Guidance Raise Despite Headwinds
Q: Why are you raising sales and EPS guidance despite headwinds?
A: We have better visibility into the back half, particularly strong order flow in domestic wholesale, and delayed European orders now flowing into the second half. Our international DTC is performing well, and although we saw domestic traffic declines, e-commerce did nicely. Overall, we feel confident due to a strong order book in domestic and international wholesale, despite some persistent challenges.

Supply Chain Impacts and Shifts
Q: Are supply chain issues causing shifts between quarters?
A: Yes, supply chain delays, especially from Asia to Europe, have shifted a material amount of orders into the second half since they couldn't be distributed in time for Q2. While it's tough to quantify, this shift is reflected in our Q3 guidance. The demand remains strong, and we expect supply chain normalization over the next quarter or two.

Gross Margin Outlook and Freight Costs
Q: How do you view gross margins and the impact of rising freight costs?
A: This quarter's gross margin was better than anticipated due to benefits from freight and mix. However, we expect these benefits to lessen over the year. Rising spot freight rates may impact us more acutely in Q3 and Q4, but we've incorporated this into our guidance. We don't anticipate as much lift in gross margin in the back half as we saw in the front half.

China Sales and Outlook
Q: What is the outlook for China sales in the second half?
A: We expect growth in the second half. Despite challenges during the 6/18 period, constant currency sales growth was double the reported rate due to significant FX headwinds. While 6/18 was more promotional this year, we continue to see brand resonance and outperforming other international brands. We're watching market recovery carefully, with the upcoming Double 11 event being significant.

India Regulatory Issues
Q: How are India regulations affecting your business, and what are your plans?
A: The regulatory environment in India had a significant impact on our Asia Pacific sales this quarter. We're building local production capacity, but it's currently insufficient to meet total demand. We've seen positive trends in certification processes and expect improvements over the year. We're optimistic about the long-term opportunity and may consider India as an export production market in the future.

Domestic DTC Trends
Q: Can you discuss the trends in domestic DTC, especially traffic slowdown?
A: We observed traffic slowdown in our brick-and-mortar stores, consistent with broader industry trends starting in late May into June. However, our e-commerce platform performed well, likely due to having the products people want and efficient fulfillment. Last year's comps were strong, affecting comparisons. We're cautious but believe consumer demand remains, evidenced by e-commerce and wholesale order book.

International Wholesale Growth Outlook
Q: What are your expectations for international wholesale growth?
A: We believe that high single-digit growth for global wholesale remains reasonable, though likely at the low end of the range. Challenges in Q2, particularly in Europe and India, impacted results, but conditions are improving. Strong order books and improving flow of goods give us confidence in the back half outlook.

Selling Expenses Increase
Q: How should we think about the increase in selling expenses?
A: Selling expenses grew about 25% this quarter due to conscious overinvestment, particularly in demand creation. We don't expect similar levels of increase in the back half, and the investment relative to sales growth will be more in line. Timing-related issues contributed to deleverage, but we believe some of that will be made up over the back half with stronger sales.

Sourcing Exposure to China and Tariff Risks
Q: What's your exposure to China sourcing, and how are you mitigating tariff risks?
A: Our sourcing footprint hasn't fundamentally changed, with approximately 40% in China, 40% in Vietnam, and the remainder elsewhere. While we continue to diversify production, the rate of growth in units means we need to run to keep things static. Potential tariff impacts are challenging to react to hypotheticals, but we'll respond quickly to actual changes.

EMEA DTC Performance
Q: How is the EMEA region performing, particularly in DTC?
A: EMEA DTC continues to perform well, with surprising upside due to strong consumer demand and product resonance. E-commerce in the region, which we began last year, has improved and contributed to good sell-through trends. We expect this positive trend to continue into Q3 and Q4, despite past challenges.