Jonna Kim

Jonna Kim inquired about the performance mix of fragrance and body care, CEO Daniel Heaf's plans for the beauty category, and details on the Disney partnership's launch and future cadence.

Answer

CFO Eva Boratto stated the company was disappointed with Body Care performance, which was down low-single digits due to a lack of newness around Mother's Day. CEO Daniel Heaf positioned the Disney collaboration as a key growth driver, noting the new multi-year agreement turns it into a durable, profitable lever for the company, with more such partnerships planned for the future.

Jonna Kim asked about the company's pricing strategy amid potential competitor price hikes due to tariffs. She also inquired about key learnings from the Disney partnership regarding the attraction and retention of new customers.

Answer

CFO Eva Boratto responded that the company will remain flexible on pricing, noting customers are value-seeking and that Q1 mix-adjusted AURs were up low-single-digits. CEO Daniel Heaf added that the Disney collaboration validated their growth model of using emotive stories to drive traffic. He emphasized the opportunity to attract new, younger consumers, who then become part of the 'remarkably sticky' loyalty program ecosystem.

Jonna Kim from TD Cowen asked about the outlook for marketing spend in the second half of the year compared to the first half, and if there were any changes planned for the holiday season marketing campaigns.

Answer

CEO Amanda Baldwin expressed confidence in the current marketing spend levels and plans for the second half, noting that holiday is an important period for the brand. COO & CFO Catherine Dunleavy elaborated that investments are aligned with the company's three strategic priorities and are focused on long-term brand building, not just short-term sales, with an expectation to see leverage from these investments over time.

Jonna Kim of TD Cowen asked for more color on the most significant changes to the sales force and marketing strategy following the restructuring. Additionally, she inquired about any tangible results or changes already being observed in clinic attrition rates due to these new initiatives.

Answer

CEO Bret Christensen detailed that the primary sales force change was a shift from a 'maintenance' focus to a 'growth' focus. This involved creating smaller territories, implementing growth-based compensation plans, consolidating leadership for clearer messaging, and revamping recruiting and training. Regarding attrition, he stated that a fully staffed sales team is critical and that the company is focused on strengthening its value proposition to make its offering 'stickier' and improve retention, though tangible results are not yet evident.

Jonna Kim from TD Cowen asked for an update on the company's inventory position ahead of the holiday season and for color on recent trends in customer traffic, conversion, and ticket size.

Answer

CEO Ciaran Long acknowledged that inventory ended Q2 lighter than desired (down 13% YoY) due to sourcing shifts and tariff management. He expressed confidence that in-stock levels would be back to desired levels by the end of Q3. Regarding KPIs, Long stated that underlying demand remains strong, though metrics were somewhat impacted by a temporary pullback in promotions and newness, which was part of their tariff mitigation strategy.

Jonna Kim of TD Cowen asked about the expected mix of international versus U.S. business within the company's 2030 long-term financial targets. She also inquired about any changes to the marketing strategy and its focus between weight loss and core offerings.

Answer

CFO Yemi Okupe explained that while international expansion is a key growth lever, the company does not have a specific target mix, as it also sees immense opportunity in the U.S. through new specialties and capabilities. He stated that marketing spend will continue to target a one-year payback period, with investments being made across both core offerings and multi-condition campaigns as the company iterates on its strategy.

Jonna Kim requested more color on the expected moderation of monthly revenue per subscriber and the growth opportunity for the oral weight loss medication.

Answer

CFO Yemi Okupe explained that monthly revenue per subscriber will face headwinds from the transition of semaglutide users but see tailwinds from branded partnerships and premium product adoption. He noted the oral weight loss offering has seen robust growth (over 300% YoY) due to its attractive price point and less restrictive eligibility requirements.

Jonna Kim inquired about the company's overall pricing strategy, including any plans to lower prices in 2025, and asked about the strategy to enhance cross-selling among its GLP-1 users.

Answer

CFO Yemi Okupe explained that as the company unlocks efficiencies, it constantly evaluates passing value to consumers, whether through direct price tests or creative offerings like multi-condition bundles. Regarding cross-selling, he noted that adoption of multiple specialties has been largely organic to date. The focus for 2025 will be on improving the user experience to reduce friction and make it easier for subscribers to opt into multiple treatments.

Jonna Kim from TD Cowen asked about the performance of the swim category and requested details on the current size and growth potential of the Beauty business.

Answer

CEO Hillary Super reported that swim was a growth category for both the Victoria's Secret and PINK brands, with particular strength in PINK's iconic swim and the Frankie's Bikinis collaboration. She stated that the Beauty business is very significant, representing about 25% of total sales, and has considerable runway for innovation, expansion, and driving customer loyalty.

Jonna Kim from TD Cowen inquired about the performance of the digital channel versus physical stores during the quarter and quarter-to-date. She also asked about the company's pricing strategy for mitigating the impact of tariffs, particularly the balance between raising prices and running promotions.

Answer

President and Executive Creative Director Jennifer Foyle noted that the company saw an uptick in the digital channel and leaned in there during a quarter with tumultuous traffic patterns. Regarding tariffs, she stated the team worked hard to mitigate risk through production, merchandising, and planning, ensuring cost of goods are in line and that they are well-positioned to compete for back-to-school.

Jonna Kim asked about the strategy to accelerate sales in the Aerie intimates business and the plans for growing the OFFLINE activewear brand.

Answer

President Jen Foyle stated that while the intimates market is challenged, Aerie is holding share and seeing growth in undies, driven by fabric innovation like SMOOTHEZ. For OFFLINE, she highlighted strong market share gains in sports bras and leggings, which are key new customer acquisition drivers and support the brand's continued expansion.

Jonna Kim asked about the monthly sales cadence during the second quarter, how consumer health has been trending, and for any initial color on the company's plans for the holiday season.

Answer

Mike Mathias, CFO, detailed that May and June were the stronger months in Q2, with a moderation in July that was consistent with broader industry trends. He noted that performance reaccelerated in August. The Q3 guidance accounts for a potential moderation in the period between the Back-to-School and holiday peaks.

Jonna Kim from TD Cowen inquired about the marketing investment strategy for the upcoming year, how it might differ from the last, and the allocation of spending. She also asked about consumer resilience and any signs of softness in the physician-dispensed channel.

Answer

Executive Michel Brousset stated that marketing investment will continue to accelerate as a percentage of sales. He detailed that Milk Makeup's strategy is broadening from organic and influencer marketing to include larger paid campaigns to support the Ulta Beauty launch. For Obagi Medical, the focus is on direct-to-consumer advertising to drive traffic to physicians. Brousset noted the physician-dispensed channel remains strong, growing at 8%, and is benefiting from premiumization and the convergence of beauty and wellness.