Amer Sports, Inc.

Thank you for standing by and welcome to the Omersports third quarter fiscal 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, press star one. Thank you. I'd now like to turn the call over to Omar Saad, SVP, Capital Markets and Investor Relations. Please go ahead.

Welcome, everyone. Thanks for joining AMR Sports' earning call for the third quarter of fiscal year 2025. Earlier this morning, we announced our financial results for the quarter ended September 30th, 2025, and the release can be found on our IR website, investors.amrsports.com. A quick reminder to everyone that today's call will contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements reflect our current expectations and beliefs only. They are subject to certain risks and uncertainties that could cause actual results to differ materially. Please see the Safe Harbor Statement in our earnings release and SEC filings. We will also discuss certain non-IFRS financial measures. Please refer to our earnings release for important information regarding such non-IFRS financial measures, including reconciliations to the most comparable IFRS financial measures. We will begin with prepared remarks from our CEO, James Zhang, and CFO, Andrew Page, followed by a Q&A session until approximately 9 a.m. Eastern. James will cover key operational and brand highlights, and Andrew will provide a financial view at both the group and segment level, and also walk through our guidance for the full year 2025, as well as an initial high-level sales and margin outlook for 2026. Arc'teryx CEO Stuart Hazelden and Salomon CEO Guillaume Mazank will join for the Q&A session. With that, I'll turn the call over to James.

Thanks, Omar. Amerisport's strong momentum continued in the third quarter as our unique portfolio of premium technical brands continues to create wide space and take share in sports and outdoor markets around the world. All three segments performed extremely well, led by exceptional Solomon footwear growth and Acterys Omnicom acceleration and solid growth from Wilson Tennis 360 and our winter sports equipment franchise. We delivered strong results across the P&L, including 30% growth, 130 base points of adjusted operating margin expansion, and more than doubling our adjusted EPS. Our performance was led by very strong growth and profitability in outdoor performance led by Solomon Footwear, and technical apparel led by Acterys. We also had a solid contribution from the ball and racket segment led by Worsham Tennis 360. All four regions accelerated in Q3 and achieved double-digit revenue growth, and that strong momentum has continued into Q4. We believe Inverse Sports is a uniquely positioned company within the global sports and outdoor space. Our specialized, highly technical brand serves the premium sports and outdoor market, which continues to be one of the healthiest segments across the global consumer landscape. Several factors give me confidence for our near, medium, and long-term outlook. First, we own a unique portfolio of premium innovation-driven sports and outdoor brands. Second, Acterix is a breakout brand story. with leading growth and profitability for the outdoor industry driven by its disruptive direct-to-consumer model. Third, Salomon Footwear has unique products and brand position and a very strong demand, but still a small share of the global sneaker market. Fourth, Worsen Equipment and our winter sports equipment brands already have leading market share and will deliver slower long-term growth except for Wilson Soft Goods, which we believe has significant long-term growth potential. And fifth, we have a strong differentiated platform in Great China, where we continue to deliver best-in-class performance across our three big brands. I want to take a moment to address September fireworks incident. We regret our involvement and are working closely with the local authorities to address the impact. We remain deeply committed to our community and the consumers and are taking actions to ensure we do better going forward. Before I turn it over to Angel Paige, allow me to briefly recap Key Brand's highlights from our three segments, starting with technical apparel, which is led by Acterix. Acterix delivers another quarter of broadband strength across regions. channels and categories, especially footwear and women's. We are encouraged by technical apparel's continued momentum in the direct-to-consumer channel, where Omnicom re-accelerates to 27% from 15% in Q2. We envision Acterys as a truly global brand with significant runway to grow in all major markets, And we are particularly encouraged by the meaningful Q3 acceleration in North America and Europe, as well as continued strength in Asia and China. Strong women's momentum continued in Q3, growing 40%, and was one of Octavia's fastest-growing categories. We continue to see a large opportunity to serve women in the outdoors in a different way, focusing on pinnacle design and performance. The new women's luthier pants was a standout performer in the quarter and was a top five model across all U.S. epicenters. Our women's climbing pants, the Clarkier, also continues to be widely popular since its launch last year. For Fall-Winter 2025, we are expanding our focus on color and have launched new models like the near pants and the women's only sheer jacket styles like Emery's and Altair. We continue to experience rising brand awareness and affinity with women in the U.S. and Europe, as we have improved fit, style, and function. As we discussed at our recent Invest Day, women will represent approximately 25% of global arterial sales in 2025, and we expect it to become 30% of sales by 2030. Fulwell also continues to be a key growth driver with 35% growth. Shoe models launched in the fall include the Conceal, a modern take on the classic approach shoe, which is light, grippy, and built for long technical missions. We also launched the Northern Nivirus, a winterized evolution of the Northern LE4. delivering high-performance running in cold conditions with a bold, modern silhouette. Looking forward, Acterix has an exciting pipeline of shoe launch for next year, and we continue to believe Footwear will be a large and profitable growth avenue for Acterix. Footwear will represent approximately 8% of global brand sales this year, and we expect it to reach 13% by 2030. Our Valence sub-brand is still small, but grows strong double digits in Q3, and we are excited for the future potential of this brand. Valence is expanding into new high-end wholesale partners in North America, and you can now find Valence in Nord Stream in the U.S. and Holt Renfro in Canada. Valence will represent approximately 5% of global brand sales in 2025, and we expected to reach 7% in 2030. Security and rebirth continue to be at the heart of our brand. We now have 32 rebirth centers, which support our successful September trading initiative, whereby guests receive a 30% credit for returning their used terrorist jackets. I would also like to mention peak performance. the other brand within our technical apparel segment. We are pleased to share that Peak Performance is seeing stabilizing sales and the profitability in its core European business, as well as early green shoots in North America. We introduced the Peak to IEI in September, and we are also opening a Vancouver flagship store in the previous Arc'teryx space in time for this winter season. Moving to the outdoor performance segment, which was led by another outstanding quarter from Salomon Footwear and Apparel, as well as a healthy performance from winter sports equipment. Salomon Footwear momentum continues across all regions, especially Asia, with strong demand for both sports style and the performance products. In addition to sneakers, bags and socks are also growing strongly across regions. There are several ongoing factors that give us confidence that Sonoma Footwear is well positioned for significant profitable growth in the year ahead. Number one, global sports style momentum continues. One of Sonoma's unique strengths as an outdoor brand is how well we are connecting with younger consumers, especially women. Our sports style offering is critical to Salomon's unique position as the modern outdoor sneakers brand, resonating with women in a way traditional outdoor brands have not. Second, our performance and the running lines are also having great success. Our gravel franchise is unlocking the run category for Salomon like never before. Salomon is gaining traction in the run specialty channel in North America and the EMEA. And even China, which has been a sports-style-centric market, is seeing traction in performance products. We are also seeing a benefit from improving capability to launch globally-coordinated marketing campaigns to support our sports style and performance launch. Third is Salomon's continually amazing brand, Keith. in Great China and Asia, where we believe we operate the most productive and profitable sneaker shops in the industry. Beyond Great China, Salomon is also experiencing surging demand in Korea and Japan, both large sneaker markets. Fourth, our epicenter strategy is working. Our strategy to open a handful of brand stores alongside strategic elevated wholesale distribution in key metro markets is critical to elevating Solomon's presence and awareness globally. Epicenter cities include Paris, London, Shanghai, Beijing, New York, LA, Milan, Miami, and more to come. Fifth, we are seeing accelerating demand in Europe, Solomon's home market. Solomon is experiencing strong pull demand from consumers, which drives strong pre-orders and a sales route for both sports style and performance. Sixth, in North America, which is still a much smaller sneaker market for us compared to Europe or Asia. It's growing at a solid double-digit rate, but under the surface. We can see that it's growing even faster. We are still exiting certain retail and e-com channels that weren't right for Solomon. where we simultaneously ramp up our North America direct-to-consumer footprint and wholesale expansion with the key strategic partners. Lastly, as we continue to elevate Salomon's brand awareness, we are excited about the upcoming Milano Cortina Olympics, where Salomon is a premium partner, outfitting all volunteers. This will be a great moment for the brand in its home market. I also want to mention our winter sports equipment franchise, which had a very strong Q3 with healthy shipment to start a season and historic outbox for the winter season overall. We were thrilled by the outstanding performance from Atomic Athletes in the World Cup in Southern Austria. The event represents a great start for the season in Europe with record attendance in the broadcast viewership. which is a positive indicator of the engagement and the passion people in Europe have for winter sports. In 2025, winter sports equipment is expected to represent only 28% of the outdoor performance segment, down from 46% in 2022. Moving to ball and racket highlights. Ball and racket had strong sales in Q3, with 16% growth, driven by continued strength in soft goods and the racket sports. Our tennis 360 products continue to resonate very well with consumers, from performance rackets to tennis apparel and footwear. Western soft goods continued its explosive growth, more than doubling in the quarter, with very strong growth across all three major regions. The brand has some big moments at this year's U.S. Open, both on and off the court. Worsham hosted brand activations across New York City during the tournament, including a four-day Worsham Tennis Club pop-up in SoHo, and our on-site U.S. Open shop again hosted record traffic and sales. On court, Arena Sabayka, when her four singles titles at the U.S. Open playing with the Worsham Raid V9. On the product side, in July, Worsham unveiled Ultra V5. This is the most versatile ultra racket yet, designed for intermediate to advanced players seeking both power and precision. Beyond the tennis 360, We saw slight growth in golf driven by email and the Dynapower line and the infinite portal. Baseball was essentially flat as growth in bets was offset by a decline in growth and the gear. Inflatables were down due to continued challenging market condition and the tariff driven price increase. U.S. retailers and consumers are showing some price sensitivity in this category. And we plan to introduce a slightly lower price point premium board next year to make sure we are well positioned as a sweet spot on the price spectrum. With that, I will turn it over to Andrew.

Thanks, James. The headline is that our strategy is working. Our brands are firing on all cylinders, allowing us to exit Q3 with momentum and setting us up to enter 2026 with confidence. Before I get into Q3 results, I want to personally thank our more than 13,000 employees around the globe for their obsessive focus on the consumer and continued push toward operational excellence. These results are only possible through their efforts. Now to our results. Solomon Footwear continues to add a strong second leg of profitable growth to Arc'teryx's already exceptional trajectory, significantly elevating the financial profile and long-term value creation potential of the ArmourSports portfolio. All three operating segments delivered both sales and margin ahead of expectations in the third quarter. And given our strong third quarter results and continued momentum, we are raising our full-year revenue, margin, and EPS expectations. ArmourSports grew sales 30% in Q3 on a reported basis. 28% X currency. The strong group sales performance was led by outdoor performance, followed by technical apparel. Ball and racket sales also accelerated and delivered double-digit growth. By channel, the group continues to be driven by direct-to-consumer, which grew 51% led by Salomon in Greater China and APAC. Wholesale grew 18% at the group level, also led by Salomon. Growth accelerated across all regions. Regional growth was led by Asia Pacific, which increased 54%, and China, which grew 47%. AMEA accelerated to 23%, and the Americas accelerated to 18% in Q3. Turning to profitability. Adjusted growth margin increased 240 basis points to 57.9% in Q3, primarily driven by favorable channel geographic, product, and brand mix. Growth margin also benefited by approximately 50 basis points from one-time inventory reserve adjustments. Adjusted SG&A expenses as a percentage of revenues was flat year over year and represented 42.3% of revenues in Q3. The technical apparel SG&A leverage on strong growth was offset by slight deleverage and outdoor performance in ball and racket, due to ongoing investments in Solomon Soft Goods and Wilson Tennis 360. Led by strong gross margin expansion, we generated 130 basis points increase in our adjusted operating margin from 14.4% last year to 15.7% in Q3. Corporate expenses were $38 million, up from $23 million in Q3 of last year. DNA was $119 million, which includes $43 million of ROU depreciation. Adjusted net finance cost in the quarter was $18 million, which comprised primarily of $26 million of interest expense, partially offset by $7 million of FX gains on the re-measurement of certain monetary assets. In the quarter, Our adjusted income tax expense was $68 million, which equates to an adjusted effective tax rate of 26%. Adjusted net income in Q3 was $185 million compared to $71 million in the prior year period. Adjusted diluted earnings per share was 33 cents compared to adjusted diluted earnings per share of 14 cents last year. Now, turning to segment results. Technical apparel revenues increased 31 percent to $683 million, led by Arterix. Growth was fueled by 46 percent direct-to-consumer expansion, including a reacceleration in our Omnicomp to 27 percent from 15 percent in Q2 of 2025. Technical apparel wholesale revenues grew 11 percent Regionally, the technical apparel growth rate was led by Asia Pacific, followed by the Americas, Greater China, and then EMEA. All regions grew strong double digits. Our territory stores are critical to the brand's growth, especially how we engage with local consumers and community. Our stores include a mix of different formats, ranging from multi-level, large-scale, alpha flagship stores to small format, very distinct mountain town shops. In Q3, excluding the recently acquired stores in Korea, which I will discuss shortly, Arterix opened four net new stores with 10 openings offset by closures of six legacy locations as part of our ongoing strategy to optimize the quality and productivity of our store fleet. New store openings included the Arc'teryx flagship in Vancouver at Robson Street. Arc'teryx also opened branch stores in Manchester, UK, Canberra, Australia, and Takanawa, Tokyo. We have opened 12 net new stores year to date, and we continue to plan to open approximately 25 net new Arc'teryx stores for the full year, with the largest number coming in North America. Our store opening plan incorporates a similar level of gross new stores as in 2024, partially offset by the closure of certain outlets and sub-optimal locations. In Greater China, we continue to focus on optimizing our territory's retail footprint. This year, we will have slight net store closures, including some legacy partner doors. However, we will still grow our owned store count and our overall square footage in China, with larger format, higher quality, and more productive locations. A good example of this is our upgrade of the original Arcteryx flagship in Shanghai at the Alpha Center, which will reopen this month after expansion and renovation. Looking ahead to 2026. We are planning for Arc'teryx to have net store openings in China after years of rationalizing the store fleet in the region. In North America, I would highlight our second New York City Alpha store, which recently opened on Fifth Avenue at Rockefeller Center. This store is the most tentacle expression of the brand in the US, and we are encouraged by the strong sales in the first few weeks. With nearly 12,000 square feet, it's one of the largest stores in North America, and a bold step forward in Arc'teryx's retail expression, designed to educate, inspire, and connect more people to the mountain through immersive storytelling and product innovation. In Q3, we also closed our asset purchase agreement with Nelson Sports, Arc'teryx's distributor in Korea since 2001. This deal effectively converted 46 partner stores into our own fleet. which include a number of small format shop and shop locations. The revenue and margin impact in Q3 was negligible. Bringing Korea in-house will benefit our top line and operating profit dollars as we convert from wholesale partner revenues to D2C revenues. Bringing Korea in-house will have an immaterial impact on both the segment and group operating margin. This acquisition will contribute approximately $25 million of incremental sales in Q4. On an annualized basis, Korea is expected to generate approximately $120 million of total sales at retail in 2025. Beyond 2025, we believe Korea is a large, high potential market for Arc'teryx, given its strong consumer affinity for the sports and outdoor category and premium global brands. Technical apparel adjusted operating margin declined 100 basis points to 19.0% as SG&A leverage was offset by approximately 125 basis point headwind from a timing shift related to government grants. Moving to our outdoor performance segment, which saw revenues increase 36% to $724 million, driven by very strong performance in Solomon footwear, apparel, and bags and socks. By channel, outdoor performance D2C grew 67%, led by new doors and higher productivity across markets, especially Greater China and APAC. Outdoor performance achieved an impressive 33% Omnicom, with strength in both stores and e-commerce. E-com is growing across regions, driven by higher traffic. Wholesale grew 26%, driven by strong sell-through and reorders in soft goods. Regionally, the outdoor performance growth rate was led by Greater China and APAC, followed by accelerating growth in both AMEA and the Americas. The popularity of Solomon footwear is inflecting globally, and we are well positioned to fully develop this unique opportunity over time. We believe we have very significant growth opportunities in all three major consumer regions, and have the right talent and team structures in place to take a meaningful share of the global sneaker market. In Asia, direct-to-consumer continues to be the critical growth channel for Salomon, led by our highly productive Salomon Compact Shop format. We opened 19 net new Salomon shops in Greater China this quarter, including both owned stores and partner stores, bringing our total count to 253 doors. We are on track to reach approximately 290 Salomon shops in Greater China by year end, including owned and partner doors. We recently opened our second Salomon flagship in Shanghai, a 7,300 square foot pinnacle expression of the brand located in the French Concession District, known for its boutique shopping. The three-level store offers a more immersive experience for consumers and has performed very well in its first few months. In APAC, we opened 12 new Salomon stores in Q3, six in Korea, four in Japan, and two in Australia. Our overall brand awareness and demand for Salomon footwear is rapidly growing across Asia. In Americas, Solomon Soft Goods grew strong double digits in Q3, and we continue to lay the groundwork to support significant future growth. Our first U.S. store in New York City continues to show incredible traction with consumers, and we are on track to operate four stores in Greater New York by the end of Q1, as well as continue to expand our presence in key wholesale accounts. New locations in Q3 include Woodbury Commons in New York, the trendy Bucktown neighborhood of Chicago. And later this week, we're opening our second New York store in Williamsburg, Brooklyn. And I also want to mention our first Los Angeles store on Melrose Avenue in West Hollywood, which opened at the beginning of Q4. The opening has been a huge success with very strong brand buzz in the area. High traffic and long lines outside the store. We were thrilled to welcome many first-time Salomon buyers, especially so many young female consumers. We will continue to focus on epicenters in 2026 and beyond, including New York, Los Angeles, Miami, and San Francisco, and we are planning to open 7 to 10 new stores next year in the U.S. Looking at U.S. wholesale. Solomon is seeing growing demand across a variety of high-quality retail partners, including RAI, Nordstrom, and Run Specialty Shops. In EMEA, we continue to expand our store fleets in key epicenters, including Milan and London. We recently opened our second brand store in Milan and will open a third one in Q4. And we will open a fourth store in London in Q4. In 2026, we will further develop our epicenters into Spain, Germany, and other key UK cities. For our winter sports equipment brands, Q3 was a strong quarter with double-digit growth across brands and regions. Sales also benefited from approximately $20 million of shipments that were planned in Q4 but went out in Q3. Order books for the season are solid, and our brands continue to take meaningful market share globally. In addition to strong market share in our core ski, boot, and binding categories, we see incremental growth opportunities in areas such as snowboarding and protective equipment. Outdoor performance adjusted operating profit margin expanded 420 basis points from last year to 21.7% in Q3. Margin expansion was led by gross margin thanks to positive channel, region, and product mix. as well as favorable product cost driven by our footwear cost optimization initiatives. Growth margin expansion offset the very slight SG&AD leverage due to continued investments in growth. Moving to ball and racket, where revenue increased 16% to $350 million driven by soft goods and racket sports. We continue to see very strong momentum in Tennis 360 globally. By category, the growth was led by soft goods, which more than doubled in the quarter with strong momentum in all regions. Soft goods now represent approximately 15% of segment revenue. Racquet sports also grew strong double digits, driven especially by very strong growth in EMEA and China. Regionally, the ball and racquet growth rate was led by China, followed by APAC, EMEA, and slight growth in Americas. Globally, in Q3, we had 10 net new Wilson brand store openings, mostly in Greater China. Wilson continues to excel in China, and we are planning to open approximately 35 Wilson Tennis 360 shops in China this year, including both owned and partnered doors, bringing the total to around 80. In Q3, Wilson celebrated the opening of its urban concept store, Brickhouse in Wuhan. which integrates American tennis club aesthetics with local Wuhan culture, a tribute to Olympic champion Zhang Chenwen's hometown. In North America, our expansion into the warmer southern markets is continuing to drive strong results. Our Dallas North Park Mall location continues to perform very well, and we continue to expand our new Tennis 360 concept store into more southern and coastal locations, including our new shop in Beverly Hills, and an upcoming shop in Miami. We also continue to expand our Tennis 360 test in new Dick's Sporting Goods locations, including House of Sports locations. In APAC, we are excited to expand our retail format into two new markets, Japan with our first store in Tokyo's Marunouchi District, and Australia with our first two stores in the Melbourne area. Ball and racquet segment adjusted operating profit increased 70 basis points to 7.6% thanks to strong gains in gross margin driven by favorable product, region, and channel mix, and pricing. Ball and racquet profitability also benefited from the above-mentioned one-time inventory reserve evaluations. These gains offset higher tariff costs and slight SG&AD leverage on continued soft goods investments. Turning to the group balance sheet, we ended the quarter with $800 million of net debt. Using the midpoint of our 2025 adjusted operating profit guidance, our net debt to adjusted EBITDA ratio was approximately 0.7 times at the end of Q3. We exited the quarter with inventories up 28% year over year, slightly lower than our 30% sales growth. We are very comfortable with the level and quality of our inventory. This higher inventory growth is primarily related to four factors. Number one, earlier receipt of seasonal Arc'teryx merchandise to prepare for better in-stock positions. Number two, higher Arc'teryx goods in transit resulting from the greater use of ocean shipping versus air freight. Three, FX translations due to the weaker U.S. dollar. And four, the addition of Arc'teryx's career inventory following the recent acquisition. We expect inventory growth rates to normalize in the second half of 2026 when we start to cycle our improved in-stock positions and the higher use of ocean freight. Driven by strong profit growth and disciplined working capital management, we generated $104 million of operating cash flow in the first nine months compared to $18 million last year. Until the full year of 2025, we expect to generate solid operating cash flow growth versus 2024 levels. Now moving to guidance. The updated guidance assumes the latest tariff rates on all countries will stay in place for the remainder of 2025 and beyond. We remain confident that we are well positioned to manage through a variety of tariff scenarios given our low exposure to the U.S., our pricing power, and our Clean Balance Sheet. We continue to expect negligible impact to our group P&L from higher tariffs in 2025 and beyond. Let's begin with our updated full-year 2025 outlook. Given the upside in Q3 and our continued momentum, we are raising our full-year revenue, operating margin, and EPS expectations. We are raising 2025 revenue growth guidance from 20 to 21% to 23 to 24%, including an approximate 100 basis point benefit from favorable FX impact on current exchange rates. By segment, we are raising our technical apparel 2025 revenue growth guidance from approximately 22 to 25% to 26 to 27%, including continued strong Omnicomp growth. We are also increasing our outdoor performance sales growth expectations from 22% to 25% to 28% to 29%, and ball and racket from 7% to 9% to 10% to 11% growth. We are also raising our full-year adjusted gross margin guidance from approximately 57.5% to approximately 58%. And we're also raising our adjusted operating margin guidance from approximately 11.8% to 12.2% to 12.5% to 12.7%. By segment, we continue to expect an adjusted operating margin of approximately 21% for technical apparel. For outdoor performance, we are raising adjusted operating margin guidance from 11 to 11.5% to 13 to 13.5%. For ball and racket, we are maintaining our adjusted operating profit margin guidance of 3 to 4%. We are now assuming full year net finance costs of 85 to $90 million and an effective tax rate of 27 to 28%. The lower effective tax rate is primarily driven by higher profit generation from lower tax jurisdictions. Other operating income will be approximately $20 million for the full year. and net income attributable to non-controlling interest will be approximately $15 million. We now expect adjusted diluted EPS of 88 to 92 cents versus our prior guidance of 77 to 82 cents, which is based on 563 million of fully diluted shares. We're also assuming DNA of $350 million, including approximately $180 million of ROU depreciation. CapEx is expected to be approximately $300 million, primarily to support new store expansion, ERP optimization, and distribution and logistics investments. As we have said before, should strong trends continue and better than anticipated demand materialize, we believe we will be well positioned to deliver financial performance ahead of our expectations. As we begin to look beyond 2025, We are also confident in our initial 2026 outlook. At the group level, we expect to deliver revenue towards the high end of our long-term algorithm of low double-digit to mid-teens annual sales growth. And we expect to deliver adjusted operating margin expansion within our long-term algorithm of 30 to 70 plus basis points. With that, I'll turn it back to the operator for questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one in your telephone keypad. If you would like to withdraw your question, simply press star one again. Your first question today comes from the line of Brooke Roach from Goldman Sachs. Your line is open.

Good morning, and thank you for taking our question. Have you seen a sales impact in China following the fireworks incident? If so, when do you expect sales to recover? Do you think there could be any longer-term brand repercussions?

Hey, Brooke, it's Stuart. Thanks for your question. Arcteryx China sales trends were softer at the beginning of Q4, but have since rebounded as weather has cooled. We're confident in Arcteryx's brand position and equity with consumers across all of our markets. We are most focused on connecting with our consumers and communities and delivering great products and store experiences.

Great, and as a follow-up for Andrew, how did this event impact guidance for 4Q?

Hi, Brooke, how are you? It did not have a factor in our Q4 guide. Thanks, Brooke.

Thank you.

Your next question comes from a line of Matthew Boss from JP Morgan. Your line is open.

Thanks, and congrats on a nice quarter. So, James, could you speak to your confidence in guiding 2026 revenue growth to mid-teens, which is the high end of your long-term algorithm? And then, Stuart, at Arc'teryx, could you break down the cadence of the third quarter 27% Omnicomp? And if you could elaborate on the strong global momentum that you've seen in the fourth quarter or just any change in demand that you've seen as we head into holiday for the brands?

Hey, I just highlight our forecast for coming years. So we, given the very solid foundation we built up in 2025, I think we have a very good level of confidence to deliver what we got in 2026. I think meeting growth patterns can be secure in 2026.

Yeah, Matt. Hey, Stuart. So yeah, the Omnicom, we're really pleased to see the momentum in the third quarter. You know, the overall DTC revenue increase at 46%, you know, we think is really healthy. The 27% Omnicom also reflects a strong two-year trajectory. And, you know, that's definitely factored into how we thought about guidance into the fourth quarter. As we look at Q3 specifically, the retail performance from a KPI standpoint was driven by traffic. So we saw really healthy traffic increases, more modest increases in conversion and AOV and UPT. Also worth mentioning, markdown levels were pretty consistent year over year. So it was not a markdown driven sales increase. As you look at your question around the global demand, strong momentum around all of our regions, it was great to see an acceleration in our North American business in the third quarter, where they moved up in the ranking after Asia Pacific, which continues to be the leading region for us. But we still saw some very strong growth in China and in Europe. We're not really seeing weakness in any of our regions. And, you know, it makes us optimistic as we look at fourth quarter and beyond. And, yeah, so I think feeling really good for how we've now stepped into the fourth quarter and the trends we're seeing quarter to date. Great. Thanks, Matt.

Your next question comes from a line of Ike Borochow from Wells Fargo. Your line is open.

Hey, guys. Let me add my congrats. I guess a higher-level question on next year's outlook, just maybe potential additional info on door growth for both technical, basically both for Solomon and Arcteryx. And then would love to hear a little bit more about the progress on Salomon in the United States specifically. Andrew, can you give us an update of where you are in penetration there? There seems to be a lot of appetite for the brand locally here. Just kind of curious how you're measuring that, balancing the growth with the push-pull model. Thanks.

We'll have Andrew actually take the first question, and then we have Guillaume Mazak here, who's the CEO of Salomon Brand. We'll take the Salomon question.

Yeah, thanks for the question. To detail on store growth, I will provide more of that update as we get into our Q4 call. So not necessarily ready to provide a detailed update on store growth yet.

And for Salomon, so nice to meet you all. Before jumping into North American, I think that we have to put Salomon into the context and the current momentum we have. I'm convinced that we hold a truly distinctive position in the market and will fully leverage it to shape what comes next. We have an incredible opportunity to define and lean the modern mountain sports movement in the market. And if I identify two strengths of Salomon, the first one is the authentic mountain performance, which is what consumers are looking for, is authenticity. We are true to what we are doing. We have a global recognition of design language led by innovation. What we are doing and developing is really true for performance, for function. And we have a growing cultural relevance bridging the mountain, the city, and the modern lifestyle. And this quarter is definitely a good example of the potential of Salomon in the market, and we believe that this is just a start. If I move on the US case, because this is a question, of course, this is today the region that we have to build the fundamentals. We are showing a little bit of strength in the MEA. We are growing very fast in Asia Pacific and China. And today we are focusing on the U.S. And the U.S. provision is coming from this leading position in winter sports and outdoor where Salomon has high market share and high recognition in the market. And now we have to move to the city. And this is what is currently happening a true epicenter strategy so that we started in new york a few quarters ago now we have la the new shop opening we have in melrose is a good example of a long line of consumer looking at this product we have also good traction in running specialty distribution in performance And now it's how we hold this good signal and insight which is coming with a new consumer, very young, very often a female consumer, how we are transitioning and translating into a bigger scale in the U.S. And this is why we look at more epicenter, more shop opening, having a curated media investment in the right spaces. And, of course, working with our B2B partner to drive, you know, the numeric distribution will expose Salomon to more consumer. And we feel very confident that we are on the right path to accelerate in North America.

Right. Thank you. Thanks, Ike.

Your next question comes from a line of Lorraine Hutchinson from Bank of America. Your line is open.

Thank you. Good morning. Just sticking with Salomon, You're pruning back some of the distribution there, which is causing a pressure. Can you talk about when that pressure will abate and where you are on U.S. awareness at this point for the Salomon brand?

I think you speak about U.S., and of course, you know, as I explained, we had this leading position in winter sports and outdoor performance. And this outdoor performance footwear led us a few years ago to go to places and some distribution that we think they are not anymore relevant. And we think, and also the partner sometimes also is looking for other priority. This is why we have this kind of looking like negative, some negative building block, which show finally kind of growth, but not growth expected as we would expect. We think that the end of H1-26 will be the last time that we will not have any more anniversary sales, and we will have a completely fresh and new setup for distribution. So we still wait for a few quarters, but I would say that most of the change has been already implemented.

Thank you. Your next question comes from a line of Jay Sol from UBS. Your line is open.

Great. Thank you so much. I want to ask about Wilson, specifically the tennis 360 stores. It sounds like, I think you said you're up to 80 stores in China. Can you just talk about the big picture long-term opportunity in China? I think you also mentioned that the store in Dallas, I think you said, is off to a good start. You're opening some more tennis 360 stores in the U.S. Can you just talk about the tennis 360 opportunity outside of China and how that's developed over the last 90 days in your view? Thank you.

Sure. Thanks, Jay. So you mentioned the Tennis 360 concept from the outside of Great China. So we have 14, 15 stores in North America. I mentioned the Dallas Park story that's doing really well. We will focus really around the small states. So you think about where you can concentrate tennis in the southern smiles of the US, starting in Georgia, down to Florida, around the south, and then back up through California. So that's what I would expect to see from our retail format epicenter concentration. We are still, you know, we're in the early stages of that. We're excited and we're super motivated about where it's going to consumers. It's really gravitating toward the product, but we're still in the early stages of really optimizing and formulating our total own retail format. In addition to our own retail format, We've also seen success in our Dix shop-and-shop formats where we are able to present the full pathway of our Tennis 360 concept head-to-toe to hand, and the consumer is really resonating with the consumer there.

So you'll start to see the expansion even in the Dix and the House of Sports format for the Dix locations. Got it. Thank you so much.

Your next question comes from a line of Paul Legere from Citigroup. Your line is open.

Hey, thanks, guys. On the margin guide for next year, I'm curious how much of the expansion is simply a function of business mix versus improvements that you might be seeing within each segment. And then I just wanted to ask a clarifying point on Solomon. Could you just say what what is the number of doors that you're actually exiting within the Solomon wholesale business? And then what are you adding over the next 12 months? Thanks.

Yeah. Hey, Paul, thanks a lot.

The same drivers of our big shift as before. It's going to be primarily driven by gross margin expansion. We will continue to make the proper investments in SG&A continue to drive growth.

So, the margin expansion that you see will be driven primarily by gross margin expense, and that gross margin expense is driven primarily by mixed shift, both channel and product and region fixed shift.

As it relates to the number of doors, you know, we're not necessarily going to comment. It's a bit nuanced. As Guillaume talked about, actually exiting some doors, also doors that couldn't tell our full expression of the brand and giving it to more strategic partners. But as we talked about, you know, start to think about clearing that through H1 at next year, and you start to see as we get into third quarter of next year, you start to see the brand really show up in the strategic partners as we plan.

Thank you. Good luck.

Your next question comes from a line of Anna Andreeva from Piper Sandler. Your line is open.

Great. Thank you so much for taking our questions and congrats. We wanted to follow up on the Americas. Nice to see the region accelerate to high teens. Can you provide more color of what you saw by channel and how did U.S. perform within that? I think you mentioned slight growth at Wilson in the U.S. And as you look into 26 and the high end of the algo, Should we expect Americas as a double-digit grower next year? And then we just had a quick follow-up. The TA Omnicom acceleration, great to hear about strength in traffic. Did that headway from outlets that you saw last quarter begin to moderate? And just remind us, when do we anniversary that outlet dynamic in 26?

Thank you, Anna. So, we'll have Stuart answer the comp and talk about the archetypes and really think about

Yeah, hey, Stuart. Yeah, the acceleration in North America for our carriers is really a function of success of our brand awareness investments, unity in different forms of brand marketing, and with the growth of our store footprint. for driving guest engagement across our key markets. So we're pleased to see the success of that reflected in the holiday conference. With regard to the, I'll just stay on the traffic counter question that you had. The traffic really reflects what I just mentioned. We saw a meaningful reduction in markdowns So into Q3 we saw our down basically on par, you know, consistent with the prior year. So if you think about next year, obviously we would be getting a lot that type of advance.

Then Andrew, I want to go to TANF 360, you know, in America. Is there any commentary around channel and then the trend there? And then, you know, on Americans, if you want to make a comment, although I think you've covered it pretty well.

Yeah, I mean, you know, to your point around the uptick in North America, it was primarily driven by our tennis 360 concept.

Both footwear and apparel were very, very strong growth over in the quarter. And the other categories in Wilson All right.

Awesome. Thanks so much.

Your next question comes from the line of Jonathan Kahn from Baird. Your line is open.

Yeah. Hi. Good morning. Thank you. Can I follow up just the initial 2026 view? Would you expect technical apparel to be at least in line with the algorithm from September, you know, mid-teens growth with China? at least low double digits in any color there?

Yes, this is Andrew. You know, as you pointed out, we have reaffirmed the full algorithm from the best of days, both at the grant level as well as at the group level.

Great. Thank you. And then a follow-up just on the Q4 outlook, Andrew. You know, operating profit growth has been very strong the first three quarters, you know, over 60%. It looks like you're embodying a single-digit growth rate in profit for the fourth quarter. So, could you just share any more detail, anything unique in the fourth quarter impacting the margin outlook? And is there anything we should expect, you know, into the first half of 26, you know, in terms of margin headwinds? Thank you.

Yeah, definitely, you know, and as, As I'll point out, obviously, really strong third quarter. We're excited about it. You see what happens when we're able to over-deliver top line, ready to drop that through to the bottom line. In the fourth quarter, as you start to think about what we're seeing, we still believe and we're excited about our four-year G&T implied guidance for the fourth quarter.

But as Gail talked about, you know, Solomon, we're in the early stages of this inflection point.

uh what quarter will be the first full quarter of tariffs uh we also have investments that were amazing in the uh and invested in um obviously a continued market around our awareness so we believe the guide for the full year and the entire guidance for the fourth quarter is responsible uh as well as we continue to say should demand uh materialize we are there's no structural reason why we won't be able to only deliver uh against our guy

Okay. That's great.

Thanks again. Your next question comes from the line of John curtain from TD Cowan. Your line is open.

Hey, good morning guys. Congrats on a, another strong quarter. Uh, Andrew, just to kind of follow up on, on Jonathan's question, um, the guidance for the outdoor performance, uh, segment margin is for a decline in two, four. obviously there's been a ton of upside to your guidance this year and the incremental margin you've been generating on soft goods uh really seems to be flowing through i'm just curious you know why the conservatism here in outdoor performance and and you know how you're thinking about the margin performance of outdoor performance into into next year yeah i mean a couple of things you know as i talked about there was some

We have some meaningful investments we want to make at the fourth quarter in marketing, increased awareness, and I know it's very familiar. And we just didn't end the Olympics. And so we believe that if business continues and the demand continues to show up as it's been, that there's opportunities in the fourth quarter. But again, we're in the early stages of that inflection point. So we don't know the edge of demand at this point.

Got it. And maybe just a quick follow-up on technical apparel and the segment margin there. It was down year over year. I'm really impressed with the top-line growth. I think you said there was a timing of government grants that affected the technical apparel profitability. Any comments on how you're thinking about fourth quarter and the drivers of operating margin expansion into next year for the technical apparel?

Sorry, repeat that last part.

Any thoughts on the technical apparel segment margin in Q4 and then into fiscal 26?

Yes. So segment apparel margins in Q4, I see those margins are in line. They are relatively strong. For the full year, I see those margins being in the low 20s for technical apparel. As we talked about, you can see the black margins. The timing of the government grants, the point that I was making there is that in the third quarter of last year, we received a higher portion of our government grants than we did this year. So it created a drag on the third quarter margin this year on a comparable basis.

Understood. Thank you.

I have one more question.

Your final question comes from a line of Alex Stratton from Morgan Stanley. Your line is open.

Perfect. Thanks for squeezing me in here. I just wanted to focus on the China growth acceleration in the quarter. It definitely stands out versus a more somber narrative from a lot of your peers. So can you just help us square that difference between you and then maybe the broader sportswear group and then how you're thinking about industry dynamics in China into the fourth quarter and then next year? Thanks so much.

How are you? Okay, thank you for the question. So, I mean, basically, we are quite pleased about the Q3 result in China, and we grow the line-up of the pattern we like, we projected, and all three brands, especially Salomon and Worsen, they're growing extremely well in China market.

Based on the Q3, we think we got a good level of foundation to finish the whole year in China with a very solid .

For Q4, I just want to call out for two major seasons, city in Q4, which is Golden Week and the W11. So overall, our overall achievement for these two major events, I'm quite satisfied. Okay, it's all a rich our locations and I think pretty much we have a very good confidence for China and this year and we will have a very good result in 2025 and so down the road for next year I think the foundation is there and we already mentioned our three major brands they all got the unique position in China which really

check a lot of younger consumers in different segments, and we are in a very good position to compete in markets, okay?

So we are quite optimistic also for 2026 in China markets.

Thanks.

You're welcome. Thank you. And that concludes our question and answer session. I will now turn the call back over to management for closing remarks.

Thanks everyone for joining. We'll see you in three months for our fourth quarter results. Have a great day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.