Financial Data and Key Metrics Changes - For Q3 2025, the company reported net sales of $758 million, with operating income of $29 million and earnings per share (EPS) of $0.32, compared to EPS of $1.62 in the previous year [4][10] - Year-to-date sales reached nearly $2 billion, with an operating income of $59 million, representing a 3% operating margin, and year-to-date EPS of $0.75 [4][10] - Adjusted operating income for Q3 was $39 million, down from $77 million a year ago, with adjusted EPS at $0.74 compared to $1.64 last year [10][11] Business Line Data and Key Metrics Changes - U.S. retail net sales grew by 3% in Q3, with a positive 2% total retail comp, while U.S. wholesale sales declined, particularly in the Simple Joys brand [11][12] - International segment sales increased by 5%, with strong performance in Mexico achieving a 16% comp [17][18] - The U.S. wholesale segment faced challenges due to lower sales in the Simple Joys brand, which has been impacted by changes in Amazon's brand management [15][16] Market Data and Key Metrics Changes - The company experienced a gross margin of 45.1% in Q3, a decrease of 180 basis points year-over-year, primarily due to higher product costs and tariffs [9][10] - The effective tax rate increased to 21.8%, up 430 basis points from the previous year, with a planned full-year effective tax rate of approximately 24% [10][28] - Cash on hand at the end of Q3 was $184 million, with net inventories at $656 million, up 8% year-over-year [19][20] Company Strategy and Development Direction - The company is focused on a business transformation strategy aimed at eliminating costs, enhancing productivity, and achieving consistent growth in revenue and profitability [3][21] - Plans include closing 150 North American stores, which is expected to lead to a sales transfer to nearby stores and e-commerce channels [24][46] - The company aims to streamline operations by reducing product choices by 20%-30% and enhancing the product development process [25][26] Management's Comments on Operating Environment and Future Outlook - Management highlighted the significant impact of tariffs, estimating an annualized incremental impact of $200-$250 million due to higher tariffs [28][29] - The company has not reinstated sales and earnings guidance due to ongoing uncertainty regarding tariffs and consumer response to price increases [30][34] - Management expressed confidence in returning to long-term, sustainable growth, with plans to increase demand creation spending by nearly 20% in 2026 [26][34] Other Important Information - The company has identified $45 million in gross savings for 2026, with $35 million expected from reducing office-based roles by approximately 15% [23][24] - The company is pursuing a new $750 million credit facility to enhance liquidity and flexibility [20][19] - The company plans to invest in IT and digital initiatives to foster growth and productivity [27] Q&A Session Summary Question: What is happening with the Simple Joys brand and its future? - Management indicated that the Simple Joys brand is being reduced in significance, with a focus on promoting core brands like Carter's and OshKosh B'Gosh on Amazon [40][41] Question: Can you elaborate on the expected sales transfer from store closures? - Management expects a 20% sales transfer rate to nearby stores and e-commerce, with the closed stores generating about $110 million in revenue [46][47] Question: What is the confidence in achieving sales growth in 2026 despite challenges? - Management believes that pricing increases and productivity initiatives will help offset tariff impacts, leading to positive growth in operating income [68][69]