Rick Patel

Rick Patel sought deeper insight into U.S. customer acquisition, specifically the proportion of growth from new versus reactivated customers, and expectations for new customer growth in 2026. He also asked about the margin profile of international markets, comparing 2025 to prior years and outlining future expectations given ongoing expansion.

Answer

CFO Sarah Oughtred explained that active customer growth was broad-based, stemming from new customer acquisition, reactivation (the largest growth rate), and improved retention, with U.S. acquisition accelerating due to effective marketing. She noted consistent trends across customer cohorts, occupations (with a slight increase in students), and spend levels, indicating no trade-down. For international margins, Sarah stated that all established markets are profitable after their first year, with higher initial selling and marketing costs expected to leverage over time through distribution network expansion and a growing returning customer base.

Rick Patel asked for deeper insight into U.S. customer acquisition, specifically the proportion of growth from new versus reactivated customers, and expectations for new customer growth in 2026. He also questioned the margin performance of international markets in 2025 compared to the prior year and future expectations given ongoing expansion.

Answer

Sarah Oughtred, CFO, explained that U.S. active customer growth was broad-based, stemming from new customer acquisition, reactivation (the largest growth rate), and improved retention, all supported by effective upper and lower funnel marketing. She expects these trends to continue into 2026. Regarding international margins, Sarah stated that all existing markets are profitable, with new markets becoming profitable after year one. She noted higher selling and marketing costs in international due to geography and new customer focus, but anticipates future leverage through distribution network expansion and a higher proportion of returning customers.

Rick Patel from Raymond James asked if Q2 inventory levels reflected any pull-forward of orders to get ahead of tariffs and also inquired about the impact of foreign exchange on international growth.

Answer

CFO Sarah Oughtred confirmed that the 8% unit inventory growth was partly driven by pre-positioning inventory ahead of original tariff dates, while the 14% dollar growth also reflected a mix shift to higher-cost goods. She stated that the foreign exchange impact was not material to the strong 20% international growth, which was broad-based across key regions.

Rick Patel inquired about Etsy's strategy for acquiring younger buyers, identifying key channels and planned initiatives for 2026. He also asked about the potential to re-engage lapsed buyers and the effectiveness of social media in this effort.

Answer

CFO Lanny Baker noted over 100 million lapsed buyers, representing a significant opportunity to increase purchase frequency. He identified the mobile app and social channels like TikTok and Pinterest as crucial for engaging younger audiences, mentioning a successful doubling of TikTok spend in Q4 2025 while maintaining ROI. CEO Kruti Patel Goyal added that it's a 'presence gap' rather than an 'appeal gap' for younger buyers, emphasizing the importance of relevant channels, discovery-oriented content, and leveraging sellers and influencers.

Rick Patel asked about Etsy's strategy for acquiring younger buyers, identifying the channels with the biggest opportunities and planned actions for 2026. He also inquired about the potential to re-engage lapsed buyers and the overall size of that opportunity.

Answer

CFO Lanny Baker stated there are over 100 million lapsed Etsy buyers, representing a significant opportunity to increase purchase frequency. For younger buyers, he highlighted the mobile app (noting Depop's 90% mobile app GMS) and social channels like TikTok and Pinterest as key levers. He mentioned doubling TikTok spending in Q4 while maintaining ROI. CEO Kruti Patel Goyal added that acquiring younger buyers is a 'presence gap' rather than an 'appeal gap,' emphasizing the importance of relevant channels, leveraging sellers and influencers, and creating discovery-oriented, personalized content.

Rick Patel asked about the assumptions underpinning the Crocs North America guidance for 2026, specifically regarding pricing versus units, any changes in pricing, and the impact of promotional pullbacks on ASPs and margins.

Answer

Andrew Rees, Chief Executive Officer, stated that no significant price changes are implied in the North American guidance, with price not being a material driver for 2026 performance. He noted select price increases were taken more internationally and for Hey Dude. The impact of promotional pullbacks is primarily due to anniversarying strategic decisions made in mid-2025, which will create a drag on sales trajectory in the first half of 2026, as embedded in the guidance.

Rick Patel asked about the assumptions underpinning the Crocs North America 2026 guidance, specifically regarding pricing versus units, any changes in pricing, and the impact of pulling back on promotions on ASP improvements and margins.

Answer

CEO Andrew Rees stated that no significant price changes are implied in the North American guidance for 2026, with price not being a material driver. He noted select price increases were more prevalent internationally and for Hey Dude. The impact of promotional pullbacks is primarily due to anniversarying strategic decisions made in mid-2025, which will create some sales drag embedded in the guidance for the first half of 2026.

Rick Patel from Raymond James Financial asked for an explanation of the performance disparity between Heydude's direct-to-consumer and wholesale channels and inquired about the timeline to right-size inventory in the wholesale channel.

Answer

CEO Andrew Rees explained that Heydude's DTC growth was primarily driven by new points of distribution. This includes the opening of new outlet stores, which improve brand awareness, and an outsized performance on TikTok Shop, where Heydude is a top-three footwear brand. He indicated the significant wholesale inventory cleanup actions would be concentrated in Q3.

Rick Patel asked CFO Scott Roe about the drivers of operational gross margin outperformance and the opportunities for the back half of the year, seeking clarification on any conservatism in the guidance and the timing of various gross margin factors.

Answer

CFO Scott Roe explained that operational gross margin improvements are primarily driven by Average Unit Retail (AUR) gains and mitigating actions in the supply chain, which will accelerate next year. He noted that the full-year gross margin outlook was raised, fully offsetting tariff impacts, but acknowledged quarter-by-quarter timing noise. The majority of tariff impact for the current year is expected in Q3 and Q4, with compounding AUR gains and accelerating mitigating actions supporting continued gross margin increases in fiscal 2027 and beyond.

Rick Patel asked for more details on Tapestry's Average Unit Retail (AUR) opportunities, the benefit from pricing strategies, and any potential swing factors from sales mix, such as larger bags or specific quality materials.

Answer

CEO Joanne Crevoiserat stated that AUR growth is a function of brand heat, innovation, quality, and the brands' unmatched value proposition, not merely a reaction to cost. New customers are entering at higher AURs. Todd Kahn, CEO and Brand President of Coach, elaborated that within the $200-$500 sweet spot, there's room for price increases through product animation where consumers perceive value, avoiding artificial 'like-for-like' hikes. Mix is a significant driver, including the 'one Coach strategy' bringing collection product to outlet stores. Customers often trade up to higher AUR bags after positive initial experiences. He emphasized maintaining value and avoiding artificial unit growth through promotions.

Rick Patel asked about the expected progression of growth in North America, seeking to understand the drivers of the implied improvement from a Q1 decline to modest growth for the full year.

Answer

CEO Joanne Crevoiserat and CFO & COO Scott Roe explained that the Q1 decline of 1% was better than expected and was primarily impacted by a planned wholesale drag. This headwind is not expected to repeat in subsequent quarters. The underlying direct-to-consumer trends are positive, which supports the outlook for slight growth in the region for the full fiscal year.

Rick Patel asked for more detail on the return to growth in fiscal 2027, specifically which areas of the business have the most confidence, what will take longer to turn (aside from wholesale), and thoughts on geographic performance variability.

Answer

Chairman and CEO John Idol expressed excitement about Jimmy Choo's growth, particularly in accessories, aiming for an $800 million business with significant store productivity increases. For Michael Kors, he emphasized sustainable growth through the Jet Set positioning, product as hero storytelling, and targeting younger consumers via social media. He expects full-price and outlet channels to contribute to revenue expansion, supported by SG&A control, cost reductions, and better full-price sell-throughs, leading to gross margin improvement.

Rick Patel requested more detail on the return to growth in fiscal 2027, asking which areas of the business the company has the most confidence in, what might take longer to turn (aside from wholesale), and thoughts on geographic performance variability.

Answer

Chairman and CEO John Idol expressed excitement about Jimmy Choo's growth, particularly in accessories, which is seen as a significant opportunity to reach an $800 million business. For Michael Kors, he emphasized building sustainable growth through the 'jet set' positioning, compelling storytelling, and product as the hero, targeting younger consumers via social media. He expects both full-price and outlet channels to return to growth. He also highlighted anticipated SG&A expansion, modest price increases, cost reductions from suppliers, and better full-price sell-throughs contributing to gross margin improvement. Database growth and three consecutive quarters of e-commerce traffic growth for Michael Kors further bolster confidence.

Rick Patel of Raymond James Financial, Inc. asked for details on the evolving U.S. distribution strategy, particularly whether consumers are migrating to the retail channel as department store exposure is reduced, and the long-term vision for the wholesale versus retail mix.

Answer

Chairman & CEO John Idol revealed that the company is not fully recapturing sales from closed stores, leading to a new strategy of re-entering certain markets with smaller, 1,500-2,000 sq. ft. stores. He expects to guide to modest store growth in fiscal 2027. For wholesale, the focus is shifting from door closures to renovating existing shop-in-shops, with the goal of returning the channel to growth in calendar year 2027.

Rick Patel asked for a deeper understanding of what drove the positive inflection in HOKA's U.S. DTC performance in Q3 compared to the first half, especially given previous comments about consumers preferring in-person shopping for new products. He also inquired about the opportunity for HOKA pricing, noting that previous increases were lower than competitors.

Answer

President and CEO Stefano Caroti attributed HOKA's U.S. DTC success primarily to the HOKA membership program, which improved revenue per customer, units per transaction, and multi-category purchases, along with a cleaner marketplace. CFO Steve Fasching added that consumers became more familiar and engaged with product updates. Regarding pricing, Caroti stated they selectively implement increases when upgrading products, with some planned for spring and fall, and Fasching noted HOKA's pricing power.

Rick Patel asked about the positive inflection in HOKA's U.S. D2C in Q3 compared to the first half, seeking to understand what changed and the durability of this growth.

Answer

Stefano Caroti, President and CEO, and Steve Fasching, CFO, attributed the success to the HOKA membership program, which improved revenue per customer, units per transaction, and multi-category purchases. They also cited a cleaner marketplace with less noise from outgoing styles and increased consumer familiarity and engagement with product updates. Exclusives and early drops also contributed. Patel also asked about the opportunity for HOKA pricing, whether there's room for higher prices, and if it's a near-term event. Caroti stated they would increase prices selectively and strategically, typically with product upgrades, with some increases planned for spring and fall. Fasching added that the quarter's performance demonstrates HOKA's pricing power.

Rick Patel from Raymond James Financial, Inc. requested an analysis of HOKA's international growth drivers, distinguishing between organic growth and new distribution. He also asked for the outlook on SG&A expenses and areas of spending control.

Answer

CEO Stefano Caroti emphasized that international growth is driven by strong product performance, with sell-through outpacing sell-in and record reorders. CFO Steven Fasching detailed that SG&A will see targeted investments in brand building and marketing, while other enterprise costs will be managed efficiently in line with business growth.

Rick Patel from Raymond James Financial asked for an analysis of HOKA's international growth drivers in Q1, distinguishing between organic growth and new distribution, and also requested an outlook for SG&A expenses.

Answer

CEO Stefano Caroti attributed HOKA's international success to strong sell-through that outpaces sell-in, record reorders in Europe, and expansion with key retail partners. CFO Steven Fasching detailed that SG&A will continue to be invested in brand building, marketing, and infrastructure to support growth, with a focus on managing expenses efficiently in proportion to business scale.

Rick Patel from Raymond James & Associates, Inc. asked for an update on the company's performance in Asia, particularly in China, given the challenging macroeconomic backdrop, and inquired about any resulting strategy changes.

Answer

CEO Stefano Caroti stated that both brands are performing well in China despite the climate, with HOKA becoming a top 5 brand in major races. CFO Steven Fasching added that Deckers is fortunate to be small but growing in China, focusing on community-building, and that the Asia Pacific region is a few years behind Europe in its development.

Rick Patel asked for additional color on the delays related to the new U.S. distribution center (DC), what gives confidence it will come online in the back half of the year, and the expected SG&A impact from transitory costs in the first half versus efficiency leverage in the back half.

Answer

Harmit Singh, EVP and Chief Financial and Growth Officer, expressed confidence in completing the U.S. DC transition by year-end, citing strong teams and Europe's successful transition. He explained that SG&A leverage will come from higher volume, DTC productivity (DTC margins up 300 basis points last year), limited headcount increases leveraging AI, and easing parallel DC costs in the second half of 2026, expecting the SG&A rate to be below 50%.

Rick Patel of Raymond James sought further details on the delays related to Levi Strauss & Co.'s new distribution center (DC), asking what provides confidence in its online activation in the back half of the year. He also inquired about the SG&A impact, specifically how to view transitory costs in the first half versus the potential for significant leverage from efficiency in the back half.

Answer

Harmit Singh, EVP and Chief Financial and Growth Officer, Levi Strauss & Co., expressed confidence in completing the U.S. DC transformation by year-end, citing strong internal and third-party logistics teams, direct management involvement, and the successful transition in Europe. Regarding SG&A, he emphasized a company-wide focus on leverage, expecting higher volume, DTC productivity, limited headcount increases (leveraging AI), and easing parallel DC costs in the second half to improve the SG&A rate below 50% for 2026.

Rick Patel asked about expectations for Average Unit Retail (AUR) in Q4, considering competitive promotions, product, and pricing wins. He also sought guidance on where inventory, in terms of both dollars and units, is expected to end the year.

Answer

CFO Mike Mathias stated that AUR was relatively flat in Q3 and is expected to be similar in Q4, driven by a mix of business between brands and category mix. He noted Aerie is seeing some AUR uptick, while AE is using more markdowns in jeans. For year-end inventory, he indicated that with the trend exceeding plans, the company is in 'chase mode' and expects inventory to be in line with sales growth, with units aligning with the 8%-9% comp guidance, also factoring in tariff impacts.

Rick Patel asked about the company's average unit retail (AUR) expectations for Q4, considering competitive promotions and product wins, and sought guidance on year-end inventory levels in both dollars and units.

Answer

CFO Mike Mathias expects Q4 AUR to be relatively flat, similar to Q3, with Aerie driving comps through AUR increases while American Eagle sees more markdowns in jeans. He anticipates year-end inventory to be in line with sales growth (8%-9% comps), with units aligning with sales, noting the company is in 'chase mode' for Aerie and OFFLINE.

Rick Patel of Raymond James Financial, Inc. asked about the outlook for promotions and how the company is balancing the need to drive conversion against protecting gross margins. He also requested an analysis of the SG&A expense trend, questioning the drivers behind the Q2 flat guidance and the spending approach for the second half.

Answer

Executive VP & CFO Mike Mathias stated that the Q2 outlook still assumes some markdown pressure to ensure a clean inventory position heading into back-to-school. For the full year, he expects SG&A to be roughly flat, with increased spending on customer-facing advertising being offset by reductions in other areas, including compensation.

Rick Patel from Raymond James asked for more details on the company's SG&A expectations, specifically how increased marketing investments in Q4 would be mitigated by other areas. He also inquired about any variability in U.S. comparable sales performance due to weather or regional differences.

Answer

CFO Robert Ball explained that while marketing investment would increase in Q4, it would be at a slightly slower pace, with general and administrative expense leverage expected due to sales growth. He emphasized a balanced investment approach and noted no significant regional or weather-related variability impacting U.S. comparable sales performance across the broader quarter.

Rick Patel asked for more details on SG&A expectations, specifically how increased marketing investment would be mitigated by other areas. He also inquired about any variability in U.S. comparable sales performance due to weather or regional differences.

Answer

CFO Robert Ball explained that while marketing investment would increase in Q4, it would be at a slightly slower pace, with G&A leverage expected from sales growth, aiming for a balanced investment approach. He noted no significant regional variability in U.S. comparable sales due to weather, as the broad store fleet typically offsets localized impacts.

Rick Patel asked for expectations on the promotional environment for both Abercrombie and Hollister, questioning if the back-half improvement at Abercrombie reflects fewer units or more assortment confidence. He also inquired about growth expectations for Europe and Asia.

Answer

CFO Robert Ball stated that while some AUR pressure from carryover will persist in Q2 for A&F, the company assumes flat AUR for the year and will work to hold its multi-year gains. He noted the goal is always to pull back on promotions where possible. For international growth, Ball reiterated the expectation for full-year growth across all regions. COO Scott Lipesky added that strong performance in the UK and Germany is driving European growth.

Rick Patel asked for more detail on the promotional outlook for Abercrombie and Hollister, and for growth expectations in Europe and Asia for the remainder of the year.

Answer

SVP & CFO Robert Ball explained that while some AUR pressure will persist in Q2 for Abercrombie, it will lessen. He stated the baseline assumption is to hold the multi-year AUR gains for both brands but the team will seek daily opportunities to improve. He also reiterated the expectation for full-year growth across all regions. EVP & COO Scott Lipesky highlighted strong performance in the UK and Germany as key drivers in Europe.

Rick Patel asked for an expansion on On's opportunity with younger consumers, including their definition of this demographic, the current size of this business, and the go-to-market strategy to acquire them across different categories and geographies.

Answer

Caspar Coppetti (Executive Co-Chairman and Co-Founder) explained that while On started with an older running demographic, it has gained significant traction with younger consumers over the last 6-7 years, aided by collaborations with figures like Zendaya and Burna Boy. He noted that 'cool kids' in affluent U.S. high schools are wearing On, indicating a strong long-term value (LTV) demographic. He also mentioned the successful launch of a kids' line, leveraging the brand's appeal to younger teens and children.

Rick Patel asked On to elaborate on the opportunity with younger consumers, defining what constitutes a "young consumer," the current size of this business, and the go-to-market strategy for acquiring these consumers across different categories and geographies.

Answer

Executive Co-Chairman and Co-Founder Caspar Coppetti noted that while On started with an older running demographic, it has gained significant traction with younger consumers over the past 6-7 years, aided by collaborations with Zendaya and Burna Boy. He described this as a "relatively new phenomenon" and highlighted the appeal to "cool kids" in affluent U.S. high schools, leading to a strong lifetime value (LTV). He also mentioned the success of the kids' line, which is hard to keep in stock.

Rick Patel from Raymond James Financial asked a big-picture question about the 'key city' strategy, requesting an update on the progress and remaining runway in the current top 30 cities, and how to think about the opportunity to expand into new key cities.

Answer

President & CEO Patrice Louvet stated that significant opportunities for growth remain even within the existing top 30 cities, using London as an example of identifying further expansion possibilities. He indicated that a more detailed discussion on the strategy for the next tranche of cities would be provided at the company's upcoming Investor Day.

Rick Patel asked for a framework to understand the level of newness in stores, specifically the mix of new year-round products versus core items, and whether the merchandising strategy is now fully optimized. He also requested a breakdown of the drivers for the Q1 SG&A increase and if the relative size of those investment buckets would remain consistent going forward.

Answer

Carrie Baker, President of Brand & Commercial, described the newness strategy as a continuous, strategic flow of product throughout the season rather than a single drop, and stated that while progress is strong, the merchandising function is not 'done' and is constantly improving. Beth Clymer, President & COO, confirmed the bulk of SG&A growth was from strategic, revenue-driving investments in areas like marketing and store labor. She emphasized that the company is learning in real-time and will dynamically adjust investment levels based on performance rather than sticking to a fixed allocation.

Rick Patel from Raymond James asked for a breakdown of the new versus core product mix in stores, an assessment of the current merchandising strategy, and the relative size of the investment buckets (stores, marketing, merchandising) that drove the Q1 SG&A increase.

Answer

Carrie Baker, President of Brand & Commercial, explained that newness is being strategically flowed into stores throughout the season and that the merchandising function is still a work in progress with more improvements planned. President & COO Beth Clymer clarified that the majority of SG&A growth was from strategic investments and that the company is dynamically allocating these funds based on real-time performance rather than fixed budgets.

Rick Patel asked for an update on the impact of anti-American sentiment on international performance and requested more detail on the enhancements to markdown algorithms benefiting gross margin.

Answer

Co-Founder & Co-CEO Mike Karanikolas noted that negative sentiment has moderated but still impacts regions like Canada, while China remains a strong growth driver. He described the markdown algorithm's impact as 'meaningful,' with CFO Jesse Timmermans adding that the benefits are in their early stages and are factored into full-year guidance.