Laura Champine • Loop Capital Markets

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SVP & CFO Jack Calandra noted that the Jordan launch on May 17 was too recent and limited in scope to have caused a major trend shift yet, though the company is excited about its potential. President & CEO Jay Schmidt stated that Caleres is sticking to its current sourcing plan despite the fluid tariff situation and clarified that while the wholesale book is in flux due to sourcing shifts, the direct-to-consumer business has seen improving retail trends into May.

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CFO Jack Calandra confirmed that the guidance can accommodate a decline in the base business, as growth from specific initiatives like lapping the $15 million SAP upgrade impact and international expansion are substantial. CEO John Schmidt noted that inventory is now more current, suggesting markdown pressures from Q4 are largely resolved. Jack Calandra added that Q1 gross margin is expected to decline, impacting profitability.

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CFO Jack Calandra clarified that the Q4 operating margin decline is expected to be driven by lower gross margin at the Brand Portfolio, where the company plans aggressive markdowns to clear slow-moving inventory. Regarding the credit issue, he confirmed shipments were suspended and the receivable was reserved for in Q3. He ranked the Q3 top-line miss drivers as: 1) weak boot sales, 2) late athletic product receipts, and 3) the customer credit issue. CEO Jay Schmidt stated that the entire international business is less than 5% of total sales, with China being the largest component of that.

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CEO John Schmidt stated that the ERP issues have been addressed and should have an immaterial impact on the second half of the year, as systems are now operational with necessary workarounds in place. He attributed the August sales rebound to a combination of three factors: being better positioned with key athletic brands, the margin-accretive success of a BOGO promotion, and a highly focused marketing campaign on kids' footwear.

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Executive James Conroy responded that flexibility to shift sourcing is limited in the short-term (3-6 months) because product for upcoming seasons is already largely committed from China for all retailers. He was not prepared to provide a specific year-end sourcing percentage, emphasizing that merchants prioritize finding compelling value for customers, regardless of the country of origin.

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Executive James Conroy responded that flexibility to shift sourcing is limited in the near-term (3-6 months) as much product is already set to be imported from China for all retailers. He was not prepared to give a specific country sourcing percentage for year-end, emphasizing that the merchants' focus is on delivering a compelling assortment at a great value, regardless of origin.

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Group President and COO Michael Hartshorn responded that while weather helps, much depends on the macro backdrop. He emphasized that the off-price model operates well in tough environments, as it creates more closeout opportunities, allowing them to pass better value to consumers, referencing their successful navigation of the 2008-2009 recession.

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CEO Barbara Rentler assured that the incoming CEO will be supported by a deeply experienced team, with direct reports having 25-30+ years of tenure at Ross. She explained the timing of the hire was driven by finding the right person, Jim Conroy, after a comprehensive 1.5-year search. She described it as an opportunistic decision to secure the right leader for the company's future.

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Group President and COO Michael Hartshorn described the efficiencies as a mix of numerous initiatives with varying timelines; some will conclude this year, while others will extend into the next. He stressed that the company is continuously working on a 'next generation' of efficiencies and that the long-term model of growing EBIT margin on a 3% to 4% comp remains unchanged.

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CEO Andrew Rees responded that it's impossible to quantify a precise tariff cost but noted they are not seeing cost increases from their key Southeast Asian partners. Regarding demand elasticity, he acknowledged that volumes would likely decrease with higher prices but stated he would rather protect margins to fund marketing than cut prices and lose the ability to communicate with consumers.

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CEO Andrew Rees explained that pricing is determined on a market-by-market basis, considering competition and brand strength. While pricing has been a past margin driver, no significant increases are planned in the short term. He noted that HEYDUDE's recent ASP increase was driven primarily by a reduction in discounting rather than absolute price hikes.

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CEO Ed Rosenfeld explained that the company is taking a "surgical approach" at the style level, with price increases ranging from 0% to as high as 20%, averaging around 10%. He emphasized the situation is fluid and they will monitor demand elasticity. He noted it was too early to comment on how their pricing actions compare to the rest of the industry.

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Chairman and CEO Edward Rosenfeld stated that the company's primary focus for the year will be integrating the Kurt Geiger acquisition, suggesting other major M&A is unlikely in the near term. He clarified that the branded wholesale footwear business was down approximately 3% in Q4 but is expected to return to low-single-digit growth in Q1 and for the full year 2025.

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Chairman and CEO Edward Rosenfeld stated that it is too difficult to quantify the potential impact at this time. He noted that a new tariff policy would have wide-ranging implications on the supply chain, the overall economy, and supply-and-demand dynamics, making it too early to speculate on the specific margin effect.

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CEO Jeff Lorberbaum explained that products from Mexico face no tariffs, so no changes are needed there. He stated the company will balance internal and external supply, maximizing utilization of its U.S. factories where it has some available capacity. Regarding Europe, he noted that prices are already very low, and it's uncertain if they can go much lower, regardless of Chinese supply shifts.

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CEO Jeff Lorberbaum provided precise figures, stating that Mohawk imports approximately $300 million in products from Mexico and exports approximately $200 million to Canada.

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Chairman and CEO Jeff Lorberbaum explained that estimating the rebuild benefit is difficult, as the timeline can stretch over a couple of years depending on the extent of damage and labor availability. Executive James Brunk added that while the pace of recovery in Europe is hard to predict due to political uncertainties, the European Central Bank has already cut rates three times, which should help stimulate activity in the category.

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Executive Stephen Lazarus explained that the share buyback program is not necessarily contingent on business strength, as the company has historically generated strong free cash flow even in downturns. He clarified that the decision to repurchase shares is driven more by the stock's valuation and a perceived dislocation between its market price and intrinsic value, suggesting they will continue to be opportunistic.

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CEO Leonard Fluxman described the SKU rationalization and pricing transformation as a complex, ongoing process that is being implemented banner by banner. He affirmed that prebooking remains a key focus, given that prebooking guests spend over 30% more, and the company continues to push its partners to enhance this channel.

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CEO Leonard Fluxman stated that cruise lines remain very protective of their data and are unlikely to share more. To drive pre-bookings, he explained that the company collaborates with partners to improve the online spa booking experience through better imagery, videos, and website navigation. A key strategy is working with cruise line marketing teams to emphasize the value and necessity of prebooking to secure desired services.

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Executive Chairman Leonard Fluxman stated that the company's partnership with Elemis is sufficient, citing a strong R&D collaboration and a long-term supply agreement that make new product lines or M&A unnecessary. He noted that while the e-commerce channel is improving, the primary focus remains on the core Elemis partnership.

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Marc Bitzer (executive) explained that while a 145% tariff is unlikely, even a 20% rate alters commercial behavior, and a full rollback is improbable. He confirmed that Asian competitors increased imports by 30% in Q4 and early Q1, creating market disruption that is expected to continue into Q2. However, he expressed confidence that Whirlpool can manage this dynamic as it did in the first quarter.

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CEO Marc Bitzer contextualized the performance by noting the overall SDA market is flat to negative, whereas Whirlpool achieved single-digit growth. He attributed the Q4 margin pressure directly to significant, planned marketing investments to support new product launches in categories like coffee makers. Bitzer stated these are crucial investments for future growth and that the company is pleased with the early momentum, though it will take time to build awareness.

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CEO Marc Bitzer stated that the company is comfortable with its full-year SDA revenue growth guidance of over 7%, attributing the Q3 decline to shipment timing rather than fundamental weakness. For North American majors, he emphasized that the primary focus is on margin expansion, not chasing revenue. He noted that market share has been recovering since the April pricing actions and that the current revenue outlook is aligned with market expectations.

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CFO John Klinger attributed the Q1 margin deleverage to lapping a prior-year CARES Act benefit, negative interest impact, inventory hedge timing, and wage costs, but did not quantify them individually. He then stated that the European store growth is largely concentrated in Germany, with additional opportunities in Austria, the Netherlands, Poland, the U.K., and Ireland.

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Executive Gary Millerchip acknowledged that while Costco's e-commerce has grown faster than the U.S. average over the last decade, they are their own toughest critic and believe there is more work to do to improve the member experience. Executive Ron Vachris added that foundational back-end work on speed and stability is underway, with more front-end improvements coming. Regarding online sign-ups, he noted they attract fewer Executive Members initially, as there's no employee to explain the benefits, but it's a way to start the member relationship.

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CFO David Loretta clarified that the significant gross margin expansion was almost entirely due to structural cost and supply chain savings, not pricing, as the 2023 price increases have been lapped. Regarding tariffs, Loretta stated that any impact would take time to materialize and is not expected to be material in 2025. He emphasized that the company is already working on sourcing flexibility and cost reductions as mitigation strategies, rather than committing to price increases.

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