Financial Data and Key Metrics Changes - The company aims for $10 billion in revenue with operating margins of 15% as part of its strategic vision [6] - Gross margins have improved from 57% three years ago to over 62% currently, indicating strong brand momentum [59][60] - Direct-to-consumer (DTC) sales have increased from 40% to 50% of total sales over the past few years, contributing to higher operating margins [11][22] Business Line Data and Key Metrics Changes - The company has exited low-margin businesses such as Denizen and Dockers to focus on Levi's and Beyond Yoga, which are expected to drive growth [7][8] - The tops business has seen a 16% increase in sales, indicating strong performance in this category [26] - Non-denim products now account for 40% of the business and are growing, with new offerings like performance tech and denim skirts [18] Market Data and Key Metrics Changes - The global denim market is valued at approximately $100 billion and is expected to grow in the mid-single-digit range [15] - The company has experienced resilience in consumer spending, particularly among consumers earning over $100,000 [43] - International markets, especially Europe and Asia, have shown strong growth, contributing to overall performance [44] Company Strategy and Development Direction - The company is transitioning to a DTC-first strategy while maintaining a significant wholesale presence [6][22] - There is a focus on becoming a denim lifestyle brand, expanding offerings beyond traditional denim products [12][19] - The company plans to open 50 to 60 new stores annually over the next five years, aiming to increase its global footprint [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining growth despite potential macroeconomic challenges, citing strong product offerings and marketing strategies [46] - The second half of the year is expected to be more modest due to stronger comparisons from the previous year and tariff impacts [44] - The company is optimistic about its ability to navigate tariff challenges and maintain market share through effective pricing strategies [50][54] Other Important Information - The partnership with Beyoncé has been successful, contributing to brand momentum, and future marketing efforts will focus on sports events [36][40] - The company has launched a loyalty program with over 40 million consumers, aiming to expand its customer base significantly [48] - Inventory levels are healthy, with a mid-teen percentage increase driven by preparations for the second half of the year [56][57] Q&A Session Summary Question: What has driven the most momentum in the business? - Management highlighted the transformation towards a higher growth and margin profile, focusing on DTC and exiting low-margin businesses [6][7] Question: How does the company view the denim cycle and its impact? - The denim category is large and growing, with casualization trends driving demand, although the company is diversifying its offerings [15][19] Question: What is the outlook for the wholesale environment? - Wholesale growth is expected to be modest, with opportunities in underpenetrated areas like women's and tops [32][33] Question: How is the company navigating potential anti-American sentiment? - Management reported no significant anti-American sentiment affecting the brand, emphasizing strong local relationships [47][48] Question: What are the expectations regarding tariffs? - The company anticipates manageable tariff impacts and is working on strategies to mitigate these costs [50][51] Question: What is the outlook for inventory growth? - Inventory was up mid-teens in Q2, primarily due to tariff preparations, but is considered healthy overall [56][57] Question: How does the company plan to leverage SG&A costs? - Management is focused on improving EBIT margins and leveraging fixed costs as the business grows [62][65]