Oliver Chen

Oliver Chen inquired about the direct-to-consumer (D2C) business, specifically the interplay between traffic and conversion, the progress and margin contributions of non-parka product expansion, and the current trends and sequential improvements observed in the volatile Greater China market.

Answer

Carrie Baker, President of Brand and Commercial, highlighted improved global store conversions for four consecutive quarters, led by APAC and North America, and strong e-commerce traffic driven by marketing investments. She noted significant growth in non-heavyweight down categories and strong consumer response to newness. For Greater China, she reported robust consumer demand, strong digital momentum, and healthy store performance, with a shift in Lunar New Year demand into Q4. Beth Clymer, President and COO, attempted to clarify a missed part of the question.

Oliver Chen from TD Cowen inquired about the dynamics of D2C traffic versus conversion, the progress and margin impact of Canada Goose's non-parka product expansion, and the current trends and sequential improvements observed in the volatile Greater China market.

Answer

Carrie Baker, President of Brand and Commercial, highlighted improved global store conversions, led by APAC and North America, driven by labor and marketing investments. She noted strong consumer response to expanded year-round and new product assortments, including new styles and fabrications of bestsellers. Baker also confirmed strong demand and digital momentum in Mainland China, with a shift in Lunar New Year demand to Q4. Beth Clymer, President and COO, briefly attempted to clarify a missed part of the question.

Oliver Chen inquired about the factors driving Canada Goose's success in the challenging China market, asked for a quantitative measure of the newness in the product assortment, and questioned the strategy for amplifying Creative Director Haider Ackermann's messaging and creative influence. He also asked a follow-up about puts and takes on gross margin, including the impact of friends and family events.

Answer

Carrie Baker, President of Brand & Commercial, explained that success in China stems from a playbook of early marketing, product availability, strong in-store execution, and significant engagement from e-commerce live streaming. She noted the strategy is to nearly double newness, primarily by animating heritage styles. Beth Clymer, President & COO, added this is a company-wide effort. Regarding Haider Ackermann, Carrie Baker stated the goal is to elevate the brand's DNA and enter the pop culture conversation, not become a fashion brand. Neil Bowden, CFO, noted the main gross margin driver was the European manufacturing facility, with product mix not being a negative factor despite the shift to newness.

Oliver Chen from TD Cowen asked about the reasons for Canada Goose's outperformance in the challenging China market, the quantitative level of product newness, the strategy for amplifying Haider Ackermann's brand impact, and factors affecting gross margin.

Answer

Carrie Baker, President of Brand & Commercial, stated that success in China stems from a consistent playbook of early marketing, new products, and strong execution, amplified by e-commerce strategies like live streaming. President & COO Beth Clymer noted that accelerating newness is a company-wide effort. Baker clarified that Haider Ackermann is elevating the brand's core DNA, not turning it into a fashion brand. CFO Neil Bowden mentioned that gross margin benefited from European manufacturing efficiencies.

Oliver Chen from TD Cowen asked about regional performance concerns amid differing global luxury trends, the expected impact of product newness on GMROI and markdowns, the sequencing of marketing with new product launches, and insights into customer lifetime value for new versus existing customers.

Answer

Carrie Baker, President of Brand & Commercial, noted macro headwinds impacted traffic in the U.K. and China but that conversion was up, and she sees opportunity in all regions. Beth Clymer, President and COO, stated the focus is on improving inventory turns rather than absolute margin dollars, noting that new categories drive basket size and repeat purchases, positively impacting overall profitability. Carrie Baker added that marketing investments are being made earlier in the fiscal year to build demand ahead of peak season. Neil Bowden, an executive, acknowledged that the company is in the early stages of maturing its customer lifetime value analytics.

Oliver Chen of TD Cowen sought insights into the key learnings from the Haider Ackermann product launch and its cadence. He also asked about recent traffic trends, both digitally and in physical stores across geographies, and inquired about the company's long-term pricing strategy across its portfolio.

Answer

Chairman and CEO Dani Reiss explained that the Haider launch successfully validated their strategy, attracting new and existing customers and driving cross-selling. Carrie Baker, President of Brand & Commercial, added that it built new, faster operational muscles for product development. Executive Neil Bowden reported that e-commerce traffic was significantly up, while store traffic was mixed, showing improvement in North America but softness in the U.K. and parts of China. Regarding pricing, the team noted it is not seen as a limiter and that they will continue to evolve the strategy based on consumer value, with the Snow Goose collection at the top of the pyramid.

Oliver Chen asked about the integration of new Creative Director Haider Ackermann, the impact on non-heavyweight down products, and the SKU reduction strategy.

Answer

CEO Dani Reiss expressed excitement for Haider Ackermann's integration and upcoming capsule collection. CFO Neil Bowden stated the full-year gross margin outlook remains similar to fiscal '24, balancing price increases with production management. President Carrie Baker added that SKU rationalization is focused on top sellers and newness, and noted Haider's positive influence on marketing and wholesale partner perceptions.

Oliver Chen asked for more color on the timing of positive growth for Michael Kors, specifically regarding channels and traffic levels, and the framework for marketing spend as a percentage of sales.

Answer

Chairman and CEO John Idol suggested that acceleration in positive growth for Michael Kors is more likely in the calendar back half of next year, driven by fully transitioned new product in full-price, expanded social media channels, 75% transition in outlet, and daigou sales reductions being behind them. Interim CFO Raj Mehta noted that marketing spend is just north of approximately 8% of sales, with a focus on influencers and TikTok, which is considered a healthy percentage to drive future growth.

Oliver Chen inquired about the timing for positive growth at Michael Kors, specifically if the back half of next year is more likely, traffic levels across channels with online being attractive, and the framework for marketing spend as a percentage of sales.

Answer

Chairman and CEO John Idol confirmed that acceleration in the back half of next year (calendar H2) is likely, driven by a full transition to new product in full-price, anniversarying promotional activity, expanded social media channels, and significant transition in the outlet channel. He also noted that Daigou sales reductions would be behind them, reducing headwinds. CFO Raj Mehta stated that marketing spend is just north of approximately 8% of sales, which is considered a healthy percentage, with a focus on wise spending on influencers and TikTok, and Michael Kors' specific marketing spend is slightly higher.

Oliver Chen from TD Cowen inquired about the key handbag families driving sequential improvement and the interplay between traffic and AUR. He also asked about the guiding principles behind the company's significant store renovation program.

Answer

Chairman & CEO John Idol identified the Layla, Nolita, and Bryant handbag families as key drivers, achieving the best sell-throughs in over four years. He also highlighted the upcoming relaunch of the legacy 'Hamilton' group. Regarding store renovations, Idol explained the program addresses an aged fleet and aims to elevate the consumer experience with a new, modern aesthetic, teasing a unique in-store experience to be unveiled at the Rockefeller Center flagship.

Oliver Chen asked about the evolution of the 'quiet luxury' trend in relation to Michael Kors' core and signature products, and also inquired about the company's outlet versus full-price segmentation strategy.

Answer

CEO John Idol explained that Versace is staying the course on its repositioning toward high-end, craftsmanship-focused luxury, which aligns with the 'quiet luxury' trend and is resonating with VICs. For Michael Kors, the strategy is to return to its 'chic and glamorous' heritage, moving away from a recent Gen Z-focused plan. He affirmed the store network is being right-sized to around 650 stores with a proper balance between full-price and outlet, stating there are no concerns of over-distribution.

Oliver Chen with TD Cowen asked about expectations for Greater China, including traffic and consumer trends, and whether Zegna brand's double-digit increases in America would continue, along with specific product performance. He also inquired about the long-term wholesale mix for Zegna and Thom Browne, and key catalysts for Thom Browne's strategy, awareness, and commercialization.

Answer

Gianluca Ambrogio Tagliabue, COO, noted slight improvement in Hong Kong but continued volatility in mainland China. Gildo Zegna, Executive Chairman, expressed bullishness on America for all three brands, citing new product offerings and store openings. He stated the group's future is increasingly retail-focused, with Zegna nearing 90% retail and Thom Browne transitioning to a stronger retail model, while Tom Ford expands in Europe and America.

Oliver Chen questioned expectations for the Greater China region (GCR) regarding a potential decrease in negativity, current traffic trends, consumer monitoring, and its interplay with results. He also asked if Zegna brand's double-digit increases in America are sustainable despite tougher comparisons, and which Zegna products are performing better. Additionally, he inquired about the long-term wholesale mix for Zegna and Thom Browne, and the progress and key catalysts for Thom Browne's awareness and commercialization strategy.

Answer

Gianluca Ambrogio Tagliabue, COO of Ermenegildo Zegna, noted slight improvement in Hong Kong but maintained a prudent, volatile outlook for mainland China, awaiting post-Chinese New Year conclusions. Gildo Zegna, Executive Chairman, expressed continued bullishness on America for all three brands, citing Zegna's new product offerings and new store openings, Tom Ford's good trend, and Thom Browne's recent store openings. He stated the group's future is increasingly retail-focused, with Zegna nearing 90% retail, Thom Browne transitioning to more retail, and Tom Ford strengthening distribution in Europe and the U.S. before Asia.

Oliver Chen of TD Cowen inquired about the performance in the Greater China region, specifically asking for details on the revenue decline, consumer traffic, and trends for the key brands. He also asked about the new CEO at Thom Browne, the key priorities for the brand, and the expected duration of its wholesale channel rationalization.

Answer

Ermenegildo Zegna, Chairperson & CEO, explained that Greater China remains challenging with lower traffic, describing it as a 'new normal' requiring a focus on personalized services like 'Salotto' and network efficiency rather than new store openings. For Thom Browne, he highlighted new CEO Sam Loban's customer-centric approach and deep brand understanding as key to fostering growth in women's and accessories. COO & CFO Gianluca Ambrogio Tagliabue added that the bulk of the Thom Browne wholesale cleanup is expected to be completed by the end of 2025.

Oliver Chen of TD Cowen inquired about the consumer environment and brand performance in the Greater China region, the key priorities for the new management at Thom Browne, and the expected timeline for the Thom Browne wholesale channel rationalization.

Answer

Chairperson & CEO Ermenegildo Zegna described the Greater China region as challenging, emphasizing a strategy to adapt to a "new normal" through network efficiency and enhanced personalized services. For Thom Browne, he highlighted new CEO Sam Loban's focus on a customer-centric experience, women's categories, and full-price selling. COO and CFO Gianluca Ambrogio Tagliabue added that the majority of the Thom Browne wholesale rationalization is expected to conclude by the end of 2025.

Oliver Chen from TD Cowen inquired about the performance in the Greater China region, the key priorities for the new management at Thom Browne, and the expected duration of the Thom Browne wholesale channel rationalization.

Answer

Chairperson and CEO Ermenegildo Zegna explained that Greater China remains challenging with lower traffic, necessitating a focus on personalized services and network efficiency. He stated the new Thom Browne CEO will focus on a customer-centric approach, women's, and accessories. COO and CFO Gianluca Ambrogio Tagliabue added that the bulk of the Thom Browne wholesale pruning is expected to be completed by the end of 2025.

Kathryn Hallberg, on behalf of Oliver Chen from TD Cowen, asked about the drivers behind the strong growth in the U.S. market, particularly the role of the DTC channel. She also inquired about the relative health of the U.S. consumer compared to other global clienteles and the company's expectations for tourism from China this year.

Answer

Group CEO Gildo Zegna attributed the unique U.S. growth to a focus on the high-end market, a shift to retail from wholesale, and the success of the luxury leisurewear wardrobe strategy. He highlighted the conversion of wholesale doors to concessions and the strength of the U.S. team. Group COO and CFO Gianluca Tagliabue added that the growth includes very positive like-for-like comps, not just channel conversion. Regarding tourism, they noted strong flows of Americans and Middle Easterners to Europe and Chinese tourists to Japan, with less traction in other areas.

Oliver Chen inquired about Costco's strategy for retail media, including digital advertising and marketplace development, and the roadmap for AI innovation across customer experience, employees, and inventory management, specifically mentioning AI in gas.

Answer

Gary Millerchip (CFO, Costco Wholesale Corporation) stated that retail media is a meaningful opportunity, building on existing alternative profit businesses. He noted early success with third-party site media activity and gas pump advertising, with value reinvested in members. Ron Vachris (President, CEO, and Director, Costco Wholesale Corporation) expressed excitement for AI's future, highlighting business-driven applications in procurement, supply chain, and employee tools, with a focus on member-facing improvements and business basics.

Oliver Chen inquired about Costco's strategy for retail media and digital advertising, its customer-centric marketplace approach, and the roadmap for AI innovation across customer experience, employee tools, and inventory management, specifically mentioning AI in the gas business.

Answer

Gary Millerchip, Chief Financial Officer, identified retail media as a significant future opportunity, noting Costco's existing alternative profit businesses. He stated that Costco is in the early stages, building data and tech platforms for personalization to improve member experience and drive sales, citing early success with third-party media and gas pump advertising. Ron Vachris, President, CEO, and Director, expressed excitement for AI, seeing tangible business value in procurement, supply chain, and employee tools, with a dual focus on member-facing improvements and business basics to lower prices.

Oliver Chen inquired about the 'low-hanging fruit' for innovation in Costco's digital roadmap and the future strategy for Kirkland Signature, asking if it involves tweaks, a similar strategy, or new amplification efforts, while maintaining its quality.

Answer

CFO Gary Millerchip highlighted improving the member experience through the app and website, particularly via more targeted and relevant personal messaging, as a high priority for the digital roadmap. For Kirkland Signature, he emphasized delivering quality, value, and innovation by filling market gaps, noting its growing penetration due to strong product development.

Oliver Chen inquired about the 'low-hanging fruit' ahead in Costco's digital roadmap for customer-centric innovation and the future strategy for Kirkland Signature, including whether it involves tweaks or a similar strategy, and how it will be amplified.

Answer

EVP & CFO Gary Millerchip identified improving the member experience through the app and website, particularly with targeted and relevant personal messaging, as a high priority in the digital roadmap. For Kirkland Signature, he stated the focus remains on delivering quality, value, and innovation where gaps exist, without a specific penetration target, while also fostering healthy tension with national brands. President and CEO Ron Vachris humorously acknowledged the suggestion of 24-hour operations.

Oliver Chen inquired about the 'low-hanging fruit' and most exciting customer-centric innovations ahead on Costco's digital roadmap, and the future strategy for Kirkland Signature, including potential tweaks or amplification.

Answer

CFO Gary Millerchip highlighted continued opportunities to improve the member experience via the app and website, with a high priority on delivering more targeted and relevant personalized messaging. Regarding Kirkland Signature, he emphasized its focus on quality, value, and innovation, filling gaps where value doesn't exist, and providing healthy tension with national brands, noting that its penetration has grown due to the team's work in delivering value.

Oliver Chen inquired about trends in general merchandise and electronics, prospects for international products, and the progress on more targeted digital promotions like the multi-vendor mailer (MVM).

Answer

Executive Gary Millerchip noted that while consumer electronics is a relatively slow category, Costco is gaining market share. He also highlighted strong growth from expanding international product sourcing. Executive Ron Vachris added that the digital MVM is driving traffic through a mix of newness and value, and its nimbleness is a key advantage.

Oliver Chen of TD Cowen asked about the key drivers for Costco's strong traffic, future opportunities in ticket size, and how the emerging retail media business will intersect with the company's traditional multi-vendor mailer.

Answer

Executive Gary Millerchip highlighted the positive momentum in items per basket, which was up about 2% adjusted for gas and FX, attributing it to strong execution by merchants and operators. Regarding retail media, he stated it is viewed as an incremental opportunity, primarily tapping into new marketing dollars from suppliers' media agencies, which ensures it doesn't detract from everyday product value.

Oliver Chen asked Michael Bender to rank the progress of initiatives for positive comparable sales, and for Jill Timm to confirm if credit card income met expectations and how to model it going forward. He also inquired about efforts to drive speed and organizational agility, leveraging AI, and updates on the Kohl's Cash program. Additionally, he questioned if Sephora's negative comparable sales were a surprise given the vibrant beauty market and what differentiates Kohl's merchandising strategy this time.

Answer

CEO Michael Bender ranked 'getting the assortment right' (proprietary brands, mix, style relevancy, women's focus) as the top initiative, noting new CTO and Chief Digital Officer hires to modernize the business. CFO Jill Timm confirmed credit income was as expected, with a slight Q4 benefit and more in 2026 as AR builds. She emphasized Kohl's Cash as an iconic, exclusion-free program popular for gifting. Michael Bender stated Sephora, a nearly $2 billion business, is maturing but newness like MAC will fuel future growth, expressing no concerns. Jill Timm added that merchandising differentiation stems from customer listening, thoughtful investment in proprietary brands (up 11% in Q3), editing redundancy, focusing on 'trip assurance' with depth over choice, and better goods transition in 2026.

Oliver Chen asked about the rank order of progress on initiatives for positive comparable sales, the performance of credit card income, efforts to drive organizational speed and leverage AI, and updates on the Kohl's Cash program. He followed up by asking about the differentiation strategy for merchandising, the comparison basis for momentum, and whether Sephora's negative comparable sales were a surprise given the vibrant beauty market.

Answer

CEO Michael Bender prioritized getting the assortment right, including proprietary brands and style relevancy, and highlighted new CTO and Chief Digital Officer hires for modernizing the omnichannel experience. CFO Jill Timm confirmed credit card income was in line with expectations, with slight Q4 improvement and more in 2026 due to AR build lag, noting stable payment rates. She reiterated Kohl's Cash as an iconic, no-exclusion program driving repeat trips. Michael Bender explained that merchandising differentiation involves listening to customers, investing in proprietary brands to fill opening price point voids, and editing redundancy. He stated Sephora, approaching a $2 billion business, is maturing like a store but has a strong pipeline for newness, like MAC in Spring 2026, and he has no concerns.

Oliver Chen of TD Securities asked what it will take to achieve positive comps and the potential timing, requesting a ranking of initiatives by impact. He also asked what makes the current private label strategy different, about plans for the store layout, and which product categories are underperforming.

Answer

Interim CEO Michael Bender stated the goal is a return to growth but declined to give a specific timeline, highlighting category reintroductions and brand mix as key. CFO Jill Timm identified proprietary brand investment as a quick win, while refining the value equation is a longer-term effort. Timm explained the current private label strategy is more customer-led, focusing on depth in core styles. Bender noted the store 'racetrack' will be used thoughtfully. Both executives identified the kids' and men's categories as the biggest opportunities for improvement.

A representative for Oliver Chen asked for a breakdown of the drivers behind the Q1 gross margin increase and for details on private label penetration, average unit retail (AUR), and the margin difference compared to national brands.

Answer

CFO Jill Timm explained that the primary driver for gross margin expansion was a favorable category mix, driven by a strategic shift back into higher-margin proprietary brands. She noted that for every 100 basis point increase in proprietary brand penetration, margins improve by 10-15 basis points. Timm also mentioned that while consumers are trading down to lower AUR items, this is partially offset by a slight increase in units per transaction (UPT), aided by impulse buys.

Oliver Chen asked about the timeline and difficulty of the new initiatives, how the current turnaround strategy differs from past efforts, and for details on the expected decline in free cash flow for 2025.

Answer

CEO Ashley Buchanan explained that the initiatives outlined for 2025 are short-term and tactical, but due to long lead times in sourcing, significant impacts may not be visible until the following year. CFO Jill Timm added that the current strategy differs by aiming to correct recent missteps that polarized the core customer, such as reducing offerings in key categories like jewelry and petites. Regarding free cash flow, Timm clarified that the 2025 decline is primarily because the company will not derive as much working capital benefit from inventory reduction as it did in 2024, especially in the first half of the year as it rebuilds its proprietary brand stock.

Oliver Chen of TD Cowen asked for a diagnosis of the unintended consequences from recent strategic shifts, particularly regarding private brands, and inquired about the path to fixing the core apparel business. He also sought clarification on inventory, margin, and promotion assumptions in the updated guidance.

Answer

CEO Tom Kingsbury and CFO Jill Timm identified the primary unintended consequence as under-investing in private brand inventory (down over 20%), which hurt opening price points and value perception. They are correcting this with a 40% increase in in-transit private brand goods. Jill Timm stated the guidance assumes inventory will end the year down mid-single digits and that Q4 gross margin will benefit from better private brand performance and clean inventory, despite a promotional environment.

Oliver Chen asked which issues in core apparel and footwear would be easier versus harder to fix. He also inquired about the mechanics of the guidance, which saw a lower revenue forecast but a higher EPS range, and followed up on whether UPTs or traffic were a bigger concern and what has changed with the consumer.

Answer

CEO Thomas Kingsbury identified the juniors business as an easier fix due to its trend-driven nature and the ability to leverage the marketplace, while categories like intimate apparel would be harder to turn around. CFO Jill Timm explained the guidance reflects current sales trends at the low end, with the high end incorporating the build from new initiatives. She noted that while transactions and conversion are up, the middle-income consumer remains squeezed, leading to smaller basket sizes (lower UPTs), which is the primary pressure point.

Oliver Chen asked about the key factors driving upside in both the Sally and BSG divisions in the recent quarter, the comp complexion including ticket trends, and the ability to leverage fixed costs with the comp outlook. He also inquired about the interplay of the bifurcated consumer environment and government shutdowns, potential drivers for comps exceeding guidance, and the leverage points for the long-term net sales growth versus operating earnings growth.

Answer

Denise Paulonis, President and CEO, highlighted strong color performance (7% overall, 8% Sally, 5% BSG), overperforming marketplaces at Sally, innovation driving positive care sales at BSG, and customer activation through the Licensed Colorist On-Demand (LCOD) program. She noted BSG's lower ticket but higher transaction volume due to stylists buying more frequently. Marlo Cormier, CFO, mentioned Q1 top-line pressure from government shutdowns leading to some de-leverage, with full-year leverage expected to be similar to last year. Paulonis added that the Sally customer remains resilient, but consumers are choiceful, with a slowdown in low-income customers due to the shutdown. She pointed to BSG's potential for expanded distribution and Sally Ignited learnings as upside drivers. Cormier identified Fuel for Growth continuation and own brand penetration as key long-term leverage points for profitability.

Oliver Chen inquired about the key factors driving the upside in both the Sally and BSG divisions during Q4, the comp complexion including ticket trends, and the company's ability to leverage fixed costs given the comp outlook. He also asked about the interplay of the consumer environment, particularly with pressure on lower-income segments and government shutdowns, and what might drive comps better than guidance. Finally, he sought clarification on the leverage points in the long-term outlook's net sales growth versus operating earnings growth algorithm.

Answer

Denise Paulonis, President and CEO, highlighted the strength of color in both businesses (up 7% overall, 8% in Sally, 5% in BSG), overperforming marketplaces on the Sally side, innovation driving care back to positive sales growth at BSG, and the success of the Licensed Colorist On-Demand (LCOD) program. She noted that BSG's lower ticket and higher transaction count were expected, reflecting stylists buying what they need more frequently. Marlo Cormier, Chief Financial Officer, addressed occupancy leverage, expecting some deleverage in Q1 due to top-line pressure from government shutdowns, but improving leverage throughout the year, similar to the prior year on a full-year basis. Paulonis further explained that the Sally customer remains resilient, responding well to initiatives, but noted choiceful spending and a slowdown from low-income customers during the government shutdown. She pointed to potential for outsized growth from BSG's expanded distribution and tuck-in M&A, and learnings from Sally Ignited. Cormier added that the long-term EBIT growth would be driven by continued Fuel for Growth benefits and increasing own brand penetration.

Oliver Chen asked about the differing macroeconomic impacts on the Sally Beauty versus the BSG divisions, the rationale for the measured pace of store refreshes, key catalysts for the hair color category, and how the company is balancing gross margin strength with driving traffic.

Answer

President & CEO Denise Paulonis explained that macro pressures are causing some Sally customers to trade down in the hair care category, while the core color business remains strong. The BSG segment saw a rebound as stylists feel optimistic, though a trend towards lower-maintenance color was noted. Paulonis stated the store refresh pace is deliberate to properly assess ROI before accelerating, with plans for 50 more in FY26. She cited marketplaces and the Licensed Colorist on Demand (LCOD) tool as key drivers for bringing new customers to the color category. CFO Marlo Cormier added that benefits from the Fuel for Growth initiative are being reinvested into marketing and innovation to drive traffic while maintaining a strong margin profile.

Oliver Chen inquired about the performance differences between the Sally and BSG segments, the outlook for e-commerce growth, the early results of the store refresh program, the growth strategy for Happy Beauty, and the potential consumer response to tariff changes.

Answer

President and CEO Denise Paulonis explained that strategic initiatives contributed 225 basis points to comp sales. The Sally segment's slight decline was due to consumer caution, while the BSG segment was more impacted by a severe flu season but is now recovering. Paulonis noted e-commerce, now 11% of sales, is growing via an expanded marketplace strategy (including Uber Eats) and personalization. She stated it's too early for definitive store refresh results but initial signs are positive, and the Happy Beauty concept is being refined based on learnings from its 20 stores before further expansion.

Oliver Chen inquired about the Q2 guidance dynamics between the Sally and BSG segments, the implied comparable sales trajectory for the second half of the year, and the forecast for traffic versus ticket.

Answer

CEO Denise Paulonis explained that Q2 guidance reflects known headwinds for BSG, such as lapping prior product load-ins and an unfavorable calendar, alongside a 'choppier' macro environment in January that disrupted consumer behavior. For the second half, she expressed confidence driven by the K18 launch, expanded distribution with Moroccanoil, and strong digital and CRM initiatives at Sally. She anticipates traffic will be relatively flat, with growth coming from increased purchase frequency among loyal customers.

Oliver Chen inquired about the timing and rationale for the Sally Beauty brand refresh, its expected impact on comps and traffic, and the outlook for Average Unit Retail (AUR) and key product categories like color, nails, and hair. He also asked for commentary on the promotional environment and whether tougher second-half comparisons imply negative comp growth.

Answer

President and CEO Denise Paulonis explained that the brand refresh is timed to build on recent growth momentum and will incorporate learnings from the 'Studio by Sally' pilot, with a rollout beginning in H2 FY25. She anticipates continued strength across key categories and expects AUR to remain modestly positive. Regarding promotions, she described the environment as consistent. CFO Marlo Cormier clarified that while second-half comps will be lower, they are not expected to turn negative, with underlying sales volumes remaining strong.

Oliver Chen inquired about the sustainability of low single-digit growth in the Americas for Q4 and whether positive wholesale growth would remain consistent or become volatile. He also asked how Levi Strauss & Co. reconciles its expanded lifestyle assortment with ongoing SKU rationalization efforts, and for any insights into gross margin comparisons for the upcoming year.

Answer

Michelle Gass, President and CEO, stated that the U.S. business is expected to remain healthy in Q4, with continued positive DTC growth. However, U.S. wholesale is expected to be down due to lapping a strong prior year and the 53rd week. She confirmed ongoing SKU rationalization, with a 15% reduction year-over-year and 40% of SKUs now globally common, leading to 20% higher SKU productivity. Harmit Singh, Chief Financial and Growth Officer, outlined 2026 gross margin tailwinds including pricing opportunities, structural mix shifts, full-price selling, and favorable cotton commodity costs, with tariffs as the primary headwind.

Oliver Chen asked if the low single-digit growth in the Americas is expected to continue in Q4 and whether positive wholesale channel growth is sustainable or prone to volatility. He also sought clarification on how expanded assortments and partnerships reconcile with ongoing SKU rationalization efforts, and a follow-up on gross margin comparisons for next year.

Answer

Michelle Gass, President and CEO, stated that the U.S. business is expected to remain healthy in Q4, with continued positive growth in DTC. However, U.S. wholesale is projected to be down due to strong prior-year comparisons, the 53rd week, and a prudent macro approach. She confirmed ongoing SKU rationalization, with a 15% reduction year-over-year and 40% of H2 2025 SKUs being globally common, leading to 20% higher SKU productivity. Harmit Singh, Chief Financial and Growth Officer, outlined 2026 gross margin tailwinds (pricing, structural improvements, full-price selling, product cost) and headwinds (tariffs).

Oliver Chen of TD Cowen asked about the relative performance of men's versus women's, weakness in Asia, the rationale for raising guidance amid uncertainty, progress on product lifecycle management, and whether merchandise margins are nearing a peak.

Answer

EVP & CFO Harmit Singh defended raising guidance by pointing to three quarters of strong momentum and consumer resilience. He noted Asia is a long-term opportunity undergoing a reset in 2025. President & CEO Michelle Gass framed the men's (up 6%) and women's (up double-digits) performance as an "and" story, with women's outperformance being intentional due to underpenetration. Singh added that they are in the "early innings" of improving retail execution and merchandise margins are not at a peak.

Oliver Chen asked about the company's framework for pricing in response to tariffs, including how much they might absorb versus pass on, and whether they could accelerate inventory receipts to mitigate impacts.

Answer

CEO Michelle Gass described the situation as dynamic, emphasizing a surgical approach to any potential pricing actions. She noted that consumers are already driving AURs higher by choosing premium products and that the company can test pricing in its DTC channel. CFO Harmit Singh confirmed they are exploring all options to manage inventory flow, including air freight and accelerating their go-to-market calendar.

Oliver Chen of TD Cowen asked about the performance of the men's business, the key building blocks to achieve the company's long-term 6-8% revenue growth target, and opportunities to improve inventory turns.

Answer

CEO Michelle Gass stated that while the men's business accelerated, there is more opportunity through energizing core products and expanding into loose fits and non-denim categories. CFO Harmit Singh addressed inventory, reiterating a long-term goal of 3.0x turns (from ~2.0x currently), which will be aided by a faster go-to-market calendar, SKU reduction, and the eventual exit of the lower-turn Dockers business.

Oliver Chen with TD Cowen asked about the Mytheresa business's impressive AOV and margins, seeking insights into upside drivers and future margin profiles. He also inquired about the roadmap and timing for addressing the significant SG&A opportunity within the Net-a-Porter division, the risks associated with customs effects on customer sentiment, and the regional/geographical assumptions underpinning the group's $2.5 to $2.9 billion guidance. Additionally, he pressed for details on the timing for inventory and marketing improvements at Net-a-Porter, the current promotional environment and opportunities from industry consolidation, the impact of new creative directors and design trends (quiet vs. louder luxury), evolving consumer sentiment, and the challenges and timeline for improving the margin structure of the off-price division.

Answer

CEO Michael Kliger and CFO Martin Beer responded. Michael Kliger highlighted Mytheresa's continued profitability improvement through full-price selling and gross margin increase, noting strong European growth and expected continued U.S. growth. For Net-a-Porter's SG&A, he outlined fast progress in operations and corporate functions, with technology savings taking two to two and a half years. He explained that merchandise changes have a significant lead time, impacting fall/winter 2026, while marketing and customer engagement tactics would show impact in the first half of the next calendar year. Kliger also discussed industry consolidation leading to a healthier environment and reduced promotional activities, expressing excitement about new designers and creativity in the luxury market, such as Thelma Gazzali at Gucci. He acknowledged the volatile consumer sentiment but noted improving trends in Europe, the U.S., and Asia from a low base. For the off-price division, Kliger emphasized the need for a separate, lean infrastructure tailored to its lower margin profile, believing the opportunities and timeline for improvement are comparable to the luxury segments. Martin Beer added that the indirect customs effect on customer sentiment is containable, with Mytheresa showing strong worldwide growth, and that the guidance does not factor in unexpected super growth in Asia, maintaining a continuous strong development across all regions.

Oliver Chen, a Retail and Luxury Analyst at TD Cowen, inquired about the Mytheresa business's upside and future margin profile, particularly regarding unit economics. He also sought details on the SG&A roadmap and timing for Net-a-Porter, the perceived risk from U.S. customs effects on customer sentiment, and the regional/geographic assumptions underpinning the group's GMV guidance. Additionally, he asked about the timing for Net-a-Porter's inventory and marketing adjustments, the current promotional environment, opportunities arising from industry consolidation, the impact of new creative directors in luxury, evolving consumer sentiment, and the challenges and timeline for improving the Off Price division's margin structure.

Answer

LuxExperience CEO Michael Kliger highlighted expected continued profitability improvement for Mytheresa through full-price sales and gross margin increases, noting strong European growth and anticipated U.S. growth. He detailed the fast-moving SG&A roadmap for Net-a-Porter, focusing on operations, corporate functions, and technology, with operational changes showing the fastest results. CFO Martin Beer addressed the containable indirect customs effect on customer sentiment and confirmed no unexpected super growth modeled for Asia, with continued strong development expected across Europe and the U.S. Michael Kliger later explained that Net-a-Porter's assortment changes have a significant lead time, with fall/winter 2026 being bought now, while marketing and customer engagement tactics will show impact in the first half of the next calendar year. He also discussed industry consolidation leading to a healthier environment and a more balanced inventory-to-demand equation, expressing excitement about new designers like Demna Gvasalia at Gucci. Regarding consumer sentiment, Kliger noted improvements in Europe and the U.S., with Asia showing improvements from a low base, while acknowledging the volatile environment. For the Off Price division, he emphasized the need for a separate, lean infrastructure tailored to its lower margin profile, expecting opportunities and a timeline similar to the luxury segment's turnaround.

Oliver Chen (TD Cowen) inquired about Mytheresa's AOV, margins, and growth drivers, the SG&A reduction roadmap for Net-a-Porter, U.S. customs impact on sentiment, and regional assumptions for the group's guidance. He also asked about Net-a-Porter's inventory and marketing strategy timing, the promotional environment, opportunities from industry consolidation, and the impact of new designer creativity. Further questions covered consumer sentiment, the Gucci transformation, and the challenges, core competencies, and margin timeline for the off-price division.

Answer

CEO Michael Kliger detailed Mytheresa's expected profitability improvement via gross margin expansion and strong European/U.S. growth. He outlined Net-a-Porter's SG&A roadmap, prioritizing operations and corporate functions, with technology savings over 2-2.5 years. For Net-a-Porter's merchandise, changes will impact from May next year, while marketing tactics will show results in H1 next calendar year. He noted industry consolidation is fostering a healthier, less promotional market, and expressed optimism about new designers at Gucci, Bottega Veneta, and Versace. Kliger observed improving but volatile consumer sentiment, and viewed Gucci's new direction positively. For off-price, he stressed separating infrastructure from luxury to align with lower margins, expecting significant opportunities and a comparable improvement timeline to Net-a-Porter. CFO Martin Beer added that U.S. customs effects are containable, with strong worldwide growth, and Asia is not a primary growth driver in current guidance.

Oliver Chen inquired about upcoming catalysts for private brands to drive differentiation, the assumptions embedded in the third-quarter comparable sales guidance range (-1.5% to +0.5%), and the long-term comparable sales growth rate required to leverage fixed expenses and achieve overall margin expansion.

Answer

Tony Spring, Chairman and CEO, discussed ongoing private brand initiatives, including reimagining home assortments, successful partnerships (Alex Freberg, Palm Royale), and upcoming events like INC's 40th anniversary. He noted that private brand penetration is still below the 20% high watermark, representing a growth opportunity. Spring reiterated a prudent approach to Q3 guidance. Tom Edwards, COO and CFO, stated a long-term opportunity to leverage SG&A and expand gross margin through private brands and end-to-end efficiencies, without providing a specific comp number for leverage.

Representing Oliver Chen of TD Cowen, an analyst asked how comparable sales across all nameplates performed relative to internal expectations and what the primary catalysts were, aside from the Easter calendar shift. The question also sought insight into the assumed category dynamics for the remainder of the year.

Answer

Chairman & CEO Tony Spring explained that performance in March and April was better than a weather-disrupted February and that momentum continued into May. He highlighted an ongoing apparel cycle, with denim performing well, alongside improved performance in fine jewelry, watches, and parts of home furnishings like mattresses and textiles. Spring underscored that the company's product diversity allows it to pivot receipts and marketing to capitalize on these emerging trends.

Oliver Chen questioned how the Macy's go-forward comps trended relative to expectations, the main category dynamics, and opportunities in private brands.

Answer

CEO Antony Spring identified strength in ready-to-wear, handbags, and women's shoes, particularly in reimagined stores, while the home category remains pressured. COO & CFO Adrian Mitchell emphasized that go-forward comps are the key future metric and are outperforming total comps, which are weighed down by underperforming and closing stores.

Oliver Chen of TD Cowen inquired about the assumptions differentiating the high and low ends of the Q4 comp guidance and how the focus on customer value intersects with private brand development and long-term merchandise margins.

Answer

COO & CFO Adrian Mitchell noted the high end of the guidance range represents year-over-year growth, encouraged by sequential improvement across the business. CEO Antony Spring added that private brands are a key part of the value equation, citing strong response to Charter Club cashmere and Style & Co. He emphasized that with 85% of the business in market brands, providing a breadth of assortment and price points is crucial to meeting the customer's definition of value.

A representative for Oliver Chen of TD Cowen asked for color on how Q1 comparable sales performed relative to internal expectations, the primary catalysts for the beat, and the outlook for category dynamics throughout the year.

Answer

Chairman & CEO Tony Spring noted that March and April performance was stronger than a weather-impacted February. He highlighted an ongoing apparel cycle, with denim performing well, alongside improved trends in fine jewelry, watches, and certain home categories. Spring stressed that the company's multi-category model allows it to pivot resources to where demand is materializing.

Oliver Chen asked about the strategy for the new online marketplace, focusing on the balance between curation and growth, its integration with the loyalty program, and the company's view on platforms like TikTok and Amazon.

Answer

President and CEO Kecia Steelman explained the marketplace will be a closed, invitation-only platform to maintain a curated assortment. Loyalty members will earn points, and returns will be handled in-store. She views it as a low-risk growth driver. Regarding other platforms, she stated they are monitoring trends like TikTok to engage with guests where they are active.

Representing Oliver Chen of Cowen and Company, an analyst asked about Ulta's marketing strategy, specifically what initiatives worked better than expected and where the company sees further opportunities to leverage social media.

Answer

President & CEO Kecia Steelman explained that a key shift has been activating the 'Ulta Beauty' master brand to create authentic connections. She cited the Super Bowl campaign, the partnership with Beyoncé's Cowboy Carter tour, and the 'Ulta Beauty World' influencer event as highly successful examples. The focus is on generating genuine energy and excitement that positions Ulta as more than just a retailer, which she sees as the key difference in their current approach.

Oliver Chen asked about the long-term drivers required to achieve positive comps, particularly by category. He also questioned if the softer sales in October were surprising and asked about the fixed cost leverage point for store occupancy.

Answer

CEO Dave Kimbell attributed long-term growth to executing on the four strategic pillars from Investor Day: Assortment, Experience, Access, and Loyalty, rather than any single category. CFO Paula Oyibo clarified that the October softness was not surprising and was related to the timing of tentpole events. She did not provide a specific leverage point but noted that rent expense is approximately 4% of sales.

Oliver Chen asked about the long-term drivers needed for positive comps, whether the softer sales in October were surprising, and for details on the fixed cost leverage point for store occupancy.

Answer

CEO Dave Kimbell pointed to the four strategic pillars from Investor Day (assortment, experience, access, loyalty) as the key long-term growth drivers. CFO Paula Oyibo stated the October softness was not surprising and was influenced by the timing of tentpole events. She did not provide a specific leverage point but noted rent expense is approximately 4% of sales as a general guide.

Julia Shielinski, on for Oliver Chen of TD Securities, asked about the evolution of the Travel Retail channel into fiscal 2026, its current health and sell-through, which brands are outperforming, and any notable cross-regional consumer trends.

Answer

CEO Sue Nabi outlined a strategy to reposition Travel Retail as a 'discovery channel' by launching key innovations as one-month exclusives, such as the new Hugo Boss fragrance. This aims to make the channel a destination for newness rather than just price. She reported that Travel Retail is growing nicely in the Americas and EMEA, while the Asia region remains affected by lower Chinese tourism. However, she noted positive signs of gradual improvement in the mainland China prestige beauty market.

Oliver Chen from TD Cowen asked about retailer replenishment trends and their implications for inventory management, as well as details on the organizational changes in the U.S. and the balance between regionalization and centralization.

Answer

CFO Laurent Mercier noted that retailers are being very disciplined and tight with inventory, moving to very low levels, a trend exacerbated by e-commerce players like Amazon. CEO Sue Nabi explained the U.S. organizational change is about empowering regions, like the newly created English-speaking region, to be more nimble and locally driven after a period of rebuilding central strategy. This shift aims to regain momentum in the U.S., which has driven the majority of the company's decline.

Oliver Chen of TD Cowen inquired about the expected timing for retailer inventory replenishment and the scale of challenges in China, Travel Retail Asia, and Consumer Beauty.

Answer

CFO Laurent Mercier quantified that the challenged areas (China, Travel Retail Asia, Australia, Consumer Beauty) represent 20% of the business, with a 3-point impact on both Prestige and U.S. Consumer Beauty. He confirmed strong sell-out but low retailer replenishment due to caution. CEO Sue Nabi added that replenishment is not expected in H2, leading to prudent guidance.

Oliver Chen inquired about the potential timeline for retailer inventory replenishment and asked for clarification on the magnitude of challenges in China, Travel Retail Asia, and Consumer Beauty.

Answer

Executive Laurent Mercier quantified the impact, stating that challenged areas like China, Travel Retail Asia, and U.S. Consumer Beauty represent 20% of the business and are worsening, negatively impacting Prestige and Consumer Beauty sales by approximately 3 points each. He noted that despite healthy holiday sell-out, retailers remain cautious on replenishment. CEO Sue Nabi added that the company does not expect replenishment to occur in the second half of the fiscal year, which informs their prudent guidance.

Oliver Chen of TD Cowen asked about Walmart's competitive advantages in AI and the roadmap for enhancing the customer experience for higher-income consumers as it builds its ecosystem.

Answer

President, CEO & Director Doug Mcmillon cited data and physical assets as key AI advantages. Walmart US CEO & President John Furner added that AI enables personalization and empowers associates. On higher-income consumers, Furner pointed to flexibility, broad assortment, and faster delivery. Sam's Club President & CEO Chris Nicholas highlighted the introduction of new, premium brands at Sam's Club as a key draw.

Oliver Chen asked about the catalysts needed for positive growth in delivery systems, the long-term growth outlook for consumables, regional consumer trends, the timing of sales organization changes, and the focus of R&D innovation.

Answer

CEO Marla Beck stated that driving device sales is a key focus with a new global customer engagement program, though macro uncertainty persists. She expressed confidence in consumables, which grew 5.3% ex-China, driven by strong booster adoption. CFO Michael Monahan noted EMEA consumables grew double-digits. Beck also highlighted a strategic marketing shift toward providers and confirmed R&D investments are for both consumables and devices, including opportunities in hair care.

Oliver Chen asked about Syndeo machine reliability, the effectiveness of the 'good, better, best' pricing strategy, the rationale for shifting China to a distributor model, and recent changes to the sales force.

Answer

CEO Marla Beck reported meaningful improvements in Syndeo device reliability and explained the tiered pricing strategy helps new providers enter the market and trade up later. Executive Michael Monahan detailed the China strategy, stating a distributor model is more capital-efficient and allows for better local focus, though it will pressure APAC revenue in the near term. Beck also confirmed the sales force structure remains but is being optimized by the new Chief Revenue Officer to improve processes and provider focus.

Oliver Chen inquired about the drivers of strong consumables sales, the reasons for continued pressure on device sales in the guidance, the company's manufacturing strategy after exiting its China partnership, and CEO Marla Beck's top priorities among the many ongoing initiatives. He also asked for an update on Syndeo customer satisfaction and any remaining risks.

Answer

CEO Marla Beck highlighted strong consumable sales per device in the Americas and EMEA. CFO Michael Monahan explained that manufacturing is being consolidated into the Long Beach facility to improve quality and efficiency. He noted the Q4 guidance reflects ongoing international pressure on device sales. Beck identified her top priorities as optimizing the global go-to-market strategy, improving gross margin, and driving consumables innovation. She also confirmed that Syndeo's technical return rate has declined significantly and the company is pleased with the progress.

Asked by Julia on behalf of Oliver Chen, the questions centered on consumer behavior and showroom performance. She asked about consumer health, spending patterns above and below the $1,000 price point for discretionary items, and the sales uplift and maturation curve of new showrooms.

Answer

Management described the consumer as discerning but responsive to the company's value proposition, leading to market outperformance and unit growth in bridal categories. Showrooms are seeing strong results, evidenced by significant growth in walk-in customers and fine jewelry sales, which validates the company's omnichannel strategy.

Oliver Chen inquired about the long-term growth algorithm, asking if fine jewelry would continue to pressure AOV and what is needed to achieve mid-to-high single-digit growth. He also asked about engagement ring trends, the path to margin expansion via marketing and fixed cost leverage, the innovation roadmap for fine jewelry, and whether value-seeking behavior from customers is intensifying.

Answer

CEO Beth Gerstein explained that lower AOV is a natural result of successful fine jewelry expansion, which has significant growth headroom. She noted that customers continue to seek value, driving strength in rings under $5,000. CFO Jeff Kuo stated that higher growth will come from executing on fine jewelry and showroom initiatives, alongside a gradual engagement ring recovery. He reiterated the high-50s gross margin target and expectations for continued marketing leverage and future fixed cost leverage as the company scales.

Asked about the path from current sales guidance to the long-term target, current engagement trends, AOV expectations, the margin impact of showroom expansion, and underappreciated aspects of the company's investment story.

Answer

The company sees engagement trends normalizing and expects long-term growth to be driven by showroom expansion, fine jewelry, and brand strength. Average order value (AOV) is expected to moderate due to a mix shift towards fine jewelry and stronger demand for bridal products under $5,000. The company highlighted its consistent profitability, strong cash balance, and brand resonance as underappreciated strengths.

Oliver Chen asked about the key drivers that will bridge the 1-3% growth guidance for 2025 to the company's long-term low-teens target, what engagement trends are assumed in the guidance, and the expected trajectory for Average Order Value (AOV).

Answer

CEO Beth Gerstein pointed to encouraging engagement ring unit trends and stated that future growth will come from showroom expansion, fine jewelry, and brand investments. CFO Jeff Kuo explained that AOV is expected to continue moderating due to the strategic success in the lower-AOV fine jewelry category. Beth Gerstein also noted stronger consumer demand for bridal products under $5,000 as a contributing factor.

Oliver Chen of TD Cowen inquired about the timeline for the engagement market's normalization, recent changes in bridal trends, the effectiveness of the price optimization engine, and the company's strategy for navigating an intensely promotional environment. He also asked about potential tariff impacts and holiday season strategies.

Answer

CEO Beth Gerstein noted sequential improvement in engagement ring bookings but did not provide a specific timeline for full market normalization. She emphasized the company's strategy of protecting its premium brand by not engaging in heavy discounting. Gerstein also highlighted Brilliant Earth's diversified supply chain as a mitigator for tariff risks and its agility for the holiday season. CFO Jeffrey Kuo added that the price optimization engine is a dynamic, ongoing tool that is continually refined to balance growth and margin.

Oliver Chen from TD Cowen asked about the competitive differentiation of the Google partnership, the future of the insurance business, and the long-term margin impact of contacts and progressives.

Answer

Co-CEO Neil Blumenthal highlighted the Google partnership's focus on all-day wear and helpful AI, leveraging Warby's 'eyewear first' distribution model. Co-CEO Dave Gilboa described insurance as a multiyear tailwind with strong growth and continued opportunity. CFO Steven Miller detailed how both contacts and progressives are significant growth drivers, noting contacts are accretive to gross margin dollars and progressives are the highest-margin glasses product, with both categories having significant room for penetration growth.

Oliver Chen inquired about customer traffic volatility in relation to market uncertainty and sought details on e-commerce performance, specifically traffic versus conversion. He also asked about the strategy for the new Target shop-in-shops, including location selection, key hurdles, and long-term model impact.

Answer

Co-CEO Neil Blumenthal acknowledged pockets of traffic volatility but noted Warby Parker's value proposition helps it benefit from market disruption, with traffic and conversion generally holding up. Co-CEO David Gilboa highlighted that e-commerce had its strongest growth since 2021. Regarding Target, Blumenthal described the initial stores as a learning phase that will leverage existing Warby Parker systems and staff, viewing it as a complementary growth channel.

Oliver Chen asked about the consumer traffic assumptions embedded in the 2025 guidance, the expected revenue contribution from new stores, and details on the new Target partnership, including its margin structure, strategic rationale, and potential for expansion.

Answer

CFO Steve Miller stated that while there's no specific traffic guide, the high end of their range models a moderate improvement in store productivity. He noted the five Target shop-in-shops opening in H2 2025 will have a negligible financial impact this year. Co-CEO Neil Blumenthal highlighted the strategic fit with Target's customer-centric culture and confirmed the shops will be staffed by Warby Parker employees. Co-CEO David Gilboa added that new standalone stores will maintain consistent productivity targets of 35% four-wall margins and a 20-month payback.

Oliver Chen from TD Cowen asked about the long-term implications for gross margin modeling given the strategic investments in hiring optometrists. He also inquired about consumer behavior, store traffic versus e-commerce traffic, and the drivers behind the 1% e-commerce revenue growth.

Answer

SVP and CFO Steve Miller explained that hiring doctors is a strategic investment to acquire customers and that the company is comfortable with gross margin remaining in the mid-50s. Co-Founder and Co-CEO Neil Blumenthal noted that Q3 was a tough e-commerce comp but that order velocity increased monthly and continued into Q4. Co-Founder and Co-CEO David Gilboa added that while demand trends are better, it's too early to call a sustained category recovery.

Oliver Chen of TD Cowen requested the free cash flow forecast for Q4, inquired about the total addressable market and R&D plans for the LVX launch vehicle program, and asked about developments in the luxury customer experience ahead of scaled operations. He also followed up on the biggest challenges in the assembly phase and the status of the Italy spaceport opportunity.

Answer

CFO Doug Ahrens projected Q4 free cash flow burn would be under $100 million. CEO Michael Colglazier discussed the LVX program's focus on supporting Virgin Galactic's fleet, with an eye toward government variants, and mentioned a feasibility study with Lawrence Livermore National Laboratory. He also detailed customer experience scaling efforts and confirmed the Italy spaceport study is progressing well with a strong government partnership.

Oliver Chen inquired about the total addressable market, the long-term trajectory for free cash flow burn, and the potential impact of tariffs on material inputs. He also asked a follow-up question regarding customer engagement and the company's luxury brand positioning.

Answer

CEO Michael Colglazier addressed the total addressable market, stating that while their proprietary research is limited, he sees strong initial demand driven by referrals and repeat customers, noting all three private astronauts from Galactic 7 have rebooked. He also confirmed that tariff impacts are minimal as most long-lead materials have already been procured. On branding, Colglazier expressed excitement about establishing Virgin Galactic as a major luxury and aspirational brand. CFO Doug Ahrens explained that peak spending is past, with a declining trend projected through 2025, and reiterated the long-term model of reaching positive cash flow with two ships in service.

Asked about potential risks from tariffs, the status of manufacturing partnerships with Bell Textron and Qarbon, the company's consumer marketing strategy, and the rationale behind announcing the third and fourth Delta ships.

Answer

Michael Colglazier responded that the company is insulated from tariffs as its supply chain is U.S.-based. He praised the partnerships with Bell and Qarbon. Marketing is currently quiet but will ramp up in late 2025. The decision to proceed with ships 3 and 4 is part of the long-term strategy to create a fully utilized, profitable spaceport, leveraging economies of scale as engineering capacity becomes available.

Oliver Chen of TD Cowen inquired about which channels or partners were stronger or weaker within the U.S. e.l.f. brand. He also asked about the strategy for Rhode's international development and potential for exclusive products at Sephora.

Answer

Senior VP & CFO Mandy Fields stated that the company saw growth across both its core brick-and-mortar retail channels and e-commerce, without specifying any weaker channels. CEO & Chairman Tarang Amin explained that the near-term focus for Rhode is executing its launch in Sephora US, Canada, and UK, but sees massive long-term potential for international expansion given the brand's global appeal.

Oliver Chen of TD Cowen, with Jonna Kim asking on his behalf, inquired about the appropriate pace for domestic shelf space growth and the potential for customer overlap or cross-selling between the e.l.f. and Rhode brands.

Answer

SVP & CFO Mandy Fields highlighted recent shelf space gains at Target and noted that Walmart remains a significant future opportunity. Chairman and CEO Tarang Amin explained that while both brands appeal to younger demographics, they serve distinct communities with broad, multi-generational appeal, suggesting they are complementary.

Oliver Chen asked about the company's contingency plans if tracked channel data worsens, the risk mitigation strategy for its upcoming ERP implementation, and the building blocks for international expansion.

Answer

CFO Mandy Fields addressed the ERP, stating the go-live is planned for spring 2025 but will be delayed if the system is not 100% ready, emphasizing extensive testing and training. CEO Tarang Amin described the international strategy as a disciplined, sequential approach, supported by investments in local teams and distribution capacity. For tracked channels, management pointed to the strong overall back-half guidance of 16-20% growth.

Oliver Chen of TD Cowen inquired about private label innovation, the role of Key Value Items (KVIs) in driving comps, the opportunistic supply environment, and the primary challenges in executing new store strategies.

Answer

President and CEO Jason Potter highlighted the success of recent private label launches like 'second cheapest wine' and noted the opportunity to refine the assortment. He explained that KVI pricing work is complete and the focus is now on storytelling. The opportunistic buying environment remains strong. Potter identified the primary past challenge as the organizational distraction from the systems implementation, stating that as the company moves past it, focus can return to customer-facing execution.

Oliver Chen asked Interim CEO Eric Lindberg to rank the company's current challenges and opportunities, and to elaborate on what it will take to continue fostering strong relationships with the independent operators (IOs).

Answer

Interim President and CEO Eric Lindberg identified restoring the company's value proposition as the top priority to regain momentum. Regarding the IOs, he acknowledged they have had a 'tough, tough year' due to system inefficiencies. He emphasized his commitment to rebuilding trust through direct and transparent communication, starting with in-person meetings with operators in the coming days.

Oliver Chen inquired about the drivers of U.S. versus international growth, the impact of a lower full-price sales mix on margins, and the evolution of owned brand capabilities.

Answer

CFO Jesse Timmermans clarified that the full-price mix was healthy and in line with 2019 levels. Co-Founder & Co-CEO Mike Karanikolas highlighted broad international strength, particularly in China. Co-Founder & Co-CEO Michael Mente added that owned brands are seeing diversified success across categories, marking five quarters of steady growth.

Oliver Chen asked about the expected drivers of revenue growth, questioning the balance between average order value and order volume amid tougher comparisons. He also sought long-term perspective on physical retail and current trends in customer return rates.

Answer

CFO Jesse Timmermans projected that future growth will be driven primarily by an increase in customers and orders, with only a slight lift in average order value from a higher full-price mix. Co-CEO Michael Karanikolas described physical retail as a 'huge long-term opportunity.' Timmermans added that for modeling purposes, the company assumes a flat return rate for 2025, though there is potential for improvement, particularly in the first half of the year.

Oliver Chen of TD Cowen asked about the apparent contradiction between Revolve's impressive revenue growth and its deeper markdowns, inquired about specific category performance, the long-term physical retail strategy, and the path to achieving higher long-term sales growth.

Answer

Co-CEO Michael Karanikolas clarified that strong revenue was driven by marketing and site merchandising efficiencies, with full-price sales growing year-over-year. CFO Jesse Timmermans positioned the 20% sales growth target as a long-term goal dependent on macro factors. Co-CEO Michael Mente described the physical retail strategy as an evolving, test-and-learn approach, starting with a significant store in Los Angeles.

Oliver Chen from TD Cowen asked about the most challenging aspects of ThredUp's AI journey and requested a ranking of its financial impacts. He also inquired about the long-term sustainability of the extraordinary new buyer growth, the potential for industry consolidation, and the primary drivers of changes in customer acquisition costs (CAC).

Answer

CEO James Reinhart identified nailing product recommendations and filtering across the vast, dynamic catalog as the hardest part of the AI journey. He ranked customer acquisition as the top financial impact, driven by improved conversion rates. Reinhart believes the new buyer growth is sustainable due to the large, underpenetrated addressable market for secondhand. He stated that the biggest driver of lower CAC has been the significant improvement in site conversion, creating a virtuous cycle of being able to invest more in growth. On consolidation, he noted the market is large and growing, suggesting big companies will be built in the space.

Oliver Chen asked about the key drivers embedded in the comp guidance, specifically regarding general merchandise, fresh food momentum, and pricing. He also inquired about how the productivity of the latest new store vintages is trending.

Answer

CEO Robert Eddy expressed confidence in merchandising momentum, particularly in fresh and the 'treasure hunt' aspect of general merchandise, which he expects to continue. Regarding new clubs, he stated that while they are performing well, the company is continuously optimizing the model to improve efficiency and accelerate the path to maturity. EVP Bill Werner added that a key strategy in new clubs is driving adoption of digital tools and the credit card program to maximize long-term member value.

Oliver Chen of TD Cowen asked about the components of the comparable sales guidance, specifically regarding general merchandise, fresh food momentum, and pricing. He also inquired about new store productivity trends and learnings from recent openings.

Answer

CEO Robert Eddy acknowledged strong Q4 general merchandise performance and stated that while discretionary spending could soften, the company will continue to invest in its GM assortment. Regarding new stores, Eddy confirmed there is significant room for optimization. EVP, Strategy and Development, William Werner added that the focus is on driving new members toward high-value behaviors like digital engagement and credit card adoption to accelerate a club's path to maturity.

Asked about the YNAP acquisition (tech integration, profitability), H2 gross margin outlook, drivers of U.S. momentum, and the long-term strategy for integrating physical and digital retail.

Answer

The plan is to migrate YNAP's luxury businesses to Mytheresa's proprietary tech platform over 24-36 months. Gross margins are expected to remain stable or slightly increase in H2. U.S. momentum is fueled by strong customer focus and relationship-building through exclusive products and experiences. The company agrees that physical presence is key and uses pop-ups and events, with service enhanced by their new distribution center and potential for future regional hubs.

Oliver Chen asked for management's view on the future of prestige beauty, the timeline for the innovation pipeline, the recipe for margin expansion, and the company's approach to M&A.

Answer

CEO Stephane de la Faverie expressed confidence in prestige beauty's fundamentals and noted the portfolio is diversified to capture consumers from entry-prestige (The Ordinary) to luxury (La Mer). CFO Akhil Shrivastava detailed the margin expansion plan, citing gross margin improvements, OpEx reduction from the expanded PRGP, and procurement savings. On M&A, both executives stated that the near-term priority is deleveraging the balance sheet.

Asked about guidance for promotions and merchandise margins, the target for inventory growth relative to sales, and a comparison of product execution and category opportunities between the Rack and Nordstrom banners.

Answer

Executives explained that Q3 margin strength was driven by regular-price selling. They aim for inventory growth to be in line with sales growth, though it is currently slightly high to support new Rack stores and expand online selection. Product execution has been strong at both banners by focusing on top brands and private labels. The online assortment strategy focuses more on choice count than in-store.

Inquired about the relationship between strong regular price sales and the inventory position, details on operational optimization initiatives, and the sustainability of momentum at the Rack.

Answer

The inventory increase is manageable and supports growth at the Rack, with good quality and aging. Operational optimization is improving merchandise flow and speed through various initiatives like RFID. The company is confident in continued momentum at the Rack due to its strong value proposition and digital capabilities.

Asked about the inventory selection and brand investment at Nordstrom Rack, and whether the in-store events are funded by an incremental marketing budget or a reprioritization of existing funds.

Answer

The company feels confident in the Rack's brand selection, stating the key is focusing on top brands rather than sourcing challenges. The in-store events are not from a large new marketing push but are driven by empowering local store teams to create consistent, smaller-scale customer engagement activities.

Oliver Chen from TD Cowen asked about the expected duration of the fragrance market's moderation, the drivers of stronger demand in Europe and the Middle East versus the U.S., the strategy for China, the timeline for retailer destocking to end, and which 2025 product launches are most material.

Answer

CFO Michel Atwood noted the market has been surprisingly resilient, but Executive Jean Madar cautioned that the high growth of recent years is unlikely to continue, though new launches for Lacoste and Roberto Cavalli should drive outperformance. On destocking, Atwood stated that the process has been slowing and is now considered to be largely behind them. For 2025, Madar identified upcoming launches for Jimmy Choo, Lacoste, Roberto Cavalli, Ferragamo, and GUESS as the most significant.