% in the U.S. The primary focus for growth is not on re-engaging lapsed customers, as retention is already very high, but on increasing the spend of loyal, existing customers by providing more product newness.

Brooke Roach asked about the learnings from this year's increased marketing spend and the future outlook for advertising as a percentage of sales. She also inquired about the results of strategies aimed at re-engaging lapsed customers in the U.S.

Answer

CFO Meghan Frank noted marketing spend will be near 5.5% of sales this year, up from the typical 4.5-5%, as they maintained campaigns despite revenue pressure. CEO Calvin McDonald added that investments are driving new guest acquisition and have raised U.S. unaided brand awareness to 36%. He clarified that the key opportunity is not with lapsed customers, as retention is very high, but in increasing revenue per guest by restoring historical levels of product newness.

Asked about demographic trends in the U.S. women's business, if the conversion issue was concentrated in any group, and about adapting marketing to better serve specific demographics.

Answer

There were no meaningful shifts in the guest profile; the conversion miss was seen across existing guests who were looking for newness. The issue was a product gap, not a customer shift. Marketing will continue to focus on top-of-funnel awareness, as strengthening the product mix is seen as the biggest lever to drive conversion.

Brooke Roach asked about trends in the U.S. women's business by consumer demographic, questioning if the conversion decline was concentrated in a specific group, and how marketing might adapt to serve these customers better.

Answer

CEO Calvin McDonald responded that there was no significant shift in the guest profile and that the conversion miss was broad across demographics, particularly affecting existing guests seeking newness. He stated that the primary focus is on fixing the product assortment, as that will be the biggest lever for improving conversion, while marketing continues to drive top-of-funnel brand awareness.

Brooke Roach asked for details on U.S. women's business trends by consumer demographic and whether the conversion decline was concentrated in any specific group. She also asked about plans to adapt marketing to better serve these customers.

Answer

CEO Calvin McDonald responded that there was no meaningful shift in the guest profile, with new customer acquisition remaining broad. The conversion miss was primarily among existing guests who were seeking newness. He stated that restoring product newness is the primary lever for improving conversion, complemented by top-of-funnel marketing to drive brand awareness.

Brooke Roach inquired about the profile of new customers acquired this quarter, specifically their age and income, and how these insights will influence marketing plans for 2026. She also asked CFO Scott Sekella if a low double-digit EBIT margin profile is still achievable and the potential pace of expansion versus reinvestment.

Answer

CEO Hillary Super stated that new customer acquisition is focused on 18-24-year-olds, coming in with higher average unit retail (AUR) and driven by product and brand rather than promotions. She noted growth across all income cohorts, with a slight uptick in higher-income customers. CFO Scott Sekella affirmed that a low double-digit operating margin is achievable over the next couple of years, driven by leveraging operational foundation as sales grow, allowing for strategic marketing investments.

Brooke Roach from Goldman Sachs asked about the profile of new customers acquired in Q3 2025, specifically their age and income levels across brands in North America, and how this informs future marketing plans for 2026. She also questioned the achievability of a low double-digit EBIT margin and the pace of expansion versus reinvestment.

Answer

CEO Hillary Super confirmed that new customer acquisition is focused on 18-24 year olds, coming in at higher Average Unit Retail (AUR) and driven by product and brand emotion rather than promotions. She noted growth across all income cohorts, with a slight uptick in higher-income customers. CFO and COO Scott Sekella affirmed that a low double-digit operating margin is achievable over the next couple of years, driven by leveraging operational foundation (buying, occupancy, SG&A) as sales grow, allowing for strategic marketing investments with positive Return on Ad Spend (ROAS).

Brooke Roach of Goldman Sachs inquired about the future marketing strategy following the hiring of a new Chief Marketing Officer and the extent of price increases embedded in the company's guidance to offset tariff impacts.

Answer

CEO Hillary Super explained that the marketing strategy will be an evolution, not an abrupt change, focusing on targeted customer acquisition, an 'always on' bra campaign, and optimizing the marketing funnel. CFO Scott Sekella added that pricing adjustments will be strategic, emphasizing optimized promotions like 'gift with purchase' (GWP) over broad-based price hikes, targeting specific categories where a value proposition gap exists.

Brooke Roach asked about the current size of the sport and swim businesses and their growth potential, and also inquired about the expected trend for SG&A expenses as a percentage of sales for the year.

Answer

CEO Hillary Super described the sport and swim businesses as relatively small but growing nicely, with a long runway for growth back towards their historical size. CFO Scott Sekella stated that marketing spend will be largely flat year-over-year, with a focus on reallocation. He noted that total SG&A will see slight deleverage under the current guide, but the model begins to leverage at 1-2% North American sales growth.

Brooke Roach inquired about the expected evolution of the marketing strategy, including spending levels and channel focus, and asked about the company's promotional plans for the holiday season, particularly if sales continue to outperform.

Answer

CEO Hillary Super stated that overall marketing spend as a percentage of sales should remain consistent, with the focus shifting to *how* it's spent: a full-funnel approach for Victoria's Secret and a mobile-first, TikTok-centric strategy for PINK. CFO Tim Johnson explained that Q4 promotions were planned to be flat year-over-year, but strong performance creates an opportunity to be less promotional. He also detailed that higher selling margins in Q4 are being offset by pressures from transportation rates, incentive costs, and calendar shifts.

Brooke Roach from Goldman Sachs asked about the specific drivers behind the better-than-expected SG&A cost control in the quarter and the outlook for SG&A dollar growth for the remainder of the year.

Answer

CFO and Interim CEO, Timothy Johnson, explained that the SG&A outperformance was the result of broad-based discipline across many areas, including travel, headcount, shipping logistics, and store payroll, rather than a single large initiative. For the back half, he expects SG&A dollars to be relatively flat year-over-year in Q3, with potential for slight growth in Q4, partly due to assumptions for higher incentive compensation. He also highlighted that buying and occupancy costs, which are part of gross margin, were down and are expected to remain flat-to-down.

Brooke Roach asked about the company's strategy to balance fashion versus basics and opening price points, and how processes are changing to ensure a systematic approach for 2026 and beyond. She also asked if there were any outsized shifts in engagement among specific income or age demographics.

Answer

CEO Lisa Harper outlined plans for opening price points to represent nearly 30% of the assortment by Q1 2026, integrated into the architecture to balance innovation with core customer needs. She highlighted successful execution in denim, non-denim, dresses, and intimates, contrasting it with the misstep in tops where core programs were neglected. Chief Strategy and Planning Officer Ashlee Wheeler added that successful categories maintained commitment to franchises while innovating. Ashlee Wheeler also stated that customer demographics and income cohorts showed consistent performance, but loyal, engaged customers reduced frequency and purchases in Q3, particularly in tops.

Brooke Roach of The Goldman Sachs Group, Inc. inquired about the health of the Torrid consumer, the drivers behind the recent sales improvement in Q1, and the expected financial contribution from the new sub-brands and planned store closures.

Answer

CEO Lisa Harper described the core customer as fundamentally strong with positive traffic trends, though conversion remains choppy. She attributed recent improvements to strength in core categories like denim and dresses, amplified by the excitement around new sub-brands. CFO Paula Dempsey clarified that the financial impact of the 40-50 store closures planned for fiscal 2025 will be minimal this year, with the majority occurring in Q4, and that the benefits will be more significant in fiscal 2026.

Brooke Roach inquired about the quantifiable level of newness planned for the first half of 2025 versus Q3 and the associated marketing strategies to drive traffic. She also asked for a breakdown of the drivers for 2025 EBITDA margin expansion and whether it could be achieved without comparable sales growth.

Answer

CEO Lisa Harper explained that while she couldn't provide an exact percentage, newness would impact every category, highlighting new sub-brands like Festi, Nightfall, and Retro Chic. Marketing will be enhanced with a robust influencer program and a repeat of the successful model search. CFO Paula Dempsey added that EBITDA margin expansion is achievable even without comp growth due to store optimization initiatives, but the company remains confident in returning to positive comps.

Brooke Roach inquired about the key business drivers that Macy's expects to sustain momentum into 2026, the opportunity for core Adjusted EBITDA margin delivery, and whether recent tariff margin pressure is recapturable in the upcoming year.

Answer

Chairman and CEO Tony Spring identified product assortment, a balanced good/better/best offering, omnichannel strength, and strategic store closures as primary drivers. He expressed satisfaction with core Adjusted EBITDA performance, noting improvement despite lower asset sale gains and sales. Spring acknowledged tariffs as an ongoing factor for 2026. COO and CFO Tom Edwards added that the full-year guidance reflects strong fundamental performance and proactive tariff mitigation efforts, which reduced the expected impact from 40-60 basis points to 40-50 basis points, flowing through to the bottom line.

Brooke Roach inquired about the key business drivers to sustain momentum into 2026, the opportunity for core Adjusted EBITDA margin delivery, and strategies to recapture tariff margin pressure in the upcoming year.

Answer

Chairman and CEO Tony Spring emphasized product assortment, omnichannel balance, and shedding underproductive stores as key drivers. He expressed satisfaction with core EBITDA performance despite asset sale shortfalls. COO and CFO Tom Edwards added that the full-year guidance reflects strong fundamental performance, with tariff impacts being lower than anticipated due to mitigation efforts like shared cost negotiations and vendor discounts, which will continue into 2026.

Brooke Roach of Goldman Sachs asked about the specific actions, beyond pricing, that Macy's is taking to strategically capture market share, such as changes to its promotional or marketing calendar. Additionally, she requested a breakdown of the Q2 gross margin pressure between transitory factors like markdowns and more sustainable pressures.

Answer

Chairman & CEO Tony Spring detailed a multi-pronged market share strategy focusing on flowing newness in product, adding new brands, improving marketing with a better balance of top and bottom-funnel investments, and enhancing the in-store experience with more colleagues and better service, leading to higher NPS scores. COO & CFO Adrian Mitchell explained that while a specific Q2 gross margin breakdown wasn't provided, the pressure comes from markdowns on late-arriving spring inventory and the flow-through of products bought under higher tariffs, alongside strategic investments in price to gain share.

Brooke Roach inquired about Macy's strategy for returning to positive comparable sales, focusing on engagement with different customer demographics and recent business trends.

Answer

CEO Antony Spring highlighted the strength of Macy's Inc.'s portfolio, which serves 40 million customers across five generations, providing flexibility in the current climate. COO & CFO Adrian Mitchell noted that while Q1 faced transitory pressures, the company is scaling successful initiatives and expects momentum to build throughout the year as it focuses on controllable factors.

Brooke Roach of Goldman Sachs asked for management's confidence in transferring the 'First 50' store learnings to the broader fleet, whether these initiatives would be profitable in 2025, and for more detail on the updated Q4 gross margin outlook and promotional environment.

Answer

CEO Antony Spring expressed confidence, citing three consecutive quarters of comp growth in 'First 50' stores and significant outperformance in test locations, stating the investments are a priority and will be accretive to overall profitability. COO & CFO Adrian Mitchell explained the updated Q4 gross margin outlook reflects a competitive landscape and a choiceful consumer, requiring a focus on providing value while balancing profitability and inventory management.

Brooke Roach inquired about the potential tailwinds from expanding 'First 50' staffing tests to more locations and the key factors needed to scale these initiatives across the entire fleet. She also asked for details on adjustments to the promotion and marketing calendar.

Answer

CEO Tony Spring expressed strong confidence in the 'First 50' initiative, citing its positive comp growth and improved NPS scores, stating that expansion is a matter of 'when, not if.' He confirmed the 100-store test for handbag and shoe staffing is a positive sign. COO and CFO Adrian Mitchell added that marketing adjustments are centered on delivering a sharp value message, enhancing in-store visual presentation, and ensuring colleague availability to amplify the value proposition for the consumer.

Brooke Roach of Goldman Sachs questioned what actions beyond pricing Macy's is taking to strategically capture market share. She also asked for a breakdown of the Q2 gross margin pressure between transitory factors and more sustainable elements.

Answer

Chairman & CEO Tony Spring detailed a multi-pronged market share strategy focused on flowing newness in product, adding new brands, improving marketing with a better top/bottom funnel balance, and enhancing the in-store experience. COO & CFO Adrian Mitchell clarified that while a specific Q2 margin breakdown wasn't provided, pressures include markdowns on late-arriving spring goods and the flow-through of products bought under higher tariffs, alongside strategic price investments to gain share.

Brooke Roach asked Michael O'Sullivan about the trends observed with lower-income customers in Q3 and any other notable customer demographic callouts. She also asked Kristin Wolfe for more color on the Q4 guidance for both comparable store sales and earnings.

Answer

CEO Michael O'Sullivan reported strong resilience in the lower-income customer segment, with stores in lower-income trade areas continuing to outperform the chain. He noted a shift in Hispanic customer trends, with stores in high Hispanic household trade areas trailing the chain in Q3 after previously outperforming. CFO Kristin Wolfe reiterated maintaining Q4 comparable store sales guidance of flat to 2% due to strong prior-year comparisons and early quarter timing. She confirmed an increase in Q4 adjusted EBIT margin guidance to 30-50 basis points, anticipating full offset of tariff pressure through continued cost savings in freight, supply chain, and store initiatives, along with SG&A leverage from incentive comp accruals.

Brooke Roach inquired about the trends observed with lower-income customers and any other significant customer demographic callouts in Q3, and then asked for more color on Burlington's Q4 guidance for both comp sales and earnings.

Answer

Michael O'Sullivan (CEO) reported strong resilience and outperformance from lower-income customers, but noted a shift in Hispanic customer trends, moving from slightly outperforming to trailing the chain in Q3, with localized variations. Kristin Wolfe (EVP and CFO) reiterated Q4 comp guidance (flat to 2%) due to early quarter timing and strong prior-year comparisons, confirming increased Q4 EBIT margin guidance (30-50 bps increase) driven by cost savings in freight, supply chain, and store initiatives, plus SG&A leverage from incentive comp accrual.

Brooke Roach of Goldman Sachs inquired about back-to-school sales trends for July and August. She also asked for a breakdown of regional and category performance strengths and weaknesses during the second quarter.

Answer

CEO Michael O'Sullivan reported that the company was 'very pleased' with its back-to-school business, with July being 'especially strong' and August trends remaining 'solid,' reflecting a successful multi-year strategy to gain market share. CFO Kristin Wolff added that regionally, the Southeast and Northeast were the strongest performers. By category, beauty, accessories, and shoes led, while apparel was in line with the chain average and home was softer.

Brooke Roach of Goldman Sachs asked for an update on Burlington's marketing programs and inquired about any lessons learned from the 2018 tariff implementation.

Answer

CEO Michael O'Sullivan described a marketing evolution focused on a clear 'value' message, amplified word-of-mouth on social media, and the 'Store Experience 2.0' initiative. Regarding 2018, he noted those tariffs were smaller in scale and impact, but the key lesson was the importance of leveraging off-price flexibility, which is critical in the current environment.

Brooke Roach inquired about the potential impact of changes to the de minimis import rule on competitors like SHEIN and whether this could benefit Burlington. She also asked for an update on the current state of off-price merchandise availability.

Answer

CEO Michael O'Sullivan stated that while changes to de minimis could conceptually be a positive, he would not expect a material impact on Burlington, as the company competes across a broad and fragmented landscape and has been taking significant market share regardless. On merchandise availability, O'Sullivan described the environment as 'very strong,' evidenced by the ability to chase sales to a 6% comp in Q4. He added that uncertainty around potential tariffs is likely to create further supply chain disruption, which typically creates even better buying opportunities for off-price retailers.

Brooke Roach requested an update on the strategy to increase the mix of better brands in the assortment and asked for more detail on how the company is thinking about the potential impact of tariffs.

Answer

CEO Michael O'Sullivan reframed the strategy as 'elevating assortments' to deliver value, which includes brands, quality, and fashion, calling it an 'evolution, not a revolution.' CFO Kristin Wolfe addressed tariffs by noting that direct import exposure is low (around 8%) and the flexible off-price model allows for negotiation. She added that tariffs can create market disruption, which is ultimately a positive for off-price buying opportunities.

Brooke Roach asked about performance trends by merchandise category in Q2 and for a breakdown of comp growth drivers, including geography, traffic, and basket size.

Answer

CEO Michael O'Sullivan reported broad-based strength, with apparel and home comping mid-single digits, and highlighted strong sales in seasonal, back-to-school, beauty, and accessories. CFO Kristin Wolfe added that the comp was entirely driven by higher transactions from both traffic and conversion, with a flat average basket. Geographically, all regions comped positively, led by the Southwest and Northeast.

Brooke Roach of Goldman Sachs asked for an update on Burlington's marketing programs as an idiosyncratic driver of comp momentum. She also inquired about any useful lessons learned from the 2018 tariff implementation during the first Trump administration.

Answer

CEO Michael O'Sullivan described the evolution of marketing under 'Burlington 2.0,' highlighting a singular focus on 'value,' a shift to amplifying word-of-mouth on social media, and the rollout of 'Store Experience 2.0' for a more exciting in-store environment. Regarding the 2018 tariffs, O'Sullivan noted they were much smaller in scale and had a modest impact. The key lesson from that period, he said, is that Burlington's flexibility as an off-price retailer is a critical strength in navigating these challenges.

Brooke Roach inquired about the current state of the store fleet across Gap Inc.'s brands, potential investments needed for the shopping experience, and the strategy for store fleet transformation, including remodels and store count changes, looking into 2026.

Answer

Richard Dickson, President and CEO of Gap Inc., stated that the company is optimizing its 2,500-store footprint by closing underperforming stores (350 previously, 56 last year, 35 in fiscal 2025, mainly Banana Republic). He mentioned testing new formats like Gap Flatiron and refreshing locations, with rational and selective investments planned for strong returns.

Brooke Roach inquired about the current state of the store fleet across all brands, necessary investments to enhance the shopping experience, and the implications for store fleet transformation, including remodels or changes in store count, looking into 2026.

Answer

Richard Dickson, President and CEO, explained that the company continuously optimizes its retail footprint, having closed 350 unprofitable stores over several years, with 35 more expected in FY25 (mostly Banana Republic). He noted the fleet is well-positioned, with ongoing tests of new formats (Gap Flatiron, Banana Republic Soho) showing positive learnings and returns, guiding rational and selective investments in repositioning, refreshing, and new store openings.

Brooke Roach inquired about Ross's approach to value gaps into holiday and 2026 as market prices rise, how much of Q3 AUR growth was from price actions versus mix, and if any categories show consumer elasticity signs from pricing.

Answer

CEO Jim Conroy stated their strategy is typical off-price, maintaining a value umbrella under traditional retailers, which helped attract new or lapsed customers. He reiterated that transactions were the biggest comp driver, and no significant changes to pricing strategy are expected for Q4. He noted it was encouraging to see modest AUR increase without UPT degradation, despite the difficulty of navigating tariff and retail environment changes.

Brooke Roach asked about Ross's approach to value gaps into holiday and 2026 as market prices rise, how much Q3 AUR growth was from price actions versus mix, and if any categories show consumer elasticity to pricing changes.

Answer

Jim Conroy (CEO) reiterated the strategy of maintaining a strong value proposition relative to traditional retailers, emphasizing value delivery even during tariffs. He noted modest AUR increases without degradation in units per transaction, with transactions being the biggest comp driver. He expects no significant pricing strategy changes for Q4.

Brooke Roach from Goldman Sachs asked if the company is observing increased signs of consumer trade-down activity or any changes in the demographic mix of its shoppers by income or ethnicity, given rising prices across the retail sector.

Answer

COO Michael Hartshorn reported that there was no noticeable change in customer income cohorts during the quarter, with performance being broad-based. He did note that stores with a high concentration of Hispanic customers, a key demographic, experienced some softness in June but saw a solid bounce-back in July.

Brooke Roach inquired about specific category plans to mitigate tariffs, such as shifting assortment within categories to minimize the sourcing impact from China, and how much can be shifted over time.

Answer

Executive James Conroy explained that while there is flexibility to adjust the merchandise mix, certain signature items are essential regardless of origin. He emphasized that the entire retail market is attempting to re-source product, which is a multi-month process. He characterized significant sourcing shifts as a 2026 adjustment, not a near-term fix for 2025.

Brooke Roach from Goldman Sachs inquired about category-specific plans to mitigate tariffs, such as shifting assortment to minimize the impact from China-sourced goods, and how much sourcing can be shifted over time.

Answer

Executive James Conroy responded that while there is flexibility to amplify certain categories over others, signature items must remain in the assortment. He noted that while all vendors are working to re-source goods, this is a several-month process, and significant shifts in country of origin are more of a 2026 adjustment rather than a 2025 one.

Brooke Roach asked for an update on the performance of dd's DISCOUNTS, whether it's experiencing the same slowdown as Ross, and what drives confidence in its future growth.

Answer

Group President and COO Michael Hartshorn reported that dd's sales gains were above Ross throughout 2024, driven by strong fashion and value offerings. He noted encouraging performance in newer markets, prompting plans to rebuild the store growth pipeline for 2026. However, he confirmed dd's saw a similar slowdown trend as Ross in early 2025.

Brooke Roach inquired about the current macro backdrop for the Ross consumer, any changes in customer engagement, and what insights could be drawn from the continued outperformance of the dd's DISCOUNTS banner.

Answer

Group President & COO Michael Hartshorn attributed dd's outperformance to strong merchant execution in improving its value and fashion offerings. CEO Barbara Rentler noted that customers did return to shopping after weather events subsided. Hartshorn added that the company has not seen a significant shift in its customer base by income or age.

Brooke Roach asked about the level and quality of inventory available in the marketplace, opportunities for new vendor partnerships, and whether inventory was being sourced at better mark-on rates.

Answer

CEO Barbara Rentler described the inventory availability in the marketplace as 'favorable' and 'broad based.' She confirmed that the company is actively expanding its vendor base, noting that with business being challenging in some retail segments, vendors are looking to build relationships, creating a favorable environment for off-price retailers to add new partners.

Brooke Roach inquired about TJX's confidence in maintaining comp momentum into the holiday season despite tough comparisons, and sought clarification on the contribution of average unit retail (AUR) and pricing growth to the quarter's comp, as well as future pricing and price gap strategies.

Answer

Ernie Herrman, President and CEO of TJX Companies, expressed confidence, citing the company's unique value proposition, pleasant shopping environment, and strong brand appeal. John Klinger, CFO, noted consistent comp cadence, with both transactions and average basket up, and ticket being the primary driver within the basket. Mr. Herrman further emphasized the company's commitment to aggressively shopping competitors to ensure their out-the-door retail prices remain below promotional levels, thereby maintaining a strong pricing gap.

Brooke Roach from Goldman Sachs inquired about TJX's confidence in maintaining comp momentum despite tough holiday season comparisons, seeking commentary on the benefit to comp from average unit retail (AUR) and pricing growth in the quarter, and plans for pricing and price gaps for the holiday season.

Answer

President and CEO Ernie Herrman expressed confidence in comp momentum, citing TJX's unique value proposition across branded merchandise, pleasant shopping environment, and accommodating associates. CFO John Klinger noted consistent monthly comp cadence, with both transactions and average basket up, and ticket being the primary driver within the basket. Herrman further emphasized the company's diligence in maintaining competitive pricing gaps against other retailers, ensuring their 'out the door' retail remains below competitors' promotional prices.

Brooke Roach inquired whether TJX is experiencing accelerated market share gains as consumers seek value and asked about the company's pricing strategy for the fall and holiday seasons, specifically regarding maintaining price gaps versus selectively raising prices.

Answer

CEO Ernie Herrman explained that TJX does not employ a top-down price-raising strategy. Instead, buyers determine prices on a deal-by-deal basis by working backward from competitors' prices to ensure a compelling value gap, which is not a fixed percentage. CFO John Klinger noted that internal customer surveys confirm that the company's value perception remains very strong.

Brooke Roach inquired about expectations for merchandise margin expansion, specifically the interplay between mark-on and tariffs, and also asked for the outlook on shrink for the upcoming year.

Answer

CEO Ernie Herrman explained that the company's buying strategy focuses on the end retail price to maintain its value gap, making factors like tariffs a vendor concern. He sees the current environment creating more buying opportunities. CFO John Klinger added that the company plans for a 'small improvement' in shrink, driven by the annualization of prior-year initiatives.

Brooke Roach inquired about TJX's exposure to direct imports from China and the potential impact of tariffs on inventory availability and merchandise sourcing costs.

Answer

CEO Ernie Herrman stated that direct imports are a very small portion of the business and that the company's primary focus is maintaining its value gap versus competitors, regardless of tariffs. He added that market disruption from tariffs can create opportunistic buying advantages. CFO John Klinger noted a minor freight headwind is anticipated and included in the Q4 forecast.

Brooke Roach inquired about the sales impact in China following the fireworks incident, potential recovery timelines, and any long-term brand repercussions. She also asked how this event influenced Q4 guidance.

Answer

Stuart Haselden, CEO of Arc'teryx, stated that Arc'teryx China's sales were softer early in Q4 but have since rebounded, expressing confidence in the brand's position. Andrew Page, CFO of Amer Sports, confirmed that the incident did not impact Q4 guidance.

Brooke Roach asked about the sales impact in China following the recent fireworks incident, including the expected recovery timeline and potential longer-term brand repercussions. She also inquired about the event's impact on Q4 guidance.

Answer

Stuart Haselden, CEO of Arc'teryx, stated that Arc'teryx China's sales were softer at the beginning of Q4 but have since rebounded with cooler weather, expressing confidence in the brand's position and equity with consumers. Andrew Page, CFO of Amer Sports, clarified that the incident did not factor into the Q4 guidance.

Brooke Roach of Goldman Sachs Group, Inc. asked about the next levers for growth at the Solomon brand and the anticipated pace and scale of its distribution expansion in the U.S. across both owned retail and wholesale channels.

Answer

CEO James Zheng explained that while Solomon's recent growth was led by Greater China, APAC, and EMEA, the U.S. market is still in a foundational phase. The company plans to expand from one to four or five U.S. stores by year-end to validate its 'compact shop' format, while also strengthening key wholesale partnerships with retailers like REI and Nordstrom. Zheng expressed high confidence in replicating the brand's international success in the U.S. over time.

Brooke Roach inquired about the sustainability of Salomon's strong Q1 growth momentum and questioned the long-term margin profile potential for the Salomon business.

Answer

CFO Andrew Page affirmed confidence in Salomon's sustainable momentum, referencing the raised full-year guidance for the Outdoor Performance segment. He stated that growth is accelerating across Asia, Greater China, and Europe, and that the strong performance of the direct-to-consumer channel serves as a leading indicator of the brand's potential.

Brooke Roach inquired about the drivers behind Salomon's outsized Q1 growth, its sustainability, and the potential long-term margin profile for the business.

Answer

CFO Andrew Page affirmed that the momentum is sustainable, as reflected in the raised full-year guidance for the Outdoor Performance segment. He attributed the growth to successful go-to-market strategies, strong performance in APAC and Greater China, and accelerating momentum in Europe. He emphasized that the direct-to-consumer channel serves as a strong leading indicator for the brand's potential.

Brooke Roach of Goldman Sachs requested details on the SG&A investments planned for the year to support growth, the key areas of focus, and the expected cadence and payoff of these investments.

Answer

CFO Andrew Page explained that SG&A investments are focused on new store build-outs, enhancing consumer connections online and in-store, and infrastructure upgrades like their ERP system and logistics. He noted that investments from 2023 and 2024 are expected to begin scaling, leading to a forecast of 'relatively flattish' SG&A as a percentage of sales in 2025.

Brooke Roach asked about Ralph Lauren's strategic actions to engage the North America value-oriented consumer during the holiday season, given the company's conservative approach despite outperforming expectations, and plans if consumer weakness intensifies.

Answer

Justin Picicci, CFO, highlighted broad-based brand momentum and the company's diversified toolkit to navigate macro pressures, emphasizing pricing power and growing value perception. He stated Ralph Lauren maintains flexibility in its price architecture for targeted value-oriented customers in channels like wholesale and outlets without compromising brand guardrails, focusing on a compelling price-value proposition through sharpened marketing and analytics. Patrice Louvet, CEO, added that storytelling and product offerings, including core icons and high-potential categories, are designed to appeal broadly, with increased emphasis on better consumer segmentation in North America to target messages effectively.

Brooke Roach asked for a deeper dive into Ralph Lauren's strategic actions to engage the North America value-oriented consumer this holiday season, given the company's conservative approach, and what the plan is if the consumer weakens further.

Answer

Justin Picicci, CFO, highlighted the brand's broad-based momentum and resilience in navigating tough environments. He emphasized flexibility in price architecture for targeted engagement with value-oriented customers in wholesale and outlets without compromising broader brand guardrails. Picicci stressed a laser focus on providing a compelling price-value proposition through sharpened marketing and analytics. Patrice Louvet, CEO, added that storytelling is designed to appeal broadly, including to value-sensitive consumers, and that North America teams are emphasizing better segmentation. He noted that the product strategy, combining core icons and high-potential categories, resonates across all consumer segments.

Brooke Roach asked about the brand's overall discount rate in North America across full-line and outlet channels, how close it is to an optimal level, and the strategy for promotions heading into the holiday season.

Answer

President and CEO Patrice Louvet stated that the company's general trend is toward reduced promotional activity, which contributed to the quarter's strong AUR growth. He explained that the plan is to continue this elevation journey by pulling back on discounts but remaining nimble, while avoiding defining an 'optimal' level due to the competitive landscape.

Brooke Roach asked about SharkNinja's outlook for category growth during the holiday season and into 2026, inquiring about the company's confidence in maintaining market outperformance and if the innovation pipeline is sufficient to sustain double-digit U.S. growth despite tough comparisons.

Answer

CEO Mark Barrocas highlighted a strong innovation pipeline, including new products like Ninja Fireside360, Shark StainForce, and Shark FacialPro Glow, alongside reinventions of existing categories such as Blend Boss and Crispi Pro. He emphasized that innovation is coming from both new categories and enhancing the core product base, expecting this trend to continue into 2026. Barrocas also noted SharkNinja's consistent market outperformance for ten consecutive quarters, driven by innovation and improved content creation.

Brooke Roach asked about SharkNinja's outlook for category growth during the holiday season and into 2026, the company's confidence in continuing to outperform the market, and whether the current innovation portfolio is robust enough to sustain double-digit U.S. growth despite tough comparisons.

Answer

CEO Mark Barrocas highlighted a strong innovation pipeline, including reinventing existing categories like air fryers with Crispy Pro and blenders with Blend Boss, alongside new category entries. He expressed confidence in continued market outperformance due to innovation and enhanced content creation. CFO Adam Quigley did not directly address this question.

Brooke Roach of Goldman Sachs inquired about SharkNinja's strategy to be 'fully on offense' in the second half of 2025, asking for a breakdown of growth opportunities between U.S. and international markets. She also requested clarification on the company's tariff commentary and the expected impact on gross margins for the third and fourth quarters.

Answer

CEO Mark Barrocas explained that the offensive strategy involves capitalizing on strong domestic demand driven by new products and retailer commitments, despite a weaker overall market. Internationally, he anticipates accelerated growth in the U.K., continued strength in France and Germany, and growing traction in new direct markets like Mexico. CFO Patrick Reagan addressed the tariff question, stating that there is now greater clarity with rates set at 30% for China and 19-20% for Southeast Asia. This clarity is factored into the updated guidance and provides increased supply chain flexibility.

Brooke Roach inquired about the extent of tariff mitigation, seeking a breakdown of the strategy, and asked about the gross margin assumptions in the updated guidance.

Answer

CEO Mark Adam Barrocas stated that while the multi-hundred-million-dollar tariff impact is not 100% offset, the company has mitigated enough through a fluid mix of buy-side, sell-side, and OpEx controls to confidently raise guidance. CFO Patraic Reagan added that the company is leveraging a well-established playbook for supply chain agility and declined to provide a specific gross margin target, emphasizing that they will remain nimble and adjust levers like pricing throughout the year.

Brooke Roach asked about the key areas for operating expense reinvestment in 2025, the potential for margin expansion in the second half of the year, and requested quantification of the revenue impact from the Mexico distributor transition and the Easter timing shift.

Answer

CEO Mark Adam Barrocas addressed the first part, noting that supply chain costs will be elevated in H1 2025 but expects leverage on OpEx in H2. He remained cautious on margin flow-through due to external uncertainties like tariffs. CFO Patraic Reagan handled the second part, explaining the Mexico transition is a strategic long-term decision. He declined to quantify the immediate revenue impact but framed it as a short-term headwind and noted Mexico represents a potential $400 million market over the next few years.

Brooke Roach asked about SharkNinja's reinvestment priorities for Q4 and early 2025, the expected rate of margin flow-through, and the specific margin profiles of its international, new product, and direct-to-consumer businesses.

Answer

CEO Mark Barrocas detailed significant reinvestments in R&D for the 2025 product pipeline, international expansion in Germany and France, and accelerating the manufacturing shift out of China. CFO Patraic Reagan explained that international margins vary by market maturity, with the UK being highest, while newer direct markets are building scale and distributor markets have lower product margins but also lower operating expenses, leading to a comparable EBITDA profile.

Brooke Roach asked about customer acquisition and retention trends across various income cohorts, and the strength observed with value-sensitive customers, particularly in the outlet channel, beyond the collection strategy.

Answer

Joanne Crevoiserat (CEO, Tapestry) reported strong customer acquisition and retention across Gen Z and all age groups, noting no meaningful differences in performance across income cohorts. This indicates successful engagement with a broad cross-section of consumers across the brand portfolio.

Brooke Roach of Goldman Sachs inquired about customer acquisition and retention trends across various income cohorts, specifically asking if Tapestry is observing similar strength with value-sensitive customers across the portfolio, including outlet channels, beyond the collection strategy.

Answer

CEO Joanne Crevoiserat confirmed strong customer acquisition and retention across all age groups and income cohorts, noting no meaningful difference in performance. She emphasized that Tapestry's brands reach a broad cross-section of consumers and are winning with all of them.

Brooke Roach asked for an analysis of Tapestry's fiscal 2026 outlook, the current business strength at the Coach brand, and the company's strategies to mitigate tariff impacts.

Answer

CEO Joanne Crevoiserat highlighted the company's strong fiscal 2025 performance and momentum carrying into Q1 2026, guiding for mid-single-digit revenue growth despite tariff headwinds. Coach CEO & Brand President Todd Kahn detailed the brand's 13% Q4 growth, strong new customer acquisition in the Gen Z and Millennial demographics, and significant brand heat, exemplified by the rapid sell-out of its Kiss Lock bag.

Brooke Roach of Goldman Sachs asked about the trend in unit volumes at the Coach brand, both in North America and internationally, in light of the significant AUR growth, and questioned what management views as the right long-term balance between AUR and unit growth.

Answer

Coach CEO Todd Kahn explained that while unit volumes are currently below 2019 levels, this is a direct result of a 70% increase in AUR in North America over that period and a strategic reduction in promotional activity. He stated that this focus on brand health and value creates sustainable growth, and he expects unit growth to follow as they continue to acquire new customers at higher price points.

Brooke Roach requested a deeper dive into the business momentum in China, asking what is specifically working in the brick-and-mortar strategy and how to think about the opportunity to accelerate growth in the region.

Answer

CEO Joanne Crevoiserat stated that Greater China returned to low single-digit growth, outpacing the industry, thanks to successful global brand-building strategies and increased marketing driving Gen Z acquisition. Todd Kahn, CEO and Brand President of Coach, added that their 25-year presence, strong local teams, and the growth of the middle class provide a significant runway for both productivity and store distribution growth in the region.

Brooke Roach inquired about the primary drivers of traffic headwinds in Nike Digital, specifically distinguishing between strategic promotion reduction and other factors, and identifying key milestones for returning the business to profitable growth.

Answer

Elliott Hill, President and CEO, emphasized the broader strategy of elevating the entire marketplace across all channels. Matt Friend, EVP and CFO, attributed the double-digit organic traffic decline in Nike Digital primarily to strategic actions like reduced promo days, improved markdown rates, and less reliance on classic/launch products and paid media. He noted progress in North America and EMEA, and while Nike Direct is not expected to grow this fiscal year, it aims for future profitability, with wholesale momentum serving as an indicator of digital repositioning success.

Brooke Roach asked about the traffic headwinds in Nike Digital, specifically how much pressure is due to the strategic reduction in promotions versus other factors, and what milestones to watch for its return to profitable growth.

Answer

President and CEO Elliott Hill emphasized elevating and growing the entire marketplace, not just Nike Direct digital commerce, to serve consumers across all channels with innovative product and tailored assortments. EVP and CFO Matt Friend confirmed that the double-digit organic traffic decline in Nike Digital was primarily due to repositioning actions in FY26, including reduced promo days, improved markdown rates, and less paid media. He noted EMEA and North America are furthest ahead in this repositioning. Matt Friend indicated that while Direct is not expected to return to growth this fiscal year, it is being set up to be a healthier, more profitable part of the business long-term, with wholesale momentum serving as an early indicator of success.

Brooke Roach of Goldman Sachs asked for an update on the China marketplace, including the timeline for a full recovery and the current competitive and operating environment.

Answer

President & CEO Elliot Hill reiterated long-term confidence in China but acknowledged that recovery is on a different timeline due to the region's unique mono-brand marketplace structure. He stated the team is focused on cleaning up inventory, elevating digital, testing new retail concepts, and connecting locally with China-specific products, but emphasized that these changes will take time to implement.

Brooke Roach asked for an assessment of the strength of NIKE's innovation team and its product pipeline, particularly concerning innovation within Sportswear franchises looking ahead to fiscal 2026.

Answer

CEO Elliott Hill expressed high confidence in NIKE's innovation pipeline, detailing a two-pronged approach of long-term research and near-term newness. He highlighted recent successes in apparel with the '24/7' collection and in footwear with styles like the Vomero 5 and Shox. Hill conveyed excitement about the Spring 2026 product line, stating it reflects the positive impact of the company's focused 'Win Now' strategy.

Brooke Roach asked for an assessment of the strength of NIKE's innovation team and its product pipeline, particularly concerning newness in Sportswear franchises leading into fiscal 2026.

Answer

President and CEO Elliott Hill expressed strong confidence in both the long-term (3-5 year) and near-term innovation pipelines, highlighting the Nike Sports Research Lab's work. He pointed to recent successes in apparel with the 24/7 collection and in footwear with the Vomero 5 and Shox models. Hill also noted his excitement after the Spring '26 product review, seeing it as evidence that the 'Win Now' strategy is beginning to yield a stronger product portfolio.

Brooke Roach requested details on specific actions being taken in the North America and Greater China geographies to accelerate the business reset over the next 12 months.

Answer

President and CEO Elliott Hill explained that in North America, a new leader is aggressively cleaning up the marketplace, rebuilding wholesale ties, and elevating NIKE Direct. For Greater China, despite a promotional environment, the focus is on product innovation (including locally designed products), bold brand moments, and resetting the retail marketplace with key partners like Topsports and Pou Sheng to drive long-term growth.

Brooke Roach requested a deeper analysis of the Greater China business, asking to distinguish between macro trends and NIKE-specific issues, clarify inventory levels by channel, and describe consumer engagement with new versus franchise products.

Answer

EVP & CFO Matthew Friend explained that soft consumer traffic was an industry-wide issue in China, prompting NIKE to be more promotional in Q1. He noted that top performance innovations like Pegasus 41 and Alphafly 3 resonated well with Chinese consumers. While near-term expectations are moderated, he expressed long-term optimism for China, driven by rising sport participation and investments in 'China for China' capabilities.

Brooke Roach from Goldman Sachs requested an operational update on the Calvin Klein brand transformation and inquired about opportunities for improved execution heading into 2026.

Answer

CEO Stefan Larsson reported that the previously flagged operational challenges in setting up Calvin Klein's global product capabilities have been resolved. He stated that for Fall 2025, sequential improvements were delivered, and for Spring 2026, targeted margin improvements have been secured with deliveries back on schedule. He emphasized the long-term value of establishing strong, global product engines for both brands.

Brooke Roach of Goldman Sachs asked how the company plans to accelerate innovative products and potentially raise prices while simultaneously navigating an expected increase in promotions, and what is needed to improve brand pricing resilience.

Answer

CEO Stefan Larsson explained that pricing resilience is built by scaling the PVH+ plan's focus on product innovation in core categories, citing strong growth in new Calvin Klein underwear and denim. He stated that connecting these product innovations to culturally relevant moments, like Tommy Hilfiger's Formula One partnership, creates demand. Furthermore, the company is increasing focused marketing spend in the second half to drive traffic and mitigate the need for broad promotions.

Brooke Roach of Goldman Sachs asked how PVH reconciles its strategy of launching innovative products and taking price with the near-term expectation for an outsized promotional environment.

Answer

CEO Stefan Larsson responded that brand resilience and pricing power are built by scaling the PVH+ plan, which involves infusing hero products with innovation and connecting them to powerful lifestyle marketing. He stated that to counteract the promotional environment in the second half of the year, the company is increasing its marketing spend in a more focused manner to drive high-quality traffic and demand for its key product initiatives.

Brooke Roach of Goldman Sachs questioned how PVH plans to reconcile its strategy of product innovation and potential price increases with the near-term expectation of an outsized promotional environment.

Answer

CEO Stefan Larsson explained that brand resilience is built by scaling the PVH+ plan, which involves creating product innovation in hero categories and connecting it to cultural moments like the Formula One partnership. He added that the company is increasing marketing spend in a focused manner to drive traffic and mitigate the need for excessive promotions, thereby strengthening pricing power.

Brooke Roach asked for an update on PVH's relationship with North American wholesale partners, the current trend in conversations, and the growth outlook for both the core business and the newly in-housed G-III business.

Answer

CEO Stefan Larsson described the partnerships with key North American wholesalers as 'very strong.' He highlighted the recent Calvin Klein women's launch at Macy's Herald Square as a prime example of driving product and brand relevance with strong marketing support, emphasizing a focus on consistent execution to drive progress season after season.

Brooke Roach asked about PVH's brand pricing strategy, any signs of increased consumer price sensitivity, and the expected level of promotions versus the broader market.

Answer

CEO Stefan Larsson stated that both brands are well-positioned on price and that the main opportunity to increase AUR is through better product assortment and inventory management via a data-driven supply chain, not direct price hikes. CFO Zac Coughlin described the expected promotional headwind in the guidance as 'modest,' emphasizing that healthy inventory levels allow PVH to be strategic with promotions rather than being forced into them by excess stock.

Brooke Roach from Goldman Sachs requested a quantification of the expected annualized tariff impact, both on a mitigated and unmitigated basis, and asked about the potential scope and timing of any future price increases.

Answer

CFO Sarah Oughtred confirmed the expected 2025 tariff impact is 150 basis points, based on current rates for Vietnam (20%), Jordan (15%), and China (30%). She noted the impact will build through Q3 and Q4. While not providing a 2026 figure, she clarified that the 2025 guidance does not yet reflect any pricing actions, as the company continues to prioritize other mitigation strategies first.

Brooke Roach inquired whether recent supply chain volatility and tariffs would impact the company's Fit Initiative and asked for more detail on the optimization of selling expenses, particularly regarding DC inefficiencies and long-term cost-saving opportunities.

Answer

CEO Trina Spear confirmed that the Fit Initiative remains on track and will not be impacted by near-term supply chain shifts. CFO Sarah Oughtred added that selling expense optimization will come from scaling the new fulfillment center, which was built for $1 billion in revenue capacity. She noted that as sales grow, natural efficiencies will emerge, supplemented by active efforts like negotiating with multi-carrier shipping vendors.

Brooke Roach asked about FIGS's strategy for re-engaging lapsed customers amid a promotional pullback and inquired about supply chain investments after pausing the Canadian DC.

Answer

CFO Sarah Oughtred explained that investments in upper-funnel marketing and targeted customer funnel initiatives are planned to support retention. She also noted that the supply chain roadmap was reassessed by the new COO, prioritizing optimization of the current U.S. facility over the Canadian DC for 2025.

Brooke Roach asked about the observed customer price elasticity, promotional plans for the holiday season, and the potential range of outcomes for the 2025 adjusted EBITDA margin considering planned investments.

Answer

Co-Founder and CEO Trina Spear acknowledged some consumer inconsistency in Q3, leading to a cautious Q4 promotional stance, but noted strength in full-price sales and improving repeat purchase frequency. CFO Sarah Oughtred added that 2025 margin improvement will be dictated by the pace of top-line stabilization and strategic investment choices, while benefiting from lapping one-time fulfillment and marketing costs from 2024.

Brooke Roach of Goldman Sachs asked for context on the magnitude and timing of additional marketing investments for both the core brands and Helly Hansen, and the results expected from this spend. She also requested quantification of the benefit from incremental distribution opportunities in the core business during the second half of the year.

Answer

President, CEO and Chair, Scott Baxter, explained that investments in Wrangler will continue due to their proven success, while the Lee brand is launching its first major equity campaign in over a decade, backed by a stronger product engine. He noted that Kontoor will help Helly Hansen better understand the domestic consumer. EVP, CFO & Global Head of Operations, Joe Alkire, specified that a disproportionate amount of the $15 million incremental investment will occur in Q3 ahead of the holiday season. He also stated that the 2-3% core business growth in H2 is driven by the 53rd week and new distribution programs.

Brooke Roach from Goldman Sachs asked for a detailed update on the Lee brand's transition, the timeline for its return to growth, and the drivers behind the significant Q1 gross margin outperformance.

Answer

CEO Scott Baxter expressed high confidence in Lee's turnaround, citing superior product, strong digital growth (+8%), and a promising new equity campaign launching in the fall, projecting an inflection to growth in 2026. CFO Joseph Alkire attributed the 200 bps Q1 gross margin expansion to favorable mix, lower product costs, and early benefits from Project Jeanius, noting some drivers will moderate through the year.

Brooke Roach asked for an outlook on the Lee brand's U.S. distribution footprint post-transformation, details on the planned demand creation spend as a percentage of sales, and specifics on mitigating actions for potential tariffs.

Answer

CEO Scott Baxter stated the Lee brand strategy involves elevating its presence by expanding into upper-tier and specialty retail. CFO Joe Alkire noted demand creation spend will grow 'meaningfully above revenue,' while COO Thomas Waldron added that a new Lee campaign will launch in H2 2025. On tariffs, Waldron confirmed they have multiple mitigation plans ready, with levers they can pull quickly in 2025 to offset impacts by 2026.

Brooke Roach asked for a detailed breakdown of the drivers behind the sequential acceleration in comparable sales, questioning the specific contribution from the new Snow Goose collection versus core products, and inquired about the strategy for scaling Snow Goose into the critical winter season. Additionally, she requested guidance on the expected year-over-year SG&A growth for the remainder of the fiscal year.

Answer

Carrie Baker, President of Brand & Commercial, attributed the comp acceleration to three factors: higher marketing investments driving engagement, a more seasonally relevant product assortment that challenged brand perceptions, and stronger in-store execution leading to higher conversion. She clarified that Snow Goose is currently positioned as a brand heat driver rather than a primary commercial driver. Neil Bowden, CFO, addressed SG&A, stating that investments in revenue-driving areas like marketing and store labor will continue, while discretionary spending is being managed with more discipline, leading to an expected lift in SG&A to fuel growth.

Brooke Roach of Goldman Sachs inquired about the drivers of the sequential acceleration in comparable sales, particularly the contribution from the Snow Goose collection, and sought clarity on the outlook for SG&A growth for the rest of the year.

Answer

Carrie Baker, President of Brand & Commercial, attributed the comp growth to a trio of factors: bold marketing, seasonally relevant product, and strong retail execution driving higher conversion. She positioned the Snow Goose collection as a brand heat driver rather than a primary commercial one for now. CFO Neil Bowden added that SG&A growth will be focused on revenue-driving investments like marketing and store labor, with discipline on other discretionary spending.

Brooke Roach of Morgan Stanley inquired about the sustainability of the strong North America comparable sales growth, measures being taken to mitigate macro uncertainty, and the planned magnitude of incremental SG&A and marketing investments for fiscal 2026.

Answer

Carrie Baker, President of Brand & Commercial, attributed the sustained North America momentum to product expansion, enhanced store execution, and impactful brand storytelling, expressing confidence in these strategies for FY26. Neil Bowden, an executive, clarified that while SG&A will increase, investments are strategic and focused on long-term value in marketing, product design, and new stores, while controlling corporate overhead. He declined to provide a specific percentage of sales for the planned spend.

Brooke Roach from Goldman Sachs Group, Inc. asked for an in-depth look at the brand's resonance with Chinese consumers, particularly in response to the Snow Goose launch, and the current competitive and macroeconomic landscape in that market. She also inquired about the progress of conversations with wholesale partners for the upcoming Fall/Winter 2025 season.

Answer

Carrie Baker, President of Brand & Commercial, stated that the response to Snow Goose in China was strong, amplifying brand health and driving momentum, especially during key commercial moments like Lunar New Year. She noted that while the macro environment remains pressured, investments are yielding results. Regarding wholesale, she confirmed the strategy is working, leading to higher sell-through, cleaner markets, and positive partner conversations, with renewed energy around Haider Ackermann's new collections. Chairman and CEO Dani Reiss added that the outlook for fiscal '26 wholesale would be provided on the next call.

Brooke Roach inquired about the margin impact of retail execution initiatives and the consumer response to recent pricing actions.

Answer

President Carrie Baker said the focus of retail initiatives is driving top-line growth to improve margins. CFO Neil Bowden noted they are cautious on the near-term margin impact but see long-term opportunity. Regarding pricing, CEO Dani Reiss stated they've been cautious, while Carrie Baker added that consumer feedback suggests room for price growth at the higher end, especially with new designs from Haider Ackermann.

Brooke Roach from Goldman Sachs asked about the potential for new products to scale and offset weakness in core items, and the specific impact of the supply chain transition on the U.S. Drinkware business's return to growth.

Answer

CEO Matt Reintjes stated that new innovation is expected to drive both diversification and growth, though its positive impact is currently masked by a broader Drinkware market correction. CFO Mike McMullen added that the 300 basis point supply chain disruption primarily impacts Drinkware, limiting some new product availability. He expressed confidence in a return to growth for U.S. Drinkware in 2026 as these constraints ease.

Brooke Roach asked for an outlook on the Drinkware business, specifically concerning underperforming categories, and inquired about the current sentiment from wholesale partners regarding forward demand.

Answer

Executive Matthew Reintjes explained that YETI's strategy to diversify its Drinkware portfolio has mitigated concentration risk from trend-driven items. He anticipates a market correction but sees durable long-term demand, supported by a strong innovation pipeline. He also affirmed that wholesale partnerships remain strong, with partners enthusiastic about the product roadmap despite macro uncertainty.

Brooke Roach inquired about the dynamics of U.S. growth in 2025, particularly for the Drinkware business, and sought the rationale for the expected growth acceleration in the second half. She also asked for an update on the DTC versus wholesale channel strategy.

Answer

EVP & CFO Michael McMullen attributed the second-half weighted growth forecast to the timing of Drinkware innovation and tougher growth comparisons from the first half of 2024. President & CEO Matthew Reintjes added that a key focus for the first half of 2025 is the successful diversification of the Drinkware supply chain, which enables a strong innovation pipeline for the second half. He described the current channel mix as a balanced omnichannel approach, with no new long-term targets provided.

An analyst on behalf of Brooke Roach asked if the expanded bags launch in 2025 would involve a pricing rebalance for existing products, similar to the strategy used for hard coolers earlier in the year.

Answer

CEO Matt Reintjes clarified that the new bags launching in the first half of 2025 are considered 'expansionary and additive' to the current portfolio. He stated that he does not expect any meaningful transitional pricing changes, as the primary goal is to expand the product line and offer more choices to consumers.

Brooke Roach of Goldman Sachs inquired about the health of the eye care consumer, Warby Parker's confidence in its growth forecast, and the potential for future SG&A leverage.

Answer

Co-CEO Neil Blumenthal affirmed the stability of the eye care category, noting that despite some choppiness in April, strong trends have returned, supported by the company's value proposition and strategic price increases. CFO Steven Miller detailed the sources of SG&A leverage, highlighting efficiency gains in retail staffing, customer experience teams, and corporate expenses, and expressed confidence in continuing this trend which has yielded approximately 300 basis points of leverage year-to-date.

Brooke Roach inquired about the specific drivers of non-marketing SG&A leverage that support the 2025 adjusted EBITDA margin expansion goal. She also asked if the long-term target of 100-200 basis points of annual margin expansion is sustainable and questioned the company's strategy regarding the emerging smart glasses market.

Answer

Co-CEO David Gilboa affirmed the sustainability of the 100-200 basis point annual margin expansion goal. He detailed that leverage in non-marketing SG&A will come from staffing efficiencies in retail and customer experience, as well as leveraging the fixed-cost base of corporate overhead. Co-CEO Neil Blumenthal addressed smart glasses, stating that as the technology matures, Warby Parker is well-positioned to participate due to its brand, design capabilities, and omnichannel distribution, and will share more as the market develops.

Brooke Roach from Baird asked about the drivers behind the sequential momentum observed during Q3 and into October, questioning how much was due to industry trends versus company-specific actions. She also inquired about marketing efficiency and spending plans for the remainder of 2024 and into 2025.

Answer

Co-Founder and Co-CEO Neil Blumenthal attributed the momentum to disciplined marketing efforts focused on customer acquisition costs, noting strength built throughout the quarter after a soft July. Co-Founder and Co-CEO David Gilboa added that momentum was evident in active customer growth and e-commerce velocity. He anticipates a moderate increase in marketing spend in Q4 for the holiday and FSA season, but expects it to remain in the low-to-mid teens as a percentage of revenue.

Brooke Roach from Goldman Sachs asked how the positive AUR and pricing strategy trends are expected to translate into margins for the second half of fiscal 2026 and into fiscal 2027, and requested details on tariff mitigation opportunities.

Answer

Interim CFO Rajal Mehta stated that while Q2 gross margin will be pressured by tariffs and pricing resets, they expect gross margin expansion in fiscal 2027. This will be driven by higher full-price sell-throughs and mitigation efforts like sourcing optimization and targeted price increases. Chairman & CEO John Idol added that the company is absorbing an $85 million tariff impact this year while maintaining its operating income guidance, thanks to cost controls and reduced promotional activity.

Brooke Roach from Goldman Sachs inquired about the wholesale outlook for the Michael Kors brand for the upcoming year, specifically asking how partner discussions are progressing compared to expectations set at the recent Investor Day.

Answer

Chairman and CEO John Idol stated that the wholesale outlook is consistent with what was presented at the Investor Day. He reported that strategic partners are responding positively to the brand's return to its 'Jet Set' heritage and that new product groups are seeing strong sell-throughs. Idol also highlighted the successful launch on Amazon, which has exceeded expectations. He clarified that while a decline is planned for the year due to scheduled door closures, the company expects to stabilize the wholesale business by the fourth quarter and return it to modest growth in fiscal 2027.

Brooke Roach of Goldman Sachs inquired about the wholesale outlook for the Michael Kors brand for the upcoming year, asking how discussions with partners are progressing compared to expectations set at the recent Investor Day, particularly in North America.

Answer

Chairman & CEO John Idol responded that the wholesale outlook is consistent with what was presented at Investor Day. He noted that partners are positive about the brand's return to its 'Jet Set' heritage, leading to strong sell-throughs of new products and even increased commitments in some cases. Idol also highlighted the successful launch on Amazon, which has exceeded expectations. He clarified that while a decline is still planned for the year due to scheduled door closures, the business is expected to stabilize and return to modest growth in fiscal 2027.

Brooke Roach requested more detail on the assumptions behind the forecast for retail sales to be flat to slightly positive in fiscal 2026, particularly regarding traffic, marketing, and product improvements.

Answer

CEO John Idol identified product innovation as the primary driver, supported by positive reactions from internal buying teams. He noted that marketing initiatives leveraging brand heritage aim to stabilize traffic declines, citing strong database growth (11-15% YoY) as a positive indicator. He highlighted specific product strategies, such as more accessibly priced luxury items at Versace and increasing signature product penetration to 40% at Michael Kors, as key tactics to re-engage consumers and drive traffic.

Requested more detail on the forecast for retail sales to improve to flat/slightly positive, asking about the underlying assumptions for traffic, marketing impact, and product improvements.

Answer

John Idol attributed the expected improvement to three factors: 1) innovative new products, 2) new marketing initiatives, particularly leveraging Michael Kors' 'Jet Set' heritage, which should help flatten traffic declines, and 3) strategic pricing architecture changes, such as introducing more accessible luxury price points at Versace and increasing signature products at Michael Kors. He noted that strong database growth is a positive lead indicator and that they will be anniversarying weak comps.

Brooke Roach inquired about the transitory margin headwinds expected in the second half and requested a quantification of their impact and timing.

Answer

CEO Mark Walsh identified increased investment in Canadian selection and the accelerated Two Peaches store conversions as key factors. COO Jubran Tanious elaborated on the strategy to 'feed the momentum' in Canada. CFO Michael Maher stated that Q2 saw the peak impact and expects second-half gross margins to be much closer to the prior year.

Brooke Roach of Goldman Sachs asked about the degree of performance variability among new stores and inquired about the company's long-term EBITDA margin potential, specifically if a high-teens target is still achievable.

Answer

Executive Jubran Tanious explained that while there is some minor variability, new store performance has been largely in line with their increasingly precise predictive models. CFO Michael Maher reaffirmed that high-teens EBITDA margins remain the long-term goal, though near-term pressure from new store investments is expected before those stores mature and contribute to earnings growth.

Brooke Roach inquired about trends among loyalty customers, shifts in customer cohorts amid macroeconomic pressures, and the expected cadence of EBITDA margin throughout 2025.

Answer

Executive Mark Walsh noted growth in loyalty members and an increase in the higher-income cohort (above $100k), which is partially offset by pressure on lower-income consumers, especially in Canada. Executive Michael Maher explained that Q1 EBITDA margin will be the lowest due to seasonality, a temporary lull in store openings, and operating losses from the 2024 class of new stores. He expects margins in Q2-Q4 to be more aligned with the full-year outlook.

Brooke Roach asked for details on the tests being conducted to improve performance in Canada, whether these tests drove the recent comp improvement, their impact on margins, and if they could be replicated in the U.S.

Answer

Executive Mark Walsh explained that the company tested several promotional and pricing strategies, with targeted price reductions by category and grade showing the most promise. However, he clarified that the more influential factor in the recent Canadian sales trend improvement was rebalancing processing levels higher after pulling back too far. Walsh confirmed that the new pricing tools and processes developed from these tests will be rolled out across North America in early 2025. CFO Michael Maher added that they do not expect these pricing tests to have a significant impact on sales or margins in the fourth quarter.

Brooke Roach asked for a deeper dive into the progress within the women's apparel business and its expected timeline for returning to growth. She also requested an update on the outlook for the credit business.

Answer

CFO Jill Timm explained that the women's business is seeing building momentum as it shifts back to its historically strong proprietary brands, with categories like juniors already showing significant improvement. She expects progressive improvement throughout the year. Regarding the credit business, Timm noted that its performance is tied to the core customer's sales and is also impacted by an accounting shift of expenses into the 'Other Revenue' line, which obscures underlying trends.

Brooke Roach followed up on the process of reversing brand exclusions from coupons and asked for additional details on the performance of the credit business, including the co-brand partnership and customer health.

Answer

CEO Ashley Buchanan clarified that the focus for reversing coupon exclusions is on the many brands that Kohl's unilaterally excluded over the years, not the major national brands that have always been excluded. Many of these brands did not ask to be excluded and some have asked for the policy to be repealed, making those conversations easier. CFO Jill Timm explained that the credit business has seen softness due to lower sales from the core credit customer, leading to reduced revolving balances. The co-brand conversion to Capital One was completed in February. She noted that less generous credit line increases in the recent conversion cohort led to slightly less spend, but this presents a future opportunity as the macro environment improves.

Brooke Roach from Goldman Sachs asked for more details on cost-saving actions beyond the previously discussed $50 million, including the areas of opportunity, potential magnitude, and timing of these savings.

Answer

CFO Susan Healy clarified that the $50 million in savings is already actioned, with the remainder to be realized evenly in Q3 and Q4 across gross margin and SG&A. She stated that further opportunities are being actively pursued, with a primary focus on SG&A and simplifying the business by eliminating investments that do not show a strong long-term return, such as certain performance marketing spend.

Asked about the profitability of the e-commerce business, comparing rack.com to the full-line business, and for details on the assumptions behind the credit card revenue guidance, including the impact of new regulations on late fees.

Answer

Rack.com achieved full-year profitability in 2023, while Nordstrom.com is already a highly profitable channel. The company has factored its best estimate of the impact from the new CFPB late fee rule into its 2024 guidance, noting its portfolio is less exposed than peers due to higher credit quality.