Jay Sole

Jay Sole asked about the drivers behind HOKA's accelerated performance in the quarter, inquiring if product innovation, marketing, or strong full-price sell-through contributed, and whether this growth is sustainable. He also followed up on HOKA's lifestyle strategy, the upcoming ad campaign, and how product diversification beyond Bondi and Clifton is changing the business mix.

Answer

President and CEO Stefano Caroti confirmed the sustainability of HOKA's growth, attributing it to strategic franchise launches, tightened inventories, and effective DTC channel use for closeouts, highlighting strong new product performance. CFO Steve Fasching added that consumer engagement with product updates contributed. Caroti further explained that lifestyle is a significant opportunity with positive early reads on Q4 products, while performance remains core.

Jay Sole inquired about the drivers behind HOKA's strong quarter and accelerated business, specifically asking if product innovation, marketing efforts, or a strong full-price sell-through mentality were key, and whether this momentum is sustainable.

Answer

Stefano Caroti, President and CEO, confirmed the sustainability, attributing success to spaced-out key franchise launches, tightened inventories, and effective DTC channel leverage for closeouts. Steve Fasching, CFO, added that new product introductions from the previous year continued to perform well. Caroti highlighted the strong start of Gaviota 5, Arahi 8, Transport 2, and Cielo X1 3.0, noting the latter was HOKA's best-selling style online on launch day. Sole also asked about HOKA's lifestyle strategy, the new ad campaign, and how product diversification is changing the business mix beyond core styles like Bondi and Clifton. Caroti explained they've boosted capabilities across innovation, design, color, and lifestyle to segment the marketplace and differentiate DTC, while performance remains core. He sees lifestyle as a significant opportunity, with positive early reads on Q4 products like Stinson 7, Bondi Mary Jane, and Speed Loafer, and noted improvements in line architecture and commercial price points.

Jay Sole asked if HOKA's calendar 2025 is considered a transition year due to accelerated life cycles of models like Bondi 8 and Clifton 9, and the tariff situation, suggesting 2026 might see different momentum with newness and clean inventories. He also asked Steve Fasching to clarify HOKA's guidance: if initial mid-teens growth (assuming no tariffs) compared to current low-teens (with tariffs), how a hypothetical initial guidance *with* tariffs would have compared to today's low-teens guidance.

Answer

CFO Steve Fasching explained that HOKA's performance, achieving low-teens growth even with tariffs, is encouraging and better than what might have been expected at the beginning of the year in a tariff-imposed world. He noted this indicates strong consumer response to product updates globally, especially internationally where tariffs are not a factor. President and CEO Stefano Caroti confirmed that 2025 is a 'bit of a transition year' for HOKA, acknowledging learnings from spacing out big product launches in the first half.

Jay Sole asked if calendar 2025 for HOKA brands is considered a transition year due to accelerated life cycles of styles like Bondi 8 and Clifton 9, and the tariff situation, suggesting that 2026 might see different financial momentum with newness and clean inventories. He also asked Steve Fasching to clarify if HOKA's current low-teens guidance with tariffs is better, worse, or in line with what guidance would have been at the beginning of the year if tariffs had been factored in.

Answer

President and CEO Stefano Caroti confirmed that 2025 is indeed a transition year for HOKA, acknowledging that too many big product launches were scheduled in the first half, which served as a learning experience. CFO Steve Fasching responded that HOKA's performance, achieving low-teens growth even with tariffs, is very encouraging and suggests that consumers are still showing up for the brands better than initially anticipated at the beginning of the year. He noted that this positive response, especially from international markets not impacted by tariffs, speaks to how well the product updates are resonating.

Jay Sole from UBS Group AG inquired about HOKA's Q2 guidance, specifically the balance between wholesale and DTC channels, the inventory status of older models like the Bondi 8 and Clifton 9, and the brand's upcoming innovation pipeline.

Answer

CFO Steven Fasching projected HOKA's Q2 growth at approximately 10%, with a more balanced contribution from wholesale and DTC channels following sequential improvements. CEO Stefano Caroti confirmed that the market is largely clear of older inventory and expressed excitement for the product pipeline, which includes updates to the Maffate, Mach, Gaviota, and Speedgoat franchises.

Jay Sole from UBS Group inquired about HOKA's Q2 growth outlook, specifically the balance between wholesale and DTC channels, the inventory status of older models like the Bondi 8 and Clifton 9, and the brand's upcoming innovation pipeline.

Answer

CFO Steven Fasching projected HOKA's Q2 growth at approximately 10%, noting a more balanced channel performance with improving DTC trends. CEO Stefano Caroti confirmed that the market is largely clear of older inventory and expressed excitement for the product pipeline, which includes updates to the Maffate, Mach, Gaviota, and Speedgoat franchises. Fasching added that the strong Q1 performance boosts confidence despite tariff uncertainties.

Jay Sole asked for a breakdown of HOKA's fourth-quarter performance between sales volume (units) and average selling prices (ASPs), particularly concerning the transition to the new Bondi 9 and Clifton 10 models. He also sought clarification on whether the projected $150 million tariff impact was a gross figure before mitigation efforts.

Answer

CFO Steve Fasching explained that Q4 HOKA revenue was impacted by increased price promotions on older models during the transition, which affected ASPs, but noted that sales volumes remained healthy. He confirmed the $150 million tariff cost is a gross number and stated that the company aims to mitigate up to half of it through a combination of selective price increases and cost-sharing negotiations with factory partners.

Jay Sole asked about Deckers' strategy for managing the HOKA brand's long-term health in a promotional environment, the growth outlook by channel for Q4, and the product launch pipeline beyond the current quarter, questioning if HOKA can sustain 20% annual growth.

Answer

CEO Stefano Caroti emphasized that HOKA is a transformational brand managed for long-term, sustainable growth through a controlled retail environment and compelling innovation, detailing upcoming launches like the Clifton 10 and Arahi 8. CFO Steve Fasching added that the strategy prioritizes building the brand globally over chasing specific growth rates, managing the marketplace cadence carefully, and deferred future growth targets to the next earnings call.

Jay Sole of UBS Group AG inquired about the impact of HOKA's new, higher-priced pinnacle products, such as the Skyward X and Cielo X1, on revenue growth and overall brand expansion.

Answer

CEO Stefano Caroti stated that pinnacle products priced above $200 have exceeded expectations and successfully cracked a new price point for the brand. CFO Steven Fasching added that this strategy is key to market penetration, improving HOKA's margin profile, and allowing existing products to be used for broader distribution expansion.

Jay Sole of UBS inquired about the potential for higher direct-to-consumer (DTC) channel margins, asking Michelle Gass to detail the key drivers and where these margins could trend from their current levels.

Answer

Michelle Gass, CEO, Levi Strauss & Co., explained that DTC margin growth would come from sales productivity leverage, enhanced retail excellence (including improved lifestyle merchandising, UPTs, and average ticket price), and better assortment planning and lifecycle management through new systems. She also mentioned a new global selling model rolling out worldwide, expecting continued margin expansion.

Jay Sole asked for more details on the belief that the direct-to-consumer (DTC) channel margins can move higher, including the specific drivers and where these margins are expected to go from current levels.

Answer

Michelle Gass, CEO, confirmed significant upside in DTC margins, driven by sales productivity and leveraging fixed costs, retail excellence (enhanced merchandising, UPTs, average ticket price), improved assortment planning, and a new global selling model. She noted 300 basis points of DTC margin expansion in the past year, with expectations for continued growth.

Jay Sole asked if the pricing actions taken in Q3 were in response to tariffs, how consumers responded to these price increases (specifically if any resistance was observed), and if Levi Strauss & Co. plans to accelerate price increases in Q4, anticipating how consumers might react.

Answer

Harmit Singh, Chief Financial and Growth Officer, confirmed that Levi Strauss & Co. took some pricing actions in Q3, primarily in selling to U.S. customers rather than MSRP. He stated that no impact on demand was observed from either customers or consumers, attributing this to thoughtful implementation and the product's relevance. He emphasized a strategy of pricing through innovation, minimizing promotions, and focusing on the price-value equation, noting the segmentation of products like Signature for value and Blue Tab for premium.

Jay Sole asked if Levi Strauss & Co.'s Q3 pricing actions were a response to tariffs and if the consumer had shown any resistance. He also questioned whether the company plans to accelerate price increases in Q4 and how the consumer might react to such changes.

Answer

Harmit Singh, Chief Financial and Growth Officer, confirmed that Levi Strauss & Co. implemented some pricing in Q3, primarily in selling to U.S. customers rather than MSRP. He stated that there was no observed impact on demand from either customers or consumers, attributing this to the brand's momentum and relevant new products. Singh noted that future pricing would be thoughtful, focusing on the price-value equation and product segmentation, including value-oriented Signature by Levi Strauss & Co. and premium Blue Tab offerings.

Jay Sole of UBS Group AG asked for more detail on the "operate with rigor" strategic pillar, including a supply chain example, and for an update on the quality and evolution of the tops business beyond basic logo tees.

Answer

President & CEO Michelle Gass explained that "operating with rigor" involves infusing a DTC mindset across the company. This includes shortening go-to-market calendars, increasing the global assortment from single-digits to over 30%, and reducing unproductive SKUs. On the tops business, she described a complete reset with new talent and capabilities, leading to broad-based growth in denim tops, sweaters, workwear, dresses, and jumpsuits, stating it's "no longer a t-shirt business."

Jay Sole asked for a regional breakdown of the organic net revenue growth guidance provided for the second quarter.

Answer

CFO Harmit Singh provided the Q2 organic growth outlook by region: U.S. at low to mid-single digits, Europe at mid-single digits, and Asia at mid-single digits. By channel, he guided DTC to high single-digit growth and global wholesale to be flat to slightly up.

Jay Sole inquired about the performance during the key holiday month of December, sought a more detailed breakdown of the drivers behind the Q4 SG&A increase, and asked for clarification on the higher tax rate guidance for 2025.

Answer

CFO and Growth Officer Harmit Singh responded, stating that the November-December period saw strong 8% organic growth. He attributed the SG&A increase to higher sales volume, compensation incentives, increased advertising for the Beyonce campaign, a 53rd week, and distribution center transition costs, while assuring the rate would normalize in 2025. Singh explained the 2025 tax rate of ~23% is a normalization following the expiration of most foreign tax credits.

Jay Sole from UBS asked for a high-level assessment of how far along Levi Strauss & Co. is in its transformation from a traditional wholesale company to a global direct-to-consumer (DTC) business, including progress on acquiring necessary skills and talent.

Answer

CEO Michelle Gass described the company as being in the 'early stages' of a multi-year journey but noted that 'rapid progress' has been made, particularly over the last year through its 'Project Fuel' initiative. She highlighted the hiring of new leaders with deep DTC and retail expertise and pointed to ongoing work in 'rewiring the company' by shortening the go-to-market calendar and enhancing store-level execution and profitability.

Jay Sole from UBS asked about VF Corporation's current practice of providing one-quarter-at-a-time guidance and what conditions would prompt the company to reintroduce full-year guidance. He also questioned if the fourth quarter would be a logical time to reintroduce such an outlook.

Answer

CEO Bracken Darrell acknowledged the investor interest in full-year guidance, stating the company is seriously considering it and weighing the pros and cons, with the close of the fiscal year being a logical time for reintroduction. EVP and CFO Paul Vogel reiterated their guidance philosophy of aiming for the top end or exceeding the range, noting Q3's outperformance was driven by less predictable DTC.

Jay Sole asked about the company's current practice of providing one-quarter-at-a-time guidance and what factors would lead to reintroducing full-year guidance, specifically if Q4 would be an important quarter for such a change.

Answer

CEO Bracken Darrell explained that full-year guidance is provided when there is predictability, acknowledging investor interest, and confirmed they are seriously considering reintroducing it, with Q4 being a logical time. CFO Paul Vogel reiterated their guidance philosophy of providing ranges and aiming for the top end, noting Q3's outperformance was driven by less predictable DTC channels.

Jay Sole asked about the strategic path back to growth for Vans, including improvements in Americas wholesale sell-through, and specific revenue growth expectations for Vans in Q2 and Q3.

Answer

Bracken Darrell, President and CEO, VF Corporation, highlighted increasing product newness, upgrading marketing to be more social-first, and the positive impact of the SZA partnership. Paul Vogel, EVP and CFO, VF Corporation, clarified that Vans' Q2 revenue was down 11% in constant dollars, with approximately 20% of that decline attributed to channel rationalization actions. He expects a similar underlying decline pace in Q3, with the impact of value channel changes moderating by Q4.

Jay Sole with UBS inquired about Vans' strategy for returning to growth, including recent sell-through improvements in Americas wholesale, and the brand's expected revenue growth trajectory for Q2 and Q3.

Answer

Bracken Darrell (President and CEO) highlighted new product introductions like Super Lowpro and Skate Loafer, increased women's styles, and an upgraded, social-first marketing strategy, including the SZA partnership. Paul Vogel (EVP and CFO) clarified Vans' Q2 revenue was down 11% constant dollars, with about 20% of the decline from value channel actions, implying a high single-digit underlying decline expected to continue into Q3 before moderating in Q4.

Jay Sole asked about the anticipated impact on unit volumes that might occur from raising prices to mitigate the financial effects of tariffs.

Answer

President & CEO Bracken Darrell stated that since the entire industry is affected, they are modeling a roughly one-to-one price elasticity but believe it could be better. He stressed the company's enhanced agility to respond to market dynamics. EVP & CFO Paul Vogel noted that some brands likely had pricing opportunities irrespective of tariffs.

Jay Sole asked for an update on the business environment in China and inquired about the priority of debt reduction given the recent progress on the balance sheet.

Answer

President and CEO Bracken Darrell described the China economy as 'soft' but noted VFC's business, particularly The North Face, continues to perform well with double-digit growth. EVP and CFO Paul Vogel affirmed that paying down debt remains the top priority for free cash flow, with a focus on reaching the 2.5x leverage target as quickly as possible.

Jay Sole asked for the rationale behind issuing quarterly guidance instead of full-year guidance and whether this move signals a major inflection point for the business.

Answer

CEO Bracken Darrell explained that the shift to quarterly guidance reflects newfound confidence in their internal forecasting. He credited CFO Paul Vogel with the idea that guiding one quarter at a time is a more sensible approach focused on consistent delivery, rather than trying to predict a full year in a dynamic environment.

Jay Sole asked for clarification on the co-CEO structure, specifically detailing the reporting lines for design and merchandising, and who will ultimately make final product decisions.

Answer

CEO Calvin McDonald explained that André Maestrini will continue in his Chief Commercial Officer role, leading global markets. During the CEO search process, product (merchandising and design) and Brand will report to CFO Meghan Frank. McDonald emphasized that many key decisions regarding design and merchandising for the first half of next year, including the winter 2026 buy, are already in place, and the team will execute these established plans.

Jay Sole asked about the specific targets for reducing lead times in the supply chain and the strategy for managing this transformation within the company's established product creation processes. He also inquired if Lululemon would consider increasing marketing as a percentage of sales to boost traffic and brand excitement.

Answer

CEO Calvin McDonald explained that teams have already improved go-to-market calendars, with new processes like upfront vendor alignment on fabrics reducing chase times by up to two months. He highlighted the new Chief AI and Technology Officer, Ranju Das, as key to leveraging technology for further agility. McDonald stated there are no plans to increase marketing spend beyond 5% of revenue, focusing instead on grassroots community engagement and direct marketing to loyal, high-value guests.

Inquired about the store growth opportunity in China, the current and future store count, and traffic trends in the region.

Answer

The company is still early in its China journey with 154 stores and a goal of ~200, seeing growth beyond that. New stores are performing well, and the co-located store strategy is still in its early stages there. While specific traffic trends were not broken out, the China market continues to see strong double-digit growth.

Jay Sole requested a specific breakdown of the planned square footage growth for the U.S. and China in 2025 and asked if U.S. expansion includes upsizing existing stores.

Answer

CFO Meghan Frank did not provide a country-specific breakdown but stated that of the 40-45 net new stores planned for 2025, 10-15 will be in the Americas, with the majority of the international remainder in China. She confirmed that the company's optimization strategy, which includes relocations and expansions, will continue with approximately 40 projects planned globally for the year.

Jay Sole asked about the opportunity with third-party brands, what attracts them to Stitch Fix, the drivers of net revenue per active client growth, and the factors influencing active client trends, including demographics of newer customers.

Answer

CEO Matt Baer explained that Stitch Fix offers an attractive value proposition for brands through a personalized, closed ecosystem that ensures product quality adjacency, respectful treatment, and high client resonance, leading to strong retention rates. CFO David Aufderhaar attributed RPAC growth to improving new client LTVs and a nearly 10% increase in average order value, driven by more items per fix and a 3% AUR increase from category mix shifts. He noted active client trends were influenced by increased new client acquisition, 8% year-over-year growth in re-engaged clients, and improved client retention, leading to confidence in a Q3 sequential increase. CEO Matt Baer added that growth is healthy, driven by engagement and unit sales, not inflation, and is strong across all income segments.

An analyst on behalf of Jay Sole asked for the Q3 gross margin outlook, the drivers of Q2 margin expansion, and for more color on quarter-to-date business trends in February and March.

Answer

Executive David Aufderhaar attributed Q2 margin results to typical seasonality but reiterated the full-year guidance of 44-45%, expecting the second half to remain in that range. Executive Matt Baer highlighted strong business momentum, noting that initiatives launched since August have exceeded expectations. Aufderhaar provided specifics, citing a 9% YoY increase in Fix AOV in Q2, which accelerated to 16% YoY in January, driven by higher adoption of flexible Fix options and better keep rates. He also guided for an improved sequential decline in active clients for Q3.

Jay Sole requested elaboration on the impact of private brands on sales and AOV, and also asked for an update on the progress being made with the active client file.

Answer

CEO Matt Baer explained that the private vs. national brand mix is dynamic and client-led, with private brands historically comprising 40-50% of the portfolio and yielding higher keep rates and margins. Regarding the client file, he emphasized the focus on acquiring 'healthy' clients and increasing their lifetime value. CFO David Aufderhaar added that they expect continued sequential improvement in the active client decline rate and reiterated the goal of achieving quarter-over-quarter growth in active clients during fiscal year 2026.

Jay Sole inquired about the impact of stepped-up marketing spending on brand performance and the outlook for operating cash flow and working capital into 2026, given current inventory control.

Answer

CEO Stefan Larsson explained PVH's disciplined marketing approach, linking high-impact campaigns with mega-talent (Rosalía, Jung Kook) to double-digit growth in Calvin Klein's core categories like underwear and denim. CFO Zac Coughlin confirmed strong inventory control, effectively flat year-over-year excluding tariffs, and projected another strong free cash flow year, providing optionality for 2026.

Jay Sole from UBS Group AG inquired about the strategy behind the increased marketing investments for the second half of the year and how these investments are expected to shape the company's P&L.

Answer

CEO Stefan Larsson explained that the increased marketing spend is designed to build on Q2's momentum by amplifying product innovation with high-impact campaigns featuring mega-talent, similar to the successful Bad Bunny campaign. CFO Zac Coughlin added that while this will cause SG&A deleverage in Q3, ongoing cost savings from the 'Value Driver five' actions will ensure SG&A leverage is achieved in Q4 and for the full year.

Jay Sole of UBS Group AG questioned whether the updated guidance reflects a loss of brand momentum, asking for evidence that Calvin Klein and Tommy Hilfiger remain strong with consumers despite decreased traffic and increased promotions.

Answer

CEO Stefan Larsson asserted that brand momentum is strong where the PVH+ plan is executed effectively. He cited the new Calvin Klein Icon Cotton Stretch underwear, which drove a 25% sales increase in its franchise, and innovative fashion denim, which grew 14%. Larsson highlighted upcoming product launches and a significant new Formula One partnership for Tommy Hilfiger as proof points of scaling these successful strategies to drive growth despite the macro environment.

Jay Sole of UBS Group AG questioned how PVH can be confident that its Calvin Klein and Tommy Hilfiger brands retain strong consumer momentum, given the observed decrease in traffic and increase in promotions.

Answer

CEO Stefan Larsson explained that brand momentum is evident where the company executes its PVH+ plan, citing specific product successes. He highlighted the Icon Cotton Stretch underwear launch, which drove a 25% sales increase in its franchise, and a 14% growth in innovated fashion denim. Larsson stated these targeted innovations, amplified by major marketing campaigns and partnerships like the new Formula One sponsorship, demonstrate the brands' ability to win with consumers despite a challenging macro environment.

Jay Sole of UBS Group AG asked for assurance that the updated guidance reflects macroeconomic pressures rather than a loss of brand momentum for Calvin Klein and Tommy Hilfiger.

Answer

CEO Stefan Larsson responded by highlighting specific successes where the PVH+ plan was executed, such as a 25% sales increase in Calvin Klein's innovative Icon Cotton Stretch underwear and 14% growth in fashion denim. He asserted that these proof points demonstrate strong consumer connection and that the company's focus is on scaling these successful initiatives to counter the challenging macro environment.

Jay Sole asked for insights from PVH's 'quality of sales' initiatives in Europe and how the enhanced execution of the PVH+ Plan is impacting the business in that region.

Answer

CEO Stefan Larsson explained that three focused 'quality of sales' actions, combined with PVH+ Plan execution in product and marketing, drove a return to high-quality D2C growth in Q3 and Q4 and shifted wholesale order books to low single-digit growth for Fall '25. CFO Zachary Coughlin added that this is expected to translate into low double-digit growth in Europe's profitability in euros for 2025.

Jay Sole asked for more details on inventory management, specifically the impact of bringing in inventory early and the strategy to invest in essential products to maintain a 95% in-stock level.

Answer

CEO Stefan Larsson clarified that while inventory dollars are up year-over-year, inventory as a percentage of sales is down by double digits, and the composition is healthier with more new product. He explained the 95% in-stock target applies to core 'style icons' like iconic underwear and shirts, a strategic investment to ensure availability of timeless items while still optimizing overall inventory levels.

Jay Sole asked for an update on the European region, specifically regarding the execution and market reception of the company's quality of sales initiatives.

Answer

CEO Stefan Larsson expressed strong confidence in the European strategy, stating that the quality of sales initiatives are resonating well. He pointed to improved inventory composition with less clearance and highlighted a significant sequential improvement in the forward wholesale order book for Spring '25, which is down only low-single-digits compared to a high-single-digit decline for Fall '24. He also teased an imminent announcement of a new, highly experienced CEO for PVH Europe.

Jay Sole asked about the analysis of customer recapture from closed stores, specifically how many shoppers are retained in other physical stores versus online channels.

Answer

Chairman and CEO Tony Spring explained that Macy's has a recapture plan for every store closure, which varies based on single-store versus multi-store markets and customer shopping channels. He stated that retention rates are consistent with past experiences and currently on or slightly above expectations. Proximity to other stores and existing loyal/credit card customer relationships are key factors in successful retention, with personalized marketing efforts targeting these customers.

Jay Sole asked about Macy's analysis of customer recapture rates from closed stores, specifically how many shoppers are retained in other physical stores or online.

Answer

Chairman and CEO Tony Spring confirmed a recapture plan for closed stores, noting it varies by market type and customer channel. He stated that retention is consistent with past experiences and on or slightly above expectations, with higher rates when another store is nearby, for big ticket items, select beauty categories, and when colleagues move to new locations. Loyal and credit card customers are also more likely to be retained, with recapture occurring both in other physical stores and online, depending on proximity and prior shopping habits.

Jay Sole asked about the company's approach to balancing investments (e.g., in service and colleagues) with SG&A leverage for growth, and whether there are opportunities to increase SG&A dollars to potentially achieve higher comparable sales growth rates.

Answer

Tony Spring, Chairman and CEO, discussed managing a portfolio of investments, prioritizing customer-facing initiatives and digital experience improvements to drive comp sales, while leveraging the company's structure for bottom-line delivery. Tom Edwards, COO and CFO, highlighted ongoing savings from store closures and end-to-end initiatives, which are strategically reinvested based on their impact and return for shareholders, leading to SG&A savings while driving sales growth.

Jay Sole of UBS asked about the performance of the furniture business, for more detail on the improvement in handbags, and for an update on business trends since Cyber Monday.

Answer

CEO Antony Spring noted the furniture business remains soft and under pressure, likely until interest rates ease, though the mattress business is more stable. He confirmed seeing nice strength in handbags at both Bloomingdale's and Macy's, driven by newness and traditional brands like Coach and Tory Burch. While not commenting on post-Cyber Monday specifics, he stated that on a quarter-to-date basis, the consumer has shown a real interest in shopping.

Jay Sole asked for more details on the asset sales that drove the increase in the full-year guidance for asset sale gains and monetization proceeds.

Answer

COO and CFO Adrian Mitchell expressed pleasure with the progress, noting healthy responses from landlords and a strong deal pipeline. He confirmed the annual guidance for asset sale gains was raised to approximately $115 million, at the high end of the prior range. This reflects $36 million in Q2 gains, a forecast of $30 million for Q3, and implies an increase in expected store closures for the year from 50 to approximately 55, demonstrating strong traction and value realization.

Jay Sole asked about the drivers behind the significant acceleration in fourth-quarter guidance, specifically the 8%-9% comp increase, and sought details on the strength and durability of current denim trends, including new silhouettes.

Answer

CFO Mike Mathias explained that the 8%-9% comp increase reflects acceleration in both brands, with American Eagle expected in low to mid-single digits and Aerie in high teens, both currently trending ahead of these expectations. President and Executive Creative Director Jen Foyle highlighted denim's strong performance, particularly in women's, noting that silhouettes are evolving rapidly and the team's strategic testing and scaling are proving effective, with trends expected to last.

Jay Sole asked about the drivers behind the accelerated Q4 guidance of 8%-9% comp growth, specifically where trends are quarter-to-date, and inquired about the strength and durability of new denim silhouettes for American Eagle into 2026.

Answer

CFO Mike Mathias explained that the 8%-9% comp guidance includes low-to-mid single-digit growth for American Eagle and high-teens for Aerie, with both brands currently trending ahead. President and Executive Creative Director Jen Foyle highlighted strong denim performance, particularly in women's, noting changing silhouettes and the impact of marketing campaigns like Sydney Sweeney on demand and out-of-stocks.

Jay Sole from UBS Group AG asked for clarification on the merchandising issues, questioning whether they stemmed from a misinterpretation of consumer trends or if competitors executed on trends more effectively. He also inquired about the expected timeline to correct the assortment and drive stronger comps for the back-to-school and holiday seasons.

Answer

Jennifer Foyle, President and Executive Creative Director of AE & Aerie, conceded there were product misses but emphasized that the team has been working swiftly since February to apply learnings. She noted that while some fashion choices in fleece and shorts did not resonate, areas like the Offline sub-brand showed strength. Foyle stated the goal is to be 'clean and mean for back to school,' expressing confidence in the team's ability to improve performance.

Jay Sole of UBS inquired about the comparable sales difference between stores in warmer versus colder climates and questioned the company's long-term ability to control SG&A expenses to achieve its margin targets.

Answer

President Jen Foyle acknowledged that stores in warmer climates performed better but did not quantify the difference, noting the quarter was still early. CFO Mike Mathias affirmed the company's expense control capabilities, referencing 2024's SG&A leverage as a proof point. He expressed confidence in achieving the long-term SG&A rate target of 25-26% with a return to revenue growth.

Jay Sole asked for an update on the denim category's performance and competitive landscape, and requested a quantification of the foreign exchange impact on the company's guidance.

Answer

President Jen Foyle stated that AEO is holding its market share in denim, with women's fashion denim showing acceleration into Q4. CFO Mike Mathias quantified the FX headwind at approximately $15 million for the fourth quarter, primarily from the Mexican peso and Canadian dollar, which accounted for about half of the downward revision to the operating income guide.

Jay Sole requested more detail on the gross margin outlook, specifically asking about management's expectations for the promotional environment and whether it has become more competitive compared to three months prior.

Answer

Mike Mathias, CFO, stated that while the retail environment is always competitive, AEO will maintain its disciplined and intelligent approach to markdowns. He expressed confidence in the company's price-to-value equation, which provides a strong starting point regardless of competitor actions. He also noted the company is tracking toward its long-term gross margin goal of 39-40%.

Jay Sole inquired about the wholesale business, specifically the order trends from partners for next year, and the potential impact on margins if Red Sea shipping lanes reopen and shipping rates decline.

Answer

Frank Conforti, Co-President and COO, stated that reopening Red Sea shipping lanes would be positive for supply and demand, but it's too early to speculate on exact rate impacts. Sheila Harrington, CEO of Urban Outfitters and Free People, expressed excitement about the wholesale business, noting strong performance for Free People and FP Movement, with continued opportunities to fuel channels and grow specialty store and international business.

Jay Sole inquired about the wholesale business, specifically the nature of orders from wholesale partners for the upcoming year. He also asked about the potential impact on margins if Red Sea shipping lanes open and shipping rates decrease.

Answer

Frank Conforti, Co-President and COO, stated that opening Red Sea shipping lanes would be positive due to increased transportation opportunities, but it's too early to speculate on exact rates or impact. Sheila Harrington, CEO of Urban Outfitters and Free People, described the wholesale business as exciting, with Free People and FP Movement performing well, expecting continued fueling of wholesale channels, noting FP Movement's spectacular quarter and thriving specialty store business, with international opportunities for both brands.

Jay Sole of UBS Group AG asked for a reframing of the long-term, big-picture opportunity for the Nuuly brand, in terms of total sales and margin potential over the next three to five years, given its exceptional performance.

Answer

David Hayne, Chief Technology Officer, expressed significant excitement for Nuuly's growth, noting that with 66% of new Q2 subscribers being new to rental, there is a large market opportunity. He stated that Nuuly is leading the market and, with approximately 370,000 active subscribers currently, is poised for continued sizable growth.

Jay Sole questioned the Q4 guidance of 3%-4% comp, noting it's higher than the company's historical 2%-3% range, asking if it signals a different approach to guiding or if current trends are simply so strong.

Answer

Group President and COO Michael Hartshorn clarified that the Q4 guidance reflects their internal plan and the underlying business momentum coming off a 7% comp in Q3. He stated there is "no change in methodology" and it's simply how they are planning the business based on current trends.

Jay Sole questioned the Q4 guidance of 3-4% comp, noting it's higher than historical 2-3% ranges, and asked if this signals a different approach to guiding or simply reflects strong quarter-to-date trends.

Answer

Michael Hartshorn (Group President and COO) clarified that the 3-4% comp guidance is their internal plan, aligning the latest forecast with the underlying business momentum from Q3, and there is no change in methodology.

Jay Sole asked if the low-end Q1 comp guidance of -3% requires further improvement from the current trend and why the full-year comp guidance range is wider than normal.

Answer

Group President and COO Michael Hartshorn confirmed the wider full-year comp range is due to a lack of visibility. He stated that they have seen an improvement in sales trends since early February as weather improved, and that this continued improvement is factored into the Q1 guidance.

Jay Sole asked whether issues with inventory availability or the timing of buys contributed to the merchandising execution challenges cited for the third quarter.

Answer

CEO Barbara Rentler stated that overall inventory availability is favorable and that the execution issues were not related to the timing or speed of inventory buys. She explained that merchants maintain liquidity to react to demand, and the challenges were related to specific merchandise choices rather than procurement timing.

Jay Sole inquired about the company's perspective on international expansion, particularly in light of competitors making moves in international markets.

Answer

Group President and COO Michael Hartshorn stated that the company's focus remains entirely on domestic growth. He cited a significant runway for expansion in the U.S., with a long-term target of 2,900 Ross stores and 700 dd's DISCOUNTS locations, and emphasized that all energy is directed toward profitably growing this domestic store base.

Jay Sole asked about the potential tension between entering Amazon and other mass market channels and maintaining an iconic brand image, and how the company plans to navigate this. He also followed up on concerns about Amazon cannibalizing in-store traffic.

Answer

CEO Daniel Heaf sees no tension, viewing Amazon as both a sales and brand opportunity, and believes telling an elevated brand story in third-party and social channels will change product perception. He noted existing gray market sales on Amazon ($60M-$80M), making their official entry brand and profit accretive. He believes digital brand storytelling will drive in-store traffic and that a wide assortment allows for differentiated propositions across channels to acquire new customers.

Jay Sole questioned if entering Amazon and other mass market channels creates tension with maintaining an iconic brand image and how the company plans to navigate this. He also asked about concerns regarding Amazon cannibalizing store traffic.

Answer

CEO Daniel Heaf asserted that entering Amazon is not an either/or situation, citing luxury brands on the platform. He views it as both a sales and brand opportunity to tell an elevated story. He noted that the brand reignition work, including new visuals and tone of voice, is underway and receiving positive consumer feedback. Regarding cannibalization, Daniel stated that Bath & Body Works products are already on Amazon via the gray market, and a direct presence will be brand and profit accretive. He believes digital storytelling will drive store traffic, and a thoughtful assortment strategy across channels will acquire different customer types.

Jay Sole expressed surprise at the 'off-the-charts' level of inventory availability despite an unprecedented year for tariffs and asked for an explanation of this dynamic.

Answer

Ernie Herrman, President and CEO, admitted a degree of surprise at the extent of availability. He explained that public retailers, needing to maintain sales and online presence, continue to buy goods, which, when combined with choppy retail performance, leads to excess inventories and closeouts. Mr. Herrman credited TJX's seasoned merchandising and planning teams for their opportunistic buying and ability to maintain liquidity in this challenging environment.

Jay Sole from UBS expressed surprise at the 'off the charts' availability of inventory despite an unprecedented year of tariffs, asking for an explanation of this dynamic and if it surprised management.

Answer

President and CEO Ernie Herrman admitted some surprise at the *degree* of inventory availability, though not the general presence of goods. He explained that public retailers, including e-commerce players, cannot drastically cut ordering despite tariffs, leading to excess inventories when sales don't materialize as expected. He also cited choppy retail conditions across the board as a contributor to the surplus of closeout goods.

Jay Sole of UBS asked for more detail on the expense initiatives within cost of goods sold that are part of the mitigation efforts. He also asked if SG&A cost savings are contemplated for the rest of the year to maintain the EBIT margin guidance.

Answer

CFO John Klinger specified that the expense initiatives are centered around distribution centers for gross margin and store initiatives for SG&A. He declined to quantify the impact by category at this time.

Jay Sole inquired about Wilson's Tennis 360 stores, specifically the 80 stores in China, the long-term opportunity in that market, and the development of the Tennis 360 concept outside of China, including the Dallas store and other U.S. openings.

Answer

Andrew Page, CFO of Amer Sports, discussed the 14-15 Tennis 360 stores in North America, highlighting a focus on 'Smile States' for future expansion. He noted the strong performance of the Dallas Park store and success in DICK's Shop & Show formats, emphasizing that while they are in the early stages of optimizing the owned retail format, they are excited about its direction.

Jay Sole asked about the long-term opportunity for Wilson's Tennis 360 stores in China, noting the reported 80 stores. He also inquired about the development of the Tennis 360 opportunity outside of China, particularly in the US, over the last 90 days.

Answer

Andrew Page, CFO of Amer Sports, discussed the growth of the Tennis 360 concept outside Greater China, mentioning 14-15 stores in North America, a focus on 'Smile States' in the southern US, and success in Dick's Shop & Shadow formats, while noting the early stages of optimizing their owned retail format.

Jay Sole from UBS Group AG posed a two-part question regarding the development of the women's business at Arc'teryx over the last 90 days and the key factors driving the significant growth inflection at the Solomon brand.

Answer

Arc'teryx CEO Stuart Haselden reported continued strength in the women's business, with revenues up over 30% in Q2 and increasing penetration, validating the brand's product strategy. CEO James Zheng attributed Solomon's success to three key drivers: a unique 'outdoor sneakers' product proposition, a powerful D2C model proven in China with nearly 300 stores, and strategic B2B partnerships with key European retailers.

Jay Sole asked for more details on the growth opportunity within the Arc'teryx women's business, including recent learnings and long-term potential.

Answer

Arc'teryx CEO Stuart Haselden identified the women's category as a major growth driver where the brand is underpenetrated. He attributed recent success, including 38% growth in Q1, to improvements in fit, color, and choice, exemplified by the popular Clarkia pants. He stated the ultimate goal is to achieve a 50-50 gender balance among its customers.

Jay Sole asked for an elaboration on the growth opportunity within the Arc'teryx women's business, including recent learnings and its long-term potential.

Answer

Arc'teryx CEO Stuart Haselden identified the women's category as a major growth driver where the brand is currently underpenetrated. He noted that improved fit, color, and choice led to 38% growth in Q1. He highlighted strong female participation in brand events and stated the ultimate goal is to achieve a 50/50 gender balance among its customers.

Jay Sole asked for an update on Arc’teryx's progress and key growth drivers over the last 90 days, and also inquired about the company's capital allocation priorities and free cash flow expectations for fiscal 2025.

Answer

Arc’teryx CEO Stuart Haselden highlighted the successful opening of the Broadway store in Manhattan, strong momentum in footwear, and over 50% growth in the women's category as key developments. CFO Andrew Page added that capital allocation priorities for 2025 include business growth via store build-outs and ERP implementation, managing debt costs, and debt paydown, with an expectation of increased free cash flow.

Jay Sole sought clarification on the 2026 initial guidance of 23% constant currency growth, asking for more detail on the confidence drivers by region and channel, and whether any specific geographies, channels, or categories are expected to decelerate more than others.

Answer

CEO and CFO Martin Hoffmann stated that the 23% growth is a constant currency number, part of a 30% CAGR. He emphasized On's strategy to expand its addressable market by increasing brand awareness through targeted community engagement (e.g., Burna Boy, Zendaya, Helena Obiri). He highlighted a "firework of innovation" in products (Cloudrunner, Cloudmonster, Lightspray), continued retail expansion (20-25 new doors annually), and elevated wholesale partner experiences, all contributing to strong growth across all regions, including the Americas.

Jay Sole inquired about how On balances strong top-line growth, significant gross margin expansion, and lean inventory management while maintaining its premium position, scarcity model, and overall operational efficiency for long-term brand health.

Answer

Martin Hoffmann (CEO and CFO) attributed the success to the team's work and amplified organizational capabilities, emphasizing that the premium business model drives gross profit margin and requires inventory discipline to protect full-price sales. He noted that pricing power, D2C focus, operational improvements, and economies of scale have consistently expanded gross margin, reaching a new sustainable level despite tariff impacts.

Jay Sole from UBS Group AG questioned the confidence behind raising both the full-year constant currency sales growth and adjusted EBITDA margin guidance, particularly given the headwind from increased U.S. tariffs.

Answer

CEO & CFO Martin Hoffmann cited exceptional brand momentum globally, a record-breaking start to Q3, and a strong order book as primary drivers for the raised guidance. He explained that while U.S. tariffs on products from Vietnam are increasing to 40%, the company has multiple levers to offset the impact. These include its premium brand positioning, a growing high-margin DTC channel, economies of scale, supply chain optimizations, and recent price increases. Hoffmann noted that further mitigation discussions with retail and factory partners have not even begun, providing additional potential offsets.

Jay Sole of UBS asked about the key drivers behind the recent success in the apparel category and when to expect an acceleration in the wholesale apparel business.

Answer

Executive Co-Chairman Caspar Coppetti called apparel a 'highlight for the quarter,' attributing its 93% growth to harmonized sizing and a focus on running, training, and tennis categories, supported by high-profile campaigns. He noted that operational improvements and learnings from their own retail stores are now helping to better serve wholesale partners, and the positive results are beginning to show in that channel as well.

Jay Sole inquired about the full-year sales guidance, asking for a breakdown of growth expectations by region and for commentary on the U.S. consumer environment in early 2025.

Answer

CFO and Co-CEO Martin Hoffmann stated that Q1 growth is expected in the low to mid-30s, driven by strong momentum and the Cloud 6 launch. He noted that while full-year guidance is prudent due to macro uncertainty, current preorders are tracking above the guided growth. Co-CEO Marc Maurer added that the brand's premium positioning provides insulation from broader competition and that strong brand awareness is driving growth across all regions, particularly in APAC and key European markets.

Jay Sole from UBS asked for an update on product assortment diversification, referencing the Investor Day goal of having multiple franchises driving sales.

Answer

Executive Co-Chairman and Co-Founder Caspar Coppetti confirmed that On has successfully achieved its goal of diversifying its product portfolio with multiple strong franchises across running, training, tennis, and lifestyle. He highlighted the success of the Cloudsurfer franchise and the upcoming Cloud 6, which will feature a higher price point. Coppetti also announced the future launch of the Cloud Zone, a new performance-inspired silhouette developed with Zendaya, aimed at capturing current trends with a futuristic design.

Jay Sole inquired about Ralph Lauren's strategy for using pricing as a lever to maintain AUR growth in the coming quarters, particularly before tariffs are lapped, and the company's ability to mitigate tariff impacts over time. He also asked how much of the second-half acceleration guidance is due to caution on a consumer slowdown versus structural or timing shifts.

Answer

Justin Picicci, CFO, explained that AUR growth is driven by multiple levers, including brand investment, attracting full-price customers, product mix, and reduced discounting, in addition to strategic pricing actions. He noted modest pricing adjustments for fall and spring 2026 due to higher tariffs, reflected in a high single-digit AUR growth guide for the back half. Mr. Picicci confirmed Q4 would be the most impacted by tariffs and timing shifts but expects 10-30 basis points of gross margin expansion this fiscal year, with future mitigation from sourcing shifts and merchandising. He clarified that the second-half guide reflects front-loaded performance and macro uncertainty, with underlying growth tracking to mid-single digits.

Jay Sole asked about Ralph Lauren's strategy for using pricing as a lever over the next few quarters before tariffs are fully lapped, and the company's ability to mitigate tariffs over time. He also inquired about the extent to which the second-half acceleration guidance is driven by general caution on a consumer slowdown versus true structural or timing shifts.

Answer

Justin Picicci, CFO, explained that AUR growth is driven by multiple levers, including brand investment, attracting full-price customers, elevated product mix, and reduced discounting, in addition to strategic pricing actions. He confirmed normal course pricing for fall and modest additional adjustments for fall/spring 2026 due to higher tariffs, reflected in the high single-digit AUR growth guide for the back half. Picicci noted that Q4 is expected to be the most impacted quarter by tariffs and timing shifts but reiterated the expectation for 10-30 basis points of gross margin expansion this fiscal year. He clarified that the second-half guide reflects strategic front-loading of performance due to macro uncertainty, with underlying growth tracking to the long-term mid-single-digit outlook when adjusted for timing shifts and strong holiday comparisons.

Jay Sole from UBS Group AG questioned the early timing of the updated fiscal guidance, asking about the specific assumptions that changed, the inclusion of tariff impacts, and the recent performance and future growth prospects of the handbag category.

Answer

CFO Justin Picicci stated the guidance was raised due to a clear Q1 over-delivery and a strong Q2 outlook, noting the tariff impact remains broadly consistent with prior views. President & CEO Patrice Louvet highlighted the handbag category's strong momentum, citing the success of foundational lines and new launches like Polo Play, and emphasized the significant long-term growth opportunity.

Jay Sole inquired about Ralph Lauren's pricing strategy for fiscal 2026, particularly in the context of potential tariffs and the significant AUR (Average Unit Retail) growth already achieved over the past eight years.

Answer

CFO Justin Picicci explained that the company is well-positioned to manage cost headwinds through a multi-pronged strategy. This includes leveraging its diversified supply chain, enhancing cost efficiencies with partners, using AI for better inventory planning, and implementing selective pricing actions and discount reductions. He noted that proactive pricing for Fall '25 was already planned and that Q1 AUR is expected to grow high single-digits, consistent with recent performance.

Jay Sole asked about the primary drivers of the holiday quarter's outperformance, questioning how much was sustainable versus near-term, and inquired about the specific factors fueling growth in the women's apparel and handbags categories.

Answer

Executive Patrice Louvet attributed the success to the cumulative effect of a multi-lever strategy, not a single event. He identified three durable drivers: sustained brand strength from marketing, a broad lifestyle portfolio with a strong core and high-potential categories, and the key city ecosystem model. For women's apparel and handbags, which grew 20%, Louvet credited a strong product foundation, dedicated marketing, and improved distribution, highlighting the significant runway for growth in these large markets.

Jay Sole inquired about Ralph Lauren's confidence in its pricing power amid a potentially less favorable environment and asked for an update on the performance and expansion potential of full-price stores in the U.S.

Answer

CFO Justin Picicci explained that pricing power is supported by durable drivers like brand elevation, product mix, and acquiring higher-value customers, providing flexibility. President and CEO Patrice Louvet added that North American full-price stores continue to lead performance, driven by traffic, and the company remains on track with its store opening plans.

Jay Sole asked for the Q4 outlook for the entire wholesale footwear segment (excluding Kurt Geiger) and wholesale accessories. He also sought clarification on the Kurt Geiger retail versus wholesale breakdown for Q4 and inquired about order visibility for Kurt Geiger into Q1 and Q2 2026.

Answer

Ed Rosenfeld, Chairman and CEO, projected wholesale footwear (excluding Kurt Geiger) to be up 2-4.5% and wholesale accessories and apparel (excluding Kurt Geiger) to be down mid to high teens for Q4. He reiterated Kurt Geiger's DTC revenue for Q4 at approximately $135M within the total $182M-$187M range. He confirmed earlier order taking for Kurt Geiger provides more visibility but deferred detailed 2026 discussions to the next call, noting the brand's continued strong performance.

Jay Sole asked for a detailed outlook for Q4 for the wholesale footwear and wholesale accessories segments, excluding Kurt Geiger. He also sought clarification on the breakdown of Kurt Geiger's revenue between retail and wholesale, and inquired about the order visibility for Kurt Geiger, specifically if orders are taken earlier than for Steve Madden and if there's visibility into Q1 and Q2.

Answer

Chairman and CEO Ed Rosenfeld clarified that for Q4, wholesale footwear (excluding Kurt Geiger) is expected to be up 2-4.5%, while wholesale accessories and apparel (excluding Kurt Geiger) is still projected to be down mid to high teens. He reiterated that Kurt Geiger's business is over 70% DTC, with approximately $135 million expected from DTC in Q4. Mr. Rosenfeld confirmed that orders for Kurt Geiger are taken earlier than for Steve Madden, providing more visibility over time, but deferred detailed discussion of 2026 to the next call.

Jay Sole questioned if moving production from China limits the ability to make certain fashion styles, how the company plans to mitigate the 10% tariff on non-China countries, and requested a breakdown of the 18% year-over-year inventory increase.

Answer

CEO Ed Rosenfeld responded that while some categories like kids' footwear are more challenging, there are no styles they are prevented from making outside of China. He stated that price increases are the primary strategy to mitigate the 10% baseline tariff. CFO Zine Mazouzi clarified the inventory increase was driven by longer lead times from supply chain disruptions, sourcing diversification, and accelerated shipments ahead of tariffs.

Jay Sole inquired about the recent performance of the fleece business, specifically trends in September and October, inventory levels, and overall demand. He also asked about the impact of tariffs on the competitive landscape, seeking insights into opportunities for Gildan to attract new business from companies looking to shift production out of Asia to their Bangladesh or Central American facilities.

Answer

Glenn Chamandy, President and CEO, stated that the fleece business is performing well, with sales meeting expectations despite early season weather. Regarding tariffs, Chamandy noted significant market uncertainty and hesitation among companies to reorient supply chains. However, he sees a long-term opportunity for Gildan, particularly in the 100% polyester product category where tariffs are highest, leveraging their Rio Nancy 6 facility and the AllPro brand.

Jay Sole asked about the Fleece business trends, specifically in September and October, considering weather impacts, and the overall inventory and demand outlook. He also inquired about opportunities to capture new business from companies looking to move production out of Asia to Gildan's factories in Bangladesh or Central America, given the current tariff environment.

Answer

Glenn Chamandy (President and CEO, Gildan Activewear) stated that Fleece is performing well, with sales meeting expectations despite early season. He noted market uncertainty regarding tariffs causing hesitation in supply chain shifts but sees a definite rethink. Chamandy highlighted opportunities in 100% polyester products due to high tariffs, mentioning Gildan's Rio Nancy 6 facility capabilities and the All Pro brand's focus on such products.

Jay Sole from UBS Group AG asked for an expansion on the comment that Gildan is benefiting from "recent changes in the industry landscape," particularly within its national accounts business.

Answer

EVP & COO Chuck Ward stated that industry volatility, including tariffs, is driving customers toward stable suppliers like Gildan, which benefits from its vertically integrated model. He noted market share gains in key categories like ring spun and Comfort Colors. President & CEO Glenn Chamandy added that Gildan's use of U.S. cotton and yarn provides a competitive advantage against tariffs, and the company is adding capacity in Central America to capitalize on these opportunities.

Jay Sole asked about the sales impact and growth potential of Gildan's new product innovations, such as the soft cotton technology. He also inquired about the company's strategic ambitions for the recently licensed Champion brand within the printwear channel.

Answer

President & CEO Glenn Chamandy explained that innovation is a key driver, with soft cotton technology boosting basics to double-digit POS growth in Q4 and the Comfort Colors brand growing 40% in 2024. He positioned the Champion brand as a key part of a multi-tier strategy, targeting the athletic and collegiate niche to gain share without cannibalizing other brands. Chamandy noted that new programs account for about 75% of the guided 2025 revenue growth.

Jay Sole asked CEO Glenn Chamandy for any new insights he gained on the business during his recent time away. He also questioned the expected timeframe for increasing leverage and executing on the renewed share buyback program.

Answer

CEO Glenn Chamandy shared that his time away reinforced his view that the company is in a 'breakout mode' with a strong innovation pipeline, and that the management team is now more motivated than ever. CFO Rhodri Harries stated that with leverage at 1.6x, the company has significant firepower and plans to actively repurchase shares in the second half of the year, with a target of reaching 2.0x leverage by year-end.

Jay Sole asked for more specifics regarding Carter's preliminary outlook for 2026 sales growth, which was described as "higher than a typical year." He sought clarification on the definition of "higher than a typical year," a potential sales range, and the underlying strategy to achieve this growth, especially considering planned store closures, declining wholesale trends, and weakening macro indicators.

Answer

Richard Westenberger (Senior Executive VP, CFO and COO, Carter's Inc) declined to provide specific numbers for 2026 sales growth, maintaining the company's discipline of discussing the new year on the February call. He emphasized that the anticipated growth would be primarily driven by pricing increases (AURs) to offset significant tariff challenges, rather than unit growth. Westenberger noted the expectation that the entire industry would be raising prices, ensuring Carter's remains competitive.

Jay Sole from UBS Group AG inquired about Carter's long-term financial targets, asking for specific goals for annual sales growth, EBIT margin, and overall earnings over a three-to-five-year horizon. He also requested a breakdown of the potential offsets for the estimated $125 million to $150 million gross impact from tariffs.

Answer

CEO Douglas Palladini declined to provide specific long-term financial targets but affirmed the company's focus on achieving long-term, sustainable, and profitable growth. CFO Richard Westenberger identified price increases as the most significant lever to offset tariffs, supplemented by cost-sharing with vendor and wholesale partners. He noted that while near-term impacts are harder to cover, the goal for 2026 and beyond is to fully mitigate the tariff costs. CEO Palladini also highlighted the supply chain's agility as a key competitive advantage.

Jay Sole inquired about Carter's long-term financial targets, including potential annual sales growth, EBIT margin, and earnings goals. He also sought details on the strategy to mitigate the $125M-$150M gross tariff impact, asking about the primary offsets and the expected timeline.

Answer

CEO Douglas Palladini declined to provide specific long-term financial targets but reiterated confidence in achieving sustainable, profitable growth. CFO Richard Westenberger identified price increases as the most meaningful tariff offset, supplemented by vendor partnerships and sourcing shifts. He noted that near-term mitigation is challenging but the company aims to fully offset the impact by 2026.

Jay Sole asked new CEO Doug Palladini for his initial thoughts on Carter's business and opportunities, and also requested clarification on the assumptions behind the estimated tariff rates presented in the slide deck.

Answer

CEO Douglas Palladini expressed his honor in leading the company and his belief in its brand assets but deferred sharing a detailed strategy. CFO Richard Westenberger clarified that the tariff rates on Slide 13 are a hypothetical aggregation based on proposed reciprocal tariffs, intended to illustrate the potential material cost impact on products from key sourcing countries like Vietnam, Cambodia, and Bangladesh.

Jay Sole asked about the U.S. Retail comparable sales figures Carter's is lapping from November and December of last year and questioned how the company measures the return on its recent pricing investments.

Answer

CEO Michael Casey stated that Q4 last year had a comparable sales decline of around 6%. He explained that the ROI on pricing investments is measured by a return to unit volume growth, improved customer reengagement, and positive trends in transactions and conversion rates. Executive Kendra Krugman added that lower-priced items act as 'basket starters,' lifting the total units per transaction.

Jay Sole from UBS Group AG asked about the durability of the company's average selling price (ASP) gains, considering various factors like FX and tariffs, and questioned how long this positive trend could continue.

Answer

CFO Ivica Krolo explained that ASP growth is driven by more than just like-for-like price increases. He attributed the mid-single-digit ASP growth to a favorable product mix, including an increased share of closed-toe styles (up 400 bps) and continued consumer preference for higher-priced leather executions.

Jay Sole asked about the company's outlook for cash flow and its priorities for the use of cash in the second half of the year and beyond.

Answer

CFO Ivica Krolo outlined the primary uses of cash as reinvesting in the business, particularly in white space opportunities with a planned CapEx of around €80 million for the year, and continuing to reduce debt. He noted that after these priorities, the company has additional discretionary cash and is always evaluating all options, including potential share repurchases.

Jay Sole from UBS asked why Birkenstock is not raising its full-year guidance despite a strong Q1 performance and inquired about the drivers of the significant B2B growth and the expected rebalancing with D2C.

Answer

CEO Oliver Reichert explained that while the start to 2025 is strong, Q1 is the smallest quarter, and significant macroeconomic uncertainty remains. He attributed the B2B strength to robust full-price sell-through (up ~40%) and reorders from wholesale partners. Reichert anticipates more balanced growth ahead as the company accelerates its global retail store openings and digital initiatives, which will boost the D2C channel.

Jay Sole asked about the performance of the injection-molded sandal business (EVA products) in the fourth quarter and the outlook for that category in the upcoming year.

Answer

CEO Oliver Reichert described this as the 'outdoor water ready' segment, which is a new strategic category being rolled out globally. He noted that while it was initially developed for tropical climates, it is performing very well in the U.S. and European outdoor channels. The company is supporting its growth with dedicated manufacturing investments and plans for collaborations and special makeups.

Jay Sole of UBS Group asked about the interplay between a reported slowdown in the primary luxury market and its effect on the resale business. He also inquired about the quarterly fluctuation in the Direct revenue segment's gross margin and its expected trend for the second half of the year.

Answer

President and CEO Rati Sahi Levesque explained their business is resilient due to product diversity and benefits when primary market prices rise. CFO Ajay Gopal added that their growth is driven by unlocking the $200B TAM in closets, insulating them from primary market volatility. Regarding Direct revenue, he stated the 15-25% gross margin range fluctuates based on product mix, with high-value items like watches having lower percentage margins but attractive profit dollars.

Jay Sole of UBS inquired about the Q2 revenue guidance, noting its moderation compared to previous quarters, and asked what macroeconomic assumptions were embedded within it.

Answer

CFO Ajay Gopal explained that tariffs have no direct impact on their U.S.-sourced supply. He clarified that the Q2 guidance, with GMV and revenue growth both guided to ~9%, reflects an expected convergence of these two metrics, unlike in the prior year when take rate changes caused revenue growth to outpace GMV growth.

Jay Sole of UBS questioned the productivity gap between experienced and newer salespeople, the potential for future efficiency gains from the sales team, and requested a breakdown of the Q1 growth forecast between units and pricing.

Answer

CEO Rati Levesque highlighted that the 15% year-over-year increase in supply per sales rep is just the beginning, noting significant room for growth as top reps bring in over $10 million annually. CFO Ajay Gopal addressed the Q1 forecast, stating that strong momentum from Q4 is expected to continue, with revenue guidance of 9% to 12% growth reflecting this strength, even after accounting for a one-point headwind from the 2024 leap year.

Jay Sole of UBS Group AG inquired about the specific factors driving Hanesbrands' outperformance in the second quarter and the underlying confidence for raising the full-year guidance.

Answer

CFO M. Scott Lewis attributed the Q2 beat to broad-based success, including sales upside from growth strategies and significant operating margin expansion driven by cost savings, strong plant productivity, and SG&A leverage. CEO Stephen Bratspies added that the confidence in the raised guidance stems from strong first-half results, a simpler business model, improving POS trends, and clear visibility into back-half cost structures.

Jay Sole asked for more detail on Hanesbrands' effective tariff rate, the nature of the incremental revenue opportunities, and the specific drivers of the Q1 earnings beat compared to guidance.

Answer

CEO Stephen Bratspies explained that the company can fully mitigate tariff impacts through natural offsets like U.S. cotton content, cost actions, and surgical pricing, noting they are planning for a higher rate to create a cushion. He clarified that revenue opportunities are for Hanesbrands' own brands, not private label, driven by retailer inquiries to replace products from other sources. CFO Markland Lewis added that the Q1 outperformance was driven by better-than-expected sales, accelerated cost savings, and strong SG&A leverage.

Jay Sole inquired about the progress and future prospects for lowering the product return rate and asked for an update on advancements in AI initiatives over the last 90 days.

Answer

Co-Founder & Co-CEO Mike Karanikolas stated that while return rate progress has been strong, H2 2025 faces tougher comps. On AI, he highlighted continued enhancements to the proprietary search algorithm, deployment of voice-to-text in customer service, and R&D efforts in landing page optimization and virtual try-on.

Jay Sole requested more detail on the company's moderated internal sales expectations, asking about the magnitude of the moderation and if it incorporates assumptions about price elasticity from potential tariff-related price hikes.

Answer

CFO Jesse Timmermans clarified that the key takeaway is that they are moderating inventory buys accordingly while remaining nimble. He explained that price elasticity is not viewed in isolation, as it is highly dynamic and influenced by overall consumer sentiment, product type, and price point, making it a complex factor in their planning.

Jay Sole asked about the impact of rapidly advancing AI technology, inquiring about new opportunities that have emerged for the business in the last 90 days and what new applications are currently being developed.

Answer

Co-CEO Michael Karanikolas highlighted that AI is a constant focus with several exciting projects in development, though it's too early to share specifics. He mentioned being particularly excited about 'newer ways of product discovery' for customers. He also noted the team continues to leverage AI and machine learning to enhance existing algorithms for site merchandising, search, and product recommendations.

Jay Sole of UBS asked for more specific details on how Revolve is leveraging AI to enhance its product assortment, drive sales, and reduce operational costs.

Answer

Co-CEO Michael Karanikolas explained that the strategy is to show the "right product to the right customer at the right time." He cited A/B tested improvements in site search and browsing pages that have significantly lifted conversion rates. He also mentioned deploying AI to optimize off-site marketing by better targeting products to various channels, which has proven highly impactful for the business.

Jay Sole asked about the performance nuances between newer stores of different vintages, specifically those opened in the last one to two years versus those opened four to six years ago. He also inquired about the expected sales productivity for a mature store.

Answer

CFO Jim Watkins noted that new stores consistently outperform older cohorts as they mature, with no significant difference between recent class years. He stated that new stores open with approximately $3.2 million in year-one sales, implying a mature store AUV of roughly $4.2 million, with plans to continue growing comps in those legacy stores.

Jay Sole of UBS inquired about the mechanics of achieving SG&A leverage on a flat comp in fiscal '26. He also asked about the potential for the $8 million tariff impact to continue into fiscal '27 and beyond.

Answer

CEO John Hazen explained that the $8 million tariff expense is expected to carry into fiscal '27, and the total impact could be higher with a full year of tariffs, though mitigation strategies will be explored. Regarding SG&A, Hazen stated that leverage will come from more normalized incentive compensation and legal expenses compared to the prior year, the benefit of new stores covering fixed costs, and continued expense discipline, despite absorbing a prior-year incentive comp reversal.

Jay Sole asked about the rationale and timing of the CEO's departure and whether it signals a strategy change. He also requested an update on the performance of the Cody James Black 1978 boot line.

Answer

Former CEO Jim Conroy explained his departure was a personal decision and emphasized strategic continuity, stating the company will continue with its successful 12-year-old model. He noted the Cody James Black line is performing well in 300 stores but is not a multi-point driver of same-store sales.

Jay Sole from UBS Group AG requested clarification on the 'modest headwind' to revenue in the second half of fiscal 2026 from lapping promotions and the associated trade-off between gross margin and unit volumes.

Answer

CFO Matt Friend clarified that the headwind is due to comparing a healthier, more full-price business in the second half of fiscal 2026 against the same period in the prior year, which involved aggressive clearance activity and off-price sales to move aged inventory. The future period will be more profitable but will face a tough revenue comparison.

Jay Sole asked how far management is willing to take near-term actions that may negatively impact results in order to position the company for long-term success, questioning if there is a limit to these measures.

Answer

President and CEO Elliott Hill emphasized that the company is acting with urgency to recenter on sport, lead with a strong product offense, and invest in brand and marketplace health. CFO Matt Friend clarified the financial impact by categorizing headwinds into two types: near-term repositioning costs that will eventually end, and transitory costs from inventory cleanup and deleverage that should be recaptured as the business returns to growth.

Jay Sole of UBS requested elaboration on the core strategies to improve the sales trajectory of Michael Kors, focusing on proven, consistent brand drivers that may have been neglected in recent years.

Answer

Chairman and CEO John Idol acknowledged past missteps, stating the company lost its way by straying from Michael Kors' original 'Jet Set' lifestyle vision. He confirmed a strategic return to this heritage, which consumer research supports. Idol also admitted that price elevations went too far and the brand is now returning to historical price points that resonate with its core customer, which is already yielding positive results. For Jimmy Choo, the focus is on expanding into casual footwear and more accessible luxury accessories to broaden its lifestyle appeal beyond formal occasions.

Jay Sole from UBS Group AG requested more detail on the core strategies to improve the sales trajectory of Michael Kors, asking what consistent, successful elements from the brand's past may have been lost and are now being reinstated for sustainable growth.

Answer

Chairman & CEO John Idol acknowledged past missteps, including straying from the brand's core 'Jet Set' lifestyle vision and elevating prices beyond consumer expectations. He stated that the company has gained clarity and is returning to its heritage, which is resonating with customers and retail partners. The strategy involves reinforcing this brand identity and offering compelling value at historical price points. For Jimmy Choo, the focus is on expanding its lifestyle appeal into casual footwear and more accessible luxury accessories to capitalize on its strong brand recognition and existing customer base.

Jay Sole from UBS inquired about the progress of the North American business reset and its outlook for fiscal 2026, and also asked for details on the company's upcoming major brand activation.

Answer

CEO Kevin Plank explained that the North American reset is being led by Kara Trent, who is implementing the successful European playbook. He emphasized a new go-to-market strategy focused on premium, innovative products supported by comprehensive storytelling, sales training, and social media, using the new 'No Weigh' backpack as a prime example. Plank clarified the brand activation will not be a single large campaign but rather a series of smaller, targeted content drops aimed at the 16-to-24-year-old consumer, leading with story instead of price, primarily in the second half of the year.

Jay Sole inquired whether the company is seeing early signs of brand inflection ahead of business results and asked for an analysis of the challenges in the APAC region, distinguishing between macro and company-specific factors.

Answer

CEO Kevin Plank stated that brand inflection is evident in the talent the company is attracting and increased interest from new retail partners. He emphasized building 'pricing power' as a key goal. Regarding APAC, Plank noted that while macro issues exist, the challenges are similar to what the company has successfully managed in other regions, and the focus is on implementing their playbook to stabilize the business and restore pricing power.

Jay Sole from UBS inquired about the strong feedback on new products mentioned by management, asking for more details on the products and the nature of retailer response in terms of orders.

Answer

CEO Kevin Plank responded that the product pipeline is the healthiest he has seen, with exciting drops planned for Q1 of calendar '25 and a major anchor around the Fall/Winter '25 season. He highlighted current successes in basics like UA compression, the Unstoppable franchise, and Vanish. Plank emphasized a strategic shift to compete on product story and innovation rather than price, stating the world needs hope, which Under Armour can provide, and that the brand will inflect before the business does.

Jay Sole of UBS asked what provides confidence in the company's ability to deliver on the sales growth guidance implied for the second half of the fiscal year.

Answer

CEO Kevin Plank stated that confidence stems from a healthy view of the business, a clear strategy focused on becoming a "sports house," and the ability to attract A+ talent like Eric Liedtke. Plank emphasized that while macro factors exist, the team is focused on internal execution and is proud of the progress made to date, creating a growing sense of momentum for what's to come.

Jay Sole of UBS inquired about Skechers' sourcing strategy concerning tariffs, asking for the percentage of production from China destined for the U.S. and the timeframe to reduce this exposure. He also questioned the extent of collective industry efforts to lobby the administration on trade issues.

Answer

John Vandemore, an executive, stated that while specific sourcing percentages are not disclosed, Skechers is actively pursuing three levers: resourcing, vendor cost sharing, and pricing. He highlighted that two-thirds of the business is outside the U.S. and less impacted. Vandemore also noted that while Skechers participates in industry lobbying efforts, a near-term resolution is unlikely, placing the responsibility on the company to navigate the tariff situation directly.

Jay Sole from UBS inquired about Skechers' gross margin outlook for fiscal 2025, seeking clarity on the expected trends and influencing factors.

Answer

John Vandemore (executive) stated that Skechers does not anticipate a material change in overall gross margin for 2025, aiming for stability. He explained that growth is expected to be more balanced across channels and geographies, which may not provide the same incremental margin accretion from DTC and international mix shifts seen in the past. Vandemore confirmed this balanced growth is the primary reason for the stable margin outlook.

Jay Sole inquired about the specific drivers behind the strong 26% domestic wholesale growth and asked for an update on the progress and strategic importance of the Indian market.

Answer

John Vandemore, CFO, explained that the domestic wholesale surge was driven by partners who, after clearing prior inventory, are now fully embracing Skechers' comfort technology products. He emphasized that India is a crucial strategic priority, with its recent 24% growth rebound resulting from the resolution of regulatory issues that had previously hampered inventory flow. Management remains optimistic about building a local supplier base for sustained long-term growth in the region.

Jay Sole asked for clarification on the decision to raise full-year sales and EPS guidance despite facing significant headwinds from foreign exchange and supply chain disruptions in the quarter.

Answer

CFO John Vandemore explained that the guidance was raised due to improved visibility into the second half of the year, particularly a very strong order book for domestic and international wholesale. He noted that while some macroeconomic headwinds will persist, the underlying consumer demand remains strong, as evidenced by the order flow and continued strength in international direct-to-consumer (DTC) sales. The negative impact of foreign currency was particularly acute in Q2 but is not expected to be as severe going forward.

Jay Sole requested elaboration on the business environment in Europe compared to North America and asked for clarification on the first-half guidance, particularly the expected performance for Q1 versus Q2.

Answer

EVP & CCO Frank Bracken described Europe as a challenging macro environment but highlighted a 2% comp gain in Q4 and noted that channel inventories are improving. CFO Michael Baughn clarified the first-half outlook, explaining that while H1 profit is expected to be flat year-over-year, Q2 will benefit from lapping a prior-year $0.09 FLX charge, implying pressure on Q1 profitability. He also guided for a sales ramp from Q1 into Q2.

Jay Sole asked if Nike's upcoming innovation pipeline is expected to create a broad 'halo effect' that lifts its entire running and lifestyle business at Foot Locker. He also inquired about the potential size of the women's basketball business and the strategy to improve the underperforming apparel category.

Answer

CCO Frank Bracken expressed strong confidence in Nike's innovation pipeline and its return to 'offense' with powerful marketing, which he believes will drive growth. On women's basketball, he sees significant potential, citing early success with Nike's Sabrina 1 and Puma's Stewie lines, and expects all major brand partners to invest in the space. For apparel, he acknowledged the need for more innovation and stated Foot Locker is focusing on key items, improving seasonal transitions, and telling better head-to-toe stories to stabilize the business.

Jay Sole from UBS asked for the big-picture, long-term growth plan for the Crocs brand in North America beyond the next year, inquiring about potential levers like brand awareness, new wholesale doors, owned retail expansion, or new product categories.

Answer

CEO Andrew Rees stated that in the 1-2 year timeframe, international growth is the primary driver for the Crocs brand. For North America long-term, he sees limited new distribution opportunities but pointed to continued growth in digital, personalization, and sandals. He added that while the company is experimenting with broader silhouettes, the main role of the North American business for now is to be a 'cash cow' funding international expansion and other investments.

Jay Sole of UBS Group asked for more details on the drivers behind the strong performance in China, which grew over 30%, and the outlook for the region.

Answer

CEO Andrew Rees attributed the success in China to effectively driving brand heat, which is bucking a weaker consumer trend in the country. Key drivers include a social-first digital marketing strategy using local celebrities, strong performance during online shopping festivals, significant expansion of mono-brand retail stores with partners, and the high consumer engagement with Jibbitz personalization.

Jay Sole asked about the rationale and timing behind hiring the company's first-ever creative director and the expected evolution of the brand as a result.

Answer

CEO Dani Reiss described the decision as the 'right thing at the right time,' marking a crucial inflection point in the brand's journey toward becoming a global luxury powerhouse. He emphasized that Haider Ackermann will build world-class design capabilities and has the potential to elevate the brand to the 'next level.'