Paul Lejuez

Paul Lejuez asked for details on HOKA's wholesale business sell-through by channel (specialty running, sporting goods, athletic specialty) for the quarter and any quarter-to-date changes.

Answer

Stefano Caroti, President and CEO, reported no major changes, with sell-through continuing to outpace sell-in across all channels, indicating strong brand health. He noted that HOKA's performance product outperformed lifestyle in the athletic specialty space, with HOKA being the number two brand in one of the two leading athletic specialty retailers in December. Lejuez also inquired about the outlook for the U.S. consumer following the holiday season and its potential influence on growth for each brand in the U.S. next year. Caroti stated that while they've been cautious about the economy, their brands' strong performance increases optimism for the coming year. Fasching added that consumers are choosing and buying the brands they want, which gives confidence for next year.

Paul Lejuez asked about HOKA's wholesale sell-through by channel (specialty running, sporting goods, athletic specialty) in the current quarter and quarter-to-date, and if there were any changes. He also inquired about the company's updated outlook for the U.S. consumer and its influence on growth for each brand next year, given previous cautionary comments.

Answer

President and CEO Stefano Caroti stated that HOKA's sell-through continued to outpace sell-in across all channels, indicating strong brand health, with performance product outperforming lifestyle in Athletic Specialty. Regarding the U.S. consumer, Caroti reiterated confidence in their brands despite economic caution, with strong holiday performance increasing optimism. CFO Steve Fasching added that consumers are choosing desired brands, reflecting strong resonance.

Paul Lejuez asked for the percentage of HOKA's wholesale business in the specialty running channel and its performance, as well as details on the HOKA new store pipeline for fiscal 2026, including the number of stores and locations.

Answer

CEO Stefano Caroti did not disclose the specific percentage for the specialty running channel but confirmed HOKA continues to perform well there. Regarding retail, he outlined a strategy focused on key global cities like London, Paris, and Shanghai, but did not provide a specific store count for FY26. CFO Steve Fasching added that FY25's significant wholesale door expansion will not repeat to the same degree, affecting year-over-year growth comparisons.

Paul Lejuez from Citi asked about Levi Strauss & Co.'s recent price increases, including where they are occurring, their magnitude, and how they relate to the F '26 growth assumptions by geography, particularly the breakdown between price and units.

Answer

Michelle Gass, CEO, Levi Strauss & Co., confirmed thoughtful, targeted pricing actions primarily in the U.S. for tariff mitigation, noting no adverse consumer reaction due to brand strength and market share gains. She explained leveraging pricing power for higher-tiered and innovative products while being diligent on entry-level prices, informed by AI-driven market analysis. Both AUR and units are expected to grow in the coming year. Harmit Singh, EVP and Chief Financial and Growth Officer, Levi Strauss & Co., added that expanding TAM and focusing on higher units per transaction (e.g., selling tops with bottoms) should drive units globally.

Paul Lejuez asked about the location and magnitude of Levi Strauss & Co.'s recent price increases, and how these tie into the assumptions for growth by geography in fiscal year 2026, specifically regarding the breakdown between price and units.

Answer

Michelle Gass, CEO, stated that targeted pricing actions are primarily in the U.S. for tariff mitigation, with no observed consumer reaction, indicating pricing power. Pricing is leveraged for higher-tiered products, with modest increases for entry-level items. Both AUR and units are expected to grow in 2026. Harmit Singh, EVP and Chief Financial and Growth Officer, added that they do not guide price vs. units by geography, but expanding TAM and focusing on UPTs should drive units globally.

Paul Lejuez of Citigroup asked for clarification on the tariff assumptions embedded in the guidance, specifically regarding Vietnam, and inquired about planned price increases for the second half and the implied mix of units versus AUR in the revenue forecast.

Answer

EVP & CFO Harmit Singh explained that due to the fluid situation, the guidance assumes an additional 30% tariff for China and an additional 10% for all other countries. He noted that any pricing actions would be targeted and minimal, with the primary focus being on reducing promotions and driving full-price sales through new product introductions rather than broad-based price hikes.

Paul Lejuez inquired about the macro-economic backdrops in Levi's major operating regions and the current competitive landscape, particularly regarding promotional trends.

Answer

CFO Harmit Singh noted that Q1's broad-based growth indicates strong brand momentum and a generally resilient consumer across regions. He stated that the company is actively tightening promotions and focusing on full-price sales, as strong consumer demand and healthy inventory levels do not necessitate increased discounting.

Paul Lejuez asked for details on square footage growth in fiscal 2024 and plans for 2025, including a geographic breakdown of store openings and the comparable sales performance of stores that have recently entered the comp base.

Answer

CFO Harmit Singh explained that while specific square footage isn't disclosed, the company opened over 100 system doors in 2024 and plans for 50-60 in 2025, primarily in Asia and Europe. He highlighted strong DTC performance, including 11 consecutive quarters of positive comps, high-teens e-commerce growth, and strong performance from new doors, which has improved the company's 'hit rate' on new store investments.

Paul Lejuez asked for observations on the three income demographics during the quarter, how performance differed in-store versus online, and where Albertsons might have gained or lost share by income demographic. He also requested a follow-up on units, asking about the pricing versus units breakdown for ID sales excluding pharmacy in Q3, and the inflation piece.

Answer

CEO Susan Morris explained that Albertsons' strategy appeals more to middle and upper-income customers, but they serve everyone. Low-income customers are stretched, showing smaller baskets and focusing on essentials. Middle-income households show some softening with trade-down behavior. Higher-income customers' spending is largely stable but increasingly value-conscious. Albertsons is leaning into personalized promotions, surgical cost inflation management, and loyalty programs to deliver value across all cohorts. President and CFO Sharon McCollam stated that Q4 trends are expected to be similar to Q3 for ID sales excluding pharmacy. She did not provide a specific pricing piece for Q3 but noted that CPI was up 2%, and Albertsons passed through less than 2% and less than its cost inflation, which is reflected in the margin.

Paul Lejuez asked for an update on the three income demographics (low, middle, high) observed during the quarter, how their behavior differs in-store versus online, and any share gains or losses by demographic. He also requested a breakdown of pricing versus units for identical sales, excluding pharmacy, for the quarter.

Answer

CEO Susan Morris explained that Albertsons primarily appeals to middle and upper-income customers. She noted that low-income customers are stretched, making smaller, essentials-focused baskets, while middle-income households show softening with trade-down behavior. Higher-income customers' spending is largely stable but increasingly value-conscious, prompting Albertsons to lean into personalized promotions and surgical cost inflation management. President and CFO Sharon McCollam stated that Q4 (excluding pharmacy) is expected to show similar trends to Q3. She added that CPI was up 2% in Q3, but Albertsons passed through less than 2% and less than its cost inflation, which is reflected in the margin.

Paul Lejuez asked for a breakdown of the drivers behind the first-quarter gross margin decline and their expected persistence, as well as for commentary on the competitive pricing environment.

Answer

CEO Susan Morris explained that the company is prioritizing sales and unit growth, leading to intentional margin investments against a tough prior-year comparison. She noted that productivity initiatives, like national buying, should provide a tailwind later in the year. Morris, along with President & CFO Sharon McCollam, characterized the pricing environment as rational but noted continued pressure from mass, club, and value-oriented competitors.

Asked about the drivers of the first-quarter gross margin decline, whether those factors will remain headwinds, and the current competitive pricing environment.

Answer

The company stated that gross margin was intentionally invested in to drive sales and units, which was amplified by a tough year-over-year comparison. They expect productivity initiatives like national buying to provide a tailwind later in the year and noted their focus is on gross margin dollars, not rate. The pricing environment was characterized as rational, with ongoing promotional pressure from mass, club, and value competitors.

Paul Lejuez from Citigroup Inc. inquired about Birkenstock's regional plans for fiscal 2026, specifically how growth is anticipated across the three major regions, and whether capacity constraints are necessitating distribution restrictions in certain areas, similar to past instances in EMEA.

Answer

CFO Ivica Krolo explained that Birkenstock's engineered distribution strategy prioritizes shifting more product to the APAC region, which offers the highest ASP and strong growth, to further develop the brand's strength. He reiterated the long-term goal of one-third business share for Americas, Europe, and APAC, noting APAC is currently at 11% and growing at twice the speed of other regions, constrained only by capacity, not demand.

Paul Lejuez from Citigroup Inc. asked for color on DTC business trends across all regions, particularly the pattern of acceleration or deceleration during the quarter, and requested a comparison of sell-through rates between the B2B and DTC channels.

Answer

Mehdi Bouyakhf, President of EMEA, confirmed that the trend of a softer April/May followed by a record June was a market-wide phenomenon, not just in EMEA. He highlighted strong B2B sell-through (up 20-25%) and significant growth in same-store sales, indicating robust demand across channels as consumers make more deliberate purchasing choices.

A representative for Paul Lejuez followed up on gross margin, asking if the company was reiterating or raising its target of approaching 60%, and requested details on the timing and regional focus of recent price increases.

Answer

CFO Ivica Krolo confirmed the key drivers for gross margin improvement are better absorption at the Pasewalk facility and favorable pricing effects. He explained that pricing is reviewed surgically on a style-by-style basis each season with the goal of maintaining a globally aligned pricing architecture, rather than being tied to specific regional events.

Kelly, on behalf of Paul Lejuez from Citigroup Inc., sought clarification on Q1 gross margin, asking if the new production facility was still a drag and if it would become a tailwind in Q2. She also asked about other margin drivers like pricing and the expected top-line cadence for the year.

Answer

VP, Global Finance Alexander Hoff clarified that the facility's impact in Q1 was the same as the prior year, not an incremental pressure. He expects the headwind to lessen and turn positive quarter-by-quarter starting in the back half of the year. He noted pricing is adjusted surgically style-by-style to offset inflation but declined to provide specific quarterly revenue guidance.

Paul Lejuez requested more detail on Q1 performance between the B2C and B2B channels, the planned channel mix for fiscal 2025, and the expected quarterly cadence for gross margin inflection.

Answer

Niko Weake, President of EMEA, stated that fiscal 2025 growth will be balanced between B2C and B2B, with owned retail expansion adding weight to the B2C channel over time. CFO Erik Massmann addressed gross margin, noting that Q4 2023 was not a comparable base due to non-cash accounting true-ups. He guided for a modest full-year gross margin improvement in fiscal 2025, with EBITDA margin expected to increase by up to 50 basis points.

Paul Lejuez asked for insights into the performance of the China business, specifically comparing e-commerce to stores, and a characterization of the athletic apparel market in China, including differences by city tiers.

Answer

CEO Calvin McDonald reported strong momentum in China, with Q3 benefiting from timing shifts and platform activations. He highlighted Lululemon's strategy of minimal discounting and high regular-price sales during these events, leveraging a lower outlet-to-store ratio for markdown product exit. Outerwear performed particularly well. McDonald noted that the brand is gaining market share across all tier cities in China, with strong resonance and performance.

Paul Lejuez sought clarification on the annualized gross pressure from reciprocal tariffs and the de minimis exemption, and the extent to which pricing is relied upon as a mitigation tool. He also asked how pricing strategies reconcile with the guidance for higher year-over-year markdowns, and if pricing changes would be global or isolated to the U.S.

Answer

CFO Meghan Frank stated that the 2026 mitigated impact is expected to be $320 million, with about half offset by expense actions, pricing, and vendor negotiations. She clarified that markdowns are for seasonal clearance and not related to pricing strategy, with pricing actions being mindful of elasticities. Frank confirmed that pricing changes are currently isolated to the U.S.

Requested details on inventory by geography, regions facing markdown pressure, the competitive promotional landscape, and whether purchase orders have been adjusted.

Answer

Markdown pressure has not materialized yet, but the risk is concentrated in the U.S. due to traffic trends. The company is monitoring increased promotional activity in the U.S. but will continue to lead with innovation. Purchase orders are always being adjusted, with flexibility provided by the large core product assortment.

Paul Lejuez asked if the observed traffic slowdown was unique to the U.S. or if it was also occurring in other regions, and inquired about any specific regional or weather-related impacts in the U.S.

Answer

CFO Meghan Frank clarified that the notable shift in traffic was primarily a U.S. trend, with no material changes seen in Canada or other international markets. She did note a slight headwind in China due to the timing of the Lunar New Year. She added there were no meaningful regional differences within the U.S. and did not comment on weather, stating a focus on controllable factors.

Paul Lejuez asked for color on the e-commerce versus store traffic dynamics in key international regions and also inquired about the competitive promotional landscape observed in Q3 and expected for Q4.

Answer

CFO Meghan Frank stated that overall traffic trends were positive across both e-commerce and stores in the Rest of World segment. CEO Calvin McDonald characterized the promotional environment as intense but not necessarily more so than the prior year. He emphasized that Lululemon continues to operate as a regular-price-driven business, unlike others in the premium athletic space, and was pleased with the guest response to this strategy during the holiday kickoff.

Asked about intra-quarter trends in Q2, quarter-to-date performance, any specific areas of high inventory, and the financial impact of pausing sales of the 'Breathe Through' product.

Answer

May's trend was in line with Q1, while June and July were softer. The company did not provide quarter-to-date details but feels the 6-7% Q3 guide is appropriate. They are comfortable with overall inventory levels and stated the 'Breathe Through' product withdrawal had a negligible financial impact as it was a small test.

Paul Lejuez asked for color on how the quarter progressed by month and region, including exit rates and quarter-to-date trends. He also inquired about the handling and financial impact of the withdrawn 'Breathe Through' product line.

Answer

CFO Meghan Frank stated that May's trend was similar to Q1, followed by a softer performance in June and July. She did not provide specific quarter-to-date details but affirmed the Q3 guidance of 6-7% growth is appropriate. Frank also noted that the 'Breathe Through' product withdrawal had a negligible financial impact as it was a small-scale test and learn initiative.

Paul Lejuez asked about the sales progression throughout Q2 by region, exit rates, and quarter-to-date trends. He also inquired about the financial impact and handling of the withdrawn 'Breathe Through' product line.

Answer

CFO Meghan Frank stated that May's trend was similar to Q1, followed by a softer June and July. She did not provide specific quarter-to-date figures but noted the Q3 guidance of 6-7% growth is appropriate given Q2's performance and macro uncertainty. Frank confirmed the financial impact from the 'Breathe Through' product withdrawal was negligible as it was a small test.

Paul Lejuez asked about the 3.3% average ticket increase, seeking a breakdown between average unit retail (AUR) and units per transaction (UPT). He also inquired about the magnitude of price increases in the third quarter relative to tariff costs, potential temporary mismatches benefiting gross margin, and the dynamic for the fourth quarter and first half of fiscal 2026.

Answer

CEO Steve Lawrence explained that AURs were up mid- to high-single digits, while UPT was down mid-single digits, indicating a trade-off. He noted that pricing architecture was well-positioned for the holiday season. CFO Carl Ford added that the 170 basis points gross margin expansion included 120 basis points from merchandise margin (inclusive of tariffs), 30 basis points from freight, and 20 basis points from shrink. He clarified that due to weighted average cost, there was an initial bump from AUR increases. For Q4, the gross margin guidance midpoint is flat. Steve Lawrence further projected AURs to be up high single to low double digits in Q4, plateauing at that level into Q1 and Q2 of next year, before settling at a flattish level in the back half of 2026 as accelerated tariffs are lapped.

Kelly Crago, on behalf of Paul Lejuez at Citigroup, inquired about the potential impact of tariffs in fiscal 2026 and the drivers behind the current gross margin guidance.

Answer

CEO Steven Lawrence declined to speculate on FY26 tariffs but emphasized the strategy of diversifying the sourcing base. EVP & CFO Earl Carlton Ford IV and Lawrence explained the current gross margin guidance is supported by multiple scenarios and mitigation tactics, including partnering with factories, leveraging their pricing optimization engine, and taking selective price increases on ancillary items rather than key traffic-driving products.

Paul Lejuez asked for quantification of the performance of products priced above $5, which departments were not comping positive despite strong overall comps, and the expected traffic versus ticket contribution for Q4 guidance.

Answer

CFO Dan Sullivan stated Q4 trends are expected to continue, with ticket-driven growth, though transactions will also provide growth. CEO Winnie Park explained that less than a handful of departments did not comp positive, largely due to intentional decisions to reallocate resources from downtrending areas or tariff impacts on sourcing. She noted double-digit growth in items above $5.

Paul Lejuez of Citigroup Inc. asked about the outcome for products that were paused when tariffs were at 145% and whether there were performance differences across customer income cohorts.

Answer

CEO Winnie Park clarified that shipments were paused but orders were not canceled; the product is now flowing since the tariff rate was reduced. She also stated that the company saw even sales growth across all customer income cohorts during the quarter.

Paul Lejuez of Citigroup asked for an assessment of the current trend environment and whether the company's conversion issues are more related to a weak trend cycle or specific pressures on the lower-income consumer.

Answer

Interim President and CEO Kenneth Bull stated that there are always trends to pursue across the company's eight 'worlds.' Executive Chairman Thomas Vellios elaborated that for Five Below, 'newness' itself is a trend; the key is to create excitement through a constant flow of new, focused items. He suggested this internal focus on newness, rather than reliance on external macro trends, is what will reinvigorate the business and drive conversion.

Paul Lejuez asked for insights into Thanksgiving weekend's traffic versus ticket performance and sought clarification on whether the '85% of the store is $2 or less' figure refers to units or sales dollars, and its split between discretionary and consumables.

Answer

CEO Mike Creedon clarified that the '85% of the store is $2 or less' refers to sales dollars. He expressed satisfaction with the start of Q4, including strong seasonal performance for Thanksgiving and Christmas, supporting the current quarter's guidance.

Paul Lejuez asked for insights into Thanksgiving weekend traffic versus ticket performance and sought clarification on the '85% of the store' metric, specifically whether it refers to units or sales dollars, and its split between discretionary and consumables.

Answer

CEO Mike Creedon clarified that the '85% of the store' metric refers to sales dollars priced at $2 or less. He expressed satisfaction with the start of Q4, highlighting strong seasonal performance for Thanksgiving and Christmas, which supports the company's positive guidance for the quarter.

Paul Lejuez inquired about the specific drivers of Dollar Tree's higher ticket, differentiating between average unit retail (AUR) and units per transaction (UPT), and sought details on pricing actions taken in Q2 versus those planned for the second half.

Answer

CEO Michael Creedon highlighted strong balance in both discretionary and consumable sales, as well as traffic and ticket. He noted that despite pricing actions in Q2, unit volume was still up and performed better than initially expected, indicating customer acceptance.

Paul Lejuez of Citigroup followed up on pricing, asking about the specific role of the $1.50 price point in offsetting tariffs and which price points are most appealing to the growing segment of higher-income shoppers.

Answer

CEO Michael Creedon clarified that the company is not pursuing a simple 'break the dollar' strategy, but is strategically using its five levers to manage costs. He noted the chain's average unit retail is still only $1.35. He confirmed that the expanded assortment from the multi-price strategy is resonating particularly well with higher-income customers, who are a key driver of new customer growth.

Paul Lejuez asked if recent price increases were driven by tariffs, what the assumed traffic versus ticket split is in the 3-5% comp guidance, and when a 'clean break' from the TSA would occur. He also inquired about any remaining lease guarantees for Family Dollar stores.

Answer

CEO Mike Creedon clarified that targeted price increases are a response to the broad inflationary environment, not just tariffs. He aims to grow both ticket and traffic but highlighted Q4's ticket strength as proof of the multi-price strategy's power. He reiterated the transaction is a 'clean deal' where all assets convey, with the exception of approximately 300 dark stores from a prior closure event for which Dollar Tree remains responsible.

Paul Lejuez asked if recent price increases were driven by tariffs, what the assumed traffic versus ticket mix is for the 3-5% comp guidance, and for details on the TSA timeline and any lease guarantees on Family Dollar stores.

Answer

CEO Michael Creedon clarified that targeted price increases are a response to the broad inflationary environment, including wages, not just tariffs. He expressed a goal of growing both traffic and ticket to achieve the comp guidance, highlighting Q4's ticket strength. He reiterated that it is a 'clean deal' with no lease guarantees beyond existing dark stores from prior closures.

Paul Lejuez asked whether pressured higher-income customers at Dollar Tree are shopping less overall or shifting to competitors, and if this might require changes to the multi-price strategy. He also inquired about any behind-the-scenes actions being taken to separate the Dollar Tree and Family Dollar businesses that could have a P&L impact.

Answer

COO Mike Creedon asserted that the shift in behavior is due to macro-driven belt-tightening, not competitive losses, pointing to continued traffic and new customer growth. CFO Jeff Davis added that regarding the strategic review of Family Dollar, the company is evaluating a wide range of options, including those with outside parties, and is pleased with the progress, but continues to operate both businesses to maximize value.

Paul Lejuez asked if pressured higher-income customers are shopping less or going to competitors, and whether this requires a change in pricing or rollout strategy. He also inquired about any behind-the-scenes actions to separate the Dollar Tree and Family Dollar businesses that could impact the P&L.

Answer

COO Mike Creedon attributed the customer behavior to macro-driven 'belt tightening' rather than competitive losses, pointing to continued traffic growth and new customer acquisition. Regarding the strategic review, CFO Jeff Davis stated that they continue to operate both businesses to maximize value while evaluating a wide range of options, including those involving external parties. He confirmed they are pleased with the review's progress.

Paul Lejuez asked about quarter-to-date performance, specifically over the Thanksgiving weekend, and how external disruptions since late October informed the Q4 comp guidance. He also inquired about expectations for the 10 days leading up to Christmas, especially given last year's performance.

Answer

CEO J.K. Symancyk explained that the Q4 guide has been cautious all year, reflecting consumer uncertainty, particularly among lower and middle-income customers. He noted that Black Friday to Cyber Monday has less impact on the quarter than the 10 days leading into Christmas. COO and CFO Joan Hilson added that the company is well within the top-line guide for Q4, maintaining a conservative stance due to potential consumer spending variability.

Paul Lejuez asked about Signet Jewelers' quarter-to-date performance, specifically over the Thanksgiving weekend, and how external disruptions since late October informed the Q4 comp guidance. He also inquired about expectations for sales acceleration in the 10 days leading up to Christmas.

Answer

CEO J.K. Symancyk explained that the Q4 guide has been cautious all year, noting softness in brands with lower and middle-income customers due to consumer uncertainty. He clarified that Black Friday to Cyber Monday has minimal impact on the quarter, with the 10 days before Christmas being far more crucial. Symancyk highlighted Signet's improved inventory position for sub-$500 and sub-$1,000 price points, especially in LGD fashion, compared to last year. COO and CFO Joan Hilson added that the company is well within its top-line guide for Q4, maintaining a prudent, conservative outlook.

Paul Lejuez of Citi inquired about the primary drivers of the Average Unit Retail (AUR) increases in both the bridal and fashion categories, specifically asking to differentiate between mix shifts and direct pricing actions. He also sought clarity on the company's strategy for mitigating the impact of Indian tariffs, both for the current year and looking ahead to fiscal 2026.

Answer

CEO & Director J.K. Symancyk explained that mix is the largest driver of AUR in both fashion and bridal, citing the introduction of lab-grown diamonds (LGDs) in fashion and customer trade-ups in bridal. Regarding tariffs, Symancyk stated that while no guidance for next year is given, the company will use the same mitigation tools, such as design adjustments, country of origin shifts, and leveraging supplier partnerships, with more lead time for future planning.

Paul Lejuez asked about the drivers of Average Unit Retail (AUR) in both bridal and fashion categories, specifically the split between mix and pricing actions, and how this is expected to evolve in the second half. He also inquired about the impact of India tariffs on the current and next fiscal year, mitigation strategies, and the role of existing inventory.

Answer

CEO J.K. Symancyk explained that mix, particularly the expansion of lab-grown diamonds (LGDs) in fashion and customers trading up in bridal, is the primary AUR driver. COO and CFO Joan Hilson added that AUR growth is consistent, with price stabilization in LGD and natural diamond markets. Regarding tariffs, J.K. Symancyk stated that while next year's guidance isn't provided, the company has tools like design adjustments, country of origin shifts, and potential onshoring to mitigate pressures, expressing confidence in maintaining guidance despite the incremental 25% penalty.

Paul Lejuez of Citigroup asked for a quantification of the unmitigated tariff pressure, the specific actions being taken to mitigate it, and the current pricing trends for both lab-grown and natural diamonds within the bridal and fashion categories.

Answer

CEO J.K. Symancyk explained that tariff impacts are incorporated into the full-year guidance and are being managed through three primary levers: assortment architecture, optimizing country of origin sourcing, and adjusting the timing of receipts. He noted that natural diamond prices have stabilized, while lab-grown diamond (LGD) prices continue to deflate, which has enabled LGD expansion in fashion and remains an AUR-accretive opportunity. CFO Joan Hilson added that LGD price decreases are slowing and highlighted that refined promotional strategies, such as a 20% reduction in discounting at Jared, are also helping to offset cost pressures.

Paul Lejuez of Citigroup asked for expectations on the overall engagement market for the upcoming year, the promotional environment's impact on AUR assumptions, and for details on the free cash flow target and inventory management plans.

Answer

COO & CFO Joan Hilson projected the engagement market to range from up low-single-digits to down low-single-digits, with AURs down low-single-digits to flat. She expects fashion AUR to grow, aided by the lab-grown diamond mix. CEO James Symancyk stated the promotional environment is stable and margin expansion will come from execution, not a change in promotions. Hilson confirmed disciplined inventory management remains a key cash flow lever, though no specific target was given.

Paul Lejuez asked about the cost and retail pricing trends for both natural and lab-grown diamonds. He also questioned the current profitability of the digital banners and the strategy to improve their financial performance in the upcoming year.

Answer

Executive Joan Hilson stated that lab-grown diamond costs are declining faster than retail prices, a gap Signet manages by introducing new, branded designs in Bridal and Fashion. She noted little price resistance to rising gold costs. Regarding digital banners, she did not comment on specific operating margins but emphasized that driving top-line growth and mixing in more finished jewelry are key to improving their profitability.

Paul Lejuez from Citi asked for specifics on engagement unit trends, including quarter-to-date performance and what growth would be required in Q4 to reach the high end of guidance. He also questioned the average ticket trends in engagement, comparing natural versus lab-created diamonds.

Answer

CEO Virginia Drosos and CFO Joan Hilson addressed the questions. Drosos confirmed engagement units are growing quarter-to-date and that the company's strategy results in a higher average transaction value (ATV) for lab-created diamonds than for natural diamonds. Hilson clarified that reaching the +5% annual unit growth target would require high single-digit to low double-digit growth in Q4, a trajectory supported by current positive trends.

Paul Lejuez inquired about out-the-door merchandise margins by brand, considering the pressure on initial merchandise margins (IMU) and lower markdowns. He also asked if there have been any demographic shifts (age, income, regional) among Nuuly's new customers compared to previous quarters.

Answer

Frank Conforti, Co-President and COO, confirmed favorable out-the-door merchandise margins due to markdown reductions, primarily from Urban Outfitters and Free People, with Anthropologie also contributing to gross profit gains. Dave Hayne, CTO and President of Nuuly, noted that Nuuly's customer base remains stable, with only slight shifts towards a slightly younger demographic and heavier penetration in the southern U.S. for new customer acquisition.

Paul Lejuez inquired about out-the-door merchandise margins by brand, considering both initial merchandise margin pressure and lower markdowns. He also asked about any demographic shifts (age, income, regional) among new Nuuly customers and the margin impact of increased rental product sales.

Answer

Frank Conforti, Co-President and COO, stated that out-the-door merchandise margins were favorable due to markdown reductions, primarily at Urban Outfitters and Free People, with Anthropologie also achieving gross profit gains. Dave Hayne, CTO and President of Nuuly, noted Nuuly's customer base remained stable, with a slight shift towards a younger demographic and heavier penetration in the southern U.S. for new customer acquisition. Frank Conforti added that higher sales of rental product (which have lower gross profit than subscriptions) were observed, but no major demographic shifts were noted.

Paul Lejuez from Citigroup Inc. inquired about the gross versus net impact of tariffs, the extent to which price increases are being used for mitigation, and the comparative performance of own brands versus national brands at the Urban Outfitters and Anthropologie banners.

Answer

Frank Conforti, Co-President & COO, detailed a four-pronged tariff mitigation strategy where pricing is the last resort, following vendor negotiations, sourcing shifts, and transport mode changes. Tricia Smith, Global CEO of Anthropologie Group, reported that Anthropologie's own brands are growing at double-digit rates and now constitute a record 71% of the business. Sheila Harrington, Global CEO of Urban Outfitters & Free People Groups, highlighted strong growth in proprietary brands like BDG and Out From Under, complemented by successful national brand partnerships.

Paul Lejuez requested context on the Urban Outfitters brand's current rent, occupancy, and SG&A levels compared to pre-pandemic benchmarks to understand the potential for margin recapture as sales grow.

Answer

Co-President and COO Francis Conforti explained that direct pre-pandemic comparisons are less relevant due to the significant mix shift between store and digital channels. He emphasized the primary focus is on improving maintained margin via lower markdowns. He noted the next step is to leverage occupancy and fixed costs as the brand returns to positive comps, which is anticipated in the second half of the year.

Paul Lejuez asked for details on the product mix between third-party brands and private label brands within the Urban Outfitters and Anthropologie businesses, and the forward-looking strategy for this mix.

Answer

Executive Shea Jensen stated that for Urban Outfitters, brand growth outpaced total brand growth in Q4, and growing national brands remains a key strategy guided by customer demand. For Anthropologie, executive Tricia Smith highlighted that own-brand penetration is a strategic driver, having reached 70% in women's apparel with continued growth opportunities in key house brands like Pilcro and Maeve.

Paul Lejuez inquired about the store growth outlook for the next fiscal year, including Urban Outfitters closures, and asked about the strategic goals for Nuuly in 2025.

Answer

Executive Shea Jensen stated that Urban Outfitters is actively evaluating its flexible lease portfolio to rightsize productivity, which will involve closures, downsizes, and relocations. CFO Melanie Marein-Efron noted that store opening plans for other brands will be similar to FY'25. Nuuly President David Hayne projected mid-double-digit revenue growth for Nuuly in the next year, with a continued focus on improving profitability.

Paul Lejuez questioned whether the product and store aesthetic at Urban Outfitters are sufficiently improved to justify increased marketing spend, the potential timing for such an investment, and the brand's ideal store size and real estate mix.

Answer

Shea Jensen, President of Urban Outfitters North America, explained that the brand is still in a 'test and learn' phase with marketing, currently focusing on social media engagement, and did not provide a specific timeline for a broader marketing push. She stated the ideal store size is smaller, around 6,000 to 8,000 square feet, and the company will evaluate each location's size and placement as leases come up for renewal.

Paul Lejuez inquired about the breakdown of the $1.3 billion operating cash flow, specifically the contributions from net income, one-time items, and working capital. He also asked for a multi-year outlook on CapEx and clarification on the drivers of comparable sales (traffic vs. ticket) for the quarter.

Answer

CFO Jill Timm clarified that the $1.3 billion operating cash flow included a $100 million one-time gain, with the majority driven by strong inventory management (down 5% year-over-year). She projected CapEx to be around $400 million this year and a run rate of $350-$400 million for the next several years. For comparable sales, she stated that average transaction value remained flat, and the improvement from Q2 to Q3, including October's positive comp, was primarily driven by increased traffic.

Paul Lejuez inquired about the breakdown of the $1.3 billion operating cash flow, specifically the contributions from net income, one-time items, and working capital benefits. He also asked for guidance on CapEx for the next several years, following the current year's $400 million, and the year-over-year drivers of comparable sales between traffic and ticket.

Answer

CFO Jill Timm detailed that the $1.3 billion operating cash flow included a $100 million one-time gain but was primarily driven by strong inventory management, with inventory down 5% against a 1.7% comp decline. She projected future CapEx to be in the $350-$400 million range annually. Regarding comparable sales, she noted that average transaction value remained flat, and the improvement in comp (from down 4% to down 1.7%) and October's positive comp were entirely driven by increased traffic.

Paul Lejuez of Citi asked for a breakdown of the comp metrics (transactions, ticket, AUR, UPT) that drove the sales improvement through July and the expected drivers for the second half. He also questioned the impact of tariffs and how much is factored into the company's guidance.

Answer

CFO Jill Timm explained that improved customer traffic was the primary driver of the comp improvement, as average transaction value was relatively flat. She said the focus is on winning back customer trips. Interim CEO Michael Bender addressed tariffs, outlining a mitigation strategy including sourcing diversification, vendor negotiations, and value engineering. He confirmed the potential impact is captured in the guidance, which Timm added was prudently set at the low end of the margin range to provide flexibility to navigate tariffs and remain price competitive.

Paul Lejuez from Citigroup asked about which competitors are likely taking market share, what floor space is being conceded to bring back private brands and jewelry, and if the company's perspective on store closures has changed.

Answer

CFO Jill Timm noted that market share loss is spread across retailers like Amazon and off-price, exacerbated by Kohl's lack of opening price point value. She stated that no floor space needs to be given up due to the large store format; it's a matter of rebalancing assortment. Regarding stores, she reiterated that over 90% are cash-positive, so while they will address underperformers, widespread closures are not the focus.

Paul Lejuez asked for details on the $500 million-$750 million in anticipated charges, specifically how much is cash versus non-cash write-offs, the number of stores being reviewed, and any split by U.S., international, or banner. He also inquired about how much of the $100 million-$125 million synergy is assumed for fiscal 2026 to achieve accretion, and if the company is targeting a larger synergy number longer term.

Answer

Navdeep Gupta, CFO, stated that more detailed assumptions on the charges would be shared during the Q4 call. He outlined three main buckets: unproductive inventory (mostly Q4, cash), store portfolio evaluation, and other unproductive assets (technology, legacy contracts, a combination of cash and non-cash). Regarding synergies, he noted that much work has been done, with ongoing conversations with brands and vendors, and more clarity expected in Q4. He confirmed the focus on driving top and bottom line for the collective business, implying pursuit of additional opportunities beyond the initial synergy target.

Paul Lejuez asked for details on the anticipated $500 million-$750 million in charges, including the split between cash and non-cash write-offs, the number of stores under review, and any breakdown by U.S., international, or banner. He also inquired about the $100 million-$125 million synergy target, how much is expected in FY26 for accretion, and if a larger long-term synergy number is being pursued.

Answer

Navdeep Gupta, CFO, explained the charges primarily cover unproductive inventory (mostly Q4), store portfolio evaluation, technology assets, and legacy contracts, with a mix of cash and non-cash components. More detailed assumptions will be shared in the Q4 call. Regarding synergies, he noted significant work is underway with brands and vendors, and while the $100 million-$125 million is the current target, the organization is always focused on driving top and bottom-line results.

Paul Lejuez from Citi asked about the performance of private brands during the quarter. He also inquired about the magnitude of cost increases from tariffs on direct-import products and the company's corresponding pricing strategy for both private and national brands.

Answer

President & CEO Lauren Hobart stated that vertical brands like DSG, CLIA, and Versed continue to perform 'very, very well,' delivering margins 700-900 basis points higher than national brands. CFO Navdeep Gupta acknowledged some price increases from both vertical and national brand partners, explaining that the company is taking a 'surgical and flexible approach' to pricing to balance sales momentum and profitability, with all impacts included in the updated guidance.

Paul Lejuez asked for specifics on the overlap between DICK'S and Foot Locker, including store locations, customer base, and Nike product assortment.

Answer

President and CEO Lauren Hobart declined to provide specific overlap data pre-close but noted that about 30% of DICK'S stores are in malls. She emphasized a key strategic benefit is gaining access to a different, more urban customer base. Executive VP & CFO Navdeep Gupta added that more details would be shared after the transaction is finalized.

Paul Lejuez inquired about which brands experienced the greatest increases in units, and the expected inventory versus unit gap at the end of Q4 2025 and into the first half of 2026.

Answer

Katrina O'Connell, CFO, stated that unit increases aligned with the outperformance seen in Old Navy and Gap, where AURs were also strong. She confirmed the company's principle of keeping unit inventory below sales for maximum flexibility and expects end-of-quarter inventory to be similar to Q3 levels.

Paul Lejuez asked which brand saw the greatest increases in units and about the inventory versus unit gap, inquiring what that would look like at the end of Q4 and into the first half of 2026.

Answer

Katrina O'Connell, CFO, stated that unit increases were aligned with outperformance, particularly at Old Navy and Gap, where AURs also showed strength. She explained that the company continues to keep units below sales to maintain maximum flexibility and responsiveness to consumer demand, expecting end-of-quarter inventory to be similar to Q3.

Paul Lejuez inquired about the monthly cadence of sales during the quarter, performance and AURs for home versus apparel, and any quantification of changes in the customer base, specifically if a certain age group was attracted to the ladies' business.

Answer

CEO Jim Conroy stated that trends were fairly consistent throughout the quarter, with a strong back-to-school season. He reiterated that traffic, UPT, and AUR all increased, with transactions being the biggest driver. Cosmetics, shoes, and ladies were top performers, while home was slightly below the chain average. He noted no significant shifts in household income demographics, with sales broad-based across income levels.

Paul Lejuez asked about the monthly sales cadence, performance and AURs for home versus apparel, and any quantification of changes in the customer base, specifically if the ladies' business is attracting a certain age demographic not previously captured.

Answer

Jim Conroy (CEO) stated that trends were fairly consistent throughout Q3, with strong back-to-school. He noted that traffic, UPT, and AUR all increased, with transactions being the biggest driver. Cosmetics, shoes, and ladies were top performers, while home was slightly below average. He mentioned broad-based strength across trade area income levels with no significant shifts in customer demographics.

Paul Lejuez from Citigroup asked for a breakdown of transactions versus ticket during the quarter, particularly in July, and how those metrics are expected to trend in the back half. He also inquired about merchandise availability relative to expectations and any potential assortment gaps for the holiday season.

Answer

COO Michael Hartshorn stated that the 2% comp was driven by slight increases in both traffic and average basket size, with the basket benefiting from both higher AUR and units per transaction. CEO James Conroy confirmed that merchandise availability, especially for closeouts, is very strong and that this helped mitigate tariff impacts in Q2.

Paul Lejuez asked for details on regional performance in Q4, which areas drove the February slowdown, the potential impact of new immigration policies, and the traffic vs. ticket mix in the FY25 guidance.

Answer

Group President and COO Michael Hartshorn identified the Pacific Northwest and Texas as top-performing regions in Q4. Regarding immigration, he noted the company over-indexes to the Hispanic customer and will monitor policy impacts. He attributed the recent sales slowdown primarily to traffic, pointing to external volatility.

Paul Lejuez asked if merchandising execution issues were related to the brand strategy, requested a quantification of the Q3 shrink benefit, and inquired about the performance of new stores in the Northeast.

Answer

CEO Barbara Rentler clarified that execution issues were related to merchandise mix rather than the brand strategy itself. Group President & COO Michael Hartshorn declined to quantify the shrink benefit but confirmed it was a significant factor in the Q3 beat and that full-year shrink is expected to be flat. He added that while it is too early to comment on specific Northeast store productivity, the company is pleased with initial results.

Paul Lejuez asked for a breakdown of the basket increase between average unit retail (AUR) and units per transaction (UPT), the current AUR, and any observed changes in customer behavior versus the first quarter.

Answer

Group President and COO Michael Hartshorn confirmed that the comp was driven by both higher traffic and a higher basket. The basket increase was due to higher AUR, partially offset by fewer items per transaction. He declined to provide a specific AUR figure but linked the increase to the company's branded strategy. He noted that customers are clearly seeking value amid persistent inflation.

Paul Lejuez inquired about early signs of elasticity based on price increases, identifying categories with greater or lower elasticity, and requested an update on the marketplace, including the number of SKUs, future expectations, and its importance for the holiday season.

Answer

John David Rainey (EVP and CFO) noted that elasticity varies by category, with electronics, toys, and seasonal items showing higher average unit retail (AURs) and flat units. John Furner (President and CEO, Walmart U.S.) stated that the marketplace focuses on offering a broad assortment, currently over 500 million SKUs, and uses AI to identify and fill assortment gaps, emphasizing the quality of listed SKUs. Doug McMillon (CEO) added that innovation is crucial alongside price for driving growth in General Merchandise, especially for higher AUR items.

Paul Lejuez inquired about early signs of elasticity based on recent price increases, identifying categories with greater or lower elasticity than expected, and requested an update on the marketplace, including SKU count, future expectations, and its importance for the holiday season.

Answer

EVP and CFO John David Rainey noted that elasticity differs by category, with electronics, toys, and seasonal showing higher average unit retail (AUR) increases and flattish units. President and CEO, Walmart U.S., John Furner, stated that the marketplace maintains over 500 million SKUs, with a focus on using AI to identify assortment gaps and ensure completeness. CEO Doug McMillon emphasized the importance of innovation alongside price for growth in general merchandise and higher AUR items.

Paul Lejuez inquired about the key drivers that led Walmart's eCommerce business to achieve profitability and the outlook for future margin expansion in this segment.

Answer

CFO John David Rainey and Walmart U.S. CEO John Furner explained that reaching eCommerce profitability was a significant milestone. Rainey attributed the success to network densification, which spreads delivery costs over more volume, and customers' willingness to pay for expedited delivery. Furner added that years of investment in a unified app, fulfillment centers, and leveraging stores for omni-channel solutions were crucial. He also highlighted the positive impact of a better business mix, including advertising and data services.

Paul Lejuez asked about Q4 markdowns relative to plan, assumptions for the promotional landscape in FY26, and the long-term opportunity in the Canadian market.

Answer

Walmart U.S. CEO John Furner attributed lower markdowns to strong inventory management enabled by technology, and noted that gross margin also benefited from newer businesses like advertising. Walmart International CEO Kath McLay highlighted Canada's strong performance, with e-commerce growth up 30% and accelerating quarterly, driven by a focus on value and convenience.

Paul Lejuez from Citi asked whether the higher average unit retail (AUR) driving the basket was due to merchandise mix or true price increases, and if TJX was capitalizing on opportunities to raise prices given the competitive landscape. He also sought clarification on income demographic performance, specifically if the consistent performance comment referred to the U.S. or other geographies, and any observed differences.

Answer

President and CEO Ernie Herrman clarified that the higher ticket was a combination of both, with a slightly greater impact from selective price increases in response to market trends, while emphasizing the company's commitment to maintaining strong value perception. CFO John Klinger added that lower income demographics were slightly outperforming in the majority of geographies, a continuation of a recent trend, but stressed that all income demographics showed healthy performance.

Paul Lejuez asked whether the higher average unit retail (AUR) was driven by merchandise mix or true price increases, and requested insights into performance across different income demographics in the United States and other geographies.

Answer

Ernie Herrman, President and CEO, clarified that the higher AUR was a combination of factors, leaning more towards selective price increases in response to market trends, while diligently maintaining strong value perception. John Klinger, CFO, added that while performance was strong across all income demographics, the lower-income demographic was slightly outperforming in the majority of geographies, a trend observed over several quarters.

Paul Lejuez requested more detail on performance across different income demographics, as well as any notable regional differences, specifically asking about the performance of stores near the Canadian and southern U.S. borders.

Answer

CEO Ernie Herrman described performance as balanced across all income and age demographics, highlighting a successful focus on attracting younger shoppers. CFO John Klinger reported that while there was a minor impact from reduced Canadian cross-border shopping, it was not material to the total. He stated there was no significant impact observed at the southern border stores and that sales were consistent across all U.S. geographies.

Paul Lejuez of Citigroup asked about the current percentage of direct-sourced product and if that might change. He also questioned if TJX would do less upfront buying to capitalize on deals later and inquired about any shifts in customer income demographics.

Answer

CEO Ernie Herrman stated that direct-sourcing is less than 10% and they don't plan to significantly change that balance. He confirmed they are leaning towards buying more "hand to mouth" to capitalize on expected opportunities. CFO John Klinger addressed demographics, noting that store performance shows strength across all income bands, leaning slightly towards lower-income demographics, which aligns with transaction-driven growth as consumers seek value.

Paul Lejuez inquired about the key drivers behind the strong Q4 performance in TJX's Canada and International divisions and asked if this outperformance is expected to continue into the new fiscal year.

Answer

CEO Ernie Herrman attributed the success to superior execution in flowing fresh merchandise, particularly around the holiday season, and a better balance of 'good, better, best' products. He noted strong home category performance also contributed. Herrman expressed confidence in continued strong performance, citing the seasoned management teams in both divisions.

Paul Lejuez asked if management's view of the consumer has changed over the past three months and requested an early outlook on margin expansion opportunities for fiscal 2026.

Answer

CFO John Klinger stated there has been no change in their view of the consumer. Regarding future margins, he reiterated the company's model where a 3-4% comp can yield flat to 10 basis points of margin expansion, but declined to provide specific FY26 guidance, emphasizing that top-line growth is the biggest lever.

Paul Lejuez asked about the margin guidance for next year, specifically how much of the expansion is attributable to business mix versus improvements within each segment. He also sought clarification on Salomon's door strategy, including the number of wholesale doors being exited and those planned for addition over the next 12 months.

Answer

Andrew Page, CFO of Amer Sports, stated that margin expansion would be primarily driven by gross margin expansion, which in turn is due to favorable channel, product, and region mix shifts. He declined to comment on the specific number of Salomon doors being exited, noting it's a nuanced process of transitioning to more strategic partners, with the clearing expected through H1 2026.

Paul Lejuez questioned how much of next year's margin expansion is due to business mix versus segment-specific improvements. He also sought clarification on the number of Salomon wholesale doors being exited and added over the next 12 months.

Answer

Andrew Page, CFO of Amer Sports, explained that margin expansion is primarily driven by gross margin expansion due to favorable channel, product, and region mix shifts. He declined to provide specific numbers for Salomon wholesale door exits, noting the strategic shift to more focused partnerships, with the transition expected to clear by H1 next year.

Paul Lejuez of Citigroup Inc. asked for details on Arc'teryx's comparable store sales, specifically the performance of full-price stores versus the drag from outlets, and also requested color on inventory levels, including any areas of tightness or excess.

Answer

Arc'teryx CEO Stuart Haselden quantified the outlet sales decline as a 'mid-single-digit drag' on the overall comp but emphasized the positive shift toward a healthier, full-price business. Regarding inventory, he noted they are still chasing demand for certain footwear and apparel items like the Plakea pant. CFO Andrew Page added that he is comfortable with inventory levels, attributing the increase partly to strategic early receipts and reduced use of air freight.

Paul Lejuez inquired about the average unit retail (AUR) trends in Salomon footwear and which parts of the assortment are showing the most strength. He also asked if the company had observed any demand 'air pockets' related to recent tariff news.

Answer

CFO Andrew Page stated that both the performance and sport style categories are strong, with sport style being the primary growth driver. While not providing specific AUR figures, he confirmed that average order values (AOV) and average selling prices (ASP) are trending positively. He also confirmed that the company has not seen any 'air pockets' in demand and that broad-based strength continues.

Paul Lejuez inquired about Salomon's footwear average unit retails (AURs) and the strongest areas of the assortment. He also asked if the company had experienced any 'air pockets' in demand related to recent tariff news.

Answer

CFO Andrew Page noted that both performance and sport style categories are strong, with sport style being the largest growth driver. While not providing specific AURs, he confirmed that both average order values and average selling prices are increasing. He stated that the company has not seen any 'air pockets' in demand and that broad-based strength has continued.

Paul Lejuez from Citigroup asked about the FY25 growth outlook for Arc'teryx's footwear and women's categories, their current sales penetration, and any updates to the footwear distribution strategy.

Answer

Arc'teryx CEO Stuart Haselden reported that footwear grew over 60% in 2024 to just under 10% of sales, with a long-term target of over 20%. The women's business outpaced overall brand growth, reaching nearly 40% of sales in Q4 and a mid-20s percentage for the full year. He reiterated that wholesale remains a critical channel for footwear expansion, particularly in the U.S.

Paul Lejuez asked about the factors contributing to weakness in the Underwear business, including market share shifts, the quantification of timing shifts versus overall market weakness, and the outlook for stabilization. He also inquired about overall point-of-sale trends, seeking insights into specific areas of strength and weakness.

Answer

Chuck Ward (EVP and COO, Gildan Activewear) explained that the innerwear business was affected by retailer floor set delays, tighter inventory management due to tariffs, and ongoing product resets. He anticipates a return to growth for innerwear in Q4 and a stable market, consistent with Q2. Ward highlighted strong performance in Comfort Colors, knit, and fleece, alongside new activewear programs and national account growth.

Paul Lejuez inquired about the factors contributing to the weakness in the Underwear business, including market share shifts and the timeline for stabilization. He also asked for insights into overall point-of-sale trends, identifying specific areas of strength and weakness.

Answer

Chuck Ward, Executive Vice President and Chief Operating Officer, explained that the innerwear business was affected by retail floor set delays, inventory management by retailers due to tariff impacts, and ongoing product resets. He anticipates a return to growth in innerwear in Q4 and a stable market, consistent with Q2's low single-digit decline. Ward highlighted strong performance in Comfort Colors, knit, and fleece, alongside growth in new activewear programs and national accounts. Glenn Chamandy, President and CEO, later clarified that the overall market was down low single digits in Q3, similar to Q2.

Paul Lejuez of Citigroup Inc. inquired about point-of-sale (POS) trends across major channels, any signs of customer destocking, and the specific tariff and pricing assumptions embedded in the company's financial guidance.

Answer

EVP and COO Chuck Ward reported strong activewear performance and market share gains, driven by product innovation, which offset a down market. President and CEO Glenn Chamandy confirmed that channel inventories are balanced with no signs of destocking. EVP and CFO Luca Barile explained that the guidance incorporates current tariff measures, noting the impact on Gildan is significantly less than the 10% headline rate due to the high U.S. content in its products. Mitigation strategies include selective price increases and supply chain flexibility.

Paul Lejuez inquired about the strongest and weakest point-of-sale (POS) trends during the quarter and quarter-to-date, and how the competitive landscape, particularly the weakness of competitors like Delta, is impacting the pricing environment in Activewear and hosiery.

Answer

CEO Glenn Chamandy stated that Gildan is widening its competitive advantage as competitors weaken, noting Delta's Chapter 11 filing creates a future market share opportunity. He mentioned that pricing is now stable after some temporary pressure from competitor liquidations. President of Sales, Chuck Ward, added that POS improved through the quarter, with June at mid-single digits, and that fleece and ring-spun categories continue to show strength and market share gains.

Paul Lejuez inquired about the future strategy for the Simple Joys brand within the wholesale channel, including plans for its reduction and potential replacements. He also asked for clarification on wholesale pricing trends, specifically how they compare to the mid-single-digit AUR increases seen in Q3 retail and the outlook for spring pricing.

Answer

Richard Westenberger (Senior Executive VP, CFO and COO, Carter's Inc) explained that Simple Joys, initially a successful private label-like brand on Amazon, is being re-evaluated due to Amazon's changing brand management approach. He indicated a shift towards core Carter's, OshKosh B'Gosh, and other brands on the Amazon platform. Doug Palladini (CEO and President, Carter's Inc) added that the company is building a framework for a more meaningful business with its core brands on Amazon and noted positive sell-in results for higher prices in the broader wholesale business, which will impact sales starting January. Westenberger clarified that Q3 wholesale pricing was roughly comparable, as the company has more flexibility in its own retail channel for price increases.

Paul Lejuez asked for quantification of the second-half inventory pullback, whether this was driven by order cancellations from major retail partners, and for more detail on the inventory receipt timing for the back-to-school and holiday seasons.

Answer

CFO Richard Westenberger described the inventory adjustments as modest and primarily impacting the company's own retail business for the late holiday season, declining to provide a specific quantity. He confirmed there has been no meaningful trend of order cancellations from wholesale partners. He also noted that fall/winter inventory begins arriving in late May and June. Executive Kendra Krugman added that the company's planning calendar allows them to delay final decisions on units and pricing.

Representing Paul Lejuez of Citigroup, Kelly Crago asked about the key metrics guiding the company's pricing investment strategy and the expected cadence of performance improvement in both the U.S. Retail and U.S. Wholesale segments throughout the year.

Answer

Executive Richard Westenberger outlined that pricing investment success is measured by unit velocity, store traffic, and customer acquisition/retention. For U.S. Retail, he expects an improving comp trend through 2025, targeting a positive comp in Q4, driven by better inventory positions and assortment enhancements, especially in the kids' category. For U.S. Wholesale, he noted first-half bookings are down slightly due to department store conservatism, with the second-half outlook still being formulated.

Paul Lejuez asked if the gross margin pressure seen in Q4 would persist into the first half of next year and sought details on the drivers behind the lowered full-year wholesale guidance.

Answer

CFO Richard Westenberger noted it was too early for specific 2025 margin guidance but anticipates modest product cost inflation in H1 2025. He attributed the revised wholesale forecast to slightly lower replenishment demand from exclusive brands and order shifts from department stores. CEO Michael Casey added that lower off-price sales also contributed to the revision.

Paul Lejuez asked about Kroger's performance across different income segments, any notable regional differences, and the company's assumptions for inflation and unit growth in the second half of the year.

Answer

Ronald Sargent, Interim CEO & Chairman, observed stable retail food spending but stressed consumers. Low and middle-income households are seeking deals, using coupons, making smaller/frequent trips, and buying more private label, while higher-income households, though concerned, are still spending on premium products and larger pack sizes. He noted declines in snack and adult beverage categories. No significant regional differences were observed. Kroger's internal inflation assumption for the second half is 1.5% to 2.5%, with units almost flat year-over-year.

Paul Lejuez of Citigroup asked for more detail on the growth of the 'Our Brands' portfolio relative to the rest of the store and inquired about any notable regional differences in the promotional landscape. He also followed up on the behavior of high-income shoppers.

Answer

Interim CEO & Chairman Ronald Sargent highlighted another strong quarter for 'Our Brands,' noting it creates great value and differentiates Kroger, citing the new Simple Truth protein line as an example of innovation. He saw no significant regional differences in performance. EVP & CFO David Kennerly added that the high-income consumer continues to behave rationally, with normal trends in premium and fresh categories.

Paul Lejuez of Citigroup inquired about the performance of the 'Our Brands' portfolio relative to the rest of the store and asked about any notable regional differences in the promotional landscape. He also followed up on the behavior of higher-income customers.

Answer

Interim CEO & Chairman Ronald Sargent highlighted another strong quarter for Our Brands, noting a significant opportunity for further growth driven by quality, value, and innovation. He stated there were no significant regional differences to report, with good performance across the chain. EVP & CFO David Kennerly added that the higher-income consumer continues to behave rationally, with normal trends in categories like premium wines and fresh produce.

Kelly Crago, on behalf of Paul Lejuez, asked for clarification on the $85 million tariff impact, questioned AUR trends for Q2, and inquired about the outlook for the second half.

Answer

CFO Eva Boratto clarified that the $85 million tariff figure includes the 25% Canadian retaliatory tariffs that were in effect until September 1st. She also noted that mix-adjusted AUR was up low-single digits in Q2, as the company was less promotional overall despite the timing of the semi-annual sale.

An associate for Paul Lejuez asked for more detail on the drivers of strong merchandise margins and AURs in Q1, particularly the impact of the Disney collaboration. They also inquired about the accounting treatment for licensing revenues from such collaborations.

Answer

CFO Eva Boratto reported a 160 basis point expansion in gross margin, with merchandise margin up 100 basis points. This was driven by low-single-digit mix-adjusted AUR increases, product cost savings from value engineering, and lower transportation costs. She also noted 50 basis points of favorable B&O leverage from exiting a fulfillment center and lower depreciation. Boratto confirmed that royalty payments for collaborations are recorded within the merchandise margin.

Paul Lejuez of Citigroup Inc. asked for a breakdown of the company's tariff exposure by country and inquired about the assumed growth for adjacent categories in fiscal 2025.

Answer

CFO Eva Boratto stated that China represents about 10% of the supply mix, which is factored into guidance, while Canada and Mexico combined are about 7%. CEO Gina Boswell added that adjacent categories are expected to become a larger percentage of the mix in 2025, viewing them as large addressable markets with the potential to become future core businesses.

Paul Lejuez inquired about the third-quarter merchandise margin, the plan for Q4 merchandise margin, and what specifically drove the 1% increase in Average Unit Retail (AUR).

Answer

CFO Eva Boratto stated that Q3 merchandise margin was flattish year-over-year and is expected to be flattish again in Q4, with overall gross margin improvement coming from B&O efficiencies. CEO Gina Boswell explained that the 1% AUR increase was driven by product mix, reflecting the success of their 'good, better, best' strategy and innovation across various price points.

Paul Lejuez from Citigroup Inc. requested more detail on the tariff impact, asking for the gross impact versus the net mitigation, and sought an update on the EMEA business, including performance by country and trends throughout the quarter.

Answer

SVP & CFO Robert Ball stated the net tariff impact is $90M for 2025 but declined to provide a gross figure, noting mitigation efforts will primarily take shape in 2026. CEO & Director Fran Horowitz reported that in EMEA, the U.K. continues to perform well due to investment, while Germany and other markets were softer. The strategy is to export the successful U.K. playbook to the rest of Europe.

Paul Lejuez requested quantification of the freight drag in H1 versus the tailwind in H2, asked for expectations on inventory levels throughout the year, and inquired about which geographic regions are expected to drive sales growth.

Answer

CFO Robert Ball attributed about 5 percentage points of the inventory increase to freight, noting that costs will remain a headwind in H1 before flipping to a tailwind in H2 as they lap last year's disruptions. He expects inventory costs to normalize through H1, with the goal of ending the year with units aligned with sales. CEO Fran Horowitz-Bonadies stated that the company expects balanced growth across all geographic regions in 2025, similar to the performance in 2024.

Paul Lejuez from Citigroup Inc. asked about the future growth opportunities and the 'next act' for the Abercrombie & Fitch brand, differentiating between U.S. and international markets. He also inquired about the expected year-end cash balance and the future pace of share repurchases.

Answer

CEO Fran Horowitz-Bonadies explained that A&F's future growth stems from its transformation into a lifestyle brand with a broader addressable market, expanding into categories like Best Dressed Guest and YPB. COO Scott Lipesky added that international growth is focused on reintroducing the brand in the U.K. and Germany. Regarding capital allocation, he noted that cash should increase by year-end and that share repurchases will remain the primary use of excess cash, supported by strong operating cash flow.

Paul Lejuez asked about the future strategy and next phase of opportunity for the Abercrombie & Fitch brand, differentiating between U.S. and international markets. He also inquired about the expected year-end cash balance and the anticipated pace of share repurchases.

Answer

CEO Fran Horowitz-Bonadies described A&F's 'next act' as continuing its evolution into a lifestyle brand for a broader age demographic with expansion in categories like YPB and Best Dressed Guest. COO Scott Lipesky highlighted international growth in the UK and Germany. While not providing a specific cash target, he expects the year-end balance to be higher and confirmed that share repurchases remain a primary use of excess cash.

Paul Lejuez from Citigroup inquired about the sales cadence throughout the second quarter and the promotional environment relative to expectations. He also asked about the company's year-end cash balance target and its minimum cash requirements.

Answer

CFO & COO Scott Lipesky stated that Q2 saw double-digit growth in each month and that the promotional environment is rational, with the company's actions driven by its own inventory and performance. He noted there is no specific year-end cash target, but after paying off debt, the focus for excess cash will shift to share repurchases while maintaining a strong balance sheet to fund investments. CEO Fran Horowitz-Bonadies reiterated that promotions are managed weekly based on business needs.

Asked for details on average price points for cash vs. managed care customers, whether the company is losing cash-pay customers to competitors, any regional performance differences, and clarification on managed care spending power.

Answer

The company confirmed managed care customers have a higher average ticket. The slight decline in cash-pay traffic was partly intentional, as they chose not to repeat a low-margin promotion from the prior year. There are no significant regional performance differences. The company is increasing its assortment of frames priced over $99 to better align with the average $130 frame allowance provided by managed care plans.

Represented by Brandon Cheatham, Paul Lejuez asked for a breakdown of the 2025 top-line guidance between managed care and cash-pay customers, and whether recent trends suggested a repurchase cycle return or showed geographic differences.

Answer

CEO L. Fahs reiterated that managed care is 40% of sales and growing at high-single-digits, making it a key focus, but did not provide a specific guidance split. He confirmed January was strong on a two-year basis and that the February softness had some geographic variability, prompting a cautious stance beyond just weather impacts.

Paul Lejuez inquired about the new stores planned for next year, such as regional concentration and any changes to the store model. He also asked for an outlook on CapEx given the slower store growth and about potential opportunities to operate within other retailers.

Answer

CEO Reade Fahs stated that the 30-35 new stores in 2025 will be exclusively America's Best locations in states where remote exams are permitted. CFO Melissa Rasmussen indicated that capital will be reallocated to reinvesting in the existing fleet through a mix of CapEx, cloud, and operating expenses. Fahs noted that while they are always open to opportunities, the primary focus is on transforming the America's Best brand.

Paul Lejuez of Citi inquired about the specific wholesale channels that experienced significant order cancellations, how ordering behavior has shifted with more tariff clarity, and the expected gross margin pressure from tariffs in Q3 and Q4 relative to Q2.

Answer

Chairman and CEO Edward Rosenfeld explained that order cancellations were highly concentrated in the value price channels, specifically mass and off-price, which accounted for approximately 95% of the organic wholesale revenue shortfall. While these channels are ordering again, he anticipates continued pressure in Q3. Rosenfeld noted that Q2 gross margin pressure from tariffs was 230 basis points, net of supplier discounts, and while not providing specific guidance, he expects a significant impact to persist in Q3.

Paul Lejuez of Citigroup Inc. inquired about the expected gross margin pressure from new tariffs throughout 2025, the company's mitigation plans, and whether the Kurt Geiger acquisition would require significant upfront investment.

Answer

Chairman and CEO Edward Rosenfeld outlined a three-part strategy to mitigate tariff impacts: diversifying production out of China (already reduced from 71% to 58% of U.S. imports), negotiating price concessions with factories, and implementing selective, surgical price increases in the fall. He stated that due to market fluidity, specific gross margin guidance would not be provided. Regarding Kurt Geiger, Rosenfeld confirmed that no meaningful upfront investment or initial operating margin drag is anticipated.

Paul Lejuez of Citigroup asked for a breakdown of comparable sales drivers by brand, specifically traffic versus ticket and AUR, and requested quantification of Old Navy's market share gains by age demographic.

Answer

CEO Richard Dickson noted Old Navy's share gains were broad, particularly in denim and active, and resonated across top and bottom income cohorts, without specifying age demographics. CFO Katrina O'Connell added that the positive company-wide comp was driven by increases in both traffic and average transactions, with AUR down modestly due to higher promotional activity at Athleta.

Paul Lejuez of Citigroup requested a breakdown of comparable sales drivers by brand, specifically traffic versus ticket and AUR. He also asked for more detail on the demographic nature of Old Navy's market share gains.

Answer

CEO Richard Dickson noted that Old Navy is gaining share across both top and bottom income cohorts, while Gap is gaining in top and middle cohorts, indicating broad consumer appeal. CFO Katrina O'Connell specified that the positive company-wide comp was driven by increases in both traffic and average transactions. She added that AUR was down modestly, primarily due to higher promotional activity at Athleta.

Paul Lejuez questioned whether the projected $40-$45 million tariff impact already accounts for potential cost-sharing with vendors and asked for a breakdown of the company's top three customers.

Answer

CFO Jim Swanson clarified that the $40-$45 million figure represents the direct cost of the incremental 10% universal tariff in the U.S. CEO Tim Boyle described vendors as long-term partners and stated they will work together to mitigate costs through various means, such as adjusting shipment timing or destinations. He declined to name top customers but confirmed that Columbia does not have any single customer representing 10% or more of sales.

Paul Lejuez of Citigroup asked about the amount of incentive compensation assumed in the fiscal 2025 guidance, the current revenue size of the OFFLINE by Aerie business, and whether any inventory purchases for the second half of the year had been adjusted.

Answer

CFO Mike Mathias stated that the guidance assumes 'very low to minimal' incentive compensation. He sized the OFFLINE business at approximately $600 million, calling it the company's fastest-growing segment. He also confirmed that the company has significant 'open-to-buy' for the back half, providing flexibility to adjust inventory based on trends.

Paul Lejuez asked for a better understanding of the demand "choppiness" mentioned, how quarter-to-date performance compared to expectations, and the comparable sales growth required to leverage SG&A next year.

Answer

CFO Mike Mathias explained that the choppiness was observed after the back-to-school peak and was exacerbated by warm weather, though trends improved during key holiday weeks. He affirmed the company's goal to leverage SG&A expenses on its 3% to 5% comparable sales growth algorithm next year through continued cost discipline.

Paul Lejuez asked for more specific details on quarter-to-date performance by brand and the underlying comparable sales assumptions for each brand in the second-half outlook. He also inquired about expectations for SG&A dollar growth in fiscal 2025.

Answer

Mike Mathias, CFO, shared that quarter-to-date, the American Eagle brand's trend is consistent with Q2, while Aerie's performance has accelerated to a level similar to its Q2 ex-swim results. For fiscal 2025, he indicated that while plans are still being finalized, the goal is to manage SG&A dollar growth to a rate below the company's target revenue growth of 3-5%.

Paul Lejuez of Citigroup asked for more detail on the flat comparable sales guidance for fiscal 2025, specifically which categories are expected to perform above or below that average, and also inquired about the outlook for food inflation.

Answer

EVP Richard Gomez responded that the company has adopted a conservative posture for its discretionary businesses due to market volatility. He indicated that the frequency businesses (Food & Beverage, Essentials) are expected to continue delivering single-digit growth, which has been their more predictable trend. The company did not provide a more granular breakdown by category or a specific forecast for food inflation.

Paul Lejuez from Citigroup requested a breakdown of the fiscal 2025 sales guidance between the U.S. and International segments, asked about any changes in ordering patterns from mass versus department store channels, and inquired about the expected quarterly cadence for gross margin.

Answer

CEO Stephen Bratspies projected the U.S. segment to be roughly flat and International to be up low-single digits on a constant currency basis, noting no major shifts in retailer ordering patterns. CFO Markland Lewis guided for a 20-30 basis point full-year gross margin increase, with a stronger year-over-year uplift in the first half due to input cost tailwinds and the timing of cost-saving benefits.

Paul Lejuez asked for the fiscal 2026 CapEx forecast, questioned the extent to which the terminated merger distracted management and contributed to current issues, and inquired about any significant leadership gaps.

Answer

CEO John Idol conceded the merger process was 'highly distracting' but stated its termination allowed management to make bold and swift strategic changes, particularly at Michael Kors. He confirmed there are no major leadership gaps, as very few people left. CFO Tom Edwards projected fiscal 2026 CapEx to be approximately $125 million, similar to fiscal 2025, primarily to support the Michael Kors store renovation program and technology investments.

Asked for the CapEx forecast for the next fiscal year, questioned how much the distraction of the terminated merger contributed to current business challenges, and inquired if there were any significant leadership gaps to be filled.

Answer

Tom Edwards stated that CapEx for next year will be around $125 million, similar to the current year, focusing on the Michael Kors store renovation program and technology. John Idol admitted the merger was 'highly distracting' for management, but the team has rebounded quickly. He confirmed that the biggest strategy changes were needed at Michael Kors. He also stated that very few people were lost during the period and there are no major leadership holes.

Paul Lejuez of Citigroup asked for the current percentage of sales occurring at full price versus historical levels and whether the outperformance of outlet stores was driven by traffic or conversion.

Answer

Chairman & CEO Thomas Chubb acknowledged that a higher proportion of sales occurred during promotional events than in prior years, pressuring gross margins. He explained this was due to both strong performance during promotions and weaker full-price selling. CFO & COO K. Grassmyer added that the true off-price channel, like Lilly Pulitzer's flash sales, constitutes about 20% of that brand's business.

Paul Lejuez of Citigroup inquired about regional performance, asking which areas were stronger or weaker during the quarter. He also sought to understand the current level of full-price selling for each brand relative to historical peaks and pre-pandemic levels, and questioned if ticket prices should be lowered to drive sales.

Answer

CEO Tom Chubb identified cooler weather regions like the Midwest and New England as relatively stronger, though all regions were soft. CFO Scott Grassmyer added that Marlin Bar locations also held up better. Regarding pricing, Grassmyer noted that the promotional level is reverting closer to pre-pandemic norms, driven by lower full-price sell-through. Chubb stated they do not plan to reprice existing products but may adjust the assortment mix in the future to feature more accessible price points, citing underinvestment in opening price point dresses as a Q2 misstep.

Paul Lejuez of Citigroup asked about regional performance, inquiring which areas were stronger or weaker. He also sought to understand where each brand stands in terms of full-price selling relative to historical peaks and pre-pandemic levels, and questioned whether ticket prices should be adjusted to drive sales.

Answer

Chairman and CEO Tom Chubb noted that while all regions were soft, cooler weather areas like the Midwest and Mid-Atlantic performed relatively better. CFO and COO K. Grassmyer added that Marlin Bar locations also held up well. Grassmyer explained that promotional levels are reverting closer to pre-pandemic norms after several years of unusually high full-price selling. Chubb addressed pricing by stating they will not reprice existing styles but may adjust the average unit retail (AUR) in the future by investing more heavily in existing lower price point offerings, which were under-inventoried in Q2.

Paul Lejuez of Citi questioned if quarter-to-date promotions were running higher year-over-year and their resulting sales impact, and also asked about the typical performance of the e-commerce business in markets where stores are closed.

Answer

CEO Antony Spring stated that quarter-to-date promotions are approximately comparable to last year, with margin impacts stemming more from product mix and liquidations rather than a higher overall discount rate. COO & CFO Adrian Mitchell addressed store closures, explaining that since most are in markets with other Macy's locations, the comp impact is expected to be limited, and a specific strategy is in place to retain customers by directing them to nearby stores.

Paul Lejuez asked for more detail on the buying environment, including categories with strong or weak availability. He also inquired about the long-term gross margin structure if consumables continue to grow as a percentage of sales.

Answer

Outgoing CEO John Swygert stated that deal flow is strong across all departments with no shortages, highlighting a recent improvement in HBA. CFO Robert Helm reiterated that the long-term gross margin target remains 40%. He acknowledged the margin drag from consumables but noted they drive valuable customer frequency and the impact can be offset by supply chain efficiencies.

Paul Lejuez asked for a breakdown of the remodel comp lift between traffic and ticket, whether there is an SG&A offset to the shrink benefit, and what the SG&A leverage point is for the upcoming year.

Answer

CEO Todd Vasos explained that remodels typically drive ticket first through an enhanced offering, with traffic following as word of mouth spreads. CFO Kelly Dilts confirmed that the SG&A leverage point remains in the historical 2% to 4% comparable sales growth range.

Paul Lejuez from Citigroup Inc. asked how the 'underdog persona' will affect the use of professional athletes as brand ambassadors and requested an update on inventory and promotional levels across major markets.

Answer

CEO Kevin Plank explained that the underdog persona applies to professional athletes as well, citing Stephen Curry as a prime example of an athlete who wasn't the biggest or fastest but changed his sport through hard work. CFO Dave Bergman addressed inventory, noting that while industry levels are improving, retailer conservatism persists. He stated that Under Armour's own inventory is in good shape, with the majority being current season, and the company expects levels to decline further by year-end.

Paul Lejuez from Citigroup questioned the full-year guidance, noting the second-half outlook appears weak, and asked about the "mixed results" from promotional tests in the factory outlet business.

Answer

CFO Dave Bergman explained the second-half guidance reflects developing pressures in APAC, higher ocean freight costs, and negative FX impacts. He also noted that H1 profitability is amplified by a planned insurance recovery and a shift in marketing spend to H2. Regarding factory outlets, Bergman confirmed that tests with lower promotions yielded mixed results, as they gave up some revenue, and the company is still in a "test and learn" phase for that channel.

Tracy Kogan, on behalf of Paul Lejuez, requested more detail on Average Unit Retail (AUR) trends, including regional variations, full-year expectations, and the key drivers behind the increases.

Answer

Coach CEO Todd Kahn explained that the brand saw mid-single-digit AUR growth, led by North America, and he expects this to continue. He attributed the gains not to simple price increases but to a healthier business mix, including less discounting and strong demand for new full-priced products like the Brooklyn bag. He also highlighted the success of selling the iconic Tabby bag at full price in outlet channels, demonstrating that consumers see 'brand' over 'channel'.

Paul Lejuez asked about the magnitude of the decline in NIKE's Running specialty business from its peak and requested a regional breakdown of the pressures contributing to the Q2 gross margin decline.

Answer

EVP & CFO Matthew Friend acknowledged losing market share in the Running specialty channel after pulling back years ago but did not quantify the peak-to-trough decline, instead focusing on the current strategy to reconnect with runners. Regarding Q2 margins, he stated the pressures from promotions and deleverage are broad-based across all geographies rather than being concentrated in a single region.

Paul Lejuez asked about the trend in promotional activity as sales momentum increased during the quarter and sought details on the expected contribution from Nike to the back-half sales plan.

Answer

CEO Mary Dillon clarified that strengthening sales were driven by the Lace Up plan's success, allowing for a pullback in promotions. Regarding Nike, she expressed confidence in the partnership, highlighting key collaborations and confirming a return to growth with the brand in Q4, supported by a strong order book.

Asked for a quantitative performance comparison of the Anniversary Sale versus the rest of the quarter and last year, and inquired about any impacts from the switch to cost method accounting.

Answer

The Anniversary Sale performed on plan with good sell-throughs and strong regular price sales year-over-year. The company did not provide a specific growth number for the sale period but noted strength across all months of the quarter. The switch to cost accounting had no material impact in Q2.