John Kernan

CFO confirmed tariff headwinds will pressure margins further in FY2027 first half. Q2 demonstrated ability to mitigate through disciplined management. CEO noted strong financial profile enables continued investment in capabilities.

CFO explained wholesale expansion front-loaded in H1, creating timing-driven DTC pressure. Back half will see more DTC growth on percentage basis as wholesale normalizes. Wholesale expansion will begin to slow as company approaches 50/50 balance.

CFO confirmed equivalent gross margin pressure carries into FY2027 first half if tariffs remain unchanged.

CFO confirmed Q2 international growth will moderate from Q1 timing effects but bulk of growth still from international. Domestic side will see incremental improvement. HOKA US DTC improvement is expected to be gradual and incremental, building sequentially.

CEO noted expansion across specialty, sporting goods domestically and internationally. Still underpenetrated versus competitors. Declined to name specific accounts but emphasized expanding product offer enables broader distribution.

CEO highlighted UGG expanding beyond slippers into sandals, sneakers, clogs, and slipper-sneaker hybrids. Men's business continues to outpace women's. CFO emphasized scarcity model driving high gross margins and full-price selling.

CFO acknowledged margin maintenance challenges as brands scale, citing inflationary pressures, FX headwinds, and freight. Scarcity model and full-price selling remain key margin drivers.

CEO confirmed US growth met expectations. International continues to outpace US as planned. Long-term target remains 50% international mix.

Justin said tariffs are the biggest gross margin headwind but confident in more than offsetting with AUR, promo pullback, product elevation, and favorable mix. Cost inflation pressure disproportionately impacts North America, shifting profitability contribution toward international.

Justin said encouraged by momentum and elevated positioning. Cautious on macro headwinds. Patrice noted planning 10 new owned stores and 25 partner stores in Europe for FY2026.

Justin said promotional pullback lever has significant runway. New consumer acquisition focused on full-price customers gives confidence in continued AUR growth and margin expansion.

Patrice said Europe still very underpenetrated. On track with Investor Day target of 40-50 full-price stores. Opened 44 since FY2022, planning 20 this year. 14 opened in Q2.

Hartshorn said merch margin was better than expected with less ticketing and stronger shrink. Expects relatively stable but sees opportunity from branded vendor relationships and closeouts. DC pressure to continue through Q4 then improve as next DC is 2-3 years away.

Hartshorn expects DC leverage over next 2 years. Long-term algorithm: 5% store growth + 3% comp = ~5% EPS, plus 1-3% EBIT upside and 2-3% buyback = ~double-digit EPS growth.

Hartshorn attributed SG&A increase to minimum wage-driven store costs. Continuously seeking efficiencies but leverage point remains around 3% comp.

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Calvin expressed confidence in long-term international growth, noting LULU ended last year at 25% international mix with opportunity for 50-50 ratio. Market share gains continue across all international regions.

Meghan confirmed marketing at about 5% of sales going into FY2025 and noted it is an area they would look to flex depending on business trend and product newness momentum.

Frank confirmed healthy operating margin expansion in China with revenue exceeding expectations. Not optimizing margin currently, focused on long-term growth. Guided China above 30% growth in Q4. McDonald added that Italy, Denmark, Belgium, Turkey and Czech Republic planned for 2025, citing brand momentum and being pulled into markets rather than pushing.

Comps started strong, had a small weather-related lull mid-quarter in June, then rebounded even stronger in July. Flow-through model updated to 10-20bp per comp point.

John identified top-line growth and market share gains as the primary margin expansion lever, noting expense decreases could also help if they materialize.

Ernie characterized consumable and beauty categories as traffic drivers and frequency builders that offer extreme value due to high initial markups elsewhere, helping drive customer visits.

Matt said NA, EMEA, and Greater China units all down; APLA is the area of focus. The forward-looking order book is the best indicator, and GM should benefit in H2 from lapping aggressive clearance.