Frederick Gaertner

Frederick 'Will' Gaertner questioned the SG&A spending trajectory for the second half of the year, the expected duration of the current heavy investment cycle, and the visibility into the order book for the U.S. versus Europe.

Answer

Executive Neal Nackman projected a 'significant increase' in Q3 SG&A, with the majority of the incremental $60 million annual spend concentrated in the second half. CEO Morris Goldfarb added that the high marketing spend as a percentage of sales will normalize as brands scale. Regarding the order book, Goldfarb noted it is more 'elastic' in North America due to an everyday delivery model, whereas the European business currently operates on a tighter inventory model with two main deliveries.

Frederick 'Will' Gaertner asked for more detail on the specific categories driving same-store sales momentum and whether inventory was being brought in earlier due to potential Red Sea shipping delays.

Answer

President and CEO Lauren Hobart highlighted that while growth was broad-based, footwear and apparel showed particular strength. Both she and CFO Navdeep Gupta clarified that the inventory build was a strategic choice to meet strong consumer demand for key items, not a reaction to supply chain timing issues.

Frederick Gaertner, on for Will Gartner, asked about the mix of China inventory (local vs. export), the reasons for ASP deceleration, and the drivers behind the divergence in brick-and-mortar traffic and e-commerce growth.

Answer

Executive David Weinberg explained that a meaningful component of production in China is for the local market. He attributed the slight ASP deceleration to product mix, some FX impact internationally, and the natural product lifecycle of comfort technologies like Slip-ins being included in more promotions. On the retail trend, he noted the traffic slowdown was consistent with the broader industry, while strong e-commerce performance was a testament to product availability and fulfillment capabilities, alongside differing prior-year comps for each channel.