Lorraine Maikis • Bank of America

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Group President and COO Michael Hartshorn explained the Q2 impact includes costs for orders already in transit when tariffs were announced, leaving no room for mitigation on those goods. He also noted that due to uncertainty around consumer behavior and sourcing dynamics, it is too early to reliably predict the impact for the second half of the year.

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Group President and COO Michael Hartshorn explained the Q2 impact is elevated because it includes costs for orders already in transit when tariffs were announced, plus additional supply chain ticketing expenses. He stated that due to numerous variables like consumer behavior and sourcing dynamics, it is too difficult to reliably predict the impact for the second half of the year.

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Group President & COO Michael Hartshorn stated that the company's long-term expectation is for the brand strategy to be accretive to earnings. He anticipates slight improvements in merchandise margins over time as vendor relationships strengthen and the company refines its understanding of customer preferences.

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Executive Richard Hayne attributed the European success primarily to strong product assortments, particularly in bottoms and tops, which are being shared with the North American division. He also credited effective marketing initiatives. Executive Sheila Harrington added that momentum in European womenswear has been building for several quarters and highlighted the strong partnership between the European and North American leadership teams.

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Co-President and COO Francis Conforti acknowledged that the company fell just short of its three-year IMU goal but emphasized that meaningful progress was made across all brands. He stated that URBN will continue to work on driving additional IMU improvements in the coming years, as management still sees opportunity on that line.

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Executive Shea Jensen responded that the team is confident in its strategy, which is rooted in a firm understanding of the UO customer. She highlighted positive momentum in key assortment areas like denim, lounge, and home, building traffic in selling channels, and disciplined inventory management that is improving the bottom line.

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Shea Jensen, President of Urban Outfitters North America, stated that inventory is clean and aligned with sales, which is the primary driver for margin recovery. Francis Conforti, Co-President and COO, added that the Q4 gross margin improvement will be driven by strong initial merchandise margins (IMU) and a significant opportunity for markdown improvement at the Urban Outfitters brand, which had unusually high markdowns in the prior year's fourth quarter.

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CEO Ernie Herrman acknowledged the unique environment and the "uneasiness" among vendors. He stated that TJX's inventories are up, reflecting their ability to capitalize on great buys, and he expects availability to increase. Herrman explained that TJX's flexibility allows them to pivot between categories if one has less availability. Regarding pricing, he confirmed they would adjust retails to preserve the value gap with traditional retailers if market prices move up, but also emphasized their ability to buy better in a chaotic market.

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CEO Ernie Herrman explained it's difficult to measure specific trade-down effects due to strong performance across all banners and demographics. CFO John Klinger added that the company saw 'nice increases' in store performance in both lower and higher-income demographic areas. Herrman also noted that market share gains from competitor closures can obscure purely demographic-driven trends.

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CFO Jesse Timmermans confirmed they are partnering closely with their over 1,000 brand partners and are seeing some price increases on a brand-by-brand and product-by-product basis. He noted that it is still too early to gauge any specific customer pushback to these changes.

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CEO Elliott Hill stated the goal is to 'rightsize, not sunset' these franchises while building a balanced portfolio with new styles. CFO Matt Friend added that while progress is being made, the inventory headwind will continue into fiscal 2026, with the cleanup in the wholesale channel expected to take through the first half of the year. He noted that by the end of Q4, the contribution from these classic franchises to the total footwear mix is expected to be down by 10 percentage points.

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President and CEO Elliott Hill expressed confidence in the upcoming product pipeline, particularly in running, training, and sportswear, noting positive retailer feedback on the Fall '25 line. CFO Matt Friend acknowledged that accelerated actions to reduce classic franchises would create a larger headwind for the remainder of the current year. However, he noted that the Summer '25 order book decline was almost entirely offset by the contribution from newness and innovation, signaling the pipeline is taking root.

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CEO Kecia Steelman stated that Ulta uses a robust, data-driven process for site selection, resulting in a balanced mix of store formats. CFO Paula Oyibo added that the 2024 class of new stores demonstrated strong performance, with similar results expected for the 2025 class.

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CFO Eva Boratto explained the guidance midpoint assumes trends consistent with Q4's acceleration, with no assumed improvement in the macro environment. She noted the high end of the range accounts for potential acceleration from innovation like the upcoming candle restage or macro tailwinds, affirming the company's focus is to meet or beat expectations.

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CEO Gina Boswell explained that as the candle category leader, Bath & Body Works has successfully amplified its quality messaging and met customer demand, resulting in unit market share gains and growth. She noted that customer response to collaborations like 'Stranger Things Part 2' and seasonal assortments has been strong, and the normalization trend that impacted 2024 has moderated. Consequently, the company views this pressure as being behind them.

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CFO Eva Boratto attributed the reduced full-year sales guidance to recent sales trends, a more value-conscious consumer, and slower-than-expected new customer acquisition. Regarding the quarterly dynamics, she highlighted that a shorter holiday selling season, with five fewer days between Black Friday and Christmas, is a key headwind impacting the fourth-quarter forecast.

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Arc'teryx CEO Stuart Haselden confirmed plans for 25-30 net new stores in 2025, consistent with prior strategy. He provided updated potential store counts: approximately 200 in North America, 75-100 in Europe, 75-100 in APAC ex-China, and an increased forecast of 150-200 for Mainland China, noting these estimates could be conservative.

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CEO Jie Zheng responded that the sports segment, particularly outdoor, is experiencing a boom in China. He highlighted that consumers in Tier 1 and Tier 2 cities are increasingly integrating outdoor activities into their lifestyle, creating a favorable market dynamic for brands like Arc’teryx and Salomon.

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CEO Michael O'Sullivan noted that while specific policy impacts are hard to predict, uncertainty and disruption have historically been beneficial for the off-price model. CFO Kristin Wolfe elaborated on the 2025 outlook, stating that at a 2% comp, they expect modest 20-30 bps of operating margin improvement, driven by merchandise margin and supply chain initiatives. She noted this is less than the 2024 plan due to faster-than-expected capture of supply chain savings and a cautious stance on freight.

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CFO Sarah Oughtred indicated that while specific 2025 guidance will be shared in the next earnings call, marketing spend is expected to return to more normalized levels after the outsized investment in Q3 2024. She noted the company will maintain flexibility to invest in opportunities that stabilize and drive top-line growth.

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CEO Calvin McDonald explained that while 'chase' and fast-track capabilities will allow for sequential improvement in newness through Q3 and Q4, the company expects to be fully back to historical levels by Spring 2025. CFO Meghan Frank confirmed that the second-half guidance is based on Q2 trends and does not assume a meaningful financial impact from the planned increase in newness.

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