Simeon Siegel • BMO Capital Markets

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CEO Hillary Super described the revenue opportunity at PINK as 'very, very significant,' stating that its current top-line is over a billion dollars below its historical peak, with major runway in apparel, beauty, and accessories. CFO Scott Sekella noted that while Victoria's Secret and PINK have similar gross margin profiles, the Beauty division's margin is 'several points higher,' providing a positive mix benefit as it grows.

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CEO Hillary Super explained that while specific financial targets for the long-range plan will be shared later in the year, she sees a tremendous opportunity in PINK. The strategy involves defending market share in intimates while aggressively recapturing historical volume in lifestyle categories. CFO Scott Sekella added that in early 2025, warmer weather regions performed several points better than colder regions, indicating a weather-related impact on sales.

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CEO Hillary Super attributed the success to a purposeful strategy combining a 'sexy, glamorous, accessible luxury' product assortment with strong marketing and the fashion show. She noted that for stores, she is focused on ensuring brand promise and proper space allocation. CFO Tim Johnson added that store consolidations result in significant productivity and profit improvements, with square footage reductions of 25-35% leading to even larger gains in productivity and operational efficiency.

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CFO and Interim CEO, Timothy Johnson, detailed that Q2 gross margin benefited from lower product costs and favorable transportation, offset by higher promotions. He expects buying and occupancy dollars to be flat-to-down going forward. Marketing spend is expected to be down year-over-year, as the Fashion Show is less costly than last year's World Tour. Regarding operating income, Johnson confirmed the Q3 guidance implies continued year-over-year growth, but Q4 faces a tough comparison due to lapping an extra week. He believes the strong acceptance of new products is the key opportunity to drive profitability.

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CEO Daniel Heaf stated he was attracted by the brand's purpose and strong business foundation, including its store footprint, loyalty program, and supply chain. He sees an opportunity to more consistently apply his consumer-centric growth philosophy. CFO Eva Boratto explained that Q1's strength was largely driven by the Disney collaboration, and the underlying business trend, which informs the Q2 outlook, was more in line with Q4's performance. She expressed confidence in the full-year forecast due to a strong pipeline of back-half innovation, including Halloween promotions and new collaborations.

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CFO Eva Boratto specified that annual marketing spend is about 3.5% of sales, with Q3 seeing a 100 basis point year-over-year increase. CEO Gina Boswell detailed that collaborations drive core product growth, generate brand awareness, attract new customers, and enhance cultural relevancy, particularly with the 18-to-34-year-old demographic. She cited traffic as a key metric for measuring their success.

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CEO Gina Boswell explained that new categories like men's, hair, laundry, and lip are meeting sales plans and performing well on key metrics including attracting new-to-brand customers, repeat purchases, and incrementality. CFO Eva Boratto clarified that the free cash flow guidance is maintained due to the CapEx reduction benefit, along with other moving parts in working capital and the impact of the Easton transaction.

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CEO Richard Dickson explained that the company is achieving greater marketing effectiveness and efficiency, generating more relevance and revenue with lower spend through better creative and a social-first strategy. Success is measured by new customer acquisition and engagement. CFO Katrina O'Connell stated that due to significant store fleet optimization, the company will achieve ROD leverage for the full year with any positive sales growth.

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CFO Paula Oyibo explained that Q1's comp was driven by a 2.3% increase in average ticket and a 0.6% increase in transactions, but the company does not provide a forward-looking forecast for this split. Regarding expenses, she clarified that the shift was related to the pacing of planned investments for the year, which started slower in Q1 but are expected to ramp up in later quarters as planned.

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CEO Dave Kimbell stated that while the competitive environment remains intense, Ulta's promotional effectiveness improved in Q3. He anticipates continued promotional intensity for the holiday season but not significantly outside of normal expectations. CFO Paula Oyibo added that the full-year guidance was raised due to Q3 performance and expense discipline. She noted that Q4 gross margin will continue to delever from fixed costs and promotions, partially offset by lower transportation costs, and that the long-term margin outlook from Investor Day remains intact.

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CEO Dave Kimbell described the environment as intensely competitive but noted Ulta's adjustments are improving performance. He anticipates continued holiday promotional intensity. CFO Paula Oyibo added that the full-year margin guidance was raised due to Q3 results and expense discipline. For Q4, she expects gross margin deleverage from fixed costs and promotions, partially offset by lower transport costs, and noted the long-term margin view from Investor Day remains intact.

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Chairman and CEO John Idol expressed optimism for revenue, citing a significant improvement in Michael Kors' retail performance in Q1, with comps moving from down 15% to nearly flat. He attributed this to the success of new product collections and the resonance of the 'Jet Set' storytelling. CFO and COO Tom Edwards explained that the gross margin guidance is lower primarily due to an estimated $60 million unmitigated impact from new tariffs in fiscal 2026. He noted that while the company aims to fully mitigate this over time through sourcing optimization and strategic pricing, the immediate priority is maintaining brand recovery momentum.

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Chairman & CEO John Idol expressed optimism in the revenue trajectory, citing a significant improvement in Michael Kors' retail comps in the current quarter, from down 15% to nearly flat, driven by new product lines and effective 'Jet Set' storytelling. He also noted that the negative impact from store and wholesale closures will soon be annualized. EVP, CFO & COO Thomas Edwards explained that the lower margin guidance is primarily due to an estimated $60 million unmitigated impact from new tariffs, which overlays previously expected improvements. He stated the company's goal is to fully mitigate this over time through sourcing optimization and strategic, careful price evaluations.

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CEO John Idol stated the competitive environment is not more promotional, but consumers are more 'choiceful,' leading to pricing adjustments at Michael Kors to align with historical levels and improve full-price sell-through. He noted wholesale declines should moderate as partners respond positively to new strategies. CFO Tom Edwards explained that Q4 gross margin is expected to be flat due to offsetting factors but anticipates modest improvement in fiscal 2026. He projected year-end net debt at approximately $1.2 billion for fiscal 2025, decreasing by about $200 million in fiscal 2026.

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Group President and COO Michael Hartshorn indicated that while it can vary, a 3% to 4% comp is generally needed to leverage expenses over a longer term. Executive James Conroy added that there was nothing notable to call out regarding the Children's business and its absence from the commentary was not significant.

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Group President and COO Michael Hartshorn explained that while they held EBIT margins flat on a flat comp in Q1, a 3% to 4% comp is generally needed to leverage expenses over a longer period. Executive James Conroy advised not to read into the lack of a callout for the Children's business, stating there was nothing notable to report on its performance this quarter.

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CEO Barbara Rentler emphasized that the initiative is a value and brand strategy, not an AUR strategy. She explained that the shift to more branded goods varies by category, with bolder moves in areas like ladies' apparel. The goal is to offer compelling value across a 'good, better, best' assortment rather than simply raising prices.

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Executive Sheila Harrington expressed confidence in the Wholesale segment's profitability, driven by strategic partnerships and the introduction of new labels into new accounts. Co-President and COO Francis Conforti explained that reducing packages per order provides a meaningful improvement to delivery expenses and that while carrier costs are not currently a challenge, they are being monitored for the second half of the year.

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CEO Richard Hayne stated that the Urban Outfitters brand can be a '$1 billion to $2 billion brand.' Co-President and COO Francis Conforti added that significant opportunity exists in Europe for both Urban Outfitters and Free People. Regarding margins, Conforti acknowledged the potential to exceed the 10% target long-term, noting that with Anthropologie and Free People in the mid-teens and Nuuly's potential, the combined opportunity is 'north of that number.'

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CEO Ernie Herrman explained their process starts with the retail price at competitors to ensure a significant value gap. Their hand-to-mouth buying allows them to be educated on cost trends and adjust retails accordingly. CFO John Klinger clarified the mark-to-market adjustment: when TJX hedges foreign currency purchases, exchange rate movements cause a temporary gain or loss on the hedge, which is offset when the invoice is actually paid in a later quarter. He stated the Q1 variance was essentially this hedge impact.

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EVP and CFO Paul Vogel stated that while not providing full-year guidance, the company expects continued margin improvement in fiscal 2026 and remains on track to meet its medium-term goals. He clarified that the $313 million free cash flow figure does not include Supreme and that both operating and free cash flow are expected to increase year-over-year.

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CEO Bracken Darrell deferred the detailed cost structure question to the upcoming Investor Day but noted positive momentum across the P&L. While not providing AUR vs. unit data, he confirmed the brand elevation strategy is on track. CFO Paul Vogel added that the company is seeing an encouraging increase in full-price selling.

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CFO Ivica Krolo explained that the second half of the fiscal year is more heavily weighted towards the DTC channel, which has less forward visibility, prompting a prudent outlook. He also noted that Q3 is seasonally the slowest growth quarter. Regarding gross margin, Krolo stated the benefit from the Pasewalk facility's absorption is materializing ahead of schedule, now expected to be a 75 basis point tailwind for fiscal 2025.

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President Americas David Kahan reiterated that over 90% of wholesale growth comes from existing partners, indicating significant share gains. He emphasized that retail partners would take more product if available, but allocation is managed strictly. VP, Global Finance Alexander Hoff stated the 70 bps gross margin decline was almost entirely due to the 400 bps shift in channel mix toward B2B, with other factors like inflation and product mix being immaterial.

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CEO Oliver Reichert clarified a recent change was a reclassification of logistics costs, not a restatement. David Kahan, President of the Americas, noted the brand's high full-price realization (>90%) insulates it from the broader promotional environment. Alexander Hoff, VP of Global Finance, stated that fiscal 2024 was the peak year for margin pressure from capacity expansion, with better absorption expected in the back half of 2025 and full absorption by Q3 2026.

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CEO Kevin Plank addressed e-commerce, stating the focus is on creating a brand-inspiring, story-driven platform rather than a purely transactional one, noting a double-digit increase in full-price sales mix. CFO David Bergman detailed the restructuring, projecting full-year run-rate savings to approach $75 million by the end of fiscal 2026, up from $35 million in savings realized in fiscal 2025. He added that while they aim for SG&A leverage, they will be mindful not to cut critical brand marketing investments.

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CEO Kevin Plank described the 'growth by constraint' model as a mindset shift focused on intentionality and empowering the team through a new operating model. CFO David Bergman added that while significant progress has been made in reducing e-commerce promotions in North America, there is still more work to do, and a similar focus is being applied to the APAC region.

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CEO Kevin Plank explained that Eric Liedtke is refining brand strategy, the operating model, and go-to-market coordination, with a primary focus on making the company's marketing budget more impactful. CFO Dave Bergman stated that while there's no structural reason the company can't reach 50% gross margin long-term, the back half of the year faces headwinds from seasonal promotions and tougher comps. Bergman noted the significant profit differential between the first and second half is due to a roughly $40 million increase in marketing investments and the absence of a $27 million insurance recovery that benefited Q2.

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CEO Kevin Plank described the SKU reduction as a strategic and surgical effort to simplify the business and ensure every product is special, with a focus on communicating performance benefits. CFO Dave Bergman added that the reduction targets "good" level products to allow for greater investment in "better" and "best" tiers, driving ASP growth. Regarding buybacks, Bergman confirmed the execution of $40 million under the new program but noted a prudent approach moving forward to maintain a strong cash position.

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CEO Peter Stern responded that the company sees consistency in churn and rising NPS scores, giving them confidence in the value being delivered. CFO Liz Coddington clarified that the total member count is also impacted by the app subscriber base, which has seen a larger decline. She explained the used equipment activation fee has been a positive, adding upfront revenue and free cash flow, and has resulted in a 'slightly improved cohort of churn' among those subscribers. She also noted that subscription revenue includes other items like content licensing.

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CEO Peter Stern stated that while it's too early to detail a growth timeline, the company is first focusing on "earning the right to grow" by rightsizing expenses, improving gross margins, and increasing the LTV to CAC ratio. CFO Liz Coddington added that the full-year adjusted EBITDA guidance was raised due to gross margin expansion and that the company is on track to exceed its $200 million cost savings target, with further opportunities for optimization.

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Interim Co-CEO Karen Boone stated that Peter Stern was chosen for his track record in driving innovation and growth, and his compensation is designed to balance both goals. She expects a 'taking stock' period but believes he will return the company to growth from the stable base they've built. CFO Liz Coddington explained the modest inventory increase was a seasonal build-up for the holidays and that the company still expects a significant inventory tailwind for the full fiscal year.

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CEO Colleen Keating attributed the Black Card strength to the narrowest-ever price gap with the classic tier and a successful 'first month free' promotion in March. CFO Jay Stasz confirmed the 5-6% comp guidance, noting Q1's growth was driven 74% by rate and 26% by volume. He expects a similar 70/30 split in Q2, moderating slightly after anniversarying the classic card price increase in June.

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CFO Jay Stasz explained that the low-to-mid-single-digit comp lift from the price hike is embedded in guidance and will anniversary in June 2025. He noted that post-hike churn trends have been favorable, with attrition rates aligning year-over-year, suggesting some members are holding onto the grandfathered $10 price. CEO Colleen Keating added that Q1 equipment sales cadence should be consistent year-over-year, with re-equips spread more evenly through 2025.

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CEO Colleen Keating responded that while typically one-third of new joins are returning members, the rate was slightly higher in the recent quarter. She emphasized that the company is focused on enhancing the member experience to attract this group. Keating also noted the price increase was strategically timed and that franchisees are supportive, viewing it as accretive to AUVs, particularly for new clubs.

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CFO Dom Blosil declined to provide any forward-looking color on gross margin, reiterating the suspension of guidance. He confirmed that cost reductions are primarily focused on controllable SG&A expenses, though some medium-to-long-term supply chain mitigants could affect COGS. CEO Jeremy Andrus detailed the marketing strategy, explaining a shift away from top-of-funnel brand marketing towards sales activation activities with clear, near-term returns, such as in-store demos, retail associate training, and an increased number of Costco roadshows.

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CEO Elliott Hill explained that promotional and excess inventory is being moved out of primary retail channels and into NIKE's value and factory stores to make room for full-price innovation. CFO Matt Friend added that the company is tightly managing overhead while accelerating demand creation (up 8% in Q3). He stated the long-term plan is to continue this discipline, investing in sales, key cities, and innovation while managing overall expenses.

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President and CEO Elliott Hill explained the strategy involves segmenting inventory by moving excess and returned products to value channels like factory stores, thereby protecting the full-price presentation of new innovation in primary digital and retail channels. CFO Matt Friend added that the company is tightly managing overhead while accelerating demand creation investment, which grew 8% in Q3. He stated the focus is on investing in sales, key cities, and innovation while maintaining overall expense discipline.

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EVP & CFO Matthew Friend did not quantify the exact size but confirmed the portfolio had become too concentrated in these classics. He noted their reduction created a mid-single-digit revenue headwind in Q1, which is expected to continue. He affirmed these are high-margin products, especially via Digital, and managing them down is creating a temporary margin headwind as the portfolio is rebalanced.

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CFO Mike Mathias implied that Aerie's performance would be above the company average while AE's would be below, similar to the 2024 dynamic. He noted the international license business is stable at around $35 million in revenue. President Jen Foyle commented that in a declining intimates market, Aerie is focused on gaining market share, which it has successfully done in bras and undies.

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President Jen Foyle described the supply chain as nimble, with strategically positioned new receipts arriving through December and available open-to-buy. CFO Mike Mathias added that the plan is for year-end inventory levels to be in line with sales growth, a strategy that will extend into the new year.

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Co-CEO Michael Mente stated he does not believe customers are aware of which brands are company-owned, as they shop based on product merit. CFO Jesse Timmermans described the owned brand margin as 'meaningfully richer' than third-party brands and noted the differential has increased since 2019. For the long-term, Timmermans said the goal is to reach high single-digit and ultimately double-digit EBITDA margins.

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CFO Melissa Rasmussen clarified that the $4 million EBITDA improvement directly corresponds to the losses from the closed stores, with $2-3 million expected to be realized in 2025 and the remainder in 2026. She did not provide specific margin profiles for store cohorts but confirmed the closed stores were unprofitable and their removal would improve the overall fleet's performance.

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