Tom Nikic

Tom Nikic from Needham & Company followed up on the private label decline, asking if the 'temporary' characterization was based on partner conversations or if there was a risk of structural reduction. He also inquired about the expected order of magnitude for SG&A growth for the year, considering various headwinds.

Answer

Chairman and CEO Edward Rosenfeld clarified that he 'hopes it's temporary' and 'believes it will be temporary' due to their unique offering and past experiences where business contracted but later returned. He cited instances where new management or direct sourcing attempts by retailers led to temporary declines before they returned to Steve Madden. Edward Rosenfeld declined to provide specific SG&A guidance, stating that they are not providing earnings guidance or line-item P&L guidance at this time.

Tom Nikic asked if the decline in the private label business is considered temporary, based on conversations with partners, or if there's a risk of it being a structural reduction. He also inquired about the expected order of magnitude for SG&A growth for the year, given the high single-digit revenue growth and various headwinds.

Answer

Edward Rosenfeld, Chairman and CEO, expressed hope that the private label decline is temporary, believing the company offers unique value that customers cannot get elsewhere. He noted that the company has seen this pattern before, where customers try lower-cost or direct options but often return after a season or two when fashion execution is not as strong. Zine Mazouzi, CFO and EVP of Operations, stated that the company is not providing guidance on individual line items like SG&A growth until earnings guidance can be provided.

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 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 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 sought clarification on the gross margin outlook, specifically the flat Q1 margin despite a 100 basis points tariff headwind, and whether this implies a down Q2 followed by improvement in the back half.

Answer

Patraic Reagan, Executive Vice President and Chief Financial Officer, explained that the full-year gross margin is guided up slightly due to supply chain efficiencies offsetting tariffs. He clarified that Q4 2025 tariffs were slightly higher than expected, Q1 2026 tariffs (100 bps headwind) are lower than expected 90 days ago, and Q2 2026 tariffs (200 bps headwind) are closer to a normalized run rate. After Q2, tariffs will be in the base, leading to a more normalized run rate in the second half of the year.

Tom Nikic sought clarification on the gross margin outlook, specifically how Q1 could be flat despite a 100 basis points tariff headwind, what offsets are in play, and if Q2 should be expected to be down given a larger tariff headwind before improving in the back half.

Answer

CFO Patraic Reagan explained that the full-year gross margin is guided up slightly due to supply chain efficiencies, not price. He clarified that Q4 2025 tariffs were higher than expected, Q1 2026 tariffs are lower than expected (100 bps headwind), and Q2 2026 is expected to see a larger headwind (200 bps). The second half will normalize as tariff impacts are then in the base, assuming no policy changes.

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 asked for a comparison of sell-through to sell-in for U.S. wholesale in Fall 2025, given the Q3 flat and Q4 high teens decline, implying an overall high single-digit decline for the season. He also inquired about the implications of the Fall 2026 U.S. wholesale order book being up less than mid-single digits with high single-digit pricing (suggesting unit declines), and potential upside if consumers remain resilient and inventories are lean.

Answer

Chairman and CEO Tim Boyle and EVP and CFO Jim Swanson confirmed that sell-through was strong, slightly up in dollars despite lower sell-in, resulting in clean marketplace inventory and confidence in the Fall 2026 order book. Tim Boyle noted that retailers are cautious about price elasticity, leading to slight unit declines as prices increased. He reiterated the significant impact of weather and the uncertainty surrounding consumer reaction to higher prices.

Tom Nikic asked about the U.S. wholesale performance (flattish in Q3, down high teens in Q4, high-single digits down for the season), how sell-through compared to sell-in, and if Fall 2025 sell-throughs were better than sell-in given improved Fall 2026 order books. He also inquired if the implied unit decline in Fall 2026 U.S. wholesale (due to high-single digit pricing) was from retailer caution and potential upside if consumers remain resilient.

Answer

Chairman and CEO Tim Boyle confirmed that sell-through was quite good, providing confidence for the Fall 2026 order book, which was mostly taken before the current good weather. EVP and CFO Jim Swanson added that combined second half U.S. wholesale was down high-single digits, but sell-through was slightly up in dollars despite lower sell-in, resulting in clean marketplace inventory. Tim Boyle confirmed that retailers are unsure about the elasticity of more expensive products, leading to slightly lower units as prices increased, and reiterated weather's significant impact.

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 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 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 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 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 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 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.