Net Sales: Decreased 6% year-over-year to $770 million, exceeding the high end of guidance due to earlier timing of spring wholesale shipments.
Direct-to-Consumer (DTC) Net Sales: Increased 3%, with growth led by brick-and-mortar.
Wholesale Business: Declined 14% year-over-year, reflecting lower spring ‘24 orders.
Gross Margin: Expanded 190 basis points, benefiting from lower inbound freight costs and favorable channel mix.
SG&A Expenses: Essentially flat, with higher DTC expenses offset by lower supply chain and variable demand creation spending.
Diluted Earnings Per Share: Decreased 4% to $0.71.
Inventory: Down 37% year-over-year, signaling a strategic reduction plan.
Future Guidance
Net Sales Outlook: Reiterated expectation of a 2% to 4% decline for the full year.
Gross Margin: Expected to expand approximately 80 to 120 basis points to 50.4% to 50.8%.
SG&A: Expected to be between 43% and 43.4% of net sales.
Operating Margin: Projected at 7.7% to 8.5%.
Diluted Earnings Per Share: Outlook modestly increased to $3.65 to $4.05, driven by higher interest income, licensing income, and a lower share count.
Operating Cash Flow: Expected to be at least $350 million for the year.
Profit Improvement Program: On track to deliver $75 million to $90 million in cost savings this year as part of a larger goal to achieve $125 million to $150 million in savings by 2026.
Trends, Market Conditions, Sentiment
Inventory Management: Emphasis on reducing inventory levels and improving turns, with further improvements anticipated.
Market Challenges: North America identified as the most challenging market, with consumers facing inflationary pressures and a cautious retail ordering environment.
International Growth: Stronger trends and growth potential highlighted in China, Japan, and Europe, with expectations for continued expansion.
Product Innovation and Strategy: Focused on attracting younger consumers and driving growth through innovative products, such as Omni-Freeze, Omni-Shade, and the Omni-MAX system.
E-commerce Strategy: Shift towards managing promotional activity to enhance brand expression and consumer engagement online.
Operational Efficiency: Achieved through disciplined expense management and a strategy to drive cost efficiencies.
Notable Quotes
”In this challenging environment, we continue to take a disciplined approach to expense management and our commercial teams are working to maximize sales across all channels.” - Timothy Boyle
”Our fortress balance sheet enables us to take a thoughtful approach to unlocking the long-term growth and profit improvement opportunities we see across the business.” - Timothy Boyle
”I’m proud of our team’s efforts to navigate the supply chain challenges over the last several years, while generating healthy gross margins.” - Timothy Boyle
”We are implementing strategies across the portfolio to accelerate the business…we win in the marketplace when we target the right consumers with our innovative products.” - Timothy Boyle
”We are reiterating our full year net sales outlook while modestly raising our diluted earnings per share range.” - Timothy Boyle
