Christopher Brazeau

Christopher Brazeau from KeyBanc Capital Markets asked for more detail on the softness in the non-scrubwear category and inquired about the company's approach to share repurchases for the rest of the year.

Answer

Co-Founder & CEO Trina Spear attributed the non-scrubwear decline to fewer launches in Q2 but noted a strong 35% three-year stacked growth rate, reaffirming the category's health and future opportunities. CFO Sarah Oughtred stated that the current capital allocation priority is investing in business growth and preserving the balance sheet, though they will remain opportunistic but conservative with repurchases.

Christopher Brazeau, on behalf of Ashley Owens at KeyBanc Capital Markets, asked for a breakdown of the 280 basis point headwind to the Brand Portfolio's gross margin, seeking to understand how much was one-time in nature versus persistent. He also requested context on the company's underlying assumptions regarding tariff headwinds for the remainder of the year.

Answer

SVP & CFO Jack Calandra detailed the margin decline in order of materiality: 1) higher inventory markdown reserves, which he believes are now adequately accounted for; 2) tariff-related cancellations; and 3) lower initial margins, which he noted was the smallest component but could persist. Due to the volatile environment, he declined to provide specific forward-looking assumptions but reiterated the three-pronged mitigation strategy: securing factory concessions, absorbing some margin impact, and implementing selective price increases.

Christopher Brazeau, on for Ashley Owens, asked for a breakdown of the 280 basis point headwind to the Brand Portfolio's gross margin, seeking to understand how much was one-time versus persistent. He also requested context on the company's assumptions regarding tariff headwinds for the remainder of the year.

Answer

SVP & CFO Jack Calandra detailed the margin decline, listing the primary factors in order of materiality: higher inventory reserves (which should not be a continued headwind), tariff-related cancellations, and lower initial margins (the smallest component, which could persist). He reiterated that due to the volatile environment, the company is not providing specific guidance but is managing tariffs through factory concessions, margin absorption, and selective price increases.

Christopher Brazeau, on for Ashley Owens, asked for quantification of the one-time versus persistent pressures within the 280 basis point headwind to the Brand Portfolio's gross margin. He also requested context on the company's assumptions regarding tariff headwinds for the rest of the year.

Answer

Jack Calandra, SVP & CFO, broke down the 280 bps margin decline, ranking the impacts as: 1) higher inventory reserves, which are not expected to be a continued headwind; 2) tariff-related cancellations; and 3) lower initial margins, which could persist. He reiterated that the company is managing tariff impacts through a three-pronged strategy of factory concessions, absorbing some margin impact, and selective price increases, but declined to provide specific forward guidance due to the volatile environment.

Christopher Brazeau, on for Ashley Owens, asked for a breakdown of the 280 basis point gross margin headwind in the Brand Portfolio, seeking to understand how much was one-time versus potentially persistent. He also requested context on the company's assumptions regarding tariff headwinds for the remainder of the year.

Answer

SVP & CFO Jack Calandra detailed the margin decline, ranking the impacts by materiality: 1) higher inventory reserves for spring, which are not expected to be a continued headwind; 2) tariff-related order cancellations; and 3) lower initial margins, which was the smallest factor but could persist. Regarding future tariff impacts, he reiterated the company's three-pronged mitigation strategy: securing factory concessions, absorbing some margin impact, and implementing selective price increases, noting the situation remains too volatile to provide specific guidance.

Christopher Brazeau, on for Ashley Owens, asked for a breakdown of the 280 basis point headwind to the Brand Portfolio's gross margin, seeking to understand which pressures were one-time versus persistent. He also asked for context on the company's assumptions for tariff-related headwinds.

Answer

SVP & CFO Jack Calandra detailed the margin decline, identifying higher inventory reserves as the largest, non-recurring factor. This was followed by tariff-related cancellations and, to a lesser extent, lower initial margins, which could persist. He stated that due to the volatile environment, the company would not provide specific tariff assumptions but reiterated its three-part mitigation strategy of factory concessions, margin absorption, and selective price increases.