Tom Nikic

Tom Nikic followed up on the U.S. wholesale rationalization, asking about the performance of Levi Strauss & Co.'s strategic wholesale accounts in the U.S., including sell-through rates and order books, despite the overall headwind.

Answer

Michelle Gass, CEO, reiterated belief in the wholesale channel, expecting it to be slightly positive long-term, guiding flat for 2026 despite rationalizing non-strategic accounts. She highlighted strong partnerships with core strategic accounts, embracing denim lifestyle, tops, and women's strategies, with positive order books in Europe and Latin America, and noted market share gains in men's, women's, and youth.

Tom Nikic from Needham & Co. followed up on the U.S. wholesale rationalization, asking about the performance of Levi Strauss & Co.'s strategic wholesale accounts in the U.S., including sell-through rates and order book trends.

Answer

Michelle Gass, CEO, Levi Strauss & Co., reiterated commitment to the wholesale channel, guiding flat for 2026 despite rationalizing non-strategic accounts like the grocery channel, which she views as beneficial for the brand. She highlighted strong partnerships with strategic accounts embracing denim lifestyle, tops, and women's strategies, with positive order books in Europe and Latin America, and noted that DTC launches inform successful wholesale product introductions.

Tom Nikic from Needham asked for clarification on Vans' underlying trend in Q3 fiscal 2026, specifically if it remained down high single digits, and whether the Q4 guidance of down mid-single digits indicates an expected improvement in the underlying trend.

Answer

CEO Bracken Darrell confirmed the assessment, highlighting green shoots for Vans, including global digital revenue growth, improved U.S. traffic, and strong performance from new products and icons. EVP and CFO Paul Vogel reiterated that the underlying trend for Vans was down high single digits in Q3 and confirmed an expected improvement to mid-single digits in Q4.

Tom Nikic asked if Vans' underlying trend in Q3 was down high single digits, similar to previous quarters, and if the Q4 guidance of down mid-single digits implies an improvement in this underlying trend.

Answer

CEO Bracken Darrell confirmed the assessment, highlighting green shoots for Vans, including global digital revenue growth, improved US traffic, and strong performance from new products like the Sk8-Low Pro and Skate Loafer. CFO Paul Vogel reiterated that the underlying trend for Vans is indeed improving from Q3 to Q4.

Tom Nikic asked about the ongoing debt deleveraging efforts, inquiring whether future reductions would primarily come from fundamental improvements and EBITDA growth, or if non-EBITDA factors like asset sales and working capital management would also play a significant role.

Answer

Bracken Darrell, President and CEO, VF Corporation, expressed confidence in achieving the 2.5x leverage target by 2028 through executing the company's plan, noting that the Dickies sale accelerates this timeline. Paul Vogel, EVP and CFO, VF Corporation, confirmed that the target was achievable with or without the Dickies sale, emphasizing continued improvements in EBIT/EBITDA and enhanced working capital management, including reducing inventory days.

Tom Nikic from Needham asked about the ongoing debt deleveraging strategy, specifically whether it now relies solely on fundamental business improvement and EBITDA growth, or if additional non-EBITDA actions are planned to further reduce the debt leverage ratio.

Answer

Bracken Darrell (President and CEO) expressed confidence in achieving the 2.5x leverage target by 2028, noting a preference for being below that. Paul Vogel (EVP and CFO) confirmed targets were achievable with or without the Dickies sale, which merely accelerates the process. He stated future deleveraging will primarily stem from EBIT/EBITDA improvements, supplemented by working capital enhancements and better inventory management.

Tom Nikic asked about the margin structure of the business, specifically how much of the margin erosion experienced in 2025 due to tariffs, the Kurt Geiger acquisition, and core brand performance is recoverable versus being structural.

Answer

Chairman and CEO Ed Rosenfeld expressed confidence that all margin erosion is recoverable over time, though not fully in 2026. He believes tariffs will eventually be absorbed into retail prices, allowing the core business to return to pre-tariff margins. Mr. Rosenfeld also noted that while Kurt Geiger is currently lower margin, it has a clear path to reaching Steve Madden's historical levels or potentially higher over time.

Tom Nikic asked about the margin structure of the business, specifically how much of the margin erosion experienced in 2025 (due to tariffs, the Kurt Geiger acquisition, and core brand performance) is recoverable, and how much might be structural.

Answer

Ed Rosenfeld, Chairman and CEO, expressed confidence that all margin erosion is recoverable over time, though not fully in 2026. He believes tariffs will eventually be absorbed into retail prices, allowing for a return to pre-tariff margins in the core business. He also noted that while Kurt Geiger currently has lower margins, it has a path to reach or potentially exceed Steve Madden's historical levels.

Tom Nikic asked about the strategic growth opportunities for the newly acquired Kurt Geiger brand, beyond sourcing improvements.

Answer

CEO Ed Rosenfeld detailed a multi-pronged growth strategy for Kurt Geiger. In the U.S., this includes expanding its digital business, rolling out more physical stores, and growing its wholesale presence. Internationally, he sees a large opportunity to leverage Steve Madden's existing network to accelerate Kurt Geiger's expansion. He also noted synergies in using Kurt Geiger's UK presence to expand the Steve Madden brand there.

Tom Nikic of Needham & Company asked about the North American wholesale environment, focusing on potential caution from partners and any impact on the in-sourcing of the G3 licenses.

Answer

CEO Stefan Larsson stated that in Q2, the company benefited from the intake of the Calvin Klein women's business and saw growth with its most important full-price partners. CFO Zac Coughlin clarified that wholesale shipment timing was normalized in 2025 to a more balanced first-half/second-half weighting, which explains some of the stronger growth in H1 that will moderate in H2, particularly in Q3.

Tom Nikic asked for more detail on the drivers behind the strong, sustained performance in the European business and inquired about the outlook for year-end inventory levels, given the 13% increase in Q2.

Answer

Chairman, President & CEO Tim Boyle attributed the European success to a disciplined, focused effort by the local team on key markets like Germany, the UK, and France, combined with an expansion of DTC and partner stores. EVP & CFO Jim Swanson stated that the company sees a path to ending the year with inventory levels flat to slightly down. He reiterated that the Q2 increase was primarily driven by the strategic pull-forward of fall inventory ahead of tariffs.

Tom Nikic asked whether Ralph Lauren is seeing any consumer pushback in international markets related to its 'Americana' brand image, given the current geopolitical and tariff rhetoric.

Answer

President and CEO Patrice Louvet responded that the company's caution is primarily domestic and that they have not observed any slowing brand momentum or anti-American sentiment impacting the business internationally. He attributed this resilience to the brand's foundation in universal values like optimism, authenticity, and family, which resonate globally and transcend politics.

Tom Nikic from Needham & Company asked if On is observing cautious ordering patterns from its wholesale partners for the second half of the year, a trend mentioned by other footwear brands.

Answer

Executive Co-Chairman Caspar Coppetti gave a direct and firm response, stating, 'We're not seeing any of that.' He clarified there are no cancellations in the order book, attributing the stability to diligent planning and close partnerships with wholesalers to manage sell-through and inventory.

Tom Nikic asked if the current uncertain environment alters the company's capital allocation strategy regarding cash levels, debt paydown, and share buybacks.

Answer

CFO Susan Healy affirmed that capital allocation plans remain unchanged. She noted that the company expects to generate significant free cash flow under various scenarios and remains committed to its target net leverage range of 1 to 1.5x. Within that framework, they will continue to both pay down debt and opportunistically repurchase shares.

Tom Nikic asked about the progress of HEYDUDE's product development and its strategy for diversifying beyond the core Wendy and Wally styles.

Answer

CEO Andrew Rees stated that the product diversification strategy is in the 'very early innings.' He emphasized that the primary focus remains on strengthening the core Wendy and Wally platforms, as their health is crucial for driving short-term growth and supporting future extensions. He cited the Austin Lift and Bradley boot as successful examples of extending the brand, but reiterated the core remains the priority.

Tom Nikic of Needham & Company asked about management's confidence in the consumer's ability to absorb price increases without negatively impacting sales volume. He also questioned if Skechers is considering a more conservative inventory plan for the second half of the year in hopes of a more favorable trade environment later.

Answer

Executive John Vandemore responded that while Skechers is not eager to raise prices, its position as a 'reasonable price solution' is an advantage in a challenging consumer environment. Executive David Weinberg addressed inventory planning, stating that the company does not build speculative inventory. He explained that they plan meticulously based on orders from their global direct-to-consumer and wholesale partners and are not in the habit of building excess inventory offshore.

Tom Nikic of Needham & Company inquired about the reason for the projected mid-teens decline in minority interest and sought confirmation on the health of inventory levels.

Answer

John Vandemore (executive) confirmed that the expected decline in minority interest is predominantly driven by the challenging performance and outlook for the China joint venture. Regarding inventory, he reiterated that it is in appropriate shape, with on-hand levels up a reasonable 12% and the vast majority of the total increase coming from healthy, order-backed in-transit goods, particularly for Europe.

Tom Nikic asked about any timing considerations for SG&A expenses between Q3 and Q4 and whether the consumer excitement for new technologies like Slip-ins is as strong in the wholesale channel as it has been in DTC.

Answer

Executive David Weinberg confirmed that the consumer response to new technologies in the wholesale channel is incredibly strong and very commensurate with what Skechers has seen in its own DTC channels, especially when partners order the new products. Regarding SG&A, he reiterated that the conscious over-investment in Q2 will not be repeated at the same level, and investment relative to sales growth should be more in line for the rest of the year, though they will continue to invest in stores, distribution, and marketing.

Tom Nikic asked for clarification on the balance between sales and margin in the third quarter, questioning why results fell short of expectations despite positive comps and gross margin improvement. He also inquired about the severe decline in apparel sales and whether weather was a contributing factor.

Answer

President and CEO Mary Dillon acknowledged that while the Lace Up plan is showing progress with positive comps and margin expansion, performance was offset by a cautious consumer and a highly promotional marketplace. EVP and CCO Frank Bracken added that the apparel decline was driven more by a category-wide lack of innovation rather than weather, noting that private label apparel remains a bright spot and inventories are clean.

Tom Nikic asked about the underperformance of the WSS banner, which has been a laggard in recent quarters, and questioned the strategy to turn it around while the core Foot Locker banner shows improvement.

Answer

CEO Mary Dillon reaffirmed long-term commitment to the WSS banner, noting it is well-positioned to serve the growing Latino family demographic, but acknowledged its core customer is currently facing more economic pressure. CCO Frank Bracken added that the WSS management team is sharpening its assortment by focusing on sub-$100 footwear, the culture of football, workwear, and private label offerings to provide better value. He also highlighted that over 70% of WSS stores are in California, where consumers face high inflation.