Wolverine World Wide, Inc. Aktie

Greetings and welcome to the Wolverine Worldwide Second Quarter Fiscal 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, [ Jared Filippone ], Head of Investor Relations. You may begin.

Good morning and welcome to our second quarter fiscal 2026 conference call. On the call today are Chris Hufnagel, President and Chief Executive Officer, and Taryn Miller, Chief Financial Officer. Earlier this morning, we issued a press release announcing our financial results for the second quarter of 2026 and guidance for fiscal year 2026. The press release is available on many news sites and can be viewed on our investor relations website at investors.wolverineworldwide.com. This morning's press release and comments made during today's earnings call include non-GAAP financial measures. These non-GAAP financial measures, including references to the ongoing business and constant currency revenue growth rates, were reconciled to the most comparable GAAP financial measures in attached tables within the body of the release or on our investor relations website.

I'd also like to remind you that statements describing the company's expectations, plans, predictions, and projections, such as those regarding the company's outlook for fiscal year 2026, growth opportunities, and trends expected to affect the company's future performance made during today's conference call are forward-looking statements under U.S. securities laws. As a result, we must caution you that there are a number of factors that could cause actual results to differ materially from those described in the forward-looking statements. These important risk factors are identified in the company's SEC filings and in our press releases. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. With that, I will now turn the call over to Chris Hufnagel.

Thanks, [ Jared ]. Good morning, everyone. Thanks for joining us on today's call. In the second quarter, our business results continue to track ahead of our expectations, driven by the team's strong execution of our global brand building model. We delivered better than anticipated revenue, growing 6% against double-digit growth last year, with adjusted earnings per share growing 14%, reflecting healthy SG&A leverage, while at the same time investing in our strategic priorities and key growth drivers. Merrell and Saucony, representing approximately two-thirds of our business, continued to lead the way with revenue up 10% and 9% in the quarter, respectively. We continue to make progress in building better brands, delivering compelling products, investing more in demand creation and telling better stories, managing the marketplace more effectively, all leading to elevating our brand's positions in their respective markets.

As a result, we're seeing the cumulative, tangible effects of our consistent efforts. Across our portfolio, our brand generated increases in consumer interest and took market share in their key categories. And these gains in consumer demand are creating more consistent growth in the business, the company having now delivered seven consecutive quarters of year-over-year growth. Given the strengthening of our brands, the solid results we drove in the first half, and the continued momentum we're seeing in the business, today we're raising our guidance for the year, which Taryn will walk you through in a few minutes. But before handing the call over to her, I'd like to share more on our brands, including the continued growth of Merrell and Saucony, as well as the progress we're making in applying our playbook to set Sweaty Betty and Wolverine on a path to more consistent growth.

I'll start with Merrell. Merrell remains focused on modernizing the outside with faster, lighter, more versatile product design and elevated brand relevance. The brand's consistent execution of its strategy has resulted in sustained meaningful growth and market share gains. And these continued in the second quarter. The brand delivered a double-digit increase in revenue with growth in all regions and outsized increases internationally, where its key city strategy has helped amplify the brand's momentum. Globally, Merrell's It Starts Outside marketing platform, launched earlier this year, is creating brand consistency and lifting purchase intent with our consumers. To extend the platform, the team executed a host of community activations as part of its Outside in the City series, redefining the outdoors in several key global cities, including London, Paris, and New York, with more cities planned in the coming weeks.

Merrell once again had triple-digit basis point market share gains in the U.S. hike category, with three in the top 10 styles. The brand's key franchises, the Moab 3 and Moab Speed 2, are exceptionally healthy, each driving significant double-digit growth in the second quarter. The iconic Moab 3 is respected on the trail and remains relevant with collaborations and rematerializations like the sought after and sold out [ Khakis ] collab and the recently dropped [ Jollipack ]. In Trail Run, Merrell continued to entrench its position with its title sponsorship of the Skyrunner World Series, composed of elite trail running races around the globe in locations such as China, Japan, France, Italy, Spain, Chile, Argentina, and right here in the U.S. Merrell's sponsored athletes currently claim seven spots in the top 15 men's and women's standings, including the top four ranked men in the series. In the marketplace, the brand's premier franchise, the Agility Peak 6, continued to gain traction, up double digits globally, versus the previous model's comparable first season.

On the lifestyle side of the business, the Wrap franchise continued to grow with additional silhouettes, more than doubling year-over-year at U.S. retail. The brand also continues to enhance its lifestyle offering with trend-right styles like the Moab 2 Woven Slide, the low-profile Relay, and hybrid Mary Janes and performance platforms, including the Moab Speed 2 and [ Speed Arc ], all of which are selling well. In June, the brand engaged influential partners at Paris Fashion Week as it continues to elevate its lifestyle profile globally and look to accelerate this side of the business in 2027. Merrell is performing well, and the brand remains on track to deliver mid-single-digit growth this year.

Shifting to Saucony. We continue to believe that Saucony is uniquely positioned as a disruptive challenger brand at the intersection of two of the fastest growing categories in the market, performance and lifestyle running. In the second quarter, the brand drove solid growth in both categories around the world, on top of 40% overall growth last year. Saucony's key city focus, which started in London a few years ago, continued to help fuel strong brand heat, consumer demand, and revenue growth, particularly in Europe. In London, the brand held one of its own [ Mays ] Run Club races earlier this year, once again sponsored the London 10K last month, and plans to sponsor the Run Hackney Half Marathon this fall. In addition, Saucony has expanded its key city strategy to Berlin with sponsorship of the Berlin 10K a couple of months ago and a broader activation plan underway, then to Paris with a [ MAZE ] race back in February and plans for a host of activations, a new Pioneer store, and title sponsorship of the Eiffel Tower 10K.

Creating tentpole moments by sponsoring race events that each reach a broad running audience, flanked by a series of community activations, often in partnership with run clubs and key retail partners, has proven to be an effective strategy. Saucony's brand search interest was up meaningfully year-over-year in the first quarter globally, with even faster growth in the UK. This past quarter, the search interest growth rate accelerated by almost two times globally and more than tripled in the UK, and France grew at an even significantly faster pace. Sell-through trends in the EMEA region are also very strong, creating a healthy pull dynamic, which we are actively managing to cultivate sustainable growth, focusing on disciplined distribution and segmentation strategies. Because of these positive results, our Key City Playbook is now being adopted by some of our distribution partners around the world. Our latest Saucony store opened in Hong Kong in the second quarter, and there are already plans to activate in Istanbul and Bangkok this year with race sponsorship and [ MAZE ] events, a store opening, and community activations on tap.

In the performance running category, Saucony gained market share at U.S. run specialty in the quarter and showed well in major marathons this spring, ranking in the top five most worn brands at Boston and London, notably second among women at the Boston Marathon. With the brand's Endorphin collection, its pinnacle offering for elite runners, Saucony launched a new version of its most innovative shoe, the Endorphin Elite 3, and plans to launch an all-new endorphin model in 2027 that we believe will further elevate innovation performance for serious runners. In Saucony's Core 4 franchises, which are targeted towards a more casual runner, the brand introduced the new Triumph 24 and Hurricane 26 in the last couple of months, and they are driving franchise growth on saucony.com and early selling with positive feedback from our wholesale partners.

Saucony also continued to fuel brand heat in its lifestyle business with compelling styles and thoughtfully selected collaborators who are helping develop the brand's relevance on several different dimensions. In the second quarter, the brand dropped collaborations with Studio Nicholson, Greyson, two with Engineered Garments, and Minted New York, the last of which was launched in an event hosted at our Covent Garden Pioneer Store in London, generating exceptional brand energy. This month the brand plans to drop a highly anticipated collaboration with Westside Gunn, building on a partnership that continues to strengthen the brand's credibility in streetwear and culture. In June, Saucony launched the [ Ride One ] as part of its extensive Paris Fashion Week presence, including a host of activations with influential collaborators, retailers, and consumers. They also introduced the [ Kinvara One ] and ProGrid Paramount in top of the pyramid distribution, while the ProGrid Omni 9 continued to drive growth globally.

Looking ahead, the brand continues to develop its lifestyle strategy, leveraging its deep and diverse product archive, developing sharpness behind streetwear and fashion, and thoughtfully cultivating greater relevance with women as well as men. Finally, as we think about realizing Saucony's full potential, I believe that should include becoming a true head-to-toe run lifestyle brand. In close partnership with our Sweaty Betty product design and development team, we're developing a capsule apparel collection designed specifically for her that we plan to drop in our stores and online early next year. I'm excited for this test and leveraging the collective power of the company and what this opportunity could mean longer term for the Saucony brand. The brand's momentum remains strong and we're raising our outlook for the brand to mid-teens growth for the year. I continue to believe that Saucony is well positioned and that the opportunity for the brand remains significant.

I'd now like to provide an update on the progress of Sweaty Betty and Wolverine, brands that we're focused on returning to sustained healthy growth through disciplined execution of clear strategies and implementing our proven brand growth playbook. It's important to note that while we don't expect performance to be perfectly linear, we're encouraged by the recent progress we've made and the real results we've seen in the marketplace. Both brands are reestablishing their premium positions, driving meaningful increases in consumer interest and purchase intent, and beginning to deliver growth in key segments of their business.

Beginning with Sweaty Betty. Sweaty Betty is one of the original female activewear brands and focuses squarely on empowering women through fitness and beyond. Last year, we fully integrated this business into Wolverine Worldwide and developed a new strategic growth plan. As part of this effort, and as noted previously, we initiated an intentional and strategic reset of the U.S. market in the third quarter of last year. As a result, the brand was down low single digits overall in the quarter, but encouragingly grew approximately 3% when excluding the impact of the market reset in the U.S. The areas of the business that we prioritized are responding positively and contributing growth in the quarter. The UK direct-to-consumer business grew mid-single digits, with continued increases in key categories like bottoms and outerwear. We're seeing our investment in the brand's new store design lift performance as well, with four refits completed so far this year. The expansion of wholesale and distribution partners in Europe and Asia Pacific also continues to advance, with revenue up strong double digits and discussions for new partnerships progressing well.

During the quarter, the brand executed several activations to continue to strengthen its bold, rebellious voice in the marketplace. This Born Sweaty, Go Shorty campaign increased purchase intent and helped drive strong revenue growth in the shorts category. The brand also effectively positioned itself relative to popular activities, including running with its Rule the Run event in April, and racket sports with its Power by London Padel event in June, and a Wimbledon event in July, all driving strong consumer engagement for the brand. Sweaty Betty brand is healthier today with a strong strategy in place and a determined team driving the business forward. We have more work to do, but I'm encouraged by our progress.

Finally, finishing with Wolverine. Wolverine is the number one work boot brand in the U.S., and again added market share in the second quarter, its third consecutive quarter of gains. Brand grew revenue high single digits in the quarter, and we continue to make good progress driving towards more consistent, sustainable growth. Wolverine is focused on managing a cleaner, more disciplined marketplace and elevating its positioning with consumers. Behind these efforts and a stronger product line, the brand continues to lift average selling prices and drive double-digit growth in key franchises at retail, including the Tradesman Wedge and Loader II, and in Western Boot with the Rancher and Wheatland. Recalibration of the marketplace to optimize assortments and inventory at key retailers is still ongoing, resulting in some expected choppiness and near-term volatility at retail. But inventory is continuing to get cleaner and our new distribution and segmentation strategies, while nascent, are sharper.

In the quarter, Wolverine also continued to build brand relevance by engaging consumers with more purpose-led, differentiated marketing. The brand's collaboration with Metallica Scholars introduced a limited edition boot and workwear collection that benefits trades education. And its American Dream contest launched a made in the USA Loader II DuraShocks boot and celebrated 50 tradespeople in our 50 states. These initiatives and previous upper funnel investments, like the brand's partnership with the Paramount+ series Landman, helped further accelerate growth of consumer interest in the quarter. Work remains to get us to where I believe we should be, but Wolverine's new product innovation and designs are performing. The brand's marketing is reaching more consumers and cultivating greater emotional resonance and the marketplace is responding. Importantly, we've added some new talent to the brand and prioritized its place in the workgroup portfolio. I continue to be enthusiastic about the brand's opportunity looking ahead and what a growing and more profitable Wolverine brand and workgroup can deliver for the company. Now I'd like to hand the call over to Taryn Miller, our Chief Financial Officer, to take you through our results for the quarter and our updated outlook for the year.

Thank you, Chris, and welcome everyone. Our second quarter results exceeded expectations and reflect the continued progress we're making across the business. The operating model we've built, combined with continued investment in our brands and capabilities, is strengthening the portfolio, improving profitability, and reinforcing our confidence in the long-term earnings potential of the company. Merrell and Saucony drove the company's revenue growth in the quarter. Growth combined with disciplined cost management contributed to 80 basis points of adjusted operating margin expansion while further improving our balance sheet and financial flexibility. Given our strong first half performance and continued execution across the business, we are raising our full year 2026 outlook.

I'll now take you through the highlights from our second quarter. Revenue of $506 million exceeded the high end of our outlook, driven by better-than-expected performance in both the active group and workgroup. Reported revenue growth was 7% compared to the prior year, or 6% on a constant currency basis. The following channel, segment, and brand performance is provided on a constant currency basis. Wholesale revenue increased 8% compared to the prior year, reflecting strong international performance and continued growth in the U.S. DTC revenue was approximately flat versus the prior year. Active group revenue increased 8% in the second quarter, with performance across the segment exceeding our expectations.

Merrell revenue grew 10% in the quarter. Strong wholesale performance was driven by international markets and continued gains in the U.S. Ongoing strength in sell-through across core franchises and key accounts supported the brand's momentum. DTC revenue declined compared to the prior year, reflecting a deliberate shift in marketing investments towards upper funnel brand building activity. Saucony revenue increased 9% in the quarter, building on 40% growth in the same quarter last year, driven by growth in both wholesale and DTC. Wholesale growth was led by international markets with continued gains in the U.S. The brand continues to build momentum across both performance and lifestyle categories, supported by ongoing marketing investments and new products that are resonating with consumers.

Sweaty Betty revenue declined 3% in the quarter, reflecting the planned and ongoing reset of its U.S. business. The brand delivered another quarter of growth in UK DTC and international wholesale, reflecting encouraging consumer response to its broader product assortment. Workgroup revenue declined 2% compared to the prior year, which was modestly ahead of expectations. Progress across the workgroup portfolio continues to vary by brand, but the actions underway to enhance product offerings and improve marketplace health are beginning to gain traction. While there's still more work to do, we are encouraged by the early results.

Consolidated gross margin was 46.5%, a decrease of 70 basis points from the prior year and 10 basis points above our expectations. Gross margin was pressured by an approximate 310 basis point unmitigated tariff headwind and a modest impact from elevated oil prices on freight costs, although mitigation actions offset most of the tariff impact. Adjusted operating margin was 10%, an increase of 80 basis points compared to the prior year and 50 basis points above our expectations. Tariff-related pressure on gross margin was more than offset by strong revenue growth and disciplined management of operating expenses. Earnings per share increased 14% year-over-year to $0.40, compared to $0.35 in the prior year and above our outlook of $0.35 to $0.38. Net debt was $443 million, down $125 million versus last year.

Turning to our outlook for 2026, we are raising our full year outlook and now expect revenue to be in the range of $1.98 billion to $2 billion, representing reported growth of approximately 6.2% at the midpoint. This compares to our prior outlook of $1.96 billion to $1.985 billion. Our foreign currency assumption is unchanged at an estimated $14 million benefit versus the prior year. As a reminder, the prior year included a 53rd week in the fourth quarter, which contributed approximately 70 basis points to full-year 2025 revenue growth, primarily within our DTC business. On a constant currency basis and excluding the 53rd week in 2025, we now expect revenue to increase approximately 6.1% at the midpoint.

The following segment and brand outlook is on a constant currency basis. Active group revenue is now expected to increase high single digits, up from our prior outlook of mid-single-digit growth. We continue to expect workgroup revenue to be approximately flat compared to 2025. At the brand level, we're raising our outlook for Saucony to mid-teens growth, the high end of our prior low to mid-teens range, reflecting the first half performance and continued momentum across categories. The investments we're making to build consumer demand are strengthening the brand's market position and driving durable growth. Our outlook for the remaining brands is unchanged, with Merrell expected to grow mid-single digits, Sweaty Betty expected to decline low single digits, and Wolverine expected to be approximately flat compared to 2025.

Gross margin is now expected to be approximately 46.9% compared to our prior outlook of 46.4%. The improvement primarily reflects stronger marketplace execution, supply chain efficiencies, and modestly lower tariffs. With respect to tariffs, our updated guidance assumes existing tariff rates remain in place for the balance of 2026. This assumption reduces the estimated unmitigated tariff impact by approximately $2 million compared to our prior outlook. While we continue to believe rates may ultimately return to UFLPA levels, the timing of any change remains uncertain. Our guidance excludes any potential refund related to the $36 million of UFLPA tariffs previously paid, which we continue to actively pursue.

Adjusted operating margin is now expected to be approximately 9.9% compared to our prior outlook of 9.5%, reflecting the higher gross margin and meaningful operating leverage for the year, while also making strategic investments in our brands and key capabilities. Interest and other expense is projected to be approximately $23 million and the effective tax rate is projected to be approximately 18%, both unchanged from our prior outlook. As a result, adjusted diluted earnings per share is now expected to be in the range of $1.55 to $1.65 compared to our prior outlook of $1.43 to $1.58. We are increasing our operating free cash flow outlook to $115 million to $130 million from $105 million to $120 million previously. We continue to expect capital expenditures of approximately $20 million.

Moving to our third quarter outlook. Revenue is expected to be in the range of $495 million to $500 million, representing reported growth of approximately 5.8% at the midpoint compared to the prior year. On a constant currency basis, revenue is expected to increase 6.5% at the midpoint. Active group revenue is expected to increase high single digits, while the work group is expected to be approximately flat to the prior year. Gross margin in the third quarter is expected to be approximately 47.4%, down 10 basis points compared to last year. This includes an approximate 180 basis point unmitigated tariff impact and a modest headwind from higher oil prices on freight costs, with mitigation actions and other business initiatives offsetting the majority of those impacts.

Adjusted operating margin is expected to be approximately 10.4%, an increase of 130 basis points compared to last year, with the improvement driven by revenue growth and disciplined cost management, which more than offset the impact of higher tariffs and elevated oil prices on gross margins. As a result, adjusted diluted earnings per share is expected to be in the range of $0.42 to $0.45 compared to $0.36 last year. To summarize, our second quarter results reflect continued progress across the business, led by the strong performance of Merrell and Saucony. We're improving profitability, strengthening our financial position and seeing encouraging traction across the portfolio. The balance sheet is meaningfully stronger than it was two years ago and while the external environment remains uncertain, our confidence in the business continues to grow. Our increased outlook for 2026 reflects both the strength of our first half results and the progress we're making across the portfolio.

With that, let me turn the call back to Chris before we open up for questions. Thanks, Taryn. To close, I believe our brands are better positioned in the marketplace today, align well with consumer trends, and they are leaders and innovators in growing and attractive categories. And importantly, they continue to get stronger each quarter around the world, both those that are already performing like Merrell and Saucony and those that are not yet as consistent as we want them to be. Our team is better, our strategies are more sound, our execution is sharper, and our brands and company are healthier. As a result, our business is better than we anticipated entering the year, giving us confidence to raise our guidance for 2026. Another important chapter in our transformation story that has now become a growth story. While our progress is encouraging, we believe a bigger opportunity is still ahead of us for the company, our team, our brand, and our shareholders. Everyone at Wolverine Worldwide remains focused to make every day better. With that, thank you for taking the time to be with us this morning, and we're happy to take your questions. Operator?.

We will now begin the question and answer session. [Operator Instructions] The first question is from the line of Jonathan Komp with Baird. Your line is now open. Please go ahead.

Yes, hi, thank you. Good morning. Could you maybe just share a little more insight what you're seeing in the running market in general from a standpoint of overall competitiveness and discounting? And when you look to the second half implied guidance for Saucony, what's given you confidence in the acceleration? Is it simply easier comparisons or are there other factors?.

Sure, thanks John. Yes, the run category is obviously a very attractive and growing category and we're thrilled that we have one of the original running brands in Saucony performing the way it has and the trajectory we see. But certainly fiercely competitive and we've got sort of great respect for the competition that's out there. At the same time, we think we've got a great team. I think one of the strongest product pipelines that we've had. And it's good to, I think we're in a good position. As it relates to the acceleration in the back half, I think you did point out, good 9% growth in the second quarter on top of 40% growth last year. And a little bit easier comparison going into the back half, but visibility remains good.

I think the important thing to note about Saucony is that we're a global growth story. It is not just a U.S. sector growth story. So really pleased by the progress we're seeing really around the world. The way our partners are leaning in and the receptance that we've seen to both performance run and the lifestyle. So we remain bullish on Saucony and think the prospects for the brand remain bright.

Yes, that's great to hear. Thanks, Chris. And then maybe, Taryn, just... Could you frame up how to think about the guidance rates for the year, the profit flow through looks very strong. How much of that is flowing slightly better tariff assumptions versus underlying improvements in the profitability. Thank you.

Yes, thanks for the question. Regarding our gross margin operating margin, and higher expectations, there's been no meaningful change to the tariff impact we've previously discussed. We said that we had previously estimated around a headwind of around $50 million on the year, and that assumption is reduced by roughly $2 million, which really leans towards what we're seeing in terms of the bigger raise that we're seeing in terms of gross margin and operating margin versus our previous expectation is the structural changes we're seeing in the business, really driven by the stronger revenue and seeing more full price sales from healthier inventories and the supply chain efficiencies driving structural improvements in the business.

Your next question is from the line of Mitch Kummetz with Seaport Research Partners. Your line is now open. Please go ahead.

Yes, thanks for taking my questions. Chris, in your prepared remarks, you mentioned accelerating the Merrell lifestyle business in 2027. Can you just remind us what percent of Merrell is lifestyle? And can you talk a little bit about what opportunities you see for lifestyle, particularly going into next year?.

Yes, it's a smaller portion of the performance sort of outdoor business for sure. But we certainly think about Merrell today as the broader outdoor lifestyle opportunity beyond the trail. And I think the team has worked really hard on that and I'm really pleased with the progress that we've seen. And I think you're sort of seeing some of that come through in our 1TRL efforts to sort of bridge that performance to lifestyle piece. And then certainly obviously legacy styles like the Jungle Moc, which continue to grow, the team being able to sort of tap into trend, seeing things like the Relay, the Wrap collection, and then taking sort of classic outdoor platforms like the Moab Speed and so forth and so on, and making them in more lifestyle styles, like our slides, or just rematerializing and make them for everyday wear. And I think you're seeing that show up importantly, I think, in our marketing as well, just how we're presenting the brand at merrell.com, how we show up on our social feeds. And I think the team's done a great job sort of bringing the outdoors to the city under the platform of It Starts Outside.

So the bigger opportunity beyond outdoor is certainly outdoor lifestyle, and I think that is going to be a key unlock. And certainly as we think about Merrell's trajectory over the last handful of years, the market share gains, the consecutive quarters of growth and the outlook we have, I think that that's a piece to it. Importantly, we have to open up appropriate distribution. And I think our sales team has done a nice job opening up new doors for us to show up where that product is sold and specifically where it's sold to her. So really pleased the progress in total and I think the greater lifestyle opportunity beyond the trail for Merrell but I can't discount the fact that we still are the leader in trail. Three of the top 10 styles for the first time in the last quarter came from Merrell and really extended our market share lead there by triple basis point gain again. So really pleased in total by the Merrell business and certainly the trajectory that we see.

And then on Saucony, I think you said in your prepared remarks that you gained share in U.S. run. I believe that's an improvement over the last quarter. If it is, maybe if you could address that. And then as far as the back half outlook for Saucony, it sounds like you're very confident there and then you have good visibility. I think that on the lifestyle side your door count in the back of this is coming down so can you maybe kind of address that in the context of the overall Saucony growth projection for the back half.

So I'll answer the two specific questions that you have a good memory. The run specialty share we did gain in Q2, and that was an improvement over Q1, which we are encouraged by. We anticipate second half lifestyle doors to be approximately flat to first half, but no change from what we told you in February. And I certainly think the momentum we continue to see in Saucony is encouraging not just here in the U.S., but certainly around the world. And I think back to John's earlier question, like the running category, I think brands that innovate and bring fresh new product to market, I think those are the brands that are winning. And I think Saucony has done a great job, whether it's the [ Azure ] launch this year, which we just made the biggest single launch in the brand's history, to updating Core 4, the Triumph and the Hurricane. We've got a new Endorphin Elite out, and I think the best, fastest Endorphins are going to be coming out in 27. So brands that continue to innovate, I think we'll continue to win, and we certainly remain bullish on the Saucony product pipeline and the way that team is driving the business.

Your next question is from the line of Laurent Vasilescu with BNP. Your line is now open. Please go ahead.

This is Lucas Cohen on for Laurent. Thanks for taking our question. Just wanted to see if you could elaborate more on the deliberate DTC pullback for Merrell in the quarter. I know you highlighted some DTC strength in prior quarters. So just wanted to get some more context there. And then did the mix of Merrell full price sales continue to improve in the quarter? And is Merrell continuing to gain share in hike? I think you had mentioned last quarter they gained share 12 of the prior 13 quarters in hike. Thank you.

Yes, I'll try to remember those questions and maybe I'll go in reverse order. Triple basis point, triple-digit basis point gain for Merrell. The number one leader in hike with three of the top 10 styles in the U.S. today. And a lot of credit to that team on what they have done. As it relates to Merrell DTC, I would say at total across the portfolio, I think the underlying health of our brands and the performance globally continues to be strong. You're seeing that show up in brand health metrics, Google search interest, and in market share gains. And I think that is a credit to the work that the teams have done over the past couple of years. As it relates to DTC, I think the story is a little bit different by brand. And for Merrell specifically, we're consciously moving marketing dollars up the funnel to work on awareness for the brand.

That has always been sort of a lagging indicator for us, and I think our team in place is now more consistently moving those dollars up the funnel, which we think is in the long-term best interest of the brand globally. And I think you're seeing those things begin to take through in those brand health metrics, which we think will help both our wholesale business and our DTC business. But that conscious shift in marketing spend obviously puts some pressure on Merrell in the short term at direct-to-consumer. We think that will even out over time and we do think is in the best long term interest. And I'm fortunate to be in a position where we can make these decisions about our investments across the portfolio as different things are working, to best manage the brand, best manage the company and our brands for long term sustainable growth that ties back to our value creation model. Really optimistic about Merrell. We do know that the DTC business, we know that we need to improve that, but I do think we're taking the right steps today to show longer term improvement. So we remain bullish on Merrell's global opportunity, both here in the U.S. and around the world, as well as wholesale and our own channels. Thank you, Lucas.

Your next question is from the line of Peter McGoldrick with Stifel. Your line is now open. Please go ahead.

Yes, thanks for taking my questions. I wanted to ask on the Saucony brand, as we think about the upgraded outlook, you represented the global uptake of the brand. Can you point to the key regions of incremental international traction for Saucony?.

Yes, good question. We're really pleased by the progress in EMEA and give a lot of credit to that team over there. Take everyone back to sort of February of 24, that really was the start of our key city strategy and the company's key city efforts really started with Saucony in Europe, specifically in London. And we think three years, sort of moving three years past that, that really has helped elevate that brand and awareness and affinity in that market. And we're seeing a strong uptick there. We led with performance run, both from a product standpoint and from an activation standpoint, you know, really sort of doubling down on London, sponsoring London 10K, investing in run clubs. And that decision to really distort investments to London has really paid off. And now we're beginning to take those learnings to other cities, Paris and Berlin and beyond.

And then we sort of followed run with lifestyle introduction. And we've learned from the U.S. on how to roll that out, how we can win as we roll that out. And we're applying those learnings to the rest of the world. But certainly if I think about regions that are, again, Saucony in total is performing very well, standout regions would certainly be Europe.

Excellent. And then on inventory, inventory dollars decrease meaningfully on the books year-over-year compared to the go forward revenue growth outlook in the back half. Can you help us think about the spread between inventory and the outlook and the quality of inventory on the books and ability to service the revenue that's in the back half outlook.

Yes, thank you. Thank you for the question, Peter. At the end of the second quarter, as you noted, the inventory was down around 17% from the prior year. Overall, our inventory is in a healthy position. The year-over-year decline is, that's really a combination of timing factors and timing of receipts, as well as the continued benefits that we're seeing from our efforts to improve. We've talked about before our efforts to improve our inventory management and our productivity across the portfolio. So the combination of timing, as well as those initiatives that we've been taking to be more disciplined with our working capital are what you're seeing. To be specific to your question and important, we are confident at the current inventory levels that we're at, together with the planned receipts in the second half, they'll fully support the increased revenue outlook for 26.

Your next question is from the line of Sam Poser with Williams Trading. Your line is now open. Please go ahead.

Operator, we don't appear to have Sam. Sam, are you there? Hi, sorry about that.

Your next question is from Mauricio Serna with UBS. Your line is open, please go ahead.

Great, good morning. Thanks for taking my questions. Maybe I wanted to ask about Saucony. You raised the guidance towards the higher end. Could you break that down? Where's the guidance increase coming from when you look at the lifestyle versus performance segment? Just high level, could you talk about what you're seeing in the U.S. in terms of like sell-through for both performance and lifestyle, and just in terms of like the full price selling and just also concerns on promotions. You've heard that it's been like relatively highly promotional in the space. So I just was wondering if you were hearing anything or sorry, not hearing, but seeing anything like that on your business. Thank you.

Yes, certainly. Thanks, Mauricio. Yes, I think our raise in Saucony sort of reflects both the delivery that we've had and certainly our outlook for the second half. And I think it's important. It is sort of broad-based growth. It's run and it is lifestyle. And we're seeing nice business, healthy business around the world. So we remain optimistic. With all of that said, it is a fiercely competitive space. We've got a tremendous number of great challengers, but I think brands that are bringing compelling, innovative product, packaging them with great stories, and then working hard on the ground game to win that battle on the floor, I think those brands will continue to win. And obviously the gain and the improvement in market share gains this quarter versus last quarter gives us encouragement. What we're seeing at saucony.com gives us encouragement. And then importantly, just the feedback from our partners and what they're seeing and hearing.

So, and again, I think it's important, I know we focus a lot on the U.S. business, but I think it's important to say that Saucony is a global growth story, which is why I'm glad I got the earlier question about Europe. The progress that we're seeing over there. So it is broad based and I would say pointing to the diversification of Saucony's growth beyond one category. Beyond one channel, the fact that we can grow performance run, the fact that we grow lifestyle, the fact that we can grow globally, the fact that we grow DTC and wholesale. I think that diversification is part of the brand growth story beyond just a few styles in a specific channel. So we remain optimistic about the potential for Saucony. We think it remains great, and it's our job to go chase that growth responsibly.

All right, quick follow up just on Merrell, just given the strong performance in the second quarter, just wondering why there doesn't seem to be an increase in the revenue guide for that brand. And maybe could you unpack a little bit more, like how much of the growth in the quarter would you attribute to core hike versus lifestyle? And lastly, just quick question for Taryn on the description of the gross margin increase outlook. You mentioned reference stronger marketplace execution. Could you explain a little bit more? Like what does that mean? Thank you.

I'll talk about Merrell first and then Taryn can hit the second point. Yes, again, really encouraged by the progress that we have seen in Merrell. And again, it's important to note, it's sort of iconic pieces that we have breathed new life into, like the Moab 3 that continues to be just a dominant boot in the marketplace. It's the Moab Speed 2, which we introduced a few years ago, and how important franchise that that has become, and then thoughtful sort of segmentation distribution strategies and really managing the marketplace well. And it's not just a U.S. story for Merrell. We're seeing good upticks in performance across Europe as well. And obviously we've got important businesses in Asia Pacific with our partner out of Japan and obviously Xtep in China.

And so I think both the performance outdoor piece as a lifestyle piece give us encouragement. And then I would really point to, we anticipate to be a record marketing investment in the brand this year around the new It Starts Outside platform that the team has developed and seeing market share gains in Merrell continue, seeing very strong Google search interest globally for the Merrell brand, I think gives us confidence. And it's important this is, you know, Merrell was the first brand to lead the company out of the turnaround in the back half of 2020, the first company to grow consecutive growth quarters and then a long string of market share gains actually accelerating to triple digits in the quarter. And I think it's also important to know domestically in the U.S. that hike category had been under pressure for several years. We're actually beginning to see hike category. And I think all of those things bode well for the outlook for Merrell. So good first half, no change to the second half outlook. Now we're going to go execute.

And, Mauricio, building on John's earlier question, when I talked about the, you know, more significant part of our, a majority of our increase in our margin outlook was due to structural or marketplace execution, so to put more color on that, that's things like healthier inventories and brand heat that is driving more full price sales. Chris just talked to investing in marketing and brands and capabilities. That is part of that brand heat that enables us to drive more full price sales, as well as product design optimization. So working with our supply chain teams and working with brands in terms of how they're driving cost efficiencies, as well as in the supply chain team, they look at logistics and their sourcing in terms of how we're driving savings. So when I'm talking about structural or marketplace execution, it's really across the board in terms of getting those more full price sales with the investments we're making in our brands and our capabilities, the supply chain, working with the brands and with our teams in terms of driving efficiencies there as well.

Awesome, thank you so much and congratulations on the results.

Your next question is from the line of Sam Poser with Williams Trading. Your line is now open. Please go ahead.

Can you hear me this time? Hello? Can you hear me?

We can hear your dog.

Yes, sorry about that. It's all good. So the follow-up question on the inventory, the very common shift and the ones in freight delivery. I think he said, was there a timing shift on inventory that was part of it? I don't think she's got any interest in the beginning of July instead of the end of June.

Operator, I'm sorry, we can't hear Sam unfortunately.

Your next question is from the line of Ashley Owens with KeyBanc Capital Markets. Your line is now open. Please go ahead.

Hi, great. Thanks and good morning. I know there's been a lot of talk on Merrell and Saucony. So maybe I'll focus on the other brands to start, but maybe just first on work. Really encouraging to see the Wolverine brand return to growth in the quarter. I was just hoping if you could discuss some of the brand level improvements that really started to work in the last quarter and then with the work portfolio guided down for the balance of the year could you just help us break that down brand by brand are you assuming that Wolverine brand is able to sustain improvements and what's the biggest drag in that area of the portfolio today.

Sure, thanks for the question. We are certainly encouraged by the progress we're seeing out of our work group and specifically Wolverine brand. I think a more thoughtful strategy, really focused on executing our global brand building model. Amazing products, great stories, and then driving the business by the results in 2Q for Wolverine brand. At the same time, we acknowledge that there's more work to go do and we don't anticipate the results to be perfectly linear moving out from here. So there will be some choppiness as we get that brand up and running again, the product line hits, and importantly, we really address the channels and make sure that channels are clear and we've got the right product inside the right doors, and importantly, with the right activation. But if I think about the global brand building model, I think about our brand growth playbook, which we've deployed with Merrell and Saucony, I think that the Wolverine brand is really focused on the right things. What is that innovation? What product are we bringing? What consumers are we targeting? And then how do we plan to sell it in and sell it through at wholesale?

I think the marketing piece, you know, some really good moves by that brand over the last handful of months, the partnership with Landman to really raise awareness and a lot of sort of on the ground activations taking place right now. And then I think importantly, just a very thoughtful segmentation and distribution strategy at U.S. wholesale and getting back to that core work business. So, I think that brand is doing the right things. We're certainly pleased by the early results, some of the metrics that we're seeing beyond just the P&L. You know, consumer interest and Google search interest, I think those things are positive. At the same time, we acknowledge there's more work to go do, and we don't expect it to be a perfect linear path from here on out. But with all that said, I remain enthusiastic about that team, the work that we're going to go do, and certainly what a healthier Wolverine brand and a healthy work group can mean for the greater portfolio.

Got it. And then on Sweaty Betty, with the UK DTC business now growing multiple quarters, you mentioned that international wholesale is strong. I would just be curious as to which strategy is working best today. And then just given the comments on the business growing, if we had exclude the U.S. part of that. Now the reset started 3Q last year. We'll just be curious at what point the reset becomes small enough that that underlying growth we're seeing internationally really begins to shine through and then maybe just quickly on Saucony to put a bow on things here. But with the mention of the lifestyle account being flat, brand outlook moved up. Is the implication there that you're seeing stronger productivity within the existing accounts in the back half. Thank you.

Yes, great couple of questions there. I'll hit Sweaty Betty first. You know we really worked hard really about a year ago this time on a strategy for that team, spent a lot of time in London with that leadership team and really came down to several key moves that we had to go do. And really sort of doubling down on what we thought was most important and that team has done that work, executed with great determination, and I'm encouraged by some of the early results. We're seeing some improvements in our UK direct-to-consumer business, and that is a little bit of a challenged market right now, just in general, that consumer, but pleased with the performance, both at sweatybetty.com as well as in our stores. I'm really pleased by the evolution of the product pipeline, diversifying beyond just the leggings business, more bottom silhouettes, mid layers, the outerwear has been very good. And then really sort of taking back its rebelliousness and having a distinct point of view in a very competitive market. So really well done there.

We finished the integration of Sweaty Betty into the Wolverine portfolio last year. And part of that was to plug their business into our international 3P market, versus trying to go do it ourselves around the world. And that has sort of paid off with some early gains, encouraged by some of the recent progress across Europe and into Asia Pacific. And I'm excited about the prospects for what that can mean for that business as well. The U.S. reset that really began to happen in the third quarter of last year. And we will shortly lap that, which will provide some easier comparisons. So I'm optimistic about where Sweaty Betty is, the improvements we've made. All of that said, they operate in an attractive yet fiercely competitive category, and the UK market certainly has been under a little bit of pressure over the past handful of months, but optimistic about the new strategy. The early results that we're seeing, every time I'm with that team, I think the product gets better and better and really pleased with the stories they're telling in the marketplace. And I think that team does a good job as anyone driving the business each day. So pleased with Sweaty Betty progress.

And then as relates to Saucony U.S. lifestyle, we did talk about that door counts are about where we had anticipated them to be when we spoke to you last, but we are encouraging that we are seeing the inventory in the channel begin to clip and we are seeing those doors being more productive. And that's an important piece. We want to run productive doors. We want to drive sell-through. We want to operate with a pull model. And I think we're working hard to optimize that business. And even with where that U.S. lifestyle was the last couple of quarters, really pleased that we can post growth and certainly raise our outlook and our optimism for the back half of the year after what we've seen in the first half of the year.

I appreciate all the detail this morning. Thank you again for taking my questions.

Thanks so much.

Your next question is from the line of Tom Nikic with Needham and Company. Your line is now open. Please go ahead.

Hey, good morning. Thanks for taking my question. I want to ask another Saucony question. I guess when we think longer term about the opportunities for the brand, you know, even with the strong performance over the last, you know, a couple of years, it's, you know, still, you know, quite a bit smaller than a lot of other, you know, peers in the space, which would suggest there's quite a bit of runway for growth over the long run. Like, you know, where do you think the long-term opportunities lie? Is it, you know, is it shelf space gains? Is it door count increases? Is it category expansion? Would love to get some color there. Thanks.

Yes, thanks for the question. And we agree with you. You know, even with the great performance of the Saucony team over the last handful of years, 25 being a record year, we still view ourselves as a small challenger brand in a very attractive category. And that gives us both optimism and drive to go be bigger and better. And I think Saucony possesses some amazing attributes. You know, a century old brand, one of the OGs, known for innovation, loved by serious elite runners. Known for bringing great products to market. At the same time has been able to tap into the intersection of performance run and lifestyle culture in a very special way and doing it in a very sort of unique way in an authentic way and I give that team a lot of credit for what they've done. So the ability to grow both performance run, more casual run, lifestyle run, and then sort of grow street and fashion, I think that is an amazing, amazing opportunity ahead of us.

And we're not sitting back, feeling good about what we've done the last couple of years, we look out and see what the opportunity can be. And importantly, it's not just a one region story. We're seeing, you know, really strong pickups in markets like Europe, which I previously mentioned. We have a great partner in China, an expert there who's helping us grow that business. I was in Tokyo a few months ago and saw Saucony on the streets in Harajuku. And it really gives us a lot of confidence. And I even mentioned today, apparel and accessories opportunity beyond just footwear, tapping into the Sweaty Betty team, tapping into the collective genius of the broader corporation to bring products to market. So excited about what that opportunity to be. We're going to test that and learn and then go from there. So I agree with you, with your premise is that despite the success we've had, it's still relatively small. I would agree with that. And certainly if you believe the total addressable market, the size of our competitors, it's our job to go chase that growth right now in a responsible way. And that's what our team is heads down trying to do.

Great. Thanks very much for taking my question and best of luck the rest of the year.

Your next question is from the line of Dana Telsey with Telsey Advisory Group. Your line is now open. Please go ahead.

Hi, good morning everyone and nice to see the progress. As you think of product, whether it's core versus innovation and newness, what should it be for each of the brands? Where do you expect it to go? And what does that mean from a price and margin standpoint? You mentioned apparel and other categories, does that become a bigger role given what you've learned from Sweaty Betty? Thank you.

Thanks, Dana. I think innovation is paramount in our business. Someone once told me, if you've got the right product, everything else matters. If you don't have the right product, nothing else matters. And I think that was true then, and it's true now. So truly innovation is critically important. I would say it varies a little bit by the categories in which we plan. I think there's a different expectation maybe in work versus outdoor versus run versus apparel like Sweaty Betty. But first and foremost, you have to bring great products that are driven by consumer insights that solve consumers' problems that are priced right and placed right within the marketplace. And I think if you look at where we're winning today and not just Wolverine brands, but the broader category is sort of brands that can do that. Brands that bring great products, that's visually distinctive, that helps solve consumers' problems that are placed right and priced right. I think those brands will continue to win in any environment.

I think too about our ability to grow and the responsibility to drive growth for the company. I would think about how we've shaped the portfolio over the past couple of years. Brands that we have divested of and brands that we've chosen to double down on. We've chose brands that we thought would be aligned well with consumer and macro trends. I think that is playing out. The categories which we play in are some of the healthier categories in footwear and apparel today. And that's where our brands and our company is focused. And importantly, not only did we do that reshaping the portfolio, we work to distort resources towards we thought were the highest, fastest value adds first. And you can see sort of what Saucony has been able to do and how Merrell has been a fast follower. So at the same time, all of that, I also think we've worked hard to make our brands more premium, bringing more innovation, telling better stories, placing them in the right doors.

And then I think we can talk about what they can be placed at and then obviously what the margin implications are as far as apparel and accessories. I do think that remains an opportunity for us and I think we've learned a lot for what Sweaty Betty has brought to the business and I certainly think Saucony has an opportunity to play there in a bigger, bigger way and leveraging the expertise of the Sweaty Betty team to help. Very good. I can't wait for that test to come live and hopefully there's something there that we can go chase to be another growth lever for the company and the brand moving forward.

Your next question is from the line of Anna Andreeva with Piper Sandler. Your line is now open. Please go ahead.

Great. Thank you so much for taking our question. And congrats, really nice results. We wanted to follow up on SG&A. Taryn, really tightly managed dollars up only 2% and 3Q guide assumes something similar. Just to double check, were there any timing shifts within that and should we think that very low single digit growth is the right way to think about SG&A growth going forward? You mentioned higher freight. I'm not sure if you quantified that impact in 2Q and what should we expect for 3Q?.

Yes, thank you Anna. The SG&A wouldn't call out any timing. If you look at the Q2 performance, the SG&A was really a reflection. The improvement there was driven by stronger revenue, so we were able to get from the revenue beat flowing through in SG&A. So I wouldn't call out any timing as it relates to the second quarter performance. When we look at the balance of the year, at the midpoint of our 26 guidance, our implied SG&A as a percentage of revenue is largely consistent with what we said in May. And that reflects a decrease of around 130 basis points to last year. And as we consistent with what we said in February as well as what we said in May, is we're continuing to invest in our brand. You know Chris talked about the growth whether it be in marketing, the key city activations, digital initiatives. And so we do continue to invest in those areas and remain disciplined across the rest of the cost structure. And that is helping improve the profitability of what we've seen year to date and expect for the balance of the year. We did not quantify. Sorry, you asked about oil. We didn't quantify it. I would say it was modest is how I would describe it. Certainly we would expect it to be a bit more in Q4 than in Q3, but just given the revenue and the shipments, particularly in e-commerce in the fourth quarter, but I wouldn't, I'd still describe it as modest.

Okay, that makes a ton of sense. And just to Chris on the DTC versus wholesale dynamic across the brand. So DTC has been coming in more muted for a few quarters now. And I know you've been focused on driving more of that full price business. So that's been a headwind. But do you expect DTC to play a role in that bounce back in the guide and where are you with refocusing on full price across the brands at this stage? And thank you so much.

Yes, thanks Anna. I appreciate the question. Yes, DTC is a significant focus for us these days and how we can get that business moving the way the rest of the organization is. I think the story is a little bit different by brand. We're really pleased with the progress we've made in Saucony and seeing good growth in our DTC channel there. Sweaty Betty obviously is hampered by the U.S. reset, which we will very quickly lap. And then we previously talked about Merrell, focused on both working to become less promotional, having a higher full price mix, and then telling more frequent better stories in our online channels. At the same time, really being thoughtful about how we're spending money up and down the funnel and where we choose to spend that. We acknowledge that there's more work to go do in DTC. But certainly I'm pleased with the progress overall in total. And I do think we're taking the right steps to get that business checking the way most of the rest of the company is checking. Obviously entering an important holiday selling season in the next few weeks as we work towards the end of the year. So we are very focused on improving the DTC performance overall. But at the same time, really pleased with where our brands sit in general.

Appreciate all the color. Best of luck.

Your next question is from the line of Sam Poser with Williams Trading. Your line is now open. Please go ahead.

Hello? Hello?

Hi, we can hear you.

Can you hear me? Or can you hear me?

We can now.

OK. All right. I don't know what's going on anyway. Just two questions or three questions. One, was how much of the international business better than you anticipated? And if so, how with the gross margin, did the mix of business by geography help your gross margin more? And is that anticipated to continue? If I'm...

Am I thinking about that right? What was your second question on margins?.

Well, your geographic mix of business, international is generally higher margins than domestic. So was the international business better than you anticipated? And if so, how much did that help the gross margin in the quarter and how much of that is built into the increase of the gross margin guidance for the year?

Yes, and I appreciate the question. Geographic mix is as anticipated. I wouldn't call it a driver for Q2 nor for balance of year.

Okay, and then secondly, your inventory levels. How much of that was a timing shift relative to, you know, something showed up on July 1st, rather than June 30th. And if we looked at inventories, let's say today, what would that look like on a year-over-year basis?

Yes, the timing shifts, there's two pieces within the timing shift. There was a piece that related to last year, frankly was one of them in terms of the receipt last year versus receipts this year. And then there was some between what I would call, to your point, between call it June and July in terms of a delta. So the timing shift is across both of those components. I think that what I want to stress though, which I said earlier when Peter asked the question, we are confident that with the inventory that we have and that the inventory that we're receiving, that we are supporting the higher growth and to put a finer point on that. I've talked before about, for example, Wolverine, we had more work to do to get that inventory in a better place. That was one of the drivers of the decline we saw from the more efficient versus some of the more timing piece was more in Sweaty Betty and Merrell. Saucony was not a driver of the decline in terms of the inventory. And when you think about where our raise is for the balance of the year on Saucony and the brands in total, we are confident we have the right inventory to meet that demand.

Okay, thank you. And then lastly, Chris, with Merrell, what percent of sales is the lifestyle business now, and where do you see that going over the next few years?.

Yes, good question. Lifestyle is approximately less than a quarter of the total business today, but we certainly see that as an opportunity for us. And I guess part of the pivot we're trying to make with that brand is obviously maintain our dominance on the trail. And I think that that's coming through in our market share gains and how we're seeing that business. At the same time, the broader outdoor lifestyle opportunities, opportunity beyond the trail and then specifically with her. I want to make sure that I emphasize the focus that we can have a better split between him and her and what that opportunity presents for the brand. So I think there is ample opportunity if we can crack into that lifestyle piece in a more meaningful way and then certainly bring trend-right, colored-right, priced-right products that solve problems for her, and then make sure they show up in channels where she shops. And that's what I think the team is really focused on. So I'm optimistic both about protecting that core business, which we've done a nice job of, and then a broader lifestyle opportunity, which I think provides a lot of runway for the business beyond where we are today.

Just quick follow up the guidance and again the results in the second quarter. Did the lifestyle growth, even though it's smaller, outpace the performance growth or can you give us some breakdown there?.

I would say we saw a lot of strength in performance in the quarter. I think that came through in the market share gains. We talked about increases in the classic Moab 3. We talked about the Moab Speed 2 with three styles in the top 10. And certainly if you think about the broader Merrell business beyond just the U.S., it very much is a performance brand in many other parts of the world. So pleased with the progress in Merrell in total. We believe there's a very strong opportunity in lifestyle, but the performance piece showed particular strength in the previous quarter.

Thank you very much.

Thank you, Sam.

We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.

Greetings, and welcome to the Wolverine Worldwide First Quarter Fiscal 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jared Filippone, Head of Investor Relations. You may begin.

Good morning, and welcome to our first quarter fiscal 2026 conference call. On the call today are Chris Hufnagel, President and Chief Executive Officer; and Taryn Miller, Chief Financial Officer.

Earlier this morning, we issued a press release announcing our financial results for the first quarter of 2026 and guidance for fiscal year 2026. The press release is available on many news sites and can be viewed on our corporate website at wolverineworldwide.com. This morning's press release and comments made during today's earnings call include non-GAAP financial measures. These non-GAAP financial measures, including references to the ongoing business and constant currency revenue growth rates, were reconciled to the most comparable GAAP financial measures in attached tables within the body of the release or on our Investor Relations page on our website, wolverineworldwide.com.

I'd also like to remind you that statements describing the company's expectations, plans, predictions and projections, such as those regarding the company's outlook for fiscal year 2026, growth opportunities, and trends expected to affect the company's future performance made during today's conference call are forward-looking statements under U.S. securities laws.

As a result, we must caution you that there are a number of factors that could cause actual results to differ materially from those described in the forward-looking statements. These important risk factors are identified in the company's SEC filings and in our press releases. All revenue growth rates will be cited on a constant currency basis unless otherwise stated.

With that, I will now turn the call over to Chris Hufnagel.

Thanks, Jared. Good morning, everyone, and thank you for joining us on today's call. The first quarter was a good start to the year, exceeding our expectations across all key financial metrics. We delivered solid growth with revenue up 11% on a reported basis and up 7% on a constant currency basis. The growth was driven by our 2 biggest brands. Merrell grew revenue high single digits, while Saucony was up mid-teens.

Encouragingly, all brands in the portfolio either met or exceed our outlook for the quarter. At the bottom line, we continue to run a much more profitable business as well, with quarterly adjusted diluted earnings increasing over 30% to $0.25 per share, all while making important investments in people, product innovation, marketing and modern tools.

In addition to delivering a solid financial performance for the quarter, we also continue to strengthen our capabilities as a company. With the progress we made over the last year plus, we've been able to attract great new talent to Wolverine Worldwide. This new talent, combined with the team that successfully executed our turnaround, further elevates our global brand-building capabilities.

I believe our team is as strong today as it's ever been. We also advanced several key strategic initiatives, including the expansion of our key city strategy, along with continuing the modernization of our tools and systems, most notably our e-commerce platform. I'm also pleased with the progress we're making on embedding AI into how we drive the business, working to become faster, more agile and more efficient.

Moving forward, with a stronger team in place and a proven brand-building playbook, I believe our company is well positioned to compete and win in the global marketplace. Additionally, I believe our reshaped portfolio aligns well relative to consumer trends today and into the future. Performance run and run lifestyle continues to be among the fastest-growing categories in footwear. Hike has returned to growth. Work continues to turn in consistent increases year-over-year and women's active wear is growing as well.

And finally, our strategies, coupled with disciplined execution continues to prove effective, building our brands around the world and enabling investment for future sustained growth, all the while improving the profitability of our business and strengthening our balance sheet.

I'd now like to spend a few minutes providing an update on our key brands, beginning with Merrell. Merrell, a leader in the global outdoor market, continues to focus on modernizing the outside, developing more athletic, style-led and versatile footwear while elevating the brand around the world.

In the first quarter, the brand grew revenue 9% while comping a 14% increase in the same quarter of 2025, with solid growth across most regions and categories. The Agility Peak 6, Merrell's premier trail run franchise was the brand's biggest new launch in the quarter, and it helped drive increases in the category overall for the brand.

Merrell continued to build on its lead in U.S. hike by again taking significant market share. The Moab Speed 2 and the iconic Moab 3 both continue to deliver strong growth in the marketplace, partially driven by fresh colorways and materializations along with enhanced storytelling.

Lifestyle iterations on these franchises have enabled the brand to extend its relevance beyond performance. Merrell introduced the trend-right woven slide version of the Moab 2 this spring, which has been well received in Tier 0 distribution around the world and was a top seller on merrell.com. A few weeks ago, Merrell launched a collaboration on the Moab 3 with the influential South Korean lifestyle brand, Khakis, selling out in Japan and South Korea in minutes, enhancing the brand's relevance in 2 influential trend markets.

In core lifestyle, the Wrapt collection again drove strong growth as it continues to scale with additional styles and silhouettes. We've worked to elevate trend and design the Merrell Lifestyle product line, and we're seeing the improvement in market. This season, the brand reintroduced the low-profile Relay from its archives, launched modern slip-ons like the Jungle Trek Moc and Mule and added hybrid Mary Janes on performance platforms like the Moab Speed 2 and the disruptive SpeedARC.

Alongside the brand's bolstered product pipeline, Merrell's marketing has also started to hit its stride, fueled by planned record investment in the brand this year. In the first quarter, Merrell launched its new brand platform, It Starts Outside, unifying its storytelling under one umbrella and advancing the brand's powerful purpose to share the simple power of the outside with everyone.

The launch of It Starts Outside helped generate strong increases year-over-year in brand search interest. Merrell also kicked off its title sponsorship of the Skyrunner series here in the U.S. and internationally, composed of over 20 of the most elite trail running races around the globe. Merrell-sponsored athletes currently include the #1 ranked man and #2 ranked women in the World Series, along with 5 of the top 10 men overall, a great start to the season.

As Merrell celebrates its 40th anniversary this year, the brand's momentum is strong. Shifting to Saucony. We believe Saucony is uniquely positioned as a disruptive challenger brand at the intersection of 2 of the fastest-growing categories in the market, performance and lifestyle running.

In the first quarter, the brand grew revenue 15% with growth across all regions, channels and categories with both performance and lifestyle contributing healthy increases. On the performance side, the Endorphin collection represents the brand's pinnacle offering of innovation for elite runners. In February, Saucony launched the all-new Endorphin Azura, which we expect will be the brand's all-time biggest franchise launch to date.

The Azura is a lightweight super trainer with innovative geometry and energy return foam to help runners go fast every day. Aided by a fully integrated global activation and eager anticipation from the marketplace, the Azura immediately became a top seller for the brand on saucony.com and at wholesale.

In March, the brand introduced the new high-performance Endorphin Pro 5 for race days with a dual layer foam midsole for advanced energy return and a slotted carbon plate for an explosive snap off the pavement. Both shoes are performing well and helped drive strong growth for the Endorphin collection overall at U.S. retail. Endorphin innovation continues to earn the respect of serious runners.

The Saucony Endorphin franchise had strong showings at both the recent Boston London Marathons with the Pro and Elite among the top shoes worn and notably in Boston, Saucony was the #2 brand overall for women. The brand plans to continue to build on this momentum with the launch of the Endorphin Elite 3, Saucony's tip of spear product in June with perhaps the fastest endorphin innovation ever set for launch in 2027.

For the broader running market, Saucony continues to elevate its core four franchises, introducing the new Ride 19 back in January and the Guide 19 in March. Quickly following the Triumph 24 and Hurricane 26 are planned to launch in June and July, respectively, and both will be built on our new proprietary IncredleX foam, a high-end composition that delivers a luxurious ride with enhanced energy return, cushioning and durability.

Pivoting to lifestyle, an important growth category for the brand, but representing less than 1/4 of the brand's business today. In the category, Saucony continues to stoke heat around the world. The brand introduced fresh colors on core lifestyle franchises like the ProGrid Omni 9 and dropped collaborations with Sneaker Politics and 316 in the first quarter, followed by collaborations with influential partners, including Greyson, Engineered Garments and the Studio Nicholson in subsequent weeks.

This weekend, Saucony plans to launch its latest collaboration with Minted New York in an event at our Covent Garden store in London and buzz is building for several weeks already. We've been very intentional in selecting collaborators who align with the brand and develop its relevance on several different strategic dimensions, and the results have been powerful.

The brand has also driven strong energy and sell-through on saucony.com with capsule collections like Hi-Octane and Kissaten. Finally, newly reintroduced styles from the brand's archives like the ProGrid Paramount and Kinvara 1 are just starting to hit Tier 0 retailers and elevated department store shelves.

The brand is driving momentum through marketing as well. Saucony plans to bolster its key city strategy, which has been vital in driving outsides brand heat and growth in Europe by extending most notably into Paris this year, with a host of activations on tap, a new pioneer store planned to open in the city and title sponsorship of the Eiffel Tower 10K.

Events to reach the broader running audience remain a key component of the brand strategy. Saucony sponsored the Philadelphia Love Run at the end of the first quarter and is planned to sponsor the London 10K, Shoreditch Half Marathon and Berlin 10K later this year. In addition to organizing owned events like -- the Maze, a series of exclusive run club races held around the world.

While events and activations are helping reach more consumers, along with the brand's run as one campaign, Saucony is also focused on its ground game to drive sell-through with enhanced investments at wholesale, specifically in co-op marketing and field support. The team continues to generate momentum. Consumer interest in the brand is reaching record levels around the world, and I remain confident we have a very special opportunity in Saucony.

Moving on to Sweaty Betty. Sweaty Betty, one of the original female activewear brands, is squarely focused on empowering women through fitness and beyond. In the first quarter, the brand drove growth across all of its key strategic priorities, offset by a contraction of its U.S. business due to our intentional reset of this market that began in the third quarter of last year.

The brand was down 4% overall. Excluding the impact of the U.S. reset, however, Sweaty Betty delivered low single-digit growth in the quarter. Sweaty Betty is now effectively executing its new multipronged strategy established a little less than a year ago. First, the brand is focused on driving its U.K. direct-to-consumer business. And in Q1, this business delivered growth for the second consecutive quarter.

Second, the brand is strategically expanding distribution with priority retailers and partners across Europe and into Asia Pacific, and this segment grew over 60% in the quarter. Finally, the strengthening of the brand's positioning underpins all of these market and channel growth initiatives and Sweaty Betty continued to drive increased brand heat and interest last quarter.

The brand remains focused on introducing more product newness as well with an emphasis on key franchise and strategic growth categories like outerwear and new silhouettes and bottoms, both of which grew significantly in Q1. The brand also continues to embrace bolder and more distinctly Sweaty Betty storytelling to break through and further elevate and differentiate the brand, starting with the launch of its Born Sweaty campaign earlier this year.

While the brand is facing the aforementioned near-term headwind related to its reset of the U.S. business to a more premium full price position, the team is making good progress and is already driving increases behind the key pillars of its new strategy, establishing a foundation for future sustained profitable growth. I'm encouraged by the progress we made over the past year and excited for where this team is headed.

And closing with the Wolverine brand. Wolverine gained share for the second consecutive quarter in the U.S. work boot market and delivered sequential revenue improvement in line with expectations, finishing down 3% compared to the prior year.

The brand has bolstered its product pipeline with new innovation like the Infinity system, the brand's Pinnacle Performance Comfort Technology, enabling elevated pricing and a stronger premium positioning and is more effectively tapped into trend with expanded Western and wedged boot assortments, fueling greater relevance with today's consumer.

Key franchises behind these initiatives like the Alpha Infinity, Loader, Rancher and Wheatland are all driving growth in the marketplace. Wolverine has also stepped up its marketing through a combination of upper funnel initiatives to generate greater reach and awareness, including its partnership with Paramount+'s hit series, Landman and lower funnel tactics to fuel increased consideration and conversion.

In the first quarter, the brand executed an integrated activation plan, leveraging its Landman partnership with prime product displays in key retailer stores, supported by activation events that tell the full story. It also executed a series of activations focused on Houston and in particular, the Houston Rodeo. These efforts continue to raise the brand's profile in the marketplace and help drive the business.

Just a few weeks ago, the brand partnered with Metallica to launch a limited edition boot to support students interested in the skilled trades, deepening Wolverine's positioning in connection with its consumers as part of Project Bootstrap. Encouragingly, we've seen a steady uptick in the brand search interest over the last few months with April delivering the largest year-over-year increase in over 5 years.

And finally, Wolverine is making good progress in recalibrating the marketplace as well, prioritizing a more premium positioning, optimizing assortment and inventory at key retailers and better aligning distribution to the brand's go-forward strategy. Although there is still work to do, the brand's disciplined approach is gaining traction.

We're already seeing proof points that the strategy is working. And coupled with our recent leadership appointments, I'm increasingly excited about the future for the company's namesake brand.

Now I'd like to turn the call over to Taryn Miller to take you through our results for the first quarter and our outlook for the remainder of the year. Taryn?

Thank you, Chris, and welcome, everyone. We delivered a strong start to 2026, exceeding expectations on both revenue and profitability and building on the momentum from 2025. These results reflect improved discipline in how we're operating the business and executing across the portfolio. We're also making progress in establishing a more consistent brand-building framework, which allows our shared capabilities to scale more effectively in support of our brands.

As these efforts continue to take hold, operating leverage is starting to come through. Revenue growth in the quarter was driven by our 2 largest brands, Merrell and Saucony. Adjusted operating margin expanded by 140 basis points, and we continued to invest in our brands and operational capabilities while further strengthening the balance sheet. Our outlook for 2026 is supported by our first quarter performance and continued progress in executing our strategy while remaining appropriately grounded given the dynamic operating environment.

I'll now take you through the highlights from our first quarter. Revenue of $458 million was above the high end of our outlook with better-than-expected performance in both the Active and Work Group. Reported revenue growth was 11% compared to the prior year or 7% on a constant currency basis with foreign currency providing a $15 million benefit. The following channel, segment and brand performance is provided on a constant currency basis.

Wholesale revenue increased 10% compared to the prior year, with growth across both international markets and the U.S. DTC revenue was approximately flat with continued improvement in the mix of full price sales across the portfolio. Active Group revenue grew 9% in the first quarter, ahead of our expectations and continuing momentum from 2025. This outperformance reflects strength in new product innovation, continued investment in marketing and brand building and improved marketplace management.

Merrell revenue grew 9% in the quarter with growth in both wholesale and DTC. Wholesale performance was led by international with solid contribution from the U.S. as sell-through at retail remains strong, supporting better-than-expected at-once orders. DTC grew for the second consecutive quarter, driven by the U.S. with the mix of full price sales continuing to improve.

Saucony revenue grew 15%, with first quarter revenue reaching a record level for the brand. Growth was broad-based across channels and regions with contributions from both performance and lifestyle. Wholesale performance was led by international markets, particularly EMEA, which was supported by strong sell-through. DTC growth was led by EMEA and the U.S. as the brand's marketing investment and new products drove consumer engagement across categories.

Sweaty Betty revenue declined 4% in the quarter, reflecting the planned reset of the U.S. business to a more premium DTC model. This was partially offset by growth from key initiatives, including expanded international wholesale distribution and continued growth in U.K. DTC. Work Group revenue was approximately flat, ahead of our guidance for a mid-single-digit decline, driven primarily by better-than-expected global wholesale performance.

We are making progress against our strategy to improve work group performance as reflected in improving retail sell-through, supported by new product launches and more effective marketing execution, contributing to healthier inventory positions across the channel. We remain focused on executing against these priorities to drive greater consistency in results and position the business to deliver sustainable growth.

Consolidated gross margin was 47.6%, consistent with the prior year. Our tariff mitigation actions and improved mix of full price sales offset a 270 basis point unmitigated tariff headwind compared to the prior year. As a reminder, prior year promotional levels were elevated in the first quarter before normalizing through the balance of 2025.

Adjusted operating margin was 7.7%, an increase of 140 basis points compared to the prior year and 110 basis points above our expectations. The improvement reflects expense leverage from revenue growth and disciplined cost management even as we continue to invest in our brands. As a result, adjusted diluted earnings per share increased 32% year-over-year to $0.25 compared to $0.19 in the prior year and above our outlook of $0.20 to $0.22. Net debt was $519 million, down $85 million versus last year.

Turning to our outlook. While the operating backdrop remains dynamic, our underlying business performance continues to support our outlook for 2026. As a result, we are reiterating full year revenue guidance and raising our expectations for gross margin, adjusted operating margin and adjusted earnings per share. We continue to expect total revenue to be in the range of $1.96 billion to $1.985 billion, representing a reported growth of approximately 5.2% at the midpoint.

This includes an estimated $14 million foreign currency benefit compared to the prior year. As a reminder, the absence of the 53rd week represents an approximate 70 basis point headwind to revenue growth, largely concentrated in our DTC business. On a constant currency basis, excluding the 53rd week in 2025, we expect revenue to increase approximately 5.2% at the midpoint.

The following segment and brand outlook is on a constant currency basis. We continue to expect Active Group revenue to grow mid-single digits and Work Group revenue to be approximately flat compared to 2025. Our brand level expectations are also unchanged from February, with Merrell expected to grow mid-single digits, Saucony expected to deliver low to mid-teens growth, Sweaty Betty expected to decline low single digits and Wolverine expected to be approximately flat compared to 2025.

Before turning to gross margin, I'll walk through a few key assumptions embedded in the guidance. The Middle East represents approximately 1% of total revenue and any disruption to date is incorporated into our outlook. The recent increase in oil prices is translating into higher freight costs, which are reflected in our revised gross margin outlook.

We expect any impact to product input costs in 2026 to be limited. With respect to tariffs, our guidance reflects the current incremental 10% rate through July with the assumption that rates return to IEPA levels thereafter. On that basis, we now estimate the 2026 unmitigated tariff impact to be approximately $50 million compared to our prior estimate of approximately $60 million.

Our guidance does not include any benefit from IEPA's tariff refunds. We paid approximately $36 million in IEPA tariffs and are actively engaged in the refund process. With that context, gross margin is now expected to be approximately 46.4% compared to our prior outlook of 46%. The improvement primarily reflects lower tariff costs, partially offset by higher freight surcharges from elevated oil prices.

We now estimate the unmitigated tariff impact in 2026 to be approximately 250 basis points. Adjusted operating margin is now expected to be approximately 9.5% compared to our prior outlook of 9.1%, reflecting higher gross margin flowing through to operating profit. We continue to expect year-over-year operating leverage, supported by revenue growth, cost discipline across the organization and ongoing efficiency improvements.

And we continue to strategically invest in our brands, primarily in marketing and key capabilities. Interest and other expenses are projected to be approximately $23 million, and the effective tax rate is projected to be approximately 18%, both unchanged from our prior outlook. As a result, adjusted diluted earnings per share is now expected to be in the range of $1.43 to $1.58 compared to our prior outlook of $1.35 to $1.50. We continue to expect operating free cash flow to be in the range of $105 million to $120 million. Capital expenditures are still expected to be approximately $20 million.

Moving to our second quarter outlook. Revenue is expected to be in the range of $495 million to $500 million, representing reported growth of approximately 4.9% at the midpoint compared to the prior year. On a constant currency basis, revenue is expected to grow 4.5% at the midpoint. Active Group revenue is expected to grow high single digits, while the Work Group is expected to decline low single digits versus the prior year.

As a reminder, 2025 included approximately $10 million of wholesale orders that shifted from the third quarter into the second quarter as retailers accelerated purchases ahead of planned price increases. This $10 million shift is comprised of $4 million in Merrell, $4 million in Saucony and $2 million in the Work Group. Gross margin in the second quarter is expected to be approximately 46.4%, down 80 basis points compared to the last year.

This includes an approximate 310 basis point unmitigated tariff impact and a slight headwind from higher oil prices on freight, partially offset by our ongoing tariff mitigation efforts. Adjusted operating margin is expected to be approximately 9.5%, an increase of 30 basis points compared to last year as continued expense leverage is expected to more than offset the impact of higher tariffs and elevated oil prices on gross margin.

As a result, adjusted diluted earnings per share is expected to be in the range of $0.35 to $0.38 compared to $0.35 last year. To summarize, we're encouraged by our first quarter performance, which reinforces our belief that the business is operating from a stronger foundation. Brand momentum is becoming more evident and the benefits of the work we've done are translating into improved financial performance. While external conditions continue to evolve, we are maintaining agility and financial flexibility and believe we are well positioned to deliver sustained profitable growth.

With that, let me turn the call back to Chris before we open for questions.

Thanks, Taryn. As we look ahead, I believe the company is well positioned. Our brands are authentic, category leaders with deep product design and innovation credibility. We've elevated our talent and tools, building the necessary capabilities to run leading brands and a great company. Our product pipelines are strong and getting better, and our storytelling is proving more effective while we make more meaningful investments in demand creation.

Importantly, we're developing more disciplined marketplace management and are becoming better brand builders around the world.

We've demonstrated the ability to successfully navigate a variety of challenges over the past 3 years, working collectively as One Wolverine to both win together and deliver results. And finally, I believe we're well prepared to navigate any headwinds we may face in the future. But while we're encouraged by the progress, we're still not satisfied, and we believe there's much more opportunity ahead for the company, our team, our brands and our shareholders, and we're driving to make every day better.

With that, thank you for taking the time to be with us this morning, and we're happy to take your questions. Operator?

[Operator Instructions] Our first question comes from the line of Tom Nikic with Needham & Company.

I wanted to ask about Saucony. So kind of digging beneath the surface of the revenue growth, can you talk a little bit more about what you're seeing from a brand heat perspective? Curious if you're seeing any interesting developments on social media, on the sneaker blogs, getting noteworthy feedback from wholesale customers regarding what their customers are telling them, et cetera.

Sure. Thanks, Tom. We appreciate the question, and good morning, everyone. We're really pleased with the brand heat that Saucony is generating in the marketplace. I'll point to the Minted collaboration launch we're going to have right now. It has been blowing up my social feed for the last couple of weeks, and we'll drop it in our new Pioneer store in Covent Garden here shortly.

And I think the heat that the brand is generating is coming from both the performance side and the lifestyle side, which gives us a lot of encouragement. And I'd point back to things that we've done intentionally, a key city strategy, investing in these key influencer markets that we think have an outsized influence on their region and really started with London, and we're seeing really record Google search interest for the brand right now, and that is obviously correlating to continued sustained growth.

So we remain bullish on the prospects for Saucony. I think it's a very special opportunity. Pleased with how the team is executing and pleased with the results that we have and certainly pleased with the outlook we have for the balance of the year.

Sounds good. And if I could follow up just quickly on Saucony. So for modeling purposes, you're lapping a really, really big number in Q2. You're lapping a plus 40% from a year ago. How should we think about the ability to grow on top of that really stellar growth from a year ago?

Thanks, Tom, for the question. Yes, the brand, as you called out, had a very strong Q2 last year with over 40% growth in the second quarter. So the second quarter will represent the toughest comp of the year for Saucony. That's partly the growth last year was partly aided by the $4 million of order timing shift that we talked about in the prepared remarks as well as the sell-in from the U.S. lifestyle distribution expansion last year.

So as a result, we would expect the second quarter to be one of the lower quarters of growth for the year for Saucony. But as we said, we're very excited about what we're seeing for the brand in the U.S. and international, and we expect Saucony to grow the full year low to mid-teens and off to a great start in the first quarter and balance of the year is, as Chris said, well supported by what we're seeing across the categories, channels and regions and sell-through.

Our next question comes from the line of Dana Telsey with the Telsey Group.

I hope you can hear me. Nice to see the progress. Good. As you think about the gross margin and the uptick you just announced, what do you see as the puts and takes? How does energy get included into the expense structure? And given the progress in wholesale, more orders versus price, is it consistent by brand? What are you seeing in that wholesale channel?

I'll start, Dana, with the gross margin question. I think it's important to remember the progress that we've made on gross margin. In 2025, we expanded gross margins by 300 basis points on top of a strong improvement in 2024. In Q1 of this year, we delivered 47.6, which was flat year-over-year, despite absorbing a 270 basis point unmitigated tariff headwind.

That is a meaningful proof point that the mitigation efforts and the structural improvements we've made are working. I'd say when you think of balance of the year in terms of how are we looking at gross margin, first, we may see some variations quarter-to-quarter, and that's really structurally in terms of our business, when you think of the seasonality and brand mix or channel mix, we may see some fluctuation quarter-to-quarter.

But second, while our year-over-year unmitigated tariff impact is expected to be lower in the second half than the first half. We're also starting to see -- starting to lap mitigation actions in the second half. You'll recall in the second half of '25 that our tariff mitigation actions outpaced the tariff increases. And then the third piece would be on freight. The higher oil prices, we expect to see higher freight in the second half of the year from the surcharges than in the first half.

But kind of back to the bigger point, structurally, we're seeing strong improvements in terms of gross margins. We would expect those to continue as we're getting more full price sales. We're realizing cost savings initiative, and that is giving us the opportunity as we've been investing the last 2 years in marketing and capabilities.

We've been able to continue those investments while holding the rest of our cost base in line as we're growing revenue, which is creating that leverage, and we would expect that to continue through the balance of the year.

On the wholesale part?

Yes. Can you repeat the question on wholesale?

Yes. Where are you seeing the strength in wholesale by region and by brand? How are orders trending as we begin to place orders for the fourth quarter?

I think what we'd say and just reiterate and echo what we said in the prepared remarks is that the current order book, the visibility we have to it, supports our outlook. Obviously, everyone is watching the consumer very closely. But the fact that the way our brands are performing, the recent market share data that we're getting, I feel good about where our brands are positioned.

I think that speaks to the work the team has done around product innovation, certainly working on the demand creation piece. And then really trying to strengthen those wholesale relationships that we have in a very disciplined way that we're managing the marketplace, who gets what product, how we're distributing it and how we're managing inventories. So as we sit here today, the visibility that we have, I think we're pleased with the progress and pleased with the way the balance of the year is setting up as of today.

Our next question comes from the line of Anna Andreeva with Piper Sandler.

We had a question on Merrell. Chris, really great to see that momentum in the brand. And you mentioned international was especially strong. Can you remind us how big is international for Merrell now? And just how do you think about the potential there over time?

And then secondly, on DTC overall for the company, you've talked about pulling back on discounting for a few quarters now, and I think you're starting to lap that now. Can you just provide more color on that? Where are you with that initiative? And are you expecting an uptick in DTC within the guide?

Sure. Thanks, Anna. Merrell's international exposure is similar to the broader portfolio and nothing sort of materially different there. I would say I'm really pleased with the progress we are seeing in Merrell globally. And I think that really speaks to the work the teams have done over the last handful of years to really grow that business. And we're seeing special strength in EMEA.

We really led by the performance product -- and then certainly, Asia Pacific has been a nice green shoot for us over the past handful of years, really building some new relationships, a great partnership with our partner in Japan and Korea. Obviously, our partnership in China. I think we're really encouraged by that. And then obviously, long-standing partnerships in Latin America.

The Merrell brand is a little bit different by region, very strong performance aspect in Europe, a very sort of cool lifestyle outdoor aspect in Asia Pacific and then more of a casual outside perspective in Latin America. But Merrell's growth continues to be broad-based across most regions and channels. And here back at home, the market share gains that we've experienced over the past couple of years have been some of the best market share gains we've seen in Merrell in my time at the company.

And both new product introductions, whether it's the Moab Speed 2, obviously, the iconic Moab 3 continues to be a leader. And then obviously, we're working hard to expand trail run as well. So really pleased with the growth in Merrell, the consistent growth in Merrell and importantly, how we're managing the business in the marketplace.

And I think we should pay attention to the broader lifestyle opportunity for Merrell beyond the trail. And I think the teams have really worked hard to grow that outdoor-inspired lifestyle offering specifically for her. So encouraged by that. And then obviously, the new brand platform, it starts outside, really celebrating Merrell's 45th year, and this will be a record year of marketing investment for the brand as well, and we're seeing really strong upticks and interest with some of the activations that they've done.

Related to the promotional cadence, yes, that has been an important piece for us. How do we become less promotional? How do we run more premium full-price brands. Obviously, that is a hard pivot to make as an organization, and we're working through that. We'll begin to sort of fully lap some of those very tough comparisons, but pleased how the overall portfolio is being led while we're working to become less promotional.

And I think that speaks to the diversified nature of Wolverine Worldwide, not dependent upon any one brand, not dependent upon any one region or channel, and we can sort of navigate pivots like that and strategy and tactics at the same time, work to navigate sort of complicated global situations we find ourselves in. So that is one of the benefits of the Wolverine portfolio in times like this.

Our next question comes from the line of Mauricio Serna with UBS.

First question on Saucony. Could you tell us how much did Performance and Lifestyle contribute to the Q1 growth? And then I think you mentioned a few minutes ago that you expect Q2 to be kind of the toughest quarter just given the compares. I mean, the lowest growth rate of the year for the brand, just given the tough compares.

Maybe could you then tell us how you're thinking about the second half? Like should we expect an acceleration as you get those compares out of the way? And what will be like the drivers for that acceleration, if that's the case?

Yes. Thanks for the question, Mauricio. Regarding the Q1 performance for Saucony, while I won't give specifics on Performance and Lifestyle, but both drove. We saw nice contributions from both Performance and Lifestyle for the growth as well as we called out across both Performance and Lifestyle as well as across channels and regions.

So really broad-based growth for Saucony in the first quarter. Yes, as we called out in the second quarter in terms of the toughest comp of the year for the reasons I explained, I think what I would point to without getting into second half, if you think of it, we guided Saucony for the year on constant currency to be in that low to mid-teens.

And when you look at the start of the year with 15% off to a strong start. So would basically call out that while it may not be exactly consistent to quarter-to-quarter, we like what we're seeing in the back half in terms of the initiatives taking root for the brands.

Got it. And then one quick follow-up on Merrell. It sounded like at the beginning on the prepared remarks, I heard something about hike category maybe getting better. Anything that you could tell us about industry level, how you're seeing the hike category in the U.S. and abroad, that will be very helpful.

Sure. A hike in the U.S. in 4Q '25 was flat. It was positive 6% in 1Q '26. And we've sort of seen that if you've been following our calls for the past year or so, obviously, hike has been under pressure, although Merrell had been gaining share while it's been under pressure. We talked about being able to call the bottom, and we've been able to sort of see hike get sequentially better.

Obviously, hike being up 6% is encouraging for the category in general and Merrell gaining share 12 of the last 13 quarters and being the industry leader, I think that bodes well for Merrell's prospects as we work our way through '26 and beyond.

Our next question comes from the line of Peter McGoldrick with Stifel.

Taryn, I'm interested in...

Peter, sorry, you're cutting up. We can't -- you're asking something about gross margin, but I can't hear the details of the question.

Maybe operator, we go to the next call and get Peter on a landline.

Moving to the next question, we have Laurent Vasilescu with BNP Paribas.

This is William Dossett on for Laurent. Congrats on a nice quarter, too. So for our first question, we wanted to ask just about guidance for '26. You mentioned that you were staying grounded in a dynamic operating environment. So how much is just conservatism given the 1Q beat with respect to top line guidance versus anything you may be seeing lately with all the disruptions in the Middle East and impacts to the consumer potentially?

And then our second question was on gross margin. I appreciate that color that input costs won't impact 2026. We've heard from other brands that 2027 spring may be the time when the impact from higher input costs flows through. And so I wanted to just understand a potential increase in COGS in early '27.

Yes. We'll start with the guide and then go to kind of the oil impact question. Regarding the guidance, we're encouraged by the start of the year and with the first quarter revenue and profitability, both coming in ahead of our expectations. And the second quarter is in line with our internal initial expectations as well.

So strong start to the year. At this point in the year, we believe it's prudent to maintain the full year outlook given the current operating environment that we've talked to. And that includes some pressure from the Middle East distributor cancellations as well as inflationary considerations for the consumer that we're monitoring.

And as -- also on profitability, we did raise the outlook to reflect the benefit of the lower expected tariff rates that were partially offset by some of those higher oil costs.

And I just want to add a couple of things to that. I think it's really important to note that we continue to see progress across the portfolio. And I think that does reinforce our confidence in the outlook. I'd say that the brand -- our brand building model is working and product innovation and marketing investments planned for the balance of the year position us well to deliver those numbers.

As the quarter noted, we've seen -- continue to see strong performance from Merrell and Saucony. Their new product is resonating. Our key city strategy is checking, and we both -- we are planning that for both Merrell and Saucony, this will be their largest investments in marketing on record. And across the broader portfolio where we have underperformed, we're seeing those trends improve.

Wolverine gained share for the second consecutive quarter, and Sweaty Betty is really executing well against its new strategy. Our sell-through trends remain encouraging, particularly where we're investing in innovation and the order book supports our full year outlook.

At the same time, we're staying very disciplined and eyes wide open given the current environment, but focused against executing our plans. But encouragingly, the year as we see it is largely unfolding as anticipated, and we're pleased with the performance to date, and what we see in the immediate horizon.

And then your questions about oil prices, we're monitoring the situation closely and the known impacts are factored into our outlook. On costs, the higher oil prices are translating into increased freight expense. That's both inbound transportation as well as our e-commerce shipping, which is reflected in the guidance.

At this stage, as I said, we expect the impact on product cost to be limited in '26. To your question on '27, it's still too early to speak to '27. But if elevated oil prices persist, we would expect some pressure on product input cost to emerge over time. That said, for the reasons I stated earlier, we're in a much stronger position to manage through cost inflation than we've been in prior periods, given the structural gross margin improvements that we've been driving across the business.

Our next question comes from the line of Jonathan Komp with Baird.

I want to follow up with a broader question on Saucony, just given some of the successes with recent launches, the momentum that you're seeing, could you share a little bit of a broader vision, how you see Saucony beyond 2026? And really anything you're willing to share on the ultimate potential here?

Yes. Thanks, John. We remain really bullish on Saucony's prospects, both because of the category in which it plays in, and what a unique and special brand that we have in the portfolio. As we've navigated, we began this turnaround and we pushed hard on Saucony to sort of reset that brand strategy to capitalize on we thought was a very big opportunity. And Saucony operates at the intersection of performance and run culture and lifestyle.

And it's a 100-plus-year-old brand. And that team has delivered really great innovative product, at the same time been able to build great brand heat around both performance piece and the lifestyle piece. So I remain very bullish on Saucony's prospects. I think we're still in the very early innings of what could be a very compelling story. Pleased with what we're seeing today. At the same time, pleased with what we have on the horizon for '27 and beyond.

I think some of the best innovation I've seen out of Saucony is going to be in the pipeline for '27. So, credit to that team, the way we've managed the business, and certainly thankful to the great partners we have around the world helping grow that brand. When I first got close to the Saucony brand, I went out and visited customers, and it's a very special brand that holds a really special place in people's hearts and really known from innovation.

And when Saucony brings innovation and can develop that brand heat, I think that there's a lot of potential. So it's a fiercely competitive space. We're not discounting that. At the same time, I like our chances continue to grow this business.

Great. And just a follow-up, if I could, Taryn, on the outlook. Could you maybe just highlight some of the puts and takes as you think about the low end or the high end of the outlook for 2026? And maybe if you could, as you think especially to the back half, are there areas of conservatism you're still embedding just given some of the uncertainty? Any more detail there would be helpful.

I appreciate the question, Jon. In terms of the guidance, as we had called out, I think when you start with revenue, the reason we said we were encouraged with the start in exceeding on the revenue front, certainly with both Active Group and Work Group performing ahead of expectations. And as I had called out earlier, the second quarter is in line with where we initially expected.

So I think well-positioned as we start the year, in terms of the guidance in the back half of the year. The reason we said we wanted to stay appropriately grounded as we look at the back half, and we talked about the potential consumer headwinds. I think that said, Chris had called out where we think we're well-positioned across the brands, both in Active Group and Work Group, and the momentum we're building with the innovation that's launching, with the marketing that's coming out across the board, as well as how we're driving the business and the supply chain to be able to meet that demand, to be flexible to that demand in the back half.

So from a top-line perspective, well-positioned. When we look at margin, I called out earlier that as we go throughout the year, we expect the unmitigated tariff impact to start to be lower as you get into the back half year-over-year. So we'll also start lapping the mitigation actions, and we'll start to see some of the higher freight costs that we had identified come through in the back half.

So I think that those would be the main points that I would call out overall. Pleased to be able to maintain that guidance on the top line, given where we're starting, as well as in raise the guidance on the bottom line, given some of the lower tariffs, net of the higher freight that we're seeing come through.

Our next question comes from the line of Peter McGoldrick with Stifel.

Yes, Take 2. Can you hear me now?

Yes. Sorry about that, Peter. We couldn't make out your first call.

Okay. Fair enough. I think we got the gist of it. I was asking about gross margin potential conservatism in the second half, but the building blocks shared on the last question get us there. Let's ask about the wholesale sell-through health and then the order book outlook. Can you help us think about the sell-through rates at retail, how that's trending a year ago in Merrell and Saucony? And how much of the outlook embedded from wholesale is driven by door expansion versus same-door productivity improvement?

Yes. I think generally, specifically in the U.S., I would say, we're pleased with the current sell-through rates in Merrell/Saucony. In some cases, sell-through rates for Saucony Lifestyle actually sell-through rates higher than last year, of which we're encouraged by as we think about that category and how important of a growth driver that can be for the brand.

As we sit here today, the current order book, the visibility we have to it, the current sell-through rates that we're getting from the marketplace, combined with the market share gains that we've talked about, leave us feeling good about how we're viewing the rest of the year.

Obviously, the conditions change and we're always thinking about what is next and close eye on the consumer. But With a strong finish to Q1 and the visibility we have into 2Q and beyond, I think we feel good about where we sit.

Very good. And then on DTC performance, DTC flat, including some pressure from a Sweaty Betty reset. Given the investments you're making in the e-commerce platform and the key city strategy, when can we expect to see these initiatives to start driving more meaningful DTC acceleration, particularly in the Maryland and Saucony brands?

Yes, That's a great question. Certainly DTC is an important component of the company and of our business, and certainly how our brands engage, gauge with consumers. At the same time, we're very focused on showing up when and where the consumers want to engage us, whether it's wholesale, whether it's direct mail, whether it's a social channel, whether it's our website or an app. Two things that I would point to our DTC business, it's alluded to it in an earlier question.

Two things with DTC. A, we're trying to become less promotional, and trying to be more consistent, more premium, a very consistent expression to our consumers, and certainly increasing the full price penetration and just a better site experience. I think the other thing that we haven't talked about in depth is we're also pivoting our marketing investment. And I think, for those of you that know sort of e-commerce businesses and how you invest up and down the funnel, I think historically we probably were invested too far down the funnel focusing on conversion.

And I think that, in the short term, feels good because you're driving conversion, driving revenue. At the same time, I think that has a knockdown effect over time relative to awareness for our brand. So we've worked hard over the past year or so to really shift that spending up the funnel, and I think you're seeing that in both Merrell and Saucony, which is why you're seeing sort of record levels of search interest.

We think that is the right way to manage long-term brands. When I talk very early in my tenure about becoming great global brand builders, that is part and parcel to that. When you make that shift up the funnel and you become less promotional, it certainly does put pressure short term on the DTC business, and we're working our way through it. We think it's the absolute right thing to do for the business for the long term. At the same time, you're gonna put pressure on short-term results.

And again, I point back to the value of how we manage the business. We have a very diversified portfolio, not dependent on any one brand, any one region, any one channel, and that allows us to sort of navigate tricky situations like that in strategy and tactics. At the same time, navigate what can be a very global macro environment. So that's how we're viewing it.

A lot of effort is being placed there. I'd also point to the fact that we've hired some great new talent to our DTC business to help us really become great retailers, and we think if we're a great DTC business both in stores and online, we're gonna be better brand managers and ultimately a better business and better company.

Our next question comes from the line of Sam Poser with Williams Trading.

I was just wondering, can you give us sort of the bridge on the DTC between the way you spoke about Merrell and Saucony and then the balance of the way the DTC business ended up as well as the domestic growth versus international. Can you give us sort of the bridge. Can you provide the bridges on all of that?

When you're talking about U.S. international, you're skipping DTC, you're talking just in total for the company.

Well, I'm talking in total for the company with that, because the domestic business was up 1.7%, international was up 12.8%. You were speaking up, you know, you were talking about how strong Merrell and Saucony were there, and then the DTC business was only was flat. And so -- but again, you were talking about the DTC business for Merrell and Saucony. I'm trying to sort of figure out like how much were those up?

Sam, when you talk about DTC, I think you also have to include the reset for Sweaty Betty in the U.S.

Right. I'm just trying to get a measure of how much that cost you versus sort of the bridge on how much Sweaty Betty was versus the other and then. So when you're talking about Merrell and Saucony being up direct to consumer, how much that was. Just trying to for both DTC and total domestic, I'm trying to sort of sort that all out.

Yes. I'll start with the U.S. versus international. As we had international grew around 13% in the quarter, and U.S. grew around 2% in the quarter for, in totality. Our largest brands, when you think of the U.S., the largest brands all grew. So Merrell saw growth in the U.S. Saucony grew the U.S. Work Group grew. Sweaty Betty did decline in the U.S. in the quarter, given the reset that we spoke to.

I think when you think of Merrell, the hike share gains that we're seeing in the U.S. and the category returning to growth, our new products coming through, like the Agility Peak 6 is doing very well and resonating. And sell-through, importantly, is strong and the inventory in the channel is clean.

I think when you look at the work that we've done across the brands, whether it be Merrell, Saucony, Work Group, in terms of that marketplace management and being able to get clean inventory for the new product to come through and sell at more full price, in the U.S., we are seeing that work across the board. So that's a bit to the U.S. versus international at a total level.

Okay. Okay. And then let me just move on. One last thing. On the narrower, have you -- how much have -- like is -- how much have you narrowed your overall assortments over the last few years? And how much of that helps -- is helping sort of this -- the margin structure of the business?

That's a good question. Yes, great question. I think we've worked really hard about the product line architecture, trying to tell fewer stories better, trying to focus on SKU productivity. And I point to Saucony as an example of that, really talking about the core four and then the Endorphin franchise and how that supports it. I think those things have really worked well for us.

I think there was a period of time where we were making a lot of different shoes and marketing them and merchandising them and having pick and choose what they wanted. And I think good brands and good brand builders take a very clear point of view on product line architecture and really narrow the assortment and try to tell fewer stories bigger.

I think to your point, Sam, I think that has worked. Really think Saucony has helped lead that. I think Merrell has done a good job trying to work on telling fewer stories better. I think it's part of the work, frankly, we have to do that we're beginning in Work Group, in sort of how we think about that product line architecture and how we distribute and segment that business.

I think the thesis of your question is how much has that contributed to both the turnaround of the organization, both in being able to grow the business, tell more compelling marketing around fewer stories and certainly the gross margin benefit that we've seen. I think that that's all been part of the story, Sam.

But how much have you narrowed it? I mean, have you cut your SKU count by 20% or 5% or in general? Where do you want to be as when you think about that sort of holistically?

I think in some brands we've taken a really strong haircut against the product line. At the same time, I think product lines are like cholesterol. They build up over time, and I think you have to keep pruning that over time and really being rigorous about that. That's part of the reason why we've added merchants to the organization.

We have not historically been a merchant-led organization, but we've added merchandising talent to all of our brands to really think about that. I think that's something that every single season we have clear SKU targets and SKU productivity, and every season I think we have to be relentless and rigorous on how we maximize the productivity of that line.

Our next question comes from the line of Mitch Kummetz with Seaport Research Partners.

I guess I have two on Saucony. So when you reported the fourth quarter, you mentioned on that call that U.S. lifestyle was planned down for the year. I'm wondering if there's any change to that outlook. On today's call, you referenced better sell-through in U.S. lifestyle, and I'm wondering if your outlook for Saucony U.S. lifestyle has changed in the last three months.

And then on the international side of Saucony, again, on the last call, you talked about the expectation that lifestyle would grow faster than performance. And I was hoping you could just address where you're seeing the international lifestyle growth. How much of that is new doors versus, growth in kinda like-for-like doors? So those are my two questions.

Sure. I think fundamentally our perspective on U.S. lifestyle, it hasn't changed dramatically from when we spoke to you in February. I will say that we are encouraged by the current sell-through rates that we're seeing as we work to manage that in the U.S., and we're encouraged by the continued market share gains we're seeing in that run lifestyle business.

Those things give us confidence in how we work to learn from where we were and how we manage that business going forward, both here in the U.S. as we think about back half of 2026 and into 2027, obviously how we manage Europe. I think we're pleased with the lifestyle expansion in Europe that we're seeing right now. Obviously learned from the U.S. expansion.

At the same time, I also want to make sure that clear, I think the key city strategy for us actually started outside the U.S., and London was actually the first city where we began that. So we've got a couple of years of investment in London around that brand, which has helped raise brand awareness.

So as you bring the lifestyle to market, I don't think we have that headwind of lower brand awareness that we have struggled with in some markets here in the U.S. I think in total, the lifestyle story is, we're pleased with the expansion. We've learned about marketplace management. I think the corrective actions that we've taken so far, we're encouraged by. But as we sit here today, we're pleased with the progress and pleased with the outlook.

Ladies and gentlemen, that concludes our Q&A session and today's conference call. We would like to thank you for your participation. You may now disconnect your lines. Have a pleasant day.

Greetings, and welcome to the Wolverine Worldwide Fourth Quarter Fiscal 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Jared Filippone, Head of Investor Relations. You may begin.

Good morning, and welcome to our fourth quarter fiscal 2025 conference call. On the call today are Chris Hufnagel, President and Chief Executive Officer; and Taryn Miller, Chief Financial Officer.

Earlier this morning, we issued a press release announcing our financial results for the fourth quarter and full year 2025 and guidance for fiscal year 2026. The press release is available on many news sites and can be viewed on our corporate website at wolverineworldwide.com.

This morning's press release and comments made during today's earnings call include non-GAAP financial measures. These non-GAAP financial measures, including references to the ongoing business and constant currency revenue growth rates were reconciled to the most comparable GAAP financial measures and attached tables within the body of the release or on our Investor Relations page on our website, wolverineworldwide.com.

I'd also like to remind you that statements describing the company's expectations, plans, predictions and projections, such as those regarding the company's outlook for fiscal year 2026, growth opportunities and trends expected to affect the company's future performance made during today's conference call are forward-looking statements under U.S. securities laws.

As a result, we must caution you that there are a number of factors that could cause actual results to differ materially from those described in the forward-looking statements. These important risk factors are identified in the company's SEC filings and in our press releases. All revenue growth rates will be cited on a constant currency basis unless otherwise stated.

With that, I will now turn the call over to Chris Hufnagel.

Thanks, Jared. Good morning, everyone, and thank you for joining us on today's call. The fourth quarter marked the conclusion of a good year for Wolverine Worldwide.

We made substantial progress in advancing our strategy and further transforming the company while delivering solid financial results in the process. We delivered high-quality revenue growth in line with our value creation model, led by Merrell and Saucony, our 2 biggest brands. Merrell drove high single digit growth for the year, while Saucony posted a record year with a 30% increase compared to 2024.

I'm pleased with how our global teams navigated a turbulent year, execute our strategy with pace and distinction and delivered top and bottom line results that exceeded our expectations, highlighted by annual adjusted earnings per share up over 50% compared to the prior year and further progress in strengthening our balance sheet.

As we turn the page to the new year, I believe our brands, company and team are better and stronger. Brand awareness and affinity are trending positively for Merrell, Saucony, Sweaty Betty and Wolverine.

We've taken market share in important categories. We've made encouraging progress in our DTC business and we have well-defined plans in motion to again deliver mid-single digit top line growth, supported by our current order book while continuing to expand profitability in the year ahead, even with tariffs and as we continue to responsibly invest in product innovation, demand creation and modern tools and capabilities to drive the business this year and into the future.

I want to start this call with an update on our biggest brands, their recent progress and their plans for this year. Beginning with Merrell. Merrell remains focused on modernizing the outside, developing more athletic, style-led versatile Performance and Lifestyle footwear while elevating the brand around the world.

In the fourth quarter, Merrell grew revenue 5% with balanced growth across regions and channels. Notably, DTC inflected the growth with revenue up mid-single digits even as we were less promotional in stores and online. The brand once again took market share in the U.S. hype category.

Underpinning these results, we saw increases across key brand health metrics to finish the year, a positive indicator for the work we're doing to build better brands. Merrell's key Performance franchise, the Moab Speed 2, nearly doubled sell-through year-over-year at U.S. retail in the quarter, while the Moab 3 also continued to deliver solid growth. The Agility Peak 5 contributed good growth in trail running as well.

Similar to key Performance franchises, the brand's latest expression of versatile Lifestyle footwear, the [ Wrap ] collection continued to grow rapidly with the iconic Jungle Moc also delivering solid growth.

In 2026, Merrell plans to deliver newness across its key Performance and Lifestyle franchises, including fresh colors and materials, seasonal energy drops and new styles to bolster the collections.

Just a few weeks ago, the brand launched the new Agility Peak 6, delivering better fit, stability and traction within the trail run category. Early sales are tracking very well relative to our expectations.

Merrell also expects to introduce the new SpeedARC Peak later this summer, leveraging the brand's highly innovative and visually disruptive SpeedARC technology to further strengthen its trail run offerings.

With positive momentum and a strong product pipeline, Merrell is entering the new year with an enhanced marketing strategy and demand creation plan for record investment to further elevate the brand. Next week, the team anticipates launching a new global platform, unifying its storytelling under one umbrella and advancing the brand's powerful purpose to share the simple power of the outside with everyone.

To entrench the brand's role in outdoor performance footwear, Merrell has secured title sponsorships of the Skyrunner World Series and Skyrunner National series in the U.S., encompassing more than 20 of the most elite trail running races globally.

In addition, the brand plans to build on its Key City Strategy in Tokyo and Paris, adding London and New York with a focused blend of integrated events, activations and retail presentations. Merrell celebrates its 45th anniversary in 2026 and we expect this to be a milestone year for the brand.

Shifting to Saucony. Saucony is uniquely positioned as a disruptive challenger brand at the intersection of the 2 of the fastest-growing categories in the market, Performance and Lifestyle running. To conclude the brand's record year in 2025, Saucony drove broad-based revenue growth across categories, regions and channels, a total increase of 24% in the fourth quarter.

Performance, the majority of the brand's business was up over 20% with Lifestyle growing even faster. In the biggest quarter for DTC, the channel grew mid-teens. And importantly, Saucony saw further increases across brand health metrics, especially with runners.

The brand continues to lead with pinnacle innovation with the Endorphin collection for elite runners, which again drove strong growth year-over-year at U.S. retail in the quarter.

The brand's core 4 franchises, the Ride, Guide, Hurricane and Triumph aimed squarely at the broader casual running opportunity continue to contribute good growth as well. On the Lifestyle side, Saucony continues to inject energy into the brand around the world. This past fall, the brand launched collaborations with Jae Tips and Engineered Garments, among others.

In December, Saucony partnered with culture shaping powerhouse Westside Gunn, an influential retailer kit to release a very special collaboration at Art Basel. The drop featuring the ProGrid Triumph 4 garnered global attention and drove record traffic to saucony.com and sold out in minutes.

The brand continues to have a voice in the cultural discourse in addition to innovating and Performance running and has strong plans in place once again for 2026.

This year, Saucony expects to deliver new iterations for each of its core 4 franchises, starting with the Ride 19 launched last month, which has immediately become a top seller on saucony.com. With this year's updates, the Triumph 24 and Hurricane 26 are both slated to get new proprietary IncrediLUX foam, a high-end compound that delivers a luxurious ride with enhanced energy return, cushioning and durability.

Just 25 days ago, Saucony brought to market what we expect to be its biggest debut launch of all time to-date, the all-new Endorphin Azura, fueled by a fully integrated global activation plan. The Azura is a lightweight super trainer with innovative geometry and advanced energy return foam to help the runner go fast every day and delivers all this innovation for $150.

The shoe represents a meaningful incremental opportunity for the brand and has been highly anticipated and well-received by the market and consumers. At this early stage, demand at saucony.com is already far ahead of forecast and sell-through at retail both here and abroad has been exceptionally strong.

On the Lifestyle front, the ProGrid Omni 9, Ride Millennium and other key silhouettes are planned to see fresh colorways and materializations this year. The brand once again anticipates an impactful lineup of collaborations, including additional drops with Westside Gunn, Minted New York, Engineered Garments and others.

In addition, Saucony anticipates reintroducing archive styles like the Grid Paramount, Kinvara 1, and Gripper at Tier 0 retail to continue to drive newness and influence at the very top of the distribution pyramid.

To capitalize on the momentum we've built, we plan to step up Saucony's brand building efforts in 2026, making our largest annual marketing investment ever in the brand. Saucony plans to continue to sponsor key events like the London 10K, the Shoreditch Half Marathon, the Eiffel Tower 10K and new this year, the Berlin 10K and coming stateside with the Philadelphia Love Run Half Marathon in March as well as organize its own events like The Maze, a series of exclusive run club races with recent installments in Seoul, New York City, and London.

In addition, the brand anticipates expanding its Key City Strategy from Tokyo and London into Paris, with continued events and activations and the planned opening of a new pioneer store in Paris later this year. While we're investing in growing awareness and fueling brand heat, we continue to strengthen the brand's ground game as well, driving sell-through with point-of-sale and co-op activations and enhanced field support.

Saucony possesses a significant global opportunity and continues to see momentum around the world. The brand has been able to marry performance and culture in a unique and compelling way and we expect another year of double digit growth in 2026.

I'd now like to spend a few minutes on Sweaty Betty and Wolverine, 2 brands that gained traction as we closed the year.

Starting with Sweaty Betty. The brand is focused on solidifying its positioning as one of the original activewear brands centered around empowering women through fitness and beyond. The brand drove mid-single digit revenue growth in the fourth quarter, completing a full year of quarterly sequential improvement in year-over-year revenue performance. 2025 was a pivotal year for Sweaty Betty as we reset the brand strategy.

Encouragingly, the brand has built momentum in the U.K., enhancing our product offering with more newness and driving the acceleration of DTC growth in the critical fourth quarter. We also made progress on expanding the brand's distribution outside of the U.K. with priority retailers and partners across Europe and into Asia-Pacific.

Importantly, we successfully strengthened the brand in its positioning, seeing meaningful gains in the fourth quarter across key brand health metrics, especially with younger consumers, the fifth consecutive quarter of improvement.

Looking ahead to 2026, Sweaty Betty's product line continues to get stronger, powered by increased newness, better category diversification in outerwear and new bottom silhouettes and a more focused strategy to go to market with greater impact. The brand storytelling continues to become bolder and more distinctly Sweaty Betty as well, in part with the launch of its new Born Sweaty campaign just last week.

Finally, the brand is making good progress in evolving its global distribution footprint to scale more effectively and more efficiently over time. As a result, Sweaty Betty is well positioned to build on momentum in its home market and it's seeing early benefits of expanding its international partnerships, while the U.S. reset that we initiated in the third quarter of last year remains a near-term headwind as the brand establishes a healthier foundation for future growth.

Finally, closing with our namesake brand, Wolverine. The Wolverine brand finished the year a little better than we anticipated entering the fourth quarter, down approximately 11%. As we shared in November, the brand's performance has taken longer than anticipated to turn around.

However, I believe we diagnosed the challenges and appointed the right leadership to effectively run a better brand and business moving forward. I'm encouraged by both the progress we've made recently and the barely early results we are beginning to see in the marketplace.

The product pipeline which candidly had become tired has improved. The team focused on developing more trend right silhouettes to resonate with evolving consumer preferences, boosting innovation to strengthen more premium product offerings and architecting better segmentation in the marketplace.

The Rancher collection, with the Rancher Pro at a premium price point has enabled the brand to capture opportunity in the important Western work category and drove significant growth at U.S. retail in Q4.

The Infinity System, the brand's pinnacle expression of its Performance comfort technology, launched midyear and performed well in the back half of the year. As a result of both new innovation and newfound strength in core offerings, the brand began to take back market share in work boots in the fourth quarter, our strongest quarter of share gains in nearly 5 years.

In 2026, the team plans to build on this momentum, bolstering the brand's premium assortment further with the [ Loader ] franchise, extend its Western work offering into Lifestyle with the new Wheatland collection and expand its Infinity System technology with new iterations of the Alpha Infinity.

Wolverine is stepping up its demand creation as well, investing up and down the marketing funnel. To expand reach, the brand partnered with Country Music star Jordan Davis throughout 2025 and was an exclusive presenting partner for season 2 of Paramount+'s hit series, Landman.

Partnership helped deliver tens of millions of impressions for the brand and drove new consumers to wolverine.com. The brand also enhanced its presence in social media. We're actively collaborating with influencers to support programs like the launch of the Infinity System in Landman and has initiated a host of additional in-store Landman activations with key retailers. Encouragingly, the brand saw increases across key brand health metrics to close the year.

With the product beginning to check and marketing efforts amplified, Wolverine's focus is now on recalibrating the marketplace, balancing inventories at retail and better aligning distribution to the brand's more premium leadership positioning.

We expect this recalibration will take a couple of quarters, but we're seeing good progress as we enter the new year and anticipate Wolverine will deliver flat revenue in 2026 compared to 2025.

Now I'd like to hand the call over to Taryn Miller to take you through our results for the fourth quarter and full year, along with our outlook for 2026 in more detail before I provide some key takeaways to close our prepared remarks. Taryn?

Thank you, Chris, and welcome, everyone. In 2025, we executed our strategy by advancing our product pipeline, accelerating marketing activation and strengthening operations to support profitable growth.

We delivered revenue growth, expanded margins and further strengthened the balance sheet while navigating a dynamic trade policy environment. This performance reflects disciplined execution and positions us for sustained growth in 2026.

I'll start today with our full year 2025 results, then cover fourth quarter performance and conclude with our outlook for 2026. Fiscal 2025 revenue was $1.874 billion, an increase of 7% compared to 2024 on a reported basis.

Revenue increased 6% on a constant currency basis as foreign currency provided a $14 million benefit. Additionally, the 53rd week contributed approximately 70 basis points to revenue growth, with the benefit largely concentrated in the DTC channel.

Gross margin was 47.3%, an increase of 300 basis points compared to the prior year, with the improvement largely driven by lower supply chain costs and a favorable mix shift towards more full price sales, while the timing benefit from tariff mitigation efforts, net of higher tariff costs provided a 50 basis point positive impact.

Adjusted operating margin was 9%, an increase of 170 basis points compared to the prior year and adjusted diluted earnings per share increased 53% to $1.35 compared to $0.88 in 2024.

I'll now take you through the highlights from our fourth quarter. Revenue was $517 million, above the $506 million midpoint of our guidance. The over delivery was driven primarily by the Active Group, with the Work Group also performing slightly better than expectations.

Reported revenue growth was 5% compared to the prior year or 3% on a constant currency basis, with foreign currency providing an $8 million benefit.

The following channel, segment and brand performance is provided on a constant currency basis. Wholesale revenue increased 3% compared to the prior year, driven by international growth, while the U.S. was approximately flat as Wolverine and the broader Work Group continued their marketplace reset.

DTC revenue increased 4% compared to the prior year, including the benefit of the 53rd week, driven by the strength in EMEA and solid performance in the U.S. at Merrell and Saucony. Active Group revenue increased 10% in the fourth quarter, ahead of our guidance of high-single digit growth, while Work Group revenue declined 12% and was slightly better than expected.

Merrell revenue increased 5% in the quarter, driven by strong wholesale performance in EMEA and in the U.S., supported by continued market share gains in its Key City Strategy. DTC returned to growth, both in the U.S. and internationally following a successful holiday season.

Saucony revenue increased 24% in the quarter, driven by strong growth in both the U.S. and internationally. Double digit wholesale growth was supported by continued positive sell-through at retail. DTC grew in mid-teens and both Performance and Lifestyle categories delivered meaningful gains.

Sweaty Betty revenue increased 5% in the quarter, driven by growth in EMEA, DTC and wholesale. Results were supported by product newness, strength in outerwear, expanded international wholesale distribution and the benefit of the 53rd week, partially offset by the brand's ongoing reset of the U.S. market to a more premium DTC business.

Wolverine revenue declined 11% in the quarter, reflecting the ongoing U.S. marketplace recalibration. Retail sell-through trends were encouraging and supported market share gains, underscoring the brand's building strength in its core boot category.

Consolidated gross margin for the fourth quarter was 47%, an increase of 340 basis points compared to the prior year and 70 basis points above our expectations. The year-over-year improvement reflects continued product cost savings, a favorable mix shifted toward more full price sales and an 80 basis point timing benefit from our tariff mitigation efforts net of higher tariff costs.

Adjusted operating margin was 11%, an increase of 110 basis points compared to the prior year and 50 basis points above our expectations. The improvement was driven by continued gross margin expansion, which more than offset strategic investments and higher incentive compensation.

As a result, adjusted diluted earnings per share increased 13% to $0.45 compared to $0.40 in the prior year and exceeded our outlook of $0.39 to $0.44.

Turning to the balance sheet. In 2025, we built on the progress made over the past 2 years, delivering solid cash flow, further strengthening the balance sheet and improving financial flexibility. Operating free cash flow in 2025 was $126 million, above the $90 million midpoint of our guidance, largely due to working capital timing.

Improved profitability and better-than-expected operating free cash flow enabled us to reduce net debt by $81 million in 2025, ending the year at $415 million. As a result, we exited the year with bank-defined leverage of 2x.

Approximately 90% of our gross debt is now comprised of senior notes maturing in 2029, providing us with a well-positioned and flexible maturity profile.

During the fourth quarter, we opportunistically repurchased approximately $15 million of our common stock at an average price of $16.13. The repurchase was intended to offset dilution from stock-based compensation and had no impact on 2025 earnings per share.

We ended the year with approximately $135 million remaining under our current share repurchase authorization.

Turning to our outlook for 2026, which is anchored in a focused strategy to sustain momentum in our largest brands while continuing to drive more consistent performance across the rest of the portfolio. For full year 2026, revenue is expected to be in the range of $1.96 billion to $1.985 billion, representing reported growth of approximately 5.2% at the midpoint. This includes an estimated $14 million foreign currency benefit compared to the prior year.

The absence of the 53rd week is expected to be an approximately 70 basis point headwind to revenue growth, with the impact largely concentrated in our DTC business. On a constant currency basis and excluding the 53rd week in 2025, we expect revenue to grow approximately 5.2% at the midpoint.

In terms of phasing for 2026, we expect revenue growth to be slightly more first half-weighted with the majority of the foreign currency benefit expected in the first quarter, while the fourth quarter comparison reflects the absence of the 53rd week that benefited 2025.

The following segment and brand outlook is provided on a constant currency basis. Active Group revenue is expected to increase mid-single digits and Work Group revenue is expected to be approximately flat.

Merrell revenue is expected to increase mid-single digits, supported by new product launches, including the Agility Peak 6, refreshes across core franchises in modern colorways and materials and disciplined marketing investments.

We also expect improved DTC performance with the momentum generated in the fourth quarter carrying into the new year on a healthier foundation.

Saucony is expected to drive outsized and broad-based growth in the low to mid-teens with gains across both Performance, which makes up the majority of the brand's revenue and Lifestyle. In Performance, the recent Endorphin Azura launch and the planned refresh of all the 4 franchises in 2026, supported by continued marketing investment and ground game activations are expected to drive global growth.

Lifestyle growth is expected to be led by international markets, particularly in EMEA, where we are seeing healthy demand supported by key city activations. In the U.S., following expanded distribution, 2026 is focused on optimizing the footprint through sharper assortments and marketing to support full price sell-through and sustainable long-term growth.

Sweaty Betty revenue is expected to decline low single digits with growth in its EMEA DTC business and expanding distribution in select international markets more than offset by the absence of the 53rd week and the ongoing transition of its U.S. business toward a more premium DTC model.

Within the Work Group, Wolverine revenue is expected to be approximately flat with performance anticipated to improve in the second half of the year as the brand continues to recalibrate the U.S. marketplace and the benefits of improved product and marketing builds throughout the year.

Before turning to gross margin, I'll walk through the tariff assumptions underlying our outlook. Our 2026 guidance reflects the continuation of the tariff rates that went into effect in August 2025.

Based on that assumption, we now estimate the full year unmitigated impact from higher tariffs to be approximately $60 million or an incremental $50 million versus 2025. Any tariff rate reduction would impact the second half of the year.

Accordingly, if the recently announced 15% tariff rate were to be implemented and remain in place through the end of 2026, we estimate it would reduce the 2026 tariff impact by approximately $5 million to $7 million relative to our current guidance. We are closely monitoring recent trade policy developments and we will evaluate potential changes as clarity improves.

Gross margin is expected to be approximately 46%, down 130 basis points compared to 2025. The decline is being driven by higher tariff costs, an estimated 300 basis point unmitigated impact, partially offset by pricing and other mitigation actions, a favorable mix shift towards more full price sales and product cost savings.

Adjusted operating margin is expected to be approximately 9.1%, up 10 basis points compared to last year, reflecting the impact of higher tariffs on gross margin that is anticipated to be more than offset by operating leverage from revenue growth, cost discipline across the organization and continued efficiency improvements. We continue to make disciplined investments in our brands, primarily in marketing and key capabilities.

Interest and other expenses are projected to be approximately $23 million, down from $28 million last year due to the reduction in net debt. The effective tax rate is projected to be approximately 18%.

As a result, adjusted diluted earnings per share is expected to be in the range of $1.35 to $1.50 compared to $1.35 in 2025. We have not assumed any future share repurchases in our 2026 outlook.

Operating free cash flow is expected to be in the range of $105 million to $120 million, with approximately $20 million of capital expenditures.

Moving to our first quarter outlook. Revenue is expected to be in the range of $445 million to $450 million, representing reported growth of approximately 8.5% at the midpoint compared to the prior year.

On a constant currency basis, revenue is expected to increase 5.1% at the midpoint, with most of the full year foreign currency impact anticipated to occur in the first quarter.

Active Group revenue is expected to be up high-single digits, and the Work Group is expected to be down mid-single digits compared to the prior year.

Gross margin in the first quarter is expected to be approximately 47.5%, down 10 basis points compared to last year. This includes an approximate 260 basis point unmitigated tariff impact.

First quarter gross margin is expected to be higher than the full year average as Q1 typically benefits from favorable channel mix.

As the year progresses, tariff impacts are expected to become more pronounced, while the year-over-year benefit from mitigation actions implemented in the second half of last year anticipated to moderate.

Adjusted operating margin is expected to be approximately 6.6%, an increase of 30 basis points compared to last year as pricing, product cost savings and SG&A leverage are anticipated to more than offset tariff headwinds. As a result, adjusted diluted earnings per share is expected to be in the range of $0.20 to $0.22 compared to $0.19 last year.

In summary, 2025 was a year of meaningful progress. We delivered revenue growth, expanded margins, generated strong cash flow and strengthened the balance sheet, while continuing to invest in our brand building model and the capabilities that support consistent execution across the portfolio.

As we look ahead to 2026, we recognize the operating environment remains dynamic. While there is more work to do, our strategy is sound, our investment priorities are clear and we enter the year from a stronger financial and operational foundation.

With that, let me turn the call back to Chris before we open it up for questions.

Thanks, Taryn. In the year ahead, we anticipate building upon the good work we've done to-date and continue to transform the company to become great builders of global brands. We're focused squarely on building awesome products, obsessing over design to deliver innovative, trend-right Performance and Lifestyle products that help make our consumers' lives better, telling amazing stories, amplifying marketing activations to raise our brands' awareness and deepen our emotional connections to consumers and importantly, driving the business each and every day.

I'm pleased the heavy lift of the turnaround is behind us with our transformation now well underway. Our balance sheet is stronger and our business is much healthier.

Our streamlined portfolio enabled by our platform of lean centers of excellence is focused on brands rooted in authenticity, product innovation and category leadership. We believe our brands are well aligned with long-term macro consumer trends at their core and uniquely positioned to extend into broader adjacent Lifestyle opportunities.

Our biggest brands are growing around the world and Sweaty Betty and Wolverine are getting better each day.

Finally, our teams are motivated, aligned and squarely focused on our consumers and executing our brand building model with pace and distinction, working together as One Wolverine to make every day better.

I would like to close by expressing my sincere thanks to our teams around the world for their work last year, not only delivering solid financial results, but also building better brands and a better Wolverine Worldwide in the process. You've been great and I'm excited to see what we can do together in the year ahead as we write the next chapter in our company's history.

With that, thank you to all for taking the time to be with us this morning and we're happy to take your questions. Operator?

[Operator Instructions] Your first question comes from the line of Jonathan Komp with Baird.

I want to ask about the outlook for Saucony for the year, very healthy growth projected again. Could you give a little more context specifically on the domestic business, the drivers that you see across Performance and Lifestyle? And if you could, any color on how distribution might play out year-over-year for the year? Any color there?

And then just separately, related -- unrelated question on tariffs. Just are you changing any of your practices given the ruling with IEEPA tariffs? And are there scenarios that you accelerate any purchases or try to take advantage of lower rates here temporarily?

Sure. Thanks, Jon. I'll tackle the Saucony question first and then we can talk about tariffs at the end. Saucony remains, I think a very compelling growth story in total.

Following a record year in 2025, we're looking at low to mid-teen growth in 2026. And that growth is really broad-based, Performance and Lifestyle, domestic and international.

Performance piece is a very encouraging part of that business, the biggest piece of the business. We just launched the Endorphin Azura, which we think is going to be the biggest launch -- biggest debut launch in the history of the brand at this time. And we're refreshing the brand's core 4 franchises, the Ride, Guide, Triumph and Hurricane. The Ride just launched and it's well ahead of our expectations out of the gate.

We're coupling a very strong product pipeline with a record year of investments. Going after our Key City Strategy and doubling down because that has proved very beneficial around the world. Sponsoring events, the London 10K, the Shoreditch Half Marathon, the Eiffel Tower 10K, adding the Berlin 10K and then bringing it stateside with the Philadelphia Love Half Marathon and then our own events like the The Maze, going further with the Run As One campaign and then importantly, investing in the ground game in POS and activation at retail so we can do better on the sales for where consumers are engaging in the business.

On the Lifestyle side, it's a strategically important piece of the business, but smaller than the performance piece in total and going to grow this year, again, after a very good year last year.

Domestically, we gained 130, 140 basis points of market share in Lifestyle in the U.S., respectively. So we remain encouraged by that. Key styles with the ProGrid Omni, the Ride Millennium and then importantly, a really strong cadence of collaborations again this year, Westside Gunn, Minted New York, Engineered Garments, and they're really targeting that Tier 0 account base, which we've had success with.

Again, regional strength. I think it's important to know, it's not just a U.S. story, very strong growth in EMEA, pleased with how we're doing in China and Asia-Pacific as well and then an encouraging trends relative to our DTC business. So I think in total, if you're looking to evaluate the Saucony story, you have to look beyond a category or a channel and look at the global growth we're trying to drive at a sustainable level. And I think we are pleased with the progress.

As it relates to your question about the domestic business, the Lifestyle piece, like I noted, is a smaller piece of the business, albeit important. We expect Lifestyle to drive growth internationally this year, and it's expected to grow faster than the performance piece of the business.

There's been a lot of attention paid to that U.S. athletic specialty channel, which we talked about on the last call. We anticipate doors this year, while to be down to second half of '25, will be flat from the first half of this year to the second half of this year as we've taken the learnings from that rollout and applied them going forward.

So I think in total, we remain bullish on the Saucony prospects. Obviously very pleased with an all-time record year last year and then to be able to guide to low to mid-teens growth this year and to see that growth really broad-based.

There's not one category, one channel that's driving the growth. It really is across the board. So very optimistic about the Saucony brand, what we can go do. And I still maintain, I think there is a great global potential for that business to be a very big powerful player in the category and certainly very meaningful to Wolverine Worldwide in total.

As it relates to tariffs, I'll let Taryn talk a little bit about that, but obviously, it remains a very fluid situation. Obviously, with the Supreme Court decision late last week and then the news out of the administration at the end of last week and then this week, we continue to monitor it.

I'm very pleased with how we reacted to the tariffs coming out of Liberation Day last year. I think the muscle we built on the turnaround, how we work to be nimble and agile and work collectively together as One Wolverine helped us navigate a very turbulent year last year.

I'm really pleased with the work that we did across the organization, the brands, the corporate centers, our global supply chain and how we navigate that. And I think we will continue that forward into this year as well.

We're staying very close to it. We're trying to glean as many insights as we can on a daily basis and then work to move the organization appropriately to make sure we can both protect and deliver consistent results for the shareholders.

And Jon, as Chris noted, the tariff environment does remain dynamic, but our mitigation strategy, which you asked about is unchanged. And it builds on the actions that we began in '25 and that we're advancing further in 2026 as it relates to the pricing actions, the product cost savings, the focus on that full price discipline and discretionary savings. So our mitigation strategy is unchanged.

And specifically to your question about any planned acceleration of inventory, I would say, given the recent change to the 15%, the incremental tariff that was communicated, not implemented yet and the continued policy uncertainty, we aren't planning any material changes to our normal inventory receipt at this time.

Your next question comes from the line of Mitch Kummetz with Seaport Research.

Chris, on Saucony, the plan for 2026 U.S. Lifestyle. It wasn't clear to me in your response to Jonathan's question if you expect U.S. Lifestyle to be up for the year. And I know you talked about the door count, which is helpful.

I'm curious what you're seeing kind of in those go-forward doors that you added last year that you are continuing to sell into. Are you seeing growth there? And how are you seeing that? Are they taking more products? Are they taking a broader assortment? And then I do have a follow-up.

Yes, sure. Thanks, Mitch. Yes, I think we continue to see strength in U.S. Lifestyle around the Lifestyle assortment that we have. Again, the majority of doors that we opened over the past couple of years, those doors have checked and met expectations.

A subset didn't. And we are working quickly to rationalize those doors to make sure that the learnings that we've taken, we can apply to go-forward doors and build a base from which to grow again.

U.S. Lifestyle. Lifestyle globally will be up for the brand this year and we anticipate it being up for this year. U.S. Lifestyle will contract this year just based on lapping that door count. And we view that as a 1-year lapping that door expansion and then moving forward and building a healthier base going forward.

And then you mentioned some things happening at sort of Tier 0 accounts. I'm curious, you mentioned some franchises. I wasn't clear to me what those were. But when you think about your Lifestyle business sort of retro tech versus classics, are you seeing like at the Tier 0 level, are you seeing more momentum in one or the other?

And if there is potentially like an uptick in classics, does that mean much in terms of kind of eventually that translating to more kind of mainstream Lifestyle accounts?

That's a great question. I appreciate you asking about fashion and trend because that is really what we're competing in, in this piece of the Saucony business. Retro tech remains healthy.

I think 3 of the top 5 styles in the fourth quarter were retro tech styles and I think 4 of the top 5 growth styles in the fourth quarter were retro tech styles. So it remains a healthy piece of the business.

At the same time, we're gaining share in that category, up over 100 basis points in both. I think we are thinking about where the world moves next and then the diversification of the product line. I'll be very honest, we're really lucky that Saucony is a 100-plus year-old brand that has an amazing archive from which to pull from to react to trends. Not all brands have that privilege and we do. So we are trying to bring newness and diversification to the line.

I think Tier 0, those great retailers, those trendsetters that edit and curate where the world moves, they're thinking about what is next and what can be next. And we're showing them other products from the archive that are certainly resonating with them.

It doesn't mean that the big commercial opportunity in retro tech is over because we're still capitalizing on that. At the same time, we have to make sure that we stay in tune with where trends and fashion is going and out in front of those retailers and importantly, the very influential customers they serve.

That's helpful.

I'm getting choked up, right?

Your next question comes from the line of Peter McGoldrick with Stifel.

I was curious if you can help us think about the makeup of revenue growth in 2026. Really encouraging to see the improvement in DTC. Can you quantify what's embedded in your DTC outlook and the pace of direct-to-consumer engagement across your brand portfolio?

Yes. As regards to DTC, we talked about the improvements that we saw in the fourth quarter as that has been a focus in terms of improving the performance in the holiday season and encouraged by the improvement we saw in that fourth quarter. Looking into 2026, we didn't give specifics in terms of DTC versus wholesale. But I would say that we would expect growth in both DTC and wholesale contributing to the business.

And can you give any color across the brands, Merrell or Saucony leading that out -- any outsized performance relative to the brand guidance that you represented for 2026?

I wouldn't call any specific brand out. I mean, the approach that our team is taking, Chris talked about how we're looking across the portfolio when we're building out capabilities and the team came together and demonstrated that in the fourth quarter looking into the holiday in terms of what were the learnings that we're applying, whether it's Saucony, whether it's Merrell, whether it's Sweaty Betty or the Work Group.

And so we have a healthier foundation in total across the business as I look at DTC. The only thing I would call out is DTC in the fourth quarter of 2026 will be -- we'll have an absence of a 53rd week.

And as I said in my prepared remarks, the 53rd week does have a bigger impact on DTC, given just the nature of that business model of always on when you think of e-commerce and in the stores.

Your next question comes from the line of Anna Andreeva with Piper Sandler.

Nice results. To Taryn, on the guide for '26. So you guys have been in investment mode for, I guess, a good portion of 2 years now. Can you break down the sources of leverage implied in the '26 guide?

How should we think about marketing within that? I think you mentioned a marketing campaign at Saucony coming up. And can you just talk about the durability of SG&A leverage in the context of your longer-term margins?

And Chris, sorry if we missed this, on Sweaty Betty growing mid-single digits in 4Q, how did the business perform in the core markets in the U.S. and U.K.? And I think you said still in a reset mode in the U.S. Maybe talk about specific initiatives to return the brand to stabilization and then growth?

Sure. Sure. I'll go first and answer the Sweaty Betty question and then have Taryn talk to you about investment and leverage. I think we're pleased with Sweaty Betty's performance in the fourth quarter.

We -- the business -- and again, I think the important thing is how we've redefined and reset that strategy, really focusing on the home market. But I think the business checked in the fourth quarter. We're pleased, less promotional. I think the messaging is resonating. We're seeing increases in brand health metrics.

And then importantly, we're seeing new category diversification working well for that brand, outerwear, new bottom silhouettes are certainly encouraging. In the U.K., which is a fairly tough trading environment right now and certainly a fiercely competitive category in which that team operates.

But pleased with the product pipeline, pleased with the DTC performance, pleased with the heavy lift of the integration is now behind us and that team is really laser-focused.

And I think this year, moving forward, I spent time with the team just a couple of weeks ago reviewing product and marketing. And I think that they are very well lined up and situated really well for this year.

Both on the product piece, but it's really getting back to sort of their distinctive voice, this sort of distinctly Sweaty Betty, this rebellious roots. And I think that Born Sweaty campaign is a perfect amplification and manifestation of that approach.

In the U.S., frankly, after the acquisition, we became very promotional and it was really damaging to the brand in total. And we didn't have the financial wherewithal to make all of the needed investments around the world that were planned.

And so we worked to sort of reset and retrench that U.S. business, becoming less promotional, becoming more full price, becoming more premium and thinking about that in the longer term. We're coupling that reset in the U.S. with doubling down on the U.K. business and then plugging Sweaty Betty into our international business and really beginning to grow across EMEA and in Asia-Pacific.

So I'm really pleased with the progress that team has made. I'm very happy with the strategy. And certainly, the results in the fourth quarter and how we're thinking about 2026 give me increased confidence about that brand and what it can mean to the portfolio.

And Anna, for SG&A, the leverage that we're guiding to in 2026 really reflects the work we've been doing as part of our broader strategy, which is making those targeted investments that we've talked about the last 2 years in our brands and in our key capabilities to support growth. And doing -- while we've been making those investments, we've also been continuing to drive efficiencies across the rest of the organization.

More specifically, a meaningful portion of the leverage comes from scale efficiencies on that higher revenue base. So as we've made those investments in the brand and in those capabilities of growing the revenue, we're getting scale efficiencies there.

And the leverage from that -- from the majority where we're seeing the leverage is across the majority of our cost structure outside of those 4 brand-building investments. So it's not just one area. It's been broad-based as we've been looking for those efficiencies in the business.

We're also benefiting from the targeted cost actions that we took in 2025 that we brought and carried into 2026 on a structural basis. So I think how I would summarize it is that SG&A leverage in '26 is driven by a combination of the scale efficiencies and the targeted cost actions that we've been taking over the last 2 years. We had called out that it would be key to our value creation model.

And then final point, regarding your specific question on marketing, we have made over the last couple of years, needed investments into marketing and building that brand awareness, building out the brand building model. And I would expect in 2026 that it would remain fairly consistent as a percentage of revenue is where it was in 2025.

Your next question comes from the line of Mauricio Serna with UBS.

Congratulations on the results. First question on the Endorphin Azura. Maybe could you elaborate on -- a little bit more on what gives you confidence about this franchise long-term opportunities? Do you think it could drive more distribution over time?

And then the second point more to Taryn, maybe could you talk a little bit more about the cadence of the tariff impact on gross margin? I think you alluded to more meaningful impact or bigger impact as the year progressed. I just want to understand like in terms of like cadence, like which quarter should be the most impacted and so forth.

Sure. Thanks, Mauricio. We're bullish on the Azura. I think the team did a very nice job identifying an opportunity in the marketplace and then importantly, building a beautiful product that performs.

And it was really well anticipated by the marketplace, given everything that we had built into it and all of the initial reaction to it. I think we're even more encouraged by the initial response to it. And it's important it's not just a domestic response. We're hearing feedback both domestic and globally.

So ahead of expectations, a good launch of saucony.com, beginning to feed into retail here in the U.S. and we're encouraged by that. And I love the fact that we've Saucony a leader in innovation and bringing elite products to elite runners, our ability to take innovation and democratize that and identify white space in the marketplace and then build a beautiful shoe at $150 price point is testament to that product team and certainly the opportunity we think that it possesses in the marketplace.

I do think it opens up additional distribution for us, places that we may not have great exposure to today. So pleased with the Azura. Again, we anticipate it to be the single biggest debut launch in the history of the brand to-date because we're going to try to do it again.

But certainly pleased initially out of the gate with Azura and what it can mean to the Endorphin franchise and the broader Saucony brand.

And to the tariff question and the phasing of that, based on our guidance of approximately $60 million of full year unmitigated impact, we would expect more of that start to come -- was already coming through in the first quarter, reflected in the guide that in the first quarter, we said it would be unmitigated around 260 basis point impact to gross margins and on the full year around 300.

So that indicates that it will -- the unmitigated impact will start to come through more in the second quarter and into the back half of the year.

The reason Q1 is a little lower than the average is primarily related to the composition of the inventory that's flowing through the P&L in the quarter and that includes some differences in brand mix and sourcing mix as well somewhat -- to somewhat degree, as you'll recall, there were different tariff rates last year, too. So why Q1 is lower is more -- somewhat lower is a combination of that brand mix and sourcing mix.

Got it. Is it fair to assume that it goes all the way to Q4 of this year, the tariff impact?

Yes. The $60 million, like I said, being that 300 basis point impact, we have assumed it through the end of the year.

Your next question comes from the line of Laurent Vasilescu with BNP.

I wanted to follow-up on Saucony. On the last call, it was mentioned that new doors was 1/3 of Saucony's third quarter growth. Curious to know how much it was for 4Q?

And then Slide 9 details your global distribution network. But this quarter, it removed the list of key accounts like DTLR, Foot Locker, JD, which was detailed in the 3Q slide. So curious to know why was that the case? Are there any accounts, Chris, that you are actually exiting for FY '26?

And then I got a question following up, Taryn, on the FIFO accounting treatment.

Can you repeat the second half of your -- I got a little lost on the first part of your -- the door count question?

Yes. Sure, Chris. Yes. So for sure, 4Q, like what was the like-for-like? And then the second question really was around the fact that your Slide 9 in your presentation this morning, it used to give you the list of like the key accounts and it doesn't show it. But I'm curious to know, of that 1,300 doors, are you exiting out any of those accounts? Or just if you can -- for the audience, can quantify, is it like 300 doors? Is it 400 doors you're exiting out? That would be very helpful.

We anticipate for U.S. Saucony Lifestyle to being about 1,000 doors in the first half of '26 and the second half of '26. And the retailers that make up those door counts include the likes of JD, DTLR, Foot Locker, Champs, Journey, Nike. That is that expansion and how we're thinking about those door counts specifically.

Wonderful. Appreciate. And then, Taryn, your 3Q 10-Q shows that 3Q EPS was boosted by $0.02 or about 7% with the FIFO accounting change, which helped your gross margin, I think by almost like 50 bps.

Curious to know how much the FIFO change helps your 4Q gross margin and EPS? And how do we think about that change in accounting as we think about 1Q, 2Q? Because I would think when you changed to FIFO, it's helpful in an inflationary environment with tariffs.

Yes. Laurent, on -- you'll recall that we made the change from -- in the third quarter and the majority of our inventory was already on FIFO accounting. And so actually, earlier in the year, we had had part of when we were looking at how do we simplify, how do we more standardize when we look for efficiencies, part of it was related to the inventory accounting in terms of why did we have it 2 ways. And so there was an effort to put the minority of the business in line with the majority of it to move to FIFO, which we did in the third quarter.

What is displayed in the tables and Jared can expand, is just an explanation of if we had not done it. I think what's important to call out is that in the guidance that we gave in November, we had already made that accounting change and contemplated the impact.

Yes. And Laurent...

Yes.

Yes. There will be [indiscernible] sales -- and on 4Q? That's the question?

Yes, how much was it for 4Q because they will be in the 10-K, but obviously, I think it's filed a little later. But for the audience, how much was it in terms of the EPS benefit for 4Q?

Yes. I would say, obviously, based on our guidance in November, this was already implied. So no impact on results versus guidance.

And in the quarter, just so you know, we'll have a full year table. We provided the tables in 3Q call. And so doing the math, it's on the COGS line, it's about $1.4 million or so.

Your next question comes from the line of Sam Poser with Williams Trading.

I wanted to follow-up on -- you say that the -- I'm just trying to decipher how much bigger -- like what percent is the Lifestyle business versus the Performance business within Saucony? Can you give us some idea of the differential Performance business there?

Yes. We talked about that last call. Performance is the majority of the business or a lion's share of the Saucony business. Lifestyle is a smaller segment.

Any degree? I mean, is it 60-40 or I mean...

We've been consistent. And Performance is the lion's share of the business in Saucony, Sam.

Okay. And then secondly, in the U.S., and maybe I'm not sure if it's overseas, but you have a third-party managing or a third-party sales team selling your Lifestyle product. I'm wondering why that is and why you haven't brought that in-house because I think if you had brought that in-house, you might not have -- may not have had the 1,300 stores and you might have avoided some issues?

Yes. I think that the model which we use a combination of in-house sales teams along with agents and agencies is not unique to us, especially in growing businesses.

The partners that we do have, we retained for -- they bring a certain expertise to the business. And I think we're obviously continuing to evaluate those relationships going forward. And that's just a normal course of business. And I think so far, the relationships have served us well.

Your final question comes from the line of Ashley Owens with KeyBanc Capital Markets.

So maybe just to start, given Saucony's low double digit plan for the first quarter, anything you can say on the guardrails you set with accounts on initial buys versus chase to ensure that push model holds through the first half?

And then just secondly, talked a lot about improving that full price mix within the portfolio. As you look at the early 2026 reads, how is the consumer absorbing those higher AURs? Any categories within Active that you are seeing greater elasticity? And then just what are the areas you believe you can still lean into some more premiumization?

Sure. Thanks for the question, Ashley. Yes, I think as we think about growing the success that we've had in Saucony sort of where it was a couple of years ago to posting an all-time record year last year, again, with low to mid-teens growth anticipated for this year, I do think we think really closely about distribution decisions, both domestically and internationally.

I think that's a big part of the Saucony story that hopefully is coming through that it's not just a U.S. story or a single category or a single couple of shoe story. It really is broad-based growth.

So we do think about that accounts that we open up, what we offer them. I think in the past, historically, we probably haven't done as good a job as a company as sort of thinking about segmentation, distribution and who gets what.

I think that is part of our new global brand building model and the discipline we've tried to enact over the past couple of years that is certainly a piece of that.

So -- and at the same time, with the global business, we learn a lot. We're always trying to learn both what's happening within brands in different parts of the world, at the same time, sharing learnings from brands across the other brands in the portfolio.

And I think our EMEA business, I think that team has done a really great job specifically in Merrell and Saucony, growing those brands. And then certainly think about how they think about the marketplace and distribution and segmentation.

So those are all things that we're paying close attention to. We do think we're at a special moment in Saucony's history. Certainly pleased with the progress we've made. At the same time, I think there's a much bigger opportunity that we need to go chase.

And regarding your question on what we're seeing in terms of the market and the pricing action, I would -- in the -- while our price increases, they've only been in market for a little over 2 quarters, generally, the market response has been in line with our expectations.

And I think that's reflected in -- we were looking at fourth quarter and the busy holiday season, and that came in line with our expectations in terms of the performance.

Across the business, we have taken deliberate actions and that includes the pricing that you're referring to that offset the tariffs and improve our cost structure. But we've also been innovating our products and investing in the marketing so that we can achieve more of that full price selling.

And I think that that healthier source from product mix, improved full price realization and the disciplined channel execution that Chris spoke to, all of those we're looking at contributions in terms of the growth. And I would say, so far, what we've seen is in line with our expectations.

That concludes our question-and-answer session. Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Greetings, and welcome to the Wolverine Worldwide Third Quarter Fiscal 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Jared Filippone, Head of Investor Relations. Jared, you may begin.

Good morning, and welcome to our third quarter fiscal 2025 conference call. On the call today are Chris Hufnagel, President and Chief Executive Officer; and Taryn Miller, Chief Financial Officer.

Earlier this morning, we issued a press release announcing our financial results for the third quarter of 2025 and guidance for fiscal year 2025. The press release is available on many news sites and can be viewed on our corporate website at wolverineworldwide.com.

This morning's press release and comments made during today's earnings call include non-GAAP financial measures. These non-GAAP financial measures, including references to the ongoing business, were reconciled to the most comparable GAAP financial measures and attached tables within the body of the release or on our Investor Relations page on our website, wolverineworldwide.com.

I'd also like to remind you that statements describing the company's expectations, plans, predictions and projections, such as those regarding the company's outlook for fiscal year 2025, growth opportunities and trends expected to affect the company's future performance made during today's conference call are forward-looking statements under U.S. securities laws. As a result, we must caution you that there are a number of factors that could cause actual results to differ materially from those described in the forward-looking statements. These important risk factors are identified in the company's SEC filings and in our press releases.

Additionally, during the quarter, we elected to change our accounting policy for certain inventory from LIFO to FIFO. The majority of our distribution warehouse inventory was already accounted for using FIFO, and this change aligns all warehouse inventory under a consistent policy. The financial statements in today's release and the numbers referenced on the call reflect the impact of this accounting change for both the current and prior year periods, which have been retrospectively adjusted.

With that, I will now turn the call over to Chris Hufnagel.

Thanks, Jared. Good morning, everyone, and thanks for joining us on today's call.

In the third quarter, we exceeded our expectations on both the top and bottom line. Revenue grew approximately 7%, in line with our long-term target of mid- to high single-digit growth and was again driven by our two largest brands, Merrell and Saucony. Healthy revenue growth, coupled with another quarter of record gross margin and strong execution, delivered adjusted earnings per share of $0.36. Adjusted EPS grew at more than triple the rate of top line growth as we continue to prudently manage the business, balancing needed an important investment into the business while expanding profitability. Our strategy and disciplined execution continues to deliver solid results, and our team remains focused on executing our brand-building model with distinction, centered squarely on building awesome products, telling amazing stories and driving the business.

As I reflect on where our portfolio is today and where we need to go tomorrow, it's clear our brands are at three different stages of development. First, Merrell and Saucony are moving at pace, taking market share and generating consistent revenue growth around the world. Our aim here is to continue to thoughtfully manage these brands to sustainably scale them to their fullest potential. We've made real progress in elevating design and innovation within their product pipeline as well as in strengthening their brand positioning through impactful marketing activations. For 2025, these two brands are expected to represent nearly 2/3 of the company's total revenue and record mid-teens year-over-year growth combined.

Second, we believe Sweaty Betty has begun to turn the corner, the result of a lot of hard work in developing a new strategy and beginning to execute it over the past 6 months. The brand has delivered on the milestones that we believe are critical at this point in its evolution, which started with margin expansion and has transitioned to sequential improvement of year-over-year revenue trends.

And finally, the Wolverine brand and our Work Group have not made the progress we anticipated. While I'm disappointed in our performance here, I believe we have a firm handle on the work that's necessary to get this business back on track.

And importantly, we have new leadership in place. As of Monday, following a thorough search process, I'm pleased to announce Justin Cupps as our new Work Group President. Justin is a veteran leader with deep experience across a host of great footwear, apparel and accessory brands. He's a strong addition to our leadership team. And for some context, Work Group revenue represents less than 1/4 of the company's consolidated revenue and is now expected to finish the year down high single digits compared to 2024. In aggregate, I'm encouraged by the progress we've made and continue to make as a company. This year, we've elevated our teams and talent by adding excellent leadership like Justin, as well as new product design, merchandising, marketing and sales talent across our brands.

We've improved our processes, including our integrated business planning approach for more efficient demand and inventory management. We successfully completed the integration of Sweaty Betty's tools and processes into the company's ecosystem, advanced the adoption and use of AI across the business and develop plans to further elevate and modernize our e-commerce tools and platform next year. We've developed new muscles to drive impact in the global marketplace with our key city strategy, and we fostered a new culture centered around growth and winning together.

In addition to the above, we expect to deliver solid financial results for the year. The midpoint of our guidance reflects revenue growth of approximately 6%, an increase in adjusted earnings per share of approximately 50% compared to 2024.

Before I turn the call over to Taryn Miller to provide greater detail on our third quarter results and outlook for the year, I'd like to share some additional insights on our brands and their continued progress.

I'll start with Saucony, which grew 27% in the third quarter. Saucony is uniquely positioned as a disruptive challenger brand at the intersection of two of the fastest-growing categories in the market, performance and lifestyle running, and the brand continues to win in these highly competitive arenas. In the third quarter, Saucony grew performance run revenue by strong double digits globally compared to last year and again took market share in the important U.S. run specialty channel, powered in part by the brand's core 4 franchises, the Ride, Guide, Hurricane and Triumph, which target its movemaker consumer.

While the brand successfully tapped into this broader market opportunity, it continues to maintain a strong focus on pinnacle innovation for elite runners with its Endorphin franchise. The collection includes the Endorphin Speed for serious training, the Endorphin Pro for race day and the Endorphin Elite super shoe for ultimate performance. In 2026, the brand plan to introduce the all-new Endorphin Azura, a premium non-plated trainer, targeting a larger consumer segment and growing opportunity within the market. In addition to further elevating franchises within the core 4 with innovation incubated within the aforementioned Endorphin series.

On the lifestyle side, Saucony drove strong revenue growth globally and took significant market share here in the U.S. as we continue to focus on prudently growing this segment of the business around the world. The brand's deep product archive enables it to authentically capitalize on a variety of different trends. So ProGrid Omni 9 and Ride Millennium, two of the brand's retro tech silhouettes, again drove significant growth in Q3. While classics like the Jazz Original and Shadow 5000 are encouragingly beginning to spark interest for 2026 with influential Tier 0 and Tier 1 retailers.

Saucony continues to fuel brand heat with culturally relevant collabs, releasing new drops over the past few months, including 3sixteen, Keith Haring, Jae Tips and Engineered Garments. Saucony collaborated with METAGIRL on a release last quarter as well, which successfully lead in the brand's significant opportunity with women, the beginning of a deeper anticipated partnership with the influential designer going forward. In addition, the brand plans on dropping its first collaboration with prominent creator Westside Gunn in December with an expanded relationship and more drops expected next year.

Saucony's brand is strong around the world, and we continue to invest in the brand in the last quarter, in part through our key city strategy. Saucony continued to leverage Tokyo in the Asia Pacific region with the flagship store opened in Harajuku earlier this year and is on track to open a host of new stores more broadly in China with our partner there. We expect that APAC will be the fastest-growing region in the world for the brand this year.

In Europe, Saucony took over Central London as the title sponsor of the London 10K in July, as I detailed on our last call, and followed this up with the sponsorship of the Shoreditch 10K in September, bookends to a powerful quarter for the brand in London and more broadly in the EMEA region, which as a whole is on track to deliver strong double-digit revenue growth this year with momentum heading into 2026.

Looking ahead, Saucony plans to expand its key city strategy to Paris, sponsoring the Eifel Tower 10K next month and opening our next pioneer store there in 2026. Brand interest continues to ramp up globally and affinity for the brand continues to increase with runners and more specifically, the younger consumer. While we continue to have success here in our home market, I'm equally excited about the global potential of the brand. Saucony's positioning within the fast-growing run lifestyle market is unique and a compelling combination of heritage and authenticity, coupled with best-in-class innovation and developing cultural relevance and the brand is setting the pace. 2025 is proving to be a great year for Saucony, which is on track to deliver all-time record revenue and profit as a brand.

Moving to Merrell, which grew revenue 5% in the third quarter, driving increases in most regions and in both the performance and lifestyle sides of this business. Merrell, the category leader in hike, remains focused on modernizing the trail as an authentic outdoor lifestyle brand with more athletic and more versatile product design and innovation. In the third quarter, the brand accelerated its long-running market share gains in its core Hike category in the U.S., having taken share in 11 of the last 12 quarters, a category which encouragingly again improved sequentially to flat year-over-year.

The Moab Speed 2, which is becoming a force on the trail and the world's #1 hiker, the Moab 3, both continue to drive growth at U.S. retail. The Agility Peak 5 drove strong growth on the trail running side. Looking ahead to the next spring, Merrell plans to introduce the new Agility Peak 6, combining plush FloatPro foam cushioning with aggressive Vibram Megagrip traction.

Merrell's lifestyle business grew strong double digits in the third quarter, driven by a strong ramp-up of its disruptive Wrapt Collection, along with steady growth from the iconic easy on, easy off Jungle Moc at U.S. retail. In 2026, we anticipate the brand's lifestyle product pipeline will take a meaningful step forward. We're introducing trend-right low-profile silhouettes with the Relay, modern iterations on the Jungle Moc, lifestyle materializations of the SpeedARC collection and a consistent flow of energy-enhancing collaborations. While we're further distancing ourselves from the competition hike, we know a significant global opportunity exists in outdoor-inspired footwear, apparel and accessories.

In the third quarter, Merrell drove increases in brand interest in affinity, particularly with women, and the brand's key city strategy continues to fuel momentum for the brand around the world as it has done for Saucony. Merrell's urban hike guide (sic) [ Urban Hiking Guide ] activation, which included media events, collabs and influencers drove brand heat in Paris and contributed to another quarter of solid growth in broader EMEA.

Turning to Sweaty Betty, which outpaced our expectations in the third quarter with revenue down 4% versus the prior year. The team is aligned around a clear strategy and is executing with a high level of conviction and increased confidence as we reinvigorate Sweaty Betty as one of the original activewear brands focused on empowering women through fitness and beyond. Our efforts started with reestablishing Sweaty Betty's premium brand positioning, which underpins our entire strategy.

Bold and distinctive storytelling behind the Wear the Damn Shorts campaign in the second quarter and the Weather Whatever campaign last quarter have continued to reinforce the brand's uniquely Sweaty Betty female-focused positioning. As a result, brand awareness and affinity continued to increase in the quarter with noteworthy gains among younger consumers and more premium buyers. At the same time, gross margins expanded once again as the brand continues strengthen both its product pipeline and positioning in the marketplace.

Along with the improved business results, we're also making meaningful progress against the three pillars of our brand's new strategy. First, we are delivering growth within our DTC business in Sweaty Betty's home market with both e-commerce and stores growing in the third quarter. We started to elevate the brand's product line by introducing more newness, enabling a fresher offering with trend-right design and more thoughtful assortments, diversifying the brand's leadership in bottoms and expanding outerwear. This effort has produced some encouraging results with pants and outerwear both up very strong double digits across our DTC business in the quarter. Within our digital channels, we remain focused on enhancing the consumer experience. One example is the new Sweaty Betty app, which we launched last quarter, where consumers are converting at a higher rate and spending more per transaction.

In brick-and-mortar, we've taken action over the past few months to further optimize our retail footprint, relocating 3 stores, opening 1 new store and closing a store. The new locations are performing well, and before the year is done, we plan to open 5 more new stores.

Second, we're making early progress in expanding distribution in certain key markets. We launched the brand's new partnership in China and opened a pop-up store in Shanghai, opened a second store with our partner in New Zealand and develop plans to open additional stores in Australia and India next year. In the third quarter, the brand's international third-party business was up meaningfully, along with the EMEA wholesale business, albeit both still on a small basis.

Third, we're resetting our U.S. operations focused on a full price, more premium online DTC business. We anticipate this transition will take some time and put some pressure on the brand's global growth numbers in the near term, but we believe it's necessary. This pivot is in motion with the business mix already shifting to more full price premium selling.

We're making progress in resetting the overall Sweaty Betty business, and we believe the brand product marketing team are strong. We've seen improvement in the year-over-year top line trends and expect this to continue in the brand's critical final quarter of the year.

And now finishing with Wolverine, which was down 8% in the quarter with the broader Work Group down 3%. Wolverine's performance remains inconsistent. Our return to running a better brand and business is taking longer than we initially anticipated. This said, we believe we have diagnosed the challenges. And effectively using our proven playbook and return the brand to steady growth in the future. The addition of Justin Cupps to the team is a win for the company, and I anticipate he'll accelerate the needed progress here. We're already well on the way to strengthen Wolverine's product pipeline, enabling more thoughtful segmentation in the marketplace and bolstering trend-right products and premium price point offerings with collections like the Rancher Pro, the USA-built Workshop Wedge and the all-new Infinity System, the brand's pinnacle expression of its performance comfort technology.

Wolverine is in the process of amplifying its storytelling as well. The brand has partnered with Country Music star, Jordan Davis this year in a variety of activations, featuring both in-line and dedicated products. I'm excited to announce this morning that Wolverine will be an exclusive presenting partner for Season 2 of the Paramount+ series Landman, with the premiere in just a couple of weeks on November 16. Both of these partnerships align well with the Wolverine brand and extend its reach significantly with consumers.

As the product and marketing improvements begin to take root, we plan to focus on recalibrating the marketplace, better balancing inventories and aligning distribution with the brand's category leadership role, more premium positioning and go-forward strategy. More to come on this as we enter the new year.

I'd like to hand the call over to Taryn Miller to take you through our third quarter results and outlook for the remainder of 2025 in greater detail. Taryn?

Thank you, Chris, and welcome, everyone. We delivered another quarter of strong results, exceeding expectations on both revenue and profitability. Our third quarter performance reflects disciplined execution of our strategy and the dedication of our teams. Our focus remains on implementing our brand-building growth model across the portfolio, starting with our two largest brands, Merrell and Saucony. Prioritizing investments in these brands has led to improved performance and market share gains in key categories. We are also seeing encouraging signs of progress in other areas, including another quarter of sequential improvement for Sweaty Betty. While there's still more work to do, particularly in the Work Group, we remain confident in our strategy and the path forward.

I'll now take you through the key highlights from our third quarter. Revenue was $470 million, ahead of the $455 million midpoint of our guidance range. The over-delivery was driven by stronger-than-expected performance in the Active Group, along with an approximate $3 million benefit from favorable foreign currency. Revenue increased 7% compared to the prior year. And on a constant currency basis, revenue increased 6% as favorable foreign currency provided a $6 million benefit.

Revenue growth in the third quarter was led by global wholesale, which increased 11% compared to the prior year, with international wholesale up mid-teens and U.S. wholesale up mid-single digits. DTC declined 5% compared to the prior year, primarily due to lower promotional activity in the U.S., partially offset by international growth, mainly in EMEA. Active Group revenue in the third quarter grew 11% compared to the prior year, ahead of our guidance of mid-single-digit growth.

Saucony revenue increased 27% in the quarter, driven by broad-based growth across channels and markets. The brand saw solid growth in both the performance run and lifestyle categories from continued positive sell-through trends at retail and expanded distribution.

Merrell revenue increased 5% in the quarter, driven by low double-digit growth in wholesale. This growth was supported by another quarter of market share gains in the hike category and strong sell-through at key accounts. This was partially offset by the DTC channel as the brand continues to lap elevated promotional activity from the prior year.

Merrell has been implementing targeted initiatives to strengthen its DTC foundation, including refining its promotional strategy, elevating marketing to reinforce premium positioning, and enhancing digital capabilities to drive higher quality engagement and conversion. These efforts contributed to an improvement in the mix of full price sales and gross margin expansion in the quarter.

Sweaty Betty revenue declined 4% in the quarter, which was better than expected. As Chris mentioned, the brand is now executing on a clear strategy to reset the Sweaty Betty business, which aided in delivering growth in its core EMEA market across both wholesale and DTC.

Group revenue declined 3% compared to the prior year and was slightly below the midpoint of our guidance range. Performance in the quarter was largely driven by lower-than-expected sell-through that impacted replenishment orders. Consolidated gross margin for the third quarter was 47.5%, an increase of 240 basis points compared to the prior year and 50 basis points above our expectations.

The year-over-year improvement reflects product cost savings, lower promotional activity and a timing benefit from our tariff mitigation efforts, net of incremental tariff costs.

Adjusted operating margin was 9.1%, an increase of 150 basis points compared to the prior year and 80 basis points above our expectations. This performance reflects gross margin expansion, continued investment in our brands, talent and key capabilities, as well as the net timing benefit from our tariff mitigation efforts.

Top line growth and operating margin expansion led to 29% increase in adjusted diluted earnings per share to $0.36 compared to $0.28 in the prior year and our outlook of $0.28 to $0.32. Net debt at the end of the third quarter was $543 million, down $20 million or 4% compared to the same time last year.

Before moving to our outlook, I want to provide an update on the impact of tariffs. This has been a dynamic situation with rate changes and evolving clarity around the timing of when the new tariffs took effect. On our last call, we shared that we expected to offset the majority of the unmitigated impact in 2025, which we estimated to be approximately $20 million. We also noted that the majority of the impact was anticipated to occur in the fourth quarter. We now expect the unmitigated impact in 2025 to be approximately $10 million. The reduction in the estimated impact reflects a timing shift between 2025 and 2026. We took quick and decisive action when trade policy changed in the second quarter of this year. As a result of those actions and the timing shift, we now expect to more than offset the $10 million impact in 2025.

On an annualized basis, we estimate the unmitigated impact from tariffs to be approximately $65 million, representing an incremental $55 million impact on 2026. We're encouraged by the progress we've made in navigating these cost headwinds and remain focused on delivering gross margin within our aspirational value creation framework of 45% to 47%. While we are not providing formal guidance for 2026 at this time, based on what we know today, we expect gross margin to be between the lower end and midpoint of our aspirational range next year as we work to offset the tariff-related headwinds over time.

Turning to our outlook. Fiscal year 2025 revenue is expected to be in the range of $1.855 billion to $1.87 billion, an increase of approximately 6.4% at the midpoint, and 5.6% on a constant currency basis compared to 2024 ongoing business. The impact of the 53rd week in fiscal 2025 is expected to provide a 60 basis point benefit to revenue growth. At the midpoint of the range, we expect Active Group revenue to grow low double digits on a constant currency basis, fueled by the momentum we built in our two largest brands, Merrell and Saucony.

New products are resonating with consumers. Our key city strategy is driving focused international growth, and we're seeing continued success in expanding our lifestyle offering. We expect the Work Group revenue to decline high single digits on a constant currency basis. As Chris shared, we haven't made the progress we expected in Work Group. While we're encouraged by recent steps in product innovation and marketing, the path to stronger, more consistent growth is taking longer than originally anticipated. We're excited to have Justin join the team, and we remain focused on improving execution across the 4 pillars of our strategy.

Gross margin is expected to be approximately 47.1% at the midpoint of the range, up 280 basis points compared to the prior year. The majority of the improvement is driven by product cost savings, a healthier mix of full price sales and a timing benefit from our tariff mitigation efforts, net of incremental tariff costs, reflecting the pace of our actions relative to the phasing of the cost increases.

Adjusted operating margin is expected to be approximately 8.9% at the midpoint of the guidance range, up 160 basis points from the prior year. The year-over-year improvement reflects strategic reinvestment of a portion of gross margin gains to support our brand-building model, including marketing, talent and key capabilities.

Interest and other expenses are projected to be approximately $27 million, down from $39 million in 2024 due to the reduction in net debt. The effective tax rate is projected to be approximately 16%. As a result, adjusted diluted earnings per share is expected to be in the range of $1.29 to $1.34, including a $0.02 foreign currency benefit versus prior year. At the midpoint, this represents constant currency growth of 50% compared to last year. Operating free cash flow is expected in the range of $85 million to $95 million, with approximately $25 million of capital expenditures.

Moving to our fourth quarter guidance. Revenue is expected to be in the range of $498 million to $513 million, a year-over-year increase of approximately 2.2% at the midpoint and 0.5% on a constant currency basis. At the midpoint of the range and on a constant currency basis, we anticipate the Active Group revenue to grow high single digits and Work Group revenue to decline by low double digits compared to the prior year.

Gross margin in the fourth quarter is expected to be approximately 46.3%, an increase of 270 basis points compared to last year. A portion of the improvement reflects a timing benefit from our tariff mitigation efforts, net of incremental tariff costs.

Adjusted operating margin is expected to be approximately 10.5%, an increase of 60 basis points compared to last year. As a result, adjusted diluted earnings per share for the fourth quarter is expected to be in the range of $0.39 to $0.44 compared to $0.40 in the prior year.

To summarize, we're encouraged by our third quarter and year-to-date 2025 performance as well as the expected continued momentum in the Active Group, which reflects the strength of our strategy and the discipline of our execution. At the same time, we recognize there's more work to do. We remain focused on driving consistency across the portfolio, sharpening our operational rigor and continuing to invest in areas that will fuel long-term growth. We're staying responsive and resilient as we manage through a dynamic macro backdrop, including evolving consumer environment and tariff-related margin pressures.

With that, let me hand the call back to Chris before we open it up for questions.

Thanks, Taryn. The company has made significant strides in becoming a builder of great global brands over the course of the past 2 years. We're squarely focused on our consumers. We're investing in our brands through enhanced product innovation and elevated marketing. And critically, we're prioritizing responsible brand management in the marketplace, focused on consistent brand experiences, thoughtful distribution decisions, reduced promotional activity, rigorous brand protection and driving sell-through. We believe Wolverine Worldwide is well positioned in the global marketplace and well positioned to navigate the dynamic and uncertain macro environment. We're executing our brand-building playbook with pace and urgency, all focused on making every day better for our consumers, our teams, our communities and our shareholders.

With that, thank you to all of you for taking the time to be with us this morning, and we're happy to take your questions. Operator?

[Operator Instructions] It looks like our first question today comes from the line of Peter McGoldrick with Stifel.

I was curious on the Saucony opportunity. Within the 25% constant currency growth, can you help parse the contribution from new distribution and like-for-like growth?

Yes. Thanks, Peter. We're really pleased with Saucony's performance in the quarter and certainly the performance year-to-date. We describe it really as broad-based categories and channels and regions, which we're encouraged by. I think if we had to put a number on the new distribution contribution for the quarter, about 1/3.

Okay. That's really helpful. And then as we think of the split between lifestyle and performance, I was curious if you can help us think about how that splits within your footwear categories. And then as you plan the business going forward, how should we think of the balance between lifestyle footwear, every day running and then the high-performance running footwear?

Yes. Great question. I think you're hitting on something that was really important to us as we began to build a new strategy for Saucony several years ago. And thinking about both the elite performance run segment, the more casual everyday lifestyle runner and then certainly the lifestyle piece. And I think that reset of strategy has really helped us gain traction and certainly helped propel Saucony forward.

Lifestyle piece is growing faster than the performance piece, but performance is also growing. And we're gaining share in both lifestyle accounts as well as the critical run specialty channel. So I'd say that we are encouraged that growth is coming from both parts. Certainly, our new entry into lifestyle coming off of a smaller base is helping to accentuate those year-over-year gains.

And our next question comes from the line of Mauricio Serna with UBS Financial.

Maybe just on Saucony to elaborate. It seems that you've had pretty good success with the expansion in lifestyle. I think you had alluded to 1,300 doors for fall '25. Any thoughts on where do you see that door count going into spring '26?

Yes. Good question. And certainly, we've been encouraged by the receptivity to the moves we've made in Saucony and certainly by that door expansion. We have opened doors in Saucony lifestyle. We've talked about that. We still believe that we're less than 1/4 of the full door potential. And I would say that we're sort of maniacally looking at sell-throughs. One of the things that we're committed to is responsible brand management. And we want to make sure that where we open new distribution, where we go put ideas, we're really moving towards a pull model versus a push model.

And so as we open new doors, we said early on that this would be a test and learn. And I would say that our doors, some doors are overperforming what we anticipated. A lot are performing at what we hoped and anticipated. And frankly, some doors are underperforming. And we need to react to that change where the consumer is, learn from where we have momentum and how do we capitalize on that responsibly. At the same time, where we aren't generating the sell-throughs that we want, we'll look to pivot away from that and diagnose what the issue is.

I think the doors where we are underperforming on sell-through rates, we largely attribute to low brand awareness, which is something we're working on simultaneously with the brand as we invest more in marketing dollars. So something we're keenly watching. Every single week, we look at sell-throughs. We're staying very close to our customers and our consumers and making sure that as we drive this growth for the brand, we're doing it responsibly and managing for the long term.

And our next question comes from the line of Laurent Vasilescu with BNP Paribas.

I just wanted to ask with regards to fourth quarter, the active, high single-digit growth. Can you maybe -- Chris, can you unpack that a little bit more in terms of expectations for Saucony? And then I have a follow-up with regards to -- for 2026.

Yes. I think for the fourth quarter for the Active Group, we remain and continue to be encouraged by the progress we've made, the momentum that they've generated. Saucony, we anticipate it will be a little better than Merrell in the fourth quarter. At the same time, Saucony's comparisons are a little easier, given that Merrell is comping growth from 2024. So -- but still encouraged. Again, I think if you think about how we've talked about the business, our long-term value creation model, our aspirations, this company does extraordinarily well at mid- to high single-digit revenue growth in the consolidated. And our goal is to get all brands working at that pace and hopefully, certainly some better than that pace.

Okay. Very helpful, Chris. And then I think in the beginning of the year, it was about 900 doors, then for the second half, it was about 400 doors. You mentioned right before that you're still under 25% penetration rate. What kind of numbers should we think about high level in terms of number of doors for spring 2026?

And I'd love to hear more about unpacking what you're seeing in terms of the underperforming doors. I think you mentioned brand awareness, but can you just give us a little bit more color on what you're seeing, what measures you're going to put in place for those underperforming doors?

Yes. Good question, Laurent. I appreciate that. We do anticipate first half of '26, the door count to be higher than the first half of '25. That's how we're thinking about the business. And then obviously, we continue to manage really week-to-week with these accounts. And in the doors that we have not met our sell-through expectations or our partner sell-through expectations, we are working to diagnose, and what performed better, men's or women's? How are the assortments? How are we merchandise? What was the consumer feedback? And then trying to triangulate that with our own data, our own e-commerce metrics, where our files are, what sort of demographics and ZIP codes do we do better with. And I think these are things that brands are going through a growth curve like this we have to manage, and we have to manage. I mean that is just a reality situation.

The good news is that stock, we believe, is going to achieve all-time record revenue and all-time record profit this year and carry that momentum into 2026. So there is work to do. And I would say, as with any business, if you're not swinging and missing a few times, you're probably not thinking about the business critically enough. And I would say where doors that we have underperformed that's a thing that we can learn and then move from.

And our next question comes from the line of Jonathan Komp with Baird.

Chris, if I could follow up, could you just maybe more directly talk to some of the sell-throughs you're seeing on more of a near-term basis? And as you think about heading into 2026, can you give a little more comfort or color on the indications you see for the Active Group into 2026 in terms of growth potential there?

And then, Taryn, just to follow up, I appreciate the gross margin commentary for 2026. Should we think that you're at a near-term peak for margin here? Or given the timing of some of the tariff impacts, are there areas you can leverage to continue to drive operating margin expansion just at an initial level here as we look forward given the goal to get back to much higher multiyear operating margins?

I'll answer the first one. And I think the question really is premised on sort of expectations for Merrell and Saucony. And I would say, again, and I tried to outline this in prepared remarks, I would bucket our brands in different stages of evolution. And I would say that Merrell and Saucony, our two biggest brands are moving at pace. And I would say that was where we applied a tremendous amount of effort in the early days of the turnaround to get our biggest brands moving. And I'm encouraged by the rigorous deployment of that playbook, how we've built the product pipeline, how we're working to create demand and then frankly, how the Wolverine Worldwide team is driving the business each day, I'm encouraged by.

We've talked about market share gains. Saucony gained share in the run specialty channel, has gained share in lifestyle. I think Merrell has 11 of 12 consecutive quarters of gaining share at a rate that's actually accelerating. Performance and lifestyle for Saucony grew in the quarter. Performance and lifestyle for Merrell grew in the quarter. And I'm encouraged by some of the work that we're doing with that new Merrell team to think about the broader outdoor lifestyle opportunity beyond the trail.

So it is not certainly easy days out there. We're -- obviously, with everyone thinking about where the consumer is, how we had in the holiday, how we think about 2026. But I think for the things that we can control with our own team, I think we've got a lot of things going in the right direction. And where we do have some challenges and opportunities to do better, I think we've diagnosed those issues, and we're going to quickly get after them.

And Jonathan, to your question on gross margins, we are pleased with the performance that we have made to date in terms of expanding our gross margin. And at the full year of our guide, we're at around 47.1% for gross margin on the year. That's up 280 basis points year-on-year. And the primary drivers of that are what we have been talking about for some time of the product cost savings that we've been driving with our supply chain organization as well as more full price sales as we're building that brand-building model across the brands and channels, we're able to get more full price sales. We're able to get the more premium price points. So that's the primary driver.

The tariff timing piece that I spoke to in the prepared remarks, for the full year, that's providing 40 bps of -- basis points of improvement year-on-year. So you can see the vast majority of that 280 improvement is really the sustainable part of our business.

I think in terms of the tariffs, why is it providing a net benefit this year? Let me explain that one a little bit. While the trade policy continues to evolve, we did start taking actions early in the year to mitigate those headwinds in the second quarter. So for 2025, the benefit of our actions started to materialize in the third quarter. However, we aren't seeing the full impact of the higher tariffs until the fourth quarter. And even then, I would note that a lot of the inventory sold in our U.S. channels reflects product that was imported when the incremental tariffs for most of our sourcing countries were at the 10% rate, not the current 20%.

Therefore, as a result of that timing, then you can see that our mitigation actions are ahead of the incremental costs hitting the P&L. And -- but like I said, the majority of that 280 on this year is really the sustainable piece. The timing piece would be that 40 basis point impact from tariffs.

Okay. And sorry, just to be more clear, I guess, thinking about operating margin, the 8.9% guide for this year, significant progress, still well below your mid-teens aspiration. So should we think that 2026 might be a step back on operating margin? Or are there other areas you could drive leverage to help manage through the tariff headwinds?

Yes. It's too early to talk details on 2026. We'll do that in February. We want to -- the reason we gave the gross margin is we were just trying to put some context around how we were looking at the broader tariff impact in '26 and our plans to mitigate. I mean we continue to find opportunity -- look for and find opportunities to expand growth and operating margin. We're obviously going to be doing that now in the face of a larger tariff impact, but our value creation model stays intact. It's just the timing of the tariffs is what we're looking at offsetting. We'll have more to share on '26 in a few months.

All right. Our next question comes from the line of Sam Poser with Williams Trading.

I'd just like to dig into Saucony a little bit more on the lifestyle side. Can you give us some idea of what's the breakdown between -- like between sell-in and sell-through on the lifestyle product? And then you mentioned, Chris, that you were seeing some changes between men's, women's and kids and so on. Can you give us some color on the sell-through rates on the rates you're seeing between them and how that may be balanced and you know where I'm going on this.

Yes. I mean I think -- thanks, Sam. I appreciate the question. Like I said in an answer to a previous question, I think I break down our performance in the early days in these lifestyles accounts. In some places, it's well outpacing what our expectations were. In a lot of cases, it's in the range of what we need it to be. And then in some places, it's at a slower rate. And so I think for us, as we try to create a really strong pull model, manage the inventory, manage the brand, manage the marketplace really well, we'll look to responsibly grow in doors where we've overperformed. And then frankly, we'll pull back in doors where we've underperformed.

And I think that is incumbent upon companies that want to run good brands. I think historically, we may have tried to force product in and not be responsible and really focus on sell-in and not sell-through. And we're trying to pivot to really obsess about the sell-through. Encouragingly, though, we are pleased with the progress that we've made in fairly short order. We're pleased with the growth rates. And then I'm encouraged by what I see for the product pipeline for '26. And then even as trends emerge and evolve with the consumer, I'm thankful that I've got a century-old archive in Saucony that I can pull from. And some early indications are maybe a move back to some classifications where Saucony has historically been very good.

So we remain encouraged by the progress in lifestyle. We're watching it very closely. We talk about it every single week. And it's something that is -- as I think about how we want to responsibly grow Saucony in the long term, responsibly growing that lifestyle business is paramount.

I really wanted to talk about the genders, the men, women and kids, not the lifestyle. I really wanted to get the breakdown on, is men's performing better -- in overall, men's are better, women's better, kids better and so on? Because I mean, historically, a long time ago, Saucony has been more appealing to women more than almost any other brand out there. And it seems like a lot of -- it may have been sort of the sell-in on men's may have been higher than it may have should have been, and women's may have bigger opportunity and so on. That's what I'm really -- that's where I'm going.

That's a good question. I wasn't trying to be elusive. I totally forgot that you asked about the gender split down, so I apologize, Sam. Sell-in, like we talked about, men's and women's, I would say women's has performed really good, really well for us, along with kids, kids has done very well for us. So we're seeing a very strong reception to the women's piece and certainly the kids piece. Interestingly enough, the way we do sizing for the lifestyle piece is a lot of unisex. So unisex numbers actually growing very high, which we assume a lot of those are buying smaller sizes for the female consumer.

So I'd say we've made really nice progress with her. We just did a collaboration with METAGIRL, which we think will deepen the connection her. She's a very influential creator who we're fortunate to partner with. And I think that product sold out before lunch -- the day of launch. So we are very focused on her, and we think there's a great opportunity with her.

And on the men's side, I mean, is the men's side living up to the expectation or is the women's side exceeding? That's where I'm going here.

That's a good question. I think men's, again, in lifestyle in total, we're very pleased with the progress. Pleased with the sell-throughs, pleased with the receptivity, pleased about what we believe that it's doing for the brand. I think we're really happy with the pickup we've seen with her.

And our next question comes from the line of Anna Andreeva with Piper Sandler.

This is Noah on for Anna. So I just wanted to touch on Merrell. You had mentioned that the brand was in the early stages of evolving its distribution. Should it follow the same playbook as Saucony with additional new door step-up in specialty into the next year? And then have you quantified what that new door opportunity could look like? And then just a quick follow-up on Saucony. Can you remind us what brand awareness is now versus a few years ago?

Sure. As it relates to Merrell, the new door expansion isn't as great for Merrell as it is for Saucony. Saucony is a very well-distributed brand. For me, it's more talk about the evolution of that distribution. And what other doors could we possibly target, especially with her. So while I do think there is door count opportunity expansion, it probably won't be at the pace in which we are able to do for Saucony. I think for us, the biggest opportunity in Merrell is moving beyond the trail, making both the trail lighter and faster, more modern at the same time, I think a much broader outdoor lifestyle opportunity for the brand, specifically for her, which is why we're encouraged by the receptivity of some of our new product launches and the ability for us to sell the Moab Speed 2, the SpeedARC and where those products are showing up are really encouraging.

And then I think we're equally excited about what we can do next year, especially with the low profile with the Relay and what that can mean from a fashion trend standpoint. And then certainly, cold and wet weather boots, we think, is an opportunity. So I think the door count expansion for Merrell isn't as great as it was for Saucony. At the same time, I think chasing the bigger outdoor lifestyle opportunities is a giant opportunity for Merrell.

And then as it relates to awareness, we see awareness slightly up sort of quarter-on-quarter. We measure it twice a year, we do brand health surveys. We see awareness slightly up. But importantly, we see bigger movements in affinity and heat for the brand, which we're really encouraged by.

So I think that really is driven by a shift in how we've chosen to invest our marketing dollars. I think we've really consciously tried to make a bigger play in upper funnel advertising and launch meaningful campaigns behind these brands to certainly raise awareness. But then obviously, it's important for us to build strong brand affinity and importantly, brand heat. And I think specifically, the places -- the cohorts that we've seen pickups are with core runners and then encouraging that younger consumer.

And our next question comes from the line of Mitch Kummetz with Seaport Research.

First one is, I'm just curious, was there any pull forward that occurred in the quarter that might explain some of the upside, the over-delivery in the quarter as well as why the fourth quarter growth rate maybe doesn't look as strong as 3Q? And then I also have a follow-up.

Yes, Mitch, no, there was -- I wouldn't call out any pull forward or timing shifts in the third quarter relative to the fourth quarter.

Okay. And then on Saucony, Chris, I think your comment around door count was that first half of '26 will be higher than the first half of '25. You added doors in the back half of '25. So I'm curious if 1H '26 is going to be above 2H '25 in terms of door count? And then also with some of these new doors that you've opened, I would imagine that the assortment going into those new doors wasn't a full assortment. And I'm curious with the doors that you recently added, let's say, for 1H '26, if you think that the doors that you've added in the last 12 months will have more product than what they had the prior year when you added those stores. Hopefully, that question makes sense.

No, it makes perfect sense. And I think that part of it is part of our test and learn, and how do we optimize the new doors that we've opened. And that part of it is where we put assortments in, how do that assortment resonate, men's, women's, kids, how is it shown? How is it presented? Is there opportunities for adding SKUs to those assortments. And that part of the optimization work.

At the same time, it's also making sure that doors where we did underperform, we're quickly moving past those doors and finding new places to grow. It's too early to call a door count second half of '26 versus the second half of '25. Obviously, those plans are still in development. And we're looking at both at a U.S. store count as well as a global door count. So just to reiterate, first half '26 stores will be an increase over first half of '25 doors, and we're still working on the back half of '26 into '27.

I guess maybe you misunderstood my question. I'm wondering if door count for first half of '26 will be above second half of '25?

No, sorry, that was the thing was embedded in our remarks. I think first half of '26 will be fewer doors than second half of '25 because we're working to rationalize that door count in places that we've underperformed, move past those doors and go look for new growth opportunities.

And we have a follow-up question from Mauricio Serna.

Maybe could you elaborate on the DTC growth that you've seen for the Saucony brand in the quarter? How does that look? And then on SG&A, like it sounds like you're continuing to invest in demand creation and other long-term enablers. How should we think about that growth rate going into '26? Because I think part of the algorithm is to get some leverage to get to that aspirational mid-teens EBIT margin.

I'll talk about the DTC performance first and then hand it over to Taryn. I think just let me talk about broader DTC in total. The quarter was generally in line with our expectations. And I think in '25, we're really trying to prioritize for our DTC operations a couple of things.

First, running a brand-accretive DTC business. How do the stores and e-commerce sites that we run do more than just drive revenue? How do they also help build brand? How are they positive brand experiences for our consumers? How do they deepen emotional connections? At the same time, be a profitable channel for us. We worked hard this year to become less promotional on our e-commerce sites. In '24, we certainly were promotional as we're working through some obsolete inventory and working to turn the organization around. And we made the choice this year to really try to become less promotional across the entire portfolio. And I'm encouraged by the progress we've made. I think in the quarter, we're at 430 basis points in gross margin because we are becoming less promotional. And at the same time, also drive more full price, more premium selling and then importantly, have better and more consistent storytelling across all of our experiences.

As it relates to Saucony, Saucony was a bright spot in the quarter, up mid-teens in their e-commerce business, which we are certainly encouraged by. And clearly, brands that have managed the marketplace well, have compelling product, new and fresh innovation, those brands are winning. I'll also say that Sweaty Betty U.K., the U.K. portion of that e-commerce business was positive in the quarter, too, which is really encouraging to see that brand begin to turn the corner for us. So that's how we approach the DTC business. Obviously, everyone is very focused on the few weeks remaining in the year, driving a successful holiday season and a successful conclusion to '25 and then carrying on to '26.

And to your second question, Mauricio, in terms of our value creation model, the revenue growth combined with our disciplined SG&A management and cost management overall, frankly, are key to our growth algorithm, as you pointed out. And we are -- I'd say how I would describe it is we're working to balance the importance of making sure that we continue to expand margins in this inflationary environment as well as making those key strategic investments that we need to make.

And this year, in 2025, as I identified earlier, we have grown gross margins with sustainable solutions. And we are reinvesting a portion of those gains in those key areas we're talking about, about driving that fuel for the growth so that we can get that leverage in the upcoming years. Those investments are in areas like marketing, like Chris has talked about the key cities. We've talked about the ground game, our talent and product development as well as key processes that Chris called out as well in terms of integrated business planning.

So we've made a lot of progress as we've been trying to balance that growing margins as well as investing for the future. Too soon, as I said earlier, to talk about 2026, but that core discipline of driving revenue growth and being disciplined with our SG&A remains true.

And that does conclude our Q&A session today as well as today's conference call. Thank you all for joining today, and you may now disconnect. Have a great day, everyone.