Financial Data and Key Metrics Changes - For Q2 2025, net sales from continuing operations were $2 billion, an 8% decline compared to the previous year, primarily due to store optimization activities completed in Q1 [28] - Comparable sales growth was positive at 0.1% for the quarter, with an estimated 25 basis points headwind from the timing of Easter [28] - Adjusted gross profit was $880 million, representing 43.8% of net sales, resulting in gross margin expansion of about 16 basis points compared to last year [31] - Adjusted diluted earnings per share from continuing operations was $0.69, compared to $0.62 in Q2 last year [33] Business Line Data and Key Metrics Changes - The Pro business achieved low single-digit growth sequentially, translating to mid single-digit growth on a two-year basis, driven by core hard parts categories [23] - DIY business performance was stable compared to Q1, with signs of stabilization, although it underperformed with a low single-digit sales decline [25][30] - The company added over 60,000 new SKUs year to date, a nearly 300% increase compared to last year, improving parts availability [13] Market Data and Key Metrics Changes - The company noted that more than 90% of its business is non-discretionary, driven by maintenance work for an aging vehicle fleet in the U.S. [5] - The market is in a transition phase, with consumers adapting to higher prices, and the company is closely monitoring consumer behavior [6][37] Company Strategy and Development Direction - The turnaround plan is built around three strategic pillars, focusing on merchandising excellence, supply chain optimization, and operational efficiency [9] - The company is committed to enhancing parts availability and service levels, with plans to open a total of 10 market hubs this year [22] - The company aims to achieve an adjusted operating income margin of approximately 7% by fiscal 2027, with a focus on gross margin expansion and supply chain productivity [42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the turnaround efforts, reaffirming full-year sales, operating margin, and free cash flow guidance [6][36] - The company anticipates that tariffs will have a more pronounced impact in the second half of the year, with a cautious approach to pricing adjustments [5][38] - Management acknowledged the challenges posed by inflation and consumer behavior, particularly in the DIY segment, and emphasized the importance of training and service execution [25][106] Other Important Information - The company completed a debt offering of $1.95 billion to support its turnaround plan and maintain financial flexibility [34] - The company expects to operate with a net adjusted debt leverage ratio of approximately 2 to 2.5 times, aiming to regain an investment-grade credit rating in the future [42] Q&A Session Summary Question: On the revised capital structure, are you expecting cost savings? - Management indicated that the new structure provides stability for the supply chain financing program and may lead to cost savings over time, but no immediate benefits were implied in guidance [46][48] Question: What percentage of the store base needs CapEx to bring it up to market standard? - Management noted that a significant portion of the store base requires upgrades, with many HVAC systems and roofs beyond their useful life [51] Question: What gives you confidence in achieving comparable sales growth in the second half of the year? - Management highlighted improving trends and easier comparisons in the back half of the year, along with ongoing initiatives in the Pro business [56][58] Question: How should we think about the linearity of progress from here? - Management acknowledged that while some initiatives are progressing well, others may take longer to yield benefits, and they are focused on maintaining a clear trajectory towards their 2027 goals [67][70] Question: What are you seeing in terms of how peers are reacting to tariff costs? - Management observed a rational industry response, with competitors also adjusting prices in line with tariff impacts [84][85]

Financial Data and Key Metrics Changes - The company reported second quarter revenues of $1,100 million, a 3% increase compared to the prior year [6][26] - Crocs brand revenues were $960 million, up 4% year-over-year, driven by a 16% growth in international markets [6][26] - Adjusted gross margins improved to 61.7%, gaining 30 basis points from the previous year [6][28] - Adjusted diluted earnings per share increased by 5% to $4.23 [6][31] - Free cash flow reached $269 million, allowing for share repurchases and debt repayment [7][32] Business Line Data and Key Metrics Changes - Crocs brand saw a 4% revenue increase, while Hey Dude revenues decreased by 4% [6][26] - The Crocs brand's wholesale revenue grew by 6%, while direct-to-consumer (DTC) sales increased by 3% [26] - Hey Dude's adjusted gross margin improved to 50.2%, up 110 basis points due to distribution efficiencies [28] Market Data and Key Metrics Changes - International revenue for Crocs grew by 16%, with China reporting over 30% growth [17][26] - North American revenues declined by 6% due to reduced discounting strategies [19][26] - The international business now represents over 50% of Crocs brand revenue [17][60] Company Strategy and Development Direction - The company is focusing on long-term brand health and profitability by reducing promotional activities and managing inventory conservatively [9][10] - Strategic actions include amplifying measures to protect brand health and profitability, particularly for the Crocs brand [9][10] - The company aims to diversify its offerings and strengthen its position in the casual footwear segment [11][12] Management's Comments on Operating Environment and Future Outlook - Management noted cautious consumer behavior in the U.S. impacting discretionary spending [8][9] - The outlook for the second half of the year is concerning, with anticipated challenges in retail order books [9][35] - Management emphasized the importance of international growth as a key driver for future performance [45][60] Other Important Information - The company has initiated $50 million in cost savings and is exploring further opportunities [11][30] - A non-cash impairment charge of $737 million on Hey Dude's intangible assets was reported due to a longer stabilization timeline [30] - The company plans to continue share repurchases and debt repayment while maintaining a target net leverage range of 1 to 1.5 times [32][36] Q&A Session Summary Question: Outlook for Crocs North America and Q3 - Management acknowledged several factors affecting North America, including cautious consumer behavior and intentional pullbacks on discounting to protect brand health [41][43] Question: Share Loss to Competitors - Management noted a trend towards athletic brands impacting market share but believes Crocs can maintain its position through innovation and product offerings [50][52] Question: International Business Growth - Management expressed confidence in the international business, highlighting strong growth in China and India, and expects mid-teens growth trajectory [60][92] Question: Impact of Tariffs and Pricing Strategy - Management indicated that tariffs will impact margins, but they plan selective price increases and cost-saving measures to mitigate effects [65][66] Question: Inventory Management and SKU Count - Management confirmed cautious planning for inventory receipts and emphasized the importance of maintaining product freshness while managing costs [116][120]

Financial Data and Key Metrics Changes - The company reported a diluted earnings per share increase of 11.5% to $0.58 compared to $0.52 in the same period last year, reaching the high end of expectations [5] - Sales for the quarter rose by 7.1% to $1,214 million, with comparable store sales increasing by 0.4%, marking the first quarterly increase since 2022 [5][15] - Gross profit rose by 8.5% compared to the same period last year, driven by a 7.1% increase in sales and a 60 basis points improvement in the gross margin rate, which rose to 43.9% [26][29] Business Line Data and Key Metrics Changes - Connected Customer sales rose by 2% year over year, now accounting for approximately 19% of sales, with strong growth in weekly active users and conversions [18] - The design services segment delivered strong sequential and year-over-year sales growth, significantly outpacing the company average [18] - Spartan Surfaces saw sales rise approximately 7% year over year, with June marking the strongest month in the company's history [22] Market Data and Key Metrics Changes - Store sales in the West Division outperformed the company for the quarter and year to date [15] - The second quarter benefit to comparable store sales from Hurricane Helene and Milton was approximately 40 basis points compared to 100 basis points in the first quarter [15] - Existing home sales fell 2.7% in June to a seasonally adjusted annual rate of 3,930,000 units, marking the lowest level in nine months [32] Company Strategy and Development Direction - The company plans to open 20 new warehouse format stores in fiscal 2025, with a disciplined and agile growth strategy [7][8] - The company is focused on mitigating the impact of tariffs through vendor negotiations and product diversification [10][11] - The company aims to maintain pricing gaps and reinforce its everyday low price message while enhancing its product assortment [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the resilience of the U.S. consumer, supported by a solid labor market, but acknowledged challenges in discretionary spending due to elevated mortgage rates [31][32] - The company does not expect significant changes in consumer behavior or housing activity for the remainder of 2025 [33] - Management highlighted the importance of internal initiatives to drive sales and improve in-store productivity amid a challenging macro environment [66][68] Other Important Information - The company ended the quarter with $876.9 million in unrestricted liquidity, consisting of $176.9 million in cash and cash equivalents [30] - The effective tax rate increased to 21.8% from 19.8% in the same period last year, primarily due to a decrease in excess tax benefits related to stock-based compensation [29] Q&A Session Summary Question: How much of the ticket increase was tariff-induced versus trade-up to better products? - Management indicated that much of the average ticket increase came from product mix, particularly in wood, with minor price changes affecting the ticket [41][44] Question: How does the company view pricing throughout the year given inventory cycles? - Management stated that modest price increases are expected in the back half of the year, with a focus on managing tariffs through SKU adjustments and vendor negotiations [45][46] Question: What is the outlook for fiscal 2026? - Management noted it is too early to react to 2026 estimates, emphasizing the need for improvement in existing home sales and the impact of new store maturation [52][54] Question: How does the company approach creating shareholder value in a challenging environment? - Management highlighted ongoing investments in in-store experiences and commercial opportunities to drive growth, even if existing home sales remain subdued [65][66] Question: How is the company performing across different income demographics? - Management indicated that the company attracts a wide range of income levels and is revisiting its studio strategy to appeal to higher-income consumers [88][90]

Financial Data and Key Metrics Changes - Net sales increased by 5% to approximately $300 million, driven by a 5% increase in net price realization, a 2% decrease in volume, and a 2% contribution from the Core King acquisition [9][19] - Gross profit margins reached a record 52.7%, with adjusted EBITDA margin increasing to 29.5%, marking the tenth consecutive quarter of year-over-year gross margin expansion [7][12] - Net leverage was significantly reduced to 2.1 times, the lowest level in over three years, providing enhanced financial flexibility [7][23] Business Line Data and Key Metrics Changes - North American net sales increased by 6% to $255 million, driven by a 6% net price realization and a 3% contribution from the Clor King acquisition [20] - In Europe and Rest of World, net sales increased by 3% to $44 million, with a 1% contribution from favorable net pricing and a 3% favorable foreign currency translation [22] Market Data and Key Metrics Changes - End demand improved in June, resulting in customer orders generally aligning with normal seasonal patterns for the quarter [10] - Nondiscretionary aftermarket maintenance demand remained resilient, while discretionary elements of the market faced pressure [10][27] Company Strategy and Development Direction - The company is focused on mitigating tariff impacts and enhancing margins while executing strategic growth plans [8][9] - Investments are being made in advanced engineering and new product development to drive future growth [12][25] - The company aims to increase its presence in high-growth regions and capture market share through targeted sales and marketing strategies [12][102] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the dynamic environment and refining guidance for full-year 2025, raising the low end of the net sales guidance range [9][26] - The company expects solid cash flow generation in 2025, with a conversion of greater than 100% of net income [27] - Management remains positive about the long-term growth outlook for the pool industry, particularly in the aftermarket segment [27] Other Important Information - The company has authorized a share repurchase of up to $450 million over three years [25][94] - The effective tax rate was approximately 25% in the second quarter, consistent with guidance [20] Q&A Session Summary Question: Outlook for gross margin in the second half - Management highlighted that the strong Q2 gross margin performance was driven by productivity improvements and product line rationalization, with expectations for continued margin protection despite potential moderation in percentage [32][36] Question: New pool market outlook - Management indicated that the new pool market remains modestly down year-over-year but is showing signs of improvement, with expectations for upward inflection as interest rates and the housing market improve [39][41] Question: Guidance clarification - Management confirmed that the lower net price increase guidance is offset by a stronger volume outlook, particularly in the U.S. market [46][48] Question: SG&A increase explanation - The increase in SG&A as a percentage of sales is due to targeted investments in advanced engineering and customer care, with expectations to leverage SG&A in the future [55][56] Question: Trends in sell-in versus sell-through - Management noted that Q2 saw strong sell-through, particularly in June, with expectations for normal inventory levels as the season progresses [64][66] Question: Repair versus replace dynamic - Management observed an increase in parts sales, indicating a trend towards repairing rather than replacing equipment, which may impact future pricing strategies [66][74]

Financial Data and Key Metrics Changes - Revenue for Q2 2025 was $3.9 billion, down 2% year-over-year and down 3% organically [10][11] - Adjusted gross margin rate for Q2 was 27.5%, a decrease from the previous year due to tariffs and lower volume [12] - Adjusted EBITDA margin was 8.1%, down 260 basis points compared to the prior year [13] - Adjusted earnings per share was $1.08, including a discrete tax benefit [13] - Free cash flow for Q2 was $135 million, reflecting strong operational performance despite trade policy impacts [14] Business Line Data and Key Metrics Changes - Tools and Outdoor segment revenue was approximately $3.5 billion, representing a 2% decline year-over-year, with organic revenue down 3% [17] - Power Tools organic revenue grew by 1%, while Hand Tools organic revenue declined by 5% due to tariff-related disruptions [19] - Outdoor organic revenue declined by 7% due to a slow buying season, but demand improved in July [20] - Engineered Fastening segment revenue was down 2% year-over-year, with a 1% organic decline [22] Market Data and Key Metrics Changes - In North America, organic revenue declined by 4%, consistent with the overall segment performance [20] - Europe saw a 1% organic revenue decline, with growth in the UK offsetting weaker demand in Germany and Italy [21] - The rest of the world delivered 1% organic growth, driven by strong performance in Latin America and the Middle East [21] Company Strategy and Development Direction - The company is focused on a multi-year supply chain transformation aimed at improving cost structure and operational efficiency [8][24] - A target of achieving an adjusted gross margin of 35% or higher is set, with ongoing initiatives to mitigate tariff impacts [30][39] - The company plans to invest over $100 million in 2025 to drive market activation and brand strengthening [38] Management's Comments on Operating Environment and Future Outlook - Management noted a slow outdoor buying season and shipment disruptions due to tariffs, impacting Q2 performance [11][12] - The company expects organic revenue to remain relatively flat in the second half of 2025 [12] - Management expressed confidence in the company's foundation for future growth and the effectiveness of their supply chain transformation [9][10] Other Important Information - The company has divested $2.6 billion in revenue to streamline its portfolio and focus on core strengths [8] - A robust cost savings initiative is expected to deliver approximately $2 billion in pretax run rate savings [24][25] Q&A Session Summary Question: Gross margin outlook for Q4 - Management expects gross margin expansion in Q3 and Q4, with Q4 potentially reaching 33% to 34% [49][50] Question: 2Q upside and full year guidance - The Q2 beat was primarily due to operational factors and tax timing, with tariff expense timing affecting the outlook [58][60] Question: Pricing actions and acceptance - The first round of price increases has been implemented successfully, with a second, more modest increase planned for Q4 [65][66] Question: Customer buying patterns and inventory levels - Inventory levels are healthy and in line with historical norms, with no significant destocking expected [78] Question: Outdoor segment performance - The outdoor segment experienced a later start to the season but is seeing improved POS activity [82] Question: Craftsman brand performance - The Craftsman brand is performing in line with market trends, with opportunities for growth in the power tool space [88]

Group 1 - The Thai government plans to implement measures to assist the private sector in coping with U.S. tariffs [1]

Core Viewpoint - The Vietnamese Ministry of Industry and Trade emphasizes that tariffs provide manufacturers with opportunities to increase added value, and the ministry is coordinating with businesses to develop measures to respond to these tariffs [1] Group 1 - The Ministry is working with enterprises to formulate strategies to address the impact of tariffs [1] - Proposed measures include improving product quality and exploring new markets [1]

Financial Data and Key Metrics Changes - The company reported a consolidated revenue of $1.1 billion, a decline of 5% compared to the previous year, with comparable sales decreasing by 3% [19][20] - Adjusted operating loss for the quarter was $68 million, with an adjusted loss per share of $0.29 [4][22] - Gross profit dollars were $322 million, with a gross margin of 29.6%, impacted by approximately $75 million in inventory write-downs [20][21] Business Line Data and Key Metrics Changes - American Eagle brand comparable sales were down 2%, while Aerie brand comparable sales declined by 4% [4][19] - Aerie faced challenges in soft apparel, particularly in fleece tops and shorts, while certain categories like intimates showed improvement [12][14] - American Eagle saw growth in women's business, particularly in social casual dressing and achieved its best quarter ever in fleece [15][16] Market Data and Key Metrics Changes - Traffic was reported to be up across brands and channels, although the overall performance was constrained by lower average unit retails (AURs) and conversion rates [19][30] - The company is focusing on diversifying its supply chain and reducing sourcing exposure to China to under 10% this year [23] Company Strategy and Development Direction - The company is committed to optimizing operations and strengthening its supply chain, including closing two Edge fulfillment centers, which is expected to generate annualized savings of approximately $5 million [6][22] - Capital allocation priorities include investments for long-term growth while returning capital to shareholders, including a $200 million accelerated share repurchase program [8][9] - The company is focused on improving product performance and preparing for the back-to-school season with fresh merchandise [24][36] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment with the first quarter performance but remains optimistic about the second half of the year, hoping for improvement as the macro environment stabilizes [4][28] - The company has paused full-year guidance until greater visibility is achieved but expects to see improvement in growth and profitability as the year progresses [22][24] Other Important Information - The company recorded a non-GAAP charge of $17 million related to the closure of fulfillment centers [6][22] - SG&A expenses increased by 2% due to higher advertising investments, with a focus on customer-facing spend [21][63] Q&A Session Summary Question: What is the view of the consumer today and its impact on the retail landscape? - Management remains optimistic about the consumer outlook, hoping for positive economic stimulation from potential tax plans [28] Question: Can you break down the assumptions for gross margin and promotional activity in Q2? - The company expects to maintain a similar comp expectation as Q1, embedding promotional activity to clean inventory for back-to-school [30][31] Question: What are the merchandising issues and how quickly can improvements be made? - Management acknowledged product misses but is working swiftly to address these issues and prepare for back-to-school [35][36] Question: How is the capital allocation and CapEx expenditure being approached? - The company has reduced CapEx guidance to $275 million, recadencing projects to preserve cash [44] Question: How are both brands trending relative to the Q2 comp guide? - Both brands are trending similarly to the guidance of down 3% for Q2 [82] Question: What is the outlook for promotions and SG&A expenses? - Promotions are expected to continue in the near term to clean inventory, with SG&A projected to be flat for the year [59][63] Question: How did digital performance compare to stores during the quarter? - There was an uptick in digital performance, with the company leaning into this channel during the quarter [67] Question: What are the plans for inventory for the remainder of the year? - The company is planning inventory in line with sales expectations and maintaining flexibility in buying [88]

Core Viewpoint - Costco executives stated that price increases are considered a "last resort" in response to tariffs [1] Group 1: Company Insights - Costco is exploring various strategies to manage the impact of tariffs without immediately resorting to price hikes [1] - The company emphasizes maintaining customer loyalty and competitive pricing as key priorities [1] Group 2: Industry Context - The retail industry is facing challenges due to rising tariffs, prompting companies to reassess pricing strategies [1] - Executives across the industry are discussing the balance between cost management and consumer price sensitivity [1]

Financial Data and Key Metrics Changes - Net sales declined by 4.1% and comparable sales decreased by 3.9% in the quarter, attributed to the closure of 24 stores [26][27] - Gross margin increased to 39.9%, up 37 basis points year-over-year, driven by category mix benefits and inventory management [30] - SG&A expenses decreased by 5.2% to $1.2 billion, leveraging approximately 32 basis points compared to last year [30] - The company reported a net loss of $15 million, with earnings per diluted share of negative $0.13, a 46% improvement from the previous year [31] Business Line Data and Key Metrics Changes - Jewelry sales increased by 10% in Q1, primarily driven by Kohl's card customers, following the reintroduction of jewelry into stores [15][16] - Women's apparel is being rebalanced to improve performance, focusing on essentials and proprietary brands [17][19] - Sephora's net sales were up 6% and comparable sales increased by 1% in Q1, contributing to a nearly $2 billion beauty business [18] - The impulse queue line rollout is expected to enhance sales, with plans to expand to nearly all stores by Q3 [18] Market Data and Key Metrics Changes - The digital business saw a sales decline of 7.7% in the quarter, underperforming compared to store sales, which declined by 2.6% [27][28] - The middle and low-income customers are under pressure, prioritizing value and trading down to lower-priced products [28] Company Strategy and Development Direction - The company is focused on three key areas: offering a curated assortment, reestablishing value and quality, and enhancing the omnichannel shopping experience [12][19][23] - Plans for 2025 include improving product assortment clarity and investing in proprietary brands to better serve customer needs [13][19] - The company aims to enhance promotions by including more brands in coupon eligibility, responding positively to customer feedback [21][22] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the ongoing transformation and the need to align the business with customer needs, particularly focusing on value [40][41] - The company is navigating a fluid environment with uncertainties, particularly affecting middle-income customers [43][44] - Despite challenges, management remains optimistic about achieving financial guidance for the year, with expectations of comparable sales down 4% to 6% [36] Other Important Information - The company completed a private offering of $360 million in senior secured notes, expected to close on May 30, to refinance upcoming debt maturities [34][35] - Inventory strategies are being implemented to manage tariff pressures, with expectations of inventory down high single digits by year-end [32][36] Q&A Session Summary Question: Any adjustments to strategic priorities and what will it take to return to comp growth? - Management does not foresee major changes to the strategy and emphasizes understanding customer needs to restore growth [39][40] Question: Insights on quarter-to-date trends and tariff impacts? - Management holds the full-year guidance due to uncertainties and notes consistent performance with some weather-related impacts [42][44][46] Question: Breakdown of gross margin increase and private label performance? - The increase in gross margin is attributed to a favorable category mix and improved inventory management, with proprietary brands expected to enhance margins [50][52] Question: Assessment of store footprint and potential closures? - The company has a healthy store base and will continue to evaluate store performance, with closures being part of regular hygiene [60][62] Question: Update on Sephora collaboration and operating environment? - Sephora is now present in all stores, and while comp growth has moderated, the company is pleased with market share gains in beauty [73][75] Question: E-commerce performance and profitability outlook? - Digital sales declined but are expected to improve as core customers return, with profitability being lower than stores due to shipping costs [80][84]