Q2 2024 Amer Sports Inc Earnings Call

August 20, 2024

Speaker Change: Thank you for standing by and welcome to the Amer Sports second quarter fiscal 2024 earnings conference call.

Unknown Executive: Ernings Conference Call.

Operator: earnings conference call. All lines have been placed on mute to prevent any background noise.

Unknown Executive: All lines have been placed on mute to prevent any background noise.

Unknown Executive: After the speaker's remarks, there will be a question and answer session.

Operator: After the speaker's remarks, there will be a question and answer session.

Speaker Change: All lines have been placed on mute to prevent any background noise.

Operator: If you'd like to, ask a question during this time, simply press star followed by the number one on your telephone keypad.

Unknown Executive: If you would 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 the star one.

Speaker Change: After the speaker's remarks, there will be a question and answer session.

Operator: If you would like to withdraw your question, again, press the star one.

Speaker Change: If you would 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 the star one. Thank you. I'd now like to turn the call over to Omar Saad, Vice President of Finance and Investor Relations. You may begin.

Operator: Thank you.

Unknown Executive: Thank you.

Speaker Change: Hello, everyone. Thanks for joining Amer Sports earnings call for the second quarter of fiscal year 2024. Earlier this morning, we announced our financial results for the quarter ended June 30, 2024, and the release can be found on our IR website, investors.amersports.com.

Unknown Executive: I'd now like to turn the call over to Omar Saad, Vice President of Finance and Investor Relations.

Speaker Change: 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, and are subject to certain risks and uncertainties that could cause actual results to differ materially.

Speaker Change: 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.

Operator: I'd now like to turn the call over to Omar Saad, Vice President of Finance and Investor Relations.

Operator: You may begin.

Speaker Change: We'll begin with prepared remarks from our CEO , James Zheng, 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 review at both the group and segment level, and also walk through our updated guidance.

Unknown Executive: You may begin.

James Zheng: Hello, everyone.

seuart hazalon: Arc'teryx CEO Stuart Haselden will join us for the Q&A session.

James Zheng: Hello, everyone.

Speaker Change: With that, I'll turn the call over to James.

James Ang: Thanks, Omar. We are pleased to announce strong second quarter results with sales margin and the EPS ahead of our guidance.

James Zheng: Thanks for joining Amer Sports earnings call for the second quarter of fiscal year 2024.

Speaker Change: The momentum behind our unique portfolio of premium sports and outdoor brands continues, and we are generating top tier growth and margin expansion within our industry.

Speaker Change: Our global end markets are healthy and growing, and we are taking market shares, positioning us to deliver another record year in 2024.

James Zheng: Earlier this morning, we announced our financial results for the quarter ended June 30, 2024. And the release can be found on our IR website, investors.amersports.com.

James Zheng: Thanks for joining Amer Sports earnings call for the second quarter, of fiscal year 2024.

Speaker Change: We generate 16% sales growth in Q2, or plus 18% on a constant currency basis led by our flagship brand, Acterix.

James Zheng: Earlier this morning, we announced our financial results for the quarter ended June 30, 2024. And the release can be found on our IR website, investors.amersports.com.

James Zheng: 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, and are subject to certain risks and uncertainty that could cause actual results to differ materially.

James Zheng: Please see the safe harbor statement and our earnings release and SEC filings.

Speaker Change: Although we benefit from a two-point shift of wholesale shares from 3Q into 2Q, our underlying growth momentum is clear. We achieved nearly a 3% adjusted operation margin, also well above our expectations.

Speaker Change: As we continue to enjoy strong gross margin expansion driven by the pricing power of our brands and a healthy makeshift toward our highest margin franchise activity.

James Zheng: A quick reminder to everyone that today's call will contain forward-looking statements within the meaning of the federal securities laws.

Speaker Change: Looking forward, several facts give me confidence for the rest of 2024 and beyond.

James Zheng: These forward-looking statements reflect our current expectations and beliefs only and are subject to certain risks and uncertainties that could cause actual results to differ materially.

James Zheng: Please see the Safe Harbor Statement in our earnings release and SEC filing.

James Zheng: We'll begin with prepared remarks from our CEO, James Zheng and CFO, Andrew Page, followed by a Q&A session until approximately 9 a.m. Eastern.

James Zheng: 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.

Speaker Change: First, we own and operate a unique and valuable portfolio of premium outdoor and sports brands.

James Zheng: James will cover key operational and brand highlights and Andrew will provide a financial review at both the group and segment level and also walk through our updated guidance.

James Zheng: Arc'teryx CEO Stuart Haselden will join us for the Q&A session.

Speaker Change: Each one is fueled by technical innovation and positioned at the pinnacle of its respective segments.

James Zheng: With that, I'll turn the call over to James.

Speaker Change: Our brands have high engagement, conversion, and satisfaction with consumers everywhere, but are still relatively small players on the global stage with significant room to grow.

James Zheng: Thanks, Omar.

James Zheng: We are pleased to announce strong second quarter results with sales, margin, and the EPS ahead of our guidance.

Speaker Change: Second, Arc'teryx is a breakout growth story with unprecedented growth and profitability for the outdoor industry, and it is charting new territory with its disruptive DTC model and strong competitive position.

Speaker Change: Activist world-class products plus the authentic and the deep connection with consumers is allowing us to have strong success in large new categories such as footwear and women's and also incredible momentum across all major geographies.

Speaker Change: Third, Solomon Wilson and all of our other brains are also healthy.

Speaker Change: They have long-standing authentic heritage, premium positioning, and high-performance products.

Speaker Change: Both Thurman and Wilson have leading market share within their heritage equipment business.

Speaker Change: but still have very small soft goods franchises with large growth opportunities ahead, especially in Salomon Forward.

Speaker Change: and the fourth.

Speaker Change: where other consumer companies are having challenge in Great China. We generally more than 50% growth there, and we continue to well outperform the market. Importantly, we are seeing strong momentum across all of our three big brands.

James Zheng: The momentum behind our unique portfolio of premium sports and outdoor brands continues.

James Zheng: And we are generating top tier growth and margin expansion within our industry.

Speaker Change: A few reasons I'd like to highlight why we are doing so well in China.

James Zheng: Our global end markets are healthy and growing.

James Zheng: And we are taking market shares, positioning us to deliver another record year in 2024.

Speaker Change: Number one.

Speaker Change: Our brands compete in one of the healthiest and fast-growing consumer segments in China, the premium sports and outdoor markets. The outdoor trend in China is very strong.

Speaker Change: Even beyond the traditional male consumers, the outdoor category is attracting younger consumers, female consumers, and we also see more luxury shoppers spending in our categories.

Unknown Executive: All lines have been placed on mute to prevent any background noise.

Operator: All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you would 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 the star one. Thank you.

Speaker Change: Second, the China consumer landscape today has evolved into a market of winners and losers, with some brands doing extremely well and others underperforming.

Unknown Executive: After the speakers remarks, there will be a question and answer session.

Unknown Executive: If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad.

Unknown Executive: If you would like to withdraw your question again, press the star one.

Speaker Change: Our still small, specialized brands with deep expertise and high quality and performance resonate strongly with Chinese shoppers.

Unknown Executive: Thank you.

Omar Saad: I now like to turn the call over to Omar Saad, Vice President of Finance and Investor Relations. You may begin. Hello, everyone. Thanks for joining our sports earnings call for the second quarter of fiscal year, 2024. Earlier this morning, we announced our financial results for the quarter ended June 30, 2024, and the release can be found in our IR website, investors.omersports.com. A quick reminder to everyone that today's call will contain forward-looking statements within the meaning of the federal security's laws.

Speaker Change: Thirdly, and the most important, we believe we have the best team in China. Our deep expertise and a unique scalable operating platform gives us a significant competitive advantage across portfolios.

Omar Saad: I now like to turn the call over to Omar Saad, Vice President of Finance and Investor Relations.

Unknown Executive: You may begin.

James Zheng: We generate 16% sales growth in Q2, or plus 18% on a constant currency basis led by our flagship brand, Arcteryx.

James Zheng: We'll also discuss certain non-IFRS financial measures. Please refer to our earnings release for important information regarding such non-IFRS financial measures, including reconciliation to the most comparable IFRS financial measures.

James Zheng: Although we benefit from a two-point shift of wholesale shares from 3Q into 2Q, our underlying growth momentum is clear.

James Zheng: Hello, everyone.

Omar Saad: These forward-looking statements reflect our current expectations and beliefs only, and 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 FCC filings. We'll also discuss certain non-IFRS financial measures. Please refer to our earnings release for important information regarding such non-IFRS financial measures, including reconciliation to the most comparable IFRS financial measures. We'll begin with prepared remarks from our CEO James Eng 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 review at both the group and segment level and also walk through our updated guidance.

James Zheng: We achieved nearly a 3% adjust operation margin, also well above our expectation. And we continue to enjoy strong gross margin expansion, driven by the pricing power of our brands, and a healthy makeshift toward our highest margin franchise, Acura.

Speaker Change: Before Andrew's financial discussion, I'd like to share some key highlights from our segments in Q2.

James Zheng: We'll 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 Zheng: Thanks for joining our sports earnings call for the second quarter of fiscal year, 2024. Earlier this morning, we announced our financial results for the quarter ended June 30, 2024, and the release can be found in our IR website, investors.omersports.com.

Speaker Change: Starting with technical apparel, which is led by our fastest-growing and now largest brand, Actarix.

James Zheng: A quick reminder to everyone that today's call will contain forward-looking statements within the meaning of the federal security's laws. These forward-looking statements reflect our current expectations and beliefs only, and 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 FCC filings.

Speaker Change: Actarix delivers another very strong quarter with healthy clothes across all regions, channels, and categories, especially footwear, women's, and high-shelved jackets.

Speaker Change: Accurate sprint momentum was most evident in the very strong Omnicom performance against a very difficult growth comparison from last year.

James Zheng: We'll begin with prepared remarks from our CEO James Eng and CFO Andrew Page, followed by a Q&A session until approximately 9 a.m.

Unknown Executive: Eastern.

James Zheng: James will cover key operational and brand highlights and Andrew will provide a financial review at both the group and segment level and also walk through our updated guidance.

Speaker Change: Globally, Actel is well-executing its retail expansion plan, opening 17 net-new brand stores in one edge, including 13 net-new locations in two-queue, bringing the total owned brand store count to 125.

Unknown Executive: [inaudible] Lowe.

Unknown Executive: [inaudible] Lowe. Second,ってる is a breakout growth story with unprecedented growth and profitability for the outdoor industry. And it is charging new territory with its disruptive DTC model and strong competitive position.ってる to work-class products, plus the authentic and deep connection with consumers is allowing us to have strong success in large new categories, such as incredible momentum across all major geographies.

Speaker Change: Key new locations this quarter include Broad Street in Toronto, as well as Le Marais and Le Martin in Paris, which have emerged as standout locations with high engagement from local consumers in France.

Speaker Change: We also opened three stores in Great China and one Los Angeles store in Brentwood.

Speaker Change: All of these new thoughts have performed exceptionally well.

Speaker Change: We are also excited to open our New York-SoHo flagship store this week with brand opening set for early September .

Speaker Change: This new ARFA store will feature our most pinnacle expression of Rebirth yet, including shop-bought re-gear installed for the first time, a large Rebirth service center facility for care and repair, and much more.

Speaker Change: Shifting to products, recall that Actarix recently launched its first sportwear line that was designed, developed, and sourced by our in-house sportwear team.

Speaker Change: we continue to extremely ple with the reception to what we believe is the best line of technical performance forwe designed for the mountain acidity

Speaker Change: Since the launch, penetration of footwear to a carrier's total revenues has jumped from 6% to 10%, often selling out of our most popular styles.

Speaker Change: Especially the press.

Speaker Change: Because of the unique position of Arc'teryx footwear in the market, the strong sales in our DTC channel

Speaker Change: and enthusiast interest from wholesale accounts, our confidence in growing that sportwear will become a very sizable and profitable growth avenue for the brand, both in own stores and the brand-relevant wholesale accounts.

Unknown Executive: Second,ってる is a breakout growth story with unprecedented growth and profitability for the outdoor industry.

Speaker Change: Women's continues to perform extremely well, growing faster than the brand overall.

Unknown Executive: And it is charging new territory with its disruptive DTC model and strong competitive position.ってる to work-class products, plus the authentic and deep connection with consumers is allowing us to have strong success in large new categories, such as incredible momentum across all major geographies.

Speaker Change: Women's Outperforms is driven by self-share and win-share, particularly the Garmer and Squamish franchises.

Speaker Change: Women's Shares of Sales is already more than 20% of the business, and we see great upside in the category as we add more colorways, models, and style options that resonate with her.

Unknown Executive: Third, Solomon Wersen and all of our other brains are also healthy.

Unknown Executive: Third, Solomon Wersen and all of our other brains are also healthy. They have long standing authentic heritage, premium positioning and high performance products. Both Solomon and Wersen have leading market share within their heritage equipment business, but still have very small soft goods franchises with large growth opportunities ahead, especially in Solomon Forward. And fourth, where other consumer companies are having challenged in Great China, we generally more than 50% growth there and we continue to well upperform the market. Importantly, we are seeing strong momentum across all of our three big brains.

Speaker Change: In May, Actarix also recently opened a cutting-edge creation center in Tokyo.

Unknown Executive: They have long standing authentic heritage, premium positioning and high performance products.

Speaker Change: This design space will serve as an innovation hub reflecting local creativity, culture, and the outdoor community.

Unknown Executive: Both Solomon and Wersen have leading market share within their heritage equipment business, but still have very small soft goods franchises with large growth opportunities ahead, especially in Solomon Forward.

Speaker Change: A quick update on our new EPE product, which comprised with the ban on PFAS, forever chemicals traditionally used in waterproof materials.

Speaker Change: Sales of our iconic beta jackets have accelerated since switching to compressed material. Our customers love the look, feel, and performance of the new material.

Speaker Change: Octavius also continues to execute cutting-edge community engagement programs.

Unknown Executive: And fourth, where other consumer companies are having challenged in Great China, we generally more than 50% growth there and we continue to well upperform the market.

Unknown Executive: A few reasons I'd like to highlight why we are doing so well in China. Number one, our friends compete in one of the hits and the first going consumer segments in China. The premium sports and outdoor market. The outdoor trend in China is very strong. Even beyond the traditional male consumers, the outdoor category is attracting younger consumers, female consumers, and we also see more luxury shoppers spending in our categories. Second, the China consumer landscape today has evolved into a market of winners and losers with some brains doing extremely well and others underperforming. Our still small, specialized brains with deep expertise and high quality and the performance resonates strongly with Chinese shoppers.

Speaker Change: This summer, Octavius launched a gym residence in climbing gyms from New York to Paris to San Francisco as part of the brand's Summer of Climb.

Speaker Change: Investments in brand awareness and activation that feed off the global excitement and the popularity of timing is driven awareness and the position are carried which is at the heart of this phenomenon.

Speaker Change: Moving to the outdoor performance segment, which also delivers upside to our expectations led by Solomon Fullwell.

Unknown Executive: Importantly, we are seeing strong momentum across all of our three big brains.

Speaker Change: partially offset by softer trends in winter sports equipment.

Speaker Change: A quick reminder that the outdoor performance is comprised of two buildings that operate in a unique environment.

Speaker Change: First, winter sports equipment, which includes ski, snowboard, and snow sport equipment across the Salomon, Atomic, and Armada brands.

Unknown Executive: Third category and the most important, we believe we have the best team in China. Our deep expertise and a unique, scalable operating platform gives us a significant competitive advantage across portfolio.

Speaker Change: These are long-standing winter sports equipment franchise that already have high market share, a very strong competitive position, and the industry leading scale and the profitability, although less growth runway ahead given the already high market shares.

Unknown Executive: A few reasons I'd like to highlight why we are doing so well in China.

Unknown Executive: Before I end your presentation, I'd like to share some key highlights from our segments in Q2. Starting with Technic Apparel, which is left by our farthest growing and the now largest brand, Aceris. Aceris delivers another very strong quarter with healthy clothes across all regions, channels, and categories, especially for women in the harshest jackets. Aceris brand momentum was most evident in the very strong omnicom performance against a very difficult growth comparison from last year.

Speaker Change: Then we also have the salmon footwear and apparel franchise, which is a higher margin, faster-growing business, but still with very low market share of the global sneaker market.

Unknown Executive: Number one, our friends compete in one of the hits and the first going consumer segments in China.

Unknown Executive: The premium sports and outdoor market.

Speaker Change: Today, it represents approximately 66% of all the performance segment sales, up significantly from 54% in 2022.

Speaker Change: We believe Salomon sneakers have an authentic and unique market position with technical features designed for the mountain, but also great for everyday use.

Speaker Change: Salomon Shoes offers consumers unique style and technical attributes at a time when consumers are more receptive than ever to wearing new sneaker brands. Looking forward, we expect Salomon Soft Shoes to grow double-digit annually over the long term.

Unknown Executive: Globary, Aceris is well executing its retail expansion plans, opening 17 net new brand stores in one edge, including certain net new locations in Q2. Bring the total on the brand store, come to 125. Key new locations this quarter included plus three in Toronto as well as Lamaray and Lamarding in Paris which have emerged as standout locations with high engagement from local consumers in France. We also opened three stores in which China and the one Los Angeles stores in Brentwood.

James Zheng: Looking forward.

James Zheng: Several facts give me confidence for the rest of 2024 and beyond. First, We own and operate a unique and valuable portfolio of premium outdoor and sports brands. Each one is fueled by technical innovation and positioned at the pinnacle of its respective segment.

James Zheng: Our brands have high engagement, conversion, and satisfaction with consumers everywhere, but are still relatively small players on the global stage with significant room to grow.

James Zheng: Second, a carrot is a breakout growth story with unprecedented growth and profitability for the outdoor industry.

James Zheng: And they are charting new territory with its disruptive DTC model and a strong competitive position.

James Zheng: Actarius' world-class products, plus the authentic and deep connection with consumers, is allowing us to have strong success in large new categories, such as footwear and women's, and also incredible momentum across all major geographies.

Speaker Change: In the second quarter,

James Zheng: Solomon Wilson, and all of our other brands are also here.

James Zheng: They have long-standing authentic heritage, premium positioning, and high-performance products.

James Zheng: Both Solomon and Wilson have leading market share within their heritage equipment business, but still have very small soft goods franchises with large growth opportunities ahead, especially in Salomon Forward, and the fourth, where other consumer companies are having challenge in Great China, with generally more than 50% growth there, and we continue to well outperform the market.

Speaker Change: Sonoma footwear showed especially strong traction in Great China and in APEC, where consumers love our sports-style offering that combines a distinct trendy look with high-technical features.

James Zheng: Importantly, we are seeing strong momentum across all of our three big brands.

James Zheng: A few reasons I'd like to highlight why we are doing so well in China, number one. Our brands compete in one of the healthiest and fast-growing consumer segments in China.

James Zheng: Supreme Sports and Outdoor Markets.

Speaker Change: In China, we have created an entire new category called Outdoor Sneakers.

James Zheng: The outdoor trend in China is very, Even beyond the traditional male consumer, the outdoor category is attracting younger consumers, female consumers, and we also see more luxury shoppers spending in our category.

James Zheng: Second, the China consumer landscape today has evolved into a market of winners and losers, with some brands doing extremely well and others underperforming.

James Zheng: Our few small specialized brands with deep expertise and high quality and the performance resonates strongly with Chinese shop.

James Zheng: Thirdly, and most importantly, We believe we have the best team in China.

James Zheng: Our deep expertise and a unique scalable operating platform gives us a significant competitive advantage across portfolios.

James Zheng: Before Andrew's financial discussion, I'd like to share some key highlights from our segment in Q2.

Speaker Change: which especially resonates with young consumers. We opened 27 salami shops in Q2, including both owned store and licensed stores. In Great China, bring our total count to 136.

Unknown Executive: All of these new stores have performed exceptional well. We are also excited to open our New York store hold flagship store this week with grand opening sets for early September. This new R4 store will feature our most pinnacle expression of rivers yet including shop bowl weekend in store for the first time a large river service center proceeding for care and repair and then much more.

James Zheng: Starting with technical apparel, which is led by our fastest growing and now largest brand, Actera.

James Zheng: Accurate sprint momentum was most evident in the very strong Omnicom performance against a very difficult growth comparison from last year.

James Zheng: Globally, Actel is well executing its retail expansion, opening 17 net new brand stores in one day, including 13 new locations in 2Q, bring the total owned brand store count to 125. Key new locations this quarter include Broad Street in Toronto, as well as Le Marais and Le Martin in Paris, which have emerged as standout locations with high engagement from local consumers in France.

James Zheng: We also opened three stores in Great China and one Los Angeles store in Brampton.

Speaker Change: We expect to end 2024 with about 200 owned and licensed Salomon stores in China, with the opportunity to grow several hundred locations just in Tier 1 and Tier 2 cities.

Speaker Change: In 2Q, we also opened a new shop in Osaka, Japan, which has become one of the highest productivity shops, well received by both local consumers and tourists.

Unknown Executive: Shifting to products because thatってる recently launched its first football line that was designed developed and sourced by our in-house football team. We continue to extremely please read the reception to what we believe is the best line of technical performance football designed for the mountain acid. Since the launch penetration of football to a carous total revenues has jumped from 6% to 10% offering selling out of our most popular stars, especially the crack because of the unique position of a carous footwear in the market.

Speaker Change: in the great home pocket of France.

Speaker Change: ahead of the recent Paris Olympics.

Speaker Change: We opened our Salomon flagship store on the Champs-Élysées in addition to our recent store opening in Le Marais.

James Zheng: All of these new thoughts have performed exceptionally well.

Speaker Change: Both new stores have performed extremely well in the first month, and they represent the highest amount of consumers have to engage with the Salomon Brand in its own environment.

Speaker Change: The Chassidy's Day store has created a landmark presence to showcase the breadth and the depth for Salomon's unique offering in its home market.

Unknown Executive: The strong sales in our DTC channel and the insist that interest from wholesale account, our confidence is growing that football will become a very sizable and profitable girls avenue for the brand both in own stores and the brand relevant wholesale accounts. Women continues to perform extremely well throwing faster than the brand overall. Women's all performance is driven by self-shared and the wind shear particular counter and the squarish franchises. Women's shares of sales is already more than 20% of the business and we see great upside in the category and we add more colorways models and style options let's resonate with her.

Speaker Change: Well, Le Marais Shoppe is a footwear-only concept store, which has proven to be a particularly successful model that we will replicate across E-Mail with three more stores in Paris, two in London, and two in Milano.

James Zheng: We are also excited to open our New York Soho flagship store this week with grand opening set for early September.

Speaker Change: We are also excited to share that we will open in October a pop-up store in New York City in Soho, which will seed the market with our first brand store in the city, ahead of our plan to open one to two permanent New York stores in 2025.

James Zheng: This new Alpha store will feature our most pinnacle expression of Rebirth yet, including shop-bought re-gear installed for the first time, a large Rebirth service center facility for care and repair, and much more, shift into product.

James Zheng: Recall that Actarix recently launched its first sportwear line that was designed, developed, and sourced by our in-house sportwear team.

James Zheng: We continue to extremely pleased with the reception to what we believe is the best line of technical performance footwear designed for the mountain.

Suomon: As you know, we are undergoing a management transition at Salomon, and I'm operating as interim brand CEO , where we perform a comprehensive search for the next brand leaders over the next 12 months.

Unknown Executive: In May, academics also recently opened a cutting-edge creation center in Tokyo. This design space will serve as an innovation hub reflecting local creativity, culture and outdoor community.

Speaker Change: Over four months in the low, I'm confident in the Salomon brand and our team, as we continue to optimize the go-to market strategy and the sales structure to maximize potential of our Salomon 4-Way business.

Unknown Executive: A quick update on our new EP product, which comprise with the band on PFAS forever chemicals traditionally using waterproof materials. Sales of our iconic better jackets have accelerated since switching to compliant material. Our customers love the look, feel and the performance of the new material.

James Zheng: Since the launch, penetration of footwear to accurate total revenues has jumped from 6% to 10%, often selling out of our most popular styles, especially the press.

James Zheng: Because of the unique position of Akerix footwear in the market, the strong sales in our DTC channel and the enthusiast interest from wholesale accounts, our confidence in growing that footwear will become a very sizable and profitable growth avenue for the brand, both in own stores and the brand-relevant wholesale accounts.

James Zheng: Women's continues to perform extremely well, growing faster than the brand overall. Women's Outperforms is driven by self-share and win-share, particularly the Garmer and Squamish franchise. Women's Shares of Sales is already more than 20% of the business.

Paul: Moving on to ball and racket highlights.

Paul: We will pre-select Boy & Racket's return to growth in 2Q, as we expect driven by improving sell-in to the retail channel.

Paul: Well, still in its early stage,

Unknown Executive: Activities also continue to execute cutting-edge community engagement programs. This summer, academics launched a gym residence in climbing gym from New York to Paris to San Francisco as part of the brand summer of time. Investments in brand awareness and activation that fit of the global excitement and the popularity of climbing is driven awareness and the position of carries which is at the heart of the brand.

Speaker Change: Our 10360 strategy is proving to be a key driver for the Wilson franchise led by apparel and footwear growth, accelerating expansion of Wilson 10360 shops in China and a key new product launch.

Roger Federer: We are particularly excited that Roger Fisher is back and active with the Wilson brand again. Roger will have his own line of premium performance rackets, bags, and accessories at Wilson called RF.

Unknown Executive: The outdoor trend in China is very strong. Even beyond the traditional male consumers, the outdoor category is attracting younger consumers, female consumers, and we also see more luxury shoppers spending in our categories.

Unknown Executive: William, Moving to the outdoor performance segment, which also delivers upside to our expectations led by Solomon Fowler, partially offset by softer trends in winter sports equipment. A quick reminder that the outdoor performance is comprised of two opinions that operate in unique environments. First, winter sports equipment, which includes ski, snowboard, and snow sport equipment across the Solomon, atomic, and amount of rains. These are longstanding winter sports equipment franchise that already have high market share, a very strong competitive position, and the industry leading scale and profitability, although less growth runway ahead, given the already high market share.

Roger Federer: which launched on his birthday, August 8th.

Speaker Change: As you know, Roger is a living legend in tennis, and this new prod line has been met with a very enthusiastic response from the market.

Unknown Executive: Second, the China consumer landscape today has evolved into a market of winners and losers with some brains doing extremely well and others underperforming.

James Zheng: And we see great upside in the category as we add more colorways, models and style options that resonate with her.

James Zheng: In May, Arc'teryx also recently opened a cutting edge creation center in Tokyo. This design space will serve as an innovation hub reflecting local creativity, culture, and the outdoor community.

Speaker Change: Wilson is also launching the first tennis shoe designed explicitly for female tennis players called the InShugger.

James Zheng: A quick update on our new EPE product, which comprises the band-arm PFAS for aerochemicals traditionally used in waterproof materials.

James Zheng: Sales of our iconic beta jackets have accelerated since switching to compressed material. Our customers love the look, feel, and the performance of the new material.

James Zheng: Arcturus also continues to execute cutting-edge community engagement programs.

Speaker Change: This shoe combines the comfort and the support of modern foam technology without losing any of the side-to-side stability required for tennis.

Speaker Change: Our 360 Tennis Athletes, Marta Kostjak, will wear it for the first time in the U.S. Open later this month.

Speaker Change: Wesson tennis and Wesson China had a big moment recently during the Summer Olympics when Ching-Wen Cheng won gold in playing with her Wesson racket.

Unknown Executive: Then we also have the Solomon Fowler and a parallel franchise, which is a higher margin for the growing opinions, but still with very low market share of the global sneaker markets. Today, it will represent approximately 66% of outdoor performance segment sales, significantly from 54% in 2022. We believe Solomon sneakers have an authentic and unique market position with technical features designed for the mountain, but also great for everyday use. Solomon shoes offers consumers unique styles and technical attributes at a time when consumers are more receptive than ever to wearing new sneaker brands.

Speaker Change: This feat didn't go unnoticed in her home country as sales of wears and jackets rose 20 times that day.

Speaker Change: There are 19 million tennis participants in Great China.

Speaker Change: Last but not least, Katherine Clark is also elevating Brandt Heat as the face of Wilson Festival.

Speaker Change: Her signature basketball collection sold exclusively online so far, sold out in record time.

James Zheng: James will cover key operational and brand highlights, and Andrew will provide a financial review at both the group and segment level, and also walk through our updated guidance.

Speaker Change: And we expect our catering club franchise to accelerate in H2 with the launch in select wholesale accounts.

James Zheng: System.

James Zheng: Octavius Launch Gym residents in climbing gyms from New York to Paris to San Francisco as part of the brand's Summer of Climbing.

James Zheng: Arc'teryx CEO, Stuart Hazelden, will join for the Q&A session.

Unknown Executive: Looking forward, we expect Solomon softwares to grow double digits annually over the long term. In the second quarter, Solomon Fowler should especially strong traction in Great China and in the back, where consumers love our sports style offering that combines the distinct trendy look with high technical features. In China, we have created an entire new category called Outdoor Sneakers, which especially resonates with young consumers. We open the 27 Solomon Shops in Q2, including both on the store and the license stores.

Andrew Page: With that, I will turn it over to Andrew.

James Zheng: Investments in brand awareness and activation that feeds off the global excitement and the popularity of timing, distributing awareness and the position of characteristics, which is at the heart of this phenomenon.

James Zheng: Moving to the outdoor performance segment, which also delivers upside to our expectation led by Solomon Fuller, partially offset by softer trends in winter sports equipment. A quick reminder that the outdoor performance is comprised of two buildings that operate in a unique environment. First, winter sports equipment, which includes ski, snowboard, and snow sport equipment across the Salomon, Atomic, and Armada brands.

James Zheng: These are longstanding winter sports equipment franchises that already have high market share, a very strong competitive position, and the industry leading scale and the profitability, although less growth runway ahead, given the already high market share.

Andrew Page: Thank you, Jay.

Speaker Change: I'm excited to discuss our strong Q2 performance and the setup for the remainder of the year. Our underlining results exceeded our guidance on sales, gross margin, operating margin, and earnings per share, giving us confidence to raise full-year guidance.

Unknown Executive: Our still small, specialized brains with deep expertise and high quality and the performance resonates strongly with Chinese shoppers.

Omar Saad: With that, I'll turn the call over to James.

James Zheng: Then we also have the salmon footwear and apparel franchise, which is a higher margin, faster growing business, but still with very low market share of the global sneaker market.

James Zheng: Today, it will represent approximately 66% of all the performance segment sales, up significantly from 54% in 2022.

James Zheng: We believe Salomon sneakers have an authentic and unique market position with technical features designed for the mountain, but also great for everyday use. Salomon Shoes offers consumers unique style and technical attributes at a time when consumers are more receptive than ever to wearing new sneaker brands.

James Zheng: Looking forward, we expect Salomon Software to grow double-digit annually over the long term.

Unknown Executive: Third category and the most important, we believe we have the best team in China.

Speaker Change: Before diving into our financial performance in Q2 and going through our updated guidance, I want to quickly discuss two timing items that affected Q2 and the cadence of our guidance for the rest of the 2024.

James Zheng: Thanks, Omar.

Speaker Change: First, there was a two-point top-line benefit from early shipments of certain wholesale orders that moved into Q2 from Q3, driving approximately one cent of EPS upside.

Unknown Executive: In Great China, bring our total count to 136. We expect to end 2024 with about 200 owned and licensed Solomon stores in China with the opportunity to grow several hundred locations just in K-1 and K-2 cities. In Q2, we also open a new shop in Osaka, Japan, which has become one of high productivity shops, well received by both local consumers and the tourists. In the brand called Market of France, ahead of the recent Paris Olympics, we open a Solomon flagship store on the Shansevisaix in addition to our recent store opening Lama Reis.

Speaker Change: Second, we had a 4-cent EPS benefit in Q2 related to the resolution of uncertain tax positions that were contemplated in the 4-year guidance that we previously provided, but were expected to be resolved in Q3 and Q4 this year.

Speaker Change: Excluding these timing shifts, our underlying operations still drove a strong beat in the quarter, which is reflected in our full year top and bottom line guidance rates.

Unknown Executive: Both new stores have performed extremely well in the first month, and the representatives and the high demand consumers have to engage with the Solomon brands in its own environment. The Shansevisaix store has created a landmark presence to showcase the breadth and depth for Solomon's unique offering in its home market. Well, Lama Reis shop is a football-only concept store, which has proven to be a particularly successful model that we will replicate a cloth email with three more stores in Paris. Two in London and two in Milan.

James Zheng: In the second quarter.

James Zheng: Sonoma footwear showed especially strong traction in Great China and in APEC, where consumers love our sports-style offering that combines a distinct trendy look with high technical features.

James Zheng: In China, we have created an entire new category called outdoor sneakers, which especially resonates with young consumers.

James Zheng: We opened 27 salami shops in Q2, including both owned store and licensed stores.

James Zheng: In Great China, bring our total count to 136.

James Zheng: Over four months in the low, I'm confident in the Salomon brand and our team as we continue to optimize the go-to-market strategy and the sales structure to maximize the potential of our Salomon footwear business.

James Zheng: We expect to end 2024 with about 200 owned and licensed salomon stores in China, with the opportunity to grow several hundred locations just in Tier 1 and Tier 2 cities.

Speaker Change: With that, let me focus on Q2 results and guidance.

James Zheng: In 2Q, we also opened a new shop in Osaka, Japan, which has become one of the highest productivity shops, well-received by both local consumers and tourists, in the Grand Home Park of France, ahead of the recent Paris Olympics.

James Zheng: We opened our Salomon flagship store on the Champs-Élysées in addition to our recent store opening in La Marrakech. Both new stores have performed extremely well in the first month and represent the highest amount of consumers have to engage with the Salomon brand in its own environment.

James Zheng: The Champs-Élysées store has created a landmark presence to showcase the breadth and the depth for Salomon's unique offering in its home market.

James Zheng: Well, Le Marais Shoppe is a footwear-only concept store, which has proven to be a particularly successful model that we will replicate across E-Mail with three more stores in Paris, two in London and two in Milan.

Speaker Change: The fast growth of our high-margin archaic franchise is elevating the financial profile of Amer Sports Group in total.

James Zheng: We are also excited to share that we will open in October a pop-up store in New York City in Soho, which will seed the market with our first brand store in the city ahead of our plan to open one to two permanent New York stores in 2025.

James Zheng: As you know, We are undergoing a management transition at Salomon, and I'm operating as interim brand CEO, where we perform a comprehensive search for the next brand leaders over the next 12 months.

Speaker Change: This dynamic allows us to deliver strong profitable growth for shareholders while reinvesting in the many long-term growth opportunities across our portfolio.

James Zheng: We are pleased to announce strong second quarter results with sales, margin, and the EPS ahead of our guidance.

Speaker Change: At the group level, Amer Sports sales grew 16% in Q2, or 18.3% at constant currency, well ahead of expectations we set back in May, even excluding the two-point wholesale shift from Q3.

James Zheng: The momentum behind our unique portfolio of premium sports and outdoor brands continues, and we are generating top-tier growth and margin expansion within our industry.

James Zheng: Our global end markets are healthy and growing, and we are taking market shares, positioning us to deliver another record year in 2024. We generate 16% sales growth in Q2, or plus 18% on a constant currency basis, led by our flagship brand, Arc'teryx.

Speaker Change: The strong group sales performance was led by technical apparel and outdoor performance.

Unknown Executive: We are also excited to share that we will open in October a pop-up store in New York City in Seoul, which will see the market with our first brand store in the city ahead of our plan to open one to two permanent New York stores in 2025.

Speaker Change: By channel, the group continues to be led by DTC, which grew 40% led by Arc'teryx.

James Zheng: Although we benefit from a two-point shift of wholesale sharements from 3Q into 2Q, our underlying growth momentum is clear.

Speaker Change: Group wholesale revenues improved plus 2% year-over-year.

Speaker Change: Regional growth was led by Greater China, which increased 54%, followed by Asia-Pacific, which grew 45%.

Unknown Executive: Our deep expertise and a unique, scalable operating platform gives us a significant competitive advantage across portfolio.

Unknown Executive: As you know, we are undergoing a medium-transition as Solomon, and I'm operating as interim brand CEO where we perform a comprehensive search for the next brand leaders over the next 12 months. Over four months in the low, I'm confident in the Solomon brand and our team, and we continue to optimize the good to market strategy and the self-structure to maximize potential of our Solomon Forward finish.

Speaker Change: Amir grew 1% and America's return to slight growth was filled up 1%.

Speaker Change: Turning to profitability, adjusted gross margin increased 200 basis points to 55.8% in Q2, primarily driven by positive segment, product, channel, and regional mix shift.

James Zheng: Before I end your presentation, I'd like to share some key highlights from our segments in Q2.

Speaker Change: The company's highest gross margin business, Arcteryx, continues to grow significantly faster than the other brands, the biggest driver of gross margin expansion.

Unknown Executive: Starting with Technic Apparel, which is left by our farthest growing and the now largest brand, Aceris.

Unknown Executive: Moving on to Paul and the rackets highlights. We will pre-slap Paul and the rackets to the ten to close in two queue, and we expect driven by improving sales into the retail channel. While still in its early stage, our 10-360 strategy is proving to be our key driver for the worse and franchise led by a parallel and a forward close, accelerating expansion of worse and 10-360 shops in China and a key new product launch.

Speaker Change: As expected, adjusted SG&A expenses as a percentage of revenues increased 210 basis points and represented 52.9% of revenues in Q2.

Speaker Change: Mainly driven by SG&AD leverage at ball and racket and higher spend related to D2C investments, including new store openings and higher retail personnel costs.

James Zheng: We achieved nearly a 3% adjust operation margin, also well above our expectations. And we continue to enjoy strong growth margin expansion, driven by the pricing power of our brands and a healthy mix shift toward our highest margin franchise, Arc'teryx.

Speaker Change: We were pleased to achieve an adjusted SG&A rate in Q2 that was better than what was contemplated in our guidance last quarter, a reflection of the expense leverage in our business model when we deliver meaningful sales upside to our forecast.

Unknown Executive: We are particularly excited that Roger Feather is back and active with the worsen brand again. Roger will have his own line of premium performance rackets back and accessories at worsen called RF, which launched on his birthday August 8th. As you know, Roger is a living legend in tennis, and this new cloud line has been met with a very enthusiastic response from the market. Worsen is also launching the first tennis shoe designed to express it for female tennis players for the injured.

Speaker Change: These factors allowed us to generate a 50 basis point increase in our adjusted operating margin from 2.4% last year to 2.9% in Q2 2024, above our guidance of approximately 0%.

Speaker Change: Adjusted corporate expenses were $25 million versus $6 million in Q2 of last year, driven by higher personnel costs due to increased tenant count and share-based compensation.

Unknown Executive: This shoe combines the comfort and the support of modern foam technology without losing any of the side-to-side stability required for tennis. Our 360 tennis accessories, Mara Costag, will wear it for the first time in the US open later this month.

Speaker Change: Depreciation and amortization was $63 million, which includes $29 million of ROU depreciation.

Speaker Change: Adjusted net finance cost in the quarter was $45 million at the low end of the range of $45 to $50 million we guided to on our last call.

Unknown Executive: Worsen tennis and the Worsen China had a big moment recently during the summer Olympics, when Qin Wenjian won gold in praying with her worsen rackets. This did not go unnoticed in her home countries as sales of worsen rackets lose 20 times that day. There are 19 million tennis participants in Gui China.

Speaker Change: In the quarter, we had an adjusted income tax benefit of $42 million, which included the resolution of certain discrete tax items that I mentioned above, resulting in a $20 million benefit to net income, or approximately $0.04 per share.

Unknown Executive: Last but not least, Feathering Clock is also elevating brand heat as a phase of worsen festival. Her signature festival collections sold exclusively online so far, sold out in record time. And we expect our Feathering Clock franchise to accelerate in H2 with the launch in select kosher accounts.

Speaker Change: Adjusted net income was $25 million in Q2 compared to an adjusted net loss of $86 million in the prior year period.

Speaker Change: Adjusted diluted earnings per share was $0.05 compared to adjusted diluted loss per share of $0.22 last year.

Andrew Page: With that, I will attend over to Andrew. Thank you, Jay. I'm excited to discuss our strong YouTube performance and the setup for the of the Year. Our underlying results exceeded our guidance on sales, gross margin, operating margin, and earnings per share, given up confidence to raise full-year guidance.

Speaker Change: We exceeded the midpoint of our Q2 EPS guidance by about 10 cents.

Speaker Change: Please keep in mind, this includes the five sense of timing shifts that I discussed that were already contemplated in our full year guidance.

Unknown Executive: Aceris delivers another very strong quarter with healthy clothes across all regions, channels, and categories, especially for women in the harshest jackets.

James Zheng: Looking forward, several facts give me confidence for the rest of 2024 and beyond. First, we own and operate a unique and valuable portfolio of premium outdoor and sports brands. Each one is fueled by technical innovation and the position at the pinnacle of its respective segment.

Speaker Change: now turn segment results

Speaker Change: Technical apparel revenues increased 34% to $407 million, led by Arc'teryx.

James Zheng: Our brands have high engagement, conversion, and satisfaction with consumers everywhere, but are still relatively small players on the global stage with significant room to grow.

Andrew Page: Before diving into our financial performance into YouTube and going through our updated guidance, I want to quickly discuss two timely items that affected YouTube and the cadence of our guidance for the rest of the 2024. First, there was a two-point top-line benefit from early shipments of certain wholesale orders that moved into Q2 from Q3, driving approximately one cent of EPS upside. Second, we had a four-cent EPS benefit in Q2 related to the resolution of uncertain tax decisions that were contemplated in the full-year guidance that we previously provided, but we're expected to be resolved in Q3 and Q4 this year. Excluding these timing shifts, our underlying operations still drove a strong beat in the quarter, which is reflected in our full-year top and bottom-line guidance rates.

James Zheng: Second, Octarix is a breakout growth story with unprecedented growth and profitability, for the outdoor industry, and it is charting new territory with its disruptive DTC model and strong competitive position. Octarix's world-class products plus the authentic and deep connection with consumers is allowing, us to have strong success in large new categories, such as footwear and women's, and also incredible momentum across all major geographies.

James Zheng: Third, Salomon, Wilson, and all of our other brands are also healthy.

James Zheng: They have longstanding authentic heritage, premium positioning, and high-performance, products.

James Zheng: Both Salomon and Wilson have leading market share within their heritage equipment business, but still have very small soft goods franchises with large growth opportunities ahead, especially in Salomon footwear.

James Zheng: And fourth, where other consumer companies are having challenges in Great China, we generate, more than 50% growth there, and we continue to well outperform the market.

Speaker Change: Growth was fueled by 39% D2C expansion, including a 26% Omnicomp, a great result comparing against an 80% Omnicomp last year in the second quarter.

Speaker Change: Our Omnicomp metric incorporates growth from both owned retail stores and e-commerce sites that have been open at least 13 months.

James Zheng: Importantly, we are seeing strong momentum across all of our three big brands.

Speaker Change: Our Tariq C2C momentum was fueled by both new and existing consumers and both strong traffic and conversion trends in stores and online.

Speaker Change: The Arc'teryx brand continues to experience broad-based strength and is outperforming across every region, channel, and category.

Speaker Change: D2C remains the core growth engine, but we also experienced strength in wholesale in the wholesale channel, which grew 24% for the second quarter.

James Zheng: A few reasons I'd like to highlight why we are doing so well in China. Number one, our brands compete in one of the healthiest and fast-growing consumer segments, in China, the premium sports and outdoor markets. The outdoor trend in China is very strong. Even beyond the traditional male consumer, the outdoor category is attracting younger, consumers, female consumers, and we also see more luxury shoppers spending in our categories.

James Zheng: Second, the China consumer landscape today has evolved into a market of winners and losers, with some brands doing extremely well and others underperforming.

Andrew Page: With that, let me focus on Q2 results in guidance. The fast growth of our high-margined archeric franchise is elevating the financial profile of AmeriSports Group in total. This dynamic allows us to deliver strong profitable road for shareholders while reinvesting in the many long-term growth opportunities across our portfolio. At the group level, AmeriSports sales grew 16 percent in Q2 or 18.3 percent at consequences. Well ahead of expectations we set back in May, even excluding the two-point wholesale shift from Q3.

Unknown Executive: Aceris brand momentum was most evident in the very strong omnicom performance against a very difficult growth comparison from last year.

Speaker Change: Regionally, technical apparel growth was led by Asia-Pacific, followed by Greater China and the Americas, which were partially offset by declines in EMEA.

Speaker Change: Our tariff is generating strong results in Europe , especially new store openings, but this is off a small base and was offset by a decline in peak performance, which continues to go through a brand reset to focus on greater full price selling.

Speaker Change: Technical Apparel Adjusted Operating Margin expanded 110 basis points to 14.2%, driven primarily by gross margin from favorable channel and geographic mix.

Andrew Page: The strong group sales performance was led by technical apparel and outdoor performance. By channel, the group continues to be led by D2C, which grew 40 percent led by archeric. Group wholesale revenues improved plus 2 percent year over year. Regional growth was led by greater China, which increased 54 percent, followed by Asia-Pacific, which grew 45 percent. Amir grew 1 percent, and America's return to slight growth was sales up 1 percent. Turning to profitability, adjusted growth margin increased 200 basis points to 55.8 percent in Q2, primarily driven by positive segment, product, channel, and regional mix shift.

Speaker Change: The technical apparel segment margin also benefited from modest SG&A leverage on Arc'teryx's strong sales growth while continuing key growth investments.

James Zheng: Our still-small specialized brands with deep expertise and high quality and performance, resonate strongly with Chinese shoppers.

James Zheng: Thirdly, and the most important, we believe we have the best team in China.

Speaker Change: i

Speaker Change: Outdoor performance segment revenues increased 11% to $304 million, driven by strong, double-digit top-line performance in Solomon footwear and apparel, and in the D2C channel, particularly in Asia-Pacific and Greater China.

Speaker Change: This was partially offset by a decline in winter sports equipment.

Speaker Change: Outdoor performance shifts also benefited from earlier than anticipated shipments that shifted from Q3 into Q2.

Speaker Change: By channel, outdoor performance C2C grew 55%, while wholesale sales declined slightly, negatively impacted by slower pre-orders in the North American sporting goods and ski channels, which increasingly relies upon replenished orders.

Andrew Page: The company's highest growth margin business, archeric, continues to grow significantly faster than the other brands, the biggest driver of growth margin expansion. As expected, adjusted SGNA expenses as a percentage of revenues increased 210 basis points and represented 52.9 percent of revenues in Q2, mainly driven by SGNA D leverage at fallen bracket and higher spend related to D2C investments, including new store openings and higher retail personnel costs. We were pleased to achieve an adjusted SGNA rate in Q2 that was better than what was contemplated in our guidance last quarter.

Unknown Executive: We also opened three stores in which China and the one Los Angeles stores in Brentwood.

Speaker Change: 2024 will be a slightly softer year for winter sports equipment due to slower trends in North America with ski equipment sales are rebasing after a strong run through and beyond COVID.

James Zheng: Our deep expertise and a unique scalable operating platform gives us a significant competitive, advantage across portfolios.

Speaker Change: This is in addition to cautious orders in EMEA after two tough snow seasons in Europe .

Unknown Executive: All of these new stores have performed exceptional well.

James Zheng: Before I end this financial discussion, I'd like to share some key highlights from our, segments in Q2, starting with Technic Apparel, which is led by our fastest-growing and now largest brand, Actarix. Actarix delivers another very strong quarter with healthy growth across all regions, channels, and categories, especially footwear, women's, and high-shelf jackets.

James Zheng: Actarix brand momentum was most evident in the very strong Omni account performance against, a very difficult growth comparison from last year.

Speaker Change: Given our great brands and scale advantages, we expect to take market share.

Speaker Change: although we don't expect when us what's equipment to be a high growth business the industry remains healthy and the consumer demand to sski vacations remains consistent and strong irrespective of weather as especially as resorts have become a depth at making their own snow

Andrew Page: A reflection of the expense leverage in our business model when we deliver meaningful sales upside to our court. Yes. These factors allowed us to generate a 50 basis point increase in our adjusted operating margin from 2.4% last year to 2.9% in Q2 2024 above our guidance of approximately 0%. Adjusted corporate expenses were $25 million versus $6 million in Q2 of last year driven by higher personnel costs due to increased pet count and share-based compensation.

James Zheng: Globally, Actarix is well-executing its retail expansion plan, opening 17 net new brand stores, in one edge, including 13 net new locations in two queues, bringing the total owned brand store count to 125. Key new locations this quarter included Broad Street in Toronto, as well as Le Marais and, Le Martin in Paris, which have emerged as standout locations with high engagement from local consumers in France.

James Zheng: We also opened three stores in Great China and one Los Angeles store in Brentwood. All of these new stores have performed exceptionally well.

James Zheng: We are also excited to open our New York Stoho flagship store this week with grand, opening set for early September. This new Alpha store will feature our most pinnacle expression of Rebirth yet, including, Shop Bowl Recare in store for the first time, a large Rebirth service center facility for care and repair, and much more.

James Zheng: Shifting to products, recall that Actarix recently launched its first footwear line, that was designed, developed, and sourced by our in-house footwear team.

James Zheng: We continue to extremely pleased with the reception to what we believe is the best line, of technical performance footwear designed for the mountain athlete.

James Zheng: Since the launch, penetration of footwear to Actarix total revenues has jumped from, 6% to 10%, often selling out of our most popular size, especially the crack.

James Zheng: Because of the unique position of Actarix footwear in the market, the strong sales in, our DTC channel and the enthusiast interest from wholesale accounts, our confidence in growing that footwear will become a very sizable and profitable growth avenue for the brand both in own stores and the brand-relevant wholesale accounts.

James Zheng: Weeming continues to perform extremely well, growing faster than the brand overall. Weeming's outperforms is driven by soft share and the win share, particularly Garmer and, the Squamish franchises.

James Zheng: Weeming's share of sales is already more than 20% of the business, and we see great upside, in the category as we add more colorways, models, and style options that resonate with her.

Speaker Change: When a sports equipment now represents one-third of outdoor performance, in long term, we expect this business to grow low single digits annually.

James Zheng: In May, Actarix also recently opened a cutting-edge creation center in Tokyo. This design space will serve as an innovation hub reflecting local creativity, culture, and outdoor community.

James Zheng: A quick update on our new EPE product, which complies with the ban on PFAS, forever chemicals traditionally used in waterproof materials. Sales of our iconic better jacket have accelerated since switching to compressed material. Our customers love the look, feel, and the performance of the new material.

James Zheng: Moving to the outdoor performance segment, which also delivers upside to our expectations, led by Salomon Footwear, partially offset by softer trends in winter sports equipment. A quick reminder that the outdoor performance is comprised of two businesses that operate, in unique environments.

James Zheng: Actarix also continues to execute cutting-edge community engagement programs. This summer, Actarix launched a gym residence in climbing gyms from New York to Paris to, San Francisco as part of the brand's Summer of Climbing.

James Zheng: Investments in brand awareness and activation that fit of the global excitement and the, popularity of climbing is driving awareness and the position Actarix, which is at the heart of this phenomenon.

Speaker Change: Regionally, outdoor performance sales growth was led by Greater China, APAC, and EMEA, offset by a decline in Americas, which has been affected by softer pre-orders as retailers increasingly rely on replenish orders.

James Zheng: First, winter sports equipment, which includes skiing, snowboarding, and snow sport equipment, across the Salomon, Atomic, and Armada brands.

Andrew Page: Appreciation and ammarization was $63 million which includes $29 million of ROU depreciation. Adjusted net finance cost in the quarter was $45 million at the low end of the range of $45 to $50 million we guided to on our last call. In the quarter we had an adjusted income tax benefit of $42 million which included the resolution of certain discrete tax items that I mentioned above resulted in a $20 million benefit net income or approximately 4 cents per share.

Speaker Change: The outdoor performance segment adjusted operating profit margin expanded 380 basis points to negative 2.1%.

James Zheng: These are longstanding winter sports equipment franchises that already have high market share, a very strong competitive position, and the industry-leading scale and the profitability, although less growth runway ahead, given the already high market shares.

James Zheng: Then we also have the Salomon Footwear and apparel franchise, which is a higher-margin, faster-growing business, but still with very low market share of the global sneaker market.

James Zheng: Today, it represents approximately 66% of outdoor performance segment sales, up significantly, from 54% in 2022. We believe Salomon sneakers have an authentic and a unique market position with technical, features designed for the mountain, but also great for everyday use. Salomon shoes offer consumers unique style and technical attributes at a time when consumers, are more receptive than ever to wearing new sneaker brands.

James Zheng: Looking forward, we expect Salomon soft shoes to grow double-digit annually over the long term. In the second quarter, Salomon Footwear showed especially strong traction in Great China and in, APEC, where consumers love our sports-style offering that combines a distinct trendy look with high technical features.

James Zheng: In China, we have created an entire new category called Outdoor Sneakers, which especially, resonates with young consumers.

James Zheng: We opened 27 Salomon shops in Q2, including both owned stores and licensed stores.

James Zheng: In Great China, bringing our total count to 136.

James Zheng: We expect to end 2024 with about 200 owned and licensed Salomon stores in China, with, the opportunity to grow several hundred locations just in Tier 1 and Tier 2 cities.

Speaker Change: This was driven by a combination of growth margin gains and SG&A leverage.

James Zheng: In Q2, we also opened a new shop in Osaka, Japan, which has become one of the highest, productivity shops well-received by both local consumers and tourists.

Speaker Change: Those margin gains were mainly driven by a favorable region and channel mix, lower discounts, and we also leveraged expenses, including payroll, administrative, and IT costs.

James Zheng: Moving on to ball and racket highlights.

Speaker Change: Moving to Ball and Bracket. Revenue increased 1% to $283 million as well as a return to growth as expected after a double-digit decline in Q1. Driven by improving wholesale sell-in,

James Zheng: We will pre-select Boy & Racket's return to growth in 2Q as we expect driven by improving selling to the retail channel, while still in its early, Our 10-360 strategy is proving to be a key driver for the Wilson franchise led by apparel and footwear growth, accelerating expansion of Wilson 10-360 shops in China and the key new product line.

Andrew Page: Adjusted net income was $25 million in Q2 compared to an adjusted net loss of $86 million in the prior year period. Adjusted deluded earnings per share was $5 cents compared to adjusted deluded loss per share of $22 cents last year. We exceeded the midpoint of our Q2 EPS guidance by about 10 cents. Please keep in mind this includes the five cents of timing shifts that I discussed that were already contemplated in our full-year guidance.

Speaker Change: Our Tenet 360 strategy continues to be a key driver for the Wilson franchise, led by footwear and apparel growth.

Speaker Change: Accelerated expansion of Wilson tennis 360 shops in China and some of the new footwear and racket product launches James mentioned.

Speaker Change: Golf also returned to growth driven by the Americas and EMEA led by premium clubs. The growth in sportswear, rackets, and golf was partially offset by declines in baseball and inflatables.

Andrew Page: Now it's ready for segment results. Tactical apparel revenues increased 34% to $407 million led by our care. Growth was fueled by 39% D to C expansion including a 26% omnicop, a great result comparing against an 80% omnicop last year in the second quarter. Our omnicop metric and corporate rates growth from both owned retail stores and e-commerce sites that have been open at least 13 months. Our TARIC D to C momentum was fueled by both new and existing consumers and both strong traffic and conversion trends in stores and online.

Unknown Executive: We are also excited to open our New York store hold flagship store this week with grand opening sets for early September.

Speaker Change: Ball and racket segment adjusted operating profit margin contracted 160 basis points compared to the second quarter of 2023 to 1.1%.

Unknown Executive: This new R4 store will feature our most pinnacle expression of rivers yet including shop bowl weekend in store for the first time a large river service center proceeding for care and repair and then much more.

Speaker Change: this margin compression was due to sgn a d leverage which was driven by retail investment in the u s sina and koreabutwe're in appall investment and timing of advertising and promotion spend

Unknown Executive: Shifting to products because thatってる recently launched its first football line that was designed developed and sourced by our in-house football team.

Speaker Change: Generating consistent margin performance is a key management priority for Ball & Racket given its low single-digit growth profile.

James Zheng: We are particularly excited that Roger Feather is back and active with the Wilson brand again. Roger will have his own line of premium performance rackets, bags and accessories at Wilson called RS, which launched on his birthday, August.

James Zheng: As you know, Roger is a living legend in tennis, and this new prod line has been met with a very enthusiastic response from the market.

James Zheng: Wilson is also launching the first tennis shoe designed explicitly for female tennis players called the Inchago. This shoe combines the comfort and the support of modern foam technology without losing any of the side-to-side stability required for tennis.

Unknown Executive: We continue to extremely please read the reception to what we believe is the best line of technical performance football designed for the mountain acid.

James Zheng: Our 360 Tennis Athletes, Marta Kostjak, will wear it for the first time in the U.S. Open later this month.

James Zheng: Wilson tennis and Wilson China had a big moment recently during the Summer Olympics when Ching Wen-Cheng went gold playing with her Wilson racket.

James Zheng: This fit didn't go unnoticed in her home country as sales of Wesson rackets lost 20 times that day.

James Zheng: There are 19 million tennis participants in Great China.

James Zheng: Last but not least, Catherine Clarke is also elevating Blanchett as the face of Wilson's best, Her signature basketball collection sold exclusively online so far, sold out in record time.

Speaker Change: We are pleased by our lean inventory position in Vol and Racket, which is down significantly versus last year and positions us for much better profitability in the second half, especially in Q4 when we cycled against our high discounts from last year.

Unknown Executive: Since the launch penetration of football to a carous total revenues has jumped from 6% to 10% offering selling out of our most popular stars, especially the crack because of the unique position of a carous footwear in the market.

Andrew Page: The our TARICs brand continues to experience broad-based strength and is outperforming across every region, channel and category. D to C remains the core growth engine but we also experienced strength and wholesale in the wholesale channel which grew 24% for the second. Regionally, technical apparel growth was led by Asia Pacific followed by greater China and the Americas which were partially offset by declines in Amea. Our TARIC is generating strong results in Europe, especially new store opening but this is off a small base and was offset by decline in peak performance which continues to go through a brand reset to focus on greater Sally.

James Zheng: And we expect our catering club franchise to accelerate in H2 with the launch in select wholesale accounts.

Andrew Page: With that, I will turn it over to Andrew.

Speaker Change: Looking ahead, we are confident that our market leadership position and flow of innovative products positions fall in racket well as market inventories reach balance and retailer orders re-accelerate in the second half, especially in Q4, when we face our easiest comparison and also have our strongest pipeline of new products.

Speaker Change: turning to the group balance sheet and cash flow we ended the quarter with one point eight billion dollars of net debt

Speaker Change: Using the midpoint of our 2024 Implied Adjusted Operating Profit Guidance, our net debt to adjusted non-IFRS EBITDA ratio is already approximately 2.6 times.

Andrew Page: Technical apparel adjusted operating margin expanded 110 basis points to 14.2% driven primarily by gross margin from favorable channel and geographic mix. The technical apparel segment margin also benefited from modest S.G.N.A, leverage on our pair of two strong sales growth while continuing key growth investments. Outdoor performance segment revenues increased 11% to $304 million driven by strong double digit top line performance and Solomon's footwear and apparel and in the D to C channel, particularly in Asia-Pacific and Greater China.

Speaker Change: Deleveraging our balance sheet remains a priority, and our goal is to reduce our leverage ratio to 1.5 times or better over the next few years through both EBITDA expansion and debt pay down.

Speaker Change: Also, our focus on inventory discipline is paying off its inventory's finished Q2 in healthy conditions, up only 2% year-over-year versus 16% reported sales growth.

Andrew Page: Thank you, Jay.

Speaker Change: Within our target to grow inventories in line with or slower than sales.

Andrew Page: I'm excited to discuss our strong Q2 performance and the setup for the remainder of the year. Our underlining results exceeded our guidance on sales, gross margin, operating margin, and earnings per share, giving us confidence to raise full-year guidance.

Speaker Change: Now, ready for guidance.

Speaker Change: Given our strong second quarter results and confidence in our brands and their financial outlook, we are raising our guidance for the full year sales, adjusted operating margin, and adjusted diluted EPS.

Andrew Page: This was partially offset by a decline in sports equipment. Outdoor performance sales also benefited from earlier than anticipated shipments that shifted from Q3 into Q2. By channel, outdoor performance D to C grew 55% while wholesale sales declined slightly negatively impacted by slower pre-orders in the North America sporting goods and ski channels, which increasingly relies upon replenish orders. 2024 will be a slightly softer year for one of sports equipment due to slower trends in North America, which ski equipment sales are rebasing after a strong run through and beyond COVID.

Andrew Page: Before diving into our financial performance in Q2 and going through our updated guidance, I want to quickly discuss two timing items that affected Q2 and the cadence of our guidance for the rest of the 2024. First, there was a two-point top-line benefit from early shipments of certain wholesale orders that moved into Q2 from Q3, driving approximately one cent of EPS upside. We had a 4 cent EPS benefit in Q2 related to the resolution of uncertain tax, that were contemplated in the four-year guidance that we previously provided, but were expected to be resolved in Q3 and Q4 this year.

Speaker Change: As we said on previous earnings call, should strong trends continue and better than anticipated demand materialize, we will be well-positioned to deliver financial performance ahead of our expectations.

Speaker Change: For the full year, we now expect revenue growth of 15-17%, which incorporates greater than 30% growth in technical apparel, mid- to high-single-digit revenue growth in outdoor performance, and low-to-mid-single-digit growth in ball and racket.

Speaker Change: We are increasing our adjusted gross profit margin guidance from approximately 54% to approximately 54.5%.

Andrew Page: This is in addition to cautious orders in America after two tough slow seasons in Europe. Given our great brands and scale advantages, we expect to take market share. Although we don't expect when a sports equipment to be a high growth business, the industry remains healthy and the consumer demand for ski vacations remains consistent and strong irrespective of weather, especially as resorts have become adept at making their own snow. When a sports equipment now represents one-third of outdoor performance and long term, we expect this business to grow low single digits annually.

Speaker Change: We are also raising our guidance for our full-year operating margin and now expect adjusted operating margin toward the high end of our previous 10.5% to 11% range.

Speaker Change: Our net finance costs for the year will be $200 to $220 million, including approximately $15 million of non-recurring finance costs in the first quarter of 2024.

Speaker Change: We still expect to have an effective tax rate on adjusted pre-tax income of approximately 38% for the full year of 2024, but the rate will be higher in the back half of approximately 50 to 55%.

Andrew Page: Regionally, outdoor performance sales growth was led by Greater China, APEC, and AMAEA, offset by a decline in America's, which has been affected by softer pre-orders as retailers increasingly rely on replenish orders. The outdoor performance segment adjusted operating profit margins expanded 380 basis points to negative 2.1%. This was driven by a combination of gross margin gains and SG&A leverage. Gross margin gains were mainly driven by a favorable region and channel vex, lower discounts, and we also leverage expenses, including payroll, administrative, and IT costs.

Speaker Change: We continue to be very focused on designing and implementing strategies to reduce our effective tax rate. We're confident that we will be able to reduce our effective tax rate to a level that is consistent with other global consumer companies over the next few years.

Speaker Change: We now expect to have full-year adjusted diluted EPS in the range of $0.40 to $0.44 versus our previous guidance of towards the high end of $0.30 to $0.40.

Andrew Page: Excluding these timing shifts, our underlying operations still drove a strong beat in the quarter, which is reflected in our full year top and bottom line guidance.

Speaker Change: Please keep in mind the five-cent timing shift into Q2 from the second half as you incorporate our revised full year and initial Q3 guidance.

Andrew Page: Moving to ball and racket, revenue increased 1% to $283 million as well as the return to growth as expected after a double-digit decline in Q1. Driven by improving wholesale sell-end, our 10-3060 strategy continues to be a key driver for the Wilson franchise, led by footwear and a parro growth. It's celebrated the expansion of Wilson 10-3060 shops in China and some of the new footwear and racket product launches, mentioned. Golf also returns to growth driven by the Americas and in May led by premium clubs.

Speaker Change: Looking at the segments, we expect a 2024 Adjusted Operating Profit Margin slightly above 20% for technical apparel, high single digits for outdoor performance, and low to mid single digit Adjusted Segment Margin for ball and racket.

Andrew Page: With that, let me focus on Q2 results and guidance.

Andrew Page: The fast growth of our high margin archaic franchise is elevating the financial profile of Amer Sports Group in total.

Andrew Page: This dynamic allows us to deliver strong profitable growth for shareholders while reinvesting in the many long term growth opportunities across our portfolio.

Andrew Page: At the group level, Amer Sports sales grew 16% in Q2 or 18.3% at constant currency, well ahead of expectations we set back in, even excluding the two-point wholesale shift for Q3.

Andrew Page: Strong group sales performance was led by Technical Apparel and Outdoor Products. By channel, the group continues to be led by DTC, which grew 40% led by Arcteris.

Andrew Page: Group wholesale revenues improved plus 2% year over year. Regional growth was led by Greater China, which increased 54%, followed by Asia Pacific, which grew 45%.

Andrew Page: Amir grew 1% and America's return to slight growth was filled up 1%.

Speaker Change: Now looking at Q3, we expect Q3 adjusted gross margin to be approximately 54% driven primarily by the mixed shift towards technical apparel and an adjusted operating margin between 11 and 12%.

Andrew Page: Turning to profitability. Adjusted gross margin increased 200 basis points to 55.8% in Q2. Primarily driven by positive segment, product, channel, and regional mixture. The company's highest gross margin business, Arterix, continues to grow significantly faster than the other brands, the biggest driver of gross margin.

Andrew Page: As expected, adjusted SG&A expenses as a percentage of revenues increased 210 basis points and represented 52.9% of revenues in Q2, mainly driven by SG&A de-leverage at ball and racket and higher spend related to D2C investment. Including new store openings and higher retail personnel costs.

Andrew Page: We were pleased to achieve an adjusted SG&A rate in Q2 that was better than what was contemplated in our guidance last quarter, a reflection of the expense leverage in our business model when we deliver meaningful sales upside to our forecast. These factors allowed us to generate a 50 basis point increase in our adjusted operating margin from 2.4% last year to 2.9% in Q2 2024, above our guidance of approximately zero.

Andrew Page: Adjusted corporate expenses were $25 million versus $6 million in Q2 of last year, driven by higher personnel costs due to increased headcount and share based compensation. Appreciation and amortization was $63 million, which includes $29 million of ROU depreciation.

Andrew Page: The adjusted net finance cost in the quarter was $45 million at the low end of the range of $45 to $50 million we guided to on our last call.

Andrew Page: In the quarter, we had an adjusted income tax benefit of $42 million, which included the resolution of certain discrete tax items that I mentioned above, resulting in a $20 million benefit, net income, or approximately four cents per share.

Andrew Page: Adjusted net income was $25 million in Q2 compared to an adjusted net loss of $86 million in the prior year period. Adjusted diluted earnings per share was five cents compared to adjusted diluted loss per share of 22 cents last year.

Speaker Change: Based on current interest rates, our net finance cost for the quarter will be $45 million to $50 million, and we will have an effective tax rate on an adjusted pre-tax income of 50% to 55%. We expect adjusted diluted EPS to be $0.08 to $0.10 per share.

Andrew Page: The growth in sportswear, rackets, and golf was partially offset by declines in baseball and inflatables. Follow-racket segment adjusted operating profit margin contracted 160 basis points compared to the second quarter of 2023 to 1.1%. This margin compression was due to SG&AD leverage, which was driven by retail investments in the US, China, and Korea, but wear an apparel investment and timing of advertising and promotion spend. Generating consistent margin performance as a key management priority for ball and racket given its low single digit growth profile.

Andrew Page: We exceeded the midpoint of our Q2 EPS guidance by about 10 cents. Please keep in mind this includes the five sense of timing shifts that I discussed that were already contemplated in our full year guide.

Andrew Page: Now let's look at the segment results.

jna: With that, I'll turn it back to the operator for Q&A.

Speaker Change: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.

Speaker Change: We ask that you please limit yourself to one question and one follow-up. Your first question comes from the line of Brooke Roach from Goldman Sachs. Your line is open.

Andrew Page: Technical apparel revenues increased 34% to $407 million, led by Arc'teryx.

Andrew Page: Growth was fueled by 39% D2C expansion, including a 26% Omnicomp, a great result comparing against an 80% Omnicomp last year in the second quarter. Our Omnicomp metric incorporates growth from both owned retail stores and e-commerce sites that have been open at least 13 months.

Broke Roach: Good morning and thank you for taking our question.

Broke Roach: I was hoping you could elaborate on the strength that you're seeing at the Arcteryx brand and provide color on the growth that you're seeing by region.

Andrew Page: Our Tariq C2C momentum was fueled by both new and existing consumers and both strong traffic and conversion trends in stores and online.

Speaker Change: How are you thinking about the sustainability of this outsized comp growth for this brand? And in the near term, what trends have you seen with customer traffic and conversion as you've entered the third quarter in your most important China and North American markets? Thank you.

Andrew Page: Looking ahead, we are confident that our market leadership position and flow of innovative products positions, ball and racket, well as market inventories reach balance and retailer orders re-accelerate in the second half, especially in Q4 when we face our easiest comparison and also have our strongest pipeline of new products. Turning to the group balance sheet in cash flow, we ended the quarter with $1.8 billion of net debt. Using the midpoint of our 2024 implied adjusted operating profit guidance, our net debt to adjusted non-IFRS even down ratio is already approximately 2.6 times.

Speaker Change: i

Stewart: Hey Brooke, it's Stuart. So let me try to address your questions. You had a number there that I'll try to speak to.

Speaker Change: As we look at the performance of our tariffs by region, we were very pleased with how balanced we saw our growth in the second quarter.

Speaker Change: the the north america business continueed to see good momentum with to be mentioned non the prepared remarks asia pacific outside of china saw the fastest growth of the four regions in which we operate

Andrew Page: De-leveraging our balance sheet remains a priority and our goal is to reduce our leverage ratio to 1.5 times or better over the next few years through both EBITDA expansion and debt paydown. Also, our focus on inventory discipline is paying off its inventory's finished Q2 in healthy conditions, up only 2% year over year versus 16% reported sales growth. Within our target to grow inventory is in line with or slower than sales.

Speaker Change: We also saw very strong growth in China.

Speaker Change: The business in Europe grew a bit slower, but we're still very encouraged by the success of the new stores that we opened in the Europe market.

James Zheng: In the brand home market of France, ahead of the recent Paris Olympics, we opened a, Salomon flagship store on Champs-Élysées, in addition to our recent store opening in, Le Marais. Both new stores have performed extremely well in the first month, and they represent, the highest amount of consumers have to engage with the Salomon brand in its own environment. The Champs-Élysées store has created a landmark presence to showcase the breadth and the depth, for Salomon's unique offering in its home market, while Le Marais shop is a footwear-only concept store, which has proven to be a particularly successful model that we will replicate across, E-Mail with three more stores in Paris, two in London and two in Milan.

Speaker Change: The stores that we opened in Paris in particular have really performed ahead of our expectations, which gives us a lot of confidence to continue to lean into our Europe expansion. So

Andrew Page: The Arcteryx brand continues to experience broad-based strength and is outperforming across every region, channel, and category.

Andrew Page: D2C remains the core growth engine, but we also experience strength and wholesale in the wholesale channel, which grew 24% for the second quarter.

Andrew Page: Regionally, technical apparel growth was led by Asia Pacific, followed by greater China and the Americas, which were partially offset by declines in AMEA.

Andrew Page: Our parent is generating strong results in Europe. But this is off a small base and was offset by a decline in peak performance, which continues to go through a brand reset to focus on greater full price.

Andrew Page: Technical Apparel Adjusted Operating Margin expanded 110 basis points to 14.2%, driven primarily by gross margin from favorable channel and geographic, The technical apparel segment margin also benefited from modest SG&A leverage on Arc'teryx's strong sales growth while continuing key growth investments.

Andrew Page: Outdoor performance segment revenues increased 11% to $304 million, driven by strong double-digit top-line performance in Solomon footwear and apparel, and in the D2C channel, particularly in Asia-Pacific and Greater China.

Andrew Page: This was partially offset by a decline in winter sports.

Andrew Page: Outdoor performance sales also benefited from earlier than anticipated shipments that shifted from Q3 into Q2, by Channel, Outdoor Performance C2C Group, 55% off.

Andrew Page: While wholesale sales declined slightly, negatively impacted by slower pre-orders in the North American sporting goods and ski channels, which increasingly relies upon replenished orders.

Speaker Change: We're really pleased across every region where we're operating with the results that we're seeing both from a brick-and-mortar standpoint as well as from an e-commerce business standpoint.

Andrew Page: Now, turning to guidance. Given our strong second quarter result and confidence in our brand and their financial outlook, we are raising our guidance for the full year sale, adjusted operating margin and adjusted deluded EPS. As we said on previous earnings call, should strong trends continue and better than anticipated demand materialize, we will be well positioned to deliver financial performance ahead of our expectations. For the full year, we now expect revenue growth of 15-17%, which incorporates greater than 30% growth in technical apparel, mid to high single-digit revenue growth in outdoor performance, and low to mid single-digit growth in ball and racket.

Speaker Change: The sustainability of the momentum in our Tariq's business

James Zheng: We are also excited to share that we will open in October a pop-up store in New York City in SoHo, which will seed the market with our first brand store in the city, ahead of our plan to open one to two permanent New York stores in 2025.

Speaker Change: we really see this as the early innings of our groross story we are are far from reaching penetration potential really any region in which we operate and so

James Zheng: As you know, we are undergoing a management transition at Salomon, and I'm operating as interim brand CEO, where we perform a comprehensive search for the next brand leaders over the next 12 months.

Unknown Executive: Women continues to perform extremely well throwing faster than the brand overall.

Speaker Change: We'll have, you know, around 60 stores in North America at the end of the year.

Speaker Change: i

Speaker Change: We could see the total potential for North America being well over 200, just for an example.

Speaker Change: And even earlier in the development of the Europe market and the Asia-Pacific market, China, we're farther along with our store count, but we still see a really exciting runway of growth there as we continue to optimize.

Unknown Executive: Women's all performance is driven by self-shared and the wind shear particular counter and the squarish franchises.

Andrew Page: We are increasing our adjusted growth profit margin guidance from approximately 54% to approximately 54.5. We are also raising our guidance for our full year operating margin and now expect adjusted operating margin toward the high end of our previous 10 and a half to 11% range. Our net finance cost for the year will be 200 to 220 million dollars including approximately 15 million dollars of non recurring finance cost in the first quarter of 2024.

Unknown Executive: Women's shares of sales is already more than 20% of the business and we see great upside in the category and we add more colorways models and style options let's resonate with her.

Speaker Change: Our real estate portfolio and the success of the Shanghai Museum Store is really helping us reset what we see as the potential for the business in China.

Unknown Executive: A quick update on our new EP product, which comprise with the band on PFAS forever chemicals traditionally using waterproof materials.

Speaker Change: And as we look at, you know, some of the other KPIs and customer performance related matters or trends, the

Unknown Executive: Sales of our iconic better jackets have accelerated since switching to compliant material. Our customers love the look, feel and the performance of the new material.

Andrew Page: We still expect to have an effective tax rate on a just pre-tax income of approximately 38% for the full year of 2024, but the rate will be higher in the back half of approximately 50 to 55%. We continue to be very focused on designing and implementing strategies to reduce our effective tax rate where confident that we will be able to reduce our effective tax rate to a level that is consistent with other global consumer companies over the next few years.

Speaker Change: We were pleased to see, you know, very healthy, double-digit guest file growth in the quarter. And that, you know, is reflected in really strong traffic. As we look at the...

Speaker Change: The results, the Omnicomp that Andrew mentioned, just the overall sales trajectory of the business, it's really a traffic story. We saw very modest improvements in conversions, but the main key KPI that is driving the sales increases.

Unknown Executive: Activities also continue to execute cutting-edge community engagement programs.

Unknown Executive: This summer, academics launched a gym residence in climbing gym from New York to Paris to San Francisco as part of the brand summer of time.

Andrew Page: And our D2C business has been traffic, and so we see that.

Unknown Executive: Investments in brand awareness and activation that fit of the global excitement and the popularity of climbing is driven awareness and the position of carries which is at the heart of the brand.

Andrew Page: We now expect to have full year adjusted deluded EPS in the range of 40 cents to 44 cents versus our previous guidance of towards the high end of 30 to 40 cents. Please keep in mind the five cent timing shift into Q2 from the second half as you incorporate our revised full year and initial Q3 guidance. Looking at the segments, we expect a 2024 adjusted operating profit margin slightly above 20% for technical apparel, high single digits for outdoor performance, and low to mid single digit adjusted segment margin for ball and racket.

Andrew Page: is a very healthy indicator of the momentum of the brand as we're building brand awareness.

Andrew Page: And we also saw a healthy growth in average spend per customer. So really strong customer metrics and very healthy and balanced KPIs across our channels. So I'll...

Speaker Change: And I'd also just add that we feel confident that we're taking share in every market in

Speaker Change: James, maybe you could address Brooke's question. Yeah, I had certain comments based on...

Andrew Page: Looking at Q3, we expect Q3 adjusted gross margin to be approximately 54% driven primarily by the mixed shift towards technical apparel and an adjusted operating margin between 11 and 12%. Based on current interest rates, our net finance cost of the quarter will be 45 million to 50 million, and we will have an effective tax rate on an adjusted pre-tax income of 50 to 55%. We expect adjusted deluded EPS to be 8 cents per share.

Speaker Change: Stuart's explanation. Okay, I think a cleric in China, it's a, it's a still, I mean, playing a clear leadership role.

Speaker Change: In the segment, I mean, we are sitting, but not only on the segment, but also the whole industry.

Unknown Executive: Today, it will represent approximately 66% of outdoor performance segment sales, significantly from 54% in 2022. We believe Solomon sneakers have an authentic and unique market position with technical features designed for the mountain, but also great for everyday use.

Speaker Change: So we really grow tremendous our sales in Q2, in the first half, and really outperformed among all the sports brands in the market.

Operator: With that, I'll turn it back to the operator for Q&A. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. We ask you please limit yourself to one question and one follow-up.

Speaker Change: And the trend we see, it continues to carry on, and it's not slowed down, okay, the overall, especially on the comp shop flows pattern in China.

Speaker Change: So it's obviously the Q2, I mean, second quarter, it's still a relatively soft season among the four quarters.

Brooke Roach: Your first question comes from the line of Brooke Roach from Goldman Sachs. Your line is open. Good morning and thank you for taking our question. I was hoping you could elaborate on the strength that you're seeing at the Arctarex brand and provide color on the growth that you're seeing by region. How are you thinking about the sustainability of this outsized comp growth for this brand? And in the near term, what trends have you seen with customer traffic and conversion as you've entered the third quarter in your most important China and North American markets? Thank you.

Speaker Change: but we also see coming we are in the middleof the coutory already so we also see a big growth patterns in china markets so i think 's so as a stewer dimmention still preliminary stage for us not only in china that the rest of the words

Unknown Executive: Solomon shoes offers consumers unique styles and technical attributes at a time when consumers are more receptive than ever to wearing new sneaker brands.

Unknown Executive: Looking forward, we expect Solomon softwares to grow double digits annually over the long term.

Speaker Change: so we have a very good confidence to continue to grow the car spinish cross boardingin the world

Speaker Change: a go at

Speaker Change: Great, thanks so much. I'll pass it on.

Speaker Change: as a we

Speaker Change: ok

matthew busts: Your next question comes from a line of Matthew Boss from J.P. Morgan. Your line is open.

Stuart Haselden: Brooke, Stuart, so let me try to address your questions. You have a number there that I'll write it to speak to. As we look at the performance of our parish by region, we were very pleased with how balanced we saw our growth in the second quarter. The North America business continued to see good momentum with, as we mentioned them, the prepared remarks, Asia Pacific outside of China saw the fastest growth of the four regions in which we operate.

Matthew Busts: Thanks and congrats on a nice quarter.

Matthew Busts: So James, maybe higher level, could you speak to runway that you see across brands and in the portfolio to capture continued market share?

Andrew Page: in the premi of sports an outdoor market and then for andrew on the bottom line maybe could you just help elaborate on the back half

Andrew Page: Margin Geography as we think about gross margin drivers relative to SG&A investments that are embedded this year relative to the past to SG&A leverage multi-year.

Andrew Page: i

Unknown Executive: In the second quarter, Solomon Fowler should especially strong traction in Great China and in the back, where consumers love our sports style offering that combines the distinct trendy look with high technical features.

Stuart Haselden: We saw also saw very strong growth in China. The business in Europe grew a bit slower, but we're still very encouraged by the success of the new stores that we opened in the Europe market. The stores that we opened in Paris in particular had really performed ahead of our expectations, which gives us a lot of confidence to continue to lean into our Europe expansion. So we're really pleased across every region where we're operating with the results that we're seeing both from a brick and mortar standpoint, as well as from an e-commerce business standpoint.

Speaker Change: Okay, Matthew, thank you for your questions. I just want to highlight here, okay, we got a very unique proposition in the market. For Amer Sports, we really own two distinguished business franchises, which is car goods, we call the equipment business, as well as the soft goods.

Andrew Page: 2024 will be a slightly softer year for winter sports equipment due to slower trends in North America with ski equipment sales are rebasing after a strong run through and beyond. This is in addition to cautious orders in EMEA after two tough snow seasons in Europe.

Speaker Change: So I would say first of all I mentioned about the hardware business or equipment business for both winter sports equipment

Andrew Page: Given our great brands and scale advantages, we expect to take market share.

Andrew Page: Although we don't expect winter sports equipment to be a high growth business, the industry remains healthy and the consumer demand for ski vacations remains consistent and strong, irrespective of weather, especially as resorts have become adept at making their own snow, when the sports equipment now represents one third of outdoor performance.

Andrew Page: In long term, we expect this business to grow low single digits annually.

Andrew Page: Regionally, outdoor performance sales growth was led by Greater China, APAC, and EMEA, offset by a decline in America, which has been affected by softer pre-orders as retailers increasingly rely on replenishment.

Speaker Change: and Wilson. I mean, we all, I mean, you guys all can tell we all got

Speaker Change: very strong market share.

Speaker Change: In the segment, we are sitting.

Speaker Change: Even the closed runways do a bit better.

James Zheng: The sustainability of the momentum and our terrorist business, we really see this as the early innings of our growth story. We are far from reaching penetration potential in really any region in which we operate. So we'll have around 60 stores in North America at the end of the year. We could see the total potential for North America being well over 200, just for an example. And we're even earlier in the development of the Europe market and the Asia Pacific market.

Speaker Change: more

Speaker Change: We have a very good level of confidence to secure or continue to amplify our market share.

Speaker Change: in the future in the ind in the seg we are setting

Speaker Change: Not only on the winter sports equipment, but also in rackets, balls, and also the increase we mentioned. Okay, so I think the team got a very good level of confidence to continue to secure our leadership in these kinds of delicate segments.

Speaker Change: For soft goods part, I think, I mean, I mean, the great performance from AptX already demonstrate our unique proposition at the premium segment of the...

James Zheng: China, we're farther along with our store count, but we still see really exciting right away at growth there as we continue to optimize our real estate portfolio and success of the Shanghai Museum stores really helping us reset what we see as the potential for the business in China. And as we look at some of the other KPIs and customer performance related matters or trends, we're pleased to see very healthy double digit guest file growth in the quarter.

Speaker Change: although industry we are seting ok so curts really about that the very

Speaker Change: Strong Momentum in the Political Sectors in Outdoor Segments and Continue to Grow.

Speaker Change: More than, I think, 30% in the markets and really leading the whole growth in the industry. So I think it's a, I will say it's a hero brand at this moment in the market. And as we just mentioned, we will continue to try.

Speaker Change: It's just that at the first phase for us, there's still a great runway for us to continue to accelerate our careers growth in the future.

James Zheng: And that is reflected in really strong traffic is we look at the results that the omnicom that Andrew mentioned, just the overall sales trajectory of the business, it's really a traffic story. We saw very modest improvements in conversion, but the main KPI is driving the sales increases and our ETC business has been traffic. And so we see that as a very healthy indicator of the momentum of the brand is building brand awareness.

James Zheng: Over four months in the low, I'm confident in the Salomon brand and our team, and we continue to optimize the go-to-market strategy and the sales structure to maximize potential of our Salomon footwear business.

James Zheng: Moving on to ball and racket highlights.

James Zheng: We will pre-select ball and racket return to growth in 2Q, and we expect it driven by improving selling to the retail channel.

Speaker Change: For Solomon, it's another new area, as I mentioned, for soft goods, Solomon, especially footwear.

Speaker Change: We are still at the preliminary stage.

Speaker Change: and we are the leaders in trail running sectors. But you guys all know the market size of the trail running is relatively limited versus the rest of the segment, four-way segment.

Speaker Change: so somon we got

James Zheng: And we also saw healthy. We're in that respect for customers, so really strong customer metrics and very healthy and balanced KPIs across our channels, so I'll. Yeah, and I'd also said that we feel confident they were taking share in every market in which we operate.

Speaker Change: kind of a very unique opportunity to create a new categories which we just mentioned we call the aldoor nakers categories ok so it's kind of a new segment and we had a tremendous successful story in the past two years we run this in china

Speaker Change: And the really, I mean, the shop, I would say the Solomon footwear compact shop really

James Zheng: James, maybe you could address. Yeah, I add a certain comments based on Stuart explanation, OK, I think a currency in China, it's still I mean paying clear leadership role in the segment, I mean, we are sitting but not not only on the segment, but also the whole industry. So we really grow tremendous. Our sales rule in Q2 in the first half and the really up outperform among all the sports brands in the markets and the trend we see it's continued to carry on and it's not slow down.

Unknown Executive: In China, we have created an entire new category called Outdoor Sneakers, which especially resonates with young consumers.

Speaker Change: We created a great buzz in China market and taking on leadership roles on the outdoor sneaker segment in the market. And last year, I mean, we literally, we were double.

Speaker Change: The Countdown to Our Shop Penetration in the China Market. By the end of the year, we foresee 200 shops in China. And meanwhile, I mean, we just opened the first Salomon footwear shop in France, in Paris.

Unknown Executive: We open the 27 Solomon Shops in Q2, including both on the store and the license stores.

Unknown Executive: In Great China, bring our total count to 136.

Speaker Change: The first compact shop also outperformed.

Speaker Change: And we also try to have this kind of format to check out the market acceptance. So we will open another two shops in London.

Unknown Executive: We expect to end 2024 with about 200 owned and licensed Solomon stores in China with the opportunity to grow several hundred locations just in K-1 and K-2 cities.

James Zheng: OK, the overall, especially on the come sharp blows pattern in China. So it's obviously the Q2, I mean, second quarter is still relatively subseason among the four quarters, but we also see, I mean, we are in the middle of the Q3 already. So we also see big growth patterns in China market.

Unknown Executive: In Q2, we also open a new shop in Osaka, Japan, which has become one of high productivity shops, well received by both local consumers and the tourists.

Speaker Change: and three more in Paris and one more in Milano and two more in Milano to further verify the models.

Speaker Change: so so these that the foot we opportunity for simon it's kind of the greatious opportunities for us to aallot in the future so we we see great we also see up momentum for us in the future

Unknown Executive: So I think it's a, as I was still to mention, it's still a preliminary stage for us, not only in China, but the rest of the world. So we have a very good confidence to continue to grow the. A coach has been his class boarding the world. Great. Thanks so much. I'll pass it on.

James Zheng: While still in its early stage, our 10360 strategy is proving to be a key driver for the Wilson franchise, led by apparel and footwear growth, accelerating expansion of Wilson 10360 shops in China and a key new product launch.

James Zheng: We are particularly excited that Roger Fisher is back and active with the Wilson brand again. Roger will have his own line of premium performance rackets, bags, and accessories at Wilson called RF, which launched on his birthday, August 8.

James Zheng: As you know, Roger is a living legend in tennis, and this new product line has been met with a very enthusiastic response from the market.

James Zheng: Wilson is also launching the first tennis shoe designed exclusively for female tennis players called the InShugar. This shoe combines the comfort and the support of modern foam technology without losing any of the side-to-side stability required for tennis.

James Zheng: Our 360 tennis athlete, Mara Kostrak, will wear it for the first time in the U.S. Open later this month.

Speaker Change: and the four woron i mean as we just mentioned we created a segment wor tenends three hundred and sixty

James Zheng: Wilson tennis and Wilson China had a big moment recently during the Summer Olympics, when Qing Wenzhen won gold in playing with her Wilson racket.

James Zheng: This feat didn't go unnoticed in her home countries, as sales of Wilson rackets rose 20 times that day.

James Zheng: There are 19 million tennis participants in Great China.

James Zheng: Last but not least, Katherine Clark is also elevating brand heat as a face of Wilson basketball.

James Zheng: Her signature basketball collection sold exclusively online so far sold out in record time.

James Zheng: And we expect our Katherine Clark franchise to accelerate in H2 with a launch in select wholesale accounts.

Speaker Change: While we continue to secure our leadership for racket business, we also introduce Wilson Sportswear, which is Wilson apparel and footwear to the market. And we also see a good light.

Matthew Boss: Your next question comes from a line of Matthew Boss from JP Morgan. Your line is open. Thanks and congrats on a nice quarter.

Speaker Change: When we introduce this kind of format both in North America and in China, specifically in China, but it's still on infant stage. We will continue to explore the opportunities.

James Zheng: So, James, maybe higher level, could you speak to runway that you see across brands and in the portfolio to capture continued market share in the premium sports and outdoor market and then for Andrew on the bottom line, maybe could you just help elaborate on the back half margin geography as we think about gross margin drivers relative to SG&A investments that are embedded this year relative to the path to SG&A leverage multi year. Okay, Matthew, thank you for your questions.

Speaker Change: In a nutshell, we will see the soft goods business, I mean, especially combine all the three major brands. We will see a tremendous growth potential for our business in the future.

Andrew Page: The Outdoor Performance Segment Adjusted Operating Profit Margin expanded 380 basis points to negative 2.1%. This was driven by a combination of gross margin gains and SG&A leverage. Margin Games were mainly driven by a favorable region and channel mix, lower discounts, and we also leveraged expenses, including payroll, administrative, and IT costs.

Andrew Page: With that, I will turn it over to Andrew.

Andrew Page: Moving to ball and rack.

Andrew Page: Revenue increased 1% to $283 million as well as a return to growth as expected after a double digit decline in Q1. Driven by Improving Wholesale Sell-Ed.

Andrew Page: Our Tenet 360 strategy continues to be a key driver for the Wilson franchise, led by footwear and apparel growth.

Speaker Change: but there two are

Andrew Page: Celebrating the expansion of Wilson Tennis 360 shops in China and some of the new footwear and racket product launches James mentioned, Golf also returned to growth, driven by the Americas and EMEA, led by premium clubs.

Andrew Page: The growth in sportswear, rackets, and golf was partially offset by declines in baseball and in blade Follow racket segment adjusted operating profit margin contracted 160 basis points compared to the second quarter of 2023 to 1.1, This margin compression was due to SG&AD leverage, which was driven by retail investments in the U.S., China, and Korea.

Speaker Change: i

Andrew Page: But we're an apparel investment in timing of advertising and promotion.

Andrew Page: Generating consistent margin performance is a key management priority for ball and racket given its low single digit growth profile.

Andrew Page: We are pleased by our lean inventory position in Vol and Racket, which is down significantly versus last year and positions us for much better profitability in the second half, especially in Q4 when we cycled against our high discounts from last year.

Speaker Change: Matt, hi, this is Andrew Page. Thanks for the question as well. As you think about the margin profile, I'll give you a little bit of perspective both on gross margin and SG&A leverage.

Andrew Page: Looking ahead, we are confident that our market leadership position and flow of innovative products positions fall in racket well as market inventories reach balance and retailer orders re-accelerate in the second half, especially in Q4, when we face our easiest comparison and also have our strongest pipeline of new products.

Andrew Page: Turn it to the group balance sheet and cash flow.

Andrew Page: We ended the quarter with $1.8 billion of net debt, using the midpoint of our 2024 Implied Adjusted Operating Process Guidelines. Our net debt to adjusted non-IFRS EBITDA ratio is already approximately 2.6 times. Deleveraging our balance sheet remains a priority, and our goal is to reduce our leverage ratio to 1.5 times or better over the next few years through both EBITDA expansions and debt paydowns.

Andrew Page: Also, our focus on inventory discipline is paying off as inventories finish Q2 in healthy conditions, up only 2% year-over-year versus 16% reported sales, within our target to grow inventories in line with or slower than sales.

Speaker Change: As you progress out, you know, we had a very, very strong gross margin quarter in the second quarter, over 55% on gross margin. That's outstanding. As you move through the year, you recall that third quarter is our largest wholesale shipment quarter. And so you'll see gross margins.

James Zheng: I just want to highlight here. So, okay, we got the very unique proposition in the market. For Amer Sports, we really own two distinguished business franchise, which is a target, we call the equipment business as well as the soft goods. So, I would say, first of all, I mentioned about the target business or equipment business for both winter sports equipment and the worsen. I mean, we all, I mean, you guys all can tell, we all got very strong market share in the segment we are sitting.

Andrew Page: Now, ready to guide. Given our strong second quarter results and confidence in our brand and their financial outlook, we are raising our guidance for the full year sales, adjusted operating margin, and adjusted diluted EPS. As we said on previous earnings calls, Should strong trends continue and better than anticipated demand materialize, we will be well positioned to deliver financial performance ahead of our expectations. For the full year, we now expect revenue growth of 15 to 17%, which incorporates greater than 30% growth in technical apparel, mid to high single-digit revenue growth in outdoor performance, and low to mid single-digit growth in ball and rack.

Andrew Page: We are increasing our adjusted gross profit margin guidance from approximately 54% to approximately 54.5%.

Andrew Page: We are also raising our guidance for our full year operating margin and now expect adjusted operating margin toward the high end of our previous 10.5 to 11% Our net finance costs for the year will be $200 to $220 million, including approximately $15 million of non-recurring finance costs in the first quarter of 2024.

Andrew Page: We still expect to have an effective tax rate on adjusted pre-tax income of approximately 38% for the full year 2024, but the rate will be higher in the back half of approximately 50 to 55%. We continue to be very focused on designing and implementing strategies to reduce our effective tax rate.

Speaker Change: from Q2 and then return to those levels that you saw at Q2 and Q4.

Speaker Change: And as we talked about our full year gross margin profile, we've upped our guidance to about 54 and a half percent. So you're going to see strong gross margins in the third and fourth quarter, with the third quarter being a bit more compressed because it reflects our largest wholesale shipments.

James Zheng: Even the gross runways to a bit small, but we have a very good high level confidence to secure or continue to amplify our market share in the future in the segment we are sitting, not only on the winter sports equipment, but also in brackets, boards and also the interest we mentioned. Okay, so I think the team got the very good level of confidence to continue to secure our leadership in these kind of data segments.

Speaker Change: As you move from an SG&A-leveraged perspective,

Speaker Change: sscna dollars obviously as we get into thirty fourth quarter will increase as you go through the year

Speaker Change: Back half of the year is meaningfully larger than the front half of the year, but you're going to see meaningful SG&A.

Speaker Change: leverage when you compare that the q two i i would think about

Speaker Change: um

Speaker Change: Q3 being meaningfully better than Q2 and Q4 being meaningfully better than Q3, so progressively as a percentage of revenue, SG&A will continue to go down as we move through the year. Hope that answers your question.

Andrew Page: Thank you, James.

Andrew Page: I'm excited to discuss our strong H2 performance and the setup for the remainder of the season.

Andrew Page: Our underlining results exceeded our guidance on sales, gross margin, operating margin, and earnings per share, giving us confidence to raise full-year guidance.

James Zheng: For soft goods parts, I think, I mean, I mean, the great performance from Akaris already demonstrated our unique proposition at the premium segment of the outdoor industry, we are sitting. Okay, so Akaris really give out the very strong momentum in the pinnacle sectors in outdoor segments and the continue to glow more than I think 30% in the markets and really leading the whole globe in the industry. So I think it's, I will say it's a hero brand at this model in the markets and as we just mentioned, we will continue to drive Akaris.

Andrew Page: Second, we had a four-cent EPS benefit in Q2 related to the resolution of uncertain tax positions that were contemplated in the full-year guidance that we previously provided, but were expected to be resolved in Q3 and Q4 this year.

Andrew Page: We're confident that we will be able to reduce our effective tax rate to a level that is consistent with other global consumer companies over the next few years.

Andrew Page: Excluding these timing shifts, our underlying operations still drove a strong beat in the quarter, which is reflected in our full-year top and bottom-line guidance rates.

Andrew Page: We now expect to have full year adjusted diluted EPS in the range of $0.40 to $0.44 versus our previous guidance of towards the high end of $30 to $40. Please keep in mind the five-cent timing shift into Q2 from the second half as you incorporate our revised full year and initial Q3 guidance.

Andrew Page: Looking at the segments, we expect a 2024 adjusted operating profit margin slightly above 20% for technical apparel, high single digits for outdoor performance, and low to mid single digit adjusted segment margin for ball and rack.

Andrew Page: Now looking at Q3.

Andrew Page: We expect Q3 adjusted gross margin to be approximately 54% driven primarily by the mixed shift towards technical apparel and an adjusted operating margin between 11 and 12%.

Andrew Page: Based on current interest rates, our net finance cost for the quarter will be $45 million to $50 million, and we will have an effective tax rate on an adjusted pre-tax income of 50% to 55%.

Andrew Page: We expect adjusted diluted EPS to be $0.08 to $0.10 per share.

paul leway: Your next question comes from the line of Paul Lejuez from Citigroup. Your line is open.

paul leway: anyof

Speaker Change: Hey guys, can you talk about the stores versus e-com channel in the China market, and how would you characterize the promotional environment in China, and did you see anything change as the quarter progressed? Thanks.

Andrew Page: With that, let me focus on Q2 results and guidance.

Andrew Page: The fast growth of our high-margin archaic franchise is elevating the financial profile of Amer Sports Group in total.

Andrew Page: This dynamic allows us to deliver strong, profitable growth for shareholders while reinvesting in the many long-term growth opportunities across our portfolio.

Andrew Page: At the group level, Amer Sports Sales grew 16% in Q2, or 18.3% at constant currency, well ahead of expectations we set back in May.

Andrew Page: Even excluding the two-point wholesale shift from Q3, the strong group sales performance was led by technical apparel and outdoor performance.

Andrew Page: By channel, the group continues to be led by DTC, which grew 40% led by archaic.

Unknown Executive: With that, I'll turn it back to the operator for Q&A.

Speaker Change: to

Speaker Change: Hey, Paul, I mean, I just want to mention here. So the China actually, it's a, we got the, we got the two legs to run. Okay, so both.

James Zheng: It's just that first, I was the first face for us, they are still a great wrong way for us to continue to accelerate Akaris close in the future. For Solomon, it's another new areas, as I mentioned, for soft goods, Solomon, especially for where we are still at the preliminary stage and we are the leaders in trail running sectors, but you guys all the most market side of the trail running in relative limit versus the rest of the segments for where segments.

Andrew Page: Group wholesale revenues improved plus 2% year-over-year. Regional growth was led by Greater China, which increased 54%, followed by Asia Pacific, which grew 45%.

Andrew Page: AMEA grew 1%, and America's return to slight growth with sales up 1%.

Andrew Page: Turning to profitability, adjusted gross margin increased 200 basis points to 55.8% in Q2, primarily driven by positive segment, product, channel, and regional mixed shift. The company's highest gross margin business, Archaic, continues to grow significantly faster than the other brands, the biggest driver of gross margin expansion.

Unknown Executive: In the brand called Market of France, ahead of the recent Paris Olympics, we open a Solomon flagship store on the Shansevisaix in addition to our recent store opening Lama Reis. Both new stores have performed extremely well in the first month, and the representatives and the high demand consumers have to engage with the Solomon brands in its own environment. The Shansevisaix store has created a landmark presence to showcase the breadth and depth for Solomon's unique offering in its home market.

Andrew Page: As expected, adjusted SG&A expenses as a percentage of revenues increased 210 basis points and represented 52.9% of revenues in Q2, mainly driven by SG&A deleverage at ball and racket and higher spend related to DTC investments, including new store openings and higher retail personnel costs.

Speaker Change #100: Our physical shops and the e-coms close extremely well in China markets, okay? So they...

Andrew Page: Now turning to segment results.

Andrew Page: These factors allowed us to generate a 50 basis point increase in our adjusted operating, margin from 2.4% last year to 2.9% in Q2 2024, above our guidance of approximately 0%.

Andrew Page: Technical apparel revenues increased 34% to $407 million, led by Arc'teryx.

Andrew Page: Adjusted corporate expenses were $25 million versus $6 million in Q2 of last year, driven, by higher personnel costs due to increased headcount and share-based compensation. Depreciation and amortization was $63 million, which includes $29 million of ROU depreciation.

Andrew Page: Growth was fueled by 39% D2C expansion, including a 26% Omnicomp, a great result comparing against, an 80% Omnicomp last year in the second quarter. Our Omnicomp metric incorporates growth from both owned retail stores and e-commerce sites, that have been open at least 13 months.

Andrew Page: Adjusted net finance costs in the quarter was $45 million, at the low end of the range, of $45 to $50 million we guided to on our last call.

Andrew Page: In the quarter, we had an adjusted income tax benefit of $42 million, which included, the resolution of certain discrete tax items that I mentioned above, resulting in a $20 million benefit to net income, or approximately 4 cents per share.

Andrew Page: Adjusted net income was $25 million in Q2, compared to an adjusted net loss of $86 million, in the prior year period. Adjusted diluted earnings per share was 5 cents, compared to adjusted diluted loss per, share of 22 cents last year. We exceeded the midpoint of our Q2 EPS guidance by about 10 cents. Please keep in mind, this includes the 5 cents of timing shifts that I discussed that were, already contemplated in our full year guidance.

Andrew Page: Arc'teryx D2C momentum was fueled by both new and existing consumers, and both strong, traffic and conversion trends in stores and online.

Speaker Change #100: We, you know, we grow the business more than 54%.

Andrew Page: The Arc'teryx brand continues to experience broad-based strength, and is outperforming, across every region, channel, and category.

Speaker Change #101: and actually this 54% is all coming from, it's kind of average coming from the physical retail as well as on e-commerce business. It's on relatively the same level of the speed.

Andrew Page: D2C remains the core growth engine, but we also experience strength in the wholesale, channel, which grew 24% for the segment.

Unknown Executive: Well, Lama Reis shop is a football-only concept store, which has proven to be a particularly successful model that we will replicate a cloth email with three more stores in Paris.

James Zheng: So Solomon, we got kind of a very unique opportunity to create the new categories, we just mentioned we call the outdoor sneakers categories. Okay, so it's kind of a new segment and we had a tremendous successful story in the past two years, we run this in China and the really, I mean, at the shop, we say the Solomon come forward compact shop. Really created a great bus in China market and taking on leadership flows on the outdoor sneakers segments in the markets and the last year, I mean, we literally we were double the count of our shop penetration in China market by the end of year, we foresee that 200 shops in China.

Andrew Page: Regionally, technical apparel growth was led by Asia Pacific, followed by Greater China, and the Americas, which were partially offset by declines in EMEA.

Andrew Page: Arc'teryx is generating strong results in Europe, especially new store openings, but, this is off a small base, and was offset by a decline in peak performance, which continues to go through a brand reset to focus on greater full price. Technical Apparel Adjusted Operating Margin expanded 110 basis points to 14.2%, driven primarily by gross margin from favorable channel and geographic mix.

Andrew Page: The technical apparel segment margin also benefited from modest SG&A leverage on our character's strong sales growth while continuing key growth investments.

Speaker Change #102: In terms of the promotional environment in China, it's a difficult market so far, I mean, for the time being, okay? But we see, I mean, there's still a lot of discount activities.

Andrew Page: Outdoor performance segment revenues increased 11% to $304 million, driven by strong double-digit top-line performance in Solomon footwear and apparel and in the D2C channel, particularly in Asia Pacific and Greater China.

Speaker Change #102: in China market to get the brand try to get the

Andrew Page: This was partially offset by a decline in winter sports equipment. Outdoor performance sales also benefited from earlier than anticipated shipments that shifted from Q3 into Q2.

Andrew Page: By channel, outdoor performance D2C grew 55%, while wholesale sales declined slightly, negatively impacted by slower pre-orders in the North America sporting goods and ski channels, which increasingly relies upon replenished orders.

Andrew Page: 2024 will be a slightly softer year for winter sports equipment due to slower trends in North America with ski equipment sales are rebasing after a strong run through and beyond COVID. This is in addition to cautious orders in EMEA after two tough snow seasons in Europe.

Andrew Page: Given our great brands and scale advantages, we expect to take market share.

Andrew Page: Although we don't expect winter sports equipment to be a high-growth business, the industry remains healthy and the consumer demand for ski vacations remains consistent and strong, irrespective of weather, especially as resorts have become adept at making their own snow. Winter sports equipment now represents one-third of outdoor performance, and long-term we expect this business to grow low single digits annually.

Speaker Change #103: More revenues, okay, with relatively high level of the inventory.

Andrew Page: Regionally, outdoor performance sales growth was led by greater China, APAC, and EMEA, offset by a decline in America's, which has been affected by softer pre-orders as retailers increasingly rely on replenished orders.

Andrew Page: The outdoor performance segment adjusted operating profit margin expanded 380 basis points to negative 2.1%. This was driven by a combination of gross margin gains and SG&A leverage. Those margin gains were mainly driven by a favorable region and channel mix, lower discounts, and we also leveraged expenses, including payroll, administrative, and IT costs.

Speaker Change #103: But the good thing for us, I mean, we are sitting mainly in outdoor segments, okay? So that segment is still quite healthy at this moment.

Speaker Change #104: I would say.

Speaker Change #104: The brand of Harrison Salomon, when we run the business at this moment, and we are, we keep the same level. I mean, as the, we, our discount is very small in our regular shop. Okay, so we don't, literally, we don't give it a discount in our regular shop.

James Zheng: And meanwhile, I mean, we just opened the first Solomon forward shop in France, in Paris, the first compact shop also outperform a lot, okay, when we opened in May and we also try to have this kind of format, okay, to to check out the market acceptance. Okay, so we will open another to shop in London and the three more in Paris and one more in Milano and a two more in Milano to further verify the models.

Speaker Change #105: and we have the outlets and then that discount ratio is only 20 to 25% off.

Speaker Change #105: from the regular prize, still at a very healthy pace.

Speaker Change #105: Our two brands in the segment, they all perform extremely well for the time being. We are also encountering a level of short supply for both brands.

Unknown Executive: Two in London and two in Milan.

Andrew Page: Moving to ball and racket.

Speaker Change #105: And so, I mean, we are quite confident, I mean, to continue to have this kind of a trend in China for our two brands business.

James Zheng: So, so these foot that the footwear opportunity for Solomon, it's kind of the greatest opportunities for us to unlock in the future, so we, we see a great, we also see a great momentum for us in the future. And the poor version, I mean, as we just mentioned, we created a segment worse than 10 360. While we continue to secure our leadership for racket spinners, we also introduce Werson Sportswear, which is Werson apparel and the footwear to the market.

Unknown Executive: Thank you.

Unknown Executive: We will now begin the question and answer session.

Speaker Change #105: The all

Speaker Change #106: Your next question comes from Jay Sole from UBS. Your line is open.

Speaker Change #107: Great, thank you so much. Can you talk a little bit about your inventory position, maybe tell us a little bit about inventory by brand and how you see inventory growth trending over the rest of the year given that I think it was only up around 2% this quarter. Thank you.

Speaker Change #108: thank welve she

James Zheng: And we also see good light when we introduce this kind of format, both in North America and China, specifically in China. But it's still an infant state, we'll continue to explore opportunities. In our show, we will see the soft goods banish, I mean, especially combine all the three major brands, we will see a tremendous growth potential for our banish in the future.

Speaker Change #108: Jay, thanks. This is Andrew. Yeah, inventory position, as you talked about, you know, grew about 2%.

Speaker Change #109: This year compared to 16% top-line revenue growth. I just want to start off with saying that this was really set up as we exited 2023. As you recall, we did a very intentional job in the back half, especially in the Q4 of 2023, cleaning up inventory across each of our brands. And we came into 2024 with a very disciplined buying approach, merchandising approach.

Andrew Page: Matt and I, this is Andrew Page. Thanks for the question as well. As you think about the margin profile, I'll give you a little bit of perspective both on Gross Margin and SGNA leverage. As you progress, we had a very, very strong gross margin quarter in the second quarter, over 55% on Gross Margin, that's outstanding. As you move through the year, you would recall that third quarter is our largest wholesale shipment quarter.

Unknown Executive: Over four months in the low, I'm confident in the Solomon brand and our team, and we continue to optimize the good to market strategy and the self-structure to maximize potential of our Solomon Forward finish.

Unknown Executive: Moving on to Paul and the rackets highlights.

Andrew Page: And so you'll see Gross Margin somewhat compressed from Q2 and then return to those levels that you saw Q2 and Q4. And as we talked about our full year Gross Margin profile, we're up there, our guidance to about 54.5%. So you're going to see strong Gross Margin in the third quarter, with the third quarter being a bit more compressed because it reflects our largest wholesale shipment. As you move from an SGNA leverage perspective, SGNA dollars, obviously as we get into the third and fourth quarter, will increase as you go through the year.

Speaker Change #109: and Focus Sells the Ruins.

James Ang: Where you see our inventory levels, as James talked about, some of our high velocity, as you think about the Arc'teryx crag shoe, and you know, sometimes we do, we are selling out quickly. We have really, really strong relationships with our sourcing partners, so we feel good about being able to be responsive to elevated demand, but we feel good about our inventory. We, you know, you're going to continue to see the trends that you saw in second quarter with inventory growing below revenue. You're going to continue to see that trend as we go through the year. It is a, it's a key KPI for us and.

Speaker Change #110: And this is not, you know, an aberration in the sense that we're short in inventory. We are lean in inventory by design and by discipline.

Speaker Change #110: myfriend

Speaker Change #111: gu thank you so i want to add a one walk around this so for the brands part ok all these three major brands they got very hearly ageure proposition at this stage

Andrew Page: Back half of the year is a meaningfully larger than the first half of the front half of the year. But you're going to see meaningful SGNA leverage when you compare that to Q2. I would think about Q3 being meaningfully better than Q2 and Q4 being meaningfully better than Q3. So progressively as a percentage of revenue SGNA will continue to go down as we move through the year. Hope that answers your question.

Speaker Change #112: okay we don't have we see the closse and we also do that relevant inventory position to feed up the future growth but it's all under good control rightnow

Unknown Executive: If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.

Andrew Page: Revenue increased 1% to $283 million as Wilson returned to growth as expected after a double-digit decline in Q1, driven by improving wholesale sell-in.

Andrew Page: Our Tennis 360 strategy continues to be a key driver for the Wilson franchise, led by footwear and apparel growth.

Andrew Page: Accelerating expansion of Wilson Tennis 360 shops in China and some of the new footwear and racket product launches changed massively.

Unknown Executive: We ask that you please limit yourself to one question and one follow up.

Andrew Page: Golf also returned to growth, driven by the Americas and EMEA, led by premium clubs.

Andrew Page: The growth in sportswear, rackets, and golf was partially offset by declines in baseball, and inflatables.

Speaker Change #112: what

Andrew Page: Ball and racket segment adjusted operating profit margin contracted 160 basis points, compared to the second quarter of 2023 to 1.1%. This margin compression was due to SG&AD leverage, which was driven by retail investments, in the U.S., China, and Korea, footwear and apparel investment, and timing of advertising and promotion spend.

Andrew Page: Generating consistent margin performance is a key management priority for ball and racket, given its low single-digit growth profile. We are pleased by our lean inventory position in ball and racket, which is down significantly, versus last year, and positions us for much better profitability in the second half, especially in Q4, when we cycled against our high discounts from last year.

Speaker Change #113: Your next question comes from the line of Ike Boruchow from Wells Fargo. Your line is open.

Ike Boruchow: Hey, good morning everyone. Congrats on the quarter. I wanted to dig in a little bit more on Europe .

Speaker Change #115: Can you just kind of talk about your expectations for the region, the rest of the year, relative to your revenue guide, obviously, it looks like it's, you know, not really showing much growth the past couple quarters.

Unknown Executive: We will pre-slap Paul and the rackets to the ten to close in two queue, and we expect driven by improving sales into the retail channel.

Paul Lejuez: Your next question comes from the line of Paul Lesway from City Group. Your line is open. Hey guys, talk about the story versus Ecom channel in the China market. And how would you characterize the promotional environment in China and did you see anything change at the quarter progress?

Unknown Executive: While still in its early stage, our 10-360 strategy is proving to be our key driver for the worse and franchise led by a parallel and a forward close, accelerating expansion of worse and 10-360 shops in China and a key new product launch.

Unknown Executive: Your first question comes from the line of Brooke Roach from Goldman Sachs.

Speaker Change #116: I would love to know just a little bit more about what you guys see in the market. You know, basically, what do you see at POS and comp and comp growth for your retail stores versus what are the conversations with your retail partners? Are they getting more reluctant to take product, kind of just trying to get a flavor of the appetite from a retail perspective in that region specifically.

Andrew Page: Looking ahead, we are confident that our market leadership position and flow of innovative, products positions ball and racket, well as market inventories reach balance and retailer orders re-accelerate in the second half, especially in Q4, when we face our easiest comparison and also have our strongest pipeline of new products.

Andrew Page: Turning to the group balance sheet and cash flow, we ended the quarter with $1.8 billion, of net debt. Using the midpoint of our 2024 implied adjusted operating profit guidance, our net debt to, adjusted non-IFRS EBITDA ratio is already approximately 2.6 times.

Andrew Page: Re-leveraging our balance sheet remains a priority, and our goal is to reduce our leverage, ratio to 1.5 times or better over the next few years through both EBITDA expansion and debt paydown.

Andrew Page: Also, our focus on inventory discipline is paying off its inventories finished Q2 in, healthy conditions, up only 2% year-over-year versus 16% reported sales growth.

James Zheng: Hey Paul, I just want to mention here. So the China actually, we got the two legs to run. So both our physical shafts and the Ecoms close extremely well in China markets. So you know we glow the business more than 54% and actually this 54% is all coming from. It's kind of a average coming from the physical retail and well with the Ecoms business. It's on relatively the same level of the speed.

Unknown Executive: As you know, Roger is a living legend in tennis, and this new cloud line has been met with a very enthusiastic response from the market.

Speaker Change #117: what is

Unknown Executive: Worsen is also launching the first tennis shoe designed to express it for female tennis players for the injured. This shoe combines the comfort and the support of modern foam technology without losing any of the side-to-side stability required for tennis.

Speaker Change #118: let me give you the high level answer on this ok so it's a we got a multiple brands in doing build in europe each brand

Andrew Page: And our target to grow inventories in line with or slower than sales.

Unknown Executive: Our 360 tennis accessories, Mara Costag, will wear it for the first time in the US open later this month.

Andrew Page: Now, turning to guidance. Given our strong second quarter results and confidence in our brand and their financial, outlook, we are raising our guidance for the full year sales, adjusted operating margin, and adjusted diluted EPS.

Unknown Executive: Worsen tennis and the Worsen China had a big moment recently during the summer Olympics, when Qin Wenjian won gold in praying with her worsen rackets.

Andrew Page: As we said on previous earnings call, should strong trends continue and better than anticipated, demand materialize, we will be well positioned to deliver financial performance ahead of our expectations.

Unknown Executive: This did not go unnoticed in her home countries as sales of worsen rackets lose 20 times that day.

Speaker Change #118: got a different proposition. So I start with Solomon. Okay, so Solomon in Europe ,

Speaker Change #119: I do believe, okay, so this year we will continue to grow our footwear business at the right level. And while we also face the level of challenge from winter sports equipment.

Speaker Change #119: So that part, so it's kind of a bearing. So for Solomon Europe specifically, it's more or less mid to high single-digit growth, okay?

Unknown Executive: There are 19 million tennis participants in Gui China.

James Zheng: In terms of the promotional environment in China, it's a difficult market so far. I mean, for time being, okay, but we see, I mean, there's still a lot of discount activities in China markets to get the brands try to get the more revenues. Okay, with relatively high level of inventory. But the good things for us, I mean, we are sitting there in outdoor segments. Okay, so that segment is quite still quite piercing at this moment, I will say.

Unknown Executive: Last but not least, Feathering Clock is also elevating brand heat as a phase of worsen festival.

Speaker Change #119: for our carrix i think ass a weir we just started with a very small base i think our carrits we will glow meaningfulfully from europe and but it's a sk small base for us

Unknown Executive: Her signature festival collections sold exclusively online so far, sold out in record time.

Speaker Change #119: and Wilson. More or less, we will keep the low to mid to low single digit closing for our business.

Unknown Executive: And we expect our Feathering Clock franchise to accelerate in H2 with the launch in select kosher accounts.

Speaker Change #120: Big performance, we will face a level of the challenge. We want to find a good way to mitigate the risk, okay? So especially our business really focus on Nordic area.

James Zheng: The brand acts as a settlement when we run the business at this moment. And we keep the same level, I mean, as the, our discount is very small in our regular shop. Okay, so we don't literally, we don't give it a discount in our regular shop. And we have our lets, I mean, that discount ratio is only 20 to 25% off from the regular price. Still at a very healthy track. So, I mean, our two brands in the segment, so they all perform extremely well for time being.

Speaker Change #121: So in Russia, okay, I think in Europe , business as a whole, I mean, when we look at this, it will be like a missing those digital in Europe for the whole year. It's kind of outlook for the perspective.

Speaker Change #122: So if I'm understanding, it's really a peak performance issue in the Europe region and all the other brands are posting some level of growth.

Speaker Change #122: That's right.

Speaker Change #123: Okay, cool. All right. Thank you. Yeah, performance still represent a very small percentage of the fairness for us. Anyway, so as a whole, okay. So, but we, yeah.

James Zheng: We also in counting level of the short of supply for both brands. And so, I mean, we are quite confident, I mean, to continue to have this kind of trend in China for our two brands business.

Unknown Executive: Your line is open.

Speaker Change #123: obious

Unknown Executive: Morning.

Speaker Change #124: Okay, thank you guys.

laurrena vsellescue: Your next question comes from a line of Lorraine Vasilescu from BNP Paribas. Your line is open.

Jay Sole: You're next question. Thanks for the line of Jay Sole from UBS. Your lack is open.

laurrena vsellescue: Oh, good morning. Thank you very much for taking my question and congrats again on strong results. James, I wanted to ask about the Solomon DTC strategy. I think you called out in your prepared remarks you have 136

Andrew Page: Great, thank you so much. You can talk a little bit about your inventory position. Tell us a little bit about inventory by brand and how you see inventory growth trending over the rest of the year given. I think it was only up around 2% this quarter. Thank you. Thanks for that. Jay. Thanks, this is Andrew. Yeah, inventory position, as we talked about, you know, grew about 2% this year compared to 16% top line revenue growth.

Speaker Change #126: Owned and Franchised Stores in China. Can you, for the audience, maybe talk about the number of stores that you own and operate globally? And if I recall correctly, I don't think you have a store...

Andrew Page: With that, I will attend over to Andrew.

Speaker Change #127: in the key North American market? Should we assume at some point in time that you're going to expand Solomon stores into the North American market?

Andrew Page: Thank you, Jay.

Andrew Page: I just want to start off with saying that this was really set up as we exit at 2023. As you recall, we had we did a very intentional job in the back half, especially in the queue for 2023 cleaning up inventory across each of our across each of our brand. And we came into 2024 with a very disciplined by an approach, merchandising approach, and and and focus sell through and so we see our inventory levels as James talked about some of our some of our high velocity as you think about that the Arctic crack shoe and you know sometimes that we do are we're selling out quickly.

Speaker Change #127: Yeah, I, Lorraine, I just want to re-enhance, I mean, we are just at the preliminary stage to expand our Salomon direct-to-consumer channels, mainly from our own retail expansion in China first.

Andrew Page: I'm excited to discuss our strong YouTube performance and the setup for the of the Year.

Andrew Page: Our underlying results exceeded our guidance on sales, gross margin, operating margin, and earnings per share, given up confidence to raise full-year guidance.

Speaker Change #127: We see a good example from China and then, I mean, from that success.

Speaker Change #127: we also expand the model to japan and asia pacific

Speaker Change #127: And we start the trial also in Europe from May this year, okay, in Paris first.

Andrew Page: We have really, really strong relationships with our sourcing partners so we feel good about being able to be responsive to elevated demand, but we feel good about that inventory. We, you know, you're going to continue to see the trends that you saw in second quarter with inventory growing below revenue. You're going to continue to see that trend as we go through the year. It is the it's a key KPI for us and and this is not, you know, an aberration and sense that we're short and inventory. We are leaning inventory by design and by different. Got it. Thank you so much.

Speaker Change #127: So it's a still infant stage for us in the outside of China.

Speaker Change #128: and others. But luckily, the shop we opened both in Osaka and in Paris, they all outperformed. So give us a good level of confidence to continue to try this kind of a format. We call the Salomon Footwear Compact Shop, okay?

Andrew Page: Second, we had a four-cent EPS benefit in Q2 related to the resolution of uncertain tax decisions that were contemplated in the full-year guidance that we previously provided, but we're expected to be resolved in Q3 and Q4 this year.

Andrew Page: Excluding these timing shifts, our underlying operations still drove a strong beat in the quarter, which is reflected in our full-year top and bottom-line guidance rates.

Andrew Page: With that, let me focus on Q2 results in guidance.

Speaker Change #128: And in U.S., I will say we will open pop-up shop in October this year in New York City, in SoHo areas.

Andrew Page: The fast growth of our high-margined archeric franchise is elevating the financial profile of AmeriSports Group in total.

Andrew Page: This dynamic allows us to deliver strong profitable road for shareholders while reinvesting in the many long-term growth opportunities across our portfolio.

Speaker Change #129: That's the first trial for us. We will test that model to see how the market responds.

Andrew Page: At the group level, AmeriSports sales grew 16 percent in Q2 or 18.3 percent at consequences.

James Zheng: I want to add one more car on this so for the brand part. Okay, all these three major brands. They got a very healthy image proposition at this stage. Okay, we don't have a, we, we see the close and we also do that run up an inventory position to feed up the future close, but it's all under good control right now.

Speaker Change #129: and i hope next year we can open

Speaker Change #130: I mean, within five shops, maybe, okay, one to two in New York City and the rest of the city.

Speaker Change #130: and another one or two shops in the rest of the city in North America and to further verify the models we experience in China. But it's still too early to tell in North America specifically.

Andrew Page: Well ahead of expectations we set back in May, even excluding the two-point wholesale shift from Q3. The strong group sales performance was led by technical apparel and outdoor performance.

Ike Boruchow: Our next question comes from the line of Ike Boroch out from Wells Fargo. Your line is open. Hey, hey, good morning, everyone. Congrats on the quarter. I wanted to dig in a little bit more on Europe. Can you just kind of talk about your expectations for the region, the rest of the year, relative to your revenue guy and obviously it looks like it's, you know, not really showing much growth, the past couple quarters.

Andrew Page: By channel, the group continues to be led by D2C, which grew 40 percent led by archeric.

Speaker Change #130: made

Andrew Page: Group wholesale revenues improved plus 2 percent year over year. Regional growth was led by greater China, which increased 54 percent, followed by Asia-Pacific, which grew 45 percent.

Speaker Change #130: very helpful toe but china do we mention that we will

Andrew Page: Amir grew 1 percent, and America's return to slight growth was sales up 1 percent.

Andrew Page: Turning to profitability, adjusted growth margin increased 200 basis points to 55.8 percent in Q2, primarily driven by positive segment, product, channel, and regional mix shift. The company's highest growth margin business, archeric, continues to grow significantly faster than the other brands, the biggest driver of growth margin expansion.

Speaker Change #131: prettyparticular our

Speaker Change #132: Penetration, and by the end of the year we will have a 200 dedicated Solomon four-wheel compact shops for both own retail as well as the franchise shops.

Andrew Page: As expected, adjusted SGNA expenses as a percentage of revenues increased 210 basis points and represented 52.9 percent of revenues in Q2, mainly driven by SGNA D leverage at fallen bracket and higher spend related to D2C investments, including new store openings and higher retail personnel costs.

Andrew Page: For the full year, we now expect revenue growth of 15% to 17%, which incorporates greater than, 30% growth in technical apparel, mid to high single-digit revenue growth in outdoor performance, and low to mid single-digit growth in ball and racket.

Andrew Page: We are also raising our guidance for our full-year operating margin and now expect adjusted operating, margin toward the high end of our previous 10.5% to 11% range.

Andrew Page: Our net finance costs for the year will be $200 million to $220 million, including approximately, $15 million of non-recurring finance costs in the first quarter of 2024.

Andrew Page: We still expect to have an effective tax rate on adjusted pre-tax income of approximately, 38% for the full year of 2024. But the rate will be higher in the back half of approximately 50% to 55%. We continue to be very focused on designing and implementing strategies to reduce our, effective tax rate.

Andrew Page: We were pleased to achieve an adjusted SGNA rate in Q2 that was better than what was contemplated in our guidance last quarter. A reflection of the expense leverage in our business model when we deliver meaningful sales upside to our court.

Ike Boruchow: Would love to notice a little bit more about what you guys see in the market, you know, basically what, what do you see at POS and comp and comp growth for your retail stores versus what are the conversations with your retail partners. Are they getting more reluctant to take product kind of just trying to get a flavor of the appetite from the retail perspective in that region specifically.

Speaker Change #133: That's great to hear, James. And Andrew, congrats on raising the full year guide. On revenues, just for the audience, I think it implies 4Q should grow about 20%.

Speaker Change #134: I know there's some some comparers. Maybe can you kind of just, Bridget, for the audience, how do we think about the acceleration into 4Q? And I think you mentioned there was a $20 million shift of 3Q into 2Q. Was that driven by one segment and should we assume some kind of shift also between 3Q and 4Q?

Andrew Page: Yes. These factors allowed us to generate a 50 basis point increase in our adjusted operating margin from 2.4% last year to 2.9% in Q2 2024 above our guidance of approximately 0%.

Andrew Page: We're confident that we will be able to reduce our effective tax rate to a level that is, consistent with other global consumer companies over the next few years.

Andrew Page: We now expect to have full-year adjusted diluted EPS in the range of $0.40 to $0.44 versus, our previous guidance of towards the high end of $0.30 to $0.40. Please keep in mind the $0.05 timing shift into Q2 from the second half as you incorporate, our revised full-year and initial Q3 guidance.

Andrew Page: Adjusted corporate expenses were $25 million versus $6 million in Q2 of last year driven by higher personnel costs due to increased pet count and share-based compensation. Appreciation and ammarization was $63 million which includes $29 million of ROU depreciation.

James Zheng: Okay, let me give you the high level answer on this, okay, so it's a big, we got multiple brands in doing things in Europe each brand got a different proposition, so I start with the Solomon. Okay, so Solomon Europe, I do believe, okay, so this year we will continue to grow our footwear finish at the right level and while we also face the level of challenge from winter sports equipment. So, so that part, so it's kind of a balance, so it's for for Solomon Europe specifically, it's more or less, mid to mid to high single digit close, okay.

Andrew Page: Looking at the segments, we expect a 2024 adjusted operating profit margin slightly, above 20% for technical apparel, high single digits for outdoor performance, and low to mid-single digit adjusted segment margin for ball and racket. Now looking at Q3, we expect Q3 adjusted gross margin to be approximately 54% driven primarily, by the mixed shift towards technical apparel and an adjusted operating margin between 11% and 12%.

Andrew Page: Based on current interest rates, our net finance cost for the quarter will be $45 million to, $50 million, and we will have an effective tax rate on an adjusted pre-tax income of, 50% to 55%.

Speaker Change #135: it is

Andrew Page: We expect adjusted diluted EPS to be $0.08 to $0.10 per share.

Speaker Change #136: Yeah, so, let me start with the $20 million. The $20 million did have some variability between a couple of different segments. Outdoor performance was a little bit more than half of that $20 million, and technical apparel was the remainder amount. All of the shift was from Q3 into Q2, and like I said, it had about a two-point top-line impact.

Andrew Page: Adjusted net finance cost in the quarter was $45 million at the low end of the range of $45 to $50 million we guided to on our last call.

Speaker Change #136: So if you think about Q2 growing 16%, really it's kind of 14% if you exclude that, and you think about the implied guidance in Q3, you know, it would have grown an additional 1.5% to 2%.

James Zheng: For our carrots, I think it's a weird, we just started with a very small base, I think our carrots, we will glow meaning for eight from Europe, but it's still small base for us. And the worst and as more or less, we will keep the middle low to mid to mid to low single digit close in for our business peak performance, we, we will face a level of the challenge, we want to find a good way to mitigate the risk, okay, so especially our business really folks on the other area.

Speaker Change #136: So that's how you think about it. The shift was really Q3 to Q2.

Speaker Change #136: As you think about the rest of the year, there's not meaningful shifts that you need to build into your models out of Q3 and into Q4.

Speaker Change #136: We anticipate

Speaker Change #137: You know, on a natural basis, Q2 would have been up about 14, Q3, you know, up similarly and then you're going to see the meaningful arc that we've talked about all year on Q4. Remember, Q4 is our biggest quarter by far. It's going to be our easiest comp given the fact that we had a lot of promotional environment activity in Q4 last year.

James Zheng: So in us in not sure, okay, I think in Europe business as a whole, I mean when we look at this, it will be like. Like a mid single digit close in Europe for the whole year, it's kind of our luck for the perspective, and so on. So if I'm understanding it's really a peak performance issue in the Europe region, and all the other brands are posting some level of growth. That's right. Okay, cool. All right, thank you. Yeah, performance is still representative, a very small percentage of the penis was anyway. So as a whole. Okay, so, but then we yeah.

Unknown Executive: Okay, thank you guys.

Unknown Executive: I was hoping you could elaborate on the strength that you're seeing at the Arcteryx brand and provide color on the growth that you're seeing by region.

Speaker Change #137: and

Stuart Haselden: How are you thinking about the sustainability of this outsized comp growth for this brand?

Speaker Change #137: them

Speaker Change #138: Thank you very much. Thank you, Andrew.

Stuart Haselden: And in the near term, what trends have you seen with customer traffic and conversion as you've entered the third quarter in your most important China and North America?

laurie hutchinson: Thank you. And your final question comes from the line of Lorraine Hutchinson from Bank of America. Your line is open.

laurie hutchinson: Thank you, good morning. I just wanted to hear you elaborate a little bit on the macro climate. Are you seeing any change in consumer behavior in any of your key regions?

Stuart Haselden: Hey Brooke, it's Stuart.

Stuart Haselden: So let me try to address your questions.

Stuart Haselden: You had a number there that I'll add it to speak to.

Stuart Haselden: As we look at the performance of our tariffs by region, we were very pleased with how balanced we saw our growth in the second quarter.

Stuart Haselden: We are far from reaching penetration potential in really any region in which we operate.

Stuart Haselden: The North America business continued to see good momentum with, as we mentioned on the prepared remarks, Asia-Pacific outside of China saw the fastest growth of the four regions in which we operate.

Stuart Haselden: We also saw very strong growth in China.

Speaker Change #140: James, why don't you take that if you're seeing any consumer behavior. Stuart, too, I think would be good to hear if you're hearing any sensitivity to the economy.

Stuart Haselden: So we're really pleased across every region where we're operating with the results that we're seeing, both from a brick and mortar standpoint, as well as from an e-commerce business standpoint.

Stuart Haselden: The sustainability of the momentum in our tariffs business, you know, we really see this as the early innings of our growth story.

Andrew Page: In the quarter we had an adjusted income tax benefit of $42 million which included the resolution of certain discrete tax items that I mentioned above resulted in a $20 million benefit net income or approximately 4 cents per share.

Lauren Vasilescu: Next question comes from a line of Lauren Vasilescu from BNP's Parabits. Your line is open. Oh, good morning.

Speaker Change #141: Yeah, let me, I, I, I think the overall, I mean, um,

Andrew Page: Adjusted net income was $25 million in Q2 compared to an adjusted net loss of $86 million in the prior year period.

Lauren Vasilescu: Thank you very much for taking my question and congrats again on strong results. James, I wanted to ask about the Solomon TTC strategy. I think you called out in the prepared remarks. They have 136 own and franchise stores in China. Can you further the audience maybe talk about the number of stories that you own and operate. Globally, and if I recall correctly, I don't think you have a store in the North American market.

Speaker Change #142: That any economic situation has got to get the level of the challenge. Okay. So, but different regions got different situations. For me, my understanding of China is it's still overall it's getting through

Andrew Page: Adjusted deluded earnings per share was $5 cents compared to adjusted deluded loss per share of $22 cents last year. We exceeded the midpoint of our Q2 EPS guidance by about 10 cents. Please keep in mind this includes the five cents of timing shifts that I discussed that were already contemplated in our full-year guidance.

Andrew Page: Now it's ready for segment results.

Speaker Change #143: People still need to figure out, okay, so how we overcome kind of a short-term difficulty as a challenge as a whole.

Lauren Vasilescu: Should we assume at some point in time that you've been up, expand Solomon stores into the North American market. Yeah, Lauren, I just want to enhance, I mean, we are just at the presuming stage to expand our Solomon director consumer channels. Many found our own retail expansion in China first. We see a good example from China and then from that success, we also expand the model to Japan and Asia Pacific. And we started trying also in Europe from May this year, okay, in Paris first.

Speaker Change #144: But on the other side, as I just mentioned, the industry we are sitting and the sports industry is still at an optimal situation. So and people and the participants level from China markets.

Lauren Vasilescu: So it's a it's a still infant stage for us in the outside China. We, but luckily that the shop we open both in Osaka and in Paris, they are all out perform. So give us a good level confidence to continue to try this kind of a format we call the Solomon Solomon forward compact shop, okay. And in US, I will say we will open pop-up shop in October this year in New York City in so whole areas.

Speaker Change #145: continue to grow. And the overall industry, sports industry, we believe still grow more than, more or less 5 to 8% on CAGR for coming three years. So I, so we think that the market size is still there.

Speaker Change #146: Okay, so and just sort of how there are some brands doing an extremely good job taking the shares.

Speaker Change #147: from some brands doing social jobs. So it's kind of a shifting, okay? It's kind of a shifting.

Speaker Change #148: And the Europe , I think it's all about, it's kind of a, my understanding, it's kind of a stable.

Speaker Change #148: Markets, Relatively Stable Markets, and it's all about

Speaker Change #149: how you created that

Speaker Change #149: kind of a excitement

Speaker Change #150: The level of excitement you created and they all, I mean, the market still welcomes new players.

Speaker Change #151: which can create a distinguished value to the consumers. And the customers also love to try certain new brands.

Lauren Vasilescu: Let's the first try for us. We will test that model to see how the market this bank. And I hope next year we can open one to, I mean, I mean, within five shops, maybe, okay, one to two in New York City. And another one or two shops in the rest of city in North America and to further verify the models we experience in China, but it's still too early to tell in North America specifically.

Speaker Change #151: Specially in the industry we are sitting so we still see a good level of the opportunity. Likewise in North America. North America so I still

Speaker Change #152: I think the macro situation is a bit of a challenge, but the consumer is still looking for some newcomers and with innovative technologies.

Speaker Change #152: High-Technical Products in the e-sports industry.

Lauren Vasilescu: Very helpful, but China and we mentioned that we will quickly go our penetration and by the end of the year, we will have a 200 dedicated Solomon forward compact shops for both only tell as well as the franchise shops.

Speaker Change #152: and we still see good opportunities for us so i 'm a pretty optimistic still

Speaker Change #152: for the overall industry, I mean in our industry, and especially that the segment we are sitting, we still see a great runway for us to explore the potential in the market.

Stuart Haselden: And so we'll have, you know, around 60 stores in North America at the end of the year.

Stuart Haselden: You know, we could see the total potential for North America being well over 200, just for an example.

Stuart Haselden: And we're even earlier in the development of the Europe market and the Asia-Pacific market.

Andrew Page: That's great to hear James. An injury congrats on raising the four-year guide on revenues just for the audience. I think it implies 4Q should grow about 20%. I know there's some some compares maybe you can just bridge it for the audience. How do we think about the acceleration into 4Q. And I think you mentioned there was a $20 million shift from 3Q to 2Q. Was that driven by one segment and should we have seen some kind of shift also between 3Q and 4Q.

Andrew Page: Tactical apparel revenues increased 34% to $407 million led by our care.

Speaker Change #152: be i

Speaker Change #153: the rain steward i'll justadd to date's comments i think what we're seeing is

Andrew Page: Growth was fueled by 39% D to C expansion including a 26% omnicop, a great result comparing against an 80% omnicop last year in the second quarter. Our omnicop metric and corporate rates growth from both owned retail stores and e-commerce sites that have been open at least 13 months. Our TARIC D to C momentum was fueled by both new and existing consumers and both strong traffic and conversion trends in stores and online.

Speaker Change #154: a bifurcation across the region we operate

Speaker Change #155: We're seeing a strong division between winners and losers, and companies that have a strong market position are taking share, and companies that have

Andrew Page: Yeah, so let me start with the 20 million. The 20 million did have some some variability between a couple of different segments. Outdoor performance was a little bit more than half of that 20 million and technical apparel was the remainder amount. All of the shift was from Q3 into Q2. And like I said, it had about a two point top line impact. So if you think about Q2 growing 16 percent really, it's kind of 14 percent.

Stuart Haselden: China, we're farther along with our store count, but we still see a really exciting runway of growth there as we continue to optimize our real estate portfolio.

Stuart Haselden: And the success of the Shanghai Museum store is really helping us reset what we see is the potential for the business in China.

Speaker Change #155: are just participating in the market are...

Speaker Change #155: are forfeiting share.

Speaker Change #156: We also see technical innovation as an important competitive advantage that is helping companies, I think, like Arc'teryx, continue to thrive in the marketplace.

Stuart Haselden: And as we look at, you know, some of the other KPIs and customer performance related matters or trends, We were pleased to see very healthy double-digit guest file growth in the quarter, and that was reflected in really strong traffic.

Stuart Haselden: As we look at the results, the Omnicomp that Andrew mentioned, just the overall sales trajectory of the business, it's really a traffic story.

Stuart Haselden: We saw very modest improvements in conversions, but the main key KPI that is driving the sales increases in our D2C business has been traffic.

Stuart Haselden: And so we see that as a very healthy indicator of the momentum of the brand as we're building brand awareness.

Stuart Haselden: We also saw healthy growth in average spend per customer, so really strong customer metrics and very healthy and balanced KPIs across our channels.

Speaker Change #156: It is a focus for how we are building our product strategy.

Speaker Change #156: So at this point, our customer dynamics are very strong.

Speaker Change #156: The signal, the demand signal that we're seeing from all our regions is very strong.

Andrew Page: If you excluded that and you think about the implied guidance in Q3, you know, it would it would have grown an additional one and a half to 2 percent. So that's how you think about it. The shift was really Q3 to Q2. As you think about the rest of the year, there's a there's not meaningful shifts that you need to build into your models out of Q3 and into Q4. We anticipate, you know, on a on a natural basis Q2 would have been up about 14 Q3, you know, up similarly.

Speaker Change #156: But we're also, we're reading the same headlines that you are around the world.

Ed: and we're very much building in the contingency plan as we might.

Stuart Haselden: Yeah, and I'd also just add that we're, we feel confident that we're taking share in every market in which we operate.

Stuart Haselden: James, maybe you could address Brooke's question.

James Zheng: Yeah, yeah, I add a certain comment based on Stuart's explanation.

James Zheng: Okay, I think accuracy in China, it's a, it's a still, I mean, playing a clear leadership role in the segment.

James Zheng: I mean, we are sitting, but not, not only on the segment, but also the whole industry.

James Zheng: So we really grow tremendous, our sales in Q2, in the first half, and really outperformed among all the sports brands in the market.

James Zheng: And the trend we see, it's continued to carry on.

James Zheng: And it's not slowed down, okay, the overall, especially on the comp shop growth pattern in China.

Ed: Be ready for any any sort of change in the macro signal, but at this point, it's quite robust and We're taking it as an opportunity to play offense and take share from our competitors

Operator: With that, I'll turn it back to the operator for Q&A.

Ed: much

James Zheng: So it's, obviously, the Q2, I mean, second quarter, it's still relatively soft season among the four quarters.

James Zheng: But we also see, I mean, we are in the middle of the Q3 already.

Operator: Thank you.

Ed: And that concludes our question and answer session. I will now turn the call back over to Omar for final closing remarks.

James Zheng: So we also see big growth patterns in China markets.

James Zheng: So I think it's a, as Stuart mentioned, it's still a preliminary stage for us, not only in China and the rest of the world.

James Zheng: So we have a very good confidence to continue to grow the experience cross-border in the world.

Unknown Executive: Great, thanks so much.

Unknown Executive: Your next question comes from a line of Matthew Boss from JP Morgan.

Unknown Executive: Your line is open.

Andrew Page: And then you're going to see the meaningful arc that we've talked about all year on Q4. Remember Q4 is our biggest quarter by far. It's going to be our easiest comp given the fact that we had a lot of emotional environment activity in Q4 last year.

Unknown Executive: Thanks and congrats on the night score.

James Zheng: So James, maybe higher level, could you speak to runway that you see across brands and in the portfolio to capture continued market share in the premium sports and outdoor market?

James Zheng: And then for Andrew, on the bottom line, maybe could you just help elaborate on the back half margin geography as we think about gross margin drivers relative to SG&A investments that are embedded this year, relative to the path to SG&A leverage, Okay, Matthew, thank you for your questions.

James Zheng: I just want to highlight here, okay, we got a very unique proposition in the market.

omarart: Thanks, Rob. Thanks, everyone, for joining. Just one quick mention, we're posting on our IR website both the presentation slides that go with the prepared remarks as well as the script of the prepared remarks for those of you who are looking for it. Thanks, everyone, for joining. We'll see you again in three months.

James Zheng: For Amer Sports, we really own two distinguished business franchises, which is hard goods, we call the equipment business, as well as the soft goods.

James Zheng: So I would say, first of all, I mentioned about the hard goods business or equipment business for both winter sports equipment, and the Wilson.

Unknown Executive: Thank you very much.

Operator: We will now begin the question and answer session.

James Zheng: I mean, we all I mean, you guys all can tell we all got very strong market share in the segment we are sitting.

Operator: If you would like to ask a question, please press star 1 on your telephone keypad to raise, your hand and join the queue.

James Zheng: Even the growth runway is still a bit small.

Operator: If you would like to withdraw your question, simply press star 1 again.

James Zheng: But we have a very good high good level of confidence to secure or continue to amplify our market share in the future in the in the in the segment we are sitting, not only on the winter sports equipment, but also in records, boards, and and the also the the increase we mentioned.

Unknown Executive: Thank you.

Unknown Executive: This concludes today's conference call.

Operator: We ask that you please limit yourself to one question and one follow-up.

James Zheng: Okay, so I think the team got a very good level of confidence to continue to secure our leadership in these kind of delicate segments.

Operator: And that concludes our question and answer session.

Unknown Executive: Thank you for your participation.

Operator: Your first question comes from the line of Brooke Roach from Goldman Sachs.

James Zheng: While we continue to secure our leadership for the records business, we also introduced Wilson Sportswear, which is Wilson apparel and footwear to the market.

Omar Saad: I will now turn the call back over to Omar for final closing remarks.

Omar Saad: Thanks everyone for joining.

Unknown Executive: You may now disconnect.

Operator: Your line is open.

James Zheng: And we also see a good light when we introduce this kind of format, both in North America and in China, specifically in China.

Omar Saad: Thanks Rob.

Omar Saad: Just one quick mention, we're posting on our IR website both the presentation slides that, go with the prepared remarks as well as the script of the prepared remarks for those of you who are looking for it.

You may now disconnect.

Operator: Good morning, and thank you for taking our question.

James Zheng: But it's still an infant stage.

Omar Saad: Thanks everyone for joining.

Operator: I was hoping you could elaborate on the strength that you're seeing at the Arc'teryx brand, and provide color on the growth that you're seeing by region.

James Zheng: We will continue to explore the opportunities.

Omar Saad: We'll see you again in three months.

Operator: How are you thinking about the sustainability of this outsized comp growth for this brand?

James Zheng: In a nutshell, we will see the soft goods business, I mean, especially combine all the three major brands, we will see a tremendous growth potential for our business in the future.

Operator: This concludes today's conference call.

Operator: And in the near term, what trends have you seen with customer traffic and conversion, as you've entered the third quarter in your most important China and North American markets?

James Zheng: Matt, hi, this is Andrew Page.

Operator: Thank you for your participation.

Operator: Thank you.

Andrew Page: Thanks for the question as well.

Stuart Haselden: Hey, Brooke, it's Stuart.

Andrew Page: As you think about the margin profile, I'll give you a little bit of perspective both on gross margin and SG&A leverage. As you progress, you know, we had a very, very strong gross margin quarter in the second quarter, over 55% on gross margin.

Stuart Haselden: So let me try to address your questions.

Andrew Page: That's outstanding.

Stuart Haselden: You had a number there that I'll add it to speak to.

Andrew Page: As you move through the year, you recall that third quarter is our largest wholesale shipment quarter. And so you'll see gross margins somewhat compressed from Q2 and then return to those levels that you saw at Q2 and Q4.

Speaker Change #159: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Stuart Haselden: So, As we look at the performance of our carriage-by-region, we were very pleased with how balanced we saw our growth in the second quarter.

Andrew Page: And as we talked about our full year gross margin profile, we've upped our guidance to about 54.5%. So you're going to see strong gross margins in the third and fourth quarter, with the third quarter being a bit more compressed because it reflects our largest wholesale shipments.

Stuart Haselden: The North America business continued to see good momentum with, as we mentioned on the, prepared remarks, Asia-Pacific outside of China saw the fastest growth of the four regions in which we operate.

Andrew Page: As you move from an SG&A leverage perspective, SG&A dollars, obviously, as we get into third and fourth quarter, will increase as you go through the year.

Stuart Haselden: We also saw very strong growth in China.

Andrew Page: Back half of the year is meaningfully larger than the first half of the front half of the year, but you're going to see meaningful SG&A leverage when you compare that to Q2.

Stuart Haselden: The business in Europe grew a bit slower, but we're still very encouraged by the success, of the new stores that we opened in the Europe market. The stores that we opened in Paris in particular have really performed ahead of our expectations, which gives us a lot of confidence to continue to lean into our Europe expansion.

Andrew Page: I would think about Q3 being meaningfully better than Q2 and Q4 being meaningfully better than Q3.

Lorraine Hutchinson: And your final question comes from a line of Lorraine Hutchinson from Bank of America. Your line is open. Thank you.

Stuart Haselden: We're really pleased across every region where we're operating with the results that we're, seeing both from a brick-and-mortar standpoint as well as from an e-commerce business standpoint.

Andrew Page: So progressively, as a percentage of revenue, SG&A will continue to go down as we move through the year.

Stuart Haselden: The sustainability of the momentum in our carriage business, we really see this as the, early innings of our growth story.

Unknown Executive: Hope that answers your question.

Stuart Haselden: We are far from reaching penetration potential in really any region in which we operate.

Unknown Executive: Your next question comes from the line of Paul Lejuez from Citigroup.

Stuart Haselden: We'll have around 60 stores in North America at the end of the year.

Unknown Executive: Your line is open.

Stuart Haselden: We could see the total potential for North America being well over 200, just for an example.

Unknown Executive: Hey guys, can you talk about the stores versus ecom channel in the China market?

Stuart Haselden: Even earlier in the development of the Europe market and the Asia-Pacific market, China, were farther along with our store count, but we still see a really exciting runway of growth there as we continue to optimize our real estate portfolio.

James Zheng: And how would you characterize the promotional environment in China?

Stuart Haselden: The success of the Shanghai Museum store is really helping us reset what we see as the, potential for the business in China.

James Zheng: And did you see anything change as the quarter progressed?

Stuart Haselden: As we look at some of the other KPIs and customer performance-related matters or trends, we, were pleased to see very healthy double-digit guest file growth in the quarter. That was reflected in really strong traffic.

James Zheng: Thanks.

James Zheng: Good morning. I just wanted to elaborate a little bit on the macro climate. Are you seeing any change in consumer behavior in any of your key regions? James, why don't you take that if you're seeing any consumer behavior? Yeah. I think it would be good to hear if you're hearing any. Yeah, let me. I think the overall, I mean, the Islamic situation still got the level of the challenge. Okay. So, but different region got different situation.

Stuart Haselden: As we look at the results, the Omnicomp that Andrew mentioned, just the overall sales, trajectory of the business, it's really a traffic story.

James Zheng: Hey, Paul, I mean, I just want to mention here, so the China actually, it's a, we got the, we got the two legs to run.

Andrew Page: The our TARICs brand continues to experience broad-based strength and is outperforming across every region, channel and category.

Stuart Haselden: We saw very modest improvements in conversions, but the main key KPI that is driving the, sales increases in our D2C business has been traffic.

James Zheng: Okay, so both our physical shops and the, and the e-commerce grows extremely well in China markets.

Stuart Haselden: We see that as a very healthy indicator of the momentum of the brand as we're building, brand awareness. We also saw healthy growth in average spend per customer.

James Zheng: Okay, so they, we, you know, we grow the business more than 54%. And, and, and actually this 54% is all coming from, it's kind of average coming from the physical retail as well as the e-commerce business.

Stuart Haselden: Really strong customer metrics and very healthy and balanced KPIs across our channels.

James Zheng: It's relatively the same level of speed.

Stuart Haselden: I'd also just add that we feel confident that we're taking share in every market in which, we operate.

James Zheng: In terms of the promotional environment in China, it's a, it's a, it's a difficult market so far, I mean, for time being.

Andrew Page: D to C remains the core growth engine but we also experienced strength and wholesale in the wholesale channel which grew 24% for the second.

James Zheng: James, maybe you could address Brook's question.

James Zheng: Okay, so, but we see, I mean, there's still a lot of discount activities in China markets to get the brands try to get more revenue.

James Zheng: Yeah, I had certain comments based on Stuart's explanation.

James Zheng: Okay, with relatively high level of human trade.

James Zheng: I think our character in China is still playing a clear leadership role in the segment we, are sitting, but not only on the segment, but also the whole industry.

James Zheng: But the good thing for us, I mean, we are sitting mainly in outdoor segments.

James Zheng: We really grew tremendously in our sales in Q2, in the first half, and really outperformed, among all the sports brands in the market.

James Zheng: Okay, so that segment is quite, still quite healthy at this moment, I would say.

James Zheng: The trend we see, it continues to carry on.

James Zheng: The brand, when we run the business at this moment, and we are, we keep the same level, I mean, as the, we, our discount is very small in our regular shop. Okay, so we don't, literally, we don't give it a discount in our regular shop. And we have the outlets, I mean, that discount ratio is only 20 to 25% off from the regular price, still at a very healthy track.

James Zheng: It's not slowed down, especially on the comp shop growth pattern in China.

James Zheng: So, I mean, our two brands in the, in the, in the segment, so they all perform extremely well for time being. We also encounter level of the short of supply for both brands.

James Zheng: Obviously, the Q2, I mean, second quarter, it's still a relatively soft season among, the four quarters.

James Zheng: And so, I mean, we are quite confident, I mean, to continue to have this kind of a trend in China for, for our two brands business.

James Zheng: But we also see, I mean, we are in the middle of Q3 already, so we also see big growth patterns, in China markets.

Unknown Executive: Your next question comes from Jay Sole from UBS.

James Zheng: I think, as Stuart mentioned, it's still a preliminary stage for us, not only in China, and the rest of the world.

Unknown Executive: Your line is open.

James Zheng: So we have a very good confidence to continue to grow the characteristics across the board, in the world.

Unknown Executive: Great.

Operator: Great.

Unknown Executive: Thank you so much.

Operator: Thanks so much.

Unknown Executive: Can you talk a little bit about your inventory position?

Operator: Your next question comes from a line of Matthew Boss from JP Morgan.

Unknown Executive: Tell us a little bit about inventory by brand and how you see inventory growth trending over the rest of the year, given that I think it was only up around 2% this quarter.

Operator: Your line is open.

Unknown Executive: Thank you.

Operator: Thanks and congrats on a nice quarter.

Andrew Page: Jay, thanks.

Operator: So James, maybe higher level, could you speak to runway, that you see across brands and in the portfolio to capture continued market share in the premium sports and outdoor market?

Andrew Page: This is Andrew.

Operator: And then for Andrew, on the bottom line, maybe could you just help elaborate on the back half margin geography as we think about gross margin drivers relative to, SG&A investments that are embedded this year relative to the path to SG&A leverage multi-year?

Andrew Page: Yeah, inventory position, as you talked about, you know, grew about 2% this year compared to 16% top line revenue growth.

James Zheng: Okay Matthew, thank you for your questions.

Andrew Page: I just want to start off with saying that this was really set up as we exited 2023. As you recall, we did a very intentional job in the back half, especially in the Q4 of 2023, cleaning up inventory across each of our brands.

James Zheng: I just want to highlight here, okay, we got a very, unique proposition in the market.

Andrew Page: And we came into 2024 with a very disciplined buying approach, merchandising approach, and focused sell through.

James Zheng: For Amer Sports, we really own two distinguished business franchises, which is hard goods, we call the equipment business, as well as the soft goods.

Andrew Page: And so, where you see our inventory levels, as James talked about, and some of our high velocity, as you think about the Arc'teryx crag shoe.

James Zheng: So I would say, first of all, I mentioned about the hard goods business or equipment business.

Andrew Page: And, you know, sometimes that we do, we're selling out quickly.

James Zheng: For both winter sports equipment and the Wilson, I mean, we all, I mean, you guys all can tell, we all got very strong market share in the segment we are sitting.

Andrew Page: We have really, really strong relationships with our sourcing partners. So, we feel good about being able to be responsive to elevated demand. But we feel good about that inventory.

James Zheng: Even the gross runway is still a bit small, but we have a very good level of confidence to secure or continue to amplify our market share in the future in the segment we are sitting, not only on the winter sports equipment, but also in rackets, boards, and also the increase we mentioned.

Andrew Page: We, you know, you're going to continue to see the trends that you saw in second quarter with inventory growing below revenue. You're going to continue to see that trend as we go through the year.

James Zheng: Okay, so I think the team got a very good level of confidence to continue to secure our leadership in these kinds of delicate segments.

Andrew Page: It's a key KPI for us.

James Zheng: For soft goods part, I think, I mean, the great performance from Apgarix already demonstrate, our unique proposition at the premium segment of the outdoor industry we are sitting.

Andrew Page: And this is not, you know, an aberration in the sense that we're short in inventory.

James Zheng: Okay, so Apgarix really give out the very strong momentum in the pinnacle sectors in outdoor segments and continue to grow more than, I think, 30% in the markets and really leading the whole growth in the industry.

Unknown Executive: We are leaning inventory by design and by this.

James Zheng: So I think it's, I will say it's a hero brand at this moment in the market.

Unknown Executive: Got it.

James Zheng: And as we just mentioned, we will continue to drive Apgarix.

Unknown Executive: Thank you so much.

James Zheng: It's just at the first, I will say, first phase for us.

James Zheng: I want to add one more color on this.

James Zheng: There are still a great runway for us to continue to accelerate Apgarix growth in the future.

James Zheng: So for the brain part, okay, all these three major brains, they got a very healthy image proposition at this stage.

James Zheng: For Solomon, it's another new area.

James Zheng: Okay, we don't have, we see the growth and we also build a relevant inventory position to feed up the future growth, but it's all under good control right now.

Andrew Page: Regionally, technical apparel growth was led by Asia Pacific followed by greater China and the Americas which were partially offset by declines in Amea.

James Zheng: For me, I'm right understanding China. It's still overall. It's getting through. So, people still need to figure out. Okay. So, how we overcome kind of a short term difficulty to challenge as a whole. But on your side, as I just mentioned, that the industry we are sitting and that was industry still at the optimal situation. So, and the people and the participants level from China markets continue to go. And the overall industry, sports industry, we believe still grow more than more than five to eight percent on Kager for coming three years.

James Zheng: As I mentioned, for soft goods, Solomon, especially footwear, we are still at the preliminary stage and we are the leaders in trail running sectors.

Unknown Executive: Your next question comes from the line of Ike Boruchow from Wells Fargo.

James Zheng: But you guys all know the market size of the trail running is relatively limited versus the rest of the segments, footwear segments.

Unknown Executive: Your line is open.

James Zheng: So Solomon, we got kind of a very unique opportunity to create a new category.

Unknown Executive: Hey, good morning, everyone.

James Zheng: We just mentioned, we call the outdoor sneakers categories. Okay, so it's kind of a new segment.

Unknown Executive: Congrats on the quarter.

James Zheng: And we had a tremendous successful story in the past two years, we run this in China.

Unknown Executive: I wanted to dig in a little bit more on Europe.

James Zheng: And really, I mean, the shop, we say the Solomon footwear compact shop really created a great buzz in China market and taking on leadership roles on the outdoor sneakers segment in the market.

Unknown Executive: Can you just kind of talk about your expectations for the region the rest of the year, relative to your revenue guide?

James Zheng: And last year, I mean, we literally, we were double the count of our shop penetration in China market.

Unknown Executive: Obviously, it looks like it's, you know, not really showing much growth the past couple quarters.

James Zheng: By the end of year, we foresee 200 shops in China.

Unknown Executive: I would love to notice a little bit more about what you guys see in the market.

James Zheng: And meanwhile, I mean, we just opened the first Solomon footwear shop in France, in Paris.

Unknown Executive: You know, basically, what do you see at POS and comp growth for your retail stores versus what are the conversations with your retail partners?

James Zheng: La Marais shop, the first compact shop also outperformed a lot when we opened in May. And we also try to have this kind of format to check out the market acceptance.

Unknown Executive: Are they getting more reluctant to take product kind of just trying to get a flavor of the appetite from a retail perspective in that region specific?

James Zheng: So we will open another two shops in London and three more in Paris and one more in Milano and two more in Milano to further verify the models.

James Zheng: Hey, let me give you the high level answer on this.

James Zheng: So the footwear opportunity for Solomon, it's kind of the greatest opportunity for us to unlock in the future.

James Zheng: Okay, so it's a big, we got multiple brands in doing business in Europe.

James Zheng: So we also see a great momentum for us in the future.

James Zheng: Each brand got a different proposition.

James Zheng: And for Wilson, I mean, as we just mentioned, we created the segment worse than 10,360.

James Zheng: So I start with the Salomon.

James Zheng: While we continue to secure our leadership, for records business, we also introduce Wilson Sportswear, which is a Wilson apparel and footwear to the market.

James Zheng: Okay, so Salomon in Europe, I do believe, okay, so this year, we will continue to grow our footwear business at the right level.

James Zheng: And we also see a good light, when we introduce this kind of format, both in North America and in China, specifically in China.

James Zheng: And while we also face the level of challenge from winter sports equipment.

James Zheng: But it's still on infant stage.

James Zheng: So that part, so it's kind of a bearing.

James Zheng: We'll continue to explore the opportunities.

James Zheng: So for Salomon in Europe, specifically, it's more or less mid to high single digit gloves.

James Zheng: In a nutshell, we will see the soft goods business, I mean, especially combined all the three major brands, we will see a tremendous growth potential for our business in the future.

James Zheng: Okay.

Andrew Page: Matt, hi, this is Andrew Page.

James Zheng: For Akerix, I think we just started with a very small base.

Andrew Page: Thanks for the question as well.

James Zheng: I think Akerix, we will grow meaningfully from Europe, but it's still a small base for us.

Andrew Page: As you think about the margin profile, I'll give you a little bit of perspective both on gross margin and SG&A leverage. As you progress, we had a very, very strong, gross margin quarter in the second quarter, over 55% on gross margin, that's outstanding.

James Zheng: And Wilson, more or less, we will keep the mid to low single digit closing for our business.

Andrew Page: As you move through the year, you would recall that third quarter is our largest wholesale shipment quarter.

James Zheng: Peak performance, we will face a level of the challenge.

Andrew Page: And so you'll see gross margins somewhat compressed, from Q2 and then return to those levels that you saw at Q2 and Q4.

James Zheng: We want to find a good way to mitigate the risk, OK?

Andrew Page: And as we talked about our full year gross margin profile, we've upped our guidance to about 54.5%. So you're gonna see strong gross margins, in the third and fourth quarter, with the third quarter being a bit more compressed because it reflects our largest wholesale shipments.

James Zheng: So especially our business really focus on Nordic area.

Andrew Page: As you move from an SG&A leverage perspective, SG&A dollars, obviously, as we get into third and fourth quarter, will increase as you go through the year.

James Zheng: So in Russia, OK, I think in Europe, business as a whole, I mean, when we look at this, it will be like a mid single digit close in Europe for the whole year.

Andrew Page: Back half of the year is meaningfully larger, than the first half of the front half of the year, but you're gonna see meaningful SG&A leverage when you compare that to Q2.

James Zheng: It's kind of our luck, for the view perspective.

Andrew Page: I would think about Q3 being meaningfully better, than Q2 and Q4 being meaningfully better than Q3.

James Zheng: So from my understanding, it's really a peak performance issue in the Europe region and all the other brands are posting some level of growth.

Andrew Page: So progressively, as a percentage of revenue, SG&A will continue to go down as we move through the year.

Unknown Executive: That's right.

Andrew Page: Hope that answers your question.

Unknown Executive: Okay, cool.

Operator: Your next question comes from the line, of Paul Leshway from Citigroup.

Unknown Executive: All right.

Operator: Your line is open.

Unknown Executive: Thank you.

Operator: Hey guys, can you talk about the stores, versus e-comm channel in the China market?

Unknown Executive: Yeah, performance still represent a very small percentage of the pain is, Anyway, so as a whole, okay, so, but we, yeah.

Operator: And how would you characterize, the promotional environment in China?

Unknown Executive: Okay, thank you guys.

Operator: And did you see anything change, as the quarter finished?

Unknown Executive: Your next question comes from a line of Lauren Vasilescu from BNP Paribas.

James Zheng: Hey Paul, I just want to mention here.

Unknown Executive: Your line is open.

James Zheng: So the China actually, we got the two legs to run.

Unknown Executive: Oh, good morning.

James Zheng: So both our physical shops and the e-comm, grows extremely well in China markets.

Unknown Executive: Thank you very much for taking my question and congrats again on strong results.

James Zheng: So we grow the business more than 50% of the time.

James Zheng: James, I wanted to ask about the Solomon DTC strategy.

James Zheng: So we have a lot of customers in China.

James Zheng: I think you called out in your prepared remarks, you have 136 owned and franchised stores in China.

James Zheng: You know, we grow the business more than 54%.

James Zheng: Can you, for the audience, maybe talk about the number of stores that you own and operate globally?

James Zheng: And actually these 54% is all coming from, it's kind of average coming from the physical retail as well as e-commerce business.

James Zheng: And if I recall correctly, I don't think you have a store in the key North American market.

James Zheng: It's on relatively the same level of the speed.

James Zheng: Should we assume at some point in time that you're going to expand Solomon stores into the North American market?

James Zheng: In terms of the promotional environment in China, it's a difficult market so far, I mean, for time being.

James Zheng: Yeah, I, Lorraine, I just want to re-enhance, I mean, we are just at the preliminary stage to expand our Salomon direct-to-consumer channels, mainly from our own retail expansion in China first.

James Zheng: Okay, so, but we see, I mean, there's still a lot of discount activities in China markets to get the brands try to get the more revenues, okay, with relatively high level of inventory.

James Zheng: We see a good example from China and then, I mean, from that success, we also expand the model to Japan and Asia-Pacific.

James Zheng: But the good things for us, I mean, we are sitting mainly in outdoor segments, okay?

James Zheng: And we start to try also in Europe from May this year, okay, in Paris first.

James Zheng: So that segment is quite still quite healthy, at this moment, I would say.

James Zheng: So it's a still infant stage for us in the outside of China.

James Zheng: So, we think that the market size do there. So, and it just says how there's some brands doing extremely good jobs taking the shares from the some brands doing social jobs. So, it's kind of a shifting. Okay. It's kind of a shifting. And the Europe, I think it's all about, it's kind of my understanding, it's kind of a stable market, relatively stable market. And it's all about how you created the kind of excitement, the level of excitement you created.

James Zheng: The brand of Harrison Salomon, when we run the business at this moment, and we keep the same level, I mean, as our discount is very small in our regular shop, okay?

James Zheng: We, luckily, the shop we opened, both in Osaka and in Paris, they all outperformed.

James Zheng: So we don't, literally we don't give it a discount, in our regular shop. And we have the outlets, I mean, that discount ratio is only 20 to 25% off from the regular price, still at a very healthy track.

James Zheng: So give us a good level of confidence to continue to try this kind of a format.

James Zheng: So, I mean, our two brands in the segment, so they all perform extremely well for time being.

James Zheng: We call the Salomon full-wear compact shop, okay.

James Zheng: We also encounter level of the short of supply, for both brands.

James Zheng: And in U.S., I will say we will open pop-up shop in October this year in New York City, in Soho areas.

James Zheng: And so, I mean, we are quite confident, I mean, to continue to have this kind of a trend in China for our two brands business.

James Zheng: That's the first try for us.

Operator: Your next question comes from Jay Sole from UBS.

James Zheng: We will test that model to see how the market responds.

Operator: Your lap is open.

James Zheng: And I hope next year we can open, I mean, within five shops, maybe, okay, one to two in New York City and another one or two shops in the rest of the city in North America and to further verify the models we experience in China.

Operator: Great.

Unknown Executive: But it's still too early to tell in North America specifically.

Operator: Thank you so much.

Unknown Executive: Very helpful.

Operator: Can you talk a little bit about your inventory position, maybe tell us a little bit about, inventory by brand and how you see inventory growth trending over the rest of your given year?

Unknown Executive: But China, as we mentioned, we will quickly grow our penetration.

Operator: I think it was only up around 2% this quarter.

James Zheng: And by the end of the year, we will have 200 dedicated Solomon four-wheel compact shops for both home retail as well as the franchise shops.

Operator: Thank you.

Unknown Executive: That's great to hear, James.

Operator: Jay, thanks.

Unknown Executive: And Andrew, congrats on raising the full year guide.

Andrew Page: This is Andrew.

Andrew Page: On revenues, just for the audience, I think it implies 4Q should grow about 20%.

Andrew Page: Yeah, inventory position, as you talked about, grew about 2% this year compared to 16% top, line revenue growth.

Andrew Page: I know there's some some comparers, maybe can you kind of just bridge it for the audience?

Andrew Page: I just want to start off with saying that this was really set up as we exited 2023.

Andrew Page: How do we think about the acceleration into 4Q?

Andrew Page: As you recall, we did a very intentional job in the back half, especially in the Q4 of, 2020, cleaning up inventory across each of our brands. We came into 2024 with a very disciplined buying approach, merchandising approach, and, focused sell through.

Andrew Page: And I think you mentioned there was a $20 million shift from 3Q to 2Q.

Andrew Page: Our TARIC is generating strong results in Europe, especially new store opening but this is off a small base and was offset by decline in peak performance which continues to go through a brand reset to focus on greater Sally.

Andrew Page: We see our inventory levels, as James talked about, some of our high velocity, as you think, about the Arc'teryx crag shoe. Sometimes we are selling out quickly.

Andrew Page: Was that driven by one segment?

Andrew Page: We have really, really strong relationships with our sourcing partners, so we feel good, about being able to be responsive to elevated demand, but we feel good about our inventory.

Andrew Page: And should we assume some kind of shift also between 3Q and 4Q?

Andrew Page: You're going to continue to see the trends that you saw in second quarter with inventory, growing below revenue. You're going to continue to see that trend as we go through the year.

Andrew Page: Yeah, so let me start with the $20 million.

Andrew Page: It's a key KPI for us, and this is not an aberration in the sense that we're short in, inventory. We're short in inventory by design and by discipline.

Andrew Page: The $20 million did have some variability between a couple of different segments. Outdoor performance was a little bit more than half of that $20 million, and technical apparel was the remainder amount.

Operator: Got it.

Andrew Page: All of the shift was from Q3 into Q2, and like I said, it had about a two-point top-line impact.

James Zheng: Thank you so much.

Andrew Page: So if you think about Q2 growing 16%, really it's kind of 14% if you exclude that. And you think about the implied guidance in Q3, you know, it would have grown an additional one-and-a-half to 2%.

Operator: I want to add one more comment on this.

Andrew Page: So that's how you think about it.

James Zheng: For the brand part, all these three major brands, they got a very healthy inventory, proposition at this stage.

Andrew Page: The shift was really Q3 to Q2.

James Zheng: We see the growth, and we also build a relevant inventory position to feed up the future growth, but it's all under good control right now.

Andrew Page: As you think about the rest of the year, there's not meaningful shifts that you need to build into your models out of Q3 and into Q4.

Operator: Thank you.

Andrew Page: We anticipate, you know, on a natural basis, Q2 would have been up about 14%, Q3, you know, up similarly, and then you're going to see the meaningful arc that we've talked about all year on Q4. Remember, Q4 is our biggest quarter by far.

Operator: Our next question comes from the line of Ike Burrowchow from Wells Fargo.

Andrew Page: It's going to be our easiest comp, given the fact that we had a lot of promotional environment activity in Q4 last year.

Operator: Your line is open.

Unknown Executive: Thank you very much.

Operator: Hey.

Unknown Executive: Thank you, Andrew.

Operator: Hey, good morning, everyone.

Unknown Executive: Thank you.

Operator: Congrats on the quarter.

Unknown Executive: And your final question comes from the line of Lorraine Hutchinson from Bank of America.

Operator: I wanted to dig in a little bit more on Europe.

Unknown Executive: Your line is open.

Operator: Can you just kind of talk about your expectations for the region the rest of the year relative, to your revenue guide?

Unknown Executive: Thank you.

Operator: Obviously, it looks like it's not really showing much growth the past couple quarters.

Unknown Executive: Good morning.

James Zheng: And they all, I mean, that the market still welcome new players, which can create the distinguished value to the consumers. And the customers also love to try certain new brands, especially in the industry we are sitting. So, we still see a good level of opportunity. Likewise, in North America, North America. So, I still wish I lit. Okay. So, I think it's, yeah, the macro situation is a bit level of challenge, but the consumers still looking for some, as I say, okay.

Operator: I would love to know just a little bit more about what you guys see in the market.

Unknown Executive: I just wanted to hear you elaborate a little bit on the macro climate.

Operator: Basically, what do you see at POS and comp growth for your retail stores versus what, are the conversations with your retail partners?

Unknown Executive: Are you seeing any change in consumer behavior and any of your key, James, why don't you take that if you're seeing any consumer behavior?

Operator: Are they getting more reluctant to take product?

Unknown Executive: Stuart, who I think would be good to hear if you're hearing any, United States.

Operator: Kind of just trying to get a flavor of the appetite from a retail perspective in that, region specifically.

Unknown Executive: Thank you.

James Zheng: Hey, Ike, let me give you the high-level answer on this.

Unknown Executive: Thank you for your time.

James Zheng: We got multiple brands doing business in Europe. Each brand got a different proposition.

James Zheng: Yeah, let me, I, I, I think the overall, I mean, economy situation still got the level of the challenge.

James Zheng: I start with Salomon.

James Zheng: Okay, so, but different region got different situation.

James Zheng: Salomon in Europe, I do believe this year we will continue to grow our footwear business, at the right level, and while we also face the level of challenge from winter sports equipment. So, that part, it's kind of a balance.

James Zheng: For me, my understanding, China, it's a, it's a, it's a still overall, it's getting through.

James Zheng: For Salomon in Europe, specifically, it's more or less mid- to high single-digit growth.

James Zheng: So people still need to figure out, okay, so how we overcome kind of a short term difficulty, it's a challenge as a whole.

James Zheng: For Akerix, I think we just started with a very small base.

James Zheng: But on your side, as I just mentioned, the industry we are sitting and the sports industry still at the optimal situation.

James Zheng: I think Akerix, we will grow meaningfully from Europe, but it's still a small base for, us.

James Zheng: So, and people and the participant level from China markets continue to grow.

James Zheng: And Wilson, more or less, we will keep the mid- to low single-digit growth for our business.

James Zheng: And the, the overall industry, sports industry, we believe still grow more than more or less 5 to 8% on CAGR for coming three years.

James Zheng: Peak performance, we will face the level of the challenge.

James Zheng: So I, so we think the market size still there.

James Zheng: We want to find a good way to mitigate the risk, especially our business really focus, on Nordic area.

James Zheng: Okay, so, and it just says how there's some brands are doing extremely good job taking the shares from the some brands are doing social job.

James Zheng: So, in Russia, I think in Europe, business as a whole, I mean, when we look at this, it will be like a mid-single-digit growth in Europe for the whole year.

James Zheng: So it's a, it's kind of a shifting.

James Zheng: It's kind of our look for the group perspective.

James Zheng: Okay, it's kind of a shifting.

Operator: So if I'm understanding, it's really a peak performance issue in the Europe region and, all the other brands are posting some level of growth.

James Zheng: And the, the Europe, I think it's, it's all about, it's kind of a, my understanding, it's kind of a stable market, relatively stable market.

Operator: That's right.

James Zheng: And it's all about how you created the kind of excitement, the level of excitement you created.

Operator: Okay, cool.

James Zheng: And they all, I mean, the market still welcome new players, which can create a distinguished value to the, to the consumers.

Operator: All right.

James Zheng: And the customers also love to try certain new brands, especially in the industry we are sitting.

Operator: Thank you.

James Zheng: So we still see a good level of the opportunity.

Operator: Yeah.

James Zheng: Likewise, in North America, North America, so I still bullish on it.

Operator: Performance still represent a very small percentage of the payments for us anyway.

James Zheng: Okay, so I think it's, it's, yeah, the macro situation a bit level of challenge, but the consumers still looking for some, as I say, okay, so there's some, some newcomers and, and with innovative, high, high, high technical products and, and in sports industries and, and we, we still see a good opportunities for us.

James Zheng: So as a whole, okay, so, but then we, yeah.

James Zheng: So I, I'm pretty optimistic still for the overall industry. I mean, in our industry and especially the segment we are sitting, we still see a great runway for us to explore the potential in the market.

Operator: Okay.

Stuart Haselden: Hey, Lorraine.

Operator: Thank you guys.

Stuart Haselden: It's Stuart.

Operator: Next question comes from a line of Lauren Vasilescu from BNP Paribas.

Stuart Haselden: I'll just add to James' comments.

Operator: Your line is open.

Stuart Haselden: I think what we're seeing is a bifurcation across the regions we operate.

Operator: Oh, good morning.

Stuart Haselden: We're seeing a strong division between winners and losers. And companies that have a strong market position are taking share, and companies that are just participating in the market are forfeiting share.

Operator: Thank you very much for taking my question and congrats again on strong results.

Stuart Haselden: We also see technical innovation as an important competitive advantage that is helping companies, I think, like Arc'teryx, continue to thrive in the marketplace.

Operator: James, I wanted to ask about the Solomon DTC strategy.

Stuart Haselden: And it is a focus for how we are building our product strategy.

Operator: I think you called out in your prepared remarks, you have 136 owned and franchised stores in, China.

Stuart Haselden: So, at this point, our customer dynamics are very strong.

Operator: Can you, for the audience, maybe talk about the number of stores that you own and operate, globally?

Stuart Haselden: The signal, the demand signal that we're seeing from all our regions is very strong.

Operator: And if I recall correctly, I don't think you have a store in the key North American market.

Stuart Haselden: But we're also – we're reading the same headlines that you are around the world.

Operator: Should we assume at some point in time that you're going to expand Solomon stores into, the North American market?

Stuart Haselden: And we're very much building in the contingency plans as we might be ready for any sort of change in the macro signal.

James Zheng: Yeah, I, Lauren, I just want to re-enhance, I mean, we are just at the preliminary stage, to expand our Solomon direct-to-consumer channels, mainly from our own retail expansion in China first.

Stuart Haselden: But at this point, it's quite robust.

James Zheng: So, some newcomers and with innovative high technical products and in sports industries. And we still see a good opportunity for us. So, I'm pretty optimistic for the overall industry, I mean, in our industry. And especially the segment we are sitting, we still see a great runway for us to explore the potential in the market.

James Zheng: We see a good example from China and then, I mean, from that success, we also expand, the model to Japan and Asia Pacific.

Stuart Haselden: And we're taking it as an opportunity to play offense and take share from our competitors.

James Zheng: And we start to try also in Europe from May this year, okay, in Paris first.

Unknown Executive: And that concludes our question and answer session.

James Zheng: So it's a still infant stage for us in the outside of China.

Omar Saad: I will now turn the call back over to Omar for final closing remarks.

James Zheng: We, but luckily the shop we opened both in Osaka and in Paris, they are all outperformed.

Omar Saad: Thanks, Rob.

James Zheng: So give us a good level of confidence to continue to try this kind of a format.

Omar Saad: Thanks, everyone, for joining.

James Zheng: We call the Solomon full-wear compact shop, okay.

Omar Saad: Just one quick mention, we're posting on our IR website, both the presentation slides that go with the prepared remarks, as well as the script of the prepared remarks, for those of you who are looking for it.

James Zheng: And in US, I will say we will open pop-up shop in October this year in New York City, in Soho areas.

Omar Saad: Thanks, everyone, for joining.

James Zheng: That's the first try for us.

Unknown Executive: We'll see you again in three months.

James Zheng: We will test that model to see how the market responds.

James Zheng: And I hope next year we can open one to, I mean, within five shops, maybe, okay, one, to two in New York City and another one or two shops in the rest of the city in North, America.

James Zheng: And to further verify the models we experience in China.

James Zheng: But it's still too early to tell in North America specifically.

Operator: Very helpful, James.

James Zheng: But China, as we mentioned, we will quickly grow our penetration.

James Zheng: And by the end of the year, we will have a 200 dedicated Solomon full-wear compact shops, for both our own retail as well as the franchise shops.

James Zheng: That's great to hear, James.

Operator: And Andrew, congrats on raising the full year guide.

Operator: On revenues, just for the audience, I think it implies 4Q should grow about 20%.

Operator: I know there's some comparers, maybe can you kind of just, Bridget, for the audience, how, do we think about the acceleration into 4Q?

Operator: And I think you mentioned there was a $20 million shift from 3Q to 2Q.

Andrew Page: Should we, was that driven by one segment and should we assume some kind of shift also, Yeah, so let me start with the $20 million.

Andrew Page: The $20 million did have some variability between a couple of different segments.

Andrew Page: Outdoor performance was a little bit more than half of that $20 million, and technical, apparel was the remainder amount.

Andrew Page: All of the shift was from Q3 into Q2, and like I said, it had about a two-point top-line, impact.

Andrew Page: So if you think about Q2 growing 16%, really it's kind of 14% if you exclude that, and, you think about the implied guidance in Q3, you know, it would have grown an additional, 1.5% to 2%, so that's how you think about it.

Andrew Page: The shift was really Q3 to Q2.

Andrew Page: As you think about the rest of the year, there's not meaningful shifts that you need to build, into your models out of Q3 and into Q4.

Andrew Page: By far, it's going to be our easiest comp, given the fact that we had a lot of promotional, environment activity in Q4 last year.

Operator: Very helpful.

Operator: Thank you very much.

Operator: Thank you, Andrew.

Operator: Thank you.

Stuart Haselden: Hey Lorraine, it's Stuart. I'll just add to Dave's comments. I think what we're seeing is a bifurcation across the regions we operate. We're seeing a strong division between winners and losers and companies that are that have a strong market position are taking share and companies that have are just participating in the market are forfitting share. We also see technical innovation as an important competitive advantage that is that is helping companies that I think like our tariffs continue to thrive in the marketplace and it's a it is a focus for how we are building our product strategy. So at this point our customer dynamics are very strong.

Operator: And your final question comes from the line of Lorraine Hutchinson from Bank of America.

Operator: Your line is open.

Operator: Thank you.

Operator: Good morning.

Operator: I just wanted to hear you elaborate a little bit on the macro climate.

Operator: Are you seeing any change in consumer behavior in any of your key regions?

Operator: James, why don't you take that if you're seeing any consumer behavior?

Operator: Stuart, too, I think would be good to hear if you're hearing any sensitivity to the economy.

James Zheng: Yeah.

James Zheng: Let me – I think the overall, I mean, economy situation still got the level of the challenge, okay?

Andrew Page: Technical apparel adjusted operating margin expanded 110 basis points to 14.2% driven primarily by gross margin from favorable channel and geographic mix.

James Zheng: So – but different region got different situation.

James Zheng: So, for me, my understanding, China, it's still overall, it's getting through – so, people still need to figure out, okay, so how we overcome kind of a short-term difficulties and challenge as a whole.

James Zheng: But on your side, as I just mentioned, the industry we are sitting and the sports industry, is still at an optimal situation.

James Zheng: So – and people and the participant level from China markets continue to grow.

James Zheng: And the overall industry, sports industry, we believe still grow more than – more or, less 5 to 8 percent on CAGR for coming three years.

James Zheng: So, I – so we think that the market size is still there, okay?

James Zheng: And just how there's some brands doing extremely good job taking the shares from some brands, doing social jobs.

James Zheng: So, it's kind of a shifting, okay?

James Zheng: It's kind of a shifting.

James Zheng: And the Europe, I think it's all about – it's kind of a – my understanding, it's kind, of a stable market, relatively stable market, and it's all about how you create the kind of excitement, the level of excitement you created.

James Zheng: And they all – I mean, the market still welcome new players, which can create a distinguished, value to the consumers.

James Zheng: And the customers also love to try certain new brands, especially in the industry we, are sitting.

James Zheng: So, we still see a good level of opportunity.

James Zheng: Likewise in North America.

James Zheng: North America, so I still bullish on it, okay?

James Zheng: So, I think it's – yeah, the macro situation is a bit level of challenge, but the consumers, still looking for some – as I say, okay, so there's some newcomers and with innovative, high technical products and in sports industries, and we still see good opportunities for us.

Andrew Page: The technical apparel segment margin also benefited from modest S.G.N.A, leverage on our pair of two strong sales growth while continuing key growth investments.

James Zheng: So, I'm pretty optimistic for the overall industry – I mean, in our industry, and, especially the segment we are sitting, we still see a great runway for us to explore the potential in the market.

Stuart Haselden: Hey Lorraine, it's Stuart, and I'll just add to James' comments.

Stuart Haselden: I think what we're seeing is a bifurcation across the regions we operate. We're seeing a strong division between winners and losers, and companies that have a strong, market position are taking share, and companies that are just participating in the market are forfeiting share.

Stuart Haselden: We also see technical innovation as an important competitive advantage that is helping companies, I think, like Arc'teryx, continue to thrive in the marketplace, and it is a focus for how we are building our product strategy.

Stuart Haselden: So at this point, our customer dynamics are very strong.

Stuart Haselden: The signal, the demand signal that we're seeing from all our regions is very strong, but we're also reading the same headlines that you are around the world, and we're very much building in the contingency plans as we might be ready for any sort of change in the macro signal.

Stuart Haselden: But at this point, it's quite robust, and we're taking it as an opportunity to play, offense and take share from our competitors.

Andrew Page: Outdoor performance segment revenues increased 11% to $304 million driven by strong double digit top line performance and Solomon's footwear and apparel and in the D to C channel, particularly in Asia-Pacific and Greater China.

Andrew Page: This was partially offset by a decline in sports equipment. Outdoor performance sales also benefited from earlier than anticipated shipments that shifted from Q3 into Q2.

Unknown Executive: The signal, the demand signal that we're seeing from all our regions is very strong but we're also we're reading the same headlines that you are around the world and we're very much building in the contingency plans as we might be ready for any any sort of change in the macro signal but at this point it's quite robust and we're taking it as an opportunity to play offense and take share from our competitors and that concludes and that concludes our question and answer session.

Andrew Page: By channel, outdoor performance D to C grew 55% while wholesale sales declined slightly negatively impacted by slower pre-orders in the North America sporting goods and ski channels, which increasingly relies upon replenish orders.

Omar Saad: I will now turn the call back over to Omar for final closing remarks. Thanks Rob. Thanks everyone for joining.

Andrew Page: 2024 will be a slightly softer year for one of sports equipment due to slower trends in North America, which ski equipment sales are rebasing after a strong run through and beyond COVID. This is in addition to cautious orders in America after two tough slow seasons in Europe.

Andrew Page: Given our great brands and scale advantages, we expect to take market share.

Omar Saad: Just one quick mention. We're posting on our IR website both the presentation slides that go with the prepared remarks as well as the script of the prepared remarks for those of you who are looking for it. Thanks everyone for joining.

Andrew Page: Although we don't expect when a sports equipment to be a high growth business, the industry remains healthy and the consumer demand for ski vacations remains consistent and strong irrespective of weather, especially as resorts have become adept at making their own snow.

Unknown Executive: We'll see you again in three months.

Andrew Page: When a sports equipment now represents one-third of outdoor performance and long term, we expect this business to grow low single digits annually.

Andrew Page: The outdoor performance segment adjusted operating profit margins expanded 380 basis points to negative 2.1%. This was driven by a combination of gross margin gains and SG&A leverage. Gross margin gains were mainly driven by a favorable region and channel vex, lower discounts, and we also leverage expenses, including payroll, administrative, and IT costs.

Operator: This concludes today's conference call. Thank you for participation.

Andrew Page: Moving to ball and racket, revenue increased 1% to $283 million as well as the return to growth as expected after a double-digit decline in Q1.

Andrew Page: Driven by improving wholesale sell-end, our 10-3060 strategy continues to be a key driver for the Wilson franchise, led by footwear and a parro growth.

Andrew Page: It's celebrated the expansion of Wilson 10-3060 shops in China and some of the new footwear and racket product launches, mentioned.

Andrew Page: Golf also returns to growth driven by the Americas and in May led by premium clubs.

Operator: You may now disconnect.

Andrew Page: The growth in sportswear, rackets, and golf was partially offset by declines in baseball and inflatables.

Andrew Page: Follow-racket segment adjusted operating profit margin contracted 160 basis points compared to the second quarter of 2023 to 1.1%. This margin compression was due to SG&AD leverage, which was driven by retail investments in the US, China, and Korea, but wear an apparel investment and timing of advertising and promotion spend.

Andrew Page: Generating consistent margin performance as a key management priority for ball and racket given its low single digit growth profile.

Andrew Page: We are pleased by our lean inventory position in ball and racket, which is down significantly versus last year and positions us from much better profitability in the second half, especially in Q4 when we cycle against our high discounts in last year. Looking ahead, we are confident that our market leadership position and flow of innovative products positions, ball and racket, well as market inventories reach balance and retailer orders re-accelerate in the second half, especially in Q4 when we face our easiest comparison and also have our strongest pipeline of new products.

Andrew Page: Turning to the group balance sheet in cash flow, we ended the quarter with $1.8 billion of net debt. Using the midpoint of our 2024 implied adjusted operating profit guidance, our net debt to adjusted non-IFRS even down ratio is already approximately 2.6 times. De-leveraging our balance sheet remains a priority and our goal is to reduce our leverage ratio to 1.5 times or better over the next few years through both EBITDA expansion and debt paydown.

Andrew Page: Also, our focus on inventory discipline is paying off its inventory's finished Q2 in healthy conditions, up only 2% year over year versus 16% reported sales growth.

Andrew Page: Within our target to grow inventory is in line with or slower than sales.

Andrew Page: For the full year, we now expect revenue growth of 15-17%, which incorporates greater than 30% growth in technical apparel, mid to high single-digit revenue growth in outdoor performance, and low to mid single-digit growth in ball and racket.

Andrew Page: We are increasing our adjusted growth profit margin guidance from approximately 54% to approximately 54.5.

Andrew Page: We are also raising our guidance for our full year operating margin and now expect adjusted operating margin toward the high end of our previous 10 and a half to 11% range. Our net finance cost for the year will be 200 to 220 million dollars including approximately 15 million dollars of non recurring finance cost in the first quarter of 2024.

Andrew Page: Based on current interest rates, our net finance cost of the quarter will be 45 million to 50 million, and we will have an effective tax rate on an adjusted pre-tax income of 50 to 55%.

Andrew Page: We expect adjusted deluded EPS to be 8 cents per share.

Unknown Executive: With that, I'll turn it back to the operator for Q&A.

Unknown Executive: Thank you.

Unknown Executive: We will now begin the question and answer session.

Unknown Executive: We ask you please limit yourself to one question and one follow-up.

Brooke Roach: Your first question comes from the line of Brooke Roach from Goldman Sachs.

Brooke Roach: Your line is open.

Brooke Roach: Good morning and thank you for taking our question.

Brooke Roach: I was hoping you could elaborate on the strength that you're seeing at the Arctarex brand and provide color on the growth that you're seeing by region.

Brooke Roach: How are you thinking about the sustainability of this outsized comp growth for this brand?

Brooke Roach: And in the near term, what trends have you seen with customer traffic and conversion as you've entered the third quarter in your most important China and North American markets?

Brooke Roach: Thank you.

Stuart Haselden: Brooke, Stuart, so let me try to address your questions.

Stuart Haselden: You have a number there that I'll write it to speak to.

Stuart Haselden: As we look at the performance of our parish by region, we were very pleased with how balanced we saw our growth in the second quarter.

Stuart Haselden: The North America business continued to see good momentum with, as we mentioned them, the prepared remarks, Asia Pacific outside of China saw the fastest growth of the four regions in which we operate.

Stuart Haselden: We saw also saw very strong growth in China.

Stuart Haselden: The business in Europe grew a bit slower, but we're still very encouraged by the success of the new stores that we opened in the Europe market. The stores that we opened in Paris in particular had really performed ahead of our expectations, which gives us a lot of confidence to continue to lean into our Europe expansion. So we're really pleased across every region where we're operating with the results that we're seeing both from a brick and mortar standpoint, as well as from an e-commerce business standpoint.

Stuart Haselden: The sustainability of the momentum and our terrorist business, we really see this as the early innings of our growth story.

Stuart Haselden: We are far from reaching penetration potential in really any region in which we operate.

Stuart Haselden: So we'll have around 60 stores in North America at the end of the year.

Stuart Haselden: We could see the total potential for North America being well over 200, just for an example.

Stuart Haselden: And we're even earlier in the development of the Europe market and the Asia Pacific market.

Stuart Haselden: China, we're farther along with our store count, but we still see really exciting right away at growth there as we continue to optimize our real estate portfolio and success of the Shanghai Museum stores really helping us reset what we see as the potential for the business in China.

Stuart Haselden: And as we look at some of the other KPIs and customer performance related matters or trends, we're pleased to see very healthy double digit guest file growth in the quarter.

Stuart Haselden: And that is reflected in really strong traffic is we look at the results that the omnicom that Andrew mentioned, just the overall sales trajectory of the business, it's really a traffic story.

Stuart Haselden: We saw very modest improvements in conversion, but the main KPI is driving the sales increases and our ETC business has been traffic.

Stuart Haselden: And so we see that as a very healthy indicator of the momentum of the brand is building brand awareness.

Stuart Haselden: And we also saw healthy.

Stuart Haselden: We're in that respect for customers, so really strong customer metrics and very healthy and balanced KPIs across our channels, so I'll.

Stuart Haselden: Yeah, and I'd also said that we feel confident they were taking share in every market in which we operate.

James Zheng: James, maybe you could address.

James Zheng: Yeah, I add a certain comments based on Stuart explanation, OK, I think a currency in China, it's still I mean paying clear leadership role in the segment, I mean, we are sitting but not not only on the segment, but also the whole industry.

James Zheng: So we really grow tremendous.

James Zheng: Our sales rule in Q2 in the first half and the really up outperform among all the sports brands in the markets and the trend we see it's continued to carry on and it's not slow down.

James Zheng: OK, the overall, especially on the come sharp blows pattern in China.

James Zheng: So it's obviously the Q2, I mean, second quarter is still relatively subseason among the four quarters, but we also see, I mean, we are in the middle of the Q3 already.

James Zheng: So we also see big growth patterns in China market.

James Zheng: So I think it's a, as I was still to mention, it's still a preliminary stage for us, not only in China, but the rest of the world.

James Zheng: So we have a very good confidence to continue to grow the.

James Zheng: A coach has been his class boarding the world.

Unknown Executive: Great.

Unknown Executive: Thanks so much.

Unknown Executive: I'll pass it on.

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

Matthew Boss: Your line is open.

Matthew Boss: Thanks and congrats on a nice quarter.

Matthew Boss: So, James, maybe higher level, could you speak to runway that you see across brands and in the portfolio to capture continued market share in the premium sports and outdoor market and then for Andrew on the bottom line, maybe could you just help elaborate on the back half margin geography as we think about gross margin drivers relative to SG&A investments that are embedded this year relative to the path to SG&A leverage multi year.

James Zheng: Okay, Matthew, thank you for your questions.

James Zheng: I just want to highlight here.

James Zheng: So, okay, we got the very unique proposition in the market.

James Zheng: For Amer Sports, we really own two distinguished business franchise, which is a target, we call the equipment business as well as the soft goods.

James Zheng: So, I would say, first of all, I mentioned about the target business or equipment business for both winter sports equipment and the worsen.

James Zheng: I mean, we all, I mean, you guys all can tell, we all got very strong market share in the segment we are sitting.

James Zheng: Okay, so I think the team got the very good level of confidence to continue to secure our leadership in these kind of data segments.

James Zheng: Okay, so Akaris really give out the very strong momentum in the pinnacle sectors in outdoor segments and the continue to glow more than I think 30% in the markets and really leading the whole globe in the industry.

James Zheng: So I think it's, I will say it's a hero brand at this model in the markets and as we just mentioned, we will continue to drive Akaris.

James Zheng: It's just that first, I was the first face for us, they are still a great wrong way for us to continue to accelerate Akaris close in the future.

James Zheng: For Solomon, it's another new areas, as I mentioned, for soft goods, Solomon, especially for where we are still at the preliminary stage and we are the leaders in trail running sectors, but you guys all the most market side of the trail running in relative limit versus the rest of the segments for where segments.

James Zheng: So Solomon, we got kind of a very unique opportunity to create the new categories, we just mentioned we call the outdoor sneakers categories.

James Zheng: Okay, so it's kind of a new segment and we had a tremendous successful story in the past two years, we run this in China and the really, I mean, at the shop, we say the Solomon come forward compact shop.

James Zheng: Really created a great bus in China market and taking on leadership flows on the outdoor sneakers segments in the markets and the last year, I mean, we literally we were double the count of our shop penetration in China market by the end of year, we foresee that 200 shops in China.

James Zheng: Okay, so we will open another to shop in London and the three more in Paris and one more in Milano and a two more in Milano to further verify the models.

James Zheng: And the poor version, I mean, as we just mentioned, we created a segment worse than 10 360.

James Zheng: While we continue to secure our leadership for racket spinners, we also introduce Werson Sportswear, which is Werson apparel and the footwear to the market.

James Zheng: And we also see good light when we introduce this kind of format, both in North America and China, specifically in China.

James Zheng: But it's still an infant state, we'll continue to explore opportunities.

James Zheng: In our show, we will see the soft goods banish, I mean, especially combine all the three major brands, we will see a tremendous growth potential for our banish in the future.

Andrew Page: Matt and I, this is Andrew Page.

Andrew Page: Thanks for the question as well.

Andrew Page: As you think about the margin profile, I'll give you a little bit of perspective both on Gross Margin and SGNA leverage.

Andrew Page: As you progress, we had a very, very strong gross margin quarter in the second quarter, over 55% on Gross Margin, that's outstanding.

Andrew Page: As you move through the year, you would recall that third quarter is our largest wholesale shipment quarter.

Andrew Page: And so you'll see Gross Margin somewhat compressed from Q2 and then return to those levels that you saw Q2 and Q4.

Andrew Page: And as we talked about our full year Gross Margin profile, we're up there, our guidance to about 54.5%. So you're going to see strong Gross Margin in the third quarter, with the third quarter being a bit more compressed because it reflects our largest wholesale shipment.

Andrew Page: As you move from an SGNA leverage perspective, SGNA dollars, obviously as we get into the third and fourth quarter, will increase as you go through the year.

Andrew Page: Back half of the year is a meaningfully larger than the first half of the front half of the year.

Andrew Page: But you're going to see meaningful SGNA leverage when you compare that to Q2.

Andrew Page: I would think about Q3 being meaningfully better than Q2 and Q4 being meaningfully better than Q3.

Andrew Page: So progressively as a percentage of revenue SGNA will continue to go down as we move through the year.

Andrew Page: Hope that answers your question.

Paul Lejuez: Your next question comes from the line of Paul Lesway from City Group.

Paul Lejuez: Your line is open.

Paul Lejuez: Hey guys, talk about the story versus Ecom channel in the China market.

Paul Lejuez: And how would you characterize the promotional environment in China and did you see anything change at the quarter progress?

James Zheng: Hey Paul, I just want to mention here.

James Zheng: So the China actually, we got the two legs to run.

James Zheng: So both our physical shafts and the Ecoms close extremely well in China markets.

James Zheng: So you know we glow the business more than 54% and actually this 54% is all coming from.

James Zheng: It's kind of a average coming from the physical retail and well with the Ecoms business.

James Zheng: It's on relatively the same level of the speed.

James Zheng: In terms of the promotional environment in China, it's a difficult market so far.

James Zheng: I mean, for time being, okay, but we see, I mean, there's still a lot of discount activities in China markets to get the brands try to get the more revenues.

James Zheng: Okay, with relatively high level of inventory.

James Zheng: But the good things for us, I mean, we are sitting there in outdoor segments.

James Zheng: Okay, so that segment is quite still quite piercing at this moment, I will say.

James Zheng: The brand acts as a settlement when we run the business at this moment.

James Zheng: And we keep the same level, I mean, as the, our discount is very small in our regular shop.

James Zheng: Okay, so we don't literally, we don't give it a discount in our regular shop.

James Zheng: And we have our lets, I mean, that discount ratio is only 20 to 25% off from the regular price.

James Zheng: Still at a very healthy track.

James Zheng: So, I mean, our two brands in the segment, so they all perform extremely well for time being.

James Zheng: We also in counting level of the short of supply for both brands.

James Zheng: And so, I mean, we are quite confident, I mean, to continue to have this kind of trend in China for our two brands business.

Jay Sole: You're next question.

Jay Sole: Thanks for the line of Jay Sole from UBS.

Jay Sole: Your lack is open.

Jay Sole: Great, thank you so much.

Andrew Page: You can talk a little bit about your inventory position.

Andrew Page: Tell us a little bit about inventory by brand and how you see inventory growth trending over the rest of the year given.

Andrew Page: I think it was only up around 2% this quarter.

Andrew Page: Thank you.

Andrew Page: Thanks for that.

Andrew Page: Jay.

Andrew Page: Thanks, this is Andrew.

Andrew Page: Yeah, inventory position, as we talked about, you know, grew about 2% this year compared to 16% top line revenue growth.

Andrew Page: I just want to start off with saying that this was really set up as we exit at 2023.

Andrew Page: As you recall, we had we did a very intentional job in the back half, especially in the queue for 2023 cleaning up inventory across each of our across each of our brand.

Andrew Page: And we came into 2024 with a very disciplined by an approach, merchandising approach, and and and focus sell through and so we see our inventory levels as James talked about some of our some of our high velocity as you think about that the Arctic crack shoe and you know sometimes that we do are we're selling out quickly.

Andrew Page: We have really, really strong relationships with our sourcing partners so we feel good about being able to be responsive to elevated demand, but we feel good about that inventory.

Andrew Page: It is the it's a key KPI for us and and this is not, you know, an aberration and sense that we're short and inventory.

Andrew Page: We are leaning inventory by design and by different.

Andrew Page: Got it.

Andrew Page: Thank you so much.

James Zheng: I want to add one more car on this so for the brand part.

James Zheng: Okay, all these three major brands.

James Zheng: They got a very healthy image proposition at this stage.

James Zheng: Okay, we don't have a, we, we see the close and we also do that run up an inventory position to feed up the future close, but it's all under good control right now.

Ike Boruchow: Our next question comes from the line of Ike Boroch out from Wells Fargo.

Ike Boruchow: Your line is open.

Ike Boruchow: Hey, hey, good morning, everyone.

Ike Boruchow: Congrats on the quarter.

James Zheng: I wanted to dig in a little bit more on Europe.

James Zheng: Can you just kind of talk about your expectations for the region, the rest of the year, relative to your revenue guy and obviously it looks like it's, you know, not really showing much growth, the past couple quarters.

James Zheng: Would love to notice a little bit more about what you guys see in the market, you know, basically what, what do you see at POS and comp and comp growth for your retail stores versus what are the conversations with your retail partners.

James Zheng: Are they getting more reluctant to take product kind of just trying to get a flavor of the appetite from the retail perspective in that region specifically.

James Zheng: Okay, so Solomon Europe, I do believe, okay, so this year we will continue to grow our footwear finish at the right level and while we also face the level of challenge from winter sports equipment.

James Zheng: So, so that part, so it's kind of a balance, so it's for for Solomon Europe specifically, it's more or less, mid to mid to high single digit close, okay.

James Zheng: For our carrots, I think it's a weird, we just started with a very small base, I think our carrots, we will glow meaning for eight from Europe, but it's still small base for us.

James Zheng: And the worst and as more or less, we will keep the middle low to mid to mid to low single digit close in for our business peak performance, we, we will face a level of the challenge, we want to find a good way to mitigate the risk, okay, so especially our business really folks on the other area.

James Zheng: So in us in not sure, okay, I think in Europe business as a whole, I mean when we look at this, it will be like.

James Zheng: Like a mid single digit close in Europe for the whole year, it's kind of our luck for the perspective, and so on.

James Zheng: So if I'm understanding it's really a peak performance issue in the Europe region, and all the other brands are posting some level of growth.

James Zheng: That's right.

James Zheng: Okay, cool.

James Zheng: All right, thank you.

James Zheng: Yeah, performance is still representative, a very small percentage of the penis was anyway.

James Zheng: So as a whole.

James Zheng: Okay, so, but then we yeah.

James Zheng: Okay, thank you guys.

Lauren Vasilescu: Next question comes from a line of Lauren Vasilescu from BNP's Parabits.

Lauren Vasilescu: Your line is open.

Lauren Vasilescu: Oh, good morning.

Lauren Vasilescu: Thank you very much for taking my question and congrats again on strong results.

Lauren Vasilescu: James, I wanted to ask about the Solomon TTC strategy.

Lauren Vasilescu: I think you called out in the prepared remarks.

Lauren Vasilescu: They have 136 own and franchise stores in China.

Lauren Vasilescu: Can you further the audience maybe talk about the number of stories that you own and operate.

Lauren Vasilescu: Globally, and if I recall correctly, I don't think you have a store in the North American market.

Lauren Vasilescu: Should we assume at some point in time that you've been up, expand Solomon stores into the North American market.

James Zheng: Yeah, Lauren, I just want to enhance, I mean, we are just at the presuming stage to expand our Solomon director consumer channels.

James Zheng: Many found our own retail expansion in China first.

James Zheng: We see a good example from China and then from that success, we also expand the model to Japan and Asia Pacific.

James Zheng: And we started trying also in Europe from May this year, okay, in Paris first.

James Zheng: So it's a it's a still infant stage for us in the outside China.

James Zheng: We, but luckily that the shop we open both in Osaka and in Paris, they are all out perform.

James Zheng: So give us a good level confidence to continue to try this kind of a format we call the Solomon Solomon forward compact shop, okay.

James Zheng: And in US, I will say we will open pop-up shop in October this year in New York City in so whole areas.

James Zheng: Let's the first try for us.

James Zheng: We will test that model to see how the market this bank.

James Zheng: And I hope next year we can open one to, I mean, I mean, within five shops, maybe, okay, one to two in New York City.

James Zheng: And another one or two shops in the rest of city in North America and to further verify the models we experience in China, but it's still too early to tell in North America specifically.

James Zheng: Very helpful, but China and we mentioned that we will quickly go our penetration and by the end of the year, we will have a 200 dedicated Solomon forward compact shops for both only tell as well as the franchise shops.

Lauren Vasilescu: That's great to hear James.

Andrew Page: An injury congrats on raising the four-year guide on revenues just for the audience.

Andrew Page: I think it implies 4Q should grow about 20%.

Andrew Page: I know there's some some compares maybe you can just bridge it for the audience.

Andrew Page: How do we think about the acceleration into 4Q.

Andrew Page: And I think you mentioned there was a $20 million shift from 3Q to 2Q.

Andrew Page: Was that driven by one segment and should we have seen some kind of shift also between 3Q and 4Q.

Andrew Page: Yeah, so let me start with the 20 million.

Andrew Page: The 20 million did have some some variability between a couple of different segments.

Andrew Page: Outdoor performance was a little bit more than half of that 20 million and technical apparel was the remainder amount.

Andrew Page: All of the shift was from Q3 into Q2.

Andrew Page: And like I said, it had about a two point top line impact.

Andrew Page: So if you think about Q2 growing 16 percent really, it's kind of 14 percent.

Andrew Page: If you excluded that and you think about the implied guidance in Q3, you know, it would it would have grown an additional one and a half to 2 percent.

Andrew Page: So that's how you think about it.

Andrew Page: The shift was really Q3 to Q2.

Andrew Page: As you think about the rest of the year, there's a there's not meaningful shifts that you need to build into your models out of Q3 and into Q4.

Andrew Page: We anticipate, you know, on a on a natural basis Q2 would have been up about 14 Q3, you know, up similarly.

Andrew Page: And then you're going to see the meaningful arc that we've talked about all year on Q4.

Andrew Page: Remember Q4 is our biggest quarter by far. It's going to be our easiest comp given the fact that we had a lot of emotional environment activity in Q4 last year.

Andrew Page: Thank you very much.

Andrew Page: Thank you.

Lorraine Hutchinson: And your final question comes from a line of Lorraine Hutchinson from Bank of America.

Lorraine Hutchinson: Your line is open.

Lorraine Hutchinson: Thank you.

Lorraine Hutchinson: Good morning.

Lorraine Hutchinson: I just wanted to elaborate a little bit on the macro climate.

Lorraine Hutchinson: Are you seeing any change in consumer behavior in any of your key regions?

Lorraine Hutchinson: James, why don't you take that if you're seeing any consumer behavior?

James Zheng: Yeah.

James Zheng: I think it would be good to hear if you're hearing any.

James Zheng: Yeah, let me.

James Zheng: I think the overall, I mean, the Islamic situation still got the level of the challenge.

James Zheng: Okay.

James Zheng: So, but different region got different situation.

James Zheng: For me, I'm right understanding China.

James Zheng: It's still overall.

James Zheng: It's getting through.

James Zheng: So, people still need to figure out.

James Zheng: Okay.

James Zheng: So, how we overcome kind of a short term difficulty to challenge as a whole.

James Zheng: But on your side, as I just mentioned, that the industry we are sitting and that was industry still at the optimal situation.

James Zheng: So, and the people and the participants level from China markets continue to go.

James Zheng: And the overall industry, sports industry, we believe still grow more than more than five to eight percent on Kager for coming three years.

James Zheng: So, we think that the market size do there.

James Zheng: So, and it just says how there's some brands doing extremely good jobs taking the shares from the some brands doing social jobs.

James Zheng: So, it's kind of a shifting.

James Zheng: Okay.

James Zheng: It's kind of a shifting.

James Zheng: And the Europe, I think it's all about, it's kind of my understanding, it's kind of a stable market, relatively stable market.

James Zheng: And it's all about how you created the kind of excitement, the level of excitement you created.

James Zheng: And they all, I mean, that the market still welcome new players, which can create the distinguished value to the consumers.

James Zheng: And the customers also love to try certain new brands, especially in the industry we are sitting.

James Zheng: So, we still see a good level of opportunity.

James Zheng: Likewise, in North America, North America.

James Zheng: So, I still wish I lit.

James Zheng: Okay.

James Zheng: So, I think it's, yeah, the macro situation is a bit level of challenge, but the consumers still looking for some, as I say, okay.

James Zheng: So, some newcomers and with innovative high technical products and in sports industries.

James Zheng: And we still see a good opportunity for us.

James Zheng: So, I'm pretty optimistic for the overall industry, I mean, in our industry. And especially the segment we are sitting, we still see a great runway for us to explore the potential in the market.

Stuart Haselden: Hey Lorraine, it's Stuart.

Stuart Haselden: I'll just add to Dave's comments.

Stuart Haselden: I think what we're seeing is a bifurcation across the regions we operate.

Stuart Haselden: We're seeing a strong division between winners and losers and companies that are that have a strong market position are taking share and companies that have are just participating in the market are forfitting share.

Stuart Haselden: We also see technical innovation as an important competitive advantage that is that is helping companies that I think like our tariffs continue to thrive in the marketplace and it's a it is a focus for how we are building our product strategy.

Stuart Haselden: So at this point our customer dynamics are very strong.

Omar Saad: I will now turn the call back over to Omar for final closing remarks.

Omar Saad: Thanks Rob.

Omar Saad: Thanks everyone for joining.

Omar Saad: Just one quick mention.

Omar Saad: We're posting on our IR website both the presentation slides that go with the prepared remarks as well as the script of the prepared remarks for those of you who are looking for it.

Omar Saad: Thanks everyone for joining.

Omar Saad: We'll see you again in three months.

Unknown Executive: This concludes today's conference call.

Unknown Executive: Thank you for participation.

Unknown Executive: You may now disconnect.

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