Q4 2024 Wolverine World Wide Inc Earnings Call
Benjamin Griffin: Benjamin Griffin, Eduardo Muñoz, Judas Roca, M Foix Koban div. larcentis A F
Benjamin Griffin: This morning, we issued a press release announcing our financial results for the fourth quarter and full year 2024 and guidance for fiscal year 2025.
Benjamin Griffin: Press release is available on many news sites and can be viewed on our corporate website at Wolverine worldwide Dot com.
Benjamin Griffin: This morning's press release and comments made during today's earnings call include non-GAAP financial measures. These non-GAAP financial measures, including references to the ongoing business, where reconciled to the most comparable GAAP financial measures and attached tables within the body of the release or on our Investor Relations page on our website Wolverine worldwide Dot com.
Benjamin Griffin: I'd also like to remind you that statements describing the company's expectations plans predictions and projections such as those regarding the company's outlook for fiscal year 2025 growth opportunities and trends expected to affect the company's future performance made during todays conference call are forward looking statements under U S Securities laws.
Benjamin Griffin: As a result, we must caution you that there are a number of factors that could cause actual results to differ materially from those described in forward looking statements.
Benjamin Griffin: These important risk factors are identified in the Companys SEC filings and in our press releases.
Benjamin Griffin: With that I'll now turn the call over to Chris Hufnagel.
Chris Hufnagel: Thanks, Alex good morning, and thanks to everyone joining us on this morning's call.
Speaker Change: And the final quarter of 2020 for our company and funded the topline growth with Merrell Saucony.
Speaker Change: Stock me when adjusted for business model changes Wolverine and three of our four global regions, all posting revenue increases compared to the prior year.
Speaker Change: Gross margin expanded by more than 600 basis points compared to last year, achieving a new fourth quarter record.
Speaker Change: The end result was earnings that exceeded our expectations.
Speaker Change: It was a good quarter by almost any measure.
Speaker Change: In conclusion to what was a pivotal year for Wolverine worldwide.
Speaker Change: Last year on this call we shared an update on our ambitious plan to turnaround the company and.
Speaker Change: It provided a corresponding financial expectations for fiscal 2024.
Speaker Change: Today I'm pleased to report that our team delivered.
Speaker Change: We successfully completed the stabilization of the company and strengthened our balance sheet.
Speaker Change: Finishing with our lowest debt level since the second quarter of 2021, and the cleanest inventory position we've had since the pandemic.
Speaker Change: We also meaningfully improved the business its profitability.
Speaker Change: Achieving record full year gross margin and delivering earnings per share nearly six times greater than last year and.
Speaker Change: And finally as we guided last February the company in fact, the growth to finish the year.
Speaker Change: In addition to solidifying our foundation and delivering improved financial results for our shareholders. We made good progress in transforming Wolverine worldwide for the future.
Speaker Change: We reshaped and simplified our portfolio brands to better align with long term macro consumer trends and we develop stronger capabilities to underpin our new brand building model.
Speaker Change: Focused on building Austin products, telling amazing stories and driving the business.
Speaker Change: We started with the consumer and establish the collective bolster consumer and trend insights.
Speaker Change: Complementing our already strong product design and development capabilities by adding new talent with the merchandising mindset.
Speaker Change: By implementing advanced tools for greater effectiveness and efficiency.
Speaker Change: We opened our first ever innovation hub in downtown Boston to tap into the concentration of exceptional talent in the region.
Speaker Change: We recruited new marketing leadership across our brands and we equipped them with an in house creative studio for fast nimble asset creation to engage today's always on consumers.
Speaker Change: We've been hard at work and providing new integrated planning processes to improve our forecasting and help ensure we've got the right product at the right place and at the right time.
Speaker Change: To drive the business to become better brand builders, we cleaned up the marketplace through a variety of brand protection measures, coupled with more disciplined distribution management.
Speaker Change: Develop more strategic relationships with our partners domestically internationally.
Speaker Change: And establish a compelling platform to activate our brands with impact through our key city initiatives beginning in Tokyo in London.
Speaker Change: Finally over the last year, we've significantly strengthened our team by adding great new talent to the organization.
Speaker Change: In the last few months alone we've onboard its <unk> president of our active group and two industry veterans to lead our product and marketing functions for Maryland.
Speaker Change: To date, we've made good progress, but I'm the first to admit we have more work to do.
Speaker Change: Theres no doubt Wolverine worldwide is much stronger today than it was just 12 months ago, but the most important chapter of certainly the next one.
Speaker Change: While it's still early in our inflection chapter and I'm sure the path wont be perfectly straight our company is growing again and our biggest brands are positioned to meaningfully grow this year.
Speaker Change: Before handing the call over a Terran Miller, our chief financial officer to provide more detail on our results in fiscal 'twenty 25 outlook.
Speaker Change: I'd like to share some additional insight on our brand's fourth quarter performance and how we plan to build the momentum we've generated.
Speaker Change: Beginning with Saucony.
Speaker Change: It can exceed our expectations and grew 7% in the fourth quarter adjusted for business model changes.
Speaker Change: In the quarter the brand grew low teens in the U S and over 20% in EMA and it did so at much healthier price points and margins.
Speaker Change: Expanding gross margin globally by more than 1400 basis points.
Speaker Change: Stock and he's running business gained market share for the second consecutive quarter in a highly competitive and important U S run specialty channel.
Speaker Change: Serious runners have long respected the brand for its innovation. Thanks to Pinnacle award winning product like the Endorphin collection and now Saucony successfully making progress on the broader run lifestyle opportunity in part with what we call. It the core four franchises the ride guide Brian Hurricane.
Speaker Change: Across these key franchise. The team has improved performance with enhanced technology in cushioning and elevated style with more versatile wearable design and the consumer is responding.
Speaker Change: The fourth quarter sell through in the U S of the core four franchise at retail was up very strong double digits year over year.
Speaker Change: The fuel the pace of the brand opened 2025 with the introduction of the new ride and guide models, which are encouragingly also off to a strong start.
Speaker Change: In a few weeks saucony will push its innovation to the next level with the launch of its highly anticipated new Super shoe the endorphin elite to.
Speaker Change: Built on next generation and credit run foam and a full length slot in carbon fiber plat late for unmatched energy return.
Speaker Change: On the lifestyle side Saucony continues to leverage its deep authentic product archives to deliver trend right styles to the marketplace.
Speaker Change: Led by the pro grid, omni ride millennium brokerage triumph and others.
Speaker Change: And it continues to fuel brand heat with a powerhouse lineup of collaborations on these various platforms.
Speaker Change: Last quarter, the brand dropped collections with the likes of J tips minted New York style cow, Paris homework embracing.
Speaker Change: The team has done a remarkable job in a very short period of time enjoying the social and cultural discourse Theres now thoughtfully translating this newfound energy into meaningful growth.
Speaker Change: Saucony continues to advance the company's key city effort as well this.
Speaker Change: This year the brand plans to repeat its sponsorship of the London 10-K expanded sponsorship efforts to include the Saucony shortage and Eiffel Tower 10-K's, and opened its first pioneer store in London's Covent Garden in just a few months.
Speaker Change: I'm also excited by the progress the brand is making in Asia Pacific elevating our partnerships in the region's key markets and further expanding its branded store footprint.
Speaker Change: A year ago, I said I was bullish in the brand's prospects and today I believe saucony is on the cusp of doing something very special.
Speaker Change: Leveraging its deep authentic running routes its tremendous performance product credibility and the macro trends benefiting the category to leapfrog into a unique position at the intersection of running and culture.
Speaker Change: Blurring the lines between performance and lifestyle.
Moving on to Maryland in the fourth quarter Merrill posted its second consecutive quarter of growth up 1% compared to the prior year.
Speaker Change: The health of the business continue to improve as well, resulting in gross margin expansion of nearly 400 basis points year over year.
Speaker Change: In the U S hiking category the brand once again grew and took significant market share during the quarter. Its eighth time. It has done so in the last nine quarters, while simultaneously gaining share in trail running.
Speaker Change: As a leader in hiking Merrell remains focused on modernizing the trail with faster lighter and more versatile product like the moab speed and.
Speaker Change: And agility peak five.
Speaker Change: In Q4, both franchise continued to establish themselves as important collections for the brand, adding revenue and fueling performance with key accounts.
Speaker Change: This more authentic product has also enabled the brand to partner with several key retailers over the last year to reshape their assortments in the floor and begin evolving consumer perception of the brand in the marketplace.
Speaker Change: Further advancing its push to modernize the trail Merrell launched the all new highly disruptive speed arc surge Boa franchise last month, one of times best New invention of 'twenty 'twenty, four and and his fellow award winner. It employs advanced materials and the brand's new speed arc platform, including its float probe plus supercritical foam.
Speaker Change: And a stabilizing flex plate for a uniquely comfortable ride with exceptional energy return.
Speaker Change: So far it's exceeded our expectations and songs are quickly at nearly a $300 price point.
Speaker Change: Later this quarter the brand will follow up this introduction, but the second style in the collection the speed arc matters.
Speaker Change: Merrell continues to make steady progress on our lifestyle side of the business as well.
Speaker Change: With key counts this year have demonstrated demand with a younger consumer in Germany and expansion of doors and revenue with you, especially independents grew strong double digits in Q4 chip.
Speaker Change: Shipments of key performance franchises, including the Moab speed to agility peak five an Moe three nearly quadrupled with lifestyle counts last quarter.
Speaker Change: Merrell is actively driving innovation in the category and our strategy monitoring the trail is gaining real traction around the world.
Speaker Change: Switching over sweaty, Betty what anybody's top line was softer than our expectations for the quarter, but in alignment with our strategy of the brand continued to significantly improve its profitability with nearly 900 basis points of gross margin improvement versus last year.
Speaker Change: Door revenue was flat year over year and E Commerce was down high single digits.
Speaker Change: The brand grew its mid layer business and leggings, along with strong sell through in outerwear, most notably the Nimbus collection.
Speaker Change: So anybody into the new year with a healthier foundation and a strong team in place the brand launch its new don't sweat. It campaign, a few weeks ago, which we plan to follow shortly with the next iteration of the Venerable where the dam shorts campaign.
Speaker Change: In closing with the Wolverine brand the print for Wolverine brand's revenue performance in the quarter is encouraging however, our trends remain inconsistent based on order patterns supply chain timing and overall footing in the marketplace.
Speaker Change: Going forward the brain is focused on bolstering its product innovation and pushing into more premium price points as a result.
Speaker Change: Starting with several new launches in 2025, including the new Vantage <unk> Ranch pro collections, which are built on the brand's new hyper rest technology for superior Cushing and energy return.
Speaker Change: In addition to improved product offerings. We're also focused on broadening the brand's reach Wolverine plans to launch a new partnership in just a few weeks of country music Superstar, Jordan Davis, including custom footwear collection apparel capsule later this year along with the Wolverine by Jordan David's trade sure that will celebrate the trades and donate to high school programs. During his concerts this fall.
Speaker Change: As we turn the page 2025, the company's on firmer financial footing in years, and we believe our brands are well positioned our teams are focused on continued to dial in our product sharpen our marketing and drive the business forward.
Speaker Change: The heavy lifting the stabilization behind us.
Speaker Change: One is excited for the next chapter for the company a new chapter focused on growth.
Speaker Change: With that I'd now like to hand, the call over to Darren to walk you through our fourth quarter results in detail and outlook for 2025 Darrin.
Darren: Thank you, Chris and welcome everyone.
Darren: As we reflect on 2024 I am pleased to share that we successfully delivered the first phase of our strategic turnaround, beating our initial expectations across all key financial metrics.
Darren: Our efforts to optimize the portfolio revitalize our brands and enhance our operations have improved our performance.
Darren: In addition, our strategic actions have strengthened the balance sheet.
Darren: Resulting in improved cash flow and a meaningful reduction in debt.
Darren: As we move forward, we remain committed to building on these achievements to ensure sustainable growth and long term value creation for our shareholders.
Darren: Fiscal 'twenty 'twenty four revenue for ongoing business of $1 $75 billion represents a decline of 12, 1% versus prior year.
Darren: Primarily driven by discrete items in 2023 related to end of life inventory liquidation.
Darren: Business model changes and a timing shift of the international distributor shipments that did not recur in 2024.
Darren: Performance strengthened throughout 2024 with an inflection to growth in the fourth quarter.
Darren: Demonstrating the success of our strategic initiatives and the dedicated execution of our team.
Darren: Full year 'twenty 'twenty four adjusted gross margin of 44.6% increased 470 basis points versus last year.
Darren: This improvement is a result of actions taken over the past year to transform the company and reduce cost.
Darren: These measures encompass supply chain and product cost savings.
Darren: Healthier inventory levels improved mix of full price sales and actions to protect our brands.
Darren: Adjusted operating margin of 7.5% increased 360 basis points compared to 2023.
Darren: Lower adjusted selling general and administrative expenses.
Darren: Restructuring savings, partially offset by incremental investment in the business normalized incentive compensation and inflation.
Darren: We made strategic investments in our brand building model, including modernizing product line management tools sponsoring the London 10-K, with Saucony to elevate brand awareness strengthening.
Darren: Strengthening our first innovation hub in Boston.
Darren: And building additional talent and capabilities.
Full year adjusted diluted earnings per share was <unk> 91 cents compared to 15 cents in 2023.
Speaker Change: Shifting to the fourth quarter performance.
Speaker Change: Fourth quarter revenue of $495 million was above the high end of our outlook with better than expected performance in both active and work groups more than offsetting foreign currency headwinds.
Speaker Change: Revenue for our ongoing business grew 3% versus the prior year.
Speaker Change: Strong growth in wholesale and international distributor channels was partially offset by a decline in our direct to consumer business.
Speaker Change: In the fourth quarter DTC margins improved significantly as we focused on more full price sales.
Speaker Change: Merrell revenue grew 1% in the quarter with growth in core product franchises, including Moab, three genco, Marc and Mel abstain.
Speaker Change: Balcony declined 5% due to the kids and China joint venture business model changes.
Speaker Change: Excluding these discrete items balcony revenue grew 7%, which is better than original expectations due to strong demand and performance Ron and lifestyle expansion.
Speaker Change: But anybody declined 6% this quarter selecting strategic actions taken to improve profitability as well as a more challenging U K trading environment.
Speaker Change: The work group revenue increased 21% in the quarter.
Speaker Change: Most of the growth was driven by strong demand for core franchises, such as trade wedge rancher and forehand as well as the recovery of third quarter supply chain disruption in shortfall.
Speaker Change: The remaining amount resulted from a timing shift between the fourth quarter of 'twenty 'twenty four and the first quarter of 2025 of certain wholesale order shipped earlier than originally expected.
Speaker Change: Fourth quarter adjusted gross margin of 44% a year over year increase of 620 basis points was in line with our expectation and reflects the health of your sales mix and the benefit of supply chain cost saving initiatives.
Speaker Change: Adjusted operating margin of 10.2% exceeded our outlook for the quarter driven by operating cost leverage on the stronger revenue performance.
Speaker Change: As a result of the improvement in revenue and operating margin fourth quarter adjusted diluted earnings per share was 42 cents above the high end of our guidance.
Speaker Change: We made solid progress in optimizing cash flow and strengthening our balance sheet.
Speaker Change: Inventory at the end of the fourth quarter was $241 million down approximately 36% from last year as we realize the benefits of improved planning and execution.
Speaker Change: Although there is still more work to be done to fully optimize inventory. We consider the current overall level close to our near term target ensuring that we have adequate coverage for the business's future growth.
We delivered $160 million of operating free cash flow in 2024.
Speaker Change: <unk> of improved profitability and lower working capital.
Speaker Change: These were key enablers to lowering net debt to $496 million and 33% or 246 million dollar reduction versus 'twenty, 'twenty, three and better than expected due to higher profit and working capital timing.
Speaker Change: As we look to the future are 2025 outlook builds on the momentum gained in 2024, reflecting a return to growth and improved profitability.
Speaker Change: This outlook highlights the strength of our focused portfolio and investments to support our brands and strategic initiatives.
Speaker Change: It also takes into account foreign currency headwinds and the impact of the 53rd week.
Speaker Change: A breakdown of these factors can be found in the investor presentation of our website.
Speaker Change: The outlook does not include potential impacts from recent tariff changes.
Speaker Change: This is a dynamic situation that we continue to monitor it closely.
Speaker Change: As it relates to the February four tariffs on U S imports from China, We believe the impact to 2025 is manageable given our current exposure and the actions we plan to take to mitigate higher costs.
Speaker Change: For the full year 2025 revenue is expected to be in the range of 1.7 hundred 95 billion to $1.8 billion to $5 billion, an increase of 2.5% to four 3%.
Speaker Change: This includes an estimated $40 million currency headwind to the prior year.
Speaker Change: On a constant currency basis, and excluding the 50 <unk> week, we expect revenue to grow approximately 4.2 to five 9%.
Speaker Change: We expect the active group revenue to grow high single digits on a constant currency basis.
Speaker Change: New product launches lifestyle expansion and focus go to market initiatives, including key city Activations are expected to drive growth in the active group.
Speaker Change: The following brand outlook is on a constant currency basis.
Speaker Change: Stocking is expected to drive outsized growth at mid teens, reflecting category momentum new launches in both performance and lifestyle products and expanded distribution.
Speaker Change: Merrell is expected to grow mid single digits.
Speaker Change: Building on second half 'twenty 'twenty four games.
Speaker Change: We expect key products, including the speed Art collection.
Speaker Change: Speed to and agility, Pete five will continue to drive the overall category.
Speaker Change: Well anybody is expected to deliver low single digit top line growth in 2020 five as we take actions to further refine our retail footprint and product offering to focus on more profitable sales.
Speaker Change: We expect the work group revenue.
Speaker Change: Grow low single digits on a constant currency basis.
And the work group reflects gains from the new products and strengthened core franchises such as Wolverine trade.
Speaker Change: Trade wedge and rancher.
Speaker Change: Adjusted gross margin is expected to be approximately 45, 5% at the midpoint of the outlook range an.
Speaker Change: An increase of 90 basis points from last year as we continue to benefit from more full price sales and product cost savings.
Speaker Change: Adjusted operating margin is expected to be approximately eight 3% at the midpoint of the outlook range up from seven 5% in 2024.
Speaker Change: Product costs, and SG&A savings are expected to offset inflation and fuel investments for future growth.
Speaker Change: These investments are crucial for driving innovation, enhancing our competitive edge and expanding our market presence.
Speaker Change: With the reduction in net debt over the past year interest and other expenses are projected to be between 25 and $30 million down from $39 million in 'twenty 'twenty four.
Speaker Change: With more than 80% of our debt now at a fixed rate we are less affected by near term interest rate fluctuations.
Speaker Change: The effective tax rate is projected to be approximately 18%.
Speaker Change: As a result of these key assumptions adjusted diluted earnings per share expected to be in the range of $1.05.
Speaker Change: At $1 20.
Speaker Change: Including an eight cent foreign currency headwind.
Speaker Change: This represents adjusted diluted earnings per share growth of 25% to 41% on a constant currency basis.
Speaker Change: Operating free cash flow is expected in the range of 70 million to $80 million with approximately 40 million of capital expenditures.
Speaker Change: This range reflects higher earnings.
Speaker Change: Her prior year and incremental investments to fuel brand growth capabilities and technology modernization.
Speaker Change: In addition, as working capital Normalizes, we anticipate this to be a modest headwind in 2020 five.
Speaker Change: Turning to our outlook for the first quarter.
Speaker Change: As we transition from the stabilization phase to driving sustained profitable growth, we expect performance to accelerate throughout 'twenty five as it did in 2024.
Speaker Change: We expect first quarter revenue of approximately $395 million, an increase of one 2% versus 2024.
Speaker Change: This reflects the impact of foreign currency headwind and the kids business model change in May of 'twenty 'twenty four.
Speaker Change: On a constant currency basis, and excluding the business model change it projected first quarter revenue growth is approximately five 1%.
Speaker Change: First quarter gross margin is expected to be around 46, 6%.
Speaker Change: Approximately flat to last year's gross margin, which included a discrete benefit related to a business model change.
Speaker Change: We expect first quarter adjusted operating margin to be approximately 4.6% roughly flat to prior year on a constant currency basis.
Speaker Change: Adjusted diluted earnings per share is expected to be approximately 10 cents.
Speaker Change: The first quarter is expected to be the lowest revenue quarter of the year, which is consistent with historical trends.
As revenue ramps up over the balance of the year, we expect operating leverage to be a key driver in the sequential step up in operating margin as demonstrated in 2024.
Speaker Change: In summary in.
Speaker Change: In 2024, we completed the stabilization phase of our turnaround.
Speaker Change: And the transformation is well underway.
Speaker Change: We anticipate that 2025 will build on this foundation with plans to begin to drive sustainable profitable growth.
Speaker Change: We are thoughtfully balancing the need for earnings and cash flow improvement with the essential reinvestment to accelerate demand creation built critical capabilities and modernize our technology.
Speaker Change: Although we acknowledge that more work lies ahead, we are encouraged by the positive momentum of our business.
Speaker Change: In this dynamic operating environment, we remain focused on what we can control investing in our brands our team and technology to build new capabilities drive growth and deliver value to our shareholders.
Chris Hufnagel: And with that let me hand, the call back to Chris before we open up for questions.
Chris Hufnagel: Thanks Darren.
Chris Hufnagel: We're focused on making People's lives better health.
Chris Hufnagel: Healthier happier and more productive our brands our original and leaders in attractive markets that we believe are aligned with where consumers are today, and importantly, where we believe they will be tomorrow.
Chris Hufnagel: We believe the potential of our brands is significant we're now seeing our efforts begin to deliver better results, giving.
Chris Hufnagel: Giving us confidence in our direction and brand building investment strategies.
Chris Hufnagel: In 2025, we are taking a thoughtful approach prior.
Chris Hufnagel: Prioritizing those initiatives focused on our biggest growth opportunities that we believe will be the most impactful most.
Chris Hufnagel: Most noteworthy saucony.
Chris Hufnagel: Given tailwind to consumer trends combined with brand momentum we plan to accelerate stocking. These lifestyle expansion in traction performance with investments in trade marketing the brand Activations brand media collaborations and key city executions, including the brand's first new brick and mortar concepts in London and Tokyo.
As a company we plan to continue to strengthen our product and merchandising capabilities with improved tools and new talent.
Chris Hufnagel: Further elevating innovation and trend rate design.
Chris Hufnagel: In addition, we plan to update the systems needed to drive the business, notably our ecommerce platform to enhance consumers' digital experiences with our brands.
Chris Hufnagel: With the close of the stabilization chapter we're planning a more balanced approach to managing the business moving forward.
Chris Hufnagel: They're expanding profitability while at the same time investing in building our brands and platforms to drive long term sustainable growth.
Chris Hufnagel: All with a focus on maximizing returns and value to our shareholders.
Chris Hufnagel: I'd like to close my prepared remarks by expressing my sincere gratitude to our team.
Chris Hufnagel: Thanks to their hard work Wolverine worldwide is a much different company today.
Chris Hufnagel: With a stronger financial footing.
Chris Hufnagel: More agile organization with improved brand building capabilities.
Chris Hufnagel: And a new emerging culture of working and winning together as one Wolverine.
Chris Hufnagel: I know I speak for our global team when I say, we're proud of the work we've done and the early proof points of validating our direction, but we aren't satisfied.
Chris Hufnagel: We're intently focused on making everyday better moving forward.
Chris Hufnagel: With that thank you for taking the time to be with US. This morning, and we're happy to take your questions operator.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two to remove yourself from the queue. We ask that in the interest of time, you limit yourself to one question and one.
Chris Hufnagel: Follow up before rejoining the question queue.
Chris Hufnagel: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the parking.
Speaker Change: First question comes from Anna I'm driver with Piper Sandler. Please go ahead.
Anna: Oh, great. Thanks, so much good morning, and congrats really nice end to the year to.
Speaker Change: Two quick ones from us are great to hear on Saucony are growing double digits in 'twenty five and you talked about at least a 900 new doors for the brand. This year are any of these slated for the fourth quarter or is that something that's going to build throughout the year and then just a similar question on merrell.
Speaker Change: I'm not sure. If you heard you know how many new doors, we should expect for the brand. This year, but curious how has been reception to the brand and some of them more female leveraged specialty retail accounts that you guys opened thanks so much.
Speaker Change: Thanks, Dan and good morning appreciate the comments.
Speaker Change: Saucony doors, Yeah, I mean, I think we're very pleased with the progress we've made in saucony in a very short period of time and as the the heat for that brand has grown in the product pipeline has gotten stronger both in the performance fees and the lifestyle piece, we're responsibly growing door count we mentioned last time expecting a 900 incremental doors this year.
Speaker Change: A lot of those are online we did test with retailers are in the middle part of last year and have expanded beyond that so more will open up but we certainly do expect a benefit a benefit from that door expansion and now we're obviously intently focused on driving sell through sell through in that business, but very encouraged by the progress in saucony.
Speaker Change: And the demand that we're seeing at the same time, we're in this for the long haul and we're gonna work to responsibly grow that business over time.
Speaker Change: Same story for Merrell, we worked hard to really work to reposition that business and.
Speaker Change: Our team has done a great job I think sort of resetting the U S wholesale landscape.
Speaker Change: Both engaging with sort of long term very successful partners and how Merrill shows up each and every day on the sales floor at the same time opening up new distribution in taking the broader outdoor lifestyle opportunity and not just so focused on the trail. So of opening up new doors is there as well are not quite at the pace at which socket. He has opened but please please.
Speaker Change: The early returns and especially for her Merrell is underpenetrated for the female consumer we've worked hard to really work and evolve that product line, we've got a new chief product officer, and she brings a great track record of working for some great brands, but we're very focused on her and the broader opportunity. So I'm glad you brought those two brands up.
Speaker Change: Very encouraged by the progress made in 'twenty four and excited for what those branches are due in 'twenty five.
Speaker Change: That's awesome. Thank you so much Chris can I just follow up there on a really strong gross margin can you guys talk about what inning are you in in terms of the product savings and I think you're now are roughly at the low end of that 45% to 47% long term goal on gross margins do you think reaching above that range.
Speaker Change: As a possibility for the business over time and thanks again.
Speaker Change: Yeah. Thanks for the question on gross margin, where we're at I think we are pleased with the progress. We've made the last two years in terms of expanding our gross margin and and.
Speaker Change: Sorry, not past two years when you look at 2024 and the results as well as for 2025. The guide that we're giving with incremental expansion in gross margin. So pleased with the performance and the results that we're getting both in terms of the cost savings as well as in the as in the <unk>.
Speaker Change: Less promotional healthier inventory more full price from our businesses.
Speaker Change: I think in 2025, what we're looking at there and beyond when you'd say, it's reached the 47% aspirational goal, we need to continue to work with the work we've done we continue to see more opportunity.
Speaker Change: In terms of the sourcing part of the business in terms of our product costs. So we're continuing to look.
Speaker Change: Look for opportunities and get those in our results as well as in terms of our SG&A savings and we have both of those planned in 2025, that's part of how we're fueling the investment for the growth in 2025.
Speaker Change: Alright, thank you so much.
Anna: Thanks Anna.
Speaker Change: Next question, Laura that's Alaska with BNP Paribas asset management. Please go ahead.
Laura: Hey, good morning, Thanks, very much for taking my question, Chris I wanted to follow up on.
Laura: On the on the slides from this morning, it's very intriguing to see the slide number five in terms of your long term aspirations as well as the busy.
Laura: It's in flux.
Laura: Where you're calling for mid to high single digit top line growth.
Laura: 45% to 47% gross margin, but the operating margin of 15 mid teens percent.
Laura: Hum.
Speaker Change: Firstly, if you could maybe parse out like what kind of timeframe youre looking at is it over the next three years and then to get to that operating margin is there part of the business. That's underperforming for an operating margin perspective that you want to potentially divest or is it really around leveraging the SG&A cost base that you're correct.
Laura: Thank you.
Speaker Change: Yeah, I'll, let parents here and begin and then I'll I'll add to that.
Speaker Change: Thanks for the question, it's too early to provide a date on the mid teen profit margin aspiration that we set for our objectives. We are encouraged as I shared about the progress in 'twenty four up 360 basis points and in 'twenty five the guide we'd have another 80, so 440 basis points in two years.
Speaker Change: And that includes we're on for 2025 that includes close to a 900 basis point headwind from currency. So you know that's why we say we're pleased with the performance that we're seeing them in the two years and the plans for 'twenty five that path to mid teens really is to continue to make.
Speaker Change: A full brand building investments to grow the top line and optimize the cost that I spoke to just a few minutes ago.
Speaker Change: I think as we think about 2025 specifically.
Speaker Change: We've obviously done a lot of work to stabilize the organization, we've highlighted that in la.
Speaker Change: Largely you know, finishing talking about turnaround and now we can focus on the next chapter which is growth I think historically, we just haven't invested enough in our brands and our platforms.
Speaker Change: And this year, we're doing a step up in those investments.
Speaker Change: Leading with investments behind Saucony, because we think that as the brand with certainly the most momentum momentum.
Speaker Change: We certainly are seeing tailwind within that category and I think you know saucony has some of the greatest potential in the portfolio at the same time and we've got the tools tools and platforms that we need to invest in.
Speaker Change: As well as an organization so our stepping up those investments. This year. We think it is the right thing to do to drive long term sustainable growth of the organization and we think it's in the best interest of our brands and certainly at the end of the day for our shareholders.
Speaker Change: Very clear. Thank you very much folks for that and then some housekeeping question on modeling.
Speaker Change: I think you mentioned there was the issue.
Speaker Change: Shifts from four one Q4 Q4 revenues and work maybe could you quantify that number or are there any shifts further that we should consider for one Q to Q.
Speaker Change: Turning on the gross margin.
Speaker Change: How do how does the gross margin evolved to get to roughly up 100 basis points and lastly, whats the interest expense line for this for this year in terms of guidance. Thank you.
Speaker Change: Great Yeah. So for the I think there's three questions in there and make sure I get them a tour for work group.
That is the one that we would highlight in terms of the shift that we saw as Chris shared in his opening remarks, while the fourth quarter revenue trends were encouraging for the work group I would say the results remain inconsistent basis based on three factors. One is the order patterns are the second is the supply chain timing and the third is the overall.
Speaker Change: <unk> of our brands in the market.
Speaker Change: The first quarter revenue in the materials, we provided you'll see we expect work group to decline low double digits constant currency about half of this decline is a result.
Speaker Change: So approximately around $7 million about half of that decline is a result of the timing shift between the fourth and the first quarter.
Speaker Change: So I think in the the wall and I think while this is a slow start to the year for the work group. We do expect the performance to improve meaningfully starting the second quarter as our new products go into market and we replenish inventory on on our key products across the brands.
Speaker Change: So that's on work group in terms of gross margin. It really is you know what I've shared previously it really is the continued benefit that we started in 2024 from the cost savings initiatives as well as on the better you know more full priced product that we're seeing in market as the innovation.
Speaker Change: Going in and we have the cleaner inventories to get that full price through in the marketing is performing so those are really the continued benefit in gross margin.
Speaker Change: As it relates to interest expense.
Speaker Change: Your question, specifically on that remind me.
Speaker Change: Just the line item how much should we assume for this year okay.
Speaker Change: Yeah. So we expect net interest and other expenses to be around $25 million to $30 million. In 2025. This is down from $39 million in 2024, and really a result of the reductions that we've that we've driven in net debt.
Speaker Change: Yeah.
Speaker Change: Very clear. Thank you very much for all the color best of luck.
Speaker Change: Thanks, a lot yeah, and I do want to clarify a point I said earlier on FX I'm I was talking to when I talked about that the headwind in terms of the FX that I was quoting in terms of E. P. S impact, it's really a 300 basis point impact on operating margin to clarify.
Speaker Change: Okay.
Speaker Change: Next question, Sam Poser with Williams trading. Please go ahead.
Sam Poser: Good morning, Thanks for taking my question.
Speaker Change: However, a handful here one you said you you mentioned that you have.
Sam Poser: <unk> identified specialty.
Sam Poser: The retailers as a positive growth vehicle or Daryl if you could tell me give some example of the type of retailer you're speaking of.
Sam Poser: Hum.
Sam Poser: And then I wondered what the value of week 53 was and where are you up for where you up for the quarter without week 53.
Sam Poser: And the split between.
Sam Poser: Men's and women's as a percentage for socket.
Speaker Change: Where do you see that going.
Speaker Change: Thanks for the question Sam I'll start with the 50 <unk> week. The 50 <unk> week will be in 2025. So it was not in 'twenty four and we'll see it in 'twenty five the 53rd week and we expect it to provide approximately 50 basis points of growth. So it says the last week of the year is now.
Speaker Change: Not a big trading period for us given the holiday shipments and and the timing of it. So it 50 basis points in terms of the full year growth for 2025.
Speaker Change: And that profit I would say is minimal given that it is a small revenue weak and as we have our full costs, you know SG&A going through it and.
Speaker Change: In the first part.
Sam Poser: Sam I. Appreciate the question. We are certainly encouraged by the progress we have seen in Merrell, both both in the performance fees and the lifestyle piece and you know as well as anyone there have been no really significant headwinds and then outdoor space in Maryland, gaining share at the fastest rate since we've been tracking with which we're encouraged by the specialty doors obviously there's.
Sam Poser: There's a lot of sort of one off specialty outdoor accounts that we worked hard with our team to sort of reengage at the same time, we're opening up new lifestyle expansion, you're going to begin to see and are seeing Merrill show up in a mall from a lifestyle perspective, where were we just we haven't been for years, so really a reset of that U S wholesale landscape.
Sam Poser: Team has done a very good job and both but both resetting the business and then really engaging with them and really moving beyond the core products that Merrell has been known for for years and dropping new products, whether it's the moab speed to where the agility peak five.
Sam Poser: We're encouraged by so nice steady on progress to construe consecutive quarters of growth for Merrell and encouraging encouraging news in the wholesale channel for for Merrell, both here in the U S.
Sam Poser: As well as email.
Sam Poser:
Sam Poser: Thanks, and then lastly on sweaty Betty how many stores are there currently and do you have plans to add stores in the U S.
Sam Poser: Yeah, there was approximately a 100 stores today and we've got 10, new stores planned for this year. We have two stores currently open in the U S. One in Georgetown and one in Chicago and really testing those markets. Early returns are positive reception to those doors and we are seeing some sort of key metrics, whether it's conversion or.
Sam Poser: Or a S P.
Sam Poser: Really checking with what where the bread the UK stores are but that's it that's the store fleet no no no.
Sam Poser: No.
Sam Poser:
Speaker Change: Specific plans to open more doors in the U S. This year the 10, new stores are all UK base.
Sam Poser: Thanks, very much and good luck.
Sam Poser: Thanks Sam.
Speaker Change: Next question is Mitch connect with Seaport Global Securities. Please go ahead.
Mitch: Yes, thanks for taking my questions I guess, the first one is a bit of a housekeeping hum on.
Speaker Change: On the on the Q1 sales guidance could you give us your expectations by your three main brands in the active groups Merrell Saucony and sweaty Betty I don't think that was in the presentation. I think you just steuben that's been overall active number but maybe I missed it.
Speaker Change: I know you didn't miss it and in terms of we were shifting the details on our external revenue guidance July and closer to our reporting segments. Mitch. This means we will continue to provide quarterly guidance by segments, meaning active and work, but we're not providing them at the brand level.
Speaker Change: I believe I think we believe that it was important to provide that brand level of detail for the full year guidance for 'twenty five as we progress our transformation, but but not on a quarterly basis.
Chris Hufnagel: Okay, and then a couple of other things Chris you talked about.
Speaker Change: Investment, particularly in Saucony I'm curious from a maybe from a marketing standpoint.
Chris Hufnagel:
Chris Hufnagel: What was your what was your marketing rate in 'twenty, 'twenty, four and where's that going in 'twenty five.
Chris Hufnagel: Yeah, it'll be it'll be up up in 'twenty five versus 24, I think we finished 24 at right around 8%.
Chris Hufnagel: It'll be up up again this year and then even 23 it was well below 8% of the company. So that is part of the investment strategy to invest behind our brands.
Chris Hufnagel: We're leading with Saucony again, because we think that brand has the momentum the category tailwind and I think a lot of good ideas.
Chris Hufnagel: Investments for Saucony include new.
Chris Hufnagel: <unk> store in Covent Garden, which will open up.
Chris Hufnagel: In May <unk> activation around sponsorships, the London 10-K will be back for a second year. This year I will be sponsoring the saucony shortage 10-K for the first time this year along with the iPhone 10-K in Paris, this year as well and bring those those to life through run clubs in Activations and all.
Chris Hufnagel: All the things associated with that I can't wait for those events were also sort of doubling down on our investments here in the U S.
Chris Hufnagel: How we how our brands show up day in and day out in run specialty in sporting goods investing in in boots on the ground to help US win the war on the floor are against a in a very competitive set and then other investments are in marketing as well and then the company is going to invest in our e-commerce platform, which needs to be updated both to provide consumer.
Chris Hufnagel: A better brand experience more frictionless experiences and <unk>.
Chris Hufnagel: How us to be more nimble on the backend. So I'm. We're excited about the investment strategy. It is needed and I'm glad that we have been able to get through all the work over the past 18 months to give us the financial wherewithal to begin to invest meaningfully back in our brands.
Chris Hufnagel: And I am excited about what that's going to mean for our team for our company for our brands and ultimately for our shareholders.
Chris Hufnagel: And then as a quick follow up to that can you say how much that rate is going up is it like 50 basis points for the year and then my final question just I'm curious.
Speaker Change: A lot of the cold weather that we've seen early in 2025 are you seeing that having any impact on the business, maybe a bit of a tailwind on ovarian boots or possibly even a headwind on the saucony running business.
Speaker Change: Yeah, No there's no headwinds on the softening running business to report I would say the winter seasonal styles and boots I would say there is a benefit and we are seeing some good at once orders as we've as we turn to the new year and we're obviously have a close eye on the order book and you know obviously every.
Speaker Change: Dave.
Speaker Change: We get we get our own e-commerce results.
Speaker Change: So I think that the cold weather, which looks like it's here to stay for a little bit.
Speaker Change: Has certainly has certainly not hurt the organization and we're not giving specific guidance on marketing.
Speaker Change: But but but it'll be up it'll be up this year versus last year.
Speaker Change: Great. Thanks, Good luck.
Speaker Change: Thanks much.
Speaker Change: Yeah.
Speaker Change: Next question, Jim Duffy with Stifel. Please go ahead.
Jim Duffy: Oh. Thank you couple of questions from me, Chris could you just speak about the state of the run specialty channel the health of that category. After a couple of years of really strong growth are you seeing any moderation there.
Jim Duffy: And then speak to Socgen these relative share within that category are you indeed, continuing to gain share.
Jim Duffy: Thanks, and Great question, you know the U S run specialty channel is a really special and important channel in the U S and certainly important to the performance running brands you're right running has been on a tear and I am pleased to report that Saucony is quickly catching up and beginning to gain share again after losing share for for a number of years.
Jim Duffy: That really is driven by product innovation.
Jim Duffy: I think our focus by the brand on both sort of our elite collections now the endorphin at the same time, a really strong focus on our core for Rod Guide triumph and Hurricane and we're seeing really positive sell throughs and like I mentioned Hum a good a good increase relative relative to market share. It is.
Jim Duffy: It is a very competitive channel as you know.
Jim Duffy: We're not seeing any sort of significant weakening that that trend continues obviously data lags a little bit, but still appears to be healthy and I think our focus this year and some of the investments we're going to make in saucony are going to benefit that brand in those doors as we invested in it teams ground game. So.
Jim Duffy: <unk> continues to appear to be healthy obviously category has been one of them one of the best performing categories.
Jim Duffy: And we're pleased that our saucony has been able to.
Jim Duffy: Really reset the business in 'twenty for and then the momentum we're seeing really led by product innovation and now we have to get the demand creation out there, which is why we're stepping up the marketing investment.
Jim Duffy: Across the brand.
Speaker Change: Okay. Thanks for that.
Speaker Change: I wanted to ask on the inventories you guys have done a great job managing the inventories they're super tight do you see this as a sustainable rate of inventory levels or are there places where you're missing sales because the inventories are so tight and you need to make some investments back into that line item.
Speaker Change: Thanks for the question Jim Yeah, as I had called in my prepared remarks, we've made meaningful reductions in inventory in the last two years and in the cash guide that we provided that assumes a modest investment and inventory for 2025 as they've normalized they I would.
Speaker Change: Say overall inventories I would characterize as healthy and close to our target levels. We continue to chase opportunities more so I'd say in saucony and but there are overall, it's healthy, but we are making a modest investment a very thoughtful and disciplined investment in 'twenty.
Speaker Change: 25 to be able to support the growth.
Speaker Change: Thank you.
Jim Duffy: Thanks, Jim.
Jim Duffy: Next question, Mauricio Hey, remember with UBS. Please go ahead.
Mauricio: Hi, Good morning, Thanks for taking my question and sorry, if I missed this but maybe could you elaborate a little bit more on what caused the decline in your DTC sales in Q4.
Jim Duffy: Also maybe you.
Jim Duffy: You know like I think you talked about maybe too early to provide an update on cost savings, but how are you thinking about that in in fiscal year 'twenty five and you know how do you reconcile that with maybe like it seems like the guidance implies some modest deleverage in <unk>.
Jim Duffy: <unk> expenses.
Jim Duffy: You know just elaborate a little bit more on that thanks, so much.
Speaker Change: I'll take the DTC question and I'll hand, it over to Terry on the cost piece I think in Q4, we really tried to be less promotional.
Jim Duffy: Obviously, we were promotional in 'twenty three as we're working through the inventory piece.
Jim Duffy: We were working through some inventory issues early in the year and we really tried across the portfolio of brands to be less promotional which put pressure on the topline.
Jim Duffy: Certainly put pressure on the top line, but there's no doubt I think in total our full price penetration. This year was 500 basis points higher in the quarter than it was last year, which is an important metric that that were that we were tracking at.
Jim Duffy: At the same time you know.
Jim Duffy: I think I.
Jim Duffy: We can do better in our direct to consumer channel I think we have to do about our direct to consumer channel. We had some brands that over performed our expectations and we had some brands that that didn't quite meet what.
Jim Duffy: What we had expected to see I would say specifically as it relates to the fourth quarter.
Jim Duffy: Our performance around the Black Friday cyber cyber week was what was less than we expected encouragingly the business did accelerate in the closing weeks of the year.
Jim Duffy: Which we were positive about but there's certainly is more work to go do there I do think in a couple of brands. We actually did have some inventory challenges saucony, specifically I think some softening.
Jim Duffy: It could have had a stronger fourth quarter, but we just the demand was so great for the products. So I think as the company moves forward DTC is an important focus again, it's not necessarily.
Jim Duffy: All in on DTC I do think the consumer wants to shop across wholesale and owned and I think we have to responsibly manage our brands and our own channels and then thoughtfully manage distribution.
Jim Duffy: And our partner channels. So it's an important piece, that's where consumers come and learn about our products, where they engage with their brands, where we can tell our own stories and I think we I think we have the opportunity to do better there at the same time I think the planned investments in our E. Commerce platform will give consumers a better experience you know there'll be faster there'll be easier to navigate there'll be less friction.
Jim Duffy: We're excited about updating those tools to give the consumers a better branded experience.
Jim Duffy: And as it relates to the operating margin.
Jim Duffy: The point I think you had mentioned a deleverage we're actually getting leverage operating margin is expanding.
Jim Duffy: Both gross and operating margins are expanding you know 80 to 90 basis points at the midpoint of our guide relative to 2024 and this really is.
Jim Duffy: As a result of the better topline performance coming through.
Jim Duffy: The cost savings.
Jim Duffy: We are continued to see in gross margins.
Jim Duffy: Both from actions that we took in 2024 as well as incremental initiatives that we're taking in 2025.
And the operating margin and SG&A line. It is a basically as we are investing in the business and we are taking thoughtful investments in the business and to build the brand building model around the the talent capabilities around our modernizing our tools as well.
Jim Duffy: As our marketing spend that Chris spoke to earlier.
We're fueling those investments by further savings that we have line of sight to for 2025 as well as offsetting the inflation and normalized incentive compensation. So margins are expanding we're benefiting from the carryover savings better healthier inventory.
Jim Duffy: And we're using that to invest in the business.
Jim Duffy: Great and then maybe if I may follow up just on sales for the first quarter just want to make sure I didn't Miss this on the presentation.
Speaker Change: You guys provided and you gave the outlook for first quarter Bye Bye brand is there anything that you can tell us about it by brand from from that perspective.
Speaker Change: Yes, as I shared we we are not providing brand guidance on a quarterly basis, where we're moving to our segment reporting which is active and work group, we're continuing to Brian provide brand guidance on an annual basis. So that you can see how we're growing the business and the trajectory.
Speaker Change: <unk> it over time, but not on the quarterly basis.
Speaker Change: Thank you very much.
Speaker Change: Yep.
Speaker Change: Next question, Jonathan Komp with Baird. Please go ahead.
Jonathan Komp: Yeah, Hi, good morning, maybe just a bigger picture question as you step back and look at 2025 I'm guiding to.
Jonathan Komp: Mid single digit revenue growth constant currency.
Jonathan Komp: Just.
Speaker Change: I'm curious what are the main factor is holding you back from achieving.
Speaker Change: You know the long term aspiration more mid to high single digit growth as it is it macro factors you're baking in a good maybe uncertainty I'm talking about new initiatives and to pay off just any any broader perspective there.
Speaker Change: Yeah, I mean I appreciate the question John.
Speaker Change: Obviously youre looking at a total company growth in across the portfolio of brands.
Speaker Change: It's really hard to get every brand working equally well at exactly the same time I'm very encouraged by the progress we've made in saucony.
Speaker Change: And very encouraged by our outlook for what Saucony can deliver this year.
Speaker Change: At the same the same can be said for merrell.
Speaker Change: What continues to be a top category. So our two biggest brands I think we've done tremendous work in a very short period of time to get those brands growing in a meaningful way and importantly at very good profit levels worked hard on the gross margin work to reset the business thoughtfully expand distribution probably could be growing.
Speaker Change: At the same time, we're trying to be responsible to drive long term sustainable growth at the same time, we've been very open you know our work group, we need to get better and I work group.
Speaker Change: And that really starts with with compelling products and then driving that business each and every day and then as it relates to sweaty Betty sort of thoughtfully.
Speaker Change: Turning to finalize the integration of sweaty Betty into the portfolio and then really working hard on the profitability of the business which were pleased.
Speaker Change: Pleased by the results so certainly at the headline as a corporate standpoint, you can draw that conclusion at the same time our biggest brands.
Speaker Change: We are going to well outpace the category there categories. This year and I think you know line of sight, we have two where they werent where they are in their order book.
Speaker Change: It gives us a lot of a lot of faith.
Speaker Change: We're gonna be able to deliver those numbers, so and that's why we're going to continue to work to accelerate those fuel those investments, which we've talked about and then in places where we're not performing at pace, we're going to work really hard this year to get it to.
Speaker Change: Those teams are.
Jonathan Komp: To perform better and John I would just to build on what Chris said when you look at the revenue guide that we provided that it then it's a range. When you exclude you do constant currency and exclude the benefit of 50 <unk> week, we are putting a guidance of four to 4.2 to five.
Jonathan Komp: 9%, which is really at the mid point of.
Jonathan Komp: Of those aspirational targets I think what Chris laid out is how do we move to the high to mid to the high and as we look to continue to grow the businesses.
Okay. Thanks again.
Speaker Change: Thanks, Tom.
Speaker Change: Next question Dana Telsey with Telsey Advisory Group. Please go ahead.
Dana Telsey: Hi, good morning, everyone and nice to see on the achievement of the targets in 'twenty four.
Speaker Change: Think about 25, and the newness, where Chris you've always talked about you have to have exciting product and you placed on the shelf. How are you thinking about newness and product, particularly for Merrell and saucony and how you're thinking about the.
Speaker Change: Full price AUR this year compared to last year, and just lastly, I know mid teens percent comes from China any change in that going forward.
Any other big areas, where you get the biggest percentage of your sourcing manufacturing Tom. Thank you.
Tom: Yeah. Good question Dana Thanks, I'll hit the sourcing question first.
Speaker Change: We will continue to reduce China. It is mid teens today.
Speaker Change: Reduce it up further this year and we're obviously paying attention to the tariff situation and that seems to be volatile and changing daily.
Speaker Change: Right now with the announced tariffs are in China. The February 4th announcement, we think we can navigate that within within the current the current guide.
Speaker Change: And you're right you know in our business at all it all begins product.
Speaker Change: And our product is the most important thing and I think you know I think coming out of the pandemic.
Speaker Change: Our innovation labs and.
Speaker Change: We have made a lot of inventory that was not the right inventory and.
Speaker Change: And we werent, bringing compelling products and newness newness was going to win and we suffered through that and we took.
Speaker Change: That took 24 to really reset that business and thoughtfully look to grow again and I'm glad that we've closed that chapter in moving on as it relates to newness.
Speaker Change: I think our product pipeline in Maryland, Saucony is as good as it's been the focus on the core four we just dropped the new ride guide 18, I'm trying to continue to check hurricane is a new entrant I.
Speaker Change: I think we're going to launch one of the best Super Skus in the business here in the endorphin elite too and in a couple of weeks and I think that she was going to be a game changer I think on the lifestyle piece I think saucony has done a great job.
Speaker Change: Happening into a century old archive on making those styles relevant and they resonate with consumers along with partnering some of the best collaborators in the business that are drawing really record record brand heat for the brand and then how we take that brand heat and translate to sort of meaningful growth, which we're seeing in the door expansion. So I'm very.
Speaker Change: Encouraged by the product pipeline and Saucony.
Speaker Change: I'm I'm Lucky because I I've eyes into what 26 looks like too and I think that team continues to innovate and I'm really pleased by the progress that we've made same can be said for merrell.
Speaker Change: Merrell for a long time has sort of long in the tooth legacy styles that were critically important very big businesses.
But we weren't innovating fast enough and I think we're really beginning to see some of those new products really begin to take root the moab speed to continues to check in sell through at rates that please both our partners and it.
Speaker Change: It takes color material it takes color material extraordinarily well, great collaborations and really resonating with her and really it really bridges that outdoor trail to outdoor lifestyle in a very compelling way agility peak five the same can be said really a great trail shoe that the people are willing to travel when they bring to hike and then.
Speaker Change: Wearing it as an everyday sneaker and then I'd point, you to speed, our search bar, which we just drops all three up to $290 price point.
Speaker Change: A disruptive shoe.
Speaker Change: That that looks fundamentally different one times best New invention last year was the disposal of award winner and as well outpacing our own expectations at our dotcom business at that $300 price point and we're gonna followed shortly thereafter with the speed dark matter. So I think our product teams are moving with pace I think 24 was a very good.
Speaker Change: Year, bringing new introductions and I think the development in 'twenty four 'twenty five has been great. Thanks, I've also brought some new talent, we have a new product the chief product officer and Merrell. She has been on the ground for a couple of months now and I just had a meeting with her on Friday sort of reviewing the next season's line and I'm really encouraged by the way. She is thinking about the business and the opportunities that we have so I'm very encouraged by the <unk>.
Speaker Change: Pipeline.
Speaker Change: And I'm really pleased that we had the opportunity to really reset the business in 'twenty four and what it's going to mean for the company and 25 and beyond.
Speaker Change: And regarding your question on the average selling prices we expect it.
Speaker Change: To see continued declines year over year in the amount of promotional.
Speaker Change: Band, it as well with cleaner inventories and a concentrated effort to taper back our promotional levels over time.
Speaker Change: Thank you.
Okay.
Speaker Change: Next question Ashley <unk> with Keybanc capital markets. Please go ahead.
Speaker Change: Great. Thanks, so much so quickly I wanted to touch on the operating margin guidance for ones here I think it's a little bit lower than last year can you just provide a little more color on kind of the SG&A line.
Speaker Change: If this is all stemming from increased marketing or what's driving the adult do my branch with a not so long ago.
Speaker Change: While margin Delta in that you can get to that eight.
Speaker Change: Eight 3% guidance that you gave.
Speaker Change: Yeah, great. So for for operating marriage, and I'll I'll start actually with the gross margin. So the Q1 guidance has a strong gross margin of 46, 6% and this reflects the actions that we have taken and continue to take to reduce supply chain costs and to improve the level and health of our inventory.
Speaker Change: As it relates to operating margin. This is more a reflection of operating leverage the first quarter revenue is and has it has historically been the lowest quarter.
Speaker Change: For the year for revenue.
Speaker Change: And at this level of operating leverage is also lower than what we would expect to see when you look through Q2 and Q2 two four so it's it's really more a reflection of operating that while the gross margin is strong. It is an operating margin level. It is more a leverage situation, which we anticipate that revenue will.
Speaker Change: Row sequentially it throughout the year.
Speaker Change: We will continue to sequentially as well to see operating margin improvements as we did in 2024 as well.
Speaker Change: When I think you were saying I do think the Forex impact, which on the total year I'm on the on the earnings per share line is around $8 million headwind to us on a full year and that's probably about even I I won't get into specifics, but it's it's not.
Speaker Change: Got a disproportionate I would say in any particular half of the year, so that full year.
Speaker Change: Profit headwind from.
Speaker Change: From currency is about an even spread.
Speaker Change: Okay, Great and then I just had one last one so maybe a little bit of a state of the union on sweaty Betty.
Speaker Change: Softer than expectations. So one just additional color potentially as to what categories may have.
Speaker Change: Underperformed relative to your expectations and then.
Speaker Change: Actually you know what you're doing from an innovation perspective. This year in overall thoughts on the broader broader athletic wear space and how you can effectively introduce new products and in a competitive market. Thank you.
Speaker Change: Yeah.
Speaker Change: At the front level obviously.
Speaker Change: Softer quarter for slightly better than we anticipated, but I think in total for the year really pleased by the progress we've made there and really pleased with where that team is.
Speaker Change: How we've worked to integrate that business and then the outlook moving forward. So we've worked really hard on improving the profitability of that business and really having that brand will be part of the portfolio.
Speaker Change: So.
Speaker Change: From a product standpoint, you know continue to attack a very.
Speaker Change: Active category and a very premium way with a very strong message around around female empowerment I'm. The new campaign that don't sweat I campaign, just debuted a week or so ago and that that is resonate with consumers and we're going to follow that up with where the dam shorts campaign. So.
Speaker Change: <unk> by that team Theres also new chief product officer in place and sweaty Betty as of the fourth quarter of last year.
Speaker Change: But you know as that team continues to move up again.
Speaker Change: Again encouraged by the progress and the product pipeline is good we've worked really hard to improve the profitability of this year and then we'll obviously look to grow that business moving forward.
Speaker Change: Hey, I appreciate the color. Thanks.
Speaker Change: Thanks.
Speaker Change: This does conclude today's teleconference. Thank you for your participation you may disconnect your lines at this time.
Speaker Change: Yeah.
Speaker Change: [music].