• Robust Growth and Momentum in Arc'teryx Brand: Arc'teryx reported a 46% DTC growth, including a 36% omni-comp, in Q1. " This strong performance was achieved despite lapping a difficult 61% comp from the prior year. " The brand continues to see strong customer acquisition and retention, with healthy average purchase patterns across all regions. " Management indicates that these trends are continuing into Q2, showcasing resilience and sustained momentum. "
• Expanding Gross Profit Margins with Further Upside Potential: The company achieved an adjusted gross profit margin of 54.3% in Q1. " Management believes there is meaningful upside to gross margins on a long-term basis, citing a potential increase of 300 basis points. " The growth of high-margin franchises like Arc'teryx and a focus on profitable channels are driving a compound effect on gross margin expansion. "
• Positive Outlook in Key Markets Including China and North America: Despite macroeconomic challenges, the company is experiencing strong growth in China, driven by increasing consumer participation in sports and outdoor activities. " Arc'teryx and Salomon are positioned uniquely in the premium segment of China's outdoor market and are taking on leadership roles. " In North America, there are indications of improving wholesale trends, with healthy inventory levels and strong sell-through across most categories. " The company is confident that it is on strategy and well-positioned for growth in the back half of the year. "

• The company expects Technical Apparel wholesale growth to slow down in upcoming quarters: "we don't expect Technical Apparel wholesale to continue growing at this rate in Q2 or for the remainder of the year." " This indicates that the exceptional growth driven by Arc’teryx may not be sustainable.
• The Ball & Racquet segment revenue decreased by 14% to $273 million in Q1, with declines in several categories, notably racquets due to "slowness in the overall market across geographies." " This suggests ongoing challenges in this segment.
• The company acknowledges that the Chinese economy still faces big challenges, with the market "getting more challenging given the overall economic development." " This could impact future growth in a key market.

AS Q1 2024 Earnings Call Q&A Summary

1. Arc'teryx Growth
   Q: What's driving Arc'teryx's robust performance?
   A: Arc'teryx continues showing exceptional growth with 44% revenue increase in Q1, fueled by 46% DTC growth including a 36% omni-comp despite tough comparisons. Strong momentum continues across all regions and channels, with high-quality full-price growth and healthy customer acquisition rates. " " "

2. China Performance
   Q: How is AS performing in China despite economic challenges?
   A: Despite China's economic headwinds, AS delivered strong growth as Chinese consumers increasingly prioritize health and sports activities. Arc'teryx and Salomon are establishing leadership in China's premium outdoor segments, with the new Shanghai flagship store expected to generate over $20 million in first-year sales. " "

3. Margin Outlook
   Q: Is there a ceiling on gross margin expansion?
   A: The company raised its gross margin guidance to approximately 54% for 2024, with continued upside potential as Arc'teryx (the highest margin business) grows faster than other brands. Management believes there's meaningful long-term upside of 300 basis points as the business mix continues to shift toward higher-margin channels and regions. " " "

4. North America Trends
   Q: What are you seeing in North America versus three months ago?
   A: North America is performing in line with expectations. While retailers were cautious entering 2024, AS is seeing pickup in reorders and improving sell-through. The company's clean inventory position has enabled it to service replenishment orders effectively, with signals from wholesale accounts indicating inventory cleanup and potential acceleration in the second half. " "

5. SG&A Investment
   Q: How are you balancing reinvestment versus margin expansion?
   A: Management is reinvesting a portion of revenue outperformance into strategic areas including infrastructure, supply chain, technology, digital platforms, and retail expansion. Q2 will see 17 new stores opened (their highest quarterly total ever), reflecting continued investment in long-term growth capabilities while still delivering operating margin above guidance. "

6. Ball & Racquet Recovery
   Q: When will Ball & Racquet segment return to growth?
   A: The Ball & Racquet segment declined 14% in Q1 due to normalized retailer ordering patterns, but Wilson continues gaining market share in retail sell-through. Management expects improvement in H2 2024 as industry inventories reach balance, with easier comparisons and new product innovations including a partnership with basketball star Caitlin Clark. "

7. Salomon Leadership
   Q: What criteria for new Salomon leadership and growth outlook?
   A: The search for a new Salomon leader is expected to take 6-12 months, with criteria including experience in business growth and footwear/apparel sector knowledge. Footwear will remain the key growth engine, with the brand positioned as a modern outdoor lifestyle brand, leveraging Olympics partnerships and strategic store openings. "

8. Wholesale Trajectory
   Q: What's the expected wholesale growth trajectory throughout 2024?
   A: Technical apparel wholesale grew 40% in Q1 but is not expected to continue at this rate. For Ball & Racquet and Outdoor Performance, wholesale growth is expected to accelerate in H2 2024 due to easier comparisons, improved inventory positions, and increased store count in Greater China. " "

9. Q2 Segment Outlook
   Q: What are the Q2 segment revenue expectations?
   A: For Q2, Technical Apparel will lead growth while Outdoor Performance is expected to deliver high single to low double-digit growth. Ball & Racquet will see more muted single-digit performance. Overall, Q2 group revenue growth is projected at approximately 10%. " " "