Executive Summary

Q2 2026 (fiscal quarter ended August 3, 2025) beat on revenue and EPS versus S&P Global consensus, while delivering meaningful gross margin expansion from a promotional reset and cost controls; management maintained FY2025 adjusted EBITDA guidance and highlighted on-track cost savings and improved inventory discipline .
Revenue was $131.7M vs $123.7M consensus, and GAAP EPS was $0.04 vs -$0.12 consensus; adjusted EBITDA was $12.0M, driven by higher average unit retails and SG&A leverage despite a 7% YoY sales decline as DTC traffic softened but retail store sales grew 5.3% .
Management reiterated FY2025 adjusted EBITDA of $20–$25M and refined 2025 capex to ~ $17M (from prior ~$20M), flagged ~$15M tariff headwind in 2H with ~12% average rate, and expects year-end inventory to decline double digits YoY .
Near-term catalysts: visible beat vs low estimate coverage, tangible margin progress, and two store openings (Kansas City, KS; Maple Grove, MN) to support retail momentum into peak season; risk: tariff impact weight in 2H and ongoing DTC traffic pressure .

What Went Well and What Went Wrong

What Went Well
- Gross margin expanded 240 bps to 54.7% on reduced promotional depth and improved product costs (direct-to-factory), with AUR up ~8% and adjusted EBITDA rising to $12.0M (9.1% of sales) .
- Inventory down 12.2% YoY to $148.1M with improved in-stocks (+200 bps), helping liquidity ($73.3M) and lowering borrowings; net debt fell versus prior quarter .
- Retail stores grew 5.3% on better traffic, conversion, and AOV; two new stores scheduled for September openings (Kansas City; Maple Grove) to extend strength .
- Management quote: “We are encouraged by our second-quarter results… promotional reset, expense management, and inventory discipline… enhanced gross margin, reduced SG&A, and lower inventory levels.” — CEO Stephanie Pugliese .
What Went Wrong
- Net sales declined 7% YoY to $131.7M, with direct-to-consumer sales down 13.7% on lower traffic as promotions were pulled back; wholesale timing also affected growth cadence .
- Advertising deleveraged 60 bps to 8.9% of sales even as SG&A dollars fell, reflecting the revenue contraction from the promotional reset .
- Tariff headwinds to weigh more heavily in 2H (~$15M for FY2025; ~12% average rate), requiring price actions and vendor negotiations to mitigate .

Financial Results

Metric	Q2 2025	Q1 2026	Q2 2026
Revenue ($USD Millions)	$141.6	$102.7	$131.7
Gross Margin (%)	52.3%	52.0%	54.7%
SG&A ($USD Millions)	$74.0	$65.7	$68.8
SG&A (% of Sales)	52.3%	64.0%	52.2%
GAAP Net Income ($USD Millions)	$(2.0)	$(15.3)	$1.3
GAAP Diluted EPS ($)	$(0.06)	$(0.45)	$0.04
EBITDA ($USD Millions)	$10.0	$(4.6)	$10.0
Adjusted EBITDA ($USD Millions)	$10.5	$(3.8)	$12.0

Segment/channel (Q2 2026):

Direct-to-Consumer net sales: $79.1M (down 13.7% YoY) on lower traffic, partly offset by higher AOV .
Retail store net sales: $52.6M (up 5.3% YoY) on higher AOV and better traffic/conversion .

KPIs (Q2 2026):

Inventory: $148.1M; down 12.2% YoY; clearance mix managed via clearance event; current products 78% at quarter end .
Cash & Equivalents: $5.7M; Net Liquidity: $73.3M; Debt (revolver): $32.5M .
Net Working Capital: $56.9M .
Advertising: 8.9% of sales (deleveraged 60 bps YoY) .
Store sales growth: +5.3% YoY; AUR +~8% company-wide .

Non-GAAP note: Adjusted EPS was $0.03 (adds back restructuring $0.03 and tax valuation allowance -$0.03, net of tax effects), vs GAAP EPS $0.04 .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EBITDA	FY2025	$20–$25M	$20–$25M	Maintained
Capital Expenditures	FY2025	~ $20M	~ $17M	Lowered
Tariff Impact	FY2025	Not quantified	~ $15M impact; ~12% avg tariff rate; largely mitigated via pricing/vendor actions	New detail
Year-end Inventory	FY2025	Normalize 2H with rebalanced receipts	Double-digit YoY decrease expected	Improved specificity
Store Openings	FY2025	2 new stores in 2H 2025	2 openings in Sept (Kansas City, KS; Maple Grove, MN)	On track
Marketing Investment	FY2025	10.8% of sales in FY2024 (context)	Maintain investment as % of sales while executing cost reductions	Maintained approach

Earnings Call Themes & Trends

Topic	Q4 2025 (Q-2)	Q1 2026 (Q-1)	Q2 2026 (Current)	Trend
Promotional strategy & price integrity	Deeper promos in Q4 to move inventory; resetting model for higher full-price sales in 2025	New CEO prioritizes simplification; reiterates focus on price integrity	Shallower promotions; AUR +~8%; gross margin +240 bps; continue discipline into H2	Improving
Tariffs	Limited explicit quantification	—	~$15M FY impact; ~12% rate; offset via price increases and vendor negotiations	Headwind rising, mitigated
Inventory discipline	Pack-and-hold/quality mix improved; liquidity strong	Ongoing focus on inventory turns	Inventory -12% YoY; in-stocks +200 bps; clearance actions executed	Improving
Fulfillment network	Adairsville key asset; Dubuque closure savings ~$5M	Continued optimization	Ongoing network optimization and planning to support peak season	Stable/optimized
Retail stores	2 new stores planned H2’25; higher hurdle rates	—	Store sales +5.3%; 2 openings in Sept (KS, MN)	Improving
Marketing & brand	New agency; brand lift; holiday success	—	Father’s Day campaign & GMA feature; “Big Dam Van” experiential marketing	Improving

Management Commentary

“We are encouraged by our second-quarter results, reflecting positive momentum in our turnaround efforts… promotional reset, expense management, and inventory discipline… enhanced gross margin, reduced SG&A, and lower inventory levels.” — Stephanie Pugliese, CEO .
“Reported EPS is $0.04 and adjusted EPS is $0.03… Adjusted EBITDA increased by $1.5M versus last year to $12.0M or 9.1% of sales… Direct channel sales decreased… Retail store sales increased 5.3%… Gross margin rate… driven by an 8% increase in average unit retail and more full-price sales.” — Heena Agrawal, CFO .
“We are on track to deliver $10M in cost reductions this year… advertising at 8.9% of sales… managing tariff impacts with price actions, vendor negotiations, and timing of receipts.” — CFO .
“Looking ahead… we will continue to leverage product sourcing, optimize our fulfillment center network, and rationalize our store portfolio… refocusing our marketing and product assortment to celebrate the self-reliant spirit of our customers.” — CEO .

Q&A Highlights

Promotional pullback metrics and sustainability: Management is prioritizing gross margin dollars and sees confidence maintaining shallower discount depth through 2H given success in 1H .
Gross margin outlook with tariffs: Price increases (implemented July 25 and Aug 8) are meeting elasticity expectations; vendor negotiations and receipt timing support mitigation; larger tariff impact in Q4 vs Q3 .
Cost savings cadence: ~$10M FY savings primarily from headcount reductions and controllable expenses; ~one-third realized by Q2 .
Longer-term margin framework: Simplification, SKU reductions (~20% planned for 2026), and inventory productivity are key levers to structurally raise margins .

Estimates Context

How results compared to S&P Global consensus:

Metric	Q4 2025	Q1 2026	Q2 2026
Revenue Actual ($USD Millions)	$241.3	$102.7	$131.7
Revenue Consensus ($USD Millions)*	252.9	104.8	123.7
EPS Actual ($)	$(0.17)	$(0.45)	$0.04
EPS Consensus ($)*	0.11	(0.42)	(0.12)
EBITDA Actual ($USD Millions)	8.5 (Adj. EBITDA)	(3.8) (Adj. EBITDA)	12.0 (Adj. EBITDA)
EBITDA Consensus ($USD Millions)*	18.6	0.0	7.3

Notes:

Q2 2026: Company beat revenue and EPS materially vs consensus; adjusted EBITDA also above consensus. Q1 2026 was softer than consensus on revenue and EBITDA; Q4 2025 was below on revenue/EPS/EBITDA versus consensus. Values with asterisk retrieved from S&P Global.
Coverage is thin (only ~2 estimates for Q2 on revenue/EPS), which can amplify surprise magnitude [GetEstimates “# of Estimates” Q2 2026 = 2*].

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

The quarter’s high-quality beat (gross margin +240 bps, EPS positive) validates the promotional reset strategy and cost actions; trajectory improved from Q1, with stores offsetting DTC softness .
FY2025 adjusted EBITDA held at $20–$25M despite tariffs, supported by pricing actions, vendor negotiations, and disciplined receipts; capex trimmed to ~$17M to preserve cash .
Inventory down 12% YoY and liquidity healthy ($73.3M) provide flexibility into peak season; management expects further double-digit YoY inventory reduction by year-end .
Tariff headwinds (~$15M in 2H) are the primary risk; execution on elasticity, vendor sharing, and promotional discipline is critical to sustaining margin gains .
Near-term catalysts: continued gross margin expansion in Q3/Q4, on-time execution of two store openings, and evidence that pricing actions sustain demand elasticity .
Medium-term thesis hinge: simplification and SKU reductions (~20% in 2026) to improve productivity and structural margins while balancing channel mix and marketing efficiency .
With thin sell-side coverage, continued delivery against guidance and margin progress could drive estimate revisions and sentiment shifts around the turnaround narrative .

Additional Documents Reviewed (Q2 window and prior quarters)

Q2 2026 8-K and press release with full financials, reconciliations, and investor deck references .
Q2 2026 earnings call transcript (full) .
Q1 2026 press release (trend context) .
Q4 2025 earnings call transcript (baseline guidance and strategic context) .
Q2-related store opening press releases (Kansas City; Maple Grove) .