Jacob Mutchler

Jacob Mutchler asked for an update on the percentage of products sourced from China, tracking the company's progress in reducing its exposure from previous quarters. He also inquired about freight cost trends for the back half of the year and the specific drivers behind the recent shipping delays. Additionally, he sought clarification on the number of store locations open in Q2 compared to the prior year and any further planned store openings beyond Nashville and Sacramento.

Answer

CEO Brendan Hoffman explained the company's significant progress in diversifying sourcing, targeting a 25% cap for any single country by holiday and spring, noting that India is not a sourcing country. He clarified that shipping delays were purposeful, stemming from tariff uncertainties in April/May, which led to holding merchandise to allow spring sales to breathe. CFO Yuji Okumura added that while freight costs impacted Q2 gross margin, no significant uptick is expected, though the air/boat ratio remains fluid. He confirmed Nashville and Sacramento as the only planned openings for the remainder of the year, and provided store count details for Q2 and the prior year.

Jacob Mutchler, on for Michael Kupinski, asked for an update on the Halston brand, clarification on which new brands were launching earlier than expected, and which product categories or influencer types the company finds attractive for future growth.

Answer

CEO Robert D'Loren reported a positive meeting with G-III regarding the Halston brand, noting their plans for substantial investment in 2026, though Xcel currently lacks near-term forecasts. D'Loren identified Cesar Millan, Gemma Stafford, and Jenny Martinez as the brands launching ahead of schedule, attributing the acceleration to domestically sourced food products. He also mentioned a strong pipeline of fashion influencers and a search for a home-category influencer for the Longaberger brand.

Jacob Mutchler, on for Joe Gomes, followed up on M&A activity, asking about specific areas or operating activities that ISG finds attractive for potential acquisitions.

Answer

Chairman & CEO Michael Connors responded that ISG's M&A focus is on adding value for clients and shareholders. Target areas include research, recurring revenues, and capabilities in transformation, digital, and AI. He emphasized the strategy of adding new capabilities that can be offered through ISG's established channel access to the C-suite of its loyal enterprise client base.