Kevin brought up a lot of gross margin drivers that we continue to not see the impact of yet. Have cut SKU’s by 25%. Cut materials by 30% in 2025 and will cut even further in 2026. Plan is to “sell so much more of so much less at a much higher full price”. Were already planning to take prices up prior to tariffs with innovation in pipeline but now think they can take prices up even a bit higher.
It’s almost getting comical how Kevin keeps adding “and yes softer demand” when describing current challenges. As in, “results are impacted by deliberate decisions to pullback in Footwear, and yes softer demand.”
They are sunsetting the Infinite footwear franchise and plan to replace the volume with the Halo franchise. Seems the primary focus of footwear going forward will be Halo and Velocity.
Well, they finally decided to give us tariff guidance after dodging the subject last quarter. The combination of $100 mm of tariff impact (~200 bps gross margin) combined with “softer demand” should result in profitability that is approximately half of last year.
Given complexity and lead times involved, most tariff mitigation actions will not have an impact until FY27 “and beyond”. Did they really have to say “and beyond”? Almost like they intentionally want the stock down...
EMEA had growth across all channels during the quarter, led by the full price business. Expect the HSD growth in 2Q26 to be driven by both wholesale and DTC. That’s somewhat encouraging as it does make you wonder how North America could have looked this year (back half) without tariffs. Momentum in EMEA – Kevin mentioned they are the top brand in France. Not sure what he is referring to.
SG&A down, primarily driven by lower marketing. Must be concerned about that as you would think they should be ramping that line item into the long-awaited fall/winter product launch.
Nobody is going to listen to Kevin on how great innovation is if he keeps using the Stealth Form hat and No Weigh backpack as examples. Good products but everyone just going to need examples in either apparel or footwear. That said, the premium price points of these product are certainly an encouraging story.
Base Layer is trending. Product they are marketing is on point. Seeing double digit sell through on compression product. Seeing positive comps at some of their biggest and best retailers.
“We are better than we were a year ago, better than six months ago. All the confidence we will be better six months from today.” – Kevin Plank. He also wanted to make it clear that his confidence is better than “fingers crossed” as seeing green shoots in things like Net Promoter Scores.
Poser asked the best question with the order book (Lejuez also went at it). Seeing greater impact from tariffs for full fiscal year. Buyers and retailers committing to things they won with before. There is a bit of wait and see with how sell-in is right now. Excited about reaction and feedback on the product. Get to tail end of fall/winter 25 but more so spring/summer 26 getting more excited. I guess the long-awaited fall/winter inflection just got pushed back…
The overall environment is pretty promotional and they simply do not want to play into that much following all the work they did to clean up the business last year.
Laurent had a good question on overall consumer elasticity issues from broad macro price increases in 2H26. We should not expect a bigger deterioration in back half. As get to Q4 should see improvement as get to better product.
I mentioned last quarter’s conference call wasn’t great by far and yet they found a way to make it even worse. I was, however, impressed last quarter by them giving “proof points” of their progress on the investor relations website yet most of that doesn’t seem to have been updated since May. This name remains my highest probability pick for an MBO/LBO.
*These are our unabridged quick thoughts and notes from the call. We get them out as soon as possible after the call ends. Management has given some topics to dig deeper into and will circle back in several days with a more comprehensive work up as well as detailed scenario analysis of how consensus numbers shook out.