Shares of Franklin Wireless Corp. (FKWL) have declined 12.4% since the company reported its earnings for the first quarter of fiscal 2026 compared with the S&P 500’s 1.7% decrease over the same period. Over the past month, the stock has fallen 11.3%, also underperforming the S&P 500’s 1.3% plunge. The stock’s steeper drop reflects investor caution despite modest improvements in several operating metrics.Franklin Wireless posted quarterly revenues of $12.7 million, down 4.3% from $13.3 million a year ago. Ne ...

Financial Data and Key Metrics Changes - Third-quarter net sales totaled $267 million, down 7% in constant currency compared to the prior year, slightly ahead of expectations [18] - Gross margin in Q3 was 48.7%, down 70 basis points year-over-year, but underlying gross margins improved compared to the prior year [18][20] - Adjusted operating loss for Q3 narrowed to $15 million from $22 million a year ago, with expectations for a break-even to slightly positive adjusted operating margin for the full year [22][25] Business Line Data and Key Metrics Changes - Traditional watch sales for the Fossil brand in Q3 were up high double digits, outperforming the market [5][6] - The wholesale channel grew mid-single digits globally, with notable strength in EMEA and Asia regions [12] - The company reported a 26% year-over-year reduction in inventory, aligning with a 7% sales decline [23][34] Market Data and Key Metrics Changes - The U.S. watch market showed low single-digit growth, with department and specialty store channels up low double digits [5] - In Asia, India and Japan experienced double-digit growth, while China remained under pressure [12][33] - The company noted a positive performance in the Asia region, particularly in traditional watches and jewelry, with gross margin expansion [32] Company Strategy and Development Direction - The company has successfully transformed its balance sheet, extending debt maturity to 2029 and bringing in over $32 million of new capital [4][24] - The turnaround plan focuses on three pillars: strengthening the core brand, right-sizing the cost structure, and improving the balance sheet [8][16] - The company is committed to a full-price selling model, which has improved margin architecture and reduced promotional activity [19][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the path to profitable growth, reiterating financial guidance for the full year [17][25] - The company acknowledged ongoing challenges in the macro environment, particularly in China, but remains optimistic about growth in other regions [33] - Management highlighted the importance of disciplined expense management and working capital improvements [22][23] Other Important Information - The company has appointed Devin Leong as General Manager for Asia, expected to enhance market presence and accelerate growth [12] - The Nick Jonas campaign has generated nearly 6 billion impressions and is attracting a younger demographic [9][10] - The company is focusing on brand investment and enhancing visibility through media and PR partnerships [11] Q&A Session Summary Question: What is driving the gap between wholesale growth and store comps? - Management clarified that the decline in store comps refers to direct-to-consumer performance, which has been intentionally reduced to improve margins [27][28] Question: Can you provide insights on the performance in Asia? - Management noted strong performance in India and Japan, while China remains challenging, with a focus on reducing promotional activity to improve gross margins [32][33] Question: What initiatives are driving inventory improvements? - Management highlighted tighter inventory control and a focus on key products, resulting in a significant reduction in SKUs and improved gross margins [34][37]

Financial Data and Key Metrics Changes - Fiscal fourth quarter 2025 revenue increased 22% to $460 million compared to $378 million in the prior year period [10] - Full-year 2025 total revenue increased 6% to $1.9 billion, driven by a slight increase in units and higher average selling prices [12] - Net loss for fiscal year 2025 was $116 million, or $7.22 per diluted share, compared to a net loss of $6.39 per diluted share in the prior year [15] - Adjusted EBITDA for fiscal year 2025 was $70 million, with adjusted diluted earnings per share of $0.44 [15] Business Line Data and Key Metrics Changes - New boat sales in Q4 increased 27% to $275 million, while pre-owned sales increased 25% to $91 million [10] - Same-store sales for the year grew by 6%, outperforming the industry which saw a decline of over 13% [12] - Revenue from service parts and other sales for the quarter increased 7% to $81 million [10] Market Data and Key Metrics Changes - The company experienced a 6% same-store sales growth for the year, outperforming broader industry trends [4] - Inventory levels decreased to $540 million from $591 million in the prior year, reflecting strategic inventory positioning [15] Company Strategy and Development Direction - The company completed a strategic exit from discontinued brands to focus on high-performing brands, which is expected to improve margins in the long term [5] - The company aims to maintain a disciplined approach to inventory and cost management to adapt to market conditions [17] - The outlook for 2026 anticipates flat same-store sales, with total sales expected to range from $1.83 billion to $1.93 billion [16] Management's Comments on Operating Environment and Future Outlook - Management noted that industry conditions remain challenging, with retail demand normalizing from pandemic highs and increased promotional activity [4] - There are positive signs of improved channel inventories and normalizing OEM production, which could support demand and growth [6] - Management expressed cautious optimism for 2026, expecting demand to fluctuate with traditional seasonal cycles [16] Other Important Information - The company exited the year with the cleanest inventory levels seen in years, providing a competitive advantage [5] - The company has a total liquidity of over $67 million, including cash and credit facilities [15] Q&A Session Summary Question: Can you quantify the change in inventory year over year? - The company reported a decrease of approximately 8.5%, or $50 million, year over year [19] Question: What is the right assumption for inventory for fiscal 2026? - Inventory is expected to increase modestly due to price increases, with a headwind of around 5% from exiting brands [20] Question: What is the outlook for interest rate expenses in 2026? - Interest rate expenses are expected to be flattish to slightly up for floor plan interest, while term interest should decrease [22] Question: Have consumer rates started to come down in a meaningful way? - Consumer rates have started to decrease, contributing to positive sales momentum [26] Question: How much were sales up at the Fort Lauderdale boat show? - Sales were nearly up 20% compared to last year at the Fort Lauderdale boat show [29] Question: How do you see the promotional environment playing out in fiscal 2026? - The promotional environment is expected to remain stable until manufacturers increase production [35] Question: What is the current dynamic regarding trade-ins for pre-owned boats? - There has been an increase in trade-ins as consumers are opting to sell through dealerships rather than independently [40] Question: What is the company's approach to M&A in the current environment? - The company is focused on being disciplined regarding debt and is taking a methodical approach to potential M&A opportunities [42]

Financial Data and Key Metrics Changes - Net sales for the September quarter were $1.14 billion, reflecting a 6% sequential increase and exceeding guidance by $10.4 million [15][24] - Non-GAAP gross margin was reported at 56.7%, impacted by inventory reserve charges of $71.8 million and underutilization charges of $51 million [15][24] - Non-GAAP operating margin increased to 24.3% of sales, with operating expenses at 32.4% of sales [15] - Non-GAAP net income was $199.1 million, translating to earnings per diluted share of $0.35, which was $0.02 above guidance [15] Business Line Data and Key Metrics Changes - The microcontroller (MCU) business grew 9.7% sequentially, while the analog business saw a 1.7% increase [4] - Sales from data center products, particularly Gen 4 and Gen 5, showed strong growth, although from previously low levels [4][21] Market Data and Key Metrics Changes - Sales growth was observed in the Americas and Asia, while Europe remained flat, which is considered acceptable for a summer quarter [4] - The data center market exhibited the strongest sales performance, with significant increases in bookings and shipments of PCIe switches and related products [21] Company Strategy and Development Direction - The company is focusing on advanced technology, highlighted by the introduction of the industry's first 3-nanometer-based PCIe Gen 6 switch, aimed at enhancing AI infrastructure [10][12] - A strategic shift towards high-performance data center products is underway, with plans to expand offerings in the AI and FPGA markets [76] Management's Comments on Operating Environment and Future Outlook - Management noted a softer overall business environment compared to previous quarters, impacting December quarter guidance, which is expected to be down 1% sequentially [28][29] - Despite the current challenges, there is optimism for strong performance in the March, June, and September quarters of 2026, driven by improved backlog and bookings [50][52] Other Important Information - Inventory levels decreased by $73.8 million sequentially, with inventory days down to 199 days [16][17] - The company is undergoing a restructuring plan, including the sale of its Fab 2 facility, which is expected to be completed by December 2025 [7][8] Q&A Session Summary Question: How does the current environment compare to 90 days ago? - Management indicated a slightly softer tone in the business environment, affecting December quarter guidance, which is better than seasonal expectations [28] Question: What is the outlook for inventory reserve and underutilization charges? - Management stated that while it is difficult to predict, they expect these charges to decrease in stronger quarters ahead [30][31] Question: What is the status of long-term supply agreements (LTSAs)? - Management clarified that they have been flexible with customers regarding LTSAs, allowing them to adjust their requirements without forcing purchases [39][40] Question: What drives confidence in above-seasonal growth for the next three quarters? - Confidence is based on improved backlog visibility and strong bookings, with expectations for inventory replenishment in the March quarter [50][52] Question: What is the expected impact of inventory charges on gross margins? - Management indicated that as inventory charges decrease, gross margins are expected to improve, potentially reaching a target of 65% in the future [66][68]

Financial Data and Key Metrics Changes - Net sales for the September quarter were $1.14 billion, reflecting a 6% sequential increase and exceeding guidance by $10.4 million [15][24] - Non-GAAP gross margin was reported at 56.7%, impacted by $51 million in underutilization charges and $71.8 million in inventory reserve charges [15][24] - Non-GAAP operating margin increased to 24.3% of sales, with operating expenses at 32.4% of sales [15] - Non-GAAP net income was $199.1 million, translating to earnings per diluted share of $0.35, which was $0.02 above guidance [15][24] Business Line Data and Key Metrics Changes - The microcontroller (MCU) business grew 9.7% sequentially, while the analog business saw a 1.7% increase [4] - Sales from Gen 4 and Gen 5 data center products experienced strong growth, although from previously low levels [4][21] Market Data and Key Metrics Changes - Sales growth was observed in the Americas and Asia, while Europe remained flat, which is considered acceptable for a summer quarter [4] - The data center market showed the strongest sales performance, with significant increases in bookings and shipments of PCIe switches and related products [21] Company Strategy and Development Direction - The company is focusing on advanced technology products, including the introduction of the industry's first 3 nm-based PCIe Gen 6 switch, aimed at enhancing AI infrastructure [9][10] - A strategic shift towards high-performance data center products is underway, with plans to expand offerings in the FPGA business unit and AI-focused initiatives [76] Management's Comments on Operating Environment and Future Outlook - The management noted a softer overall business environment compared to previous expectations, impacting guidance for the December quarter [28] - Despite a challenging December quarter, the company anticipates strong momentum in the following quarters, particularly in March, June, and September 2026 [25][50] Other Important Information - Inventory levels decreased by $73.8 million sequentially, with inventory days down to 199 days [16][17] - The company has entered into a purchase and sales agreement to sell its Fab 2 wafer fabrication facility as part of a restructuring plan [7][8] Q&A Session Summary Question: Characterization of current business environment versus 90 days ago - The company noted a slightly softer tone in the business environment, impacting December quarter guidance, which is better than seasonal expectations [28] Question: Update on inventory reserve and underutilization charges - Management indicated uncertainty in predicting future charges but expects improvements in the coming quarters as sales grow [30][31] Question: Insights on long-term supply agreements (LTSAs) - The company clarified that it has dismantled many obligations under LTSAs, allowing customers flexibility in their purchasing [36][39] Question: Confidence in above-seasonal growth for the next three quarters - The company cited strong visibility in backlog and bookings as key drivers for confidence in upcoming quarters [47][50] Question: Expectations for gross margin improvements - Management indicated that inventory write-offs are expected to normalize quicker than underutilization charges, with a path to improved gross margins [80][82]

Financial Data and Key Metrics Changes - Consolidated revenue in Q3 2025 increased by 17%, driven by a 23% increase in HDMC revenue, which was up $198 million compared to the prior year [16][22] - Consolidated operating income for Q3 was $475 million, primarily influenced by the HDFS transaction, while HDMC operating income decreased by 2% year-over-year [16][17] - Earnings per share for Q3 was $3.10, with a consolidated operating income margin of 35.4%, significantly up from 9.2% in the same quarter last year [17][23] Business Line Data and Key Metrics Changes - HDMC revenue rose by 23% in Q3, with motorcycle shipments up 33% to 36,500 units, while HDFS revenue decreased by 3% [16][22] - LiveWire revenue increased by 16%, but the segment reported an operating loss of $18 million [16][30] - HDFS's operating income surged by 472% year-over-year, primarily due to the HDFS transaction, with a significant benefit from the reversal of the allowance for credit losses [27][29] Market Data and Key Metrics Changes - Global retail sales were down 6%, with North America down 5% and international markets down 9%, reflecting soft demand amid high interest rates and inflation concerns [17][18] - In North America, the Softail family saw a 9% increase in sales, while Adventure Touring bikes were up 4% [18][20] - Latin America experienced a 16% increase in retail sales, marking the first quarter of growth since Q3 2024 [19][20] Company Strategy and Development Direction - The company is focused on improving dealer health and profitability, with immediate actions including better inventory management and market-responsive promotions [5][6] - There is a commitment to enhancing the product portfolio to balance aspiration with accessibility, particularly in light of the current interest rate environment [9][10] - The HDFS transaction aims to transform the business into a capital-light model, unlocking $1.2-$1.25 billion in discretionary cash through Q1 2026 [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment with the motor company's results but highlighted the positive impact of the HDFS transaction [6][16] - The CEO emphasized the need to attract younger riders and make the brand more accessible and fun [40][42] - The company plans to continue focusing on cost and capital efficiency while enhancing the dealer network's health [9][10][37] Other Important Information - The company has committed to returning capital to shareholders, having repurchased 6.8 million shares for $187 million year-to-date [32][33] - The global tariff environment remains uncertain, with an estimated full-year impact from tariffs expected to be between $55-$75 million [26][27] Q&A Session Summary Question: How does the company plan to address demographic headwinds? - The CEO noted the need to make the brand more fun and accessible, with plans to introduce lighter and more affordable bikes to attract younger riders [40][42] Question: Can you elaborate on market-responsive promotions? - Management indicated that high dealer inventory levels necessitate promotional activities to drive sales, particularly for touring models [43][44] Question: What is the expected impact of the HDFS transaction on future earnings? - The company confirmed that the transaction is expected to provide a $275-$300 million operating income benefit in the second half of the year [50][54] Question: What are the shipment expectations for 2026? - Management indicated that while they are not providing specific guidance for 2026, they expect to continue reducing dealer inventory and improving sales dynamics [56][61] Question: How is the company addressing inventory levels? - The company has seen a significant reduction in dealer inventory, with expectations to continue this trend into the next year [57][63]

Core Insights - Avacraft, a premium cookware company, is utilizing Amazon's supply chain services to enhance inventory management and logistics operations [1][2] Group 1: Transition to Amazon Services - The transition to Amazon's services was gradual, starting with Fulfillment by Amazon (FBA) and expanding to include Amazon Warehousing and Distribution (AWD) and Amazon Global Logistics (AGL) as the company scaled [2] - CEO Asha Kangralkar reported a significant reduction in time spent on supply chain tasks, from five to six hours daily to five to six hours weekly due to the use of AWD and AGL [3] Group 2: Benefits of Amazon Warehousing and Distribution - Prior to using AWD, Avacraft managed inventory independently and coordinated shipments across multiple warehouses, which was complex and time-consuming [4] - With AWD, inventory management has become easier, featuring automatic replenishment that reduces the need for manual oversight [4] - The previous reliance on a third-party freight forwarder involved multiple steps and delays, complicating the logistics process [5][6] Group 3: Logistics Challenges - The process of moving goods from the third-party logistics (3PL) warehouse to FBA required creating shipments in Amazon's Seller Central platform, which added to the complexity of logistics operations [7]

Core Insights - The apparel industry is facing significant margin pressures due to rising costs without corresponding price increases, necessitating innovation to maintain profitability [2] - Companies are increasingly seeking partnerships that prioritize relationships and textile innovation rather than mere transactions [3] - Improved inventory management is essential, requiring greater transparency and collaboration among supply chain partners to address challenges like unpredictable weather and stock issues [4] Group 1: Industry Challenges - Mills are experiencing little to no margin due to increased costs from testing, facility upgrades, and labor, while not receiving adequate price increases [2] - The expectation is that efficiencies should lead to lower costs over time, but rising costs are counteracting this trend [2] Group 2: Innovation and Partnerships - Innovation in product development is crucial for allowing brands to charge higher prices, which can help all parties involved achieve better margins [2] - The focus has shifted towards brands that emphasize textile innovation and have a solid marketing plan [3] Group 3: Supply Chain Management - Inventory management remains a challenge, with a need for more collaboration and transparency from brands to improve operations [4] - Shorter lead times complicate the supply chain, as commitments to materials involve costs that stakeholders are reluctant to bear [4]

Core Insights - Americold's stock price has decreased by 65% over the last five years, which is atypical for a stable and necessary business like cold storage [1][7] - The significant price drop is attributed to market misinterpretation of cyclical trends, leading to overvaluation during peak inventory periods and subsequent undervaluation as earnings decline [2][6][10] Company Analysis - Americold is a global leader in cold storage, and despite the stock price decline, long-term business trends remain positive with analyst estimates indicating a rebound in earnings by 2027 [7][10] - The company was overvalued five years ago, and the current low stock price reflects a market correction following an oversupply situation that was not sustainable [8][12] - The market's tendency to extrapolate current trends has led to Americold trading at low multiples, despite the cyclical nature of its business [10][33] Financial Performance - The company has faced challenges with earnings guidance, cutting forecasts for revenue growth and same-store revenue [17][18] - Service revenue remains strong, indicating continued customer demand, while storage revenue has declined due to lower inventory levels [21][19] - Current margins are stable, but higher electricity costs have impacted profitability; however, cost-cutting measures have helped maintain margins [25][22] Valuation Metrics - Americold's stock is currently trading at 55% of its net asset value and at a forward consensus AFFO multiple of 9.5X, which is lower than industry peers [26][27][32] - Adjusted AFFO shows a true earnings figure of approximately $0.87 per share, leading to a 14.6X multiple on true AFFO, which is still cheaper than most competitors [31][33] - Analysts suggest that the stock is undervalued at 14.5X trough AFFO, with potential for recovery as fundamentals improve [33][34]

Summary of Caleres Conference Call Company Overview - **Company**: Caleres - **Industry**: Footwear - **Key Executives Present**: Jay Schmidt (President and CEO), Jack Calandra (CFO), Liz Dunn (SVP of Corporate Development and Strategic Communications) [1][2] Key Financial Metrics - **Revenue**: Direct-to-consumer sales account for over 70% of total revenue - **Brand Portfolio Segment**: Represents 45% of total revenue - **International Operations**: Active in 68 countries with significant growth opportunities [3][4] Q2 Accomplishments - **Performance**: Strong performance in lead brands and direct-to-consumer channels, with double-digit growth in international markets - **Famous Footwear**: Elevated brands performed well during the back-to-school season [3][4] Strategic Initiatives - **Sourcing Migration**: Reduced sourcing from China to below 15% by the second half of the year - **Cost Savings**: Achieved $15 million in annualized structural savings, with half expected in the second half of the year - **Acquisition**: Completed the acquisition of Stuart Weitzman in August, focusing on integration and transition [4][5][8] Second Half Outlook - **Guidance**: Annual guidance suspended due to tariff uncertainties; however, Q3 expectations include a +1% comp in August, with low single-digit declines anticipated in September and October - **Gross Margin**: Expected to decline by approximately 240 basis points in Q3 due to tariffs, with improvement anticipated in Q4 as mitigating actions take effect [5][6][7] Market Trends - **Footwear Market**: Driven by newness and brand demand; consumers favor authentic and differentiated brands - **Lead Brands**: Continued strong performance from Sam Edelman, Allen Edmonds, Naturalizer, and Vionic, with ongoing investments in marketing and product development [11][14][17] Brand Portfolio Insights - **Premium Brands**: Strong growth in licensed brands like Vince and Veronica Beard, with Stuart Weitzman expected to enhance the portfolio - **Direct-to-Consumer**: Digital sales represent 30% of the brand portfolio, with a focus on omnichannel strategies [20][26][28] Inventory Management - **Famous Footwear**: Well-managed inventory with a tighter relationship between inventory levels and sales; challenges in the Brand Portfolio segment due to high initial inventory levels [24][25] Competitive Advantages - **Kids' Business**: Represents over 20% of total sales, with growth opportunities through stronger brand alignment - **Store Base**: Approximately 830 stores expected by year-end, with a focus on optimizing store performance and expanding the FLAIR format [36][38] Tariff Strategy - **Mitigation Actions**: Multi-pronged strategy to address tariff impacts, including sourcing adjustments, factory negotiations, and selective price increases - **Tariff Impact**: Anticipated gross margin impact from tariffs, with efforts to offset through SG&A opportunities [41][42] Conclusion - **Future Outlook**: Caleres is focused on leveraging its brand portfolio, optimizing operations, and navigating market challenges while maintaining a strong consumer focus [42]