FitLife Brands (FTLF) Q2 2025 Earnings Call August 14, 2025 04:30 PM ET Speaker0Good day, and welcome to the Filipends Second Quarter twenty twenty five Financial Results Conference Call. The floor will be open for questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Dayton Judd, CEO at FitLife. Sir, the floor is yours.Speaker1Thank you, Paul. I'd like to welcome everyone to FitLife's Second Quarter twenty twenty five Earnings Call. We appreciate you ...

Core Viewpoint - Anta Sports is rumored to be acquiring the American sneaker brand Reebok, which has sparked significant market interest [3][4]. Group 1: Anta's Acquisition Strategy - Anta Sports has a history of strategic acquisitions since 2009, which have significantly boosted its performance [5][8]. - The acquisition of FILA in 2009 for 600 million HKD transformed the brand from a struggling entity into a major revenue contributor, with 2021 revenues reaching 21.8 billion CNY [8][9]. - Following the success with FILA, Anta accelerated its acquisition strategy, including the purchase of Amer Sports for 4.6 billion euros in 2019, which added several high-profile brands to its portfolio [9][10]. - As of now, Anta has built a diverse brand matrix, including Anta, FILA, Descente, Kolon, and Jack Wolfskin, contributing to a revenue of 70.83 billion CNY in 2024, a 13.58% increase year-on-year [10][11]. Group 2: Financial Performance and Challenges - Despite impressive revenue growth, the wealth of Anta's leaders, Ding Shizhong and Ding Shijia, has decreased from a peak of 116.97 billion CNY in 2021 to 71.01 billion CNY in 2025, a drop of 45.96 billion CNY [6][18]. - Anta's revenue growth rate slowed to 13.58% in the last year, down from 16.23% the previous year, indicating potential fatigue in growth momentum [21]. - The company's gross margins have also declined, with the main brands showing a decrease in gross margin percentages compared to the previous year [21]. - Financial pressures are evident, with cash reserves dropping by approximately 25% year-on-year and current liabilities increasing by 38.86%, reaching a high of 28.59 billion CNY [21][22]. - Anta's brand integration faces challenges due to the independent operation of its various brands, complicating marketing and channel strategies [21][22].

Group 1: Beauty Industry Adjustments - Innisfree, a brand under Amorepacific, has closed its Tmall overseas store, focusing solely on local products due to market pressure from rising domestic beauty brands. This follows a significant store closure in 2021, with a 15.7% sales increase expected in Q1 2025 for Amorepacific, indicating a strategic shift towards local product development [3][4] - L'Oréal has acquired the hair care brand Color Wow for approximately $1 billion, aiming to enhance its professional hair care portfolio. Color Wow's star product sells every 4.4 seconds, and the brand is projected to generate over $300 million in sales in 2024 [10] - Kate Moss's beauty brand Cosmoss has entered liquidation, burdened with $4 million in debt, due to a mismatch between brand positioning and market perception, leading to poor sales performance [14] Group 2: Fashion Industry Developments - The acquisition of Sweaty Betty's China operations by Baozun aims to revitalize the brand, which has seen a significant reduction in stores from 5 to 1 due to high pricing and localization issues. Baozun plans to leverage local resources to enhance brand performance [4] - H&M's founder's family has increased their stake to 64%, with speculation about a potential privatization by 2030. H&M's stock has dropped 9% this year, and the company reported a 68% decline in net profit for 2024, reflecting challenges in the fast fashion sector [5] - Armani's operating profit has plummeted 69% to €67 million in 2024, primarily due to a decline in the Asia-Pacific market, with sales down 6% to €2.3 billion. The brand is focusing on quality over expansion, investing €332 million in store renovations [8] Group 3: Market Trends and Challenges - Two French fast fashion brands, Comptoir des Cotonniers and Princesse tam tam, have filed for bankruptcy, highlighting the shift in consumer demand towards online platforms and the struggles of traditional retail models [12][13] - Skechers has been acquired by 3G Capital for over $9 billion, facing shareholder lawsuits questioning the sale. The brand's revenue growth is slowing, particularly in China, which contributes over 20% to its revenue [9] - Roberto Cavalli is seeking strategic partners or potential buyers again, as the brand struggles to maintain profitability despite a recent recovery [11]

Financial Data and Key Metrics Changes - The company reported flat global revenue compared to the prior year, consistent with expectations, with adjusted gross margin expanding by 200 basis points to 47.7% due to lower input costs and favorable mix [29][34] - Adjusted earnings per share (EPS) was $1.20, including an $0.11 impact from acquisition-related stock-based compensation, while excluding this expense, adjusted EPS was $1.31, a 13% increase compared to the prior year [37][49] - Inventory decreased by 12% to $443 million, with a strong focus on managing working capital prudently [38] Business Line Data and Key Metrics Changes - Wrangler's global revenue increased by 3%, with a notable 40% growth in the female segment, while Lee's global revenue decreased by 8% as brand repositioning continues [15][18][32] - The female business of Wrangler, now at 10% of global revenue, is expected to drive long-term growth opportunities [16] - Lee's U.S. revenue decreased by 8%, but digital sales grew by 12%, indicating a shift towards online engagement [33][19] Market Data and Key Metrics Changes - The U.S. market remains the largest outdoor apparel and footwear market, with significant growth opportunities identified for Helly Hansen, expected to contribute approximately $425 million to full-year revenue [6][24] - International revenue for Wrangler increased by 4%, driven by a 6% growth in wholesale [31] Company Strategy and Development Direction - The acquisition of Helly Hansen is expected to enhance growth, cash flow, and capital allocation options, with a focus on increasing operating margins and leveraging global supply chain efficiencies [5][9][27] - The company aims to establish itself as an employer of choice in the industry, emphasizing talent retention and cultural fit with Helly Hansen [10] Management's Comments on Operating Environment and Future Outlook - Management noted an increase in macro volatility but expressed confidence in the company's operational agility and ability to navigate challenges [12][41] - Recent trends in POS (point of sale) have shown improvement, with March and April indicating a positive shift after a slowdown in February [30][41] Other Important Information - The company expects full-year revenue to be in the range of $3.06 billion to $3.09 billion, representing growth of 17% to 19%, with organic revenue growth expected at 1% to 2% [43][44] - The adjusted gross margin outlook for the full year is now expected to be between 45.9% and 46.1%, reflecting an increase compared to the previous year [47] Q&A Session Summary Question: State of U.S. Consumer - Management characterized the U.S. consumer as resilient, with positive trends observed in March and April, indicating a recovery from earlier volatility [60][63] Question: Guidance for 2Q and 2026 Outlook - The company expects 2Q revenue growth of approximately 4%, with organic growth driven by new programs and distribution expansion [45][66] Question: Lee Brand Transition - Management expressed confidence in the Lee brand's transition, highlighting improvements in product quality and digital engagement, with expectations for growth in 2026 [76] Question: Gross Margin Drivers - The significant gross margin outperformance was attributed to a favorable mix, lower product costs, and benefits from Project Genius, with expectations for continued positive contributions [77][79] Question: Tariff Impact and Mitigation - The unmitigated tariff impact for 2025 is now estimated at $50 million, with proactive measures being implemented to offset potential costs [51][84]