Q3 2025 Amer Sports Inc Earnings Call

Speaker #1: Thank you for standing by, and welcome to the Amer Sports Q3 fiscal 2025 earnings conference call. All lines have been placed on mute to prevent any background noise.

Speaker #1: After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad.

Speaker #1: If you would like to withdraw your question, again press star one. Thank you. I now like to turn the call over to Omar Saad.

Speaker #1: SVP, Welcome,

Speaker #1: Capital Markets and Investor Relations. Please go ahead.

Speaker #2: everyone. Thanks for joining Amer Sports earnings call for the third quarter of fiscal year

Speaker #2: We announced our financial results for the quarter ended September 30, 2025. The release can be found on our IR website, investors.amersports.com. A quick reminder to everyone that today's call will contain forward-looking statements within the meaning of the federal securities laws.

Speaker #2: Statements reflect our current expectations and these forward-looking beliefs only. They are subject to certain risks and uncertainties that could cause actual results to differ materially.

Speaker #2: Please see the Safe Harbor statement in our earnings release and SEC filings. We will also discuss certain non-IFRS financial measures. Please refer to our earnings release for important information regarding such non-IFRS financial measures, including reconciliations to the most comparable IFRS financial measures.

Speaker #2: We will begin with prepared remarks from our CEO, Jie Zheng, and CFO, Andrew Page, followed by a Q&A session until approximately 9:00 AM Eastern.

Speaker #2: Jie will cover key operational and brand highlights and will provide a financial view at both the group and segment level. And also walk through our guidance for the full year 2025, as well as an initial high-level sales and margin 2026.

Speaker #2: Our CEO, Stuart Hazelden, and Solomon CEO, Guillaume Zheng, will join for the Q&A outlook session. With that, I'll turn the call over to James.

Speaker #3: Thanks, Omar. Amer Sports' strong momentum continued in the third quarter. As our unique portfolio of premium technical brands continues to create white space and traction in sports and outdoor markets around the world, all three segments performed extremely well, led by exceptional Salomon footwear growth.

Speaker #3: And Omnicom acceleration and solid growth from Wilson Tennis equipment 360 and our winter sports We delivered strong results across the P&L, including 30% growth.

Speaker #3: 130 basis points of adjusted operating margin expansion and more than doubling our adjusted EPS. Our performance was led by very strong growth and profitability in outdoor performance.

Speaker #3: Led by apparel, Solomon footwear, and the technical Arc'teryx, we also had solid contributions from the board and racket segment, led by Wilson Tennis 360. All four regions accelerated in Q3 and achieved double-digit revenue growth.

Speaker #3: And that strong momentum has continued into Q4. We believe Amer Sports is a uniquely positioned company within the global sports and outdoor space. Our specialized, highly technical brand serves the premium market, which continues to be one of the healthiest segments across the global consumer landscape.

Speaker #3: Several factors give me confidence for our near medium and long-term outlook. First, we own a unique portfolio of premium innovation-driven sports and outdoor brands.

Speaker #3: Second, Acteryx is a breakout brand story with leading growth and profitability for the outdoor industry driven by its disruptive direct-to-consumer model. Third, Solomon footwear has a unique and a very strong demand.

Speaker #3: Second, Acteryx is a breakout brand story with leading growth and profitability for the outdoor industry, driven by its disruptive direct-to-consumer model. Third, Salomon footwear has a unique product and brand position, but still a small share of the global sneaker market.

Speaker #3: Fourth, Wilson equipment and our winter sports equipment brands already have leading market shares and will deliver slower long-term growth, except for Wilson soft goods, which we believe has significant long-term growth potential.

Speaker #3: And the fifth, we have a Great China, where we continue to deliver best-in-class strong differentiated platform in brands. I want to take a moment to address performance across our three big September fireworks involvement, and our working closely with incident.

Speaker #3: the local authorities to address the impact. We remain deeply committed to our communities and the consumers, and are taking actions to ensure we do better going forward.

Speaker #3: I turn it over to Andrew. We regret our before page. Allow me to briefly recap key brand highlights from our three segments. Starting with technical apparel, which is led by Arc'teryx.

Speaker #3: Acteryx delivered another quarter of broad-based strength across regions, channels, and categories. Especially footwear and women's. We are encouraged by technical apparel's continued momentum in the direct-to-consumer channel, where the Omnicom re-accelerates to 27% from 15% in Q2.

Speaker #3: We envision Acteryx as a truly global brand with significant runway to grow in all major markets. We are particularly encouraged by the meaningful Q3 acceleration in North America and Europe, as well as continued strength in Asia and China.

Speaker #3: Strong women's momentum continues in Q3, growing 40%, and was one of Amer Sports' fastest-growing categories. We continue to see a large opportunity to serve women in the outdoors in a different way.

Speaker #3: Focusing on pinnacle design and performance, the new women's retail pants was a standout performer in the quarter and was a top epicenter. Our women's climbing pants also continue to be a five-model success across all U.S. markets, widely popular since its launch last year.

Speaker #3: For four winter 2025, we are expanding our focus on color. And have launched a new model like the new pants and the women's only sheer jacket styles like Emirates and Altair.

Speaker #3: We continue to experience rising brand awareness and affinity with women in the U.S. and Europe, as we have improved fit, style, and function. As we discussed at our recent Investor Day, women's will represent approximately 25% of global sales in 2025.

Speaker #3: And we expect it to become 30% of sales by Acteryx sales in 2030. Footwear also continues to be a key growth driver with 35% growth.

Speaker #3: Shoe models launched in the fall included a conceal, a modern take on the classic approach shoe, which is light, grippy, and beautiful long technical missions.

Speaker #3: We also launched Northern Nivaris, a winterized evolution of the Northern LD4, delivering high-performance running in cold conditions with a bold modern silhouette. Looking forward, Acteryx has an exciting pipeline of shoe launches for next year.

Speaker #3: And we continue to believe footwear will be a large and profitable growth avenue for Acteryx. Footwear will represent approximately 8% of global brand sales this year and we expect it to reach 13% by 2030.

Speaker #3: Our valence sub-brand is still small, but grows strong double digits in Q3 and we are excited for the future potential of this brand. Valence is expanding into new high-end wholesale partners in North America.

Speaker #3: Valence in Nord Stream in the U.S. and the whole rent flow in Canada. Valence will represent approximately 5% of global brand sales in 2025, and we expect it to reach 7% by 2030.

Speaker #3: Security and rebirth continue to be at the heart of our brand. We now have 32 Rebirth Centers, which support our successful September trading initiative, whereby guests receive a 30% credit for returning their used Arc'teryx jackets.

Speaker #3: Mention Peak Performance. The other I would also like to brand within our technical apparel segment. We are pleased to share that Peak Performance is seeing stabilizing sales and profitability in its core European business.

Speaker #3: As well as early green shoes in North America. We introduced the peak to IEI in September. And we are also opening a Vancouver flagship store in the previous Acteryx space in time for this winter season.

Speaker #3: This was led by another outstanding quarter from the moving to the outdoor performance Salomon footwear and apparel, as well as a healthy performance from winter sports equipment.

Speaker #3: Salomon Footwear's momentum continues across all regions, especially Asia, with strong demand for both sports styles and performance products. In addition to sneakers, bags and socks are also growing strongly across regions.

Speaker #3: There are several ongoing factors that give us confidence that Salomon Footwear is well positioned for significant profitable growth in the year ahead. Number one, global sports style momentum continues.

Speaker #3: One of Salomon's unique strengths as an outdoor brand is how well we are connecting with younger consumers, especially women. Our sports styles offering is critical to Salomon's unique sneakers brand.

Speaker #3: Women in a way traditional outdoor brands have not. Second, our performance and the running lines are also having great success. Our gravel franchise is unlocking the run category for Salomon like never before.

Speaker #3: Salomon is gaining traction in the run specialty channel in North America and the EMEA. Even China, which has been a sports style-centric market, is seeing traction in performance products.

Speaker #3: We are also seeing a benefit from improving our capability to launch globally coordinated marketing campaigns to support our sports style and the performance launch. Third, Salomon's continued amazing brand key in Greater China and Asia.

Speaker #3: We believe we operate the most productive and profitable sneaker shops in the industry. Beyond Greater China, Salomon is also experiencing surging demand in Korea and Japan, both large sneaker markets.

Speaker #3: Fourth, , our epicenter strategy is working. a handful of brand stores alongside strategic elevate Our strategy to open wholesale distribution in key metro markets is critical to elevating Salomon's presence and awareness globally.

Speaker #3: Epicenter cities include Paris, London, Shanghai, Beijing, New York, L.A., Milan, Miami, and more to come. Fifth, we are seeing accelerating demand in Europe, Salomon's home market.

Speaker #3: Salomon is experiencing strong pool demand from consumers, which drives strong reorders, pre-orders, and sales for performance. Sixth, in both sports style and North America, which is still a much smaller sneaker market for us compared to Europe or Asia.

Speaker #3: It's growing at a solid double digit rate, but under the surface. We can see that it's growing even faster. We are still exiting certain retail and e-com channels that weren't right for simultaneously ramp up our North America direct-to-consumer footprint and wholesale expansion with the key strategic partners.

Speaker #3: Salomon. Lastly, as we continue to elevate Salomon's brand awareness, Where we we are excited about upcoming Milano Cortina partner, outfitting all Olympics. volunteers. This will be a Where Salomon is a premium great moment for the brand in its home market.

Speaker #3: I also want to mention our Winter Sports Equipment franchise. Which had a very strong Q3 with healthy shipment to start the season and a solid outbooks for the winter season overall.

Speaker #3: We were thrilled by the outstanding performance from Atomic Athletes in the World Cup in Southern Austria. The event represents a great start for the season in Europe.

Speaker #3: With record attendance and the broadcast viewership, which is a positive indicator of the engagement and the passion people in Europe have for Winter Sports.

Speaker #3: In 2025, Winter Sports Equipment is expected to represent only 28% of the outdoor performance segment, down from 46% in 2022. Moving to ball and racket highlights.

Speaker #3: Ball and racket had strong sales in Q3, with 16% growth driven by continued strength in soft goods and racket sports. Our Tennis 360 products continue to resonate very well with consumers.

Speaker #3: From performance rackets to tennis apparel and footwear, Western soft goods continue their explosive growth, more than doubling in the quarter with very strong performance across all three major regions.

Speaker #3: The brand has some big moments at this year's US Open. Both on and off the court. Western coastal brand activations across New York City during the tournament.

Speaker #3: Including a four-day Western Tennis Club pop-up in Soho. And our on-site US Open shop again posted record traffic and sales. On court, Arena Sabarica won her fourth single titles at the US Open playing with the Western Great V9.

Speaker #3: On the plus side, in July Western unveiled Ultra V5. This is the most versatile ultra racket yet. Designed for intermediate to advanced players seeking both power and precision.

Speaker #3: Beyond the tennis 360, we saw a slight growth in golf driven by email and the data power portal. Baseball was flat, and the infinite was essentially flat as growth in bats was offset by a decline in gear.

Speaker #3: In free throws, what's done due to continued challenging market conditions and the tariff-driven price increase? U.S. retailers and the consumers are showing some price sensitivity in this category.

Speaker #3: And we plan to introduce a slightly lower price point premium ball next year to make sure we are well positioned at the sweet spot on the price spectrum.

Speaker #3: With that, I will turn it over to Andrew.

Speaker #2: Thanks, James. The headline is that our strategy is working. Our brands are firing on all cylinders, allowing us to execute Q3 with momentum and setting us up to enter 2026 with confidence.

Speaker #2: Before I get into Q3 results, I want to personally thank our more than 13,000 employees around the globe for their obsessive focus on the consumer and continued push toward operational excellence.

Speaker #2: Only possible through their efforts. Now to our results: these results are significant. Salomon Footwear continues to add a strong second leg of profitable growth to our Terrax's already exceptional trajectory, significantly elevating the financial profile and long-term value creation potential of the Amer Sports portfolio.

Speaker #2: All three operating segments delivered both sales and margin ahead of expectations in the third quarter. Given our strong third quarter results and continued momentum, we are raising our full-year revenue, margin, and EPS expectations.

Speaker #2: Amer Sports group sales 30% in Q3 on a reported basis. Or 28% ex-currency. The strong group sales performance was led by outdoor performance, followed by technical apparel.

Speaker #2: Ball and racket sales also accelerated and delivered double-digit growth. By channel, the group continues to be driven by direct-to-consumer sales, which grew 51%, led by Salomon and Greater China and APAC.

Speaker #2: Wholesale grew 18% at the group level, also led by accelerated across all Salomon. Growth regions. Regional growth was led by Asia Pacific, which increased 54%, and China, which grew 47%.

Speaker #2: A MEA accelerated to 23%, and the Americas accelerated to 18% in Q3. Turning to profitability, adjusted 240 basis points to growth margin increased 57.9% in Q3, primarily driven by favorable channel, geographic, product, and brand mix.

Speaker #2: benefited by approximately 50 Growth margin also basis points from one-time inventory reserve adjustments. Adjusted SG&A expenses as a percentage of revenues was flat year over year and represented 42.3% of revenues in Q3.

Speaker #2: The technical apparel SG&A leverage on strong growth was offset by slight deleverage at outdoor performance and ball and racket due to ongoing investments in Salomon soft goods and Wilson Tennis 360.

Speaker #2: Led by strong growth margin expansion, we generated $130 basis points increase in our adjusted operating margin from 14.4% last year to 15.7% in Q3.

Speaker #2: Corporate expenses were $38 million. Up from $23 million in Q3 of last year. DNA was $119 million, which includes $43 million of ROU depreciation.

Speaker #2: Adjusted net finance cost in the quarter was $18 million. Which comprised primarily of $26 million of interest expense partially offset by $7 million of FX gains on the remeasurement of certain monetary assets.

Speaker #2: In the quarter, our adjusted income tax expense was $68 million, which equates to an adjusted effective tax rate of 26%. Adjusted net income in Q3 was $185 million.

Speaker #2: Compared to $71 million in the prior year period, adjusted diluted earnings per share was $33, compared to adjusted diluted earnings per share of $14 last year.

Speaker #2: Now, turning to segment results. Technical apparel revenues increased 31% to $683 million. Led by our Terrax. Growth was fueled by 46% direct-to-consumer expansion, including a re-acceleration in our Omnicom to 27% from 15% in Q2 of 2025.

Speaker #2: Technical apparel wholesale revenues grew 11%. Regionally, the technical apparel growth rate was led by Asia Pacific, followed by the Americas, Greater China, and then AMEA.

Speaker #2: double digits. Our Terrax stores are critical All regions grew strong to the brand's growth, especially how we engage with local consumers and community. Our stores include a mix of different formats ranging from multi-level large-scale alpha flagship stores to small format very distinct mountain town shops.

Speaker #2: In Q3, excluding the recently acquired stores in Korea, which I will discuss shortly, our Terrax opened four net new stores. With 10 openings offset by closures of six legacy locations as part of our ongoing strategy to optimize the quality and productivity of our store fleet.

Speaker #2: New store openings included our Terrax flagship in Vancouver at Robson Street. Our Terrax also opened brand stores in Manchester, UK; Canberra, Australia; and Takenawa, Tokyo.

Speaker #2: We have opened 12 net new stores year to date, and we continue to plan to open approximately 25 net new Terrax stores for the full year, with the largest number coming in North America.

Speaker #2: Our store opening plan incorporates a similar level of growth for new stores as in 2024, partially offset by the closure of certain outlets and suboptimal locations.

Speaker #2: In Greater China, we continue to focus on optimizing our Terrax retail footprint. This year, we will have slight net store closures, including some legacy partner doors.

Speaker #2: However, we will still grow our own store count and our overall square footage in China, with larger format, higher quality, and more productive locations.

Speaker #2: A good example of this is our upgrade of the original Terrax flagship in Shanghai at the Alpha Center, which will reopen this month after expansion and renovation.

Speaker #2: Looking ahead to 2026, we are planning for our Terrax to have net store openings in China after years of rationalizing the store fleet in the region.

Speaker #2: In North America, I would highlight our second New York City Alpha store, which recently opened on 5th Avenue at Rockefeller Center. This store is the most technical expression of the brand in the US, and we are encouraged by the strong sales in the first few weeks.

Speaker #2: With nearly 12,000 square feet, it's one of the largest stores in North America and a bold step forward in our Terrax's retail expression. Designed to educate, inspire, and connect more people to the mountain through immersive storytelling and product innovation.

Speaker #2: In Q3, we also closed our asset purchase agreement with Nelson Sports, our Terrax distributor in Korea since 2001. This deal effectively converted 46 partner stores into our own fleet, which included a number of small-format shop-in-shop locations.

Speaker #2: The revenue and margin impact in Q3 was negligible. Bringing Korea in-house will benefit our top line and operating profit dollars, as we convert from wholesale partner revenues to D2C revenues.

Speaker #2: Bringing Korea in-house will have an immaterial impact on both the segment and group operating margin. This acquisition will contribute approximately $25 million of incremental sales in Q4.

Speaker #2: On an annualized basis, Korea is expected to generate approximately $120 million of total sales at retail in 2025. Beyond 2025, we believe Korea is a large high potential market for our Terrax, given its strong consumer affinity for the sports and outdoor category and premium global brands.

Speaker #2: Technical apparel adjusted operating margin declined 100 basis points to 19.0%, as SG&A leverage was offset by approximately 125 basis points headwind from a timing shift related to government grants.

Speaker #2: Moving to our outdoor performance segment, which saw revenues increase 36% to $724 million, driven by very strong performance in Solomon footwear, apparel, bags, and socks.

Speaker #2: By channel, outdoor performance D2C grew 67%, led by new doors and higher productivity across markets, especially Greater China and APAC. Outdoor performance achieved an impressive 33% Omnicom with strength in both stores and e-commerce.

Speaker #2: E-commerce is growing across regions, driven by higher traffic. Wholesale grew 26%, driven by strong sell-through and reorders in soft goods. Regionally, the outdoor performance growth rate was led by Greater China and APAC.

Speaker #2: Followed by accelerating growth in both AMEA and the Americas. The popularity of solomon footwear is inflecting globally, and we are well positioned to fully develop this unique opportunity over time.

Speaker #2: We believe we have very significant growth opportunities in all three major consumer regions and have the right talent and team structures in place to take a meaningful share of the global sneaker market.

Speaker #2: In Asia, direct-to-consumer continues to be the critical growth channel for Solomon, led by our highly productive Solomon compact shop format. We opened 19 net new Solomon shops in Greater China this quarter.

Speaker #2: Including both owned stores and partner stores, bringing our total count to 253 doors. We are on track to reach approximately 290 Solomon shops in Greater China by year-end, including owned and partner doors.

Speaker #2: We recently opened our second Solomon flagship in Shanghai, a 7,300 square foot tentacle expression of the brand located in the French Concession district, known for its boutique shopping.

Speaker #2: The three-level store offers a more immersive experience for consumers and has performed very well in its first few months. In APAC, we opened 12 new Solomon stores in Q3.

Speaker #2: Six in Korea, four in Japan, and two in Australia. Our overall brand awareness and demand for Salomon footwear is rapidly growing across Asia. In the Americas, Salomon soft goods grew strong double digits in Q3, and we continue to lay the groundwork to support significant future growth.

Speaker #2: Our first US store in New York City continues to show incredible traction with consumers, and we are on track to operate four stores in Greater New York by the end of Q1.

Speaker #2: As well as continuing to expand our presence in key wholesale accounts, new locations in Q3 include Woodbury Commons in New York, the trendy Buck Town neighborhood of Chicago, and later this week, we're opening our second New York store in Williamsburg, Brooklyn.

Speaker #2: And I also want to mention our first Los Angeles store on Melrose Avenue in West Hollywood, which opened at the beginning of Q4. The opening has been a huge success, with very strong brand buzz in the area.

Speaker #2: High traffic and long lines outside the store. We were thrilled to welcome many first-time Solomon buyers, especially many young female consumers. We will continue to focus on epicenters in 2026 and beyond.

Speaker #2: Including New York, Los Angeles, Miami, and San Francisco, and we are planning to open 7 to 10 new stores next year in the US.

Speaker #2: Looking at U.S. wholesale, Solomon is seeing growing demand across a variety of high-quality retail partners, including REI, Nordstrom, and run specialty shops. In AMEA, we continue to expand our store fleets in key epicenters, including Milan and London.

Speaker #2: We recently opened our second brand store in Milan and will open a third one in Q4. Additionally, we will open a fourth store in London in Q4.

Speaker #2: In 2026, we will further develop our epicenters into Spain, Germany, and other key UK cities. For our Winter Sports Equipment brands, Q3 was a strong quarter with double-digit growth across brands and regions.

Speaker #2: Sales also benefited from approximately $20 million of shipments that were planned in Q4 but went out in Q3. Order books for the season are solid, and our brands continue to take meaningful market share globally.

Speaker #2: In addition to strong market share in our core ski, boot, and binding categories, we see incremental growth opportunities in areas such as snowboarding and protective equipment.

Speaker #2: Outdoor performance adjusted operating profit margin expanded 420 basis points from last year to 21.7% in Q3. Margin expansion was led by gross margin, thanks to positive channel, region, and product mix, as well as favorable product costs driven by our footwear cost optimization initiatives.

Speaker #2: Gross margin expansion offset the very slight SG&A deleverage due to continued investments in growth. Moving the ball and racket, where revenue increased 16% to $350 million, driven by soft goods and racket sports.

Speaker #2: We continue to see very strong momentum in tennis 360 globally. By category, the growth was led by soft goods, which more than doubled in the quarter with strong momentum in all regions.

Speaker #2: Representing approximately 15% of Soft Goods Now segment revenue, racket sports also grew strong double digits, driven especially by very strong growth in AMEA and China.

Speaker #2: Regionally, the ball and racket growth rate was led by China, followed by APAC, AMEA, and slight growth in Americas. Globally, in Q3, we had 10 net new Wilson brand store openings, mostly in Greater China.

Speaker #2: Wilson continues to excel in China, and we are planning to open approximately 35 Wilson Tennis 360 shops in China this year. Including both owned and partner doors, this will bring the total to around 80.

Speaker #2: In Q3, Wilson celebrated the opening of its urban concept store Brickhouse in Wuhan, which integrates American tennis club aesthetics with local Wuhan culture. A tribute to Olympic champion Zhang Chenwen's hometown.

Speaker #2: In North America, our expansion into the warmer southern markets is continuing to drive strong results. Our Dallas North Park mall location continues to perform very well.

Speaker #2: expand our new tennis 360 concept store into more southern and coastal locations. Including And we continue to our new shop in Beverly Hills and an upcoming shop in Miami.

Speaker #2: We also continue to expand our tennis 360 tests in new Dick's Sporting Goods locations, including House of Sports locations. In APAC, we are excited to expand our retail format into two new markets: Japan, with our first store in Tokyo's Marunouchi District, and Australia, with our first two stores in the Melbourne area.

Speaker #2: Ball and racket segment adjusted operating profit increased by 70 basis points to 7.6%, thanks to strong gains in gross margin driven by favorable product, region, and channel mix.

Speaker #2: And pricing. Ball and racket profitability also benefited from the above-mentioned one-time inventory reserve evaluations. These gains offset higher tariff costs and slight SG&A deleverage on continued soft goods investments.

Speaker #2: Turning to the group balance sheet. We ended the quarter with $800 million of net debt. Using the midpoint of our 2025 adjusted operating profit guidance, our net debt to adjusted EBITDA ratio was approximately 0.7 times at the end of Q3.

Speaker #2: with inventories up We exited the quarter 28% year over year. Slightly lower than our 30% sales growth. We are very comfortable with the inventory.

Speaker #2: With inventories up, we exited the quarter 28% year over year, slightly lower than our 30% sales growth. We are very comfortable with the level and quality of our inventory, which is primarily related to four factors.

Speaker #2: Number one, earlier receipt of seasonal Arc'teryx merchandise to prepare for better in-stock positions. Number two, higher Arc'teryx goods in ocean shipping versus air freight.

Speaker #2: Three, FX translations due to the weaker US dollar. And four, the addition transit resulting from the greater use of of arc terraces career inventory following the recent acquisition.

Speaker #2: We expect inventory growth rates to normalize in the second half of 2026 when we start to cycle our improved in-stock positions and the higher use of ocean freight.

Speaker #2: Driven by strong profit growth and disciplined working capital management, we generated $104 million of operating cash flow in the first nine months compared to $18 million.

Speaker #1: Cash flow growth versus now moving to guidance 2024 levels. The updated guidance assumes the latest tariff rates on all countries will stay in place for the remainder of 2025 and beyond.

Speaker #1: We remain confident that we are well positioned to manage a variety of tariff scenarios. Given our low exposure to the U.S., our pricing power, and our clean balance sheet.

Speaker #1: continue to expect We negligible impact to our group . PNL from higher tariffs in 2025 and beyond . Let's with our begin updated full year Given the 2025 outlook .

Speaker #1: upside in Q3 and our continued momentum , we are raising our full revenue year , operating and EPs expectations margin . We raising 2025 revenue growth guidance from 20 to 21% are 23 to 24% , to including an 100 basis point benefit from favorable FX impact on exchange current approximate by segment .

Speaker #1: raising our technical We are Apparel guidance from growth approximately 22 to 25% including 26 to 27% , continued strong Omnicom growth . We are 2025 revenue our outdoor performance , sales growth expectations from 22 to 25% to 28 to 29% , and ball to and from 7 to 9% to 10 to 11% .

Speaker #1: Growth. We are also raising our adjusted full-year gross margin guidance from approximately 57.5% to approximately 58%. Additionally, we are raising our adjusted operating margin guidance from approximately 11.8% to a range of 12.2% to 12.7%.

Speaker #1: By segment . We continue to adjusted operating expect an margin of approximately 21% for technical for apparel performance , we raising adjusted operating margin guidance from 11 to 11.5% to 13 to 13.5% for are ball and racquet , we are maintaining our adjusted operating profit margin guidance of are assuming year net finance 3 to 4% .

Speaker #1: now effective tax 85 to $90 million and an rate of 27 to 28% . The lower effective tax rate is driven higher profit generation from by lower jurisdictions operating .

Speaker #1: approximately $20 million for the full year , and net full income attributable to noncontrolling interests Other will be We now diluted EPs approximately $15 million .

Speaker #1: Expecting earnings per share of $0.88 to $0.92, compared to our prior guidance of $0.77 to $0.82, which is based on 563 million fully diluted shares. We are also assuming DNA of $350 million, including approximately $180 million of ROE depreciation.

Speaker #1: CapEx is expected to be approximately $300 million , primarily to new store support expansion . ERP optimization , and distribution , and logistics investments .

Speaker #1: As we have said before , should strong trends continue and better than anticipated demand materialize , we believe we will be positioned to deliver well financial performance ahead of our expectations as we begin to look beyond 2025 , we are also confident in our initial 2026 outlook at the group level , we expect to towards revenue the high end of our long algorithm of low term double digit to mid-teens annual sales growth , and we expect to deliver adjusted operating margin expansion within our long term algorithm of 30 to 70 basis points .

Speaker #1: That, I'll turn it back to the operator for questions.

Speaker #2: Thank you . We will now begin the question and answer session . If you would like to ask a question , please press star one on your telephone keypad .

Speaker #2: If you would like to withdraw your question , simply press star one again . Your first question today comes from the line of Brooke Roche from Goldman Your line Sachs .

Speaker #2: is open .

Speaker #3: Good thank you for morning , and taking our question . Have you seen a sales in China following the fireworks impact incident ? If so , when do you expect sales to recover ?

Speaker #3: Do you think there could be any longer-term brand repercussions?

Speaker #3: ?

Speaker #4: Hey , It's Brooke . Stuart . Thanks for your question . Our China sales trends were softer at the beginning of Q4 , but have since rebounded as weather has cooled .

Speaker #4: We're confident in our brand position and equity with consumers across all of our markets. We are most focused on connecting with our consumers and communities and delivering great product experiences.

Speaker #4: . Great .

Speaker #3: And as for this event, Andrew, how did this impact the overall performance?

Speaker #4: Hi ,

Speaker #1: are you ? it The did not have a factor in Q4

Speaker #1: guide .

Speaker #5: congrats on a on a quarter nice . So , James , could you speak Brooke .

Speaker #5: to your guiding 2026 revenue growth to mid-teens , which high end of is the your long algorithm ? And then Stuart at Arc'teryx , could you break down the cadence of the third How quarter , Thanks , 27% ?

Speaker #5: And if you could elaborate on the strong Omnicom global momentum that you've seen in the fourth quarter, or just in demand that you've seen as we head into the holiday for the brand?

Speaker #4: Hey , I just .

Speaker #6: Highlight our forecast for coming years. So we have given the very solid foundation we built up for 2025. I think we have a very good level of confidence to deliver what we guide for 2026.

Speaker #6: I think mid-teen growth patterns can be secured in 2026.

Speaker #4: Hey , Stuart . So yeah ,

Speaker #4: the Omnicom we're really pleased to see momentum the in the third quarter . You know the overall DTC Yeah . revenue Matt . at 46% .

Speaker #4: You know we think is really increase The 27% . Omnicom also reflects a strong two year trajectory . And you know that's definitely factored into how we thought about guidance into the fourth quarter .

Speaker #4: we look at Q3 , specifically the retail The performance was from a KPI standpoint , was driven by traffic . So we saw really traffic healthy increases modest increases in , more conversion and AOV and upped also worth mentioning .

Speaker #4: Markdown were pretty levels consistent year over year . So it was not a markdown driven , you know , sales increase as you , you know , look at your and your question around the global demand , strong momentum around of our you all know , it was great to regions , see the acceleration in our North American business third quarter in the , where they moved up in the after ranking Pacific , which continues to be the region leading for .

Speaker #4: But we saw some very strong growth in still China, in the U.S., and in Europe. So we're not really seeing weakness in any of our regions.

Speaker #4: And , you know , makes optimistic it as we look at fourth quarter and beyond . And yeah , so I think really good for how we've now stepped into the fourth quarter and the trends quarter we're seeing to date .

Speaker #4: Matt

Speaker #4: . Great .

Speaker #2: Your next question comes from the line of Ike Boruchow from Wells Fargo. Open your line.

Speaker #7: Hey guys . Let me add my congrats guess higher level question on the excuse me on next year's outlook . Just , just maybe potential additional info on door growth for both technical basically both for Solomon and our in Arc'teryx .

Speaker #7: And then we'd love to hear a little bit more about the progress on Solomon in the United States . Specifically . Andrew , can you give us an update of where you are in penetration there , just there seems lot of to be a appetite for the brand locally here .

Speaker #7: I’m just kind of curious how you’re measuring that, balancing the growth with the push-pull model. Thanks.

Speaker #4: Have Andrew to first question, and then actually take the we have Guillaume.

Speaker #8: Here . Who's the CEO of Solomon Brand . We'll take the Solomon Yeah . question . Thanks .

Speaker #1: for the Thanks question .

Speaker #4: Regards

Speaker #8: detail of store .

Speaker #8: I will provide more of Growth . that update as we get into our Q4 So not not call . not necessarily ready to provide a detailed update on store growth yet .

Speaker #8: I will provide more of Growth . that update as we get into our Q4 So not not call . not necessarily ready to provide a detailed update on store growth yet .

Speaker #9: And so, nice to meet you all jumping into North before America. I think that we have to put Solomon's context and current momentum we have.

Speaker #9: So and the I'm convinced hold a that we truly distinctive position in the market , and we leverage it fully it to in next .

Speaker #9: shape We what comes have incredible opportunity an define the modern mountain sports movement in the market , and if identify a few strengths of Solomon , first one is the authentic mountain the performance , which is what consumer is looking for .

Speaker #9: Is authenticity . We are true to what we are doing . We have a global recognition of design , language led by innovation .

Speaker #9: What we are doing and developing is really true for performance , for function . And we have a growing cultural relevance . Reaching the mountain , the city and the modern lifestyle .

Speaker #9: And and this quarter is the good example the of Solomon in the potential of market . And we believe that this is just a start .

Speaker #9: If if I move on the US case , because this is a this is a question . Of course , you know , this is today the , the the , the region that we have to build the fundamentals .

Speaker #9: So we , we are showing a strength in are very EMEA . We growing very fast in Asia Pacific and . And China today we are focusing on us and the US position is coming from this leading position in winter sports and outdoor , where Solomon has high market share and high recognition in the market .

Speaker #9: And to the now we have city . this is And what is to move currently happening by a true epicenter strategy , so that we started in New York a few a few quarters ago .

Speaker #9: Now we have LA. The new shop opening we have in Melrose is a good example of a long line of consumers looking at this product.

Speaker #9: We have good traction in running, also specialty distribution, and now performance. How we assess this is through all the signals and insights, which are coming from a new consumer—very, very often a female consumer.

Speaker #9: How we are and transitioning translating into a bigger US scale in the . And this is why we look at more epicenter , more shop opening , having a curated media investment in the right spaces and of course , working with our B2B partner to drive the numeric distribution .

Speaker #9: We will expose ourselves to more consumers, and we feel very confident that we are on the right path to accelerate in North America.

Speaker #8: Great .

Speaker #7: Thank you .

Speaker #8: Thanks , Ike .

Speaker #2: Your next comes question from the line of Lorraine Hutchinson from Bank of America . Your line is open .

Speaker #10: you . Good morning . with Just sticking . You're back some pruning of the there , distribution which is causing a pressure . Can you talk about when that pressure will abate and where you are on us awareness at this point for the Solomon brand .

Speaker #9: I think you still about speak us and of course , you know , as I explained , we we had this leading position in in winter sports outdoor and performance and footwear and this outdoor performance footwear led us a few years ago to go to a places and some distribution that we , we think there are not any more relevant and we think and also the partner sometimes also is looking for other priorities .

Speaker #9: This is why we have this kind of looking like negative. Some negative building blocks which show finally kind of growth, but not the growth expected.

Speaker #9: As we would. We think that the end of each H1 2026 will be the last time that we will not have any more anniversary sales, and we will have a completely fresh and new setup for distribution.

Speaker #9: So we still wait for the for for few quarters , but but I would say that the most of the change has the been already implemented of .

Speaker #10: Thank you .

Speaker #2: Your next question comes from the line of Jay Sole from UBS. Your open line is.

Speaker #11: Thank you so much . I want to ask about Great . Wilson , 360 stores . It like I sounds said you're up to specifically the China .

Speaker #11: just talk think you 80 stores in picture , long term opportunity in China . And about you also I think mentioned that the store Dallas , I think in you said is off to a good start .

Speaker #11: You're opening some more three stores in the tennis , US . Can you just talk the tennis 360 opportunity China outside of and how about developed over view ?

Speaker #11: In your the last 90 days ?

Speaker #8: Sure . Thanks , Jay . So you mentioned . Hey the tennis 360 concept outside of have , you know , China . So 1415 stores we in America .

Speaker #8: North I mentioned the Park Dallas store is doing well . really focus . Really the around state . So think about where you you concentrate the tennis and southern of the US smiles starting in that Georgia down to Florida around the south , and then and then through California .

Speaker #8: So back up what that's what I would expect to see retail format epicenter concentration . We are still , you know , we're in the stages of that .

Speaker #8: We're excited and super we're about where it's going motivated . Consumer . It's really gravitating towards the product . But we're still in the early stages of really optimizing of and and start to the hand . and the We've pathway consumer there .

Speaker #8: We're excited and super we're about where it's going motivated . Consumer . It's really gravitating towards the product . But we're still in the early stages of really optimizing of and and start to the hand .

Speaker #8: format . see 360 present our our our format And So you'll are also seen go to retail of the in the and success able to formats , .

Speaker #8: Dick's and the own shop for the six locations.

Speaker #11: much Thank you so Got it . .

Speaker #2: Your next comes from the line of question Paul from Leslie Citigroup . Your line is open .

Speaker #12: Thanks , Hey . guys . margin guide for I'm next year . On the the curious how expansion much of is a function of simply business mix versus improvements that you might be seeing within each segment ?

Speaker #12: then I just And wanted to clarifying on Solomon point Could you just say what ? What is the of number actually you're exiting in the doors that business ?

Speaker #12: Wholesale, and then you, Solomon, what are we adding over the next 12 months?

Speaker #8: Yeah . Hey , a lot . You know , same drivers of our the mix shift as before . It's going to be primarily driven by gross margin expansion .

Speaker #8: will We continue to make the proper investments in to continue to drive growth . So margin expansion that you see will be driven primarily by gross expansion .

Speaker #8: gross margin That expansion is driven margin by mix shift , both channel and product and region relates to the fixed as it number of doors .

Speaker #8: We're not necessarily going to comment as a it's a nuance as we as as Galen talked about exiting , exiting some wholesale doors that couldn't tell that expression of the brand and getting into more strategic partners .

Speaker #8: But as we talked about , start to think about clearing that through H . H one of next year and you start to see as we get into third quarter of next year , you start to see the brand really show up in the strategic partners that we'd like .

Speaker #12: Thank you . Good luck .

Speaker #2: Your next question comes from the line of Anna from Andreeva Piper Sandler. Your line is open.

Speaker #13: Your line is open .

Speaker #10: Great .

Speaker #14: Thank you so much for taking our questions . And congrats . We wanted to follow up on the Americas . Nice to see the region accelerate to high teens .

Speaker #14: Can you provide more color on what you saw by channel , and how did us perform within that ? I think you mentioned slight growth at Wilson in the US , and as you look into 26 and the high end of the algo , should we expect Americas as a double digit grower next just had a then we year ?

Speaker #14: Up. The to Omnicom and acceleration. Great to hear about strength in traffic. Did that headwind from outlet that you saw last quarter begin to moderate?

Speaker #14: And just remind us, when do we anniversary that outlet dynamic in 26?

Speaker #8: Thanks . So we'll have .

Speaker #15: answer the Stewart call and talk about the tires . We really think about your first question by brand . Yeah . Not not the group level .

Speaker #15: So we have each of the brand studios here . We'll let each of the answer start . Three . Yeah . Hey , Anna Stewart .

Speaker #4: Yeah, the acceleration in North America for...

Speaker #15: .

Speaker #4: For Terex is really

Speaker #4: The function of our brand success is driven by our awareness investments and different forms of brand marketing. With the growth of our store footprint, the stores are providing a critical catalyst for driving guest engagement and brand awareness across our key markets.

Speaker #4: So we're pleased to see the success of that reflected into the camera . With regard to the I'll just stay on the traffic question that you had , the traffic really reflects what I just mentioned .

Speaker #4: You know, the we saw.

Speaker #15: A .

Speaker #4: Meaningful reduction in markdown revenue in the first half of the year . So into Q3 , we saw our markdown basically on par , consistent with prior year .

Speaker #4: So as we think about next year , would be obviously we going to lap .

Speaker #15: That dynamic . I was going to talk about 360 in the Americas . Is any commentary around channel . And then there and then on Americans , we want to make a comment .

Speaker #15: I think you covered it pretty well.

Speaker #8: Yeah .

Speaker #15: I mean ,

Speaker #8: You know , point around to your the uptick in North America , it was primarily driven by our 360 concept . Both in both footwear and apparel , both very , very strong growth over the quarter and and the other categories in in Wilson also was strong , notably racquet sports , was pretty strong .

Speaker #8: Bats were strong, although baseball was relatively flat because it was offset by some challenges with guns. But that's why we're really excited about what we're seeing and how that's really reflected in the return to growth this quarter.

Speaker #10: right . All Awesome .

Speaker #14: Thanks so much .

Speaker #2: Your question comes from the line of Jonathan Camp from Baird. Your line is open.

Speaker #16: Hi . Good Yeah . morning . Thank you . Can I follow up just the initial 2026 view , would you expect technical apparel to be at least in line with the algorithm from September ?

Speaker #16: You know , mid-teens growth with , with China , at least low double digits . Any color there ?

Speaker #8: Yes . This is Andrew . Yeah . You know , as you pointed out , we have reaffirmed the full algorithm from Investor Day , both at the brand level as well as the group level .

Speaker #16: Great . Thank you . And then a follow up just on the Q4 outlook , Andrew , you know , operating profit growth has been very strong .

Speaker #16: The first three quarters show over 60%. It looks like you're embedding a single-digit growth rate in profit for the fourth quarter.

Speaker #16: So could you just share any more detail , anything unique in the fourth quarter impacting the margin outlook ? And is there anything we should expect into the first half of 26 in terms of margin headwinds ?

Speaker #16: Thank you .

Speaker #8: . No . You know as Yeah , as I . pointed out , obviously really strong third quarter . We're excited about it .

Speaker #8: You see what happens when we're able to over deliver top line to through to the bottom line drop that the fourth quarter . in As you said , as you start to think about what we're seeing , we still believe and we're excited about our full year .

Speaker #8: You can see the implied guidance for the for the fourth quarter , but as as Gail talked about , you know , we're in the early stages of this point inflection .

Speaker #8: The fourth quarter will be the first full quarter of tariffs. We also have investments that we're making in the Olympics and have invested in.

Speaker #8: Obviously , a continuing market around our awareness . So we believe the guide for year guidance for the fourth quarter is responsible as we as we have continued to say , should demand materialize , we are there's no structural reason why we won't be able to deliver against .

Speaker #15: Our .

Speaker #8: Guidance .

Speaker #16: Okay . Thanks again .

Speaker #8: Thanks . John .

Speaker #2: Your next question comes from the line of John Kernan from TD Cowan. Your line is open.

Speaker #4: Hey good morning guys .

Speaker #17: Congrats on another strong quarter Andrew . Just to kind of follow up on on Jonathan's question , the guidance for the outdoor performance segment margin is for a decline in Q4 .

Speaker #17: Obviously, there's been a ton of upside to your guidance this year, and the incremental margin you've been generating on the soft goods really seems to be flowing through.

Speaker #17: I'm just curious know , why the , you conservatism here in outdoor performance and , you know how you're thinking about the margin performance of outdoor performance into into next year .

Speaker #8: Yeah , I mean , a things , couple of you know , as I talked about , there were some early shipments into the third quarter , winter sports equipment .

Speaker #8: We have some meaningful investments to make in the fourth quarter, including increased marketing awareness. And I think we're, but we're, and we just.

Speaker #15: In .

Speaker #8: The And the Olympics . we that believe so that business continues and the demand continues to to show up as it's been . And this opportunities in the fourth quarter .

Speaker #8: But again , we're in the early stages of that , of that inflection point . So we don't know the demand at this point .

Speaker #17: And maybe Got it . just a follow up on quick technical apparel . And the segment margin . There down was year over year .

Speaker #17: Really impressive top line growth . I think you said there was a timing of government grants that affected the technical apparel profitability . Any comments on how you're thinking about fourth quarter and the drivers of operating margin expansion into next year for technical apparel ?

Speaker #8: Sorry, repeat the last part.

Speaker #17: Yeah . Any thoughts on the technical apparel segment margin in Q4 ? And then into fiscal 26 ?

Speaker #18: Yeah

Speaker #8: So . . Okay .

Speaker #15: Segment apparel .

Speaker #8: Margins in Q4; I see those margins are in line.

Speaker #15: They are .

Speaker #8: We are strong. Relatively, we've not. And for the full year, I see margin in the low 20s. The technical apparel isn't talked about.

Speaker #8: You can see the market black fourth quarter . in the The timing the government grants . You know , the point that I was making there is that in the third quarter of last year , we received a higher portion of our government than we did this year .

Speaker #8: You can see the market black fourth quarter . in the The timing the government grants . You know , the point that I was making there is that in the third quarter of last year , we received a higher portion of our government than we did this grants So created a drag on the third quarter of this year .

Speaker #8: Compared basis .

Speaker #17: you Understood . Thank .

Speaker #8: One more question .

Speaker #2: final question comes Your from the Alex Stratton from line of Morgan Stanley . Your line is open .

Speaker #10: Perfect .

Speaker #12: Thanks for squeezing me in here . wanted to I just focus on the China growth acceleration in the It quarter . versus a more somber stands out narrative from a lot of your peers .

Speaker #12: So can help square that difference you just between you and maybe us the broader sportswear group , and then how you're thinking about industry dynamics in China into the fourth quarter and then next year .

Speaker #12: much Thanks so .

Speaker #15: Hey .

Speaker #6: How are you ? Okay . Thank you for the question . So I mean , basically we we are quite pleased about the Q3 results in China .

Speaker #6: And we grow the right level of the pattern . We like . We projected and all three brands , especially Solomon and worsen .

Speaker #6: They're growing are extremely well . And in China market . So I think based on the Q3 , I believe we think we got a good level of foundation to finish the whole year in China with a very solid status .

Speaker #6: Q4 I want to call out for two major seasons , city in Q4 , which is a golden week , and the W11 .

Speaker #6: So overall , our overall achievement for these two major events are quite satisfied . Okay , it's all about rich . All about our expectations .

Speaker #6: And I think pretty much we have a very good confidence for China . year , I And this mean and we we will have a very great result in 2025 .

Speaker #6: And so down the road for next year , I think it's the foundation . Is there . And we already mentioned we our three major brands .

Speaker #6: got the They all unique in position China and which really attract a lot of younger consumers in different segments . And the and and we , are we are are , we in a very unique position to compete markets .

Speaker #6: Okay . So we are quite optimistic also for in China . But 2026 , .

Speaker #12: Good luck Thanks . .

Speaker #13: And .

Speaker #2: concludes And that our question and answer session . I will now turn the call back over to management for closing remarks .

Speaker #15: Thanks, thanks everyone for joining. We'll see you in the next session.

Speaker #8: Months for our three results: fourth quarter. Have a great day.