Wolverine World Wide, Inc.

Greetings and welcome to the Wolverine Worldwide Second Quarter Fiscal 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If you'd like to ask a question, please press star and the number 1 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Jared Filippone, Head of Investor Relations. You may begin.

Good morning and welcome to our Second Quarter Fiscal 2025 Conference Call. On the call today are Chris Huffnagle, President and Chief Executive Officer, and Taryn Miller, Chief Financial Officer. Earlier this morning, we issued a press release announcing our financial results for the Second Quarter of 2025 and guidance for the Third Quarter of 2025. The press release is available on many news sites and can be viewed on our corporate website at wolverineworldwide.com. This morning's press release and comments made during today's earnings call include non-GAAP financial measures. These non-GAAP financial measures, including references to the ongoing business, were reconciled to the most comparable GAAP financial measures and attached tables within the body of the release or on our Investor Relations page on our website, wolverineworldwide.com. I'd also like to remind you that statements describing the company's expectations, plans, predictions, and projections, such as those regarding the company's outlook for the Third Quarter of 2025, growth opportunities, and trends expected to affect the company's future performance made during today's conference call, or forward-looking statements under U.S. securities laws. As a result, we must caution you that there are a number of factors that could cause actual results to differ materially from those described in the forward-looking statements. These important risk factors are identified in the company's SEC filings and in our press releases. With that, I will now turn the call over to Christophe Nagle.

Thanks, Jared, and welcome again to Wolverine Worldwide. It's great to have you on the team. And good morning, everyone. Thanks for joining us on today's call. In the Second Quarter, we exceed our expectations on nearly every financial measure, headlined by double-digit revenue growth, with increases in every region and strong growth from our two biggest brands. Saucony was up 42% compared to last year, achieving record revenue for Q2, and Merrill grew 11%. The Work Group returned to growth, hosting a 2% revenue gain, while Sweaty Betty improved sequentially in the quarter, reflecting important progress in these two divisions. Our teams are intently focused on driving growth, building stronger brands, better managing the marketplace, and fueling consumer demand, and doing so in a healthy, profitable way. In the quarter, we delivered more than 400 basis points of gross margin expansion versus the prior year, once again achieving a quarterly record. Our high-quality growth enabled us to more than double earnings at the bottom line compared to last year. A good quarter by most measures. A new brand building playbook has proven effective, and we've been able to sequentially improve our -over-year revenue trends for five consecutive quarters now, this past quarter posting our best -over-year comparison in nearly three years. Our teams have done a tremendous job of embracing a new growth-focused mindset, and I'm grateful for their drive and resilience as we continue to build the new Wolverine worldwide. Looking ahead, I'm pleased we've built momentum in the business and that the company is on much firmer financial footing. We believe we're well positioned to navigate today's volatile macro environment, and that the actions we've taken to date and can take in the future will enable us to largely mitigate the impact of tariffs going forward. A new reality, however, is uncertainty in the global marketplace. Due to the ever-shifting global trade policies, coupled with a downstream effect on the economy and consumers, this reality informs both our outlook and our actions as we move forward into the back half of the year. With that, I'd like to share the progress our brands continue to make around the world for handing the call over to Taryn for more detail on the quarter and our outlook. Beginning with Saucony. Saucony delivered very strong broad-based revenue growth of 42%, coupled with 560 basis points of gross margin expansion in the quarter. The brand grew in every region and channel, while delivering record second quarter revenue. I believe 2025 will be a pivotal year for the brand, the result of an ambitious strategic reset in 2023 and 2024, and our new growth agenda. We positioned the brand at the intersection of authentic performance and lifestyle running, given unique footholds in the competitive landscape and opening of a significant addressable market opportunity for the brand. Over the last several months, Saucony executed with excellence on many fronts. Its run as one campaign, launched earlier this year, continued to position and build the brand with its target consumer. Brand search interest is up meaningfully around the world compared to last year, and we're seeing stronger affinity for the brand, specifically among runners and younger consumers. Saucony also continued to advance its key city strategy. Just a few weeks ago, following the recent opening of its store in Harajuku, Tokyo, the brand opened its Pioneer store in London's Covent Garden, one of the premier shopping destinations in the world. Importantly, the store serves as a valuable hub for brand activations in London. Last month, building on a success in 2024, Saucony was again the title sponsor for the London 10K, an amazing event with over 17,000 runners this year. The branch took over the city for the week with an impactful slate of great marketing and brand activations. I was fortunate to run in the event. It could have been more impressed by the brand's overwhelming presence around the city and how far the brand has come in such a short time. Saucony will expand its event sponsorship in London with a shortage 10K and then to France with the Eiffel Tower 10K later this year. In Paris, the brand garnered extensive interest a few weeks ago at Paris Fashion Week, highlighting its disruptive approach to collaborations and taking appointments with a rapidly growing number of highly influential retail partners. I'm also pleased to announce we just signed a lease to open the brand's third Pioneer store in Paris next year. Saucony's activations and compelling retail execution are engaging consumers directly and providing a vision inspiration for our partners around the world. Building on our efforts in Tokyo, for example, we've already started opening a host of new stores with our -in-class partners in Asia Pacific with plans to open more in the second half of this year. Saucony continues to fuel product innovation as well with its clinical endorphin franchise. The brand followed up the introduction of the award-winning endorphin Elite 2 Super Shoe in March with the new endorphin Speed 5, combining a nylon plate with power run PB foam for a fast lightweight design at less than $200. A compelling price point for so much innovation. The brand also continued to push forward its Core 4 franchises squarely aimed at the broader casual run opportunity with the launch of the Triumph 23, its premium neutral runner engineered to deliver plush comfort through innovative geometry and cushioning. Together, the Core 4 franchises, including the Ride, Guide, Triumph, and Hurricane, grew at a very strong double-digit pace at U.S. retail in the quarter. On the lifestyle side, Saucony continues to leverage its deep product archive to deliver authentic, trend-right styles to the marketplace. The brand's expansion of distribution within the lifestyle, athletic specialty channel continues to progress as a result of positive sales performance, adding roughly 400 doors for the back half of this year. This will raise the brand's door count in this channel to roughly 1,300 doors. While the opportunity is meaningful, we can take a methodical approach to thoughtfully expanding distribution. Saucony has made a remarkable amount of progress, but I maintain that it's poised to do more. The brand possesses a unique and compelling combination of heritage and authenticity, coupled with -in-class innovation and emerging cultural relevance. I believe that Saucony's vision does something very special. Moving to Merrill, our biggest brand, which came to build momentum and deliver another strong performance. The brand grew 11% in the second quarter, its fourth consecutive quarter of growth with increases in most regions and channels, and delivered nearly 600 basis points of gross margin expansion versus the prior year. Merrill remains focused on modernizing the trail. The brand's faster, lighter, more athletic product offerings continue to fuel momentum and drive significant share gains in the hype category. Moab Speed 2 revenue nearly quadrupled year over year at U.S. retail, making it the brand's second-largest hype franchise behind the industry-leading Moab 3, which grew at high single digits in the quarter. The award-winning SpeedArc Manus, built on the brand's new visually disruptive SpeedArc platform for a uniquely comfortable ride with exceptional energy return, is now the number four hype franchise at Merrill.com after just a few months of selling. Merrill has built good momentum, outpacing the market for 10 of the last 11 quarters in the U.S. hype category, which had been under pressure for the better part of two years. But encouragingly, we've now begun to see a broader hype trend improve a bit. We believe this is another positive indicator for Merrill, the market leader, moving forward. On a trail-running side, the Agility Peak 5 franchise is up double digits at U.S. retail, and the brand launched the new ProMorph, an all-terrain hybrid runner designed with premium flow plus foam for superior cushioning. Merrill's continued progress in modernizing the trail helps strengthen its ability to advance in lifestyle as well. Performance products like the Moab Speed 2 and Agility Peak 5 and lifestyle colorations and materials continue to gain traction at certain lifestyle retailers, reaching a younger consumer for the brand. In addition, revenue from progressive casual styles like our Wrap franchise and the iconic Jungle Mock grew significantly in the second quarter as well. In the U.S., Merrill, still in the early stages of evolving its distribution, has rationalized its points of distribution over the last couple of years. The brand is focused on developing more impactful -to-market plans with its key strategic outdoor specialty and sporting goods partners, and is establishing a footprint in the healthier lifestyle market. Globally, the brand saw accelerated growth in Asia Pacific in the quarter, thanks in part to its key city strategy, which has initially focused on Tokyo with its partner in Japan. Retail store concepts in Harajuku and Shibuya have continued to perform well, and together with compelling marketing and storytelling in the market, have effectively helped elevate the brand in one of the most influential cities in the world. Merrill is also now beginning to activate Paris as part of its key city strategy with focused campaign investment and in key to the brand built on its market share lead in outdoor footwear in France and delivered strong growth in the broader EMEA region. Moving on to Sweaty Betty and Wolverine. The two brands were focused on getting on track. Encouragingly, both brands saw sequential improvement in the second quarter. I'll start with Sweaty Betty. As we previously shared, our priority with Sweaty Betty has been to establish a healthy foundation from which to grow. We continue to make steady progress on reestablishing the brand's premium positioning. In Q2, we again increased the brand's full price mix and expanded gross margin by more than 500 basis points. Sweaty Betty's female-focused, inclusive positioning and storytelling has been effective, and our recent Wear the Dam Shorts campaign reinforced the brand's original rebellious, distinctive voice. Brand awareness is up. Consumer sentiment is dramatically higher and perception as an inner hot brand is trending positively. And while consumers already rank Sweaty Betty at the top of the competitive landscape for product quality, we're enhancing future product offerings with elevated design and more style innovation, including inducing more newness for the important holiday season this year. Looking ahead with a stronger foundation in place, we're taking action to drive profitable growth in Sweaty Betty with a multi-pronged strategy. First, the brand's -to-consumer business in the UK will be the number one priority. Digitally, we plan to deliver a reinvigorated flow of innovative premium products with a keen focus on our Madewell mover consumer target and deliver enhanced digital experiences for her, including the brand's recently launched app, which has been among the top downloaded shopping apps in the UK. Second, we're also taking action to further improve the productivity and profitability of our UK stores, along with a full fleet review of real estate to ensure we're in the right doors driving strong returns. Second, we're moving to a more disciplined, full-price DDC business online in the US. Sweaty became too promotional too often, which only served to erode the brand's equity. Third, we plan to expand the brand into new or nascent international markets, including leveraging Wolverine Worldwide's global network of -in-class distributor partners, as we began to do in China last year. Finally, we're integrating the brand's tools and processes into the Wolverine Worldwide ecosystem. We anticipate this will be largely complete later this month. This will be a critical enabler of our strategy and part of our broader technology modernization effort across the portfolio. In addition to these growth strategies for Sweaty Betty, we're exploring options to better leverage this team's DTC and broader apparel expertise across the portfolio to drive improved performance and growth in our footwear brands. One example is the brand's use of AI to better manage pricing and maximize margins, a solution Sweaty Betty piloted, and we expect to have a wider benefit across the portfolio. Today Sweaty Betty stands on better footing to scale over time, and I feel good about the recent work we've done to hone its strategy. I remain excited about the potential and opportunities Sweaty Betty provides for Wolverine Worldwide in the future. And concluding with Wolverine, in the second quarter, the brand's top line revenue trend improved and gross margin expanded over 400 basis points. We expect the brand to now be on a path of quarterly sequential improvement as new product and marketing initiatives begin to impact performance and the effects of comping elevated discounting in the prior year begin to displace. As we've discussed, the brand has been focused on strengthening its Western and premium price collections with products like the Rancher Pro. Over the past year, it has gained well over 100 basis points of market share in the US at prices above $125. To further this effort in June, the brand launched its new USA built workshop wedge, featuring premium full grain leather, a Goodyear welts construction, and price at $250. It sold out on Wolverine.com in less than a day. Just yesterday on the innovation front, the brand announced its new Infinity system, the pinnacle expression of its performance comfort technology, delivering two times the impact absorption and energy return of the leading workbook in the category, with price points between $175 and $155. As the market leader in the US workbook category, the brand continues to elevate product quality and innovation, while simultaneously telling better, more compelling stories and investing in the ground game with its wholesale partners. While we've made good progress for both sweaty, betty Wolverine in the last few months, there's more work to do to get them growing, contributing as we'd expect. With that, I'd now like to hand the call over to Taryn Miller to take you through our second quarter results and how we're viewing 2025 in greater detail. Taryn?

Thank you, Chris, and welcome everyone. Results in the second quarter exceeded our expectations for both revenue and profitability, reflecting the momentum we've built in the business, led by our two largest brands, Merrill and Saucony. Our inflection to growth in the fourth quarter of 2024, which is accelerated through the first half of 2025, underscores that our growth playbook is working in a dynamic market environment. For today's call, I will start with a review of our second quarter results, provide an update on the financial impact from tariffs and our mitigation initiatives, and close with our third quarter 2025 outlook. Starting with our results for the second quarter. Revenue was $474 million, which exceeded the high end of our outlook of $450 million. The over delivery was driven by stronger than expected performance in both the active and workgroups, highlighting underlying momentum and solid execution by our teams. The quarter also benefited from a timing shift between the second and third quarters and approximately $4 million of favorable foreign currency relative to guidance. As it relates to the timing shift, approximately $10 million of wholesale orders shipped in the second quarter that were originally planned for the third quarter. The shift primarily relates to retailers accelerating orders in advance of planned price increases. Active group orders accounted for approximately $8 million of earlier shipments, split evenly between Saucony and Merrill, and the workgroup orders made up the remaining $2 million shift. Ongoing revenue increased .6% compared to the prior year, and on a constant currency basis, revenue grew .4% as favorable foreign currency provided a $5 million benefit compared to the prior year. Revenue growth compared to the prior year was driven by performance in the active group. Saucony and Merrill continued to deliver strong results, reinforcing their momentum, while Sweaty Betty and the workgroup showed sequential improvement relative to the first quarter. From a channel perspective, global wholesale revenue was the primary driver of our performance, with international growth slightly outpacing the U.S. -to-consumer declined less than 2%, reflecting sequential improvement relative to the first quarter. As a reminder, the second quarter of 2024 included $2 million of revenue that did not repeat this year related to the Saucony and Merrill kids business model change. Active group revenue increased 16% compared to the prior year and was ahead of our outlook for high single-digit growth. The active group's -than-expected performance in the quarter was led by Saucony and Merrill. Saucony increased revenue by 42% in the quarter and saw broad-based growth across regions and channels, led by wholesale performance in both the United States and internationally, with -to-consumer up low double digits. Saucony delivered strong results in both performance-run and in lifestyle, reinforcing the continued expansion of its lifestyle distribution footprint with leading retailers. Merrill increased revenue 11% in the quarter, driven by strong wholesale performance. This growth was supported by steady retail sell-through, which led to strong replenishment orders. Merrill also benefited from the previously mentioned $4 million timing shift from the third quarter to the second quarter. Merrill continued to take share as the leader in the high category through its focus on modernizing the trail, supported by the continued success in core franchises, including Moab 3 and Moab Speed 2. Sweaty Betty revenue declined 6% in the quarter, which was better than our expectations. While there is still more work to do to improve the brand's performance, this was a sequential improvement compared to the first quarter and reflects early progress in our efforts to reestablish Sweaty Betty's premium positioning through product and marketing. Thrust margin improved significantly, up over 500 basis points year over year, driven by a better mix of full-price sales. The workgroup revenue grew 2% compared to the prior year. Adjusting for the timing shift of wholesale orders into the second quarter from the third quarter, workgroup revenue would have been approximately flat year over year ahead of our guidance of a low single-digit decline and a sequential improvement compared to the first quarter. Gross margin for the company was .2% in the second quarter, an increase of 410 basis points compared to last year and was in line with our expectations. The year over year improvement reflects our healthier inventory position, a higher mix of full-price sales, and the continued benefits of product cost savings across almost the entire portfolio. The impact of incremental tariffs on U.S. imports in the second quarter was minimal. Adjusted operating margin in the second quarter was 9.2%, an increase of 290 basis points compared to last year and includes continued investment in our brands as part of our growth playbook. Adjusted operating margin was 200 basis points higher than our outlook of approximately 7.2%, primarily the result of SG&A leverage from better than expected revenue. The combination of strong revenue growth and gross margin expansion led to adjusted diluted earnings per share of 35 cents compared to 15 cents in the prior year. Turning to the balance sheet, net debt at the end of the second quarter was $568 million, down $99 million or 15% lower compared to the same time last year. Next, I will provide an update on the financial impact from tariffs and our mitigation initiatives. On our last call in May, we estimated that the incremental tariffs would translate to a fiscal 2025 profit impact of $30 million before any mitigation. This was based on tariff rates of 145% for China and 10% for our other sourcing countries. Based on the tariff rates announced by the US administration on August 1st that go into effect on August 7th, we now estimate the 2025 profit impacts from incremental tariffs will be approximately $20 million before any mitigation. The reduced 2025 profit impact versus our prior estimate is primarily due to lower China tariff rates, down from 145% to 30% as of May, partially offset by increases in other sourcing countries, rising from 10% to approximately 20% starting in August. Our team's successful execution of our strategy over the past 24 months has enhanced our brands and our capabilities, strengthened our financial position, and prepared us to navigate ongoing changes. We've taken strategic steps to mitigate the impact of tariffs and have plans in place that we believe position us to offset the majority of the profit impact this year. That said, we'll continue to monitor how these plans unfold and how the broader trade environment evolves. Prior to the tariff announcements in April, we had already begun executing targeted initiatives to enhance profitability. While external conditions have evolved, our strategy remains consistent. We're accelerating those efforts and actively pursuing new opportunities to strengthen our financial position, preserve flexibility, and support long-term growth. Actions we have taken include leveraging our diversified supply chain and dual sourcing capabilities, negotiating cost sharing with our supply chain partners to alleviate the financial impact of tariff changes, reducing product source from China to the United States from the mid-teens earlier this year to less than 10% by the end of 2025, implementing strategic price increases on select products across the brand portfolio, and capturing discretionary SG&A savings while also continuing to invest in our brands. These efforts are designed to offset tariff-related headwinds while maintaining investment in brand building and long-term growth drivers. Turning to our outlook for 2025. As it pertains to the full year, while we are not reinstating our formal 2025 annual outlook today due to continued macroeconomic uncertainty from global trade policy, I would like to provide some insights into how we are viewing the second half of the year. We're pleased with the -to-date performance of the business, delivering .6% constant currency revenue growth in the first half, which is at the high end of our long-term value creation aspiration. This performance reflects the strong execution of our brand building strategy across product innovation, marketing, and distribution expansion, particularly in Saucony and Merrill, as well as some favorable timing shifts. As we look to the second half, while we expect this momentum to continue, supported by ongoing execution and sequential improvement in Sweaty Betty and the workgroup, we anticipate our -over-year growth to moderate compared to the first half, as the impact of timing shifts normalizes and we lap the initial gains from incremental distribution expansion. In addition, we will be comping a more stabilized second half of 2024 relative to the first half. With respect to the impact of tariffs and our mitigation efforts on gross margin, we expect the majority of the incremental expense to impact cost of goods sold in the fourth quarter, while our mitigation efforts are anticipated to be more balanced between the third and fourth quarters. With that, I will now provide our outlook for the third quarter. Revenue is expected to be in the range of $450 to $460 million, a -over-year increase of approximately .3% at the midpoint on a reported basis and .6% on a constant currency basis. At the midpoint of the range, we expect active group revenue for the third quarter to grow by a -single-digit percentage -over-year, and workgroup revenue is expected to decline by a low single-digit percentage. Adjusting for the previously mentioned $10 million timing shift from the third quarter into the second quarter, active group revenue is expected to grow high single digits, and workgroup is expected to be approximately flat compared to the prior year. Gross margin is expected to be approximately 47%, an increase of 170 basis points compared to last year. Adjusted operating margin is expected to be approximately 8.3%, an increase of 60 basis points compared to last year. And adjusted diluted earnings per share is anticipated to be in the range of $0.28 to $0.32, compared to $0.29 in the prior year. To summarize, our second quarter results and third quarter outlook reflect strong execution of our growth strategy in a dynamic environment. Our brands continue to show meaningful progress, we're driving healthier sales across the portfolio, and our balance sheet is meaningfully stronger than two years ago. We believe the improvements we've made and the actions we're taking to navigate the evolving trade landscape position us for a sustainable, profitable growth. With that, let me hand the call back to Chris before we open it up for questions.

Thanks, Taryn. After two years, Wolverine Worldwide is well underway to becoming a new company, with a clear vision to make every day better. We aspire to become great, consumer-obsessed brand builders, focus squarely on creating innovative, trend-right products, telling differentiated and amazing stories, and driving the business each day as a collective one Wolverine. We've elevated talent throughout the organization by bringing in new leaders with exceptional experience and heightened consumer focus, bolstering our capabilities in areas including product design, merchandising, modern demand creation, and business planning. I believe our team, this new talent, coupled with a solid base of company veterans, is the strongest we've fielded since I joined the company almost 17 years ago. We've also made good progress in equipping our teams with the processes, tools, and environments they need to win. We're injecting more consumer and trend insights into our brands with the collective, opened our first-ever Innovation Hub in Boston this past fall, co-located our active group brands in a refreshed space this spring, developed new integrated planning processes, and we've embarked on the most ambitious tech modernization effort in our company's history. And finally, and importantly, our culture is evolving. Our teams have embraced the challenge to get better every day, to win and work together as one Wolverine. Just last month, I'm proud to say Wolverine Worldwide was officially certified as a great place to work. Based on an independent formal assessment of our team's belief in our strategic direction, sense of collaboration, and pride in the work we're doing together, the first time our company has ever received such a recognition. But while Wolverine Worldwide is already a much different company, there is much more to do. The next chapter is the most important one as we push to realize the full potential of our brands, team, and company, all guided by our vision to make every day better for our consumers, our teams, our partners, our communities, and ultimately for our shareholders. With that, thank you to all for taking time to be with us this morning, and we're happy to take your questions.

Operator? Thank you. The floor is now open for questions. Your first question comes from the line of Jonathan Komp with Bayard. Your line is open.

Yeah, good morning. Thank you. I want to follow up on Sokini, given the strong performance continuing here, and ask about how we should think about the range of outcomes for growth in the second half. And when you think about growth between direct, which obviously had a strong quarter, I think you said low double-dedic growth, but also then wholesale with the new doors plus sell-through and reorders at existing doors you've added here. Just any further detail on sort of range of outcomes and some of the key building blocks?

Thanks, John. Sokini certainly is having a moment, and I'm really pleased with the progress we've made since we really worked to reset that business a couple of years ago. It is broad-based growth happening in both performance and lifestyle happening around the world. I think first and foremost driven by a reinvigorated product pipeline. Innovation is back at Sokini, whether it's -the-spirit product like the Endorphin collection, whether it's focusing on the Core 4, or ability to tap into an archive of lifestyle product. And that is very encouraging. And importantly, it's healthy growth. It's responsible growth. We walked away from tough distribution, from products that had relatively low gross profit, and we took the chance to really reset that business from a strategic standpoint. And then first and foremost, really making sure the product pipeline was firing out of cylinders. And then importantly, our ability to tell amazing stories. This will be a very large investment year in Sokini from a demand creation perspective, really happening around the world. And I think really headline right now about what has happened in EMA over the past couple of years. We're going to be focusing on the key city strategy, activations, the sponsorship of key events, and then just the team really driving the business each and every day. So we're going to begin to lap opening of that distribution. We continue to methodically think about where we can responsibly open more doors. At the same time, as we think about growth for the company, we're in it for the long run. We want to drive long-term, sustainable, profitable, healthy growth and really have a pull model versus a push model. So we'll begin to lap that new door expansion. And really, as a company right now, we are laser focused on sell through what is happening in real time in the marketplace. And then really build a long-term platform for the company to drive sustainable results for the shareholders in the long term. But make no mistake, very pleased with the progress Sokini has made in a very short period of time and the rigorous execution of our new brand building model. But as I said in the prepared remarks, while I'm very pleased with the results Sokini has generated in a very short period of time, I'm very optimistic about the potential. This intersection of performance and lifestyle in a culturally relevant brand driving tip of spear innovation, at the same time pulling on archives, I think is a very powerful combination for us to drive great growth in a very attractive market for the long term for the company.

That's great. And then on gross margin, if you step back, is there anything that's unsustainable other than maybe the short-term disruption from tariffs when you look at operating at the current level of gross margin? And now as you've been at 47% for several quarters, which is the high end of your broader target, are you gaining comfort in the longer term opportunity to get back to double-dated operating margin? Thanks again.

Thanks, John. We, as you pointed out, we're now on the gross margins through the first two quarters at 47.2%. Does reflect the progress we've made on some of the things Chris has talked about in terms of driving higher mix of full price sales, as well as the supply chain initiatives that we've talked about in terms of optimizing our costs. We do expect to continue to see the benefits from pricing discipline as well as those cost initiatives. And we're looking at that Q through guide that we gave approximately 47%. And I think that yes, in short, we are gaining confidence in that aspiration that we've provided in long term of 45% to 47%. While we're not guiding on the fourth quarter, I would remind though that fourth quarter is generally lower than our quarters, just given the nature of the holiday season that we're seeing in the fourth quarter. But overall short answer is yes, gaining confidence given more with the product, putting the marketing behind it and the distribution gains in terms of being able to sustain in that 45 to 47%.

Okay, thanks again.

Thanks, John. Thank you. Your next question comes from the line of Peter Mcgoldrick with Stifle. Your line is open.

Hey, thanks for taking our question. I was curious if you could discuss your go to market strategy and the pathway for returning DTC to growth. How is that channel contribution embedded in your third quarter outlook?

Yeah, good question. I appreciate asking about our DTC business. We are pleased by the progress we're making in DTC, albeit we acknowledge we have more work to go do. We've seen sequential improvement in Q2 over one queue. And I would say by and large, a lot of our brands this year are focusing on becoming less promotional, more consistent in our messaging, and really be a great showcase for our brands as consumers engage with us digitally. So we saw a nice gross margin expansion. I think somewhere approaching 300 basis points of gross margin expansion in total for DTC. And importantly, our biggest brands, I think, sort of outperformed us in total. You know, Saucony saw a nice growth. Sweaty Betty saw some improvement along with Merrill. We do have some acute pain points that we're working to address. But I think the combination of lapping some of the promotional from last year, telling more consistent messaging to our consumers, really showing a great innovative flow of fresh product. And then certainly on the modernization side, we have some updating to do on our tools and we've begun to do that. So DTC is a critically important piece of our business. I think we have to show up when and where consumers want to engage with us, whether it's on their phones or our social channels, whether it's in our great wholesale partners here and around the world, or whether it's in our own stores or own sites. We have to show up consistently great. So pleased that we made progress in the quarter from the first quarter. Acknowledge though that we still have more work to go do. But the team is laser focused on making that both a great growing and profitable channel for us, along with great representations of our brands.

Okay. And then I did want to ask on on sock any really impressive traction there. Can you help us think of the brand performance within the newly expanded doors? How would you characterize sell through and the level of penetration on shelves today versus where you plan to be at your end?

Yeah, good question. I think that that's really what we're focused on. And I think credits to the product pipeline credits the stories and certainly the fact that sock is a great authentic heritage brand. Our ability to open up that new distribution was critically important last year. We're beginning to lap those new door growth. I would say right now we're very focused on sell through. Let's make sure the ground game is in place. There's great marketing in stores. We're engaging with the teams and we're really working to drive sell through. I would say we're in the early innings of opening up that potential distribution. If we look at just total door counts and the doors that we're in at the same time, like I said earlier, we really want to make sure that we're driving a pull model versus the brand versus the push model for the brand. So, as we've seen that door expansion, we're very focused on it. We're encouraged by it. But every single week we obsess about the sell through rates to make sure that we have traction there. So there's a lot more doors that we could open. We're not laser focused on that right now. We're working to build a platform for long term sustainable growth in a responsible way. And that that really is what will get the Wolverine worldwide engine really moving and humming in order. All right. Very good. Thank you. It's

bitter. Your next question comes from the line of Lauren Vasilevsky with BP in Paribas. Your line is open.

Good morning. Thank you very much for taking my questions. I wanted to ask about talking as well. I recognize, Chris, that you will start to lap those 1300 doors next year. But curious to know what your conversations are like for the spring 2026 orders. And second, I know that the locker is now offering the lifestyle offering. But is there an opportunity at some point in time for Dick's Sporting Goods to offer sockiness performance offering?

Good question. I appreciate the attention on talking. Again, I think that team has been able to generate tremendous momentum in a very short period of time. And I would take you back a couple of years ago. It really was a full reset of that business. And I think we took the time to really think about what the potential sock and he had what we thought the market opportunity was where the competition sat and then the various levers that we could pull. So we are very focused and thankful for the doors that we've opened. And again, I think that the notion of broad based is important. We're seeing growth in both performance category. Again, whether it's tip of fear product like the endorphin, whether it's the core for at the same time, what we've seen, what we've seen in lifestyle expansion. So, you know, we'll begin to we're actually beginning to lap that new door growth last year as we sort of got to get into back to school and into holiday. We're very focused on the sell through. I would say our teams are staying very close to the wholesale partners in which we've opened and then also working to build hopefully responsible responsible responsible growth plan. I'm not going to go into that in detail here, but I was out in market in this last quarter. I've been able to travel to London, Paris, Tokyo. I was in Boston just last week. I was in New York a couple weeks before that. And it's great to see talking showing up on their shelves showing up in those windows and then just talking to the store staff that are wrapping our product. Just the enthusiasm that sock and he has been able to generate. So again, I while we're pleased with the progress and a record second quarter for the brand. I do think we remain very optimistic about what the future potential is for sock and he both what it means to the Wolverine worldwide portfolio what it means for our shareholders and certainly what sock and he can mean the greater landscape of sporting goods.

Very helpful and then Merrill another great quarter double digit growth here with the modernize the trail strategy. I recognize Chris, you don't guide by brand anymore for the quarters out. But why should we see a deceleration the back half if there's momentum in so many different product categories and then Karen I recognize. Last year you had an operating cash flow number of 180 million dollars. I think there was a working capital benefit from from inventory. But this year you're obviously operating profit net income is going up. Is there any reason why we couldn't see a similar rate of operating cash and what I mean by what I'm leading to is where do you think leverage goes by the end of this year?

Yeah, I had the mayor of questions first and turn over to Karen. I appreciate asking about Merrill. I know a lot of headlines are going to be about talking to growing 40%. But you know, Merrill has four consecutive quarters of growth. I think kind of the past 11 quarters. We've gained share. And we've done it in a really responsible way while adding gross margin and importantly, it's on the backs of new product introductions. You know, obviously the Moab three continues to be great. That is the original hiking boot. But what we've been able to do on the Moab speed to the agility peak five, the speed Ark Mattis. All of those new introductions are helping us to make the trail lighter, faster, more modern and really responding to the consumers and really, really being innovation. At the same time, we've been very thoughtful in the distribution in the US and I give the Merrill team credit. The Merrill US sales team credit for how they've really thought about the US distribution landscape with doors we want to show up in. How do we show up in those doors? Great. I was in one of our best wholesale partners last week and I've never thought Merrill has looked better than what I saw last week. So credit to our partners for getting behind Merrill credit for the growth that we're driving the investments we're making making in the ground game. So at the same time, encouragingly, you know, we've seen the height category under a lot of pressure for the past two years. We actually saw it get a little bit better last quarter. And if that is a long term trend force, certainly that bodes well for Merrill's prospects. Having gained share for the past two years, being the market leader, the retrenchment we've done to improve point to distribution, new products we brought gives us a lot of reasons to be encouraged about Merrill's future trajectory.

Great. And then to answer your question in terms of leverage, where are we going? I think overall I would answer the question in the context that we are really focused on delivering sustainable long term profitable growth. And you can see that in the cash flow. You mentioned 2024. We did say that we did expect in terms of when we looked at our capital allocation, it's remained consistent. We remain focused in terms of investing in the business as well as continuing to pay down debt and maintaining the dividend on in terms of our priorities of capital allocation. And when I speak to investing in the business, we had identified earlier this year that we did expect after getting our inventory to much healthier levels, we expected a modest investment and working capital this year. And you can see part of that in the second quarter. You saw inventory was a bit higher. That was largely primarily stocking. If you recall last year, we said we'd probably leaned in a bit too much on the inventory as we were chasing demand. And so we are making a very strategic and thoughtful choice about where we're investing in the inventory to support the growth regarding. And then the second is on the priority was continuing to pay down debt. Our leverage, our bank defined leverage at the end of the second quarter was 2.9 times. That compares to 3.9 times a year ago. So again, continued no change in capital allocation priorities and progress against both of them so far this year.

Very helpful. Best of luck. Thanks a lot.

Your next line or your next question comes from the line of Sam poser with Williams trading. Your line is open.

Thank you very much. I want to talk to you a little bit about the SGA and your your your marketing to bank creation spend. How much is how much is that elevated? It looks like it's implied to be elevated again. And then how much. You're doing a lot of this. Are you doing most of the spend for long term brand story. And and I'll ask you that first. My follow up.

I'll let Taryn dig into some of the SGA detail, but I'll answer the last part first. I think absolutely, Sam. I think we I think previously we sort of got caught in a in a cycle of sort of lower conversion focused marketing and our brand spend at the upper end of the funnel was was was compressed. And I think we were chasing revenue a while ago and really focusing on conversion to try to help stimulate that. And that potentially had a short term benefit, but to the long term cost cost of the brand. So we're working to reverse that. We do have a new stable of CMOs in the building, which is great, which bring a new perspective that how we want to lead our brands. And as we sort of emerged from the turnaround and have additional financial wherewithal to invest in our brands, we're very focused on on spending up and down the funnel and really working on awareness and affinity for our brands. And I think those things are beginning to take hold. And I think you're seeing that in in Saucony. I think you're seeing that in sort of an all time record sort of Google search interest. You know, we follow Google search interest as a proxy. And we've seen some positive metrics for Maryland Saucony as we thought differently about how we spend. So definitely a different approach to it. I'm trying to take a longer term horizon set to how we build it, build and protect our brands at the same time, how we're sort of managing responsible growth for the company as well. I'll let Taryn answer the .N.A. question more specifically.

Yeah, the build I would have is that I think it's important to note that our if you look at the second quarter, our gross margin increased four hundred and ten basis points and our adjusted operating margin increased two hundred and ninety basis points year over year. As Chris said, and that we have stated as part of our strategy, we are reinvesting a portion of the gross margin gains in key areas of the business that are going to fuel that growth for this year. And as Chris said, long term fueling the growth and it is, you know, you ask a specific question about where it's investments in marketing and our talent. Chris just mentioned a few of those in tools such as our integrated business planning as we're navigating, which has been a benefit as we're navigating the current macro environment and processes that are really going to be able to sustain profitable growth is the key areas. I would call out both in terms of where you're seeing a bit of that elevated .N.A.

Thank you. And then just to follow up, Chris, the top of funnel marketing, you know, longer term, did you you beat your sales, your guidance by quite a lot. Did you see short term results from those? You know, did you see that opposite impact where you saw short term sales benefits from the top of funnel marketing?

Sorry, Sam.

Oh, go ahead. Sorry.

I think I think we certainly did. I think, you know, certainly as we sort of have been thinking about running brands differently and you and I have talked about this, you know, how we lead brands, how we think about the product pipeline, how we think about the man creation, where we think to spend, how we think about distribution segmentation. I think we certainly think those are the right long term things to do for the company for our brands at the same time. I do think we are seeing a short term lift. And I think importantly, as we think about managing brands in a portfolio, as we think about capital allocation, where we spend, how we spend, we have to think about where those brands product pipelines are. You know, where do we sit? How is the relationship with wholesale partners? So I certainly think that it's in the long term best interest of our brands and being great brand managers, which we aspire to be at the same time. Certainly, we're encouraged by the short term results for posting this order.

Does that mean though, did you guide next quarter the same way where it looks like there's increased SG&A spend, but you didn't work in the short term, the potential short term revenue impacts of that? Because clearly you didn't work that into the QQ guidance.

In the third quarter guidance?

Yeah.

I think it's the third quarter at the midpoint you're seeing that SG&A would be around that 38.7 and that does reflect 120 basis point increase relative to prior year. I think in terms of current, we absolutely expect in terms of it driving near the combination of near term, but as well as long term growth.

And then lastly, what are you, what are you, your interest expense for the balance of the year? I mean, is it is it going to average around 8 million a quarter? Is that right? Or is it going to drop down now that you're saying your net debt's coming down?

I'd say it was largely unchanged interest expenses 8 and a half million in the second quarter.

Thank you very much. Continue to success.

Thank you,

Sam. Thank you. And as a reminder, please limit your questions to one initial and one follow up question. Your next question comes from the line of Dana Telsey with Telsey Advisory Group. Your line is open.

Hi, good morning, everyone. And so nice to see the progress. Karen, if you think about the timing shift that you talked about, is there potential for additional timing shift in the fourth quarter, the third quarter? What are you seeing from that wholesale channel? And Chris, given the focus always on earning the place on the shelves, how are you thinking of new product penetration versus core? And how do you see pricing changing in this new world of care? That is have a quick follow up.

Yeah, I think the audience are the first part of your question. The timing shift that we called out from the in the second quarter from the third quarter to the second quarter, that 10M dollars at the current guidance that we're giving. I wouldn't call it any other timing shifts in that number, Dana.

Yeah, and I did to answer your question about product and earning yourself. I mean, that's that's absolutely right. You know, we still do three quarters of our business through wholesale partners. And we do have to earn our way in the shelf and we do have to displace the competition. And I would say, you know, we're I'm spending a lot of time at retail. I was walking retail just last week and how our brands are showing up in our important wholesale customers. We look much I feel we feel we look much better today than we did a year ago and certainly two years ago. I spent a full day walking retail last week and just how we show up in the shelf. The fact that we're showing up in the windows again of key partners, I think is very encouraging. Again, if the onus comes to right product, innovative, trend, right price, right colored, right place, right product that solves consumers problems. And then importantly, we also have to have brand and we have to have the right brands with the right messaging, differentiated storytelling. And then we have to invest in our partners to make sure we've got a ground game, make sure they're helping support them and then assess about sell through. So I certainly am encouraged by the progress you've made. There is certainly more work to go do. But the brand is the brand our brands and company, I think, are in a fundamentally different place today than we were just a few short years ago.

And is pricing changing at all given care, whether in DTC, e-commerce or wholesale?

Yeah, I mean, I think you're hearing a lot about about the price impacts. I think the clarity around tariffs is getting somewhat less murky than it was at the same time for the downstream effects on the economy, consumer sentiment, and ultimately consumer spending. It's something that we're paying attention to. We did selectively take some price increases at the end of June. We're closely monitoring that both on our own sites, plus what's happening on the shelves, sell throughs and all the data we get. At the same time, looking to see what the competition has done and where the competition sits in pricing. I think we'll get more clarity as we work through the back to school season and sort of understand how all that shakes out. But certainly the price increases we took, the impact on the consumer, the macro consumer environment are things that we're paying very close attention to. With all of that said, I'm very thankful that we've been able to get the work done over the past couple of years to shore up the balance sheet to get our brands growing again to do the significant improvement in margin. I think we're in a much better position to withstand these current challenges and hopefully emerge better brands and better company on the other side. Thank you. Thanks, Dana.

Your next question comes from the line of Mauricio Serno with UBS. Your line is open.

Great. Good morning. Thanks for taking my questions. I guess just to start, could you elaborate on what you've seen so far since you've selectively raised prices at the end of June across the business? Any high level commentary on whether you've seen any reaction from the consumer? And just taking a step back and seeing all the products that you've seen and stuff and it's very nice. How far along would you say you are on the turnaround of the other brands, particularly Mero and Sweaty Betty?

Great question. I would say we're still very early days of the price increases. I think the wholesale customers that we went to said that they largely expected brands to increase price and that was what we've heard. I think we're still too early to sort of render judgment on where the consumer sits and how those have been adopted. As it relates to the other brands, I would contend a little bit that we're turning around Mero. Mero has got four consecutive quarters of growth. We've got 10 of 11 quarters of market share gains, significant gross margin expansion. So I would say Mero and Saucony have sort of rapidly deployed our new brand building playbook and I think we're encouraged by the progress those brands have made in a short period of time. As it relates to the work group and Sweaty Betty, we did see sequential improvement this quarter versus last quarter, albeit self-admittedly not generating the results that we would expect. I think we're making progress on the work group product pipeline. We've got a new Chief Product Officer and I think he's done a great job thinking about newness and innovation. We had a Made in the USA collection that dropped a few weeks ago that sold out in a day. We just launched the new Infinity collection yesterday to really good reaction. I was getting some e-commerce sales last night, which is fantastic. And then I've been able to spend a lot of time with Sweaty Betty over the last quarter. I've been to London twice, really thinking about the strategy and where we fit what's most important in sort of the next couple of years with that brand. So I feel good about the work, the strategy work. I feel good about sequential improvement. We've seen the product pipeline, the work group is getting better. And I do think we're bringing innovation to Sweaty Betty and the new products we're dropping, the new colorways and the new Prints. We dropped some outerwear a couple of weeks ago on our stores in the UK. Those have all been positively received. So certainly more work to go do, but I do think we are on the right path. And I certainly think there are things that we've learned from Marilyn Saucony that we can apply to the balance of the brand to get everyone moving in a more positive direction.

Very helpful. And one quick follow up on the tariff impact that you provided, $20 million. Could you elaborate on how much of that falls in Q3 and how much in Q4?

Yeah, I didn't get specifics more than to say that more of it is expected to be in the fourth quarter than in the third quarter. Just given the time of when the higher rates went in as well as our inventory that we had that would sell through. So the fourth quarter will be our first full quarter of seeing the higher tariffs.

So that means that third quarter, there's part of it that doesn't have a tariff impact?

Correct. So again, I didn't give the specifics. Just more to say it's more weighted. We will see some and we expect to see some in the third quarter. We expect to see more of the $20 million in the fourth quarter.

Very helpful. Thank you. Thanks, Reese.

Yes. Your next question comes from the line of Mitch Comets with Seaport Research Partners. Your line is open.

Yes, thanks for taking my questions. I've got one on Saucony, one on Marilyn. So I'll start with Saucony. When you look at the second quarter growth, can you say how much of that, either the percentage or the dollars, was New Doors versus same store? And then when you think about the potential for Saucony growth in the back half, is it fair to kind of assume that the same store momentum is unchanged? Is just that there's less benefit from the New Doors? Is that how you're thinking about it?

Good question. I would say well less than half of the growth at Saucony during the second quarter was driven by New Door expansion. And when we talk about that, that's why in the pre-arrangement I talk about broad-based, you know, regions and channels, performance and lifestyle, that there's not just one thing driving the Saucony engine right now, which gives us a lot of confidence in where that brand is and certainly what that brand can be. And I say right now we're very focused, like I said previously, just really focused on sell through and then really obsessing right now about the product pipeline. How do we follow up the great work that that team has done to bring newness and innovation and reinvigorate that product pipeline to make sure that we can build a long-term model. So encouraged by the growth, it is broad-based regions and channels. Other metrics that we look at, brand search interest, it's certainly encouraging. And then as we begin to develop an order book for first half of 26, visibility into what that order book looks like. And then as we continue to begin to bring new activations online, I think early days of the turnaround, we took a chance with the London 10K as part of our first key city strategy. Those results have been phenomenal. Our partner in Japan has done a great job, a new partner in Japan. We moved our Saucony relationship to our Merrill partner in Japan. And then they've done a great job opening a Saucony store in Harajuku. And like I said, we're going to activate in London with a shortage 10K this fall. And then we'll move to France with the Eiffel Tower 10K in December and really begin to really activate this key city strategy, which has really generated a lot of momentum over the last year. So that's a lot for our brand.

Maybe before I ask about Merrill, as a quick follow up, Chris, you referenced search again, and you've done that a couple times on this call. From what I've seen, there's been an uptick for back to school. Is there anything you can say about Saucony performance for back to school today?

I can't really comment on Intra quarter. I think back to school is still relative to the early days. I can tell you every Tuesday here, the company sort of spends the full day just herniating over our results. Sell through what's happening, shipments, what's happening at DTC. And we're in the middle of it. I grew up as a retailer, so back to school and Christmas were the busiest times of the year. And I'm sort of excited, get excitement and energy from us sort of pivoting to the back half of the year. But certainly we're pleased with the momentum we've been able to generate in the first half of the year. But eyes wide open to the back half of the year, delivering a solid year for the company and then carrying momentum into 26.

I guess my question on Merrill is more about the segment. Actually, you talked about some inflection there and I'm curious if you could elaborate that more just a function of that the segment's been under pressure for so long that eventually things kind of just find the bottom or is there something that's actually driving more consumer interest in the hike category?

That's a great question. Certainly, hike has been under pressure for a couple of years and someone once told me you can't fall off the floor. But hike has been under pressure for a couple of years. We did see it get better last quarter, which is great. So sort of like down low single digits versus down high single digits or double digits. Whether or not it's just sort of comping bad business and it has found a floor is to be determined. At the same time, I do think there is a responsibility and onus onus on the market leaders to bring innovation and bring life to categories. And that's why I think as Merrill as the clear market share leader, really working to modernize that hike category, lighter, faster, more athletic and then sort of some of the great growth we've seen in the Moab speed too. And that's why I'm encouraged by the speed Archimedes and what that can potentially mean. So I think your question is well noted. It has been under pressure. It's been sort of twice anniversary in those tough times. But certainly that category finding bottom beginning to grow again, I think is good for everyone and certainly should be good for the market leader.

Thank you.

Thanks Mitch.

Your next question comes from the line of Anna and DRIVA with Piper Sandler. Your line is open.

Great. Thanks so much and congrats again. Great results. We had a follow up on Merrill. Great to see that momentum. Just any additional color on how international versus domestic performed for the brand. Chris, I think you mentioned Asia Pac accelerated. How big is international for Merrill and how do you guys think about the potential there? And to Taryn, a follow up on gross margins. You've called out the supply chain initiative as a benefit. I think for a few quarters now. Can you talk about sustainability of these going forward? And just curious, where are the two big brands in terms of their historic markdown rates? Just as we think about additional opportunity with full price selling ahead. Thanks so much.

Yeah, I appreciate the question and thanks for the comments. We'll attempt to answer those. A couple of things you asked. We generally don't disclose that at the brand level. So we'll be sensitive there. International was good for Merrill. US wholesale was good. We saw improvement in our DTC business. Our Merrill stores domestically performed very well. But a couple of regions internationally actually outperform the US. I was in Tokyo just last month and spent time with our partner there. Merrill looks so much different today than it did just a couple of years ago. It's lighter, faster. I was walking the streets of Harajuku. I was in Shibuya scramble. Just seeing Merrill show up on young consumers in Tokyo was very encouraging. I was seeing the right shoes. I was seeing Moab Speed 2. I was seeing Speed Ark Mattis. I was seeing Barefoot. I was seeing Rapps, which is encouraging. And the fact that we've got Merrill's three-story flagship in Harajuku. We've got a one TRL store in Shibuya scramble. It gives us a lot of encouragement. And then let's not forget about EMA. I think EMA, our strategy following the key city strategy that we deployed in Saucony has worked. I think Merrill became the leader in outdoor performance footwear in France last quarter, which is great, overtaking some very well-known and some other great brands. So I think a contribution internationally for Merrill is great. But at the same time, I don't want to dismiss the great progress we made here in the US as well.

And as it relates to gross margin, what I would call out is we're not looking at any one area. When we're looking in that 45 to 47% of our aspirations, it's really the, we're working with our teams as we're looking at capabilities across. So the better mix, the more full-price sales. And I think there is still more room. There's more premium product. We talked about whether it is in Saucony, whether it's in Merrill, whether it's in Swayty Betty. We're talking, and in the work group, we're talking about how do we get more premium product, which helps in terms of the gross margin as well. And then on the supply chain piece, I'd say we're consistently looking for opportunities in supply chain, the exact nature of it shift over time, meaning early on it was some sourcing that worked. The team did a great job in terms of executing. So

we can

then also, I was more recently with the team in Vietnam, and how do we look at more, how do we look at our design in terms of making sure that we're optimizing how we're building the design as well as we're building those premium products. So for gross margins in totality, I would explain it that we are looking at multiple levers in terms of being able to drive long-term sustainable gross margin. And the exact lever in one quarter or one year can shift, but overall looking at sustainable margins.

Okay, terrific. Thank you so much. And best of luck.

Thanks, Anne.

And your final question comes from the line of Ashley Owens with KBank. Your line is open.

Hi, great. Thanks for taking my questions. Maybe just to round out Saucony and focus higher level. Given the broad-based momentum you've been observing, could you discuss some of the further capabilities you see within the brand compared to maybe a year, year and a half ago when innovation really started to ramp back up and how that's influencing your decision to further invest behind the brand? I guess what ending would you say we're in in terms of innovation and newness and where you see additional white space moving forward? Thanks.

That's a great question. I appreciate you asking that. I mean, I think the Saucony story is a couple years in the making. I think we really took the opportunity in 23 and 24 to really reset that business and really think hard about where the brand sat, pulling on 100 years of history. At the same time, the opportunity in the marketplace and then think about what we should be focused on. And I think we've historically may have been focused on smaller niche parts of the business. And I think certainly our product pipeline hasn't always been full as it is today. And then certainly our ability to drive demand. So we took the opportunity to really reset that business, a new strategy. We brought in several new team members. And first and foremost, I want to give the product team credit. Really got back to innovation and really both thinking about tip of spear elite running at the same time, take what had been a very sort of broad product range in a product line architecture and really focus on a few core styles. And then democratize innovation. Bring innovation not just for marathons, but bring innovation down to someone who's going to go try to run their first 5K. And so I think that's a really intense focus on democratizing innovation, maintaining tip of spear innovation around endorphin, focusing on the core four. And then really thinking about color and materials and how we show up at the same time, really tapping into that lifestyle piece of the business. Unfortunately, for 100 year old brand, we have a tremendous product archive that we can pull from and then really injecting energy and excitement in that lifestyle piece. So both through collaborations with some amazing collaborators that we've been able to partner with at the same time, how do we then take that and really take that hot brand heat that we can generate and really make that a commercial success? And we're beginning to see that as it relates to sort of what inning we're in. I still think we're in the early innings because I think we're just getting momentum now in that business. And I think certainly we're building confidence and certainly to think about the markets that our brand can address. One of the biggest markets that we can go build brands in is we're softening operates. It has a great 100 year history. We've got that product engine moving. I'm really proud of that product team. We have a new CMO in place. Think about how we drive demand. And we brought some good leaders. We brought new leadership into our region, which helps craft our key city strategy and that momentum is building. And as I think about where softening can play in the future, there's a lot of opportunities for us to think about that business moving forward beyond just where we sit today. Other footwear categories we can plan and certainly apparel and accessory opportunity beyond because we're largely a footwear only brand. I will tell you, we've got a fairly small apparel assortment in our Covent Garden store and I was there the week of the 10K. The penetration of a fairly small apparel assortment was amazing, which only gives us more confidence that when we create great products, we package them to great stories. Consumers want to participate in our brand. So I would say that we're in the early innings of softening, but certainly encouraged by an all time record revenue second quarter, phenomenal gross margin expansion. And I'm really proud of what that team has been able to do. So I remain, I said in February of 24, I was bullish on softening and thankfully that team has stood and delivered.

Great, that's super helpful, Coller. Maybe just lastly, now that we're back to a place of inventory growth, we could just speak to how we expect inventory growth to evolve relative to sales growth during the back half year from a modeling standpoint. Thanks.

Yeah, I think we didn't give, we typically only share cash or inventory objectives on a full year, Ashley. And so I don't have any specifics other than to say that, again, what I would point to is that the inventory growth that we have seen in the second quarter was primarily behind softening as we were getting, being able to support that demand. So to a lesser degree, there's some currency and tariffs in there as well. But primarily it's more really as we had expected to building in the inventory to support the demand we saw in softening. So I wouldn't call anything out on the full year other than just to remind where we're at in the second quarter.

Got it. Thanks and best of luck for the back half.

Thanks

Ashley.

There are no further questions at this time. This does conclude today's conference call. You may now disconnect.