Tracy Kogan

Tracy Kogan inquired about Birkenstock's strategy for its $200 million share buyback program, specifically whether the company would be more aggressive in the open market rather than waiting for private equity, and also asked about the willingness of insiders to purchase stock at current levels.

Answer

CFO Ivica Krolo affirmed that the stock is undervalued and confirmed the intention to repurchase $200 million in shares in fiscal 2026, subject to market conditions. He mentioned that open market repurchases are an option, similar to the previous year's repurchase in conjunction with a secondary offering. He clarified that insiders have been in blackout periods for most of the year due to fiscal quarter reporting, transaction-related activities (Wittichenau and Australia distributor acquisitions), and potential secondary transactions by L Catterton, which has prevented them from buying shares despite a strong desire to do so.

Tracy Kogan inquired about Birkenstock's plans for its $200 million share buyback in fiscal 2026, specifically if the company would be more aggressive in the open market given the stock's current trading levels, and about the willingness of insiders to buy stock.

Answer

CFO Ivica Krolo agreed the stock is undervalued and confirmed the intention to repurchase $200 million in shares in FY26, with open market repurchases as an option alongside a secondary offering structure. Regarding insider buying, he explained that extensive blackout periods (fiscal quarter ends, transaction-related, and secondary transaction-related) have prevented any window for insiders to buy shares since he joined, assuring it's not due to a lack of desire.

Tracy Kogan inquired about the regional breakdown of the fall order book growth, specifically comparing the U.S. to international markets, and the implications for U.S. unit trends given the high single-digit price increases. She also asked if price increases are primarily implemented in the U.S. or globally to offset tariffs.

Answer

Chairman and CEO Tim Boyle and EVP and CFO Jim Swanson indicated that while the U.S. business is showing the most improvement, international markets are expected to continue outperforming. They projected U.S. wholesale to grow at a low- to mid-single-digit rate in the second half, with emerging brands growing faster. Tim Boyle confirmed that the primary impact of price increases is concentrated in the U.S.

Tracy Kogan asked for a regional breakdown of the Fall order book's mid-single digit growth, specifically if the U.S. is growing similarly, and what the U.S. unit sales look like given high-single digit price increases. She also inquired if price increases are primarily in the U.S. or globally to offset tariffs.

Answer

Chairman and CEO Tim Boyle stated that the U.S. business, while most challenged, is showing the biggest improvements, but international businesses are expected to continue outperforming. EVP and CFO Jim Swanson added that international businesses (China, Europe, distributor) will outpace U.S. growth, with the U.S. at a low- to mid-single digit growth rate, and all four brands are expected to grow, with emerging brands growing faster. Tim Boyle confirmed that the primary impact of price increases is in the U.S.

Tracy Kogan, on behalf of Paul Lejuez at Citigroup, asked if there were differences in order trends among U.S. wholesale partners, such as department stores versus specialty retailers. She also requested a breakdown of the 2025 capital expenditure guidance and whether the $60-$80 million range is a sustainable run rate.

Answer

CEO Tim Boyle noted that while relationships with all partners are strong, the order book is much stronger with customers that align with the new target consumer for their updated product lines. EVP & CFO Jim Swanson stated that the $60-$80 million CapEx range is a fair estimate going forward, with roughly a quarter being maintenance capital. He noted the most significant investment is in stores.

Tracy Kogan, on behalf of Paul Lejuez, asked about the better-than-planned Q3 gross margin, specifically the comment on lower promotions in the U.S. She requested a characterization of the current promotional environment and what is built into the Q4 guidance regarding promotions.

Answer

CEO Tim Boyle stated that they expect promotions to be stronger in the upcoming holiday season and have built those expectations into the guidance. CFO Jim Swanson elaborated that while the Q3 promotional environment was less intense than anticipated, they have not raised the gross margin outlook significantly for Q4, expecting promotions to remain a factor. He noted the main driver of year-over-year Q4 margin expansion will be cleaner inventory leading to fewer wholesale closeout sales.

Tracy Kogan from Citigroup asked about the specific drivers behind the Q3 fiscal 2026 gross margin beat, including mitigation efforts, mix, product costs, and promotional activity. She also sought details on the factors influencing the Q4 gross margin outlook of flat to slightly up, and whether lower year-over-year promotions are expected.

Answer

EVP and CFO Paul Vogel explained that Q3 gross margin benefited from less promotion, sourcing savings, and mix, offsetting tariff impacts. For Q4, he noted that initial pricing actions and ongoing sourcing savings are expected to offset tariff impacts, resulting in a flat to slightly up gross margin, with potentially slightly lower promotions.

Tracy Kogan asked about the specific drivers behind the Q3 gross margin beat, including the impact of mix, lower product costs, and promotions. She also sought clarification on the drivers for the Q4 gross margin guidance of flat to slightly up, and whether lower year-over-year promotions are expected in Q4.

Answer

CFO Paul Vogel attributed the Q3 gross margin beat to less promotion (better full price), unmitigated tariff impact, and sourcing benefits. For Q4, he expects similar trends, with initial pricing actions and ongoing sourcing savings offsetting tariff impacts. He anticipates promotions to be 'maybe slightly' lower year-over-year in Q4.

Tracy Kogan, on behalf of Paul Lejuez, asked if quarter-to-date trends were consistent with Q2 guidance and why the negative impact from deliberate actions at Vans seemed less severe than in the previous quarter.

Answer

EVP & CFO Paul Vogel declined to comment on intra-quarter performance but stood by the Q2 guidance. He explained the impact from Vans' channel rationalization was in line with expectations, with the variance from the prior quarter (~40% vs. ~50%) being a function of timing and math rather than a change in strategy.

Tracy Kogan asked about quarter-to-date trends outside of the sweater category and inquired whether the observed weakness is broad-based across brands or if there are significant deviations in performance among them.

Answer

Chairman and CEO Tom Chubb reported that the three larger brands (Tommy Bahama, Lilly Pulitzer, Johnny Was) are experiencing relative weakness quarter-to-date, while the Emerging Brands Group continues to show strong momentum, with a 17% increase in Q3. He noted that Lilly Pulitzer's assortment was impacted by fewer embellished/novelty items due to China tariffs, while Tommy Bahama saw strong performance in versatile products like Boracay pants and long-sleeve wovens.

Tracy Kogan asked about Oxford Industries' CapEx outlook for fiscal 2026 and beyond, seeking an appropriate ongoing CapEx number and inquiring about any future major investments in distribution centers. She also asked for early expectations regarding store growth for the next fiscal year and any identified new store openings.

Answer

Scott Grassmyer, CFO and COO, stated that after the Lyons, Georgia distribution center project is substantially complete, the ongoing CapEx rate is expected to be around $75 million, depending on the pace of store openings. For store growth, he mentioned that Johnny Was openings have slowed, Southern Tide will have some but at a reduced pace, and Tommy Bahama and Lilly Pulitzer will continue at a normal pace, subject to real estate availability. He estimated around 15 net new locations for next year, similar to the current year, including a few more expensive Marlin Bars.

Tracy Kogan asked about the expected CapEx number for fiscal 2026 and beyond, following the completion of the Lions, Georgia distribution center, and if there are plans for other major distribution center investments. She also inquired about early expectations for store growth in the next fiscal year, including identified openings.

Answer

CFO and COO Scott Grassmyer stated that after the Lions, Georgia distribution center is substantially complete (with a small portion potentially trailing into next year), the ongoing CapEx rate is expected to be around $75 million, depending on the pace of store openings. He noted that Johnny Was store openings have slowed, Southern Tide will have some, and Tommy Bahama and Lilly Pulitzer will likely continue at a normal pace, subject to real estate availability. Overall, he anticipates around 15 net new locations next year, similar to the current year, including a few Marlin Bars and standalone stores for various brands.

Tracy Kogan inquired about the expected capital expenditure for fiscal 2026 and beyond, after the completion of the distribution center, and any future major investments. She also asked for early expectations regarding store growth for the next year and identified openings.

Answer

Scott Grassmyer, CFO and COO, expects the Lions distribution center project to be substantially complete, with an ongoing CapEx rate of around $75 million annually, depending on the pace of new store openings, and no further major distribution center investments in the near future. He indicated that Johnny Was store openings are slowed, Southern Tide's rapid expansion has moderated, and Tommy Bahama and Lilly Pulitzer will likely continue with a 'normal' pace of a few standalone stores and Marlin Bars, along with a couple for The Beaufort Bonnet Company and a few for Southern Tide. Overall, store growth is expected to be closer to this year's 15 net new locations.

Tracy Kogan, filling in for Paul Lejuez at Citigroup, asked about the intra-quarter comp sales trend, specifically comparing February to the March-April period. She also inquired about the drivers of the restaurant business performance, including traffic and ticket trends.

Answer

Chairman, CEO & President Tom Chubb stated that sales trends improved sequentially through the quarter, with April being the strongest month, partly due to the Easter shift. For the restaurant business, he noted that while total sales were down 3%, comps were down only 1%, with ticket sizes increasing slightly. EVP, CFO & COO Scott Grassmyer added that the temporary closure of the Sarasota restaurant for relocation negatively impacted the total sales figure.

Tracy Kogan of Citigroup, filling in for Paul Lejuez, asked about the intra-quarter comparable sales trend, specifically comparing February to the March-April period, and sought details on the restaurant business's performance, including traffic and ticket drivers.

Answer

Chairman and CEO Tom Chubb reported that comparable sales improved sequentially through the quarter, with April being the strongest month, aided by the Easter calendar shift. He noted the restaurant comp was down only 1%, with ticket sizes increasing slightly. CFO and COO Scott Grassmyer added that total restaurant sales were impacted by the temporary closure of the Sarasota location for relocation.

Tracy Kogan of Citigroup, filling in for Paul Lejuez, followed up on the wholesale channel, asking what the company is seeing in its actual order books versus general market caution. She also sought clarification on the guided $9-$10 million tariff impact, asking if any mitigation was already assumed in that figure.

Answer

CFO and COO K. Grassmyer responded that the company's latest projection for the wholesale business is relatively flat for the year, incorporating some caution for future bookings despite strong on-floor performance. Regarding tariffs, he clarified that the $9-$10 million figure does include some mitigation, but further actions are being negotiated. He expressed hope the final impact could be slightly better but noted that most mitigation benefits will be realized in Spring 2026, and the current figure represents a potential worst-case scenario for the year.

Tracy Kogan asked for an update on Macy's store closure program, specifically where the company expects to be at year-end regarding the 150-store target over three years, and whether more or fewer stores are anticipated to close. She also requested details on the Macy's Media Network reduction.

Answer

COO and CFO Tom Edwards stated that 64 stores were closed last year, and new closure announcements will be made on the Q4 call, reaffirming commitment to store optimization. Regarding Macy's Media Network, he explained that the slight guidance reduction is a recalibration of advertising spending, but it is still expected to grow strongly (double digits) year-over-year for Q4 and the full year, emphasizing its role in the broader customer ecosystem.

Tracy Kogan asked for an update on Macy's store closure program, specifically where the company expects to be at year-end regarding the 150 stores over three years target, and whether fewer or more stores are expected to close. She also requested details on the Macy's Media Network reduction.

Answer

COO and CFO Tom Edwards stated that 64 stores were closed last year, and new closure announcements will be made at the end of the year, after the holiday season. He reaffirmed commitment to the store optimization program. Regarding Macy's Media Network, Edwards explained the slight guidance reduction is a recalibration of advertising spending, but the network is still expected to grow strongly year-over-year, up low double digits for the full year, leveraging the brand's strength and partnerships.

Tracy Kogan followed up on price increases, asking how they are distributed between private brands and national brands, and how consumer elasticity has looked so far relative to expectations, specifically regarding unit changes.

Answer

Tony Spring, Chairman and CEO, described the early stages of consumer response to marketplace changes, noting resiliency and interest in newness. He explained a flexible buying strategy, adjusting unit purchases based on higher costs or price points, and emphasized the advantage of Macy's multi-brand, multi-category, multi-channel, and multi-price point model. Tom Edwards, COO and CFO, added that Bold New Chapter initiatives are supporting performance regardless of the external environment.

Tracy Kogan, on behalf of Paul Lejuez, requested more detail on credit card revenue trends in Q4 and quarter-to-date, including payment rates and losses.

Answer

COO & CFO Adrian Mitchell reported that credit card revenues stabilized in 2024 and are expected to return to growth in 2025. This is driven by a healthy portfolio, stabilized net credit losses, and initiatives to increase card usage and applications. He confirmed there have been no meaningful negative changes quarter-to-date and that growth is reflected in the annual guidance.

Tracy Kogan, on for Paul Lejuez, asked about performance differences by consumer income demographic, particularly as the overall environment weakened during the second quarter.

Answer

CEO Tony Spring responded that there was a consistent trend of increased caution across all nameplates and demographics during Q2, as consumers became more judicious with their spending amid macro uncertainty. He emphasized that the company's strategy is to create compelling reasons to buy through newness, exclusivity, and events like the upcoming Bloomingdale's 'Celebration of Italy' and Bluemercury's 25th anniversary, which appeal to all income levels.

Tracy Kogan followed up on the pricing discussion, asking for clarification on whether the consumer had responded to higher prices or if the lack of hesitancy was only observed from wholesale partners. She also requested an update on the U.S. wholesale business, specifically comparing sell-ins to sell-outs.

Answer

Harmit Singh, Chief Financial and Growth Officer, clarified that the consumer has remained resilient, and no demand contraction has been observed from the marginal pricing initiatives. He confirmed that sell-throughs in the wholesale channel have been fairly consistent with sell-ins, indicating healthy demand and inventory flow.

Tracy Kogan followed up on pricing, asking if the consumer response to higher prices had actually been observed, or if the lack of hesitancy was only from wholesale partners. She also requested comments on how sell-ins to U.S. wholesale partners compare to sell-outs, to gauge if partners are being more cautious than the end consumer.

Answer

Harmit Singh, Chief Financial and Growth Officer, clarified that the lack of demand contraction was observed from both customers and consumers, indicating consumer resilience despite marginal pricing and sustained full-price selling. He confirmed that sell-throughs have been fairly consistent with sell-ins, which contributes to the company's optimism for a strong year-end and continued momentum into 2026.

Tracy Kogan, on behalf of Paul Lejuez, asked for more regional detail on the business acceleration seen in Q1 and inquired about the magnitude of price increases assumed in the guidance for the Coach brand.

Answer

CEO Joanne Crevoiserat confirmed the acceleration is widespread across all regions, as Coach's global strategies are resonating with consumers. Coach CEO Todd Kahn added that the brand's mid-to-high single-digit growth forecast is supported by a favorable product mix and AUR lift from initiatives like selling full-price collection items in outlet stores.

Tracy Kogan, on behalf of Paul Lejuez, inquired about the profitability of the e-commerce business and its path to sales improvement. She also sought clarification on how much margin pressure from tariffs is factored into the company's guidance.

Answer

CFO Jill Timm stated that while the digital business is profitable, its sales have been weighed down by its high penetration in the underperforming home category and with the core Kohl's Card customer. She expects progressive improvement as strategic changes take hold. Regarding tariffs, Timm confirmed that the company believes it can mitigate the vast majority of the pressure and that the current financial guidance already accounts for any expected impact.

Tracy Kogan from Citigroup asked for confirmation that the Q2 EPS tariff impact of $0.11 to $0.16 already includes some mitigation efforts. She also inquired whether a trade-down customer contributed to the sales improvement in the quarter.

Answer

Group President and COO Michael Hartshorn confirmed the Q2 guidance includes some mitigation but also incorporates the impact of goods already in transit when tariffs hit. Regarding the customer, he noted that comp performance was broad-based across income bands, which does not suggest a significant trade-down effect.

Tracy Kogan, on for Paul Lejuez, sought to confirm if the Q2 EPS tariff impact of $0.11 to $0.16 already includes mitigation efforts. She also asked if a trade-down customer contributed to the sales improvement in Q1.

Answer

Group President and COO Michael Hartshorn confirmed the Q2 guidance includes some mitigation but is also negatively impacted by products that were already in transit when tariffs hit. He added that sales comps were broad-based across store income demographics, which does not suggest a significant trade-down effect.

Asked if the Q3 gross margin improvement from full-price selling was consistent across both banners, if it exceeded expectations, and what the outlook is for the Q4 promotional environment and gross margin.

Answer

The Q3 gross margin improvement was driven by strong regular-price selling and was broadly consistent across banners, though slightly stronger at the Nordstrom banner. For Q4, they expect year-over-year gross margin improvement, consistent with prior guidance. The promotional environment for the holiday season is living up to expectations of being highly promotional.