Q1 2025 Wolverine World Wide Inc Earnings Call
Speaker Change: Greetings and welcome to the Wolverine World Wide first quarter fiscal 2025 Erinn's call.
At this time,
Speaker Change: For all participants are in a losing only mode. A question and answer session will follow the normal presentation. If you'd like to ask a question, please press star and the number one on your telephone keypad. As a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host, Alex Wiseman, Vice President of Finance. You may begin.
Speaker Change: Good morning, and welcome to our first quarter fiscal 2025 conference call. On the call today are Chris Hufnagel, President and Chief Executive Officer, and Taryn Miller, Chief Financial Officer.
Speaker Change: Earlier this morning, we issued a press release announcing our financial results for the first quarter of 2025 in guidance for the second quarter of 2025 The press release is available on many new sites and can be viewed on our corporate website at wolverineworldwide.com [inaudible]
Speaker Change: This morning's press release and comments made during today's earnings call include non-GAAP financial measures.
Speaker Change: These non-GAAP financial measures, including references to the ongoing business, were reconciled to the most comparable GAAP financial measures and attached tables within the body of the release or on our investor relations page on our website, wolverineworldwide.com
Speaker Change: I'd also like to remind you that statements describing the company's expectations, plans, predictions, and projections, such as those regarding the company's outlook for the second quarter of 2025, growth opportunities and trends expected to affect the company's future performance made during today's conference call are forward looking statements under U.S. securities laws.
Speaker Change: As a result, we must caution you that there are a number of factors that could cause actual results to differ materially from those described in the forward looking statements.
Speaker Change: These important risk factors are identified in the company's SEC filings and in our press releases. With that, I'll now turn the call over to Chris Hufnagel.
Chris Hufnagel: Thanks, Alex. Good morning. Thanks to everyone joining us for today's call.
Chris Hufnagel: Given everything has transpired in April 2nd, we have a lot of ground to cover this morning, so let's get right into it.
Chris Hufnagel: First, let me start here. The headline is simply that for the things that we can control, I feel very good about where we are today, and more importantly, confident about where we're going tomorrow.
Chris Hufnagel: With that said, there's definitely uncertainty in the marketplace. So on this call, I'm going to cover both what we know and what we don't know, along with the actions we've taken to date and our plans to navigate the challenges on the horizon.
Chris Hufnagel: First, what we know, Wolverine World Wide delivered sequential improvement in top line trends throughout 2024 and ultimately infighted to growth in the fourth quarter. A meaningful achievement, marking the conclusion of a year of fast and bold actions to reestablish our footing of the company and reinvigorate our brands.
Chris Hufnagel: Momentum Generated last year has continued to build into 2025. In the first quarter, we exceed our expectations on just about every financial measure.
Chris Hufnagel: Revenue grew by over 5% on an ongoing basis and nearly 7% on a constant currency basis. We also achieved record Q1 gross margin.
Chris Hufnagel: In part, due to healthier brands and better inventory management, resulting in improved pricing power and a stronger full price business.
Chris Hufnagel: The fourth time in the last five quarters that we posted record gross margins [inaudible]
Chris Hufnagel: As a result, I'm pleased to report that earnings increased by more than three times compared to last year.
Chris Hufnagel: These results are another important proof point of our strategic direction and solid execution by our team
Chris Hufnagel: A sincere thank you to our team and partners around the world for a great start to the year.
Chris Hufnagel: Our first quarter results were driven by our two biggest brands. Let me start with Sockini, followed by Merrill
Chris Hufnagel: Sockney delivered revenue growth of 30% year-over-year in the first quarter, with broad-based contributions from all regions and channels.
Chris Hufnagel: Wide by strong, double-digit growth in North America, and more than doubling our age-specific business.
Continuing to drive a better, healthier, full-price business [inaudible]
Chris Hufnagel: Sockney translated its brand-heat and product innovation in the significant higher average selling prices throughout the quarter in the U.S.
Chris Hufnagel: Coupled with strong market share gains in the important and highly competitive run specialty channel.
Chris Hufnagel: We launch new Ryan Guide models in the first couple of months of this year, and both franchises delivered solid double-digit revenue growth at US retail.
and Taryn Miller. Thank you. Thank you.
And Mark Sockin launched the highly anticipated indoor finale, too.
Chris Hufnagel: Incorporating Next-Generation and Credit-Run Foam, and a full-length slotted carbon fiber plate.
Chris Hufnagel: This super shoe helped drive growth fitting door for an elite franchise of over 30% versus last year at US Retail
Chris Hufnagel: And I'm pleased to share that three of the brand styles place in the top ten most worn shoes by runners of the Boston Marathon last month.
Chris Hufnagel: More than any other brand, and another proof point of Sokanis reinvigorated product innovation pipeline.
Chris Hufnagel: On the lifestyle side, the brand continues to draw on its deep product archive and partner with leading pacemakers to deliver trend-right styles for the marketplace.
Chris Hufnagel: Sockney's strategic positioning at the intersection of culture and authentic running heritage as repelled the brand of key franchises like the Progrid Omni-9, Ride Millennium, and others around the world.
and Taryn Miller. Thank you. Thank you.
Speaker Change: Building on the roughly 900-door expansion and lifestyle led, especially the spring, Brann expects to add over 400 more doors in the back half of this year as a result of positive self-returns.
Chris Hufnagel: The brand continues to take a methodical approach to strategically growing distribution with the right partners.
We're also investing meaningfully to drive brand awareness and affinity [inaudible]
Chris Hufnagel: Last year, for example, stalking sponsors of London 10K, with a holistic set of activations around the event.
This sponsorship drove strong results
Chris Hufnagel: including record brain search interest in the UK and accelerated e-commerce growth.
Chris Hufnagel: This year we plan to repeat the sponsor of this great event and expand the brand's investment to other runs, including the shortage 10K in London as part of our key city strategy.
Chris Hufnagel: I'm pleased to report that Sakai opened a flagship store in Harajuku, Cho Kyo, this past quarter, and we anticipate opening a second in London's Coven Garden in just a few weeks.
Chris Hufnagel: With future plans to open host of new stores across Asia Pacific with our best in class partners.
Speaker Change: At U.S. retail, the brain is wrapping up activations and retail marketing drives sell-through.
Speaker Change: We anticipate 2025 will be the single biggest investment year in Sokanie since we acquired the brand nearly 13 years ago.
Speaker Change: I believe Salkin is your best potential in both performance and lifestyle and possessive the ability to blur the lines in a compelling way. I continue to maintain the brand is on its path through something very special.
Speaker Change: Leveraging a unique synergy between superior performance-run product innovation and cultural relevance on a global scale.
Speaker Change: Moving to Merrill. Merrill grew revenue by 13% compared to Q1 last year, with the largest contributions coming from Asia-Pacific, Enima.
Speaker Change: In the U.S. mural, continue to take market share in its primary category of hike. Now the ninth time we've done so in the last ten quarters.
Speaker Change: This quarter we also took share in trail running and lifestyle [inaudible]
Speaker Change: The brand improved gross margin by more than 200 basis points versus last year, driven in part by an increase in average selling price at US retail.
Speaker Change: A strong quarter, now three consecutive quarters of growth, and another proof point for the company's biggest brand.
Speaker Change: Merrill's recent performance as a direct result of her focus on modernizing the trail as a leader in the category.
Speaker Change: The brand initiated strategy with faster and lighter proclamation and core outdoor performance categories a little over a year ago.
Speaker Change: Introducing award winning collections like the Moab Speed 2 in hike and the agility peak 5 in trail running.
Speaker Change: Both of which have become significant franchises and continue to grow rapidly in the first quarter [inaudible]
Speaker Change: To push private innovation to an even greater level, Merrill launch the visually disruptive speed arc surge boa in January , both on the brand's new speed arc platform for a uniquely comfortable ride with exceptional energy return.
Speaker Change: It's sold through almost entirely in the matter of a few months at a nearly $200 price point.
Speaker Change: In March, Merrill followed up with a launch of the speed arc madness, the next iteration of the speed arc family, which is driving healthy itself through in just a few weeks in the market.
Speaker Change: Merrill continue to make progress in lifestyle business as well, driving very strong double-digit growth in both men's and women's at US retail in the first quarter and even faster growth in influential tier zero accounts. I'll be get on a smaller base.
Speaker Change: The Branketease tasked an earned placement of strategic counts to reach younger consumers, particularly women.
Speaker Change: Our product pipelines are stronger. We've implemented disciplined distribution strategies while simultaneously cleaning up the marketplace. We're beginning to build brand heating momentum through compelling new brand campaigns, key city activations, innovative collaborations, and investments in retail marketing on the sales floor.
Speaker Change: While it made great strides in these critical businesses, we have certain areas where we believe we can and should perform better, specifically the Wolverine brand and Sweaty Betty.
Taryn Wolverine
Speaker Change: We continue to work to find consistent footing here. The ad we shared previously, while the brand's Q4 results were strong, we cautioned that our trends were still inconsistent, and the business was now on the first quarter on its continued choppiness.
Speaker Change: Our efforts to strengthen soft spots in West Canada and improve our gaining traction with new offerings like the Ranch of Promo advantage.
Speaker Change: Power of the Brain is copying against the period of significant discounting on certain styles last year as we cleaned up our inventory position
Speaker Change: A headwind which we anticipate will begin to dissipate as we move to the back half of the year.
Speaker Change: On a positive note, our U.S. marketer turned the quarter and proved someone, and our DGC business is performing better.
Speaker Change: Finally, importantly, we've initiated search for a new leadership for the work group as Tom County is planning to retire later this year.
Speaker Change: And closing a sweaty body. Over the past year, we've largely been focused on better integrating and proving the profitability of sweaty body. Pre-requisites to building a healthier brand and business.
Speaker Change: While if any for the brand is strong with a unique and differentiated position in a desirable category, we believe in what's further bolster our premium position.
Speaker Change: Whether the products we build, the stories we tell, are how we manage the business each day.
Speaker Change: We're focused on driving a less promotional business here, at the expense of top line growth in the near term. Encouragingly, first quarter-ghost margins rub nearly 1000 basis points year-over-year, driven by improving our full price mix at Swatibedi by approximate the same amount.
Speaker Change: Let's continue to improve in the first few weeks of the second quarter
Speaker Change: Additionally, we're encouraged by some of the early results we're seeing in acquiring new consumers under our more full-prite strategy.
Speaker Change: As a new consumer acquisition was ahead of our internal plan on the first quarter, and the lifetime value of the full price consumer on average is 20% higher than consumers we acquired to promotional tactics.
Speaker Change: We've had a new challenge with the brand over the past six months as well, most notably a new product chief.
Speaker Change: We're chasing new prox for the back half of this year, targeting the important holiday
Speaker Change: While not satisfied with our top-line results, we have confidence in our strategy and we're technically focused on building a stronger brand and business the right way.
Speaker Change: While the challenges and opportunities are different for Wolverine and sweaty buddy, we believe they've been properly identified, and we're working at pace to get these businesses moving in a more positive direction.
Speaker Change: Now let me say that to where we are as a company coming out of our turnaround and heading in the rest of the year.
Speaker Change: On my second call with U.S. CEO in November 2023, I identified key areas we had to improve pannies and organizations to become great global brand builders and I outlined an ambitious plan to redesign the company to compete and win in the future.
Speaker Change: Central to the separate was transforming our culture and building new capabilities, squarely focused on our consumer and modern brand building.
Speaker Change: Since then, we've made good progress and I'm pleased with the improved results we're posting.
Speaker Change: Given the turnaround in our business, our team's confidence continues to grow in our strategy in the ability to execute with distinctions.
Speaker Change: Confirmed the progress we made in transforming the company and informed by our stronger performance of the business. We acted in the first quarter with an outlook, well-entracked to deliver our full year 2025 expectations.
Speaker Change: which called for solid revenue growth led by our biggest brands, meaningful profit improvement year-over-year, and material investments in our brands and suite of new tools and capabilities.
Speaker Change: Unfortunately, significant uncertainty entered the equation on April 2nd with the initial tear of proclamations followed by the subsequent revisions.
Speaker Change: As we sit here today, it is difficult, if not impossible, to predict the potential twists and turns in trade policy, along with consumer sentiment and spending.
Speaker Change: Therefore, we were compelled to withdraw our full year guidance for 2025.
Speaker Change: A decision we did not take lightly but felt prudent given the dynamic situation
Speaker Change: For all we can control, I remain optimistic and bullish on our prospects
Speaker Change: Our current order book and DTC trends support the top end of our previous full-year revenue outlook. Not to mention improving market share gains across most brands in our portfolio.
Speaker Change: In addition, I can tell you that overall demand trends for our brands appear to be holding at this point
Speaker Change: Celter at US Retail, for example, has remained strong throughout April and we're getting similar reports from our international regions [inaudible]
Speaker Change: For what we can't control, we believe that we are well positioned to navigate the current challenges thanks to the momentum we generated, a strong and gritty team, and a variety of strategic and operational advantages, along with many actions already taken or in motion to mitigate the risk.
And we've read a few details about why I'm optimistic.
Speaker Change: Today, our sourcing footprint is strategically diversified due to a very intentional evolution over the past several years.
Speaker Change: In 2019, nearly 40% of our products sold in the US was sourced from China. This year, we now expect that to be just high-single digits, primarily related to our work group friends.
Speaker Change: Our supply chain is also Nimbler today, enabling optimization across the mix of suppliers and factories, in some cases leveraging dual sourcing of franchises to maximize flexibility.
Speaker Change: Importantly, we've invested in developing our relationship with their key supply chain partners over the last couple of years through annual summits and close to your partnership and planning.
Speaker Change: And we benefit greatly from pointing an industry about China's our chief global supply chain officer a little over a year ago.
Speaker Change: On the commercial side, our business is truly global, with our brands being sold in approximately 170 countries and territories around the world, through an asset-light model powered largely through wholesale and distributor partnerships.
Speaker Change: As on the sourcing side, we focused considerable effort on continuing to strengthen these relationships over the past 18 months.
Speaker Change: Engaging a top-top meetings hosting our key partners here on campus and more regularly visiting the port market around the world.
Speaker Change: Please report our business is strong and growing outside the U.S. Up mid-teens year over year in the first quarter with a good outlook for the bounce of the year.
and Taryn Miller. Thank you. Thank you.
Speaker Change: Finally our team has developed critical capabilities and confidence over the last two years in facing the challenges of stabilizing and turning around the company
Speaker Change: We developed a pension for a fast and bold action as an organization, and we've implemented new tools and processes to help us better manage the business, in addition to adding talent with new skill sets and strong pedigrees to the company.
Speaker Change: With the benefit of these advantages and building momentum for our team and brands, we're taking a proactive approach to address the current challenges head on [inaudible]
Speaker Change: We have a solid plan to protect profitability, but also working to protect the momentum we generated across a range of model scenarios.
Our approach consists of three components – mitigate, navigate, and elevate
Speaker Change: Submit to get the impact of terrorists and deliver the projects Park consumers want at the best possible values. We've initiated a holistic balance that have actions across the entire value chain.
Speaker Change: We plan to leverage our diversified supply chain and dual sourcing flexibility to the maximum extent possible to limit our exposure to elevated tariffs on good sourcing China into the US.
Speaker Change: As mentioned, we expect this will mount to be less than 10% of our volume this year, and we're targeting to push this down to near zero in 2026.
Speaker Change: In addition, we're in discussions with our supply team partners on the financial impact of the tariffs and redirecting product into our vast international distribution network where we have demand tailwinds without coronavirus tariffs.
Speaker Change: While we intend to continue to invest in our brand's momentum, for simultaneously exceeding the plan to capture SGNA savings across discretionary areas of the business in the near term until the dust settles.
Speaker Change: Finally, we've communicated a set of strategic, consurgical price adjustments to the marketplace of the marketplace. Thank you.
Speaker Change: Taking price increases is not something we do without significant consideration, but we believe our brands in momentum positioning in the marketplace and product innovation pipelines will help limit potential demand headwinds.
Speaker Change: To navigate what is still a very fluid situation going forward, we formed a dedicated internal team which is meeting daily, helping surface insights, align planning, and drive action at pace across the global enterprise.
Speaker Change: We've taken the playbook from our turnaround stabilization efforts over the past 21 months and applied every learning to this new reality. This new muscle we built will serve us well in the days and weeks and months ahead.
Speaker Change: Despite the challenges, we are viewing the shifting landscape also as an opportunity to elevate and emerge a better and stronger company. We intend to proceed with our highest priority growth investments to accelerate share gains in certain areas, and at the same time, scrutinize every expense.
Speaker Change: As in any difficult situation, there will inevitably be winners and losers. It's our responsibility to be among the former
Speaker Change: With that, I'd now like to hand the call over to Taryn Miller to take you through our first court results and how we're viewing 2025 in more detail. Jan?
Taryn Miller: Our first quarter performance demonstrates the strength of our focus portfolio, investments to support our brands and strategic initiatives, and the dedicated execution by our team.
Taryn Miller: First quarter revenue of $412 million, was above our outlook of approximately $395 million million dollars.
Taryn Miller: The majority of the over-delivery was driven by increased demand in the active group, and favorable foreign currency contributed $6 million.
Taryn Miller: Constant currency revenue growth for our ongoing business in the quarter was 6.7% versus the prior year and reflects increased demand for our brands and products as we execute our consumer focus strategy.
Taryn Miller: A year-over-year comparison includes $6 million of revenue in the first quarter of 2024 that did not repeat this year related to the Maryland Sock and a Kids Business Model change.
and Taryn Miller. Thank you. Thank you.
Taryn Miller: Active Group revenue grew 13% compared to the prior year, better than our outlook amid single
Taryn Miller: The beat was primarily due to accelerating momentum in Sockeny, which was up 30% year-over-year to the strong demand in both performance run and lifestyle.
Crimes 22, ride 18, and guide 18
Taryn Miller: as well as the endorphin franchise led the way. Driving higher replenishment orders from the wholesale channel and elevated consumer demand on sockany.com.
Taryn Miller: Merrill Revenue, grew 13% in the quarter, with growth in core product franchises, including Moab 3, Agility Peak 5, and Moab Speed 2, Sweaty Betty Revenue declined 16% this quarter, which was in line with our expectations.
Taryn Miller: We shared in our fourth quarter call that we were taking actions to improve the profitability of Sweaty Betty.
Taryn Miller: As Chris shared, Wedi Betty made meaningful progress towards this goal in the first quarter, with material gross margin expansion driven by lower levels of promotion coupled with a better mix of full price sales.
Taryn Miller: Workgroup revenue decreased 17% in the quarter, somewhat below our expectations
Taryn Miller: Approximately half of the decline was a result of a timing shift between the fourth quarter of 2024 and the first quarter of 2025 that we shared in our February call.
Taryn Miller: The other half of the decline relates to the non-repeat of significant discounting on certain styles from the prior year and challenges in our product offering, which we are actively
Taryn Miller: We expect workgroup performance to improve as new products go into market and inventory on key products is replenished.
Taryn Miller: Adjusted gross margin of 47.3% increased 80 basis points compared to last year
Taryn Miller: Gross margins were above our expectations and reflect a healthier sales mix, lower promotional activity, and the benefit of supply chain initiatives.
Taryn Miller: As a result of the improvement in revenue and operating margin, adjusted deluded earnings per share improved from five cents in the first quarter of 2024 to 18 cents in 2025, above our outlook of ten cents.
Taryn Miller: Turning to our outlook for the balance of the year. In response to the dynamic nature of our operating environment, particularly the evolving care situation and its impact on our business, we've reassessed our outlook.
Taryn Miller: Our strategic progress, the effects of higher care freight on costs and inventory.
Taryn Miller: As a result of our assessment while we are providing guidance for the second quarter today, we are withdrawing the full year 2025 guidance we provided in February .
Taryn Miller: Once we have better visibility regarding the tariff rates and their potential impact on our business and our consumers will be in a better position to return to providing a current fiscal year outlook.
Taryn Miller: We believe this approach provides a clear and strategic view of our progress and performance and allows us to navigate the complexities effectively.
Taryn Miller: Let me walk you through how these factors informed our guidance update for 2025, starting with our strategic progress.
Taryn Miller: Our first quarter results combined with the development of the order book, strengthen our confidence in our February outlook
Taryn Miller: The active group, led by our two largest brands, Merrill and Sockini, continues to build momentum, bringing innovative products to market, growing distribution, and expanding market share.
Taryn Miller: Freddie Betty remains focused on margin expansion driven by a continued shift to more full price business.
Taryn Miller: which provides a stronger foundation for future growth. In the work group, the focus remains on bolstering product innovation and maximizing trends through key franchises, such as the rancher and the trade wedge.
Taryn Miller: We accelerated plans to move production out of China in 2025 for US products.
Taryn Miller: Less than 10% of our products are now expected to be sourced from China, down from the midteens just earlier this year.
Taryn Miller: Using our current sourcing and incremental tariff rates of 145% for China and 10% for other sourcing countries.
Taryn Miller: We expect these incremental tariffs to translate to an estimated $30 million profit impact to 2025 before any mitigation.
Taryn Miller: Before the new tariffs were announced, we had already started strategic actions to enhance our profitability. Now we are intensifying those efforts and accelerating existing initiatives while prudently reducing spending in certain planned areas. We're working closely with our customers and partners to implement strategic pricing.
Produced Product Costs and Lower S-GNA Spending
Taryn Miller: In parallel, as I shared, we've already reduced our US sourcing from China and planned to lower it further over time [inaudible]
and Taryn Miller. Thank you. Thank you.
Taryn Miller: Our objective remains to balance the need to protect margins and cashflow with the imperative to invest in initiatives that fortify our brands to drive long-term sustainable growth.
Taryn Miller: This approach will enable us to navigate a potential decline in consumer spending in the second half of 2025.
Taryn Miller: Given the current trade uncertainty, we are reinforcing our emphasis on our balance sheet health.
Taryn Miller: The investments we've made in integrated business planning are enabling us to make more informed decisions about inventory flow, allowing us to mitigate the impact of increased tariffs on the value and volume of our inventory.
We remain committed to our capital allocation priorities.
Taryn Miller: which are investing in the business to fuel profitable growth, reducing debt, and maintaining the dividend.
Turning to our outlook for the second quarter [inaudible]
Taryn Miller: Based on current trends in the business, we are seeing the momentum we've built over the past several quarters continue into the second quarter [inaudible]
Taryn Miller: We expect the impact of higher tariffs to be more significant in the second half of 2025 than in the second quarter.
Taryn Miller: Expect second quarter revenue to be in the range of $440 to $450 million, a year-over-year increase of approximately 5% at the midpoint, or 4.6% on a constant currency basis.
Taryn Miller: The year-over-year comparison includes $2 million of revenue in the second quarter of 2024 that will not repeat this year related to the mayoral and sucking a kid's business model change.
Taryn Miller: Regarding foreign currency, thought rates have shifted significantly since the beginning of the year, but the US dollar weakening against most currencies.
Taryn Miller: At the midpoint of the range, we expect active group revenue for the second quarter to grow by high single digit percentage year-over-year.
Taryn Miller: Workgroup Brevenue is expected to decline by a low single-digit percentage, reflecting as sequential improvement compared to the first quarter.
Taryn Miller: We expect improvements in operating margins and earnings with second quarter adjusted operating margins of approximately 7.2% and adjusted deluded earnings per share of 19 to 24 cents.
In summary.
Taryn Miller: The realities and challenges in our current market conditions are evident.
Taryn Miller: Our actions are designed to thoughtfully balance earnings and cash flow improvement with essential reinvestment
Dinsure, Sustained, Profitable Growth, and Value for our shareholders First.
Taryn Miller: We are in a better position today to address these challenges than we were 12 months ago. Our brands are stronger, our teams are leveraging new capabilities, and our balance sheet has improved significantly.
Chris Hufnagel: And with that, let me hand the call back to Chris before we open it up for questions
Thanks, Taryn.
Chris Hufnagel: After a very strong start to the year, we, along with our entire industry, are now facing an dynamic marketplace and uncertain road ahead.
Chris Hufnagel: Despite this reality, I believe the new Wolverine World Wide is well positioned to navigate the challenges and emerge a better company
Chris Hufnagel: Our advantages and actions include original leading brands and attractive categories that we believe are aligned with long-term macro consumer trends and present size opportunities for future growth.
Chris Hufnagel: A proven playbook that's reinvigorated our biggest brands and is helping to drive momentum across the business.
Chris Hufnagel: A diversified and nimble supply chain and global distribution network that enables us to optimize
Chris Hufnagel: A holistic, balanced, hair-faction plan designed to protect the business's profitability and our brand's momentum, informed by the lessons learned from our stabilization and turnaround efforts.
Chris Hufnagel: And finally, and possibly most importantly, a strong and resilient team with an emerging culture obsessed with winning.
Chris Hufnagel: Coupled with enhanced capabilities bolstered by new talent, processes and tools.
Chris Hufnagel: Every situation presents opportunity, and our team is determined to be among the winners. We remain focused on building the new Wolverine World Wide, a company promised I'm building and leading great global brands, with everyone working together to win, and ultimately to make every day better.
Chris Hufnagel: With that, thank you to all of you for taking the time to view us this morning, and we're happy to take your questions. Operator?
Speaker Change: Thank you. Well now we're conducting a question and answer session. As a reminder, if you'd like to ask a question, please press star and the number one on your telephone keypad.
Speaker Change: In the interest of time, please limit yourself to one question and one follow-up and re-cute for any additional questions. Thank you. And your first question is from Laurent Vasilescu, from VNP Paribas.
Please proceed with your questions.
Laurent Vassilescu: Good morning. Thank you very much for taking my question. And I have to say congrats on a really solid first quarter. And thank you very much for giving at least guidance for 2Q.
Speaker Change: While I recognize you are pulling annual guidance, it sounds like most of your China's sourcing is for the work business. Also, it sounded like Chris, you were mentioning the order book is holding up. So on those two points made in the prepared remarks.
Speaker Change: Any high-level changes that you're seeing with your guards to socket any marital business for the full year relative to what you called out in February ?
Speaker Change: Thanks, Laurent. Thanks for getting up early. Appreciate the question. Yeah, you picked up those comments. Correct. We've
Speaker Change: As it relates to sort of momentum in the business and sort of order book visibility, I think we where we were we feel good about how 25 is shaping up and
Speaker Change: Certainly in some places we think we've got a little bit more momentum than we had before. We're encouraged by where our brands sit. I think the product pipelines feel very good. We're obviously tracking the business each and every day, both focused on our own DTC business along with. [inaudible]
Speaker Change: Order book trends and at once trends. So I think in general, you know, certainly pre-April second.
Speaker Change: We felt good about where we sat for the year, the month and we've seen [inaudible]
Speaker Change: Yeah, other than sentiment and sort of where the world's going so that level of uncertainty with where the consumer is and certainly where the tear situation will ultimately settle. Let us to the decision to withdraw the full year at the same time give you a little more visibility how we saw the second quarter playing out. [inaudible]
and Taryn Miller. Thank you. Thank you.
Speaker Change: Very helpful. And then two housekeeping questions here. I think last quarter there was a shift in work revenues between 1, 2, and 4, 2. Did you see any shift between 2, 2, 2 into 1, 2? Is there 1, 1 from 2, 2 into 3, 2?
Speaker Change: Second part of the housekeeping question, Daren, I think it was very helpful to that you quantified $30 million dollar profit impact from the tariffs. Is that on the gross margin? Is that EBIT? Is that net income? And should we think about it between, like, equally split between 3.2 and 4.2? Thank you.
Speaker Change: Yeah, on the work group question, thank you, Laurent, the no other shift that I would call out, other than the shift that we had called out in art.
Speaker Change: Furnings Collins in February , and basically that being half of the decline that we saw in the first quarter this year, no other shift to report regarding the second house keeping item in terms of the $30 million tariff impact without taking any mitigation.
Speaker Change: That's it's really gross margin profit I think of it very similarly when we're giving you that approximate $30 million and we did we're not providing right now a Q3, Q4 how it phases in
Speaker Change: Understood. Thank you very much for all the color and best of luck.
Thanks a lot.
Thank you.
Speaker Change: Our next question comes from the line of Ashley Owens from Keybank [inaudible]
Please proceed with your question.
Speaker Change: Good morning. So maybe just to start, you mentioned taking price increases across the marketplace as part of the broader plan to help mitigate some of this terrif impact.
Speaker Change: Did you just discuss the magnitude of these increases and then maybe more specifically if these will be applied across all brands and select or if it's more limited and where the focus would be if so, and then maybe how much these are helping to offset or recapture some of those product cost increases. Thank you.
Speaker Change: Thanks, Ashley. Great question. I think our approach to price increases were thoughtful and considered strategic and insurgable.
Speaker Change: We didn't apply a blanket across every brand, every category. We looked very closely at where our brand sat, where the competition was.
Speaker Change: where we felt we had opportunity, and we tried to be thoughtful. So it's hard to take a broad stroke across everyone and say this is exactly what we did. It was it was
Speaker Change: done by brand specifically and at the same time reviewed with us at the level and communicated this week and will be effective Thank you.
Speaker Change: for specific products, similar to Meryl and similar to the workgroup. We don't anticipate this to fully offset the impact of the tariffs.
Speaker Change: which is why we are looking to other levers to pull to offset that risk.
Speaker Change: to react to the current situation. But again, the price increases were thoughtful strategic surgical and considered. And with the best insights we had to partially offset the tariffs.
Speaker Change: Okay, great. And then just two quick follow-ups. So one, I didn't see an outlook or breakdown of expectations for second quarter by segments.
Anything you can say, quarter to date there. And then Q for growth margin, for second quarter. I know a similar situation. Understand with the ongoing volatility.
Speaker Change: Any guidelines as to how we should do weighing some of the higher full price sales even realizing versus initial impacts and how much of that you're planning to absorb or maybe pass through in the second quarter just any goal post for how we should be thinking about the gross margin line would be helpful.
Speaker Change: I'll take the first part and hand the second part to Taryn. As we said, we haven't seen any fall off yet.
Both from a consumer sentiment or from customers
Speaker Change: We haven't seen that yet, obviously, where we're paying very close attention to that. I will say, interestingly enough, we've actually seen an uptick in Sock and he sits in the tear of announcements.
Speaker Change: in that business. But nothing adverse yet at the same time. We're all paying close attention to where the consumers obviously lots of talk about uncertainty and where consumer sentiment is. Obviously sentiment doesn't equal spending, but we'll certainly pay attention to that moving forward.
Speaker Change: And then regarding your question in terms of gross margins for the quarter we did not give gross margin for the for the quarter given the current operating margin or operating environment dynamics.
and the range of outcomes.
Speaker Change: We're giving a somewhat broader range for the quarter as opposed to the $440 million to the $450 million in revenue.
Speaker Change: It's a bit broader than we would normally give. We're also focusing the guidance on key metrics such as revenue, the operating profit and earnings for share, rather than specifics on gross margin or S.G.N.A. I believe that these metrics can give you a clear view of
Speaker Change: The progress we're making, the momentum we're seeing in the business, and it also allows us to navigate to navigate.
Speaker Change: The complexities and some of the uncertainties in the environment. So that's a bit of the reason in terms of-
Speaker Change: of the guidance that we did give to the second quarter. Regarding the segment expectations, what we had shared was for active group.
Speaker Change: We expect that to be high single digit revenue growth and for the work group we would expect a decline of low single digits, which is that improvement sequentially that we're seeing quarter to quarter [inaudible]
Speaker Change: and Michael Stornant. Thank you for watching. I hope you enjoyed this video. If you did, please like, share, and subscribe. I will see you next time.
Okay, got it. That's helpful. Thank you
Thanks, Ashley.
Speaker Change: Thank you. Our next question comes from the line of Sam Poser from Williams Trading. Please proceed with the question.
Thank you guys for taking my questions.
Speaker Change: I got a handful, but starting with, you're talking a lot about, you talk about order book and things like that. What are you doing from like a demand planning basis when looking into the back half? Are you, are you pulling back on, on on the supply in. [inaudible]
Speaker Change: In advance of the potential for less consumer demand, regardless of what you're seeing now, in order so you don't get caught with too much inventory.
Speaker Change: If it does slow down, taking the order book out of it, I'm really talking about consumer demand, not with some buyers from whatever retailer are placing.
Speaker Change: Oh, good question. Sam, thanks for getting up early with us. One of the things that we've done over the last year or so is to stand up a new integrated business planning group.
Speaker Change: We didn't do a particularly good job as a company navigating everything coming out of COVID and we knew that we had to improve that capability in order to improve that capability.
Speaker Change: We haven't talked a lot about it, but this new team is really doing a very nice job orchestrating efforts across the enterprise, both demands signals coming from the marketplace, and then how we plan and produce inventory.
Speaker Change: specific to your question on how we're thinking about the back half of the year. It's hard to paint a broad brush across the entire enterprise. There are some places we are certainly more cautious.
Speaker Change: Just giving brand momentum what's happening in that market, how we view the product pipeline, and we will be constrained there to make sure that we manage inventory responsibly.
Speaker Change: Whatever we want to call them, we believe that certain segments generally hold up a little bit better and we certainly think athletic and outdoor in some downward cycles to generally hold up a fair little bit better than other categories. So, to answer your questions, Sam, very close attention to the marketplace, where the consumers and customers are paying attention to the order book. [inaudible]
Speaker Change: A new capability with our integrative business planning team And then more surgical, not across the board cuts a regulated inventory if we're nervous about the environment, but more thoughtful about where each brand sits and the momentum they possess.
Speaker Change: Given, I mean, given the momentum, let's say, of Sockney or Meryl at the moment.
Speaker Change: When you look at the back half, you anticipate the same kind of momentum, or are you going to temper your expectation for that momentum in the way you feed the beast to support it?
Speaker Change: Yeah, so, you know, again, we're not going to, we're not going to provide, we're not providing second half guidance. I think the what you can infer from what Chris just said is that somewhat, yes, we have pulled back on inventory versus our original expectations in the back half.
and Taryn Miller. Thank you. Thank you.
Speaker Change: Thank you. And then I continue to get lots of promotional emails from Merrill and you had a nice margin increase there and it sounds like it's getting some momentum. And you also talked, you said that you were talking about your district, you know, about your new, you know, how you were, you know.
Speaker Change: How, and is that cleaning up old stuff for what's going on and then, and then, you know,
Speaker Change: Was it cell-in or cell-through that drove the the marrow increase in Q1?
Speaker Change: Uh, specifically on the promotional thing. It's a good question and I appreciate you raising it. We are working hard to become less promotional business.
Speaker Change: Certainly, the factors of the last handful of years led the company into place where we had to clear more for a whole variety of reasons. We are much cleaner today, our brands are in a much better place today, and we're working to become a less promotional business.
Speaker Change: That does not happen overnight though. There is a period of time which we have to make that transition and you're going to see that. I would anticipate a material increase across our portfolio and dropping those that promotional gains of emails at the same time improving our gross margins but there will be a shift that has to take place.
Speaker Change: Merrill, specifically in their first quarter, from a DTC standpoint, probably lagged a little bit of our other brands on a full price mix was largely due to a one style that was a little bit late.
Speaker Change: Getting into our distribution centers so we could roll it out. So specifically, you will see it's become much more national that's bearing true in the facts.
Speaker Change: And it's something that we're talking about more broadly as an organization. I'm pleased with the progress we've made but it's not going to happen in a quarter But certainly as we get into the back half of this year and begin to lap next year, you should certainly feel it [inaudible]
Speaker Change: And then lastly, can you just thank you and can you just give us a breakdown with your international business of
Speaker Change: Units versus Dollars, or you know, how to, because you have so much distributor business in your international market.
Speaker Change: Can you talk about, it's about 50% of the total revenue but how much of it is it in units?
Speaker Change: versus, you know, in units, versus domestic sales. And any color you can give us on that.
Speaker Change: I don't even know how to ask it. You haven't broken it out in the past with the subs and the distributors, but any color given all the noise here and how big in like wholesale equivalent that would really be if it was all a sub or something like that.
Speaker Change: Sarah, Alex tried a couple of points to that question. Sam and our investor presentation, which is on our website right now. You'll see on page 9, we give you some insights into our regional dispersion of revenue and units. And so in there, you'll see outside of the U.S.
Speaker Change: You know, you'll see a large chunk of our pair is kind of generated in.
Speaker Change: outside the US and international markets. So I won't go through each region for you, but just point you to that, that specific page and the investor presentation, and happy to follow up with you after on any specific questions.
Speaker Change: All right, thank you all, and look there. Thank you [inaudible]
Yes, ma'am.
Speaker Change: Thank you. Our next question comes from the line of Tiga Mugovic from Slyphil. Please
Speaker Change: Thanks for taking a question. I was curious on the dockony lifestyle rollout to the 900.
Speaker Change: New retailers. Can you talk a bit about the audience you're attracting there and the initial response?
Speaker Change: And then how we should think of the additional 400 stores and the consequence that has to the forward revenue trajectory.
Sir, thanks Peter and then welcome to the coverage [inaudible]
Speaker Change: Yeah, we're very bullish on the prospects of Sockini lifestyle. Sockini is a central brand, benefits from a great product archive. And we found this in sort of resetting the brand over the past handful of years and developing a new strategy with the new team. There's an amazing opportunity, this intersection of run heritage and lifestyle and being part of the cultural conversation.
Speaker Change: I think the team has done a very nice draw in very short order tapping into that [inaudible]
Speaker Change: The lifestyle side is a meaningful part of the business. We're showing up in new distribution, doors like...
Footlocker and Journeys and Snipes
Speaker Change: We're seeing the branch up there in meaningful ways and we've tested that product in those doors [inaudible]
And so the expansion that you're seeing is cast based, saying there is demand for the brand and brand heat, and we're going to open that up. So, we've opened that aperture. The business continues to perform well. Men's women's and kids.
Speaker Change: and we're encouraged by the reception, and it really helps balance and complement that performance run piece, which is where the brand certainly is known for it and cuts its teeth, and that's why I think.
Speaker Change: The prospects for the brand are so bright, you know, on the February
Speaker Change: 24 call in the middle of the turnaround. I said that I was bullish on the prospects for Sockney.
Speaker Change: Because I've been part of the strategy, I've been part around the new leadership team [inaudible]
and certainly from where the brand was.
Speaker Change: It's history of innovation being one of the original running brands and then be able to capitalize on both fun and lifestyle I think in an amazing opportunity and I remain very bullish on the prospects of that brand and that team and certainly the lifestyle piece is an important part of our growth story.
Speaker Change: Thanks for that. And I think I cut this correctly that sweaty Betty had a thousand dips underlying margin improvement. That's pretty material to the overall gross margin progression, the underlying progression, excluding tariffs. How should we think of the comparisons for that as the year rolls forward?
Speaker Change: Yeah, I mean, let's talk anything, and hopefully my prepared remarks spoke to it, you know.
We are committed. We are committed.
to making that and bolstering its premium positioning.
Speaker Change: I think we had gotten too promotional, too many sale messages, and we need to do a better job there. So at the expensive short-term top line revenue in the spirit of chasing long-term brand health and a premium positioning, we're going to walk that back and...
Speaker Change: You will see pressure on the top line, but the thousand basis points of gross margin expansion driven by a thousand basis points of improvement in full price mix is material to that. So we have worked to do in Sockney. I'm headed there over the weekend. I'll be in London next week.
Speaker Change: Sorry, sweaty Betty not sockening. I'll be spending time with the sweaty Betty team next week. But we have work to go do there, but I think we're on the right path.
All right. Thank you. Good luck in the future.
Thanks, Peter.
Speaker Change: Thank you. Our next question comes from the line of Anna Andreeva, from Piper Sandler. Please proceed with the question.
Thank you.
Speaker Change: Andree, thanks so much, good morning, and congrats, really nice result.
Speaker Change: Thank you, thank you. A couple from us. The first on Merrill, great to see that double digit momentum for the brand. In the US, can you guys talk about what are you seeing with a new distribution versus sharegain as they existing doors? And are you seeing the hype category improves at all or just has been more about sharegain accelerating even further for the brand. And then we have a couple of others. Let's go.
Speaker Change: Sure, thanks. You know, there's a lot of things to be excited about in Merrill.
Three consecutive quarters of growth
Speaker Change: Nice movement in the Moeb-3, the Moeb-2 continues to gain traction, the agility peak five in trail run, you know gaining share in hike trail and lifestyle in the same quarter, certainly all encouraging the drop of the speed arc surge boa followed by the speed arc matters. [inaudible]
Speaker Change: You know, a $300 price point for Merrill is pretty thin air and we're very pleased with that what that has done. It is visually disruptive it looks different and importantly it performs. It performs.
Speaker Change: And then the lifestyle piece, you know, certainly some continued momentum in Jogelmock [inaudible]
Speaker Change: And then the Raptor Collection, which is this barefoot sort of transitional shoe that has so many uses it looks different. We're encouraged by where that is and where the Proc engine has come.
Speaker Change: We do have a new product chief in the brand too, which we're very excited about. So there's a lot of things to be excited about for the Merrill brand and certainly expansion from the lifestyle piece in the US is important, you know, new doors that we talked about opening up in some lifestyle retailers which we had not been in for a period of time. [inaudible]
is encouraging
Speaker Change: Pike, you know, outdoor hike, you know, still obviously some pressure there, but we're pleased that we continue to gain share in that business. It's part of our responsibility as the market leader to help innovate. And we certainly think, you know, the Moab speed to the speed arc surge boa, you know, those products certainly do help evolve and bring innovation innovation to that category. So, please with marital progress, it's great to see the double digit growth.
Speaker Change: And honestly, I'm excited about the team we have in the field and how we continue to evolve and grow that brand in the future
Speaker Change: Okay, no, that's awesome. Very helpful. And more of that will be great. On Sweaty Betty, appreciating the fact that you guys are managing the brand for profitability right now. But can you just give us the update of thoughts on the commitment to Sweaty Betty as part of the portfolio and what KPIs are you watching to measure the success there?
Thanks for the question.
Speaker Change: Yeah, you know, I think certainly our focus right now is improving the profitability helping to build it and make it a great brand and then grow that business.
Speaker Change: We have some new players in place, which is important. Certainly getting Sockety and Merrill growing again, adding Susie Cune to the team, having her oversee the workgroup allows us to really focus our efforts and businesses that aren't quite tracking. So I'm excited to spend more time with the sweaty bedding team. Like I said, I'm on my way to London to be with that team, plus visit the construction of a new Sockety store in Covent Garden. But we're committed to improving the profitability, making that a great brand.
and then Growing Sweaty, buddy.
Speaker Change: Chris, is there a timeline that you think about as a kind of a realistic recovery for the brand in the near-to-medium term?
Speaker Change: Well, I think we're copying some promotional activity from last year and we talked about becoming less promotional, not giving specific timelines.
Speaker Change: I will point to where the company was a year ago and certainly where our biggest brands are today. We have a playbook for growth.
Speaker Change: We have an aligned and motivated team and frankly we're doing fewer things and we're doing those fewer things better today than we were 18 months ago so I think we are committed to the work we've got the right team have identified the issues and now we have to go solve those. [inaudible]
Speaker Change: Okay, now that's fair enough. And just as a final one, I think you mentioned that Sakhani further accelerated here in the second quarter. Can you just confirm that? And thank you so much, [inaudible]
Laurent Vassilescu: Yeah, my comment was, I think, a response to Laurent's question.
Laurent Vassilescu: about what we had seen. Interestingly enough, we sort of track pre- Liberation Day, a post- Liberation Day, and Sockini Act actually has accelerated since April 2nd. So, that's just early days, it's a very small data point.
But we haven't seen any negative effects so far.
And we did that for that.
Speaker Change: He did not give in a brand specific guidance for the second quarter, Anna Porter.
Well, thank you so much, and best of luck.
Peace, Anna.
Speaker Change: Thank you. Our next question comes from the land of Mauricio Sedna from UBS. Please proceed with the question.
Mauricio Serna: Great, great, good morning and congratulations on the results. I had a couple of questions. First, housekeeping, the provided outlook. Just making sure for Q2, are you guys expecting an impact from Tarev? And then on the $30 million impact on your gross profit?
Speaker Change: So that include already China being high single digits of what's coming into the U.S.
Mauricio Serna: Regarding your question, thank you Mauricio for what we have assumed in terms of the 30 million tariffs before mitigation, I will start there.
Mauricio Serna: That includes what it assumes is we didn't give any we're not giving the specifics of what it means in terms of the sourcing what we're saying is we expect it to be
Mauricio Serna: Less than 10%, and that from where we started earlier this year to that less than 10% that we've talked about for 2020-25, that is included in the $30 million that we identified.
Mauricio Serna: Okay, so being an elephant in a tempest, I did, okay.
Sorry, sorry about that [inaudible]
Sorry in your first question.
Oh, like the Scoot 2 has any impact on her [inaudible]
Mauricio Serna: Yeah, thank you. The Q2 tariff impact, we're not identifying any meaningful. We expect it to be more significant in the second half.
Speaker Change: Okay, got it, got it. Okay, so sorry, and just make sure I understood that like the 30 million does include that, you know, it's going to be less than 10% of China sourcing for U.S., is that correct? At the end of 20, in 2025, yes.
Speaker Change: Okay, got it. And then maybe just one thing about the Q1 results, just wondering, you know, pretty strong results across the board, just was wondering, like, what happened in the DTC channel that you saw, like, 7% decline on the ongoing business?
Speaker Change: Yeah, from a DTC standpoint, you know, certainly we've talked a little bit about that, you know, I think that's part of our taking a less promotional stance in our DTC businesses
Speaker Change: You know, Sockini was up, Merrill was down a little bit, and then we talked about pressure in sweaty body and workgroup. So I think we are trying to take a long approach in DTC, trying to manage that business more responsibly, make that a more full price business.
Speaker Change: And I'm buying large across all of our brands we saw in a nice increase in gross margin. I think it was 550 basis points in total in DDC up
in the quarter, which is the ninth lift.
Speaker Change: And certainly that the increase in full price mix is an important metric so it's only we pay attention to obviously you know we get we get reads every two hours you
Speaker Change: We're working to improve that channel, but right now it's to make that a better experience for our consumers, a more full price business, a less promotional business, and really give our consumers a more frictionless experience as they engage with our brands.
Speaker Change: Great, and very last one, thanks again for the time. Any initiatives underway that you're thinking about to maybe resume kind of like the pay-down of depth.
Speaker Change: to pay down of debt. I think in terms of where we're at, what we've called out with our capital while location priorities haven't changed. And in terms of where the, in terms of paying down to investing in our business and maintaining the dividend. So we haven't given, we aren't giving any back half guidance. I don't have a debt leverage target for the year other than to save that our goal is to continue to focus on the leveraging.
Speaker Change: You know, given the debt that we paid down last year, we're in a much…
Better Place than where we were a year ago, Mauricio, and I think from...
Speaker Change: The standpoint of we make great progress on improving the financial performance of the company.
The position puts us in a much better place.
Understood. Thanks so much and congratulations again on the results.
Please see the complete disclaimer at https://sites.google.com
Speaker Change: Thank you. Our next question comes from the line of Mitch Komp, from Seaport Research Partners. Please receive the question.
Mitch Kmetz: Yes, thanks for taking my questions. I guess my first question, Chris, on the second quarter.
Mitch Kmetz: The Top Line Outlook. I mean, it sounds like you guys had a good start to the quarter. You reference Sockney also.
Mitch Kmetz: You said that you have yet to see any real change in the consumer or your customers Can you maybe speak to the assumptions that you're using for the balance of the court or are you kind of assuming that April trends hold through May and June are you assuming more cautious stance on the consumer in your customers and then I have a couple of thoughts.
Yeah, it's a good question, Mitch.
Mitch Kmetz: I think it's a little bit of mixed. I think we're sort of looking at the momentum we have, the backlog we have, the sell-through rates, the conversations we're having with our customers and what we're seeing from the consumer standpoint. At the same time, our eyes are wide open to what's happening in the more macro landscape. And
Mitch Kmetz: You know, I'll echo what was said yesterday, you know, I think...
Mitch Kmetz: You know, in the data right now, the data still looks pretty good, but there's obviously a ton of talk about where a consumer sentiment is, you know, we all look at those studies we there's a good report to the FDA published a week or so ago about where they see the consumer going so. Thank you very much.
Mitch Kmetz: It's next. We're trying to both understand where our brands are, where the momentum is, what we're hearing from our customers and sell through rates and order book.
Mitch Kmetz: At the same time, you know, very cognizant of what's happening in the broader world.
Mitch Kmetz: Whether it's the new Integrative Business Planning Function, whether it's our Tuesday, Read and React Sessions,
Mitch Kmetz: And some new talent we brought to the business that have a more retail consumer mindset [inaudible]
Mitch Kmetz: I think we're sort of breaking old habits and old muscle, how we weren't as tied into the pulse of what's happening with the consumer. It doesn't mean that we're going to be perfect, but I certainly think we've got a much better handle on how we run the business day to day and certainly more agile and nimble than we may have been historically. And again, you know, we're not afraid to take fast action in the spirit of protecting and building our brands in the best interest of our shareholders. [inaudible]
and Taryn Miller. Thank you. Thank you.
Speaker Change: Yep, and then on the 30 million, you know, it sounds like you've built in.
Speaker Change: You know, the impact of China, if you said less than 10%, and then also 145% tariffs, but
Speaker Change: Are you actually currently landing goods from China at 145 or are you holding off on doing that, hoping that maybe that number comes down from 145 which might, I mean, if you are doing that, that might imply maybe some upside to the 30 million?
Speaker Change: Without getting too detailed in terms of what we are or not shipping, because it's going to vary a little bit by the brand and and
To Chris' point of being very thoughtful, being very surgical [inaudible]
Speaker Change: about what we are moving. What I would say is given the fact that we have said that earlier this year, China represented midteens, and now we're saying less than 10%, I think that it hauls out that we have reducing it.
Speaker Change: Definitely our sourcing from China and anything that we do plan to bring in is assumed in that in that $30 million unmitigated.
Speaker Change: Okay, and then lastly, you guys have referenced some potential offsets, whether it be...
Speaker Change: Price, or, you know, the S-GNA savings, is there any way to quantify the amount of assets that you've identified or, you know, you're talking $5 million to $1 million to $15 million? I'm sure you've probably done some of that math, I'm hoping you could share that with us.
Speaker Change: Yeah, well, we're not going to share too much of the math with you, you know, obviously for us it's a handful of lovers that we're going to pull Certainly as we're thinking about price that we're paying for these goods, certainly our price in the marketplace [inaudible]
Speaker Change: And then a high level of scrutiny on all the dollars that we spent, making sure that we're continue to try to protect and fuel where we have gram momentum, other discretionary things that would have been nice to do, those things are going to be on pause until we see where the dust settles.
Speaker Change: We're obviously anxious to see what happens with the trade war and where that is.
Speaker Change: At the same time, we're moving quickly to mitigate the risk that we see today, and, certainly, work to exploit the opportunities that we believe we have, or that we may have in the future, at the same time, trying to run the company really responsibly in the face of this sort of unprecedented event.
Okay, great. Thanks, guys
Speaker Change: Thanks, Mitch. Hey, Mauricio, just one more comment Alex pointed out to me when I did say that that reducing debt is...
Speaker Change: Definitely part of deleverging as part of our priorities and plans. I think it is important to call out the reason I talked about the strength [inaudible]
Speaker Change: of our balance sheet compared to where we were a year ago, and the confidence of...
Speaker Change: of moving through the challenges we see today. It'd be important to point out the foundation of our capital structure is the 550 million 4% senior notes that we have maturing in 2029.
Speaker Change: and complimenting that our senior notes are mostly undrawns of bank credit facility of $830 million.
Speaker Change: So just to give you some color in terms of the debt structure that we have and the great progress that we made last year, certainly Thank you, leveraging is important and so we feel good about where we're at today
and Taryn Miller. Thank you. Thank you.
What we should do today? [inaudible]
Thank you.
Speaker Change: There are no further questions. Ladies and gentlemen, that concludes today's meeting. Thank you all for joining and you may now disconnect.