Q2 2025 Wolverine World Wide Inc Earnings Call
Greetings and welcome to the Wolverine worldwide. Second quarter, fiscal 2025 earnings call.
At this time, all participants are in a listen-only mode.
A question and answer session will follow the formal presentation.
if you'd like to ask a question, please press star and the number 1 on your telephone keypad,
As a reminder, this conference is being recorded.
It is now my pleasure to introduce you to your host, Jarred Filipone, Head of Investor Relations. You may begin.
Good morning and Welcome to our second quarter of fiscal 2025 conference. Call on the call today are Chris South Nigel president and chief executive officer and Taran Miller Chief Financial Officer
And guidance for the third quarter of 2025, the press release is available on, many news sites and can be viewed on our corporate website at Wolverine worldwide.com.
This morning's press release and comments made during today's earnings call include non-GAAP financial measures. These non-GAAP financial measures, including references to the ongoing business, were reconciled to the most comparable GAAP financial measures, and attached tables within the body of the release or on our investor relations page on our website will be wolverineworldwide.com.
I'd also like to remind you that statements describing the company's expectations plans, predictions and projections such as those regarding the company's outlook for the third quarter of 2025 growth opportunities and Trends expected to affect the company's future performance made during today's conference call, or forward-looking statements under us Securities laws as a result. We must caution you. That there are a number of factors that could cause actual results to differ materially from those described in the forward-looking statements,
These important risk factors are identified in the company's SEC filings. And in our press releases with that, I will now turn the call over to Kristoff Nigel.
Thanks Jared and welcome again to Wolverine worldwide. It's great to have you on the team.
And good morning everyone. Thanks for joining us on today's call.
In the second quarter, we exceed our expectations on nearly every Financial measure headline by double digit Revenue growth.
With increases in every region and strong growth from our 2 biggest brands.
Stock was up 42% compared to last year, achieving record revenue for Q2 in millions, and grew 11%.
The work group returned to growth hosting a 2% Revenue gain.
While Sweaty Betty improved sequentially in the quarter reflecting important progress in these 2 divisions.
Our teams are intently focused on driving growth, building stronger Brands better managing the marketplace and fueling consumer demand.
And doing so in a healthy profitable way.
In the quarter, we delivered more than 400 basis points of gross margin expansion versus the prior year.
Once again, achieving a quarterly record.
Our high quality growth enabled us to more than double earnings at the bottom line compared to last year.
A good quarter by most measures.
A new brand building Playbook has proven effective and we've been able to sequentially improve our year-over-year. Revenue trends for 5 consecutive quarters now.
This past quarter, posting our best year-over-year comparison in nearly 3 years.
Our teams have done a tremendous job of embracing a new growth focused mindset.
And I'm grateful for their drive and resilience as we continue to build the new Wolverine worldwide.
Looking ahead. I'm pleased, we built momentum in the business and that the company is on much firmer Financial footing.
We believe we're well positioned to navigate today's volatile macro environment and that the actions we've taken to date and can take in the future will enable us to largely mitigate the impact of tariffs going forward.
A new reality. However is uncertainty in the global Marketplace.
Due to the ever-shifting global trade policies.
Coupled with a downstream effect on the economy and consumers.
this reality informs both, our Outlook and our actions as we move forward into the back half of the year,
With that, I'd like to share the progress Our Brands continue to make around the world.
For handing, the call over to Taran for more detail on the quarter and our Outlook.
Beginning with stock.
Socket delivered very strong, broad-based Revenue, growth of 42%.
Couples with 560 basis points of gross margin expansion in the quarter.
The brand grew in every region and channel while delivering records. Second quarter Revenue.
I believe 2025 will be a pivotal year for the brand.
The results of an ambitious strategic reset in 2023 and 2024.
And our new growth agenda.
We position the brand of the intersection of authentic performance and lifestyle running.
Given the unique foothold in the competitive landscape and opening of a significant addressable Market opportunity for the brand.
Over the last several months stocky executed, with Excellence on many fronts.
It's run as 1 campaign on earlier. This year, continue to position and build the brand with its Target consumer.
Brands Rich interest is up meaningfully around the world compared to last year.
And we're seeing stronger affinity for the brand.
Specifically among Runners and younger consumers.
Stock also continue to advance its key City strategy.
Just a few weeks ago following the recent opening of its store in Harajuku. Tokyo, the brand opened its Pioneer store in London's Covent Gardens
1 of the premier shopping destinations in the world.
Importantly, the store serves as a valuable hub for brand activations in London.
Brand activations.
I was fortunate to run in the event. It couldn't have been more impressed by the Brand's overwhelming presence around the city and how far the brand has come in such a short time.
Sony will expand its event sponsorship in London with a shortage 10K and then to France with the Eiffel Tower 10K layer this year.
In Paris, the brand garnered extensive interest a few weeks ago at Paris Fashion Week, highlighting its disruptive approach to collaboration and taking appointments with a rapidly growing number of highly influential retailers.
I'm also pleased to announce, we just signed a lease to open the Brand's third Pioneer store in Paris next year.
So, and he's activations and compelling. Retail execution are engaging, consumers, directly, and providing a vision inspiration for our partners around the world.
Building on our efforts in Tokyo. For example, we've already started opening a host of new stores with our best-in-class partners in asia-pacific with plans to open more in the second half of this year.
So, can you continue to fuel product Innovation as well?
With the technical endorphin franchise.
The brand followed up the introduction of the award-winning endorphin, Elite 2, super shoe in March with the new endorphins speed 5.
Combining a nylon plate with power run PB foam for a fast lightweight design at less than $200.
A compelling price point for so much innovation.
The brand also continued to push forward. Its core 4 franchises.
Squarely into the broader, casual run opportunity.
with the launch of the Triumph, 23, its premium neutral, Runner engineered to deliver plush Comfort through Innovative geometry and cushioning
Together, the core 4 franchises including the ride guide, Triumph and hurricane.
Grew at a very strong. Double digit Pace at us, retail in the quarter.
On the lifestyle side, socking, Kinesis to leverage, its deep product, archive to deliver authentic Trend, right style to the marketplace, the Brand's expansion of distribution within the lifestyle athletic Specialties, and I'll continue to progress as a result of positive self-performance, adding roughly 400 doors for the back half of this year. This will raise the Brand store count in this channel to roughly 1300 doors. While the opportunity is Meaningful, we can you take a methodical approach to thoughtfully expanding distribution?
Stock is made a remarkable amount of progress.
But I maintain that it's poised to do more.
The brand possesses a unique and compelling combination of Heritage and authenticity.
Coupled with best-in-class Innovation and emerging cultural relevance.
I believe that stocking positions do something very special.
Moving to Merrill. Our biggest brand.
Which came to build momentum and delivered, another strong performance.
The brand grew 11% in the second quarter. Its fourth consecutive quarter of growth with increases in most regions and channels.
And delivered nearly 600 basis points of gross margin expansion versus the prior year.
Marrow remains focused on modernizing the trail.
The brand's faster, lighter, more athletic product offerings continue to feel momentum and drive significant share gains in the high category.
Mob Speed, 2 Revenue nearly quadrupled year-over-year at us, retail making it the Brand's. Second largest hike franchise behind the industry-leading, Moab 3, which screwed High single digits in the quarter.
The award-winning speed Ark Madness built on the Brand's new visually disruptive speed Ark platform for Unique weekly comfortable ride with exceptional energy return is now the number for high franchise of ml.com after just a few months of selling.
Muriel has built good momentum outpacing. The market for 10 of the last 11 quarters in the US height category, which had been under pressure for the better part of 2 years. But encouragingly, we've now begun to see a broader hike Trend improve a bit.
We believe, this is another positive indicator for Merrill. The market leader moving forward.
On the trail running side, the Agility Peak 5 franchises up double digits at U.S. retail, and the brand launched the new prompt, an all-terrain hybrid runner designed with premium Flow Plus foam for superior cushioning.
Merl's continued progress. In modernizing the trail help strengthen its ability to advance and lifestyle as well.
Performance Products, like the Moab speed to an agility, Peak, 5 and lifestyle, colorations and materials.
Continue to gain traction at certain lifestyle, retailers, reaching a younger consumer for the brand.
In addition revenue from Progressive casual Styles, like our wrap franchise in the iconic. Jungle, Moc grew significantly in the second quarter as well.
In the US Merrill. Still in the early stages of evolving. Its distribution as rationalized its points of distribution over the last couple of years.
The brand is focused on developing more impactful. Go to market plans with its key strategic outdoor specialty in Sporting Goods partners and is establishing a footprint in the healthier lifestyle Market.
Globally, the brand stock accelerated growth in Asia Pacific in the quarter, thanks in part to its key City strategy.
Which has initially focused on Tokyo with its partner in Japan.
Form. Well, and together with compelling marketing and storytelling in the market, have effectively helped Elevate the brand in 1 of the most influential cities in the world.
Nurse also now beginning to activate Paris as part of its key City strategy with focused campaign investment and in key to the brand built on its market, share leading outdoor, footwear in France and delivered, strong growth. In the broader emea region.
Moving on to Sweaty Betty and Wolverine the 2 Brands were focused on getting on track.
Encouragingly both Brands saw sequential Improvement in the second quarter.
I'll start with sweaty buddy.
As we previously, shared our priority with Sweaty Betty has been to establish a healthy Foundation from which to grow.
We continue to make steady progress on reestablishing the brand's premium positioning.
In Q2 we again, increase the Brand's full price mix and expanded gross margin by more than 500 basis points.
sweaty Betty's, female focused inclusive positioning and storytelling has been effective and our recent where the damn shorts campaigns reinforced, the Brand's original rebellious, distinctive voice,
Brand awareness is up consumer, sentiment is dramatically higher and perception. As an inner hot brand is trending positively.
And while consumers already ranked Sweaty Betty at the top of the competitive landscape for product quality, your enhancing future product, offerings with elevated designs and more style Innovations including inducing more newness for the important holiday seasons this year.
Looking ahead with a stronger foundation in place.
We're taking action to drive profitable growth and Sweaty Betty with a multi-prong strategy.
First, the Brand's direct to Consumer business in the UK will be the number 1 priority.
Digitally, we plan to deliver a reinvigorated flow of innovative premium products with a keen focus on our maidwell, mover consumer targets, and deliver enhanced digital experiences for her.
Including the brands recently launched app.
Which has been among the top downloaded shopping apps in the UK.
We're also taking action to further improve the productivity and profitability of our UK stores.
Along with a full fleet review of real estate to ensure we're in the right doors, driving strong returns.
Second removing to a more disciplined full price TDC Business Online in the US.
Sweaty became 2 promotional too often, which only serve to erode the Brand's equity.
Third, we plan to expand the brand into new or Nation International markets, including leveraging, Wolverine worldwide, Global Network of best-in-class distributor Partners as we began to do in China last year.
Finally, we're integrating the Brand's tools and processes into the Wolverine worldwide ecosystem.
We anticipate. This will be largely complete layer this month.
This will be a critical enabler of our strategy and part of our broader technology modernization effort across portfolio.
In addition to these growth strategies for Sweaty Betty. We're exploring options to better leverage this team's DTC and broader apparel expertise across portfolio. To drive improved performance and growth in our Footwear brands.
1 example, is the brands use of AI to better manage pricing and maximize margins.
Solutions, Sweaty Betty piloted and we expect to have a water benefit.
Across the portfolio.
Today's Sweaty Betty stands on better footing to scale over time and I feel good about the recent work. We've done to hone its strategy.
Our main excited about the potential and opportunity to sweaty body provides for Wolverine worldwide in the future.
And concluding with Wolverine.
In the second quarter of the brands, Topline Revenue Trend improved and gross margin expanded over, 400 basis points.
We expect the brand to now be on a path of quarterly sequential improvements as new product and marketing initiatives, begin to impact performance and the effects of comping elevated. Discounting in the prior year, begin to displace.
As we discussed, the brand, has been focused on strengthening, its Western and premium price collections with product like the Rancher Pro.
Over the past year, has gained well over 1, our basis points of market share in the US that prices above 125 dollars.
To further this effort in June, the brand launched its new USA Built Workshop wedge, featuring premium full-grain leather, a Goodyear welt construction, and priced at $2,550.
It sold out and wolverine.com in less than a day.
Just yesterday on the Innovation front. The brand announced its new Infinity system.
The Pinnacle expression of its performance Comfort technology. Delivering 2 times, the impact absorption and energy Return of the leading work. Boot in the category, with price points, between 175 and 250.
As the market leader in the US worked boot category, the brand continues to elevate, product quality, and Innovation while simultaneously telling better more compelling stories and investing in the ground game, with its wholesale partners.
Always made good progress for both Sweaty. Betty Wolverine in the last few months, there's more work to do to get them growing contributing as we'd expect.
With that. I'd now like to hand the call over to Taran Miller to take you through our second quarter results and how our viewing 2025 in Greater detail.
Karen.
Thank you, Chris, and welcome, everyone.
For both revenue and profitability reflecting the momentum, we've built in the business led by our 2 largest Brands Merrill and cicchini.
Our inflection to growth in the fourth quarter of 2024, which is accelerated through the first half of 2025, underscores that our growth playbook is working in a dynamic market environment.
For today's call, I will start with the review of our second quarter results.
Provide an update on the financial impact from tariffs and our mitigation initiatives.
and close with our third quarter, 2025 Outlook,
Starting with our results for the second quarter.
Revenue was 474 million, which exceeded the high-end of our outlooks of 450 million.
The over delivery was driven by stronger than expected performance in both the active and work groups highlighting underlying momentum and solid execution by our teams.
Quarter. Also benefited from a timing shift between the second and third quarters.
And approximately $4 million of favorable foreign currency relative to guidance.
As it relates to the timing shift.
Approximately 10 million dollars of wholesale orders. Shipped in the second quarter that were originally planned for the third quarter,
The ship primarily relates to retailers accelerating orders in advance of planned price increases.
Active group orders accounted for approximately 8 million dollars of earlier shipments, split evenly between falcony and Merrill and the work group orders, made up the remaining $2 million shift.
I'm going Revenue, increased 11.6% compared to the prior year. And on the constant currency, basis, Revenue, grew 10.4%, as favorable, foreign currency provided, a $5 million benefit compared to the prior year.
Revenue growth compared to the prior year was driven by performance in the active group.
Balcony and Merrill continued to deliver strong results, reinforcing their momentum.
While Sweaty Betty and the work group showed sequential Improvement relative to the first quarter.
from a channel perspective, Global wholesale Revenue was the primary driver of our performance with International growth slightly outpacing the US
Direct to Consumer declined, less than 2%, reflecting sequential Improvement. Relative to the first quarter.
As a reminder, the second quarter of 2024 included $2 million of Revenue that did not repeat this year related to the so and maril kids business model change.
Active group Revenue, increased 16% compared to the prior year and was ahead of our outlook for high single-digit growth.
The active groups' better-than-expected performance in the quarter was led by Sony and Merrill.
Sekani increased Revenue by 42% in the quarter and saw broad-based growth of regions and channels led by wholesale performance in both the United States and internationally with direct to Consumer upload double digits.
Falcony delivered strong results in both performance run and in lifestyle reinforcing, the continued expansion of its lifestyle distribution footprint with leading retailers.
Merrill, increased Revenue, 11% in the quarter driven by strong wholesale performance.
This growth was supported by Steady retail sales through which led to strong replenishment orders.
Merrill also, benefited from the previously mentioned 4 million timing shifts from the third quarter to the second quarter.
Merrill continued to take share as a leader. In the height category, there is focus on modernizing the trail supported by the continued success in core franchises. Including Moab 3, and Moab Speed Tube.
Sweaty. Betty, Revenue declined 6% in the quarter, which was better than our expectations.
While there is still more work to do to improve the Brand's performance. This was a sequential Improvement compared to the first quarter and reflects early progress, in our efforts to reestablish sweaty Betty's premium positioning through product and marketing.
First margin improved significantly up over 500 basis points year-over-year driven by a better mix of full price sales.
The work group Revenue grew 2% compared to the prior year.
Adjusting for the timing shift of wholesale orders into the second quarter. From the third quarter,
Work group Revenue would have been approximately flat year-over-year ahead of our guidance of a low single digit Decline and a sequential Improvement compared to the first quarter.
Year and was in line with our expectations.
The year-over-year Improvement, reflects our healthier inventory position, a higher mix of full price sales and the continued benefits of product cost savings across. Almost the entire portfolio.
The impact from incremental tariffs on us Imports in the second quarter was minimal.
Adjusted operating margin in the second quarter was 9.2%, an increase of 290 basis points compared to last year, and includes continued investment in Our Brands as part of our growth Playbook.
Adjusted operating margin with 200 basis points higher than our Outlook of approximately. 7.2% primarily the results of sgna, Leverage from better than expected Revenue.
The combination of strong Revenue growth and gross margin expansion, led to adjusted diluted earnings per share of 35 cents compared to 15 cents in the prior year.
Turning to the balance sheet, net debt. At the end of the second quarter was 568 million down 99 million or 15% lower compared to the same time last year.
Next, I will provide an update on the financial impact from tariffs and our mitigation initiatives.
on our last call in may we estimated the incremental tariffs would translate to a fiscal 2025 profit impact of dollars before any mitigation
this was based on tariff, rates of 145%, for China and 10% for our other sourcing countries.
Based on the Tariff rates announced by the US Administration on August 1st, that go into effect on August 7th. We now estimate the 2025 profit impact from incremental tariffs will be approximately 20 million dollars before any mitigation
The reduced 2025 profit Impact versus our prior estimate is primarily due to lower China, tariff rates down from 145% to 30%, as of May.
Partially offset by increases in other sourcing countries rising from 10% to approximately 20% starting in August.
Our team's successful execution of our strategy over the past 24 months has enhanced our brands and our capabilities.
Strengthened our financial position and prepared us to navigate ongoing changes.
We've taken strategic steps to mitigate the impact of tariffs and have plans in place that we believe position us to offset the majority of the profit impact this year.
That said, we'll continue to monitor how these plans unfold and how the broader trade environment evolves.
Prior to the Tariff announcements in April. We had already begun executing targeted initiatives to enhance profitability.
While external conditions have evolved our strategy remains consistent.
We're accelerating those efforts and actively pursuing new opportunities to strengthen our financial positions. Preserve flexibility and support. Long-term growth
actions, we have taken include
leveraging, our Diversified supply chain and dual source and capabilities.
Negotiating cost sharing with our supply chain Partners to alleviate the financial impact of tariff changes.
Reducing product Source from China, to the United States from the mid teens earlier this year to less than 10% by the end of 2025.
Implementing strategic price increases on select products, the brand portfolio.
And capturing discretionary sgna savings. While also continuing to invest in our brands.
These efforts are designed to offset tariff related, headwinds while maintaining investment in brand building and long-term growth drivers.
Turning to our outlook for 2025.
As it pertains to the full year, but we are not reinstating, our formal 2025 annual Outlook today. Due to continued macroeconomic uncertainty from global trade policy.
I would like to provide some insights into how we are viewing the second half of the year.
We're pleased, but the year to date performance of the business.
Delivering 8.6% constant currency Revenue growth in the first half, which is at the high end of our long-term value creation aspiration.
This performance, reflects the strong execution of our brand building strategy, across product, Innovation, marketing, and distribution expansion, particularly in stock, and Merill, as well as some favorable timing shifts.
Work group.
We anticipate our year-over-year growth to moderate compared to the first half.
As the impact of timing shifts normalizes and we lack the initial gains from incremental distribution expansion.
In addition, we will be comping a more stabilized. Second half of 2024 relative to the first half.
With respect to the impact of tariffs and our mitigation efforts on gross margin. We expect the majority of the incremental expense to impact cost of goods sold in the fourth quarter. While our mitigation efforts are anticipated to be more balanced between the 3rd and fourth quarters.
With that, I will now provide our outlook for the third quarter.
Revenue is expected to be in the range of 450 to 460 million a year-over-year increase of approximately 3.3%. At the midpoint, on a reported basis and 2.6% on the constant currency basis.
At the midpoint of the range. We expect, active group revenue for the third quarter to grow by a mid single digit percentage year-over-year. And work group revenue is expected to decline by low single digit percentage.
Adjusting for the previously, mentioned 10 million timing shift from the third quarter into the second quarter.
Active, group revenue is expected to grow, High, single digits. And work group is expected to be approximately flat compared to the prior year.
Gross margin is expected to be approximately 47%, an increase of 170 basis points compared to last year.
Adjusted operating margin is expected to be approximately 8.3%, an increase of 60 basis points compared to last year.
And adjusted diluted earnings per share is anticipated to be in the range of 28 to 32 cents, compared to 29 cents in the prior year.
To summarize our second quarter results and third quarter Outlook reflects strong execution of our growth strategy in a dynamic environment.
Our brains continue to show, meaningful progress. We're driving healthier sales across the portfolio and our balance sheet is meaningfully stronger than 2 years ago.
We believed the improvements we've made and the actions we're taking to navigate the evolving trade. Landscape position us for a sustainable profitable growth.
With that, let me hand the call back to Chris before we open it up for questions.
For 2 years.
Wolverine worldwide.
Is a Clear Vision to make every day better.
We aspire to become great consumer. Obsessed brand, builders Focus, squarely on creating Innovative Trend right products.
Telling differentiated and amazing Stories and driving the business each day as a collective 1 Wolverine.
We've elevated Talent throughout the organization by bringing in new Leaders, with exceptional experience and heightened consumer Focus.
Bolstering our capabilities in areas including product, design, merchandising, modern demand creation, and business planning.
I believe our team this new Talent, coupled with a solid basis company veterans is the strongest. We feel that since I joined the company almost 17 years ago,
We've also made good progress in equipping our teams with the processes tools and environments. They need to win.
We're injecting more consumer and Trend insights into our brands with the collective.
Opened our first ever Innovation Hub in Boston. This past fall co-located, our active group Brands, and refreshed space, this spring
Developed new integrated planning processes, and we've embarked on the most ambitious Tech modernization efforts in our company's history.
And finally, and importantly, our culture is evolving.
Our teams have embraced the challenge to get better every day to win and work together as 1 Wolverine.
Just last month I'm proud to say, Wolverine worldwide, was officially certified. As a great place to work.
based on an independent formal assessment of our team's belief, in our strategic Direction, sense of collaboration and primary work, we're doing together,
The first summer company has ever received such a recognition.
But while Wolverine worldwide is already a much different company, there is much more to do.
The next chapter is the most important 1 as we push to realize the full potential of Our Brands, team and Company,
All Guided by our vision to make every day better.
for our consumers, our teams, our partners, our communities, and ultimately, for our shareholders,
With that. Thank you to all for taking time to be with us this morning and we're happy to take your questions.
Operator.
Thank you. The floor is now. Open for questions.
Your first question comes from the line of Jonathan comp with Bayard. Your line is open.
Yeah, good morning. Thank you. Um, I want to follow up on so given the, the strong performance continuing here and, and ask about,
App. And when you think about growth between uh, direct which which obviously had a strong quarter, I think you said, low double, did it growth. Uh, but also then, uh, you know, wholesale with with the new doors Plus sell through and, and, and reorder that existing doors, you've added here, just any further detail, on sort of range of outcomes. And some of the key building blocks,
Yeah, thanks John. Uh, Sony certainly is, uh, is having a moment, and I'm really pleased with the progress we've made. Since we really worked to reset that business a couple of years ago. And, um, you know, it is broad-based growth, um, happening in both performance and lifestyle happening around the world. Um, I think first and foremost driven by a reinvigorated product pipeline, um, Innovation is back at, so whether it's tip a sphere product, like the Endorphin collection, whether it's focusing on the core 4 or our ability to tap into an archive of Lifestyle products. Um, and that, that, that is the, that is very important and importantly, it's Healthy Growth. Um, it's responsible growth, we walked away from, from from tough distribution, from products that had relatively low low, gross profit. And and we took the chance to, to Really reset that business from a strategic standpoint. And then first and foremost, really making sure the product pipeline was firing on all cylinders. And then importantly, you know, our ability to to tell Amazing Stories. Um, you know, this will be a very large investment year uh, In Stocking from from a demand.
Creation perspective, um, really happening around the world. Um, and I think really headlined right now, but what has happened in EMA, oh, over the past couple of years, uh, focused on a key City strategy, um, activations, the sponsorship of of of key events. Um, and then just the team really driving the the business each and every day. So we're going to begin to lap opening of that distribution.
We continue to methodically think about where we can responsibly open more doors.
At the same time. Um, as we think about growth for the company, you know, we're in it for the long run. We want to drive long-term sustainable profitable, Healthy Growth and, and really, really have a pull model of versus a push model. So we'll begin to lap um some uh that that new door expansion uh, and really as a company. Right now, we are laser focused on sell through um what is happening in real time in the marketplace. Uh, and then really build a, a long-term platform uh, for the company to drive, uh, sustainable results for the shareholders in the long term, but, um, make make make no mistake, uh, very pleased with the progress. So I can he's made in a very short period of time. Um, and uh, and and the rigorous execution of our new new brand building model. Um, but as I said, in the prepared remarks, um, well, I'm very pleased with the result of society has generated a very short period of time. Uh, I'm very optimistic about the potential this intersection of performance and lifestyle being a culturally relevant. Brand, uh, driving tip of spear Innovation, at the same time, pulling on archives. I think is a, is a very powerful combination for us to drive, uh, great.
Which is the high end of your your your broader Target? Are you gaining comfort in the in the longer term opportunity to get back to double digit? Operating margin. Thanks again.
Thanks John. Um we you know as you pointed out now in the gross margins through the first 2 quarters at 47.2% um does reflect the progress we've made on some of the things Chris has talked about in terms of driving higher mix of full price sales as well as the supply chain initiative that we've talked about in terms of optimizing our costs
We do expect to continue to see the benefits from pricing discipline as well as those costs initiatives. And we're looking at that Q3 guide that we gave approximately 47% and I I think that yes the in short, we are gaining confidence in that aspiration that we've provided in long term of 45% to 47%. Um while we're not guiding on the fourth quarter. Um, I would remind though that fourth quarter is generally lower than our quarters, just given the nature of the holiday season that we're seeing in the fourth quarter. But overall short answer is yes. Um, gaining confidence given more with the product, putting the marketing behind it and the distribution gains. In terms of being able to sustain in that 45 to 47%.
Okay, thanks again.
Thanks John. Thank you.
Your next question comes from the line of Peter McGoldrick with stifle. Your line is open.
Hi, thanks for taking our question. Um, I was curious, if you could discuss your go to market strategy and the pathway for returning DTC to growth. How is that channel contribution, embedded in your third quarter Outlook,
Yeah, good question. I appreciate asking about about about our DTC business. Um, we we are, um, we're pleased by the progress of making a DTC albeit, we acknowledge we have more work to go do. Um, we've seen sequential Improvement in Q2 or over 1 q and I would say by and large a lot of Our Brands to see our focusing on becoming less promotional, um, more consistent in our messaging, um, and really be a great showcase for Our Brands as consumers, engage engage with us digitally. So, we saw a nice gross margin expansion. I think, somewhere approaching 300 basis points, of course, margin expansion in total for DTC, and importantly, our biggest brands, I think sort of outperformed a, a Us in total, you know, stock and you saw a nice growth. Um, Sweaty Betty saw some improvement along with Merrill, we do have some acute pain points, uh, that that we're working to address, but, um, I think, uh, the, the combination of, of, of lapping. Some of the promotional from last year, uh, telling more consistent messaging to our consumers, uh, really showing a great Innovative flow of fresh product, um, and then
Certainly on the modernization side. Um, we have some updating to do on our tools and, and, and we've begun begun to do that. So, uh, DTC is a critically important piece of our business. Um, you know, I think we have to show up when and where consumers want to engage with us. Uh, whether it's on their phones, through our social channels, whether it's, uh, in our great wholesale Partners here and around the world or whether it's in our own stores or own sites, uh, we have to show up consistently great. So pleased that we made progress, um, in in the quarter from the first quarter uh acknowledged though, that we still have more work to go do. Uh but the team is, is laser focused on making that both a great growing and profitable channel for us along with great representations of Our Brands.
Okay, and then I I did want to ask on on sock and he really impressive attraction there. Can you help us think of the brand performance within the newly expanded doors? How would you characterize sell through and the level of penetration on shelves today versus where you plan to be at your end?
Yeah, good question. I think that that that's really what we're focused on and I think you know credit to the product pipeline credit to the stories and certainly the fact that you know, Sony is is a great authentic, Heritage brand. You know, our ability to open up that new distribution was critically important last year, we're beginning to lap those new door growth. I would say right now we're very focused on sell through. Um, let's make sure the ground game is in place. There's great Marketing in stores. We're engaging with the teams and we're, we're really working to drive sell through. I would say we're in the early Innings of opening up that potential distribution. If we look at just total door counts,
And humming in order.
All right, very good. Thank you.
Hey, Peter.
Your next question comes from the line of Lawrence vasilescu.
Your line is open. Good morning. Uh, thank you very much for taking my questions. I want to ask about sake as well. I I recognize Chris that you, you will start to laugh. Those 1300 doors next year, but curious to know what what your conversations are, like, for the spring 2026 orders. And second, I, I know that you focus now offering the lifestyle offering, but is there an opportunity at some point in time for Dick Sporting Goods to offer stock performance offering?
Yeah, good question. And I appreciate the attention on Sony. Um, again, I think, uh, that team has been able to generate tremendous momentum in a very short period of time, and and I would take you back a couple of years ago. It really was a full reset of that business. Um, and I think we, we took the time to really think about, um, what the potential. So, he had, um, what we thought the market opportunity was where the competition's at and then the the, the, the, the, the, the V various levels that we could pull. So, um, we are very focused and and thankful for the doors that we've opened. Um, and again, I think that the notion of broad-based is important. Um, we're seeing growth in both performance category. Um, again, whether it's tip a sphere process, like the Endorphin, whether it's the core 4, uh, at the same time, what what what, what, what we've seen, what we've seen in livestock expansion. So, um, you know, we'll begin to, we're actually beginning to lap that new door growth last year.
Here as we sort of got get into back to school. Uh, and then the holiday, um, we're very focused on the sell through. I would say our teams are staying very close to the wholesale partners, and in which we've opened. Um, and then also working to build, hopefully responds, responds, responsible growth plan, but I was out in Market in this last quarter, I've been able to travel to London Paris Tokyo. Um, I was in Boston, uh, just last week, I was in New York, a couple weeks before that, uh, and it's great to see so many showing up on those shelves, showing up in those windows. And then just talking to the store staff that are product, just the enthusiasm and the society has has been a able to generate. So, um, again I while we're pleased with the progress and and a record second quarter for the brand, um, I do think we remain very optimistic about what the future potential is for Sony. Um, both what it means to the Wolverine worldwide portfolio, what it means for our shareholders and certainly what stock any can mean the greater landscape of Sporting Goods.
Very helpful and then Merrill, another great quarter, double digit growth here with the modernizing, the trail strategy. Um, I recognize Chris that you're you don't guide, um, you know, by brand anymore for the quarters out. But why, why should we see a deceleration in the back half, if there's momentum in so many different product categories. And then Taran, um, I recognize, um, last year you had an operating cash flow number of 180 million dollars. I think there was a working capital benefit from from the inventories, but this year, you're, you know, obviously operating profit for your net income is going up.
Like, is there any reason why we couldn't see a similar rate of operating cash? And what I mean? And what I'm leading to is, where do you think leverage goes by the end of this year?
Yeah, I I had the mar Marl question first and turn it over to Taran. Um, I appreciate asking about Marilyn. I know a lot of headlines are going to be about softening growing 40% but you know, maril has 4 consecutive quarters of growth. I think 10 of the past 11 quarters, we've gained share, um, and we've done it in in a really responsible way while adding gross margin. Uh, and importantly, it's on the backs of new product introductions. Um, you know, obviously, the Moab 3 continues to be great. That that is the the original hiking boot. But you know what, we've been able to do around the Moab speed too, um, the agility, Peak 5, um, the speed, dark Mattis, um, all of those new introductions are helping us to make the trail lighter faster, more modern and really responding to the consumers and really, really bringing Innovations. At the same time, we've been very thoughtful in the distribution in the US and I gave the marilene credit, the, the Merrill Us sales team credit for how they've really thought about the Us distribution landscape with doors. We want to show up in how do we show up in those doors, great? Um, I was in, I was in 1 of our best wholesale Partners last week and I and I've never thought Merrill has looked better than what I saw last week. So
Credit to our partners for for getting behind Marilyn, credit for the growth that we're driving the Investments. We're making making in the ground game. So at the same time, um, encouragingly um, you know, we've seen the high category under a lot of pressure for the past 2 years. Uh we actually saw it. Get get a little bit better last quarter. Uh, and if that is a long-term Trend Force, certainly that bodes. Well for males prospects, having gained share for the past 2 years being, the market leader. The retrenchment we've done to improve points of distribution. The new products we brought, um, gives us a lot of reasons to be encouraged about, uh, Marilyn's, Marilyn's future trajectory
Focused on delivering.
Sustainable long-term profitable growth and you can see that in, in the cash flow, you mentioned 2024. We did say that, uh, we did expect in terms of when we looked at our Capital, allocation, it remained consistent. Uh, we remain focused in terms of investing in the business.
as well as continuing to pay down debt and maintaining the dividend on in, in terms of our priorities of capital, allocation, when I speak to investing in the business,
we had identified earlier this year that we did expect after getting our inventory to much healthier levels. We expected a modest investment in working capital this year. Um and and you can see part of that in the second quarter, you saw inventory was a bit higher. That was largely primarily stocky. If you recall last year we said we'd probably leaned in a bit too much on on the inventory as we were chasing demand. And so, we are making a very strategic and thoughtful choice about where we are, investing in the inventory, to support the growth regarding. And then the second, is it on the priority was continuing to pay down debt, our leverage, our bank defined leverage at the end of the second quarter was 2.9 times that compares to uh 3 point time 9 times a year ago. So again continued
no change in capital, allocation priorities, and progress, uh, against both of them so far this year,
Very helpful best of luck.
Thanks lauron.
Your next line or your next question comes from the line of Sam poser with Williams trading. Your line is open.
Thank you very much. Uh, I I want to talk to you a little bit about the sgna and, um, your, uh, your, your marketing demand creation spend. Um, how much is, how much is that elevated? It looks like it's implied to be elevated again. And then how much
You're doing a lot of this. Are you doing most of the spend for long term? Brand Story?
And, and I'll ask you that first and I follow up.
Karen did dig into this with some of the Senate detail but I'll answer the last part first. I think absolutely Sam.
Um, I think we, we, I think, uh, previously we sort of got caught uh, in in, in a, in a cycle of sort of lower conversion focused marketing, uh, and, and Our Brands spend at the upper end of the funnel. Um, was was, was compressed. And I think we were chasing Revenue, uh, uh, a while ago and and, and really focusing on conversion, um, to try to help stimulate that and that, um, potentially at a short-term benefit, but to the long term costs cost of the brand. So, we're, we're working to reverse that. Um, we do have a new stable of CMOS in the building, um, which is great, which bring bring in New Perspective that to how, how we
I'm going to lead Our Brands and um, you know, as we sort of emerged from the turnaround and have additional Financial wherewithal to invest in Our Brands. We're very focused on on spending up and down the funnel and really working on on awareness and affinity for Our Brands. And I think those things are are, are beginning to take. Hold. And I think you're seeing that, um, in in socketing, if you're seeing that in sort of the all-time records, sort of Google search interest, you know, we we follow Google search interest as a proxy.
And we know we've seen some positive metrics from Maryland Softee, um, uh at as we thought differently about how we spend, so definitely a different approach to it. I'm trying to take a longer term Horizon to, to how we build it, build and protect our brands at the same time how we're sort of managing responsible growth for the company as well. I'll let Taran and answer the essay question more. Specifically the yeah, the build I would have is the
I think it's important to note that our, if you look at the second quarter, our gross margin increase 410 basis points and our adjusted operating margin, increase 290, uh, basis points year-over-year as Chris said, and if we have stated as part of our strategy, we are reinvesting. A portion of the gross margin gains in key areas of the business that are going to fuel that growth for this year. And as Chris said, long term, fueling the growth. Um, and it is, you know, you have to specific question about where its investments in marketing and our talents. Chris just mentioned, a few of those um, in tools such as our integrated business planning, as we're navigating, which is has been a benefit
We're navigating the current macro um environment and processes that are really going to be able to sustain profitable growth. Um, is the key areas I would call out both in terms of where you're seeing um a bit of that elevated sgna.
From the, you know, this was it, did you see that opposite impact where you saw short-term sales benefits from the top of funnel marketing?
Sorry, Sam.
Oh, go ahead. Sorry, no, I I, I, I think, I think we certainly did. Um, I think, you know, certainly as we sort of have been thinking about running Brands differently and you, and I have talked about this, you know, how how we lead Brands, how we think about the product pipeline, how we think about demand creation and where we think to spend how we think about distribution segmentation. I think we certainly think those are the right long-term things to do for the company for our brands. At the same time, I, I do think we, we are seeing a short-term left. And I think importantly, as we think about managing brands in their portfolio, as we think about Capital allocation, where we spend, how we spend, we have to think about, you know, where those Brands product pipelines are, you know, where do we sit? Um, how is the relationship with Keith wholesale Partners? So, I certainly think that it's in the long term best interest of Our Brands and being great brand managers, which we aspire to be at the same time. I'm certainly, uh, we're encouraged by the short term results. We're posting this quarter.
2 guidance.
If you.
In the third quarter guidance.
Yeah.
I think at the the third quarter at the,
you know, sgna would be around that 38.7, and that does reflect 100.
20 basis points, increase relative to Prior year. Um, I think in terms of current, we absolutely expect in terms of it, driving near the combination of near-term, but as well, as long term growth.
And then lastly what are you? What are you? Um your interest expense.
For the balance of the year. I mean is it is it going to average around 8 million a quarter? Is that right? Or is it going to drop down? Now that you're say you're not that's coming down.
Largely unchanged interest expense, was 8 and a half million in the second quarter.
Thank you very much. Um, continued success.
Thank you, Sam.
Thank you. And as a reminder, please limit your questions to 1 initial and 1, follow-up question. Your next question comes from the line of Dana telsey. With telsey Advisory Group, your line is open.
Hi, good morning everyone. It's so nice to see the progress.
Karen. If you think about the timing shift that you talked about, is there potential for additional timing shift in the fourth quarter, the third quarter, what are you seeing from that wholesale Channel? And Chris, given the focus always on earning the place on the shelves, how you thinking of new product penetration versus core? And how do you see pricing changing in this new world of care that I just have a quick follow-up.
Yeah, I think the first I'll answer the first part of your question. The timing shift?
The second quarter from the third quarter, to the second quarter, that 10 million dollars. Um, at at the current guidance that we're giving, I wouldn't call it any other timing shifts in that number Dana,
Yeah. And I, I just to answer your question about product and entering yourself, I mean, that's, that's absolutely right. You know, we we still do 3 quarters of our business through wholesale Partners um and we we do have to earn our way in the shelf and we do have to displace the competition. Um, and I would say, you know, we're I'm spending a lot of time at retail. I was walking in retail just last week and you know how our brands are showing up in our important. Wholesale customers, we look much. I feel we feel we look much better today than we did a year ago and certainly 2 years ago. Um, I spent a full day walking resale last week and just how we show up in the Shelf, the fact that we're showing up in the windows, again, of key Partners, um, I, I, I think is, is very encouraging.
Again the onus comes to write product um, Innovative Trend, Right? Price Right colored right place, right product that solves consumers problems. Uh and then importantly, we have also have to have Brands uh and we we have to have the right brands with the right messaging, differentiated storytelling. And then we have to do an invest in our partners too and make sure that we've got a ground game. Make sure we're helping support them and then obsess about sell through. So, I certainly am encouraged by the progress we've made. There is certainly more work to go do. Um, but uh, but at the brand is the brand Our Brands and Company I think are are in a fundamentally different place today than we were, uh, to to, to, to just just just a few short years ago
Yep. And his pricing changing at all given tariffs, whether in DTC, e-commerce or wholesale.
The price impacts. I think the the clarity around tariffs is getting somewhat less murky than it was uh at the same time sort of the downstream effects on the economy consumer sentiment and ultimately consumer spending. It's something that that we're paying attention to, um, we did selectively, take some price increases at the end of June, we're closely monitoring that both on our own sites, Plus, what's happening um, on the shelves, um, sell throughs and and all the data we get at the same time, looking to see what the competition has done. Uh, and and where the competitions sits in price, I think, uh, we'll get more clarity as we work through the back to school season and sort of understand how, how all that shakes out. Um, but certainly um, the price increases, we took the impact on the consumer that the macro consumer. Environment are things that we're paying very close attention to. With all of that said, I'm very thankful, um, that we've been able to get the work done over the past couple of years to shore up the balance sheet to get Our Brands growing again, uh, to do the significant Improvement in margin. I think we're in a much better position to to withstand these current challenges.
And hopefully emerge better Brands and better company on the other side.
Thank you.
Thanks Dana.
Your next question comes from the line of Mauricio cirno with UBS. Your line is open.
Uh, great. Good morning. Uh, thanks for taking my questions, I guess. Just to start could you uh, elaborate on what you've seen so far? You know, um, since you've uh, selectively raised prices at the end of June across across the business, any high level commentary of whether you seen like any reaction from the consumer and just like taking a step back and, you know, seeing all the products that you've seen in stock and it's very nice. Uh, how far along are you like, would you say, you are on the turnaround of the other brands, you know, particularly marrow and Sweaty Betty
Yeah, good great. Great, great. Great question. I would say we're still very early days of the price increases. Um, I think the wholesale customers that we went to said that, they largely expected Brands to to increase price. And that was, that was what we've heard. Um, I think we're still too early to sort of render judgment on where the consumer sits and and how those have been adopted um, as it relates to the other brands. Um, I I would, I would contend a little bit that we're turning around. Meril Merrill's got 4 consecutive quarters of growth. We've got 10 of 11 uh, quarters of market share gains. Uh, significant gross margin expansion. Um, so I I would say, maril, Marilyn soy have sort of rapidly deployed our our new brand building Playbook. Um, and I think we're encouraged by the progress. Those brands have made made in a short period of time as relates to the work group and Sweaty. Betty, we did see sequential Improvement, um, this, uh, this quarter versus last quarter, albeit self, admittedly not generating the results, uh, that that
That that we, that we, that we would expect. Um, I think we're making progress on the work group product pipeline. We've got a new Chief product officer and I think he's done a great job thinking about newness and Innovation. Um, you know, we had made in the USA collection that dropped a few weeks ago that sold out in a day. We just launched the the new Infinity collection, uh, yesterday on to, um, to really good reaction. I was getting um, getting some e-commerce sales last night, which is fantastic. Um, and then I've been able to spend a lot of time with Sweaty Betty over the last last quarter, I have been to London twice, uh, really thinking about this the strategy, and where we sit what's most important, uh, uh, in in sort of the, the next next couple of years, with that brand. So, I feel good about the work that the strategy work. I feel good about sequential Improvement, we've seen the product pipeline. We work group is getting better and I do think we're bringing Innovation uh, to Sweaty Betty. And the new products, we're dropping new colorways of the new prints. Uh, we dropped some outerwear a couple of weeks ago on our stores in the UK. Um, those have all been been positively received, so certainly more work to go do.
But I do think we are on the right path and I certainly think there are things that we've learned from Maryland soccer, uh, that we can apply to the balance of the brands. Get everyone moving in a, in a more positive direction.
Not uh very helpful and 1 quick, um, follow up on the tag impact that you provided 20 million dollars. Could you elaborate on know how much of that falls in Q3 and how much in Q4?
Uh yeah I didn't give I didn't get specifics uh it's more than just say the more of it is expected to be in the fourth quarter than in the uh third quarter. Just given the time of when the higher rates went in as well as our inventory that we had that would sell through. So the fourth quarter will be our first full quarter of seeing the higher tariffs
got it. So that being said third quarter, there's part of it that doesn't have the tires. In fact, this
correct.
Thank.
Thanks.
your next question comes from the line of Mitch commits with C Port research Partners, your line is open
Uh, yes, thanks for taking my questions. Um, I've got 1 on society, 1 on Merill, so I'll start with stock any when you look at the second quarter growth, can you say, how much of that either the percentage or the dollars was new doors versus same store? And then when you, when you think about the potential for stock me growth in the back half,
is it fair to kind of assume that the same store momentum is unchanged is just that there's less benefit from the new doors. Is that how you're thinking about it?
Yeah, good question. I I would say um well less than half of the growth that stocking generally. The second quarter which was driven by new door expansion. Uh, and when we talk about that, that's why we in the prepare, I'm trying to talk about broad-based, you know, regions and channels performance and lifestyle, uh, that there, there's not just 1 Thing driving the stock in the engine right now, which gives us
Uh, a lot of confidence, um, in in, in where that brand is and certainly what that, that, that brand can be, um, and I'd say right now and we're very focused. Like I said, previously just really focused on sell through. Um, and then, uh, really obsessing right now about the product pipeline, you know, how do we follow up, uh, the great work, that that that team has done to bring newness and Innovation and reinvigorate that product pipeline, to make sure that we, we can build a, a long, long term.
From model. So encouraged by by the growth, it is broad-based, uh, regions and channels. Um, you know, other metrics that we look at, you know, brand search interest is is certainly encouraging. And then, you know, as we begin to develop an order book for first half of 26 visibility in in what that order book looks like and then as we continue to begin to bring new activations online. Um, you know, I think early days of the turnaround we we we we took a chance with the London 10 case as part of our first key City strategy, that um, those results have been phenomenal. Um, you know, our partner in Japan has done a great job, uh, new partner in Japan. We move we moved our softening relationship into our marital partner in Japan. Uh, and, and they've done a great job. Opening a Sony store in Harajuku. And like I said, we're going to activate in London with a shortage 10K. Uh, this fall and then we'll move to France um with the Eiffel Tower 10K in December. Uh and really begin to really activate this key City strategy which, um, has really generated a lot of momentum uh, for, for our brands,
If maybe before I asked about Merrill as you click follow up Chris you you you referenced search again and you've done that a couple times on this call.
Um, from what I've seen, there's been an uptick for back to school. Um, is there anything you can say about Tsukami performance for back to school today?
Uh, I can't, I can't really comment on on inch reporter. I think back to school is, is still still relatively early days. Um, you know, I can tell you, you know, every Tuesday here, uh, the company sort of spends the full day, you know, uh, just herniating over our results. You know, sell through what's happening, shipments what's happening at DTC. Um and I and and we're a we're in the middle of it, you know, I grew up as a retailer, so back to school in Christmas. What were the busiest times of the year? And I'm sort of excited to get excitement and energy. Um, from a sort of pivoting to the back half of the year. And but certainly, um, we're pleased with the momentum. We've been able to generate in the first half of the year. Uh but Eyes Wide Open to the back half of the year and delivering a solid solid year for the company and then carrying momentum into 26.
I guess my question on on Merrill is more about the segments, actually. Uh, you you you talked about some inflection there and I'm curious if you could elaborate, is that more just a function of that that the segments been under pressure for so long that you know eventually things kind of just find a bottom or is there something that's actually driving more consumer interest in the hike category?
Times, but certainly that category uh finding bottom beginning to grow. Again, I think is good for everyone and certainly should be good for the market leader.
I do.
Thanks Mitch.
Your next question comes from the line of Anna Andrea with Piper Sandler. Your line is open.
Uh, great thanks so much, and, uh, congrats again, great results. Uh, we had a follow-up on Merrill. Um, great to see that momentum. Just any additional color on how International, um, versus domestic performed for the brand. Uh, Chris, I think you mentioned ASAP accelerated, um, how big is international from Merl, and how do you guys think about the potential there and, uh, to their and a follow up on Gross margins? Uh, you've called out a supply chain initiative as a benefit. I think her few quarters now. Uh, can you talk about sustainability of these, uh, going forward and just curious? Where are the 2 big Brands? Uh in terms of their historic markdown rates, uh, just as we think about additional opportunity uh, with full price. So ahead, thanks so much.
Yeah, I appreciate the question, and thanks for the comments, so, we'll attempt to answer those a couple of couple of things you asked. We, we generally don't disclose that, at the Brand level, so we'll be sensitive their International was good for Merill. Um, you know, us wholesale was good. We saw improvement in our in our DTC business, our Merril stores domestically performed very well, uh, but a couple of reasons, internationally actually outperformed the US. Um, uh, Emma
An APAC specifically, um, which we're encouraged by. I was in Tokyo, uh, just last month, and spent time with our partner there. And, you know, Marl looks...
So much different today than it did. Just a couple of years ago. Um, it's lighter faster. Um, I was walking the streets of Harajuku. I was in in Shibuya scramble and, you know, just seeing maril show up on. On young consumers in Tokyo was was very encouraging and I was seeing the right shoes. I was seeing Moab speed too. I was seeing speed dark Mattis. I was seeing Barefoot, I was seeing wraps, um, which is, which is encouraging in the fact that we've got, you know, a Merl Merl of 3 story. Uh, Flagship and Harajuku. Uh, we've got a, A 1 TL, uh, store in Shibuya scramble. He gives us a lot of encouragement and then, let's not forget about him, you know, I think Emma, uh, are sort of our strategy following the key cities reg that we deployed in stock and he has worked, uh, I think Merl became the, the, the leader in outdoor Performance Footwear, uh, in France last quarter, which is great overtaking, some some, uh, some very well known and some other great Brands. So I think the, the, the, the contribution internationally for Merrill, uh, is great. Uh, but at the same time, I don't want to dismiss the great progress. You made here in the us as well.
And as it relates to gross margin.
I what the what I would call out is we're not looking at any 1 area when we're looking in that 45 to 47% of our aspirations. It's really the we're working with our teams as we're looking at capabilities across so the better mix the more full price sales um and I think there is still more room, there's more premium products, we've talked about whether it is in stocking, whether it's in Morrow, whether it's in Sweaty, Betty was talking. And in the work group, we're talking about, how do we get more premium product, which helps in terms of the growth margin as well? And then on the supply chain piece, um, I'd say you're consistently looking for opportunities in supply chain. The exact nature of it is shift over time, meaning early on, it was some sourcing work that the team did a great job in terms of executing. But we can then also, you know, I was more recently with the team in Vietnam and how do we look at more? How do we look at our design in terms of making sure that that we're
Optimizing how we're building the design as well, um, as we're building those premium products. So, for gross margins in totality, I would explain it that we are looking at multiple levers in terms of being able to drive long-term sustainable, gross margins. Um and the the exact Weaver in 1 quarter, or 1 year could shift. Um, but overall looking at sustainable margins,
Okay. Terrific. Thank you so much and best of luck.
And your final question comes from the line of Ashley Owens with KeyBank. Your line is open.
A couple years in the making, um, I think we really took the opportunity in 23 and 24 to really reset that business. Uh, and really think hard about where the brand sat, um, pulling on a 100 Years of history. At the same time, the opportunity in the marketplace, um, and then think about what we should be focused on. Um, and I think we've historically may have been focused on on smaller Niche, parts of the business. Um, and I think certainly our product pipeline, um, hasn't always has been full as it is today, and then, certainly, our ability to drive drive drive demands. So, we took the opportunity to really reset that business. A new strategy, we brought in several new team members, um, and first and foremost. So I I want to get the product team credit. Um, really got back to Innovation. Um, and really both thinking about tip of spear Elite running at the same time, uh, take what had been a very sort of broad product range in in, in, in, in a product line architecture and really focus on, on, on, on a few core Styles and then democratize Innovation, uh, bring Innovation, not just for Marathon.
On to bring Innovation down to down to someone, who who's going to go try to try to run their first 5k. Um, and so I think that really intense focus on democratizing Innovation, maintaining tip of spear Innovation around around endorphins focusing on the core for. And then really thinking about color and materials and how we show up at the same time, really tapping into that lifestyle piece of the business.
Unfortunately, for 100-year-old brand, we have a tremendous product archive that that we can pull from and then really injecting energy and excitement, um, in in, in in, in, in that lifestyle piece. Both through collaborations with, with some amazing collaborate, collaborators that we've been able to partner with at the same time. How do we then take that and really take that? That hot brand heat that we can generate uh and really make that a commercial success and we're be beginning to see that, uh, as it relates to sort of what inning we're in. Um, I still think we're in the early Innings, um, because I think we're just, we're just getting momentum now in that business. Um, and I think certainly, um, we're building confidence, uh, and certainly to think about the, the markets that that Our Brands can address, um, 1 of the biggest markets, that, that, that that, that we can go build Brands and is, is, is we're softening the operates. Um, it has a great 100 Year history, we've got that product Engine moving, I'm really proud of that product team. Uh, we have a new CMO in place, think about how we drive demand and we brought some good leaders. We brought new leadership into our
Emma region which helped craft our, empty city city city strategy. Um and and and at that moment in this building and as I think about where stock and you can play in the future, you know, there there's a lot of opportunities for us to think about that business moving forward Beyond just where we sit today, um, other other footwork categories, we can plan and certainly apparel on Accessory opportunity, uh, Beyond because we're largely a 4, only brand I will tell you. We've got a fairly small apparel assortment in our coven Garden Store. Uh, and I was there uh the week of the 10K, um, the the
Penetration of a fairly small apparel assortment, um, was was, was amazing. Which only gives us more confidence that when we create great products, we package them into great stories. Consumers, want to participate in our brand. So, uh, I would say that we're in the early Innings of sock, Andy. Um, but certainly encouraged by an all-time record Revenue, second quarter, uh, phenomenal gross margin expansion. Uh, and I'm really proud of what that team has been able to do. So, um, I I remain. I I said, I said in, uh, I said in February of, um, 24. I was bullish on softening, um, and thankfully, that team that team has stood and delivered.
Great, that's super helpful caller. Maybe just. Lastly, now that we're back to a place of inventory growth
We could just speak to, you know, how we expect inventory growth to evolve relative to sales growth during the back half year from a modeling standpoint. Thanks,
Yeah, I think, you know, we didn't give we typically only share cash or inventory objectives on a full year, Ashley and so, I don't have any specifics other than to say that, you know, again, what I would, what I would point to is that the inventory growth that we've seen. In the second quarter, was primarily behind stocking, as we were getting being able to support that demand there to a lesser degree. There's some currency and, um, tariffs in there as well. Um, the primarily it's more really as we hit it.
Expected to building in the inventory to support. The demand we saw in stock Andy, so I wouldn't call anything out on the full year, other than just to remind where we're at in the second quarter.
Okay, got it. Thanks, and best of luck for the back half.
Thanks Ashley.
There are no further questions at this time. This does conclude today's conference call, you may. Now disconnect