Financial Data and Key Metrics Changes - In Q4 2025, the company reported net sales of $925 million, an 8% increase year-over-year, with a 3% increase on a comparable 13-week basis excluding the additional week of sales [11][12] - Gross margin was 43.2%, down 460 basis points from the previous year, primarily due to tariffs impacting $40 million [12][14] - Adjusted operating income was $89 million, with an adjusted operating margin of nearly 10%, down from 13.4% the previous year [13][15] - Adjusted earnings per share were $1.90, compared to $2.39 last year [14] Business Line Data and Key Metrics Changes - U.S. retail net sales grew 9% in Q4, with comparable sales increasing 4.7%, marking the third consecutive quarter of comp sales gains [16] - U.S. wholesale net sales increased 3%, benefiting from the additional week in the calendar [18] - International segment reported a 10% increase in net sales year-over-year, with a strong performance in Canada and Mexico [19] Market Data and Key Metrics Changes - The company experienced broad-based demand across its business segments during the holiday season, indicating a positive consumer shopping environment [10] - The active consumer count continued to grow, particularly among Gen Z and millennial families, indicating a shift in consumer demographics [8] Company Strategy and Development Direction - The company aims to return to sustainable and profitable growth by reducing promotional activity and focusing on higher-priced products [5][24] - Strategic pillars include consumer-led initiatives, brand focus, and a direct-to-consumer model to enhance consumer connectivity and brand loyalty [24] - Plans to close approximately 150 lower-margin stores by 2028, with 60 closures planned for 2026 to improve fleet productivity [26] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's path forward despite uncertainties related to tariffs, indicating that the recent tariff news could be net positive for the company [4][30] - The outlook for 2026 includes expected net sales growth in the low to mid-single digits, with adjusted operating income also projected to grow in the same range [32][36] Other Important Information - The company ended the year with strong liquidity of over $1 billion, including nearly $500 million in cash [19][20] - The effective tax rate for 2026 is planned at approximately 22%, up from 19% in 2025, reflecting changes in global tax policies [35] Q&A Session Summary Question: Can you talk more about your full price realization and the drag from tariffs? - Management noted that full price realization is improving, with less promotional activity and higher average unit retail (AUR) prices being achieved [45][46] Question: Can you provide more detail on U.S. wholesale margins in Q4? - The decline in wholesale margins was primarily driven by the net impact of tariffs, with a significant portion of the decline attributed to inventory provisions [58][59] Question: What is the expected impact of the early Easter on sales? - Management indicated that the earlier Easter could provide a benefit of one or two percentage points to comp sales [85] Question: How does the pricing at wholesale take effect? - Pricing increases are planned across the year, with more significant benefits expected in the second half compared to the first half [67][68] Question: What is the assumption on AUR growth for the full year? - The assumption is for a mid-single digit increase in full year pricing, reflecting the pricing increases initiated in the second half of 2025 [76]

Financial Data and Key Metrics Changes - In Q4 2025, the company reported net sales of $925 million, representing an 8% increase over the previous year's fourth quarter. On a comparable 13-week basis, net sales increased by 3% [10][11] - Gross margin for Q4 was 43.2%, a decrease of 460 basis points year-over-year, primarily due to tariff impacts amounting to $40 million [11][12] - Adjusted operating income for Q4 was $89 million, with an adjusted operating margin of nearly 10%, down from 13.4% the previous year [12][14] - Adjusted earnings per share for Q4 were $1.90, compared to $2.39 in the prior year [13] Business Segment Data and Key Metrics Changes - U.S. retail net sales grew by 9% in Q4, with comparable sales increasing by 4.7%, marking the third consecutive quarter of comp sales gains [16] - U.S. wholesale net sales increased by 3% year-over-year, benefiting from an additional week in the fiscal calendar [18] - International segment reported a 10% increase in net sales year-over-year, with a growth of nearly 30% in Mexico [19] Market Data and Key Metrics Changes - The company experienced broad-based demand across its business segments during the holiday season, indicating a strong consumer shopping environment [9] - The company noted that consumer counts are growing, particularly among Gen Z and millennial families, who are increasingly purchasing higher-priced products [5][6] Company Strategy and Development Direction - The company aims to return to sustainable and profitable growth by reducing promotional activity, enhancing pricing power, and focusing on emotional brand storytelling [4][5] - Strategic pillars for 2026 include consumer-led initiatives, brand focus, and a direct-to-consumer (D2C) model [24] - The company plans to close approximately 150 lower-margin stores by 2028, with around 60 closures planned for 2026 to improve fleet productivity [26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's path forward despite uncertainties related to tariffs, indicating that productivity initiatives and demand creation investments are expected to yield positive results [8][31] - For 2026, the company anticipates low to mid-single-digit net sales growth and adjusted operating income growth, with a focus on mitigating tariff impacts through pricing and supply chain actions [33][34] Other Important Information - The company ended the year with strong liquidity of over $1 billion and successfully refinanced its debt, issuing $575 million in new senior notes [19][20] - The effective tax rate for Q4 was 15.4%, lower than expected, due to a higher mix of income outside the U.S. [13] Q&A Session Summary Question: Can you talk more about your full price realization and the drag from tariffs? - Management indicated that full price realization is improving, with less promotional activity and higher average unit retail (AUR) sales. The gross impact of tariffs is expected to be around $200 million for the year [43][46] Question: Can you provide more detail on U.S. wholesale margins in Q4? - The decline in wholesale margins was primarily driven by the net impact of tariffs, with approximately $20 million of the $40 million tariff impact affecting gross margins [55][56] Question: When does pricing at wholesale take effect? - Pricing increases are planned across all segments, with more significant benefits expected in the second half of the year [64][66] Question: What is the impact of the early Easter on sales? - Management expects the early Easter to provide a benefit of one to two percentage points in comparable sales [82] Question: Can you discuss the cadence of marketing and demand build investments? - The company is ramping up investments in marketing to drive demand and improve brand equity, with early signs of positive returns [91]

Financial Data and Key Metrics Changes - In Q1, organic sales declined by approximately 3%, with a favorable timing shift contributing to this decline [27][28] - The company expects organic sales growth in the back half of the year to be positive, low single digits, while the front half is anticipated to be negative, low single digits [7][8] - Input costs and inflation are projected to increase by about $70 million for the full year, which is $20 million more favorable than previous estimates [21][22] Business Line Data and Key Metrics Changes - The U.S. retail category is expected to grow at a muted rate of 0-1%, still below historical averages [7] - Innovations are planned in key businesses, including new product launches and expansions of existing platforms, which are expected to drive consumption improvement [8][9] - The trash and cat litter businesses are experiencing increased promotional activity and competitive pressure, impacting market share [41][42] Market Data and Key Metrics Changes - The competitive environment remains rational, with some categories experiencing increased promotions, particularly in trash and cat litter [16][17] - The company has seen a decline in market share due to ERP implementation challenges, but is focused on regaining share through innovation and demand creation [31][32] Company Strategy and Development Direction - The company is focused on reinvigorating category growth and delivering superior value to consumers through a robust demand creation plan [4] - The successful launch of a new ERP system is seen as a foundational step to strengthen the company's digital backbone and unlock new value streams [4] - The company is actively reviewing its portfolio to ensure it aligns with long-term growth objectives, including divesting underperforming segments [56][57] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the stress consumers are under, which is influencing shopping behaviors and category growth [15][16] - The company remains optimistic about the back half of the year, driven by innovation and improved execution plans [81][82] - Management is closely monitoring consumer behavior and market dynamics to adjust strategies as needed [81][82] Other Important Information - The company has largely recovered its inventories post-ERP implementation and is back to normal fill rates with retailers [91] - The promotional environment is expected to remain competitive, with ongoing adjustments to pricing and promotional strategies [20][21] Q&A Session Summary Question: Insights on organic sales cadence and category growth - Management indicated that organic sales growth in the front half would be negative, while the back half is expected to be positive, driven by consumption improvement and market share gains [7][8] Question: Environment for promotions and competitive landscape - The competitive environment is rational, with increased promotions in certain categories, but overall promotional spending remains manageable [16][17] Question: Market share trends and demand creation activities - Management noted a decline in market share due to ERP challenges but is focused on regaining share through innovation and effective demand creation [31][32] Question: Gross margin outlook and inflation impact - The company expects moderate inflation and has adjusted its gross margin outlook to reflect more favorable input costs [21][22] Question: Inventory trends and destocking behavior - Management confirmed that they are not experiencing material destocking and have largely rebuilt inventories post-ERP [62] Question: Future portfolio actions and strategic focus - The company is taking a long-term view on its portfolio, focusing on strengthening core brands and exploring opportunities for growth [54][56]