Jonathan Komp

Jonathan Komp from Baird questioned the discrepancy between the previously discussed 50%+ incremental margin on D2C revenue recovery and the current operating margin performance, seeking a post-mortem on what went differently and how quickly issues can be addressed, especially given lower seasonal sales volumes. He also requested more clarity and quantification on the expected margin expansion for fiscal 2027.

Answer

Beth Clymer, President and COO, outlined a three-phase margin journey: right-sizing corporate costs (achieved), driving sustained positive comps (achieved in fiscal 2026), and leveraging strength for meaningful margin improvement (current focus). She attributed Q3's unusual margin compression largely to discrete, non-recurring items, and emphasized that the underlying economic model supports attractive D2C flow-through, with current initiatives focused on store cost efficiency, marketing efficiency, and gross margin improvements. Neil Bowden, CFO, stated that more color on fiscal 2027 plans, including margin expansion, would be provided at the end of the fiscal year.

Jonathan Komp questioned the deviation from previous expectations of 50%+ incremental margin on D2C revenue recovery, seeking a post-mortem on what went differently, the speed at which operating margin issues can be addressed, and the rationale behind not providing forward guidance for fiscal 2027 margin expansion.

Answer

Beth Clymer, President and COO, explained the margin journey, highlighting success in right-sizing corporate costs and achieving four consecutive quarters of positive D2C comps. She attributed Q3's margin compression largely to discrete, non-recurring items and emphasized that current investments are foundational for future D2C flow-through. Neil Bowden, CFO, stated that fiscal 2027 plans and more color on margin expansion would be provided at the end of the fiscal year.

Jonathan Komp asked if Q1 SG&A spend would follow the typical pattern of being less than 20% of the full-year total and inquired about the revenue scale needed to return to historical EBIT margin levels. He also asked for clarification on a potential store closure in China and the ability to continue driving traffic growth through the Douyin channel after anniversarying its initial success.

Answer

Neil Bowden, CFO, declined to comment on the quarterly SG&A phasing due to the absence of guidance but noted investment timing is strategic. He stated that while revenue scale will drive significant margin expansion, he could not provide a specific revenue target. Carrie Baker, President of Brand & Commercial, confirmed that they are continuously learning and optimizing their live streaming channels like Douyin and expect them to remain a great driver. Neil Bowden confirmed a store in Dalian was closed upon lease expiration as a better-located store had opened nearby.

Jonathan Komp from Robert W. Baird & Co. inquired about SG&A seasonality, the revenue scale required to achieve historical EBIT margin levels, a recent store closure in China, and the ability to anniversary strong growth from the Douyin platform.

Answer

CFO Neil Bowden stated that the timing of investments is dynamic and declined to provide specific guidance on SG&A seasonality or the revenue scale needed for margin expansion. He confirmed a lease expiration in Dalian where another store had recently opened. President of Brand & Commercial Carrie Baker expressed confidence in their ability to continue driving growth on platforms like Douyin by constantly optimizing their strategy.

Jonathan Komp of Robert W. Baird & Co. requested more detail on the assumptions for the implied fourth-quarter outlook. He also asked for a broader perspective on the key takeaways from the quarter's performance, weighing the success of new product and marketing strategies against short-term pressures and considering the implications for future growth and profitability.

Answer

Executive Neil Bowden indicated that Q4 gross margin is expected to be slightly better year-over-year, though continued marketing spend will pressure operating income. Carrie Baker, President of Brand & Commercial, acknowledged that the late marketing start in Q3 had a short-term impact but established a new, bolder, and more effective go-to-market strategy for the long term. Chairman and CEO Dani Reiss added that the strong performance of non-outerwear categories like apparel and fleece is highly encouraging for future growth.

Jonathan Komp followed up on the quarter-to-date sales acceleration prior to the storms, asking for additional drivers beyond it being broad-based, and how the business is performing across exclusive brands versus existing third-party and new brands. He also inquired about anecdotes supporting confidence in new unit growth towards the long-term target and whether the 20% EPS growth algorithm remains the current framework.

Answer

CEO John Hazen stated that the January acceleration and quarter-to-date performance were primarily transaction-driven and broad-based across all major merchandise categories, with both third-party and exclusive brands performing well. CFO Jim Watkins confirmed that the 20% EPS growth algorithm is still relevant, though it might be closer to 18% with the accelerated 12%-15% new unit growth due to the ramp-up period for new stores. He added that new stores perform similarly to existing ones, with a slightly higher Western skew in non-legacy markets, reinforcing confidence in the long-term unit growth target.

Jonathan Komp asked for further insights into the drivers of the quarter-to-date sales acceleration prior to the winter storms, and how performance is segmented across exclusive brands versus existing third-party brands. He also inquired about anecdotes supporting confidence in the long-run new unit target and whether the 20% EPS growth algorithm remains the current framework.

Answer

CEO John Hazen reiterated that the QTD acceleration was primarily transaction-driven and broad-based across both third-party and exclusive brands. CFO Jim Watkins confirmed that the EPS growth algorithm is now closer to 18% due to accelerated new unit growth (12-15%), noting that new stores perform similarly to existing ones, with a slight Western skew in non-legacy markets.

Jonathan Komp asked about the potential risk of running inventory too lean, given that comp store inventory was up less than 3% while comps are guided higher. He also asked a broader question about whether the CEO is considering any entirely new strategic initiatives beyond the current priorities.

Answer

CFO Jim Watkins stated that the company feels very good about its inventory flow and is confident it has enough product to meet its guidance and handle potential upside. CEO John Hazen affirmed his focus on the three key adjustments—sourcing, exclusive brand marketing, and reinvigorating the work business—emphasizing the importance of maintaining simplicity and focus for the foreseeable future.

Jonathan Komp of Baird asked about the key drivers behind the recent acceleration in the two-year same-store sales trend. He also inquired about the company's path back to achieving mid-teens operating margins over the long term.

Answer

CEO John Hazen identified a significant positive shift in the denim business as a primary driver of the recent sales acceleration, alongside continued strength in Western boots and work apparel. CFO Jim Watkins added that the business feels like it's back to its historical algorithm of low-to-mid-single-digit growth. Regarding margins, Watkins expressed confidence in reaching the 15% operating margin target over time, stating that absent the current tariff pressures, this year would have shown progress towards that goal.

Jonathan Komp asked for specific drivers behind the strong acceleration in e-commerce sales. He also inquired about any planned changes to the company's marketing and promotional strategy.

Answer

Interim CEO John Hazen attributed the e-commerce growth primarily to increased traffic, driven by successful customer acquisition through Google's marketing tools while maintaining a strict return on ad spend. For future marketing, he indicated the company will continue to lean into artist collaborations and expand its use of connected TV.

Jonathan Komp's associate, Alex Conway, asked for the assumptions behind the Q3 comp guidance range and inquired about the qualities being sought in a permanent CEO.

Answer

CFO Jim Watkins explained the Q3 guidance reflects recent trends adjusted for potential election disruption and a shorter holiday period. Former CEO Jim Conroy stated that interim CEO John Hazen was the top internal succession choice and is well-positioned for the permanent role, emphasizing the importance of the company's collaborative culture.

Jonathan Komp asked what it would take to translate Vans' positive global digital traffic into overall total revenue growth. He also asked CFO Paul Vogel for more details on the medium-term targets for fiscal 2028 regarding revenue and margin progression.

Answer

CEO Bracken Darrell indicated that while he wouldn't predict when Vans would turn positive, digital traffic is a good sign, along with strong interest in premium products. CFO Paul Vogel reiterated confidence in the FY28 targets, including a 10% operating margin and 2.5x leverage, noting significant progress on debt reduction from 4.1x to 3.5x, driven by strong free cash flow despite headwinds.

Jonathan Komp with Baird asked what VF Corporation believes is necessary to translate Vans' positive global digital traffic into overall total revenue growth. He also asked CFO Paul Vogel for more insight into the progression of the company's medium-term targets for fiscal 2028, specifically regarding revenue and margin.

Answer

CEO Bracken Darrell indicated that while he wouldn't provide a timeline for Vans' total growth, positive digital traffic, strong brand interest, and premium product launches are encouraging signs. EVP and CFO Paul Vogel reaffirmed confidence in hitting fiscal 2028 targets for operating margin, leverage, and free cash flow, outlining the path to achieve them through continued operational improvements and debt reduction.

Jonathan Komp from Baird asked for more details on Q2 gross margins, specifically quantifying tariff impacts and promotional offsets, and sought an update on the progress of broader cost discipline and phase two savings initiatives across the organization, including Vans.

Answer

Paul Vogel (EVP and CFO) explained Q2 gross margin was flat, with minimal FX headwinds and positive impacts from lower promotions. He confirmed that all longer-term cost savings initiatives, including markdown management, integrated business planning, and store optimization, are on track to meet FY28 debt leverage and operating margin targets, with more detailed updates planned for year-end.

Jonathan Komp inquired about the gross margin performance in Q2, specifically the factors influencing it such as tariffs and discounting, and sought updates on the progress of cost discipline and phase two savings initiatives.

Answer

Paul Vogel, EVP and CFO, VF Corporation, explained that Q2 gross margin saw a slight negative impact from FX and a positive impact from lower promotions. He confirmed that the company is making good progress on longer-term initiatives like markdown management, integrated business planning, and SG&A optimization, reiterating confidence in achieving medium-term targets for debt leverage and operating margin.

Jonathan Komp sought more detail on the expected sequential revenue improvement in Q3 and Q4 and asked if any parts of the business were outperforming internal plans.

Answer

CEO Bracken Darrell noted that overall business performance has been very consistent with internal expectations, without any significant areas outperforming. He expressed confidence in the ongoing improvement trajectory but declined to quantify the future rate of change.

Jonathan Komp asked Elliott Hill if North America's recovery timeline, characterized by two to three quarters of severe pressure followed by a return to growth, serves as a reasonable playbook for China. He also questioned why Nike is not providing two-to-three-year out targets or more specific timelines for achieving double-digit margins, given that current headwinds and resets are viewed as temporary.

Answer

Elliott Hill, President and CEO, Nike, stated that while Nike has a handle on China's issues and a path forward, the reliance on partners and the need for new capabilities make it difficult to put an exact date on recovery, though they are confident in the team. Matthew Friend, EVP and CFO, Nike, explained that Nike operates in a dynamic environment, turning around three brands, multiple sports, and four geographies, which complicates long-term forecasting. He emphasized the need for flexibility to make daily decisions for long-term brand health and stated that as confidence grows, more long-term insights will be shared.

Jonathan Komp asked if the North America experience, characterized by a few quarters of pressure followed by a return to growth after Win Now Actions, serves as a reasonable timeline or playbook for China. He also questioned why Nike isn't providing two- or three-year-out targets or more specific timelines for achieving double-digit margins.

Answer

President and CEO, Elliott Hill, stated that while actions are being taken in China, it's difficult to provide an exact timeline due to working with partners and the need for a fresh approach. EVP and CFO, Matthew Friend, explained that operating in a dynamic environment with turnarounds across multiple brands, sports, and geographies is complicated. He emphasized the need for flexibility to make daily decisions for long-term brand health and indicated that greater insight into longer-term targets would be shared as confidence grows.

Jonathan Komp from Robert W. Baird & Co. asked if the inflection in wholesale order growth could lead to a return to total revenue growth at any point during fiscal 2026.

Answer

President & CEO Elliot Hill expressed confidence in the 'WinNow' actions and the 'sport offense,' citing the improving order book as a positive signal. However, he cautioned that a full recovery will take time as each geography is on a different timeline, with North America and EMEA showing the clearest progress and China taking longer. The company will provide guidance 90 days at a time.

Jonathan Komp asked about the potential for margin recapture, questioning if there are unique efficiency opportunities in the supply chain or if improvement depends solely on returning to growth to scale prior investments.

Answer

President and CEO Elliott Hill confirmed that growth is a factor but also highlighted a new strategic focus on supply chain efficiency by having the Chief Supply Chain Officer report directly to him. CFO Matt Friend added that there is a significant margin rate opportunity in NIKE Direct by shifting away from a 50% promotional mix to a healthier, full-price model, which would also reduce reliance on costly paid media.

Jonathan Komp asked about the initial 2026 outlook, specifically if technical apparel would align with the September algorithm (mid-teens growth with China at least low double digits). He also inquired about the Q4 outlook, why profit growth is embedding single-digit growth, and any unique factors impacting Q4 margin or potential headwinds into H1 2026.

Answer

Andrew Page, CFO of Amer Sports, reaffirmed the full algorithm from investor day for both brand and group levels for 2026. For Q4, he noted strong Q3 over-delivery, but Q4 would be the first full quarter of tariffs, include investments for the Milan Olympics, and continued marketing. He stated that if demand materializes, there's no structural reason not to over-deliver.

Jonathan Komp followed up on the initial 2026 outlook, asking if technical apparel is expected to align with the mid-teens growth algorithm, with China at least low double digits. He also sought details on the Q4 operating profit outlook and any potential margin headwinds into H1 2026.

Answer

Andrew Page, CFO of Amer Sports, reaffirmed the full algorithm from investor days for both brand and group levels. Regarding Q4, he cited early sports equipment shipments into Q3, meaningful Q4 marketing investments (Olympics, awareness), and the first full quarter of tariffs as factors influencing the outlook.

Jonathan Komp from Robert W. Baird & Co. asked about the outlook for Arc'teryx's outlet comp drag, the strategic opportunity of acquiring its Korean distributor, and why the full-year operating margin guidance was raised less than the gross margin guidance.

Answer

Arc'teryx CEO Stuart Haselden expects the outlet drag to remain consistent with H1 levels and described the Korea acquisition as an 'exciting' opportunity with potential to become larger than Japan. CFO Andrew Page explained the operating margin guidance reflects a strategic decision to reinvest the gross margin upside into growth initiatives, such as new stores and marketing to support the Solomon brand's inflection, while still delivering 100 basis points of bottom-line expansion.

Jonathan Komp questioned the full-year outlook, which implies a slowdown in profit growth in the second half, and asked for more color on the recently positive-trending Salomon wholesale business.

Answer

CFO Andrew Page described the back-half guidance as a responsible approach given macro uncertainties. CEO Jie Zheng added that Salomon's wholesale business, primarily in Europe, is seeing strong momentum with accelerated reorders and positive future bookings, driven by strong resonance for new products like the XT-Whisper and Aero Glide 3.

Jonathan Komp questioned the implied second-half slowdown in the full-year outlook, asking if it was due to specific factors or a conservative approach. He also asked for color on the Salomon wholesale business turning positive.

Answer

CFO Andrew Page described the guidance as a 'responsible' approach given significant macro uncertainty. CEO Jie Zheng added that Salomon's wholesale business, driven by Europe, is seeing strong momentum with accelerated reorders and positive future order bookings, fueled by successful new product launches that are resonating with retail partners.

Jonathan Komp asked for more specific details on HOKA's product launch plans into 2026, including the cadence and plans for key styles like Clifton, Bondi, and Arahi. He also sought a breakdown of the 'billions of revenue' potential for HOKA, identifying major growth opportunities. Additionally, he inquired if the back-half operating margin (low 20% range) represents the current annual run rate and whether tariff-related margin pressure is temporary or a permanent step down.

Answer

President and CEO Stefano Caroti outlined HOKA's growth areas: performance on trail, hike, fitness, lifestyle, and future apparel, noting the brand operates in a half-trillion-dollar market with significant upside. He detailed product transitions, including tightened inventories for outgoing styles and upcoming launches of Gaviota, Mach, Transport, and Speedgoat, with the Clifton update in fall 2026 and no overlap with Bondi. CFO Steve Fasching clarified that the back-half operating margin decline is primarily tariff-driven, which will continue to be a headwind into FY2027, indicating that while mitigation efforts are ongoing, the pressure is not entirely temporary.

Jonathan Komp asked for more specific details on HOKA's product launch plans into 2026, including the cadence and plans for key styles like Clifton, Bondi, and Arahi. He also sought a build-up or big buckets of growth opportunities for HOKA, given its potential to add billions in revenue. Additionally, he inquired if the back-half operating margin in the low 20% range indicates a new annual run rate for the business, and whether the unmitigated tariff pressure is a temporary or permanent step down in margin.

Answer

President and CEO Stefano Caroti detailed HOKA's product strategy, including tightened inventory for outgoing styles and upcoming launches of Gaviota, Mach, Transport, and Speedgoat. He noted that the Clifton update is planned for Fall 2026, and Clifton and Bondi will no longer overlap. For HOKA's growth, Stefano Caroti highlighted focus areas: performance trail, hike, fitness, lifestyle, and eventually apparel, operating in a half-trillion-dollar market with significant upside. CFO Steve Fasching clarified that the operating margin declines in the back half are primarily driven by tariffs, not a change in the underlying business profile. He stated that the margin change between last year and this year is tariff-driven, and these headwinds, along with an assumed level of promotion, will continue into FY2027, despite successful mitigation efforts in Q2 that may not be repeatable.

Jonathan Komp of Robert W. Baird & Co. asked about the business insights driving HOKA's strategic focus on enhancing capabilities and improving product launch cadence. He also questioned the company's minimum cash requirements and the Board's perspective on share buybacks.

Answer

CEO Stefano Caroti explained that investments in innovation and design are crucial in a competitive landscape and that the company learned to better space out key launches. CFO Steven Fasching stated that the company's strong cash position enables opportunistic share repurchases, especially when management feels the stock is undervalued.

Jonathan Komp of Robert W. Baird & Co. inquired about the business insights driving the focus on enhancing HOKA's capabilities and launch strategies, and also asked about the company's perspective on its minimum cash requirements and share buyback approach.

Answer

CEO Stefano Caroti explained that investments in innovation, design, and color are crucial in a competitive market and that key learnings include better spacing of product launches and tighter inventory management. CFO Steven Fasching stated that the company's strong cash position allows the board to authorize share repurchases, particularly when they believe the stock is undervalued.

Jonathan Komp inquired about the specific factors driving the slowdown in HOKA's U.S. direct-to-consumer (D2C) channel and sought assurance against broader competitive pressures. He also asked about the potential for HOKA to achieve mid-teens growth for the full year and the long-term importance of its emerging lifestyle and fitness categories.

Answer

CFO Steve Fasching attributed the HOKA U.S. D2C pressure to temporary factors, including consumers purchasing new models in physical stores, promotions on outgoing models, and slower new customer acquisition amid macro uncertainty, while noting strong international D2C performance. CEO Stefano Caroti affirmed his strong confidence in the brand's long-term potential. Fasching added that while a mid-teens growth rate is the goal in a normal environment, current uncertainty makes it difficult to forecast demand precisely.

Jonathan Komp questioned the low implied consolidated growth rate for Q4, asking if double-digit growth is achievable in fiscal 2026 given positive demand. He also inquired about HOKA's competitive landscape and future distribution strategy.

Answer

CFO Steve Fasching explained the Q4 growth rate is not indicative of brand health but a result of deliberate market management, inventory control, and difficult year-over-year comparisons. CEO Stefano Caroti addressed competition by highlighting HOKA's strong innovation pipeline and stated that distribution expansion will remain selective and thoughtful, particularly in international markets.

Jonathan Komp from Robert W. Baird & Co. asked for details on HOKA's second-half growth plan, given the full-year guidance implies a slowdown from the first half's 32% growth. He also questioned if the cautious gross margin outlook is based on current promotional trends or a forward-looking assumption.

Answer

CFO Steven Fasching explained the growth moderation was planned, with new styles and door expansion driving a front-loaded first half. He confirmed the back-half gross margin caution is a forward-looking assumption based on a potentially challenged holiday season, more product in the channel, and planned promotions for upcoming product transitions, not current trends.

Jonathan Komp questioned the second-half same-store sales outlook, which appears conservative given recent positive trends. He also asked about the biggest hurdles to returning to net unit growth and the suitability of the current franchisee base.

Answer

CFO Tom Kim explained the outlook is prudent, reflecting a conservative view on the timing of new customer acquisition initiatives, despite recent positive trends. Chairman & CEO Chris Morris added that the main hurdle to growth is restarting a stalled development pipeline, which requires rebuilding franchisee confidence. He affirmed his belief that the existing franchisee base is well-suited to drive future growth with the right corporate support.

Inquired about the reasons for increased center build-out costs, whether future growth depends more on cost optimization or top-line initiatives, and the key themes for the upcoming franchisee convention.

Answer

The executive attributed higher build-out costs to inflation and stated that returning to unit growth relies on both identifying suitable markets and ensuring franchisee profitability. The upcoming convention will focus on aligning franchisees with the company's strategic plan, assessing the current situation, and outlining a collaborative path forward.

Asked about the status of the development pipeline, the impact of external factors like consumer behavior and competition, and for an update on the previously disclosed number of licenses.

Answer

The 2025 opening pipeline (10-12 units) is firm, but many franchisees have paused new development. While the macro environment is a headwind, the competitive landscape hasn't changed significantly, and the company believes its issues are more internal and fixable. The ~370 licenses are still valid, but the company is re-tooling its real estate and development strategy to be more top-down and strategic before re-accelerating growth.

In a follow-up, Jonathan Komp asked about the potential for the working media budget to increase in 2025 and for confirmation on whether the company has purchased any franchisee units.

Answer

CFO Stacie Shirley confirmed that the company has not purchased any units to date, with transfers to other franchisees being the preferred option. CEO David Berg added that there is a significant opportunity to increase the working media spend by bringing marketing activities in-house and reallocating retainer fees, which will benefit the entire system.

Jonathan Komp asked for the updated same-store sales assumption in the 2025 guidance, drivers of the recent slowdown, franchisee feedback on new operational support initiatives, and the new CEO's near-term transition plan.

Answer

CFO John Meloun indicated the guidance now assumes low single-digit same-store sales for H2, citing seasonality and softness in some brands. President, North America John Kawaja reported positive franchisee feedback on the new field operations team. New CEO Mike Nuzzo stated the company is well-positioned for him to get a quick start on strategy.

Jonathan Komp asked about the specific factors driving the downward revision to the 2025 new unit outlook, the company's confidence in the new range, and the materiality of revenue recognized from license terminations.

Answer

CFO John Meloun cited two main reasons for the revised outlook: a pipeline bottleneck from the recent pause in license sales and higher-than-expected Q1 closures. He expressed high confidence in the new net opening range of 160 to 180. Meloun clarified that revenue from license terminations has historically been a few million dollars per quarter and is part of historical results, but a forward-looking figure is not yet determined.

Jonathan Komp asked for a timeline on key strategic initiatives, more context on potential legacy operational issues, and the percentage of studios at risk of closure.

Answer

CEO Mark King outlined that initiatives like the field ops pilot, data warehouse project, and international deployment are in motion, with significant momentum expected in 2026. He attributed legacy issues to a past lack of structure and process, stating a new culture of transparency is in place. CFO John Meloun identified that roughly 10% of the portfolio is underperforming (below $360k AUV), with 5-7% in a critical range, aligning with the 2025 closure guidance.

Jonathan Komp sought clarification on the Q4 studio closure outlook, franchisee appetite for 2025 openings, and the reasoning behind the wide Q4 revenue guidance range.

Answer

CFO John Meloun projected Q4 closures to be at or below Q3 levels and expects the annual closure rate to decline significantly in 2025 from the current year's 3-5% range. He noted good visibility into 2025 openings but emphasized successful launches over hitting a specific number. The wide Q4 revenue range was acknowledged, but Meloun expects sequential growth driven by equipment revenue from new openings and revenue from the annual franchisee conference.

Jonathan Komp of Robert W. Baird & Co. inquired about the growth outlook for Saucony in the second half of 2025, seeking details on the key drivers. He also questioned the sustainability of the company's high gross margin and its path to achieving double-digit operating margins.

Answer

CEO Christopher Hufnagel explained that Saucony's growth is broad-based, driven by product innovation and a new brand-building model, but noted that growth will moderate as they lap new door openings. CFO Taryn Miller expressed increased confidence in maintaining gross margins within the 45% to 47% target range, citing pricing discipline and cost initiatives, while acknowledging typical Q4 seasonality.

Jonathan Komp asked a high-level question about the primary factors preventing the company's 2025 revenue growth guidance from reaching the higher end of its long-term mid-to-high single-digit target.

Answer

CEO Chris Hufnagel responded that while the largest brands, Saucony and Merrell, are poised for strong growth, it is challenging to have all portfolio brands peak simultaneously. He specifically mentioned that the Work Group requires performance improvement. CFO Taryn Miller added that the 2025 constant currency guidance of 4.2% to 5.9% growth is already at the midpoint of the long-term aspirational range.

Jonathan Komp asked about plans to offset higher churn from online cancellations and initiatives to drive unit economics. He also sought updates on converting High School Summer Pass members and the timing of a potential Black Card price increase.

Answer

CFO Jay Stasz framed the online cancellation feature as the right choice for members. CEO Colleen Keating noted that High School Summer Pass participation is up markedly, which is a positive indicator for fall conversions. On Black Card pricing, she said the company wants to let the initial churn from the online cancellation rollout moderate before deciding on the timing.

Jonathan Komp asked if the company is seeing any changes in member behavior, given that the 2025 comp guidance isn't higher than the Q4 run-rate despite pricing benefits. He also sought to quantify the step-up in investments and understand the underlying earnings leverage potential.

Answer

CFO Jay Stasz stated that member trends are good and consistent. He explained that 2025 is a unique investment year due to the hiring of a new CMO and CDO and a full year of CEO compensation, which is why revenue and adjusted EBITDA are guided to grow at the same rate. He clarified that in a normalized year, the company would expect SG&A to grow slower than revenue, leading to EBITDA margin expansion, and expects to return to that leverage in future years.

Jonathan Komp inquired about the expected timeline for the company's other strategic priorities, particularly the marketing evolution for Q1. He also sought clarity on the visibility for Q4 new club openings and whether 2024 should be viewed as a floor for the annual pace of expansion.

Answer

CEO Colleen Keating stated that the brand positioning work is in its final stages, with new creative being developed for Q1, and that recruiting a CMO and CDO is a top priority. CFO Tom Fitzgerald addressed unit growth, expressing confidence in meeting the Q4 opening targets. He noted that while 2025 guidance is not yet available, the current strategic initiatives are designed to accelerate new unit growth in the future.

Jonathan Komp of Robert W. Baird & Co. inquired about the progress of shifting the supply chain, the market's reaction to recent price increases, the key drivers behind the raised full-year guidance, and the comparative size and growth rates of the outdoor versus work business segments.

Answer

CFO & COO Thomas Robertson stated that the supply chain shift, particularly to their Dominican Republic and Puerto Rican facilities, is ahead of schedule. President, CEO & Chairman Jason Brooks noted that retail partners have been largely understanding of the price increases. Robertson explained the guidance raise was driven by Q2's outperformance and strong Q3 bookings, supported by better inventory for Muck and ExtraTough. He also clarified that the outdoor category is growing faster and now represents about a third of Q2 sales, with the work category remaining the largest overall.

Jonathan Komp sought clarification on the guidance math, questioning how gross profit dollars could remain unchanged with flat revenue and lower gross margin percentages. He also asked about the pricing strategy, customer communication regarding price hikes, and the quantifiable progress in shifting production capacity to Vietnam, India, and Cambodia.

Answer

Chief Operating and Chief Financial Officer Thomas Robertson clarified that price increases are expected to slightly lift revenue, but this is tempered by potential volume softness. The primary goal is to preserve gross profit dollars, which mathematically results in a lower gross margin percentage. Executive Jason Brooks added that they have communicated with key retailers, who prefer a clean price increase over a tariff surcharge. Regarding sourcing, Brooks confirmed they are accelerating a methodical shift, with Robertson quantifying that new locations have been secured for 90-92% of the product, leveraging their inventory buffer to manage the transition.

Jonathan Komp of Robert W. Baird & Co. inquired about the recent mixed signals in consumer behavior, the confidence behind the low single-digit revenue growth forecast for 2025, the specifics of the projected 110 basis point tariff impact, and the key brand drivers for the upcoming year.

Answer

CFO Thomas Robertson and executive Jason Brooks acknowledged strong sell-through but noted retailer caution is affecting order pace. Robertson explained that confidence in the annual forecast stems from a strong order book, but Q1 is expected to be flat due to inventory replenishment timing, with growth accelerating in Q2 and Q3. Regarding tariffs, they are based on existing rates and are being mitigated through pricing, vendor negotiations, and sourcing adjustments. Key growth drivers identified were the XTRATUF, MUK, and Durango brands, along with the Lehigh B2B business and strategic use of online marketplaces.

Inquired about the revised second-half outlook, the relative size of key brands, and visibility into the first half of 2025.

Answer

The revised outlook is due to a combination of underperformance in brands like Muck (due to weather) and missed upside in XTRATUF/Durango (due to inventory). The company declined to share brand sizes but provided preliminary 2025 growth targets, noting strong Q1 bookings for key brands.

Jonathan Komp of Robert W. Baird & Co. inquired about recent brand awareness trends across regions and the specific growth drivers for the Americas business for the remainder of the year.

Answer

Executive Co-Chairman Caspar Coppetti attributed strong Q1 results to upper-funnel brand campaigns like the Super Bowl ad and Zendaya partnership. Co-CEO Martin Hoffmann added that momentum continued into April, the company's strongest month ever. For the Americas, Hoffmann cited strong brand resonance, market share gains in running, controlled store expansion, a favorable comparison to last year's D2C operational issues, and a robust product pipeline reflected in strong preorders.

Jonathan Komp asked about the 2025 outlook, seeking details on expected operational efficiencies, and also inquired about the company's progress toward its long-term strategic targets for apparel, D2C, retail, and China.

Answer

CFO and Co-CEO Martin Hoffmann explained that G&A leverage is the primary driver for the expected adjusted EBITDA margin expansion to 17-17.5%, with further benefits from warehouse automation expected later in 2025 or early 2026. Co-CEO Marc Maurer addressed the long-term targets, stating they are on track with retail and China expansion but slightly behind on apparel, though they have clear plans to accelerate growth. He noted China's store count will grow from 58 to approximately 80 in 2025.

Jonathan Komp of Baird asked whether the LightSpray technology is primarily a marketing tool or a commercially scalable innovation, and for the assumptions behind the Q4 EBITDA outlook.

Answer

Executive Co-Chairman Caspar Coppetti asserted that LightSpray is a potentially disruptive manufacturing technology intended for large-scale commercialization, not just a marketing story. CFO and Co-CEO Martin Hoffmann explained the Q4 EBITDA margin outlook reflects a balance of growth and investment, with planned spending on major brand campaigns and higher D2C distribution costs during the holidays. This aligns with the long-term strategy of gradually expanding margins toward the 18%+ goal by 2026.

Jonathan Komp asked for the rationale behind withdrawing guidance and not providing a Q2 revenue outlook, and questioned if the company is planning to fully offset the potential $130 million tariff impact.

Answer

CEO Andrew Rees explained that while April performance was strong, the decision to withdraw guidance is a matter of prudence due to the highly unpredictable global trade environment. He clarified that the $130 million tariff impact is an extreme and unlikely scenario, as the company would not continue importing from China at current rates if the 145% tariff remains. He noted they are already shifting sourcing away from China.

Jonathan Komp asked about the health of the Crocs brand in North America, the drivers for its expected inflection after Q1, and the rationale for the step-down in SG&A growth in the second half of 2025.

Answer

CEO Andrew Rees expressed confidence in the North American product pipeline for Crocs but noted a prudent outlook due to consumer uncertainty. CFO Susan Healy explained that the lower SG&A growth in 2H 2025 is due to lapping the back-half weighted investments made in 2024. Rees added that after a period of rapid growth and SG&A leverage, the company has been making critical investments in capabilities and marketing, and is now committed to maintaining a 24% operating margin floor.

Jonathan Komp of Robert W. Baird & Co. inquired about the specific drivers for the Crocs North America DTC business in Q4 and the expected role and growth drivers for the North American segment in 2025.

Answer

CFO Susan Healy confirmed that Q4 DTC is expected to be positive, offset by a planned decline in wholesale due to earlier shipments, while maintaining a flat outlook for the second half. CEO Andrew Rees characterized the North American business as a stable, highly profitable cash generator that funds international growth and HEYDUDE investments, and he anticipates modest growth in the short to longer term.

Jonathan Komp of Robert W. Baird & Co. asked about the outlook for Crocs North America in Q3, questioning the unique versus lasting factors driving the forecast and the long-term strategy to reinvigorate brand excitement. He also followed up on potential market share loss in family channels to athletic brands and how the company is protecting profitability amid a significant revenue slowdown.

Answer

CEO Andrew Rees explained that the North American outlook is affected by a cautious consumer and a deliberate, strategic pullback on promotions to protect long-term brand health and profitability. He acknowledged a competitive athletic trend but highlighted Crocs' strong international growth, innovation in sandals, and ongoing cost-saving measures ($50 million actioned) as key priorities. Rees noted that 170 basis points of Q3 margin deleverage are due to tariffs.

Jonathan Komp sought clarity on whether the shift of U.S. sourcing from China is permanent, the risk of product shortages from this move, and if the $40-$45 million margin impact is a one-time event that the company will aim to recover next year.

Answer

CEO Tim Boyle explained that reducing U.S. sourcing from China has been a multi-year strategy and does not pose a risk to product assortment or quality. CFO Jim Swanson stated that while the company is absorbing the tariff costs this year, the expectation is to implement strategies to recover those costs next year, though the environment remains highly uncertain.

Jonathan Komp of Baird requested more detail on the key metrics and objectives for the planned increase in marketing spend. He also asked for management's long-term perspective on recovering profitability to historical levels, given the current margin profile.

Answer

CEO Tim Boyle explained the marketing goal is to attract younger, more active consumers to its premium, innovative products. EVP & CFO Jim Swanson added that key metrics include online conversion rates and loyalty program member acquisition. Regarding profitability, Swanson stated the long-term goal is to reach upper-quartile operating margins in the teens, which requires both cost management and top-line growth.

Jonathan Komp followed up on the H1 2025 wholesale outlook, noting it would still be down on a two-year basis and asking for an assessment of this multiyear performance relative to the industry. He also questioned the balance of targeting margin expansion via cost-cutting while simultaneously investing to accelerate growth, asking if there's a risk they cut too deeply.

Answer

CEO Tim Boyle responded that in the consolidated North American retail market, Columbia must improve its performance through better marketing and in-store execution, leveraging unique products like PFG to drive a stronger wholesale business. On balancing costs and growth, Boyle clarified that the "Accelerate" strategy is not about across-the-board cuts but about reallocating spend from postponed initiatives toward high-impact marketing and promotional activities to regain brand strength.

The analyst inquired about the reasons for retail store traffic declines and the potential impact of store closures on the direct-to-consumer business. He also questioned the significant sequential inventory increase, the strategy for managing SKU count, the level of markdown pressure assumed in guidance, and the profitability outlook for Q3.

Answer

Executives acknowledged challenging store traffic but noted sequential improvement and benefits from a multichannel market strategy and local events. They are prepared to exit underperforming stores upon lease renewal. The inventory increase was attributed to reacting to a leaner-than-expected position coming out of Q4 and receiving some spring/summer orders late, which shortened the selling window. The gross margin guidance already contemplates the necessary markdowns (about 50 basis points of pressure). For Q3, they expect seasonality to follow prior years but with higher margin pressure due to clearance activities.