Wolverine World Wide, Inc. Aktie

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.

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

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

Good morning, and welcome to our second 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 second quarter of 2025 and guidance for the third quarter of 2025. The press release is available on many news sites and can be viewed on our corporate website at 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 the third quarter of 2025, growth opportunities and trends expected to affect the company's future performance made during today's conference call are forward-looking statements under U.S. securities laws. As a result, we must caution you that there are a number of factors that could cause actual results to differ materially from those described in the forward-looking statements. These important risk factors are identified in the company's SEC filings and in our press releases.

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

Thanks, Jared, and welcome again to Wolverine Worldwide. It's great to have you on the team. And good morning, everyone. Thanks for joining us on today's call.

In the second quarter, we exceeded our expectations on nearly every financial measure, headlined by double-digit revenue growth with increases in every region and strong growth from our 2 biggest brands. Saucony was up 42% compared to last year, achieving record revenue for Q2, and Merrell grew 11%. The Work Group returned to growth, posting a 2% revenue gain, while Sweaty Betty improved sequentially in the quarter, reflecting important progress in these 2 divisions.

Our teams are intently focused on driving growth, building stronger brands, better managing the marketplace and fueling consumer demand and doing so in a healthy, profitable way.

In the quarter, we delivered more than 400 basis points of gross margin expansion versus the prior year, once again achieving a quarterly record. Our high-quality growth enabled us to more than double earnings at the bottom line compared to last year, a good quarter by most measures. A new brand-building playbook has proven effective, and we've been able to sequentially improve our year-over-year revenue trends for 5 consecutive quarters now, this past quarter posting our best year-over-year comparison in nearly 3 years.

Our teams have done a tremendous job of embracing a new growth-focused mindset, and I'm grateful for their drive and resilience as we continue to build the new Wolverine Worldwide.

Looking ahead, I'm pleased we build momentum in the business and that the company is on a much firmer financial footing. We believe we're well positioned to navigate today's volatile macro environment and that the actions we've taken to date and can take in the future will enable us to largely mitigate the impact of tariffs going forward.

A new reality, however, is uncertainty in the global marketplace due to the ever-shifting global trade policies, coupled with a downstream effect on the economy and consumers. This reality informs both our outlook and our actions as we move forward into the back half of the year.

With that, I'd like to share the progress our brands continue to make around the world before handing the call over to Taryn for more detail on the quarter and our outlook.

Beginning with Saucony. Saucony delivered very strong broad-based revenue growth of 42%, coupled with 560 basis points of gross margin expansion in the quarter. The brand grew in every region and channel while delivering record second quarter revenue. I believe 2025 will be a pivotal year for the brand, the result of an ambitious strategic reset in 2023 and 2024 and our new growth agenda. We position the brand at the intersection of authentic performance and lifestyle running given the unique foothold in the competitive landscape and opening up a significant addressable market opportunity for the brand.

Over the last several months, Saucony executed with excellence on many fronts. Its Run As One campaign, launched earlier this year, continued to position and build the brand with its target consumer. Brand search interest is up meaningfully around the world compared to last year, and we're seeing stronger affinity for the brand, specifically among runners and younger consumers.

Saucony also continued to advance its key city strategy. Just a few weeks ago, following the recent opening of its store in Harajuku, Tokyo, the brand opened its pioneer store in London's Covent Garden, one of the premier shopping destinations in the world. Importantly, the store serves as a valuable hub for brand activations in London. Last month, building on a success in 2024, Saucony was again the title sponsor for the London 10K, an amazing event with over 17,000 runners this year. The brand took over the city for the week with an impactful slate of great marketing and brand activations. I was fortunate to run in the event and couldn't have been more impressed by the brand's overwhelming presence around the city and how far the brand has come in such a short time. Saucony will expand its event sponsorship in London with the Shoreditch 10K and then to France with the Eiffel Tower 10K later this year.

In Paris, the brand garnered extensive interest a few weeks ago at Paris Fashion Week, highlighting its disruptive approach to collaborations and taking appointments with a rapidly growing number of highly influential retail partners. I'm also pleased to announce we just signed a lease to open the brand's third pioneer store in Paris next year.

Saucony's activations and compelling retail execution are engaging consumers directly and providing a vision and inspiration for our partners around the world. Building on our efforts in Tokyo, for example, we've already started opening a host of new stores with our best-in-class partners in Asia Pacific with plans to open more in the second half of this year.

Saucony continued to fuel product innovation as well with its pinnacle Endorphin franchise. The brand followed up the introduction of the award-winning Endorphin Elite 2 super shoe in March with the new Endorphin Speed 5, combining a nylon plate with PWRRUN PE foam, for a fast, lightweight design at less than $200, a compelling price point for so much innovation. The brand also continued to push forward its core 4 franchises squarely aimed at the broader casual run opportunity with the launch of the Triumph 23, its premium neutral runner, engineered to deliver plush comfort through innovative geometry and cushioning. Together, the core 4 franchises, including the Ride, Guide, Triumph and Hurricane, grew at a very strong double-digit pace at U.S. retail in the quarter.

On the lifestyle side, Saucony continues to leverage its deep product archive to deliver authentic trend-right styles to the marketplace. The brand's expansion of distribution within the lifestyle athletic specialty channel continues to progress as a result of positive sales performance, adding roughly 400 doors for the back half of this year. This will raise the brand's store count in this channel to roughly 1,300 doors.

While the opportunity is meaningful, we continue to take a methodical approach to thoughtfully expanding distribution. Saucony has made a remarkable amount of progress, but I have maintained that it's poised to do more. The brand possesses a unique and compelling combination of heritage and authenticity, coupled with best-in-class innovation and emerging cultural relevance. I believe that Saucony is positioned to do something very special.

Moving to Merrell, our biggest brand, which came to build momentum and delivered another strong performance. The brand grew 11% in the second quarter, its fourth consecutive quarter of growth with increases in most regions and channels, and delivered nearly 600 basis points of gross margin expansion versus the prior year. Merrell remains focused on modernizing the trail. The brand's faster, lighter, more athletic product offerings continue to fuel momentum and drive significant share gains in the hike category.

Moab Speed 2 revenue nearly quadrupled year-over-year at U.S. Retail, making it the brand's second-largest hike franchise behind the industry-leading Moab 3, which grew at high single digits in the quarter. The award-winning SpeedARC Matis built on the brand's new visually disruptive SpeedARC platform for uniquely comfortable ride with exceptional energy return, is now the #4 hike franchise at merrell.com after just a few months of selling.

Merrell has built good momentum, outpacing the market for 10 of the last 11 quarters in the U.S. hike category, which had been under pressure for the better part of 2 years. But encouragingly, we've now begun to see a broader hike trend improve a bit. We believe this is another positive indicator for Merrell, the market leader moving forward.

On the trail running side, the Agility Peak 5 franchise was up double digits at U.S. retail, and the brand launched the new ProMorph, an all-terrain hybrid runner designed with premium flow plus foam for superior cushioning. Merrell's continued progress in modernizing the trail helped strengthen its ability to advance in lifestyle as well. Performance products like the Moab Speed 2 and Agility Peak 5 in lifestyle colorations and materials continue to gain traction at certain lifestyle retailers, reaching a younger consumer for the brand. In addition, revenue from progressive casual styles like our Red franchise and the iconic Jungle Moc grew significantly in the second quarter as well.

In the U.S., Merrell, still in the early stages of evolving its distribution, has rationalized its points of distribution over the last couple of years. The brand is focused on developing more impactful go-to-market plans with its key strategic outdoor specialty and sporting goods partners and is establishing a footprint in the healthier lifestyle market.

Globally, the brand saw accelerated growth in Asia Pacific in the quarter, thanks in part to its key city strategy, which has initially focused on Tokyo with its partner in Japan. Retail store concepts in Harajuku and Shibuya have continued to perform well and, together with compelling marketing and storytelling in the market, have effectively helped elevate the brand in one of the most influential cities in the world. Merrell is also now beginning to activate Paris as part of its key city strategy with focused campaign investment. And in Q2, the brand built on its market share-leading outdoor footwear in France and delivered strong growth in the broader EMEA region.

Moving on to Sweaty Betty and Wolverine. The 2 brands were focused on getting on track. Encouragingly, both brands saw sequential improvement in the second quarter.

I'll start with Sweaty Betty. As we previously shared, our priority with Sweaty Betty has been to establish a healthy foundation from which to grow. We continue to make steady progress on reestablishing the brand's premium positioning. In Q2, we again increased the brand's full price/mix and expanded gross margin by more than 500 basis points. Sweaty Betty's female-focused inclusive positioning and storytelling has been effective, and our recent Wear the Damn Shorts campaign reinforced the brand's original rebellious distinctive voice. Brand awareness is up, consumer sentiment is dramatically higher and perception as an inner hot brand is trending positively.

And while consumers already rank Sweaty Betty at the top of the competitive landscape for product quality, we're enhancing future product offerings with elevated design and more style innovation, including introducing more newness for the important holiday season this year.

Looking ahead, with a stronger foundation in place, we're taking action to drive profitable growth in Sweaty Betty with a multipronged strategy. First, the brand's direct-to-consumer business in the U.K. will be the #1 priority. Digitally, we plan to deliver a reinvigorated flow of innovative premium products with a keen focus on our Madewell consumer target and deliver enhanced digital experiences for her, including the brand's recently launched app, which has been among the top downloaded shopping apps in the U.K. We're also taking action to further improve the productivity and profitability of our U.K. stores, along with the full fleet review of real estate to ensure we're in the right doors, driving strong returns.

Second, we're moving to a more disciplined full-price DTC business online in the U.S. Sweaty became too promotional too often, which only served to erode the brand's equity. Third, we plan to expand the brand into new or nascent international markets, including leveraging Wolverine Worldwide's global network of best-in-class distributor partners as we began to do in China last year. Finally, we're integrating the brand's tools and processes into the Wolverine Worldwide ecosystem. We anticipate this will be largely complete later this month. This will be a critical enabler of our strategy and part of our broader technology modernization effort across the portfolio.

In addition to these growth strategies for Sweaty Betty, we're exploring options to better leverage this team's DTC and broader apparel expertise across the portfolio to drive improved performance and growth in our footwear brands. One example is the brand's use of AI to better manage pricing and maximize margins, a solution Sweaty Betty piloted, and we expect to have a wider benefit across the portfolio.

Today, Sweaty Betty stands on better footing to scale over time, and I feel good about the recent work we've done to hone its strategy. I remain excited about the potential and opportunity Sweaty Betty provides for Wolverine Worldwide in the future.

And concluding with Wolverine. In the second quarter, the brand's top line revenue trend improved and gross margin expanded over 400 basis points. We expect the brand to now be on a path of quarterly sequential improvement as new product and marketing initiatives begin to impact performance and the effects of comping elevated discounting in the prior year begin to dissipate.

As we've discussed, the brand has been focused on strengthening its Western and premium price collections with products like the Rancher Pro. Over the past year, it has gained well over 100 basis points of market share in the U.S. at prices above $125. To further this effort, in June, the brand launched its new USA-built Workshop Wedge, featuring premium full grain leather, of Goodyear Welt construction, and priced at $250. It sold out on wolverine.com in less than a day.

Just yesterday, on the innovation front, the brand announced its new Infinity System, the pinnacle expression of its performance comfort technology, delivering 2x the impact absorption and energy return of the leading work boot in the category with price points between $175 and $250. As the market leader in the U.S. work boot category, the brand continues to elevate product quality and innovation while simultaneously telling better, more compelling stories and investing in the ground game with its wholesale partners.

While we've made good progress for both Sweaty Betty and Wolverine in the last few months, there's more work to do to get them growing and contributing as we'd expect.

With that, I'd now like to hand the call over to Taryn Miller to take you through our second quarter results and how we're viewing 2025 in greater detail. Taryn?

Thank you, Chris, and welcome, everyone. Results in the second quarter exceeded our expectations for both revenue and profitability, reflecting the momentum we've built in the business led by our 2 largest brands, Merrell and Saucony. Our inflection to growth in the fourth quarter of 2024, which has accelerated through the first half of 2025, underscores that our growth playbook is working in a dynamic market environment.

For today's call, I will start with a review of our second quarter results, provide an update on the financial impact from tariffs and our mitigation initiatives, and close with our third quarter 2025 outlook.

Starting with our results for the second quarter. Revenue was $474 million, which exceeded the high end of our outlook of $450 million. The over-delivery was driven by stronger-than-expected performance in both the Active and Work groups, highlighting underlying momentum and solid execution by our teams. The quarter also benefited from a timing shift between the second and third quarters and approximately $4 million of favorable foreign currency relative to guidance.

As it relates to the timing shift, approximately $10 million of wholesale orders shipped in the second quarter that were originally planned for the third quarter. The shift primarily relates to retailers' accelerating orders in advance of planned price increases. Active Group orders accounted for approximately $8 million of earlier shipments, split evenly between Saucony and Merrell, and the Work Group orders made up the remaining $2 million shift.

Ongoing revenue increased 11.6% compared to the prior year. And on a constant currency basis, revenue grew 10.4% as favorable foreign currency provided a $5 million benefit compared to the prior year. Revenue growth compared to the prior year was driven by performance in the Active Group. Saucony and Merrell continued to deliver strong results, reinforcing their momentum, while Sweaty Betty and the Work Group showed sequential improvement relative to the first quarter.

From a channel perspective, global wholesale revenue was the primary driver of our performance, with international growth slightly outpacing the U.S. Direct-to-consumer declined less than 2%, reflecting sequential improvement relative to the first quarter. As a reminder, the second quarter of 2024 included $2 million of revenue that did not repeat this year related to the Saucony and Merrell Kids business model change.

Active Group revenue increased 16% compared to the prior year and was ahead of our outlook for high single-digit growth. The Active Group's better-than-expected performance in the quarter was led by Saucony and Merrell. Saucony increased revenue by 42% in the quarter and saw broad-based growth across regions and channels, led by wholesale performance in both the United States and internationally, with direct-to-consumer up low double digits. Saucony delivered strong results in both performance run and in lifestyle, reinforcing the continued expansion of its lifestyle distribution footprint with leading retailers.

Merrell increased revenue 11% in the quarter driven by strong wholesale performance. This growth was supported by steady retail sell-through, which led to strong replenishment orders. Merrell also benefited from the previously mentioned $4 million timing shift from the third quarter to the second quarter. Merrell continued to take share as the leader in the height category through its focus on modernizing the trail, supported by the continued success in core franchises, including Moab 3 and Moab Speed 2.

Sweaty Betty revenue declined 6% in the quarter, which was better than our expectations. While there is still more work to do to improve the brand's performance, this was a sequential improvement compared to the first quarter and reflects early progress in our efforts to reestablish Sweaty Betty's premium positioning through product and marketing. Gross margin improved significantly, up over 500 basis points year-over-year driven by a better mix of full price sales.

The Work Group revenue grew 2% compared to the prior year. Adjusting for the timing shift of wholesale orders into the second quarter from the third quarter, Work Group revenue would have been approximately flat year-over-year, ahead of our guidance of a low single-digit decline and a sequential improvement compared to the first quarter.

Gross margin for the company was 47.2% in the second quarter, an increase of 410 basis points compared to last year and was in line with our expectations. The year-over-year improvement reflects our healthier inventory position, a higher mix of full price sales and the continued benefits of product cost savings across almost the entire portfolio. The impact from the incremental tariffs on U.S. imports in the second quarter was minimal.

Adjusted operating margin in the second quarter was 9.2%, an increase of 290 basis points compared to last year and includes continued investment in our brands as part of our growth playbook. Adjusted operating margin was 200 basis points higher than our outlook of approximately 7.2%, primarily the result of SG&A leverage from better-than-expected revenue.

The combination of strong revenue growth and gross margin expansion led to adjusted diluted earnings per share of $0.35 compared to $0.15 in the prior year.

Turning to the balance sheet. Net debt at the end of the second quarter was $568 million, down $99 million or 15% lower compared to the same time last year.

Next, I will provide an update on the financial impact from tariffs and our mitigation initiatives. On our last call in May, we estimated that the incremental tariffs would translate to a fiscal 2025 profit impact of $30 million before any mitigation. This was based on tariff rates of 145% for China and 10% for our other sourcing countries. Based on the tariff rates announced by the U.S. administration on August 1 that go into effect on August 7, we now estimate the 2025 profit impact from incremental tariffs will be approximately $20 million before any mitigation. The reduced 2025 profit impact versus our prior estimate is primarily due to lower China tariff rates, down from 145% to 30% as of May, partially offset by increases in other sourcing countries, rising from 10% to approximately 20% starting in August.

Our team's successful execution of our strategy over the past 24 months has enhanced our brands and our capabilities, strengthened our financial position and prepared us to navigate ongoing changes. We've taken strategic steps to mitigate the impact of tariffs and have plans in place that we believe position us to offset the majority of the profit impact this year. That said, we'll continue to monitor how these plans unfold and how the broader trade environment evolves.

Prior to the tariff announcements in April, we had already begun executing targeted initiatives to enhance profitability. While external conditions have evolved, our strategy remains consistent. We're accelerating those efforts and actively pursuing new opportunities to strengthen our financial position, preserve flexibility and support long-term growth.

Actions we have taken include leveraging our diversified supply chain and dual-sourcing capabilities, negotiating cost sharing with our supply chain partners to alleviate the financial impact of tariff changes, reducing products sourced from China to the United States from the mid-teens earlier this year to less than 10% by the end of 2025, implementing strategic price increases on select products across the brand portfolio and capturing discretionary SG&A savings while also continuing to invest in our brands. These efforts are designed to offset tariff-related headwinds while maintaining investment in brand building and long-term growth drivers.

Turning to our outlook for 2025. As it pertains to the full year, while we are not reinstating our formal 2025 annual outlook today due to continued macroeconomic uncertainty from global trade policy, I would like to provide some insights into how we are viewing the second half of the year. We're pleased with the year-to-date performance of the business, delivering 8.6% constant currency revenue growth in the first half, which is at the high end of our long-term value creation aspiration. This performance reflects the strong execution of our brand-building strategy across product innovation, marketing and distribution expansion, particularly in Saucony and Merrell as well as some favorable timing shifts.

As we look to the second half, while we expect this momentum to continue, supported by ongoing execution and sequential improvement in Sweaty Betty and the Work Group, we anticipate our year-over-year growth to moderate compared to the first half as the impact of timing shifts normalizes and we lap the initial gains from incremental distribution expansion. In addition, we will be comping a more stabilized second half of 2024 relative to the first half.

With respect to the impact of tariffs and our mitigation efforts on gross margin, we expect the majority of the incremental expense to impact cost of goods sold in the fourth quarter, while our mitigation efforts are anticipated to be more balanced between the third and fourth quarters.

With that, I will now provide our outlook for the third quarter. Revenue is expected to be in the range of $450 million to $460 million, a year-over-year increase of approximately 3.3% at the midpoint on a reported basis and 2.6% on a constant currency basis. At the midpoint of the range, we expect Active Group revenue for the third quarter to grow by a mid-single-digit percentage year-over-year and Work Group revenue is expected to decline by a low single-digit percentage. Adjusting for the previously mentioned $10 million timing shift from the third quarter into the second quarter, Active Group revenue is expected to grow high single digits and Work Group is expected to be approximately flat compared to the prior year.

Gross margin is expected to be approximately 47%, an increase of 170 basis points compared to last year. Adjusted operating margin is expected to be approximately 8.3%, an increase of 60 basis points compared to last year. And adjusted diluted earnings per share is anticipated to be in the range of $0.28 to $0.32 compared to $0.29 in the prior year.

To summarize, our second quarter results and third quarter outlook reflect strong execution of our growth strategy in a dynamic environment. Our brands continue to show meaningful progress. We're driving healthier sales across the portfolio, and our balance sheet is meaningfully stronger than 2 years ago. We believe the improvements we've made and the actions we're taking to navigate the evolving trade landscape position us for a sustainable, profitable growth.

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

Thanks, Taryn. After 2 years, Wolverine Worldwide is well underway to becoming a new company with a clear vision to make every day better. We aspire to become great consumer-obsessed brand builders, focused squarely on creating innovative, trend-right products, telling differentiated and amazing stories and driving the business each day as a collective One Wolverine.

We've elevated talent throughout the organization by bringing in new leaders with exceptional experience and heightened consumer focus, bolstering our capabilities in areas including product design, merchandising, modern demand creation and business planning. I believe our team, this new talent, coupled with a solid base of company veterans, is the strongest we fielded since I joined the company almost 17 years ago.

We've also made good progress in equipping our teams with the processes, tools and environments they need to win. We're injecting more consumer and trend insights into our brands with The Collective, opened our first-ever innovation hub in Boston this past fall, co-located our Active Group brands in a refreshed space this spring, developed new integrated planning processes, and we've embarked on the most ambitious tech modernization effort in our company's history.

And finally, and importantly, our culture is evolving. Our teams have embraced the challenge to get better every day to win and work together as One Wolverine. Just last month, I'm proud to say Wolverine Worldwide was officially certified as a Great Place to Work based on an independent formal assessment of our team's belief in our strategic direction, sense of collaboration and pride in the work we're doing together, the first time our company has ever received such a recognition.

So while Wolverine Worldwide is already a much different company, there is much more to do. The next chapter is the most important one as we push to realize the full potential of our brands, team and company, all guided by our vision to make every day better for our consumers, our teams, our partners, our communities and ultimately for our shareholders.

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

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

I want to follow up on Saucony given the strong performance continuing here and ask about how we should think about the range of outcomes for growth in the second half. And when you think about growth between direct, which obviously had a strong quarter, I think you said low double-digit growth, but also then wholesale with the new doors plus sell-through and reorders at existing doors you've added here, just any further detail on sort of range of outcomes and some of the key building blocks.

Thanks, Jon. Saucony certainly is having a moment, and I'm really pleased with the progress we've made since we really worked to reset that business a couple of years ago. It is broad-based growth happening in both performance and lifestyle, happening around the world, I think, first and foremost, driven by a reinvigorated product pipeline. Innovation is back at Saucony, whether it's tip of spear product like the Endorphin collection, whether it's focusing on the core 4 or our ability to tap into an archive of lifestyle product. And that is very encouraging. And importantly, it's healthy growth. It's responsible growth.

We walked away from tough distribution from products that had relatively low gross profit, and we took the chance to really reset that business from a strategic standpoint and then, first and foremost, really making sure the product pipeline was firing on all cylinders. And then importantly, our ability to tell amazing stories. This will be a very large investment year in Saucony from a demand creation perspective, really happening around the world and I think really headlined right now about what has happened in EMEA over the past couple of years focused on a key city strategy, activations, the sponsorship of key events and then just the team really driving the business each and every day. So we're going to begin to lap opening of that distribution.

We continue to methodically think about where we can responsibly open more doors. At the same time, as we think about growth for the company, we're in it for the long run. We want to drive long-term sustainable, profitable, healthy growth and really have a pull model versus a push model. So we'll begin to lap that new door expansion. And really, as a company right now, we are laser-focused on sell-through, what is happening in real time in the marketplace and then really build a long-term platform for the company to drive sustainable results for the shareholders in the long term.

But make no mistake, very pleased with the progress Saucony has made in a very short period of time and the rigorous execution of our new brand building model. But as I said in the prepared remarks, while I'm very pleased with the results that Saucony has generated in a very short period of time, I'm very optimistic about the potential. This intersection of performance and lifestyle, being a culturally relevant brand, driving tip of spear innovation, at the same time, pulling on archives, I think, is a very powerful combination for us to drive great growth in a very attractive market for the long term for the company.

That's great. And then on gross margin, as you step back, is there anything that's unsustainable other than maybe the short-term disruption from tariffs when you look at operating at the current level of gross margin. And now as you've been at 47% for several quarters, which is the high end of your broader target, are you gaining comfort in the longer-term opportunity to get back to double-digit operating margin?

Thanks, Jon. As you pointed out, the gross margins through the first 2 quarters at 47.2% does reflect the progress we've made on some of the things Chris just talked about in terms of driving higher mix of full price sales as well as the supply chain initiatives that we've talked about in terms of optimizing our costs. We do expect to continue to see the benefits from pricing discipline as well as those cost initiatives, and we're looking at that Q3 guide that we gave of approximately 47%.

And I think that, yes, in short, we are gaining confidence in that aspiration that we have provided in long term of 45% to 47%. While we're not guiding on the fourth quarter, I would reminder that the fourth quarter is generally lower than our quarters, just given the nature of the holiday season that we're seeing in the fourth quarter. But overall, short answer is yes, gaining confidence given more with the product, putting the marketing behind it and the distribution gains in terms of being able to sustain in that 45% to 47%.

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

I was curious if you could discuss your go-to-market strategy and the pathway for returning DTC to growth. How is that channel contribution embedded in your third quarter outlook?

Yes. Good question. I appreciate asking about our DTC business. We're pleased by the progress we're making in DTC, albeit we acknowledge we have more work to go do. We've seen sequential improvement in Q2 over 1Q. And I would say, by and large, a lot of our brands this year are focusing on becoming less promotional, more consistent in our messaging and really be a great showcase for our brands as consumers engage with us digitally. So we saw a nice gross margin expansion, I think, somewhere approaching 300 basis points of gross margin expansion in total for DTC.

And importantly, our biggest brands, I think, sort of outperformed us in total. Saucony saw a nice growth. Sweaty Betty saw some improvement, along with Merrell. We do have some acute pain points that we're working to address. But I think the combination of lapping some of the promotional from last year, telling more consistent messaging to our consumers, really showing a great innovative flow of fresh products, and then certainly, on the modernization side, we have some updating to do on our tools, and we've begun to do that.

So DTC is a critically important piece of our business. I think we have to show up when and where consumers want to engage with us. Whether it's on their phone through our social channels, whether it's in our great wholesale partners here and around the world or whether it's in our own stores and our own sites, we have to show up consistently great. So pleased that we made progress in the second quarter from the first quarter, acknowledge though that we still have more work to go do, but the team is laser-focused on making that both a great growing and profitable channel for us, along with great representations of our brands.

Okay. And then I did want to ask on Saucony, really impressive traction there. Can you help us think of the brand performance within the newly expanded doors? How would you characterize sell-through and the level of penetration on shelves today versus where you plan to be at year-end?

Yes. Good question. I think that's really what we're focused on. And I think credit to the product pipeline, credit to the stores and certainly, the fact that Saucony is a great authentic heritage brand, our ability to open up that new distribution was critically important last year. We're beginning to lap those new door growth. I would say right now, we're very focused on sell-through. Let's make sure the ground game is in place. There's great marketing in stores. We're engaging with the teams, and we're really working to drive sell-through.

I would say we're in the early innings of opening up that potential distribution if we look at just total door counts, in the doors that we're in. At the same time, like I said earlier, we really want to make sure that we are driving a pull model for the brand versus a push model for the brand. So as we've seen that door expansion, we're very focused on it. We're encouraged by it. But every single week, we obsess about the sell-through rates to make sure that we have traction there. So there's a lot more doors that we could open. We're not laser-focused on that right now. We're working to build a platform for long-term sustainable growth in a responsible way. And that really is what will get the Wolverine Worldwide engine really moving and humming in order.

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

I wanted to ask about Saucony as well. I recognize, Chris, that you will start to lap those 1,300 doors next year, but curious to know what your conversations are like for the spring 2026 orders. And second, I know that Foot Locker is now offering a lifestyle offering. But is there an opportunity at some point in time for DICK'S Sporting Goods to offer Saucony's performance offering?

Yes. Good question, and I appreciate the attention on Saucony. Again, I think that team has been able to generate tremendous momentum in a very short period of time. And I would take you back a couple of years ago, it really was a full reset of that business. And I think we took the time to really think about what the potential Saucony had, what we thought the market opportunity was, where the competition sat, and then the various levers that we could pull. So we are very focused and thankful for the doors that we've opened.

And again, I think that the notion of broad-based is important. We're seeing growth in both performance category, again, whether it's tip of spear product like Endorphin, whether it's the core 4, at the same time, what we've seen in lifestyle expansion. So we're actually beginning to lap that new door growth last year as we sort of get into back-to-school and into holiday. We're very focused on the sell-through. I would say our teams are staying very close to the wholesale partners in which we've opened and then also working to build hopefully responsible growth plan.

But I was out in the market, in this last quarter, I've been able to travel to London, Paris, Tokyo. I was in Boston just last week. I was in New York a couple of weeks before that. And it's great to see Saucony showing up on those shelves, showing up in those windows. And then just talking to the store staffs that are repping our product, just the enthusiasm that Saucony has been able to generate. So again, while we're pleased with the progress and a record second quarter for the brand, I do think we remain very optimistic about what the future potential is for Saucony, both what it means to the Wolverine Worldwide portfolio, what it means for our shareholders and certainly, what Saucony can mean in the greater landscape of sporting goods.

Very helpful. And then Merrell, another great quarter, double-digit growth here with the modernizing the trail strategy. I recognize, Chris, that you don't guide by brand anymore for the quarters out. But why should we see a deceleration in the back half if there's momentum in so many different product categories?

And then, Taryn, I recognize last year, you had an operating cash flow number of $180 million. I think there was a working capital benefit from inventories. But this year, obviously, your operating profit, your net income is going up. Like, is there any reason why we couldn't see a similar rate of operating cash? And what I'm leading to is, where do you think leverage goes by the end of this year?

Yes. I'll have the Merrell question first and then turn it over to Taryn. I appreciate you asking about Merrell. I know a lot of headlines are going to be about Saucony growing 40%, but Merrell has 4 consecutive quarters of growth. I think 10 of the past 11 quarters we've gained share. And we've done it in a really responsible way while adding gross margin. And importantly, it's on the backs of new product introductions. Obviously, the Moab 3 continues to be great. That is the original hiking boot. But what we've been able to do around the Moab Speed 2, the Agility Peak 5, the SpeedARC Matis, all of those new introductions are helping us to make the trail lighter, faster, more modern and really responding to the consumers and it really being innovation.

At the same time, we've been very thoughtful in the distribution in the U.S. and I gave the Merrell team credit, the Merrell U.S. sales team credit for how they've really thought about the U.S. distribution landscape. The doors we want to show up in, how do we show up in those doors is great. I was in one of our best wholesale partners last week, and I never thought Merrell has looked better than what I saw last week. So credit to our partners for getting behind Merrell, credit for the growth that we're driving, the investments we're making in the ground game.

At the same time, encouragingly, we've seen the hike category under a lot of pressure for the past 2 years. We actually saw it get a little bit better last quarter. And if that is a long-term trend for us, certainly, that bodes well for Merrell's prospects. Having gained share for the past 2 years, being the market leader, the retrenchment we've done to improve points of distribution, the new products we brought gives us a lot of reasons to be encouraged about Merrell's future trajectory.

Great. And then to answer your question in terms of leverage, where are we going, I think overall, I would answer the question in the context that we are really focused on delivering sustainable long-term profitable growth. And you can see that in the cash flow. You mentioned 2024. We did say that we did expect in terms of when we looked at our capital allocation, it's remained consistent. We remain focused in terms of investing in the business as well as continuing to pay down debt and maintaining the dividend in terms of our priorities of capital allocation.

When I speak to investing in the business, we had identified earlier this year that, after getting our inventory to much healthier levels, we expected a modest investment in working capital this year. And you can see part of that. In the second quarter, you saw inventory was a bit higher. That was largely primarily Saucony. If you recall last year, we said we'd probably leaned in a bit too much on the inventory as we were chasing demand. And so we are making a very strategic and thoughtful choice about where we are investing in the inventory to support the growth.

And then the second, on the priority was continuing to pay down debt, our bank-defined leverage, at the end of the second quarter was 2.9x. That compares to 3.9x a year ago. So again, no change in capital allocation priorities and progress against both of them so far this year.

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

I want to talk to you a little bit about the SG&A and your marketing demand creation spend. How much is that elevated? It looks like it's implied to be elevated again. Are you doing most of the spend for long-term brand story? And I'll ask you that first, then my follow-up.

I'll let Taryn dig into some of the SG&A detail, but I'll answer the last part first. I think absolutely, Sam. I think previously, we sort of got caught in a cycle of sort of lower conversion-focused marketing and our brand spend at the upper end of the funnel was compressed. And I think we were chasing revenue a while ago and really focusing on conversion to try to help stimulate that and that potentially had a short-term benefit, but to the long-term cost of the brand. So we're working to reverse that.

We do have a new stable of CMOs in the building, which is great, which bring a new perspective to how we run and lead our brands. And as we sort of emerge from the turnaround and have additional financial wherewithal to invest in our brands, we're very focused on spending up and down the funnel and really working on awareness and affinity for our brands. And I think those things are beginning to take hold. And I think you're seeing that in Saucony. I think you're seeing that in sort of all-time record sort of Google search interest. We follow Google search interest as a proxy. And we've seen some positive metrics from Merrell and Saucony as we thought differently about how we spend. So definitely a different approach to it. I'm trying to take a longer-term horizon to how we build and protect our brands, at the same time, how we're sort of managing responsible growth for the company as well.

I'll let Taryn answer the SG&A question more specifically.

Yes. The build I would have is that I think it's important to note that if you look at the second quarter, our gross margin increased 410 basis points and our adjusted operating margin increased 290 basis points year-over-year. As Chris said and as we have stated as part of our strategy, we are reinvesting a portion of the gross margin gains in key areas of the business that are going to fuel that growth for this year and, as Chris said, long term, fueling the growth.

And you asked a specific question about where, it's investments in marketing and our talent. Chris just mentioned a few of those, in tools such as our integrated business planning, which has been a benefit, as we're navigating the current macro environment, and processes that are really going to be able to sustain profitable growth is the key areas I would call out, both in terms of where you're seeing a bit of that elevated SG&A.

And then just a follow-up, Chris. The top-of-funnel marketing longer term, you beat your guidance by quite a lot, did you see short-term results -- did you see that opposite impact where you saw short-term sales benefits from the top-of-funnel marketing in the quarter.

I think we certainly did. I think certainly, as we sort of have been thinking about running brands differently, and you and I have talked about this, how we lead brands, how we think about the product pipeline, how we think about demand creation, where we think the spend, how we think about distribution and segmentation, I think we certainly think those are the right long-term things to do for the company and for our brands. At the same time, I do think we are seeing a short-term lift.

And I think importantly, as we think about managing brands in the portfolio, as we think about capital allocation, where we spend, how we spend, we have to think about where those brands, product pipelines are, where do we sit, how is the relationship with key wholesale partners. So I certainly think that it's in the long-term best interest of our brands and being great brand managers, which we aspire to be. At the same time, certainly, we're encouraged by the short-term results we're posting this quarter.

Does that mean, though, that you guide next quarter the same way where it looks like there's increased SG&A spend, but you didn't work in the potential short-term revenue impacts of that? Because clearly, you didn't work that into the 3Q guidance.

In the third quarter guidance?

Yes.

I think at the third quarter, at the midpoint, you're seeing SG&A will be around that 38.7%, and that does reflect a 120 basis point increase relative to prior year. We absolutely expect in terms of it driving near -- the combination of near term, but as well as long-term growth.

Okay. And then lastly, your interest expense for the balance of the year? I mean, is it going to average around $8 million a quarter? Is that right? Or is it going to drop down now that your net debt is coming down?

I'd say largely unchanged. Interest expense was $8.5 million in the second quarter.

[Operator Instructions] Your next question comes from the line of Dana Telsey with Telsey Advisory Group.

So nice to see the progress. Taryn, as you think about the timing shift that you talked about, is there a potential for additional timing shift in the fourth quarter to the third quarter? What are you seeing from that wholesale channel? And Chris, given the focus always on earning the place on the shelf, how are you thinking of new product penetration versus core? And how do you see pricing changing in this new world of care? And then I just have a quick follow-up.

Yes. I think I'll answer the first part of your question. The timing shift that we called out in the second quarter, from the third quarter to the second quarter, that $10 million, at the current guidance that we're giving, I wouldn't call it any other timing shifts in that number, Dana.

Yes. And to answer your question about product and earning your shelf, I mean, that's absolutely right. We still do 3/4 of our business through wholesale partners. And we do have to earn our way on the shelf, and we do have to displace the competition. And I would say I'm spending a lot of time at retail. I was walking in retail just last week. How our brands are showing up in our important wholesale customers, I feel we look much better today than we did a year ago and certainly 2 years ago. I spent a full day walking retail last week and just how we show up on the shelf, the fact that we're showing up in the windows again of key partners, I think is very encouraging.

Again, the onus comes to right product, innovative, trend-right, price-right, colored-right, placed-right product that solves consumers' problems. And then importantly, we also have to have brand. And we have to have the right brands with the right messaging, differentiated storytelling. And then we have to invest in our partners, too, and make sure that we've got a ground game, make sure we're helping support them and then obsess about sell-through. So I certainly am encouraged by the progress we've made. There is certainly more work to go do. But our brands and company, I think, are in a fundamentally different place today than we were just a few short years ago.

And is pricing changing at all given tariffs, whether in DTC, e-commerce or wholesale?

Yes. I mean I think you're hearing a lot about the price impacts. I think the clarity around tariffs is getting somewhat less murky than it was. At the same time, sort of the downstream effects on the economy, consumer sentiment and ultimately, consumer spending is something that we're paying attention to. We did selectively take some price increases at the end of June. We're closely monitoring that, both on our own sites plus what's happening on the shelves, sell-throughs and all the data we get, at the same time, looking to see what the competition has done and where the competition sits in pricing. I think we'll get more clarity as we work through the back-to-school season to sort of understand how all that shakes out. But certainly, the price increases we took, the impact on the consumer, the macro consumer environment are things that we're paying very close attention to.

With all of that said, I'm very thankful that we've been able to get the work done over the past couple of years to shore up the balance sheet, to get our brands growing again, to do the significant improvement in margin. I think we're in a much better position to withstand these current challenges and hopefully emerge better brands and better company on the other side.

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

I guess just to start, could you elaborate on what you've seen so far since you've selectively raised prices at the end of June across the business? Any high-level commentary of whether you've seen like any reaction from the consumer? And just like taking a step back and seeing all the products, of course, what we've seen in Saucony is very nice, how far along would you say you are on the turnaround of the other brands, particularly Merrell and Sweaty Betty?

Great question. I would say we're still very early days of the price increases. I think the wholesale customers that we went to said that they largely expected brands to increase price, and that was what we've heard. I think we're still too early to sort of render a judgment on where the consumer sits and how those have been adopted. As it relates to the other brands, I would contend a little bit that we're turning around Merrell. Merrell has got 4 consecutive quarters of growth. We've got 10 of 11 quarters of market share gains, significant gross margin expansion. So I would say Merrell and Saucony have sort of rapidly deployed our new brand-building playbook. And I think we're encouraged by the progress those brands have made in a short period of time.

As it relates to the Work Group and Sweaty Betty, we did see sequential improvement this quarter versus last quarter, albeit self-admittedly, not generating the results that we would expect. I think we're making progress on the Work Group product pipeline. We've got a new Chief Product Officer, and I think he's done a great job thinking about newness and innovation. We had a maiden U.S.A. collection that dropped a few weeks ago that sold out in a day. We just launched the new Infinity collection yesterday to really good reaction. I was getting some e-commerce sales last night, which is fantastic. And then I've been able to spend a lot of time with Sweaty Betty over the last quarter. I've been in London twice, really thinking about the strategy and where we sit, what's most important in sort of the next couple of years with that brand.

So I feel good about the strategy work. I feel good about the sequential improvement we've seen. The product pipeline in Work Group is getting better. And I do think we're bringing innovation to Sweaty Betty. And the new products we're dropping, the colorways and the new prints, we dropped some outerwear a couple of weeks ago in our stores in the U.K., those have all been positively received. So certainly more work to go do, but I do think we are on the right path. And I certainly think there are things that we've learned from Merrell and Saucony that we can apply to the balance of the brands to get everyone moving in a more positive direction.

Got it. Very helpful. And one quick follow-up. On the tariff impact that you provided, $20 million, could you elaborate on how much of that falls in Q3 and how much in Q4?

Yes, I didn't give specifics, it's more to say that more of it is expected to be in the fourth quarter than in the third quarter just given the time of when the higher rates went in as well as our inventory that we had that would sell through. So the fourth quarter will be our first full quarter of seeing the higher tariffs.

Got it. So that means that third quarter, there's part of it that doesn't have a tariff impact.

Correct. So again, I didn't give the specifics, just more to say it's more weighted -- we will see some, and we expect to see some, in the third quarter. We expect to see more of the $20 million in the fourth quarter.

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

I've got one on Saucony, one on Merrell. So I'll start with Saucony. When you look at the second quarter growth, can you say how much of that, either the percentage or the dollars, was new doors versus same-store? And then when you think about the potential for Saucony growth in the back half, is it fair to kind of assume that the same-store momentum is unchanged? It's just that there's less benefit from the new doors, is that how you're thinking about it?

Good question. I would say well less than half of the growth at Saucony during the second quarter was driven by new door expansion. And when we talk about that's why -- in the prepared remarks, I talk about broad-based regions and channels, performance and lifestyle, there's not just one thing driving the Saucony engine right now, which gives us a lot of confidence in where that brand is and certainly what that brand can be. And I'd say right now, we're very focused, like I said previously, just really focused on sell-through and then really obsessing right now about the product pipeline, how do we follow up the great work that, that team has done to bring newness and innovation and reinvigorate that product pipeline to make sure that we can build a long-term model. So encouraged by the growth. It is broad-based regions and channels.

Other metrics that we look at, brand search interest is certainly encouraging and then as we begin to develop an order book for first half of '26, just the visibility into what that order book looks like, and then as we continue to begin to bring new activations online. I think the early days of the turnaround, we took a chance with the London 10K as part of our first key city strategy. Those results have been phenomenal. Our partner in Japan has done a great job, a new partner in Japan. We moved our Saucony relationship into our Merrell partner in Japan, and then they've done a great job opening a Saucony store in Harajuku. And like I said, we're going to activate in London with a Shoreditch 10K this fall, and then we'll move to France with the Eiffel Tower 10K in December and begin to really activate this key city strategy, which has really generated a lot of momentum for our brands.

Maybe before I ask about Merrell, as a quick follow-up, Chris, you referenced search again. And you've done that a couple of times on this call. From what I've seen, there's been an uptick for back-to-school. Is there anything you can say about Saucony performance for back-to-school to date?

I can't really comment on intra-quarter. I think back-to-school is still relatively early days. I can tell you, every Tuesday here, the company sort of spends a full day just herniating over our results, sell-through, what's happening, shipments, what's happening at DTC. And we're in the middle of it. I grew up as a retailer. So back-to-school and Christmas were the busiest times of the year. And it's sort of excitement and energy from us sort of pivoting to the back half of the year. But certainly, we're pleased with the momentum we've been able to generate in the first half of the year, but eyes wide open to the back half of the year, delivering a solid year for the company and then carrying momentum into '26.

And I guess my question on Merrell is more about the segment actually. You've talked about some inflection there. And I'm curious if you could elaborate. Is that more just a function of that the segment has been under pressure for so long that eventually things kind of just find a bottom? Or is there something that's actually driving more consumer interest in the hike category?

That's a great question. Certainly, hike has been under pressure for a couple of years, and someone once told me, "You can't fall off the floor." But hike has been under pressure for a couple of years. We did see it get better last quarter, which is great, so sort of like down low single digits versus down high single digits or double digits. Whether or not it's just sort of comping bad business and it has found a floor is to be determined.

At the same time, I do think there is a responsibility and onus on the market leaders to bring innovation and bring life to categories. And that's why I think as Merrell, as the clear market share leader, really working to modernize that hike category, lighter, faster, more athletic, and then sort of some of the great growth we've seen in the Moab Speed 2, and that's why I'm encouraged by the SpeedARC Matis and what that can potentially mean. So I think your question is well noted. It has been under pressure. It is sort of twice anniversarying those tough times. But certainly, that category, finding bottom beginning to grow again, I think, is good for everyone and certainly should be good for the market leader.

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

Congrats, again, great results. We had a follow-up on Merrell. Great to see that momentum, just any additional color on how international versus domestic performed for the brand. Chris, I think you mentioned Asia Pac accelerated. How big is international for Merrell? And how do you guys think about the potential there?

And to Taryn, a follow-up on gross margins. You've called out supply chain initiatives as a benefit, I think, for a few quarters now. Can you talk about sustainability of these going forward? And just curious, where are the 2 big brands in terms of their historic markdown rates just as we think about additional opportunity with full price selling ahead?

Yes. I appreciate the question, and thanks for the comments. We'll attempt to answer those. A couple of things you asked, we generally don't disclose that at the brand level, so we'll be sensitive there. International was good for Merrell. U.S. wholesale was good. We saw improvement in our DTC business. Our Merrell stores domestically performed very well, but a couple of regions internationally actually outperformed the U.S., EMEA and APAC specifically, which we're encouraged by.

I was in Tokyo just last month and spent time with our partner there. And Merrell looks so much different today than it did just a couple of years ago. It's lighter, faster. I was walking the streets at Harajuku, I was in Shibuya Scramble and just seeing Merrell show up on young consumers in Tokyo was very encouraging. And I was seeing the right shoes. I was seeing Moab Speed 2. I was seeing SpeedARC Matis. I was seeing Barefoot. I was seeing Wrapt, which is encouraging. And the fact that we've got Merrell a 3-story flagship in Harajuku. We've got a 1TRL store in Shibuya Scramble. It gives us a lot of encouragement.

And then let's not forget about EMEA. I think EMEA, our sort of our strategy following the key city strategy that we deployed in Saucony has worked. I think Merrell became the leader in outdoor performance footwear in France last quarter, which is great, overtaking some very well known and some other great brands. So I think the contribution internationally for Merrell is great. But at the same time, I don't want to dismiss the great progress we made here in the U.S. as well.

And as it relates to gross margin, what I would call out is we're not looking at any one area. When we're looking at that 45% to 47% of our aspiration, it's really we're working with our teams as we're looking at capabilities across, so the better mix, the more full price sales. And I think there is still more room. There's more premium product. Whether it is in Saucony, whether it's in Merrell, whether it's in Sweaty Betty and in the Work Group, we're talking about how do we get more premium product, which helps in terms of the gross margin as well.

And then on the supply chain piece, I'd say we're consistently looking for opportunities in supply chain. The exact nature of it could shift over time, meaning early on, it was some sourcing work that the team did a great job in terms of executing. But we can then also -- I was more recently with the team in Vietnam and how do we look at our design in terms of making sure that we're optimizing how we're building the design as well as we're building those premium products. So for gross margins in totality, I would explain it that we are looking at multiple levers in terms of being able to drive long-term sustainable gross margin. And the exact lever in 1 quarter or 1 year could shift, but overall, looking at sustainable margins.

And your final question comes from the line of Ashley Owens with KeyBanc.

Maybe just to round out Saucony and focus higher level. Just given the broad-based momentum you've been observing, could you discuss some of the further capabilities you see within the brand compared to maybe 1 year, 1.5 years ago when innovation really started to ramp back up and how that's influencing your decision to further invest behind the brand? I guess just what inning would you say we're in, in terms of innovation and newness, and where you see additional white space moving forward?

That's a great question. I appreciate you asking that. I mean I think the Saucony story is a couple of years in the making. I think we really took the opportunity in '23 and '24 to really reset that business and really think hard about where the brand sat, pulling on 100 years of history, at the same time, the opportunity in the marketplace and then think about what we should be focused on. And I think we've historically may have been focused on smaller niche parts of the business. And I think certainly, our product pipeline hasn't always been full as it is today and then certainly our ability to drive demand. So we took the opportunity to really reset that business, a new strategy. We brought in several new team members.

And first and foremost, I want to give the product team credit, really got back to innovation and really both thinking about tip of spear elite running, at the same time, take what had been a very sort of broad product range and a product line architecture and really focus on a few core styles. And then democratize innovation, bring innovation not just for marathons, but bring innovation down to someone who's going to go try to run their first 5K. And so I think that's really intense focus on democratizing innovation, maintaining tip of spear innovation around Endorphin, focusing on the core 4 and then really thinking about color and materials and how we show up, at the same time, really tapping into that lifestyle piece of the business.

And fortunately, for a 100-year-old brand, we have a tremendous product archive that we can pull from. And then really injecting energy and excitement in that lifestyle piece, both through collaborations with some amazing collaborators that we've been able to partner with, at the same time, how do we then take that and really take that hot brand heat that we can generate and really make that a commercial success, and we're beginning to see that.

As it relates to sort of what inning we're in, I still think we're in the early innings because I think we're just getting momentum now in that business. And I think certainly, we're building confidence. And certainly, if you think about the markets that our brand can address, one of the biggest markets that we can go build brands in is where Saucony operates. It has a great 100-year history. We've got that product engine moving. I'm really proud of that product team. We have a new CMO in place. Think about how we drive demand. And we brought some good leaders. We brought new leadership into our EMEA region, which helped craft our key city strategy and that momentum is building.

And as I think about where Saucony can play in the future, there's a lot of opportunities for us to think about that business moving forward beyond just where we sit today. Other footwear categories we can play in and certainly apparel and accessory opportunity beyond because we're largely a footwear-only brand. I will tell you, we've got a fairly small apparel assortment in our Covent Garden store, and I was there the week of the 10K. The penetration of a fairly small apparel assortment was amazing, which only gives us more confidence that when we create great products, we package them into great stories, consumers want to participate in our brands.

So I would say that we're in the early innings of Saucony, but certainly encouraged by an all-time record revenue second quarter, phenomenal gross margin expansion, and I'm really proud of what that team has been able to do. So I said in February of '24, I was bullish on Saucony. And thankfully, that team has stood and delivered.

Great. That's super helpful color. Maybe just lastly, now that we're back to a place of inventory growth, if we could just speak to how we expect inventory growth to evolve relative to sales growth during the back half of the year from a modeling standpoint.

Yes. I think we typically only share cash or inventory objectives on a full year, Ashley. And so I don't have any specifics other than to say that, again, what I would point to is that the inventory growth that we have seen in the second quarter was primarily behind Saucony as we were being able to support that demand. To a lesser degree, there's some currency and tariffs in there as well. But primarily, it's more really as we had expected to building in the inventory to support the demand we saw in Saucony. So I wouldn't call anything out on the full year other than just to remind where we're at in the second quarter.

There are no further questions at this time. This does conclude today's conference call. You may now disconnect.