Amer Sports reports 30% sales growth and boosts 2025 guidance, driven by strong demand in outdoor segments and promising outlook for 2026.

OPERATOR - (00:01:15)

Thank you for standing by and welcome to the Amer Sports third quarter fiscal 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. 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. If you would like to withdraw your question again, press Star one. Thank you. I'd now like to turn the call over to Omar Saad, SVP Capital Markets and Investor Relations. Please go ahead.

Omar Saad - SVP Capital Markets and Investor Relations - (00:01:46)

Welcome everyone. Thanks for joining Amer Sports Earnings call for the third quarter of fiscal year 2025. Earlier this morning we announced our financial results for the quarter ended September 30, 2025 and 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. These forward looking statements reflect our current expectations and beliefs only. They are subject to certain risks and uncertainties that could cause actual results to differ materially. Please see the safe harbor statement in our earnings release and 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. We will begin with prepared remarks from our CEO James Zhang and CFO Andrew Page, followed by a Q and a session until approximately 9:00am Eastern. James will cover key operational and brand highlights and Andrew will provide a financial review at both the group and segment level and also walk through our guidance for the full year 2025 as well as an initial high level sales and margin outlook for 2026. Arc'teryx CEO Stuart Hazelden and Salomon CEO Guillaume Mazank will join for the Q and A session. With that, I'll turn the call over to James.

James Zhang - Chief Executive Officer - (00:03:13)

Thanks Omar Amer Sports' strong momentum continued in the third quarter as our unique portfolio of premium technical brands continues to create wide space and take share in sports and outdoor markets around the world. All three segments performed extremely well led by exceptional Solomon Footwear growth and Arc'teryx Omnicom RE acceleration and solid growth from Wilson 10, 360 and our winter sports equipment franchise. We delivered strong results across the PNL including 30% growth, 130 basis points of adjusted operating margin expansion and more than doubling our adjusted eps. Our performance was led by very strong growth and the profitability out of performance led by Salomon Footwear and Technical apparel led by Arc'teryx. We also had solid contribution from the ball and racket segment led by Wilson Tennis360. Our four regions accelerate in Q3 and achieved double digit revenue growth and that strong momentum has continued into Q4. We believe Amherst Sports is a uniquely positioned company within the global sports and outdoor space. Our specialized highly technical brand serves the premier sports and outdoor market which continues to be one of the healthiest segments across the global consumer landscape. 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. Second, Arc'teryx 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 unique products and brand position and a very strong demand but still a small share of the global sneaker market. 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 and the fifth we have a strong differentiated platform in Great China where we continue to deliver best in class performance across our three big brands. I want to take a moment to address September fireworks incident. We regret our involvement and are working closely with the local authorities to address the impacts. We remain deeply committed to our community and the consumers and are taking actions to ensure we do better going forward. Before I turn over to Angel Page, allow me to briefly recap key brand highlights from our three segments starting with Technical Apparel which is led by Arc'teryx. Arc'teryx delivered another quarter of broad based strength across regions, channels and categories, especially footwear and women. We are encouraged by technical apparels continued momentum in the direct to consumer channel where the Omnicom RE accelerate to 27% from 15% in Q2. We envision Arc'teryx as a truly global brand with significant Runway to grow in all major markets and we are particularly encouraged by the meaningful Q3 acceleration in North America and Europe as well as continued strength in in Asia and China. Strong women's Momentum continued in Q3 growing 40% and was one of Arc'teryx fastest growing categories. We continue to see a large opportunity to serve women in the outdoors in a different way focusing on pinnacle design and performance. The new women's Routier pants was a standout performer in the quarter and was a top five model across all US Epicenters. Our women's climbing pants, the Clarke also continues to be widely popular since its launch last year for fall winter 2025, we are expanding our focus on color and have launched new models like the Near Pen and the Women's only sheer jacket styles like Emirates and Outcare. We continue to experience rising brand awareness and affinity with women in the US 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 acter sales in 2025 and we expect it to become 30% of sales by 2034. Also continues to be a key growth driver with 35% growth. Shoe models launched in the fall include the Concierge, a modern take on the classic approach shoe which is light, grippy and built for long technical machines. We also launched Northern Nivarrus, a winterized evolution of the Northern LD4, delivering high performance, running in cold conditions with a bold modern silhouette. Looking forward, arc' Teryx has an exciting pipeline of shoe launches for next year and we continue to believe footwear will be a large and profitable growth avenue for Arc'teryx footwear will represent approximately 8% of global brand sales this year and we expect it to reach 13% by 2030. 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. Veilance is expanding into new high end wholesale partners in North America and you can now find Veilance in Nord Stream in the US and hold rent flow in Canada. Veilance will represent approximately 5% of global brand sales in 2025 and we expect it to reach 7% in 2030. Secularity 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 debts receive a 30% credit for returning their used terrace jackets. I would also like to mention Peak Performance, the other brand within our technical apparel segment. We are pleased to share that Peak Performance is seeing stabilizing sales and the profitability in its core European business as well as early green shoots in North America. We introduced Peak to IEI in September and we are also opening a Vancouver flagship store in the previous Arcteric space in time for this winter season. Moving to the outdoor performance segment which was led by another outstanding quarter from Salomon footwear and apparel as well as a healthy performance from winter sports equipment. Salomon Footwear momentum continues across all regions, especially Asia with strong demand for both sports style and performance products. In addition to sneakers, bags and socks are also growing strongly across regions. 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 One of Salomon's unique strengths as an outdoor brand is how well we are connecting with younger consumers, especially women. Our sports style offering is critical to Salomon's unique position as the modern outdoor sneakers brand, resonating with women in a way traditional outdoor brands have not. Second, our performance and running lines are also having great success. Our Grival franchise is unlocking the run category for Salomon like never before. Salomon is gaining traction in the run specialty channel in North America and the EMEA and even China which has been a sports style centric market, is seeing traction in performance products. We are also seeing a benefit from improving capability to launch globally coordinated marketing campaigns to support our sports style and performance launch. Third is Salomon's continued amazing brand kit in Great China and Asia where we believe we operate the most productive and profitable sneaker shops in the industry. Beyond Great China, Salomon is also experiencing surging demand in Korea and Japan, both large sneak markets. Fourth, our epicenter strategy is working. Our strategy to open a handful of brand stores alongside strategic elevated wholesale distribution in key metro markets is critical to elevating Salomon's presence and awareness globally. Epicenter cities include Paris, London, Shanghai, Beijing, New York, LA, Milan, Miami and more to come. Fifth, we are seeing accelerating demand in Europe, Salomon's home market Salomon is experiencing strong pool demand from consumers which drives strong reorders, pre orders and sell through for both sports style and performance. In North America which is still a much smaller sneaker market for us compared to Europe or Asia, 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 comm channels that weren't right for Salomon where we simultaneously ramp up our North America direct to consumer footprint and wholesale expansion with the key strategic partners. Lastly, as we continue to elevate Salomon's brand awareness, we are excited about upcoming Milano Cortina Olympic where Salomon is a premium partner outfitting all volunteers. This will be a great moment for the brand in its home market. I also want to mention our winter sports equipment franchise which had a very strong Q3 with Hersey Schumann to start a season and sorry out books for the winter season. Overall we were thrilled by the outstanding performance from atomic athletes in the World cup in Southern Austria. The event represent a great start for the season in Europe 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. 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 Ball and racket had strong sales in Q3 with 16% growth driven by continued strength in soft goods and the racket Sports. Our Tennis 360 products continue to resonate very well with consumers from performance rackets to tennis apparel and footwear. Wilson Soft Goods continued its explosive growth, more than doubling in the quarter with very strong growth across all three major regions. The brand has some big moments at this year's U.S. open both on and off the court. Wilson hosted brand activations across New York City during the tournament including a four day Wilson Tennis Club pop up in Soho and our on site US Open shop again hosted record traffic and sales arena. Sabalenka won her four singles titles at the US Open playing with the Wilson Blade V9 on the product side in July version and Ultr V5. This is the most versatile ultra rack yet designed for intermediate to advanced players seeking both power and precision. Beyond the 10360 we saw slight growth in golf driven by Emea and the Dynapower line and the Infinite Portal Baseball was essentially flat as growth in bets was offset by a decline in growth and the gear inflatables were down due to continued challenging market condition and tariff driven price increase. US Retailers and consumers are showing some price sensitivity in this category and we plan to introduce a slightly lower price point premium board next year to make sure we are well positioned at a sweet spot on the price spectrum. With that I will turn it over to Andrew.

Andrew Page - Chief Financial Officer - (00:17:37)

Thanks James. The headline is that our strategy is working. Our brands are firing on all cylinders, allowing us to exit Q3 with momentum and setting us up to enter 2026 with confidence. 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. These results are only possible through their efforts. Now to our results. Salomon Footwear continues to add a strong second leg of profitable growth to Arc'teryx's already exceptional trajectory significantly elevated the financial profile and long term value creation potential of the Amer Sports portfolio. All three operating segments delivered both sales and margin ahead of expectations in the third quarter and given our strong third quarter results and continued momentum, we are raising our full year revenue margin and EPS expectations. Amer Sports grew 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. Falling racket sales also accelerated and delivered double digit growth by channel. The group continues to be driven by Direct to consumer which grew 51% led by Salomon in Greater China and APAC Wholesale grew 18% at the group level also led by Salomon. Growth accelerated across all regions. Regional growth was led by Asia Pacific which increased 54% and China which grew 47%. EMEA accelerated to 23% and the Americas accelerated to 18% in Q3. Turning to profitability, adjusted gross margin increased 240 basis points to 57.9% in Q3 primarily driven by favorable channel, geographic product and brand mix. Gross margin also Benefited by approximately 50 basis points from one time inventory reserve adjustments. Adjusted SGA expenses as a percentage of revenues was flat year over year and and represented 42.3% of revenues in Q3. The technical apparel SG&A leverage on strong growth was offset by slight deleverage and outdoor performance in Ball and Racquet due to ongoing investments in Salomon Soft Goods and Wilson Tennis360 led by strong gross margin expansion, we generated 130 basis points increase in our adjusted operating margin from 14.4% last year to 15.7% in Q3. 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. 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 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 compared to $71 million in the prior year period. Adjusted diluted earnings per share was 33 cents compared to adjusted diluted earnings per share of 14 cents last year. Now turning to segment results, technical Apparel revenues increased 31% to $683 million led by Arteryx. Growth was fueled by 46% direct to consumer expansion including a RE acceleration in our omnicomp to 27% from 15% in Q2 of 2025. 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 emea. All regions grew strong double digits. Our Terek stores are critical 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. In Q3, excluding the recently acquired stores in Korea which I will discuss shortly, Arc'teryx 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. New store openings included the Arc'teryx flagship in Vancouver at Robson Street. Arc'teryx also opened brand stores in Manchester, UK, Canberra, Australia and Takanawa, Tokyo. We have opened 12 net new stores year to date and we continue to plan to open approximately 25 net new Arc'teryx stores for the full year, with the largest number coming in North America. Our store opening plan incorporates a similar level of gross new stores as in 2024, partially offset by the closure of certain outlets and suboptimal locations in Greater China. We continue to focus on optimizing Arcarix's retail footprint. This year we will have slight net store closures including some legacy partner doors. 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. A good example of this is our upgrade of the original Arc'teryx flagship in Shanghai at the Alpha center which will reopen this month after expansion and renovation. Looking ahead to 2026, we are planning for Arc'teryx to have net store openings in China after years of rationalizing the store fleet in the region. 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 pinnacle expression of the brand in the US and we are encouraged by the strong sales in the first few weeks. With nearly 12,000 square feet, it's one of the largest stores in North America and a bold step forward in Arc'teryx's retail expression designed to educate, inspire and connect more people to the mountain through immersive storytelling and product innovation. In Q3, we also closed our asset purchase agreement with Nelson Sports, Arc'teryx's distributor in Korea since 2001. This deal effectively converted 46 partner stores into our own fleet which include a number of small format shop and shop locations. The revenue and margin impact in Q3 was negligible. Bringing career in house will benefit our top line and operating profit dollars as we convert from wholesale partner revenues to D2C revenues, bringing career 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 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 arc' teryx given its strong consumer affinity for the sports and outdoor category and and premium global brands. Technical apparel adjusted operating margin declined 100 basis points to 19.0% as SGA leverage was offset by approximately 125 basis point headwind from a timing shift related to government grants. Moving to our outdoor performance segment which saw revenues increase 36% to $724 million driven by very strong performance in Solomon footwear apparel and bags and socks 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% omnicomp with strength in both stores and E commerce. E Comm 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 followed by accelerating growth in both EMEA and the Americas. The popularity of Solomon footwear is inflecting globally and we are well positioned to fully develop this unique opportunity over time. 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 in Asia. Direct to Consumer continues to be the critical growth channel for Salomon, led by our highly productive Salomon Compact shop format. We opened 19 net new Salomon shops in greater China this quarter including both owned stores and partner stores, bringing our total count to 253 doors. We are on track to reach approximately 290 Salomon shops in Greater China by year end including owned and partnered doors. We recently opened our second Salomon flagship in Shanghai, a 7,300 square foot pinnacle expression of the brand. Located in the French Concession district. Known for its boutique shopping, 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, 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 Americas, Salomon Soft Goods grew strong double digits in Q3 and we continue to lay the groundwork to support significant future growth. 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 as well as continue to expand our presence in key wholesale accounts. New locations in Q3 include Woodbury Commons in New York, the trendy Bucktown neighborhood of Chicago, and later this week we're opening our second New York store in Williamsburg, Brooklyn 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, high traffic and long lines outside the store. We were thrilled to welcome many first time Solomon buyers, especially so many young female consumers. We will continue to focus on epicenters in 2026 and beyond including New York, Los Angeles, Miami and San Francisco and we are planning to open seven to 10 new stores next year in the. U.S. Looking at U.S. wholesale, Salomon is seeing growing demand across a variety of high quality retail partners including rei, Nordstrom and run specialty shops in emea. We continue to expand our store fleets in key epicenters including Milan and London. We we recently opened our second brand store in Milan and will open a third one in Q4 and we will open a fourth store in London in Q4 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. Sales also benefited from approximately $20 million of shipments that 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. 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. 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 cost driven by our footwear cost optimization initiatives. Gross margin expansion offset the very slight SGNA deleverage due to continued investments in growth moving to ball and racket where revenue increased 16% to $350 million driven by soft goods and racket sports. We continue to see very strong momentum in Tennis360 globally by category, the growth was led by soft goods which more than doubled in the quarter. With strong momentum in all regions, soft goods now represents approximately 15% of segment revenue. Racket sports also grew strong double digits, driven especially by very strong growth in EMEA and China. Regionally, the ball and racket growth rate was led by China, followed by APAC, EMEA and slight growth in Americas. Globally in Q3 we had 10 net new Wilson brand store openings, mostly in Greater China. Wilson continues to excel in China and we are planning to open approximately 35 Wilson Tennis360 shops in China this year, including both owned and partnered doors, bringing the total to around 80. In Q3, Wilson celebrated the opening of its urban concept store Brick House in Wuhan, which integrates American tennis club aesthetics with local Wuhan culture, a tribute to Olympic champion Zhang Chen Wen's hometown 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 and we continue to expand our new Tennis 360 concept store into more southern and coastal locations including our new shop in Beverly Hills and an upcoming shop in Miami. We also continue to expand our Tennis360 test 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 Marinucci district and Australia with our first two stores in the Melbourne area. Ball and racket segment adjusted operating profit increased 70 basis points to 7.6% thanks to strong gains in gross margin driven by favorable product region and channel mix and pricing fall and racket profitability also benefited from the above mentioned one time inventory reserve revaluations. These gains offset higher tariff costs and slight SGA deleverage on continued soft goods investments. 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 we exited the quarter with inventories up 28% year over year, slightly lower than our 30% sales growth. We are very comfortable with the level and quality of our inventory. This higher inventory growth is primarily related to four factors. Number one earlier receipt of seasonal Arc'teryx' teryx merchandise to prepare for better in stock positions. Number two Higher Arc'teryxteric goods in transit resulting from the greater use of ocean shipping versus air freight 3 FX translations due to the weaker US dollar and 4 the addition of Arc' Teryx's Korea inventory following the recent acquisition. 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 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 last year and for the full year of 2025 we expect to generate solid operating cash flow growth versus 2024 levels. Now moving to Guidance the updated guidance assumes the latest tariff rates on all countries will stay in place for the remainder of 2025 and beyond. We remain confident that we are well positioned to manage through a variety of tariff scenarios given our low exposure to the us Our pricing power and our clean balance sheet. We continue to expect negligible impact to our Group P and L from higher tariffs in 2025 and beyond. Let's begin with our updated full year 2025 outlook. Given the upside in Q3 and our continued momentum, we are raising our full year revenue operating margin and EPS expectations. We are raising 2025 revenue growth guidance from 20 to 21% to 23 to 24% including an approximate 100 basis point benefit from favorable FX impact on current exchange rates. By segment, we are raising Our technical apparel 2025 revenue growth guidance from approximately 22 to 25% to 26 to 27% including continued strong omnicomp growth. We are also increasing our outdoor performance sales growth expectations from 22 to 25% to 28 to 29% and ball and racket from 7 to 9% to 10 to 11% growth. We are also raising our full year adjusted gross margin guidance from approximately 57.5% to approximately 58% and we're also raising our adjusted Operating operating margin guidance from approximately 11.8% to 12.2% to 12.5% to 12.7%. By segment, we continue to expect an adjusted operating margin of approximately 21% for technical apparel. For outdoor performance, we are raising adjusted operating margin guidance to 11 and a half percent to 13 to 13.5%. For ball and racket, we are maintaining our adjusted operating profit margin guidance of 3 to 4%. We are now assuming full year net finance costs of 85 to 90 million dollars and an effective tax rate of 27 to 28%. The lower effective tax rate is primarily driven by higher profit generation from lower tax jurisdictions. Other operating income will be approximately $20 million for the full year and net income attributable to non controlling interest will be approximately $15 million. We now expect adjusted diluted EPS of 88 to $0.92 versus our prior guidance of 77 to $0.82 which is based on 563 million of fully diluted shares. We are also assuming DNA of $350 million including approximately $180 million of rou depreciation. Capex is expected to be approximately $300 million primarily to support new store expansion, ERP optimization and distribution and logistics investments. As we have said before, should strong trends continue and better than anticipated demand materialize, we believe we will be well positioned to deliver 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 deliver revenue towards the high end of our long term algorithm of low 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 plus basis points. With that, I'll turn it back to the operator for questions.

OPERATOR - (00:40:20)

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press Star one in your telephone keypad. If you would like to withdraw your question, simply press Star one again. Your first question today comes from the line of Brooke Roach from Goldman Sachs. Your line is open. Good morning and thank you for taking our question. Have you seen a sales impact in China following the fireworks incident? If so, when do you expect sales to recover? Do you think there could be any longer term brand repercussions?

Stuart Hazelden - CEO - (00:40:53)

Hey Brooke, it's Stuart. Thanks for your question. Arc'teryx China Sales trends were softer at the beginning of Q4 but have since rebounded as weather has cooled. We're confident in Arc'teryx's 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 products and store experiences.

Brooke Roach - Equity Analyst - (00:41:23)

Great. And as a follow up for Andrew, how did this event impact guidance for 4Q?

Andrew Page - Chief Financial Officer - (00:41:31)

Hi Brooke how are you? It did not have a factor in our Q4 guide. Thanks Brooke.

OPERATOR - (00:41:39)

Thank you. Your next question comes from the line of Matthew Boss from J.P. morgan. Your line is open.

Matthew Boss - Equity Analyst - (00:41:48)

Thanks and congrats on on a nice quarter. So James, could you speak to your confidence in guiding 2026 revenue growth to mid teens which is the high end of your term algorithm? And then Stuart at Arc' Teryx, could you break down the cadence of the third quarter? 27% Omni comp. And if you could elaborate on the strong global momentum that you've seen in the fourth quarter or just any change in demand that you've seen as we head into holiday for the brand.

James Zhang - Chief Executive Officer - (00:42:24)

Hey, I just highlight our forecast for coming years. So we given the very solid foundation we built up 2025, I think we have been managing to get a very good level of confidence to deliver what we guide in 2026. I think meeting growth patterns can be secured in 2026.

Matthew Boss - Equity Analyst - (00:42:50)

Yeah. Matt.

Stuart Hazelden - CEO - (00:42:50)

Hey Stuart. So yeah, the omni-channel comp we're really pleased to see the the momentum in the third quarter. You know the overall direct-to-consumer revenue increase at 46%, you know we think is really healthy. The 27% omni-channel comp also reflects a strong two year trajectory and you know that's definitely factored in into how we thought about guidance into the fourth quarter. The as we look at Q3 specifically the retail performance was from a KPI standpoint was driven by traffic. So we saw really healthy traffic increases, more modest increases in conversion and AOV and upt. Also worth mentioning markdown levels were pretty consistent year over year. So it was not a markdown driven sales increase. As you look at your question around the global demand, strong momentum around all of our regions. You know it was great to see an acceleration in our North American business in the third quarter where they moved up in the ranking after Asia Pacific, which continues to be the leading region for us. But we still saw some very strong growth in China and in Europe. So we're not really seeing weakness in any of our regions. And you know it makes us optimistic as we look at fourth quarter and beyond and yeah, so I think feeling really good for how we've now stepped into the fourth quarter and the trends we're seeing quarter to date. Great, thanks. Matt.

OPERATOR - (00:44:41)

Your next question comes from a line of Ike Baruchow from Wells Fargo. You your line is open.

Ike Baruchow - Equity Analyst - (00:44:49)

Hey guys, let me add my congrats. I 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 Salomon and Arc'teryx and then would love to hear a little bit more about the progress on Salomon in the United States specifically. Andrew, can you give us an update of where you are and penetration there just there seems to be a lot appetite for the brand locally here. Just kind of curious how you're measuring that balancing the growth with a push pull model. Thanks. We'll have Andrew actually take the first question. Then we have Guillaume Zak here. Ike, who's the CEO of salon brand, will take the salon question. Yeah, Ike, thanks. Thanks for the question. Start to detail on store growth. I will provide more of that update as we get into our store Q4 call. So not, not, not necessarily ready to provide detailed update on store growth yet.

Guillaume Mazank - CEO - (00:45:52)

And so Salomon. So nice to meet you all. Before jumping into North American, I think that we have to put Salomon into the context and the current momentum we have. So I'm convinced that we hold a truly distinctive position in the market and we fully leverage it in to shape what's come next. We have an incredible opportunity to define the modern mountain sports movement in the market. And if I don't give two strengths of Salomon, the first one is the authentic maintain performance which is what consumer is looking for is authenticity. We are true to what we are doing. We have a global recognition of design language led by innovation. What we are doing and developing is really true for performance, for function. And we have a growing cultural relevance bridging the mountain, the city and the modern lifestyle. And this quarter is definitely the good example of the potential of Salomon in the market. And we believe that this is just a start. If I move on the US case because this is a question, of course this is today the region that we have to build the fundamentals. So we are showing a strength in emea. We are growing very fast in Asia Pacific and China. And today we are focusing on US and the US provision is coming from this leading position in winter, sport and outdoor has high market share and high recognition in the market. And now we have to move to the city. And this is what is currently happening by a true epicenter strategy. So that we started in New York few quarters ago. Now we have la. The new shop opening we have in Melrose is a good example of a long line of consumer looking at this product. We have also good traction in running specialty distribution in performance. And now it's how we all this good signal and insight which is coming with a new consumer. direct-to-consumer (direct-to-consumer) very often the female consumer how we are transitioning and translating into a bigger scale in us. 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. We will expose Salomon to more consumers and we feel very confident that we are on the right path to accelerating Dorset.

Ike Baruchow - Equity Analyst - (00:48:29)

Thank you. Thanks Ike.

Lorraine Hutchinson - (00:48:33)

Your next question comes from a line of Lorraine Hutchinson from Bank of America, your line is open. Thank you. Good morning. Just sticking with Solomon. You're pruning back some of the distribution there 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 Salomon brand?

Guillaume Mazank - CEO - (00:49:01)

I think you speak about us and of course you know, as I explained we, we had this leading position in, in winter sport and outdoor performance and footwear and this outdoor performance footwear led us few years ago to go to places and some distribution that we, we think they are not any more relevant. And we think also the partner sometimes also is looking for other purity. This is why we have this kind of looking like negative, some negative building block which finally shows growth, but not the expected growth. We think that the the end of H1 26 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. So we still wait for the few quarters but I would say that the most of the change has been already implemented.

OPERATOR - (00:50:06)

Thank you. Your next question comes from a line of JSOLE from ubs. Your line is open. Great.

J. Sole - (00:50:17)

Thank you so much. I want to ask about Wilson specifically the Tennis 360 stores it sounds like, I think you said you're up to 80 stores in China. Can you just talk about the big picture long term opportunity in China? And I think you also mentioned that the store in Dallas I think you said is off to a good start. You're opening some more Tennis 360 stores in the U.S. can you just talk about the Tennis 360 opportunity outside of China and how that's developed over the last 90 days in your view. Thank you.

UNKNOWN - (00:50:41)

Sure.

Andrew Page - Chief Financial Officer - (00:50:42)

Hey, thanks Jay. So you mentioned the Tennis 360 concept outside of Greater China. So we have you know, 14, 15 stores in North America. I mentioned the Dallas park store is doing really well. We will focus really around the smile state. So you think about where you concentrate Tennis and the southern smile of the US Starting in the, you know, Georgia down to Florida, around the south and then back up through California. So that's what, that's what I would expect to see from our retail format. Epicenter concentration. We are still, you know, we're in the early stages. We're excited and we're super motivated about where it's going. Consumer. It's really gravitating towards the product but we're still in the early stages of really optimizing and formulating our total go to market. Our total owned retail format. In addition to our own retail format, we've also seen success in our Dick's shop and shop formats where we are able to present the full of our 10360 concept at the toes ahead. And the consumer is really resonating with the consumer there. So you'll start to see the expansion even in the Dicks and the House of Sports format for the Dicks locations. Got it.

J. Sole - (00:52:04)

Thank you so much.

OPERATOR - (00:52:08)

Your next question comes from a line of Paul Lejwick from Citigroup. Your line is open.

Paul Lejwick - Equity Analyst - (00:52:15)

Hey, thanks guys. On the margin guide for next year, I'm curious how much of the expansion is simply a function of business mix versus improvements that you might be seeing within each. And then I just wanted to ask a clarifying point on Salomon. Could you just say what, what is the number of doors that you're actually exiting in the within the Solomon wholesale business? And then what are you adding over the next 12 months? Thanks.

Andrew Page - Chief Financial Officer - (00:52:48)

Yeah. Hey Paul, thanks a lot. You know, the same drivers of our big shift as before, it's going to be primarily driven by gross margin expansion. We will continue to make the proper investments in SG&A to continue to drive growth. So the margin expansion that you see will be driven primarily by gross margin expansion and that gross margin expansion is driven primarily by mix shift, both channel and product and region mix shift as it relates to the number of doors. You know, we're not necessarily going to comment. It's a, it's a bit nuanced as we that as Gillen talked about exiting some doors that couldn't tell our full expression of the brand and getting into more strategic partners. But as we talked about, you know, start to think about clearing that through H1 of next year and you start to see as we get into third quarter next year, you start to see the brand really show up in the strategic partners that we like.

Paul Lejwick - Equity Analyst - (00:53:51)

Thank you. Good luck.

OPERATOR - (00:53:55)

Your next question comes from a line of Anna Andreeva from Piper Sandler. Your line is open.

UNKNOWN - (00:54:00)

Your line is open.

Anna Andreeva - Equity Analyst - (00:54:02)

Great. 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. Can you provide more color 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 year? And then we just had a quick follow up the TA omnicomp acceleration. Great to hear about strength in traffic. Did that headwind from outlet that you saw last quarter begin to moderate and just remind us when do we anniversary that outlet dynamic in 2016.

Andrew Page - Chief Financial Officer - (00:54:48)

Thanks, Anna. So we'll have Stuart answer the comp and talk about the Arc'teryx to really think about your first question by brand, not at the group level. So since we have each of the brand CEOs here, we'll let each of them answer.

UNKNOWN - (00:55:04)

Yeah.

Stuart Hazelden - CEO - (00:55:05)

Hey Stuart. Yeah. The acceleration in North America or for Terex is really a function of success of our brand awareness, investments, community and different forms of brand marketing. And with the growth of our store footprint, the stores are providing critical catalyst for driving guest engagement brand awareness across our key markets. So pleased to see the success of that reflected in the omni-channel performance. With regard to the. I'll just stay on the traffic congress question that you had. The traffic really reflects what I just mentioned. We saw a meaningful reduction in markdown revenue in the first half of the year. So into Q3 we saw our markets basically on par, you know, consistent with prior year. So as we think about next year, obviously we would begin to laugh that time advanced 360, you know, in the Americas designing commentary around channel and then the trend there and then America. They want to make a comment. Although I think you covered it pretty well. Yeah, I mean, you know, to your point around the uptick in North America is primarily driven by our Tennis 360 concept. Both both footwear and apparel both very, very strong growth over in the quarter and and the other categories. And Wilson also were strong. Notably racket sports was pretty strong. Bats were strong, although baseball was relatively flat because it was offset by some challenges with guns. But that and we're really excited about what we're seeing and how that's really reflected and returned to strong growth this quarter.

OPERATOR - (00:57:10)

All right, awesome. Thanks so much. Your next question comes from the line of Jonathan Kampf from Baird. Your line is open.

Jonathan Kampf - (00:57:21)

Yeah. Hi, good morning. Thank you.

Andrew Page - Chief Financial Officer - (00:57:23)

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 mid teens growth with China at least low double digits. Any color there? Yes, Andrew, you know, as you pointed out, we have reaffirmed the full algorithm from the best today, both at the brand level as well as at the group level? Great, thank you. And then a follow up just on the Q4 outlook. Andrew, you know operating profit growth has been very strong the first three quarters, you know, over 60%. It looks like you're embedding a single digit growth rate in profit for the fourth quarter. 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, you know, into 1H26, you know, in terms of margin headwinds? Thank you. Yeah, definitely know, you know, as I point out, obviously really strong third quarter. We're excited about it. You see what happens when we're able to over deliver top line ready to drop that through to the bottom line in the fourth quarter, as you said. As you start to think about what we're seeing. You know, we still believe we're excited about our full year to implied guidance for the, for the four quarter. But as, as, as G talked about, you know, Salomon, we're in the early stages of this inflection point. Fourth quarter will be the first full quarter of tariffs. We also have investments that were making in the Hydro Flask and invested in obviously continued market around our. So we believe the guide for the full year and the kind guidance for the fourth quarter responsible as well as we continue to say should demand materialize? We are. There's no structural reason why we won't be able to over deliver against our guide. Okay, that's great. Thanks again. Thank you.

Jonathan Kampf - (00:59:39)

Thanks John.

OPERATOR - (00:59:41)

Your next question comes from the line of John Kernan from TD Cowan. Your line is open.

John Kernan - Equity Analyst - (00:59:47)

Hey, good morning guys. Congrats on another strong quarter. Andrew, just to kind of follow up on Jonathan's question, the guidance for the outdoor performance segment margin is for a decline in Q4. 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 pulling through. I'm just curious, you know, why the conservatism here on outdoor performance and you know, how you're thinking about the margin performance of outdoor performance into. Into next year. Yeah, I mean a couple of things. You know, as I talked about, there were some early shipments into the third quarter winter sports equipment. We had some meaningful investments when it made the fourth quarter marketing, increased awareness in our drug footwear and we just end the Olympics. And so we believe that if the business continues and the demand continues to show up as it's been, that there's opportunities in the fourth quarter. But again we're in the early stages of that inflection plan so we don't know the end of demand at this point. Got it. And maybe just a quick follow up on technical apparel and the segment margin there was down year over year. I'm really impressed with 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, the drivers of operating margin expansion into next year for technical apparel? Sorry, repeat the last part. Yeah. Any thoughts on the technical apparel segment margin in Q4 and then into fiscal 26?

Andrew Page - Chief Financial Officer - (01:01:41)

Yeah. Okay, so segment, segment apparel margins in Q4. I see those margins are you know in line. They are relatively strong. We, we've not and for the full year I see this margins being, you know in the low 20s. The technical apparel as talk about you can see the applied margin in the fourth quarter, the timing of the government grants, you know the, the point that I was making there is that in the third quarter of last year we received a higher portion of our government grants than we did this year. And so it created a drag on the third quarter margin this year on a comparable basis. Understood, thank you. One more question.

Alex Stratton - Equity Analyst - (01:02:29)

Your final question comes from the line of Alex Stratton from Morgan Stanley. Your line is open. Perfect. Thanks for squeezing me in here. I just wanted to focus on the China growth acceleration in the quarter. It definitely stands out versus a more somber narrative from a lot of your peers. So can you just help us square that difference between you and then maybe the broader sportswear group and then how you're thinking about industry dynamics in China into the fourth quarter and then next year. Thanks so much.

James Zhang - Chief Executive Officer - (01:03:03)

How are you? Okay, thank you for the question. So I mean basically we, we are quite pleased about the Q3 reliable in China and we grow the lineup of the pattern we like we projected and all three brands, especially Solomon and Wilson, they're growing extremely well and in China market. So I think Based on the Q3 I, I, we, we think we got a good level of foundation to finish the whole year in China with a. Very solid growth measures for Q4. I just want to call out for two major seasons sitting in Q4 which is golden week and the double 11. So overall our overall achievement for these two major events are quite satisfied. Okay. It's all reach or above our expectations and I think pretty much we have a very good confidence for Emma China and this year, I mean and we will have a very great result in 2025 and so download for next year. I think it's the foundation is there. I mean as we already mentioned we our three major brands, they all got the unique opposition in China which really attract a lot of younger consumers in different segments and we are in a very unique position to compete the markets. Okay. So we are quite optimistic also for 2026 and in China market.

Alex Stratton - Equity Analyst - (01:04:50)

Thanks. Good luck.

Adam - (01:04:53)

Thanks, Adam.

OPERATOR - (01:04:54)

And that concludes our question and answer session. I will now turn the call back over to management for closing remarks. Thanks everyone for joining. We'll see you in three months for our fourth quarter results. Have a great day. This concludes today's conference call. Thank you for your participation. You may now disconnect.